Thursday , April 9 2020
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Tag Archives: Federal Reserve/Monetary Policy

It’s Not About Jobless Claims Today, It’s About What Will Hamper Job Growth In A Few Months

You’ve no doubt heard about the jobless claims number. At an incomprehensible 3.28 million Americans filing for unemployment for the first time, this level far exceeded the wildest expectations as the economic costs of the shutdown continue to come in far more like the worst case. And as bad as 3mm is, the real hidden number is likely much higher. As next week’s tally will certainly be. The dislocation is upon us, but that’s no longer our major concern. Having been left no chance to avoid...

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Collateral Shortage Goes Global, Hinting At The Way The (euro)Dollar Reaches Its Eventual End

Government securities have become so scarce that it is driving down repo rates. A collateral shortage that has become so acute, money dealers won’t part with their stock of government securities no matter what the price. Stop me if you’ve heard this before. Except, we’re talking about Japan and JGB’s here rather than UST’s. The trick is that both types of government bonds are being hoarded for US$ purposes. The shortage of JGB’s is due to Japanese dealers desperate to source US$ funding. With...

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Not Good: Eurodollar Futures Curve Sells Off, At The FRONT

If the Fed has promised to print an unlimited supply of money, then why are inflation expectations at crisis lows and falling? At the same time, there are still-growing signs of illiquidity and an interbank crackup. Bazooka after bazooka, yet they don’t seem to be having much effect. That’s true domestically but more so offshore. You may have seen references to something called the OIS-FRA spread recently as it has gone vertical and refuses to normalize no matter what Jay Powell announces....

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Three Short Run Factors Don’t Make A Long Run Difference

There are three things the markets have going for them right now, and none of them have anything to do with the Federal Reserve. More and more conditions resemble the early thirties in that respect, meaning no respect for monetary powers. This isn’t to say we are repeating the Great Depression, only that the paths available to the system to use in order to climb out of this mess have similarly narrowed. That’s what’s ultimately going to matter the most, not what comes next but what comes...

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MAKING SENSE (podcast)

Joining me for my inaugural podcast to try to make sense of this GFC2 (and more) is my colleague and fellow monetary enthusiast Emil Kalinowski. We talk repo, collateral, and why there are only dudzookas from the Fed.  It’s also the start and tip of the ice berg for what we hope will become a much bigger project: an expansive, collaborative Eurodollar University.  We’ll have much more to say about that plus making sense of this crazy world in what will be a regular, weekly feature...

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What If The Economy Wasn’t In A Good Place Entering Its Shutdown?

Why didn’t they think about this first? All of a sudden, with markets in the toilet (especially stocks), everyone is itching to get the economy back up and running. The first real peeks at what’s happened to it (as we’ll see in a minute) have definitely contributed to what seems to be an about-face. Many are starting to ask if the damage from shutting down the economy for a prolonged period will end up being worse than the pandemic itself. It’s a legitimate question. To state the obvious...

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Collateral Shortage > Bond Vigilantism (and it’s not even close)

Faced with severe economic distress and a global market meltdown, they promised that it would be big. Massive fiscal “stimulus”, however, might come at a price. In the short run it was necessary, according to the orthodox view. When a crisis shows up you don’t worry about how to pay for things. Once all is said and done, the current “stimulus” bill will probably dwarf the last one – not that size will make a lick of difference, mind you. There was a reason that prior effort ended up being...

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Right on Cue, Low Money Rates Are Not What You Might Think

For several weeks now, the Federal Reserve has launched one bazooka after another. Officials there keep reassuring the markets, and the public, they’ve got an unlimited toolkit. However, the fact that they feel it necessary to keep showing you is a warning sign, especially how quickly each one is forgotten and overshadowed by the latest Big New Thing. The reason why is simple: they are all the same thing just with different letters and bigger numbers. Central bankers can explore infinity...

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Regime Change

Stocks took another beating last week as the scope of the coronavirus shutdown started to sink in. The S&P 500 was down 15% last week with most of that coming on Monday after the Fed’s emergency rate cuts. Our accounts performed much better than that, but were still down on the week as corporate and municipal bonds continued to get marked down. Municipals recovered slightly at the end of the week as the Fed announced they would be buying highly-rated bonds with maturities up to a year....

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The Solution Is To Stop Being Backward

I knew long before they came out that it was going to be a shitshow, pardon my French. You don’t screw up that badly and let the worst global monetary crisis in four generations happen on your watch with it having been any other way. So, when the FOMC transcripts for 2008 finally came out early in 2014, I knew going into it I would find so many cringeworthy, infuriating discussions transcribed within the hundreds of pages. I just didn’t expect the level of total incompetence on display. And...

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