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Tag Archives: inflation

Suasion, Sure, But Is It Really Moral?

One of the concepts educators sort of snuck into the curriculum was something they called “moral suasion.” This term has meanings outside of Economics, but within the discipline it refers to one key element to the monetary policies of central banks. Basically, persuading markets or economic groups to act in the way officials want using rhetoric or threats without having to resort to overt and explicit means. If central bankers have walked softly all these years, the so-called big stick they...

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Labor Shortage Under #1 Becomes Labor Bottleneck Under #2

It doesn’t quite rise to the level of the LABOR SHORTAGE!!!! fiasco, not yet, but it’s moving up toward that territory. This, of course, had been during Inflation Hysteria #1 when at its absolute peak the unemployment rate was being used to justify expectations for not just a little more in consumer prices but a lot more. In 2018, in particular, there were widespread anecdotes, hardly a day would pass without some mainstream media story about how companies were struggling to cope finding...

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The Fundamentals of the Bond ‘Bubble’

They were never very specific to begin with, even in Ben Bernanke’s infamous November 2010 Post op-ed covering the start of QE2. Officials like to keep it purposefully vague as a kind of dry powder, a margin for error. If bureaucrats become too specific, the public would reasonably hold them to their own standard being laid out. The point behind Alan Greenspan’s infamous fedspeak was, most of all, wiggle room. QE is going to help boost the economy. How, you naturally ask? Don’t say. Keep it...

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Being Specific About Dollar Specifics

Last week, IHS Markit reported that sentiment in Mexico’s factory sector had slipped again during December 2020. The organization’s manufacturing PMI had declined for the second straight month, having peaked recently back in October. Even then, the index hadn’t yet come close to crossing the magic 50 dividing line. The best it had managed during this global rebound was a mere 43.6.This sentiment data correlates closely enough to the Mexican government’s statistics. According to that...

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Macro Drivers while Covid Remains Out of Control

The new Covid outbreak, social restrictions, business closures, and lockdowns render most of the upcoming data mostly irrelevant.  Given the serious spread of the infection and the seemingly slow rollout of the vaccine, the economic data will be distorted even though the impact may not be as severe as last March and April. Policy settings are also considerably more accommodative, though it does little to address the loss of capacity, especially in services.   Manufacturing is holding up...

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They’ve Gone Too Far (or have they?)

Between November 1998 and February 1999, Japan’s government bond (JGB) market was utterly decimated. You want to find an historical example of a real bond rout (no caps nor exclamations necessary), take a look at what happened during those three exhilarating (if you were a government official) months. The JGB 10-year yield had dropped to a low of just 77.2 bps during the depths of 1998’s Asian Financial Crisis (or “flu”, so noted for its regional contagious dollar shortages). Having backed...

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Inflation, Reflation, Or Something Else?

Is there a difference between inflation or reflation, and whatever this is? Not mere semantics, it may be everything for what the future ultimately looks like. Yet, the only one ever talked about is the first, as if a foregone conclusion. Why?We’re conditioned to believe in only one or the other, recession still contracting or otherwise total recovery, on top of never questioning whatever it is the Federal Reserve may be doing: We’ve been left with the impression that the economic...

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The Doctor Is In?

Gold’s not buying. Neither is the bond market. Inflation Hysteria #2 has so much less to it than #1 in 2017-18 ever did. But this one isn’t completely empty. There are some asset classes which have been absolutely on fire thus seemingly consistent with the “money printing” excesses of Fed and feds. Investors fearing for currency “debasement” and fiscal breakdown by piling into real and tangible assets in an obvious way.Just not gold. Other commodities, however, particularly copper.They call...

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Inflating Inflation Expectations

Rising prices feature in many economic forecasts for the US.  It is seen as part of the reflation meme as the vaccines roll out.  There seem to be three threads to the discussion.  The first is practically mathematically certain.  Economists refer to it as the base effect.  As the pandemic struck and the economy shut down, prices fell.  Headline CPI fell by 0.4% in March 2019, by 0.8% in April, and another 0.1% in May.  The PCE deflator, which the Fed targets, fell by 0.3% in March and by...

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The Summer Slowdown Collides With The Summers Acceleration Theory

You’d think Larry Summers would know better. Not that he stepped in it, again, but rather why he did this particular time. Making a big deal out of inflationary aggregate demand when he’s been practically the lone mainstream Economist to look at the post-2008 economy in an honest and serious fashion to then somehow failing to incorporate that view into our current place. What got Summers in hot water a few days ago was a rather careless throwaway surrounding his usual partisan politics....

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