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Tag Archives: ZIRP

Wait A Minute, What’s This Inversion?

Back in the middle of 2018, this kind of thing was at least straight forward and intuitive. If there was any confusion, it wasn’t related to the mechanics, rather most people just couldn’t handle the possibility this was real. Jay Powell said inflation, rate hikes, and accelerating growth. Absolutely hawkish across-the-board.And yet, all the way back in the middle of June 2018 the eurodollar curve started to say, hold on a minute. That’s the part which caused so much apprehension since we...

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What Would The Hole Be Without The ‘L’?

It’s a pretty simple question, at least when asked by a member of the American citizenry not already compelled by one bias or another. Did the 2009 “stimulus” bill (American Recovery and Reinvestment Act; or ARRA) work? The answer depends upon who you ask, including breaking down along partisan lines. To Democrat Economists, it absolutely did. For their Republican counterparts, snicker snicker shovel-ready.What anyone really wants to know is did all that government activity, and there was a...

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The Reason For So Many Lies: He Finally Realizes He’s In Way Over His Head

This is not a man who’s comfortable thrust into a position of leadership. Say what you want about Ben Bernanke, and there’s a lot that still needs to be said, he at least carried on with the arrogance through thick and thin (almost entirely the latter). Jay Powell sounds like a boxer who just realized the lightweight he thought he was fighting put on 75 lbs of muscle and has been practicing by sparring with world champs.So, when he still says he’ll be the champ the words instead come out of...

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‘Something’ Sure Seems Off

It seemed like an odd, counterintuitive market reaction to what was total chaos. First the news of Lehman Brothers followed closely by AIG, panic gripped every corner of the global marketplace. Toward late September 2008, the stock market would meltdown (the main part of GFC1 that most people associate with the term) in a wave of liquidations due to a global dollar shortage that would last through October 10 in its most acute stage.During that time, though, bond rates at the long end of the...

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The Obligatory Europe QE Review

If Mario Draghi wanted to wow them, this wasn’t it. Maybe he couldn’t, handcuffed already by what seems to have been significant dissent in the ranks. And not just the Germans this time. Widespread dissatisfaction with what is now an idea whose time may have finally arrived. There really isn’t anything to this QE business. But we already knew that. American officials knew it in June 2003 when the FOMC got together to savage the Bank of Japan for their lack of results. It was decided then that...

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What Kind Of Risks/Mess Are We Looking At?

The fact that the mainstream isn’t taking this all very seriously isn’t anything new. But how serious are things really? That’s pretty much the only question anyone should be asking. What are the curves telling us about what’s now just over the horizon? I hesitate to use 2008 comparisons too often because many people immediately jump to extrapolations, especially in these more esoteric market indications. If you say something is like 2007 or 2008, people think you are saying we are on the...

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How Do You Get A September Rate Cut?

When the eurodollar futures curve first inverted a year ago in the wake of May 29, 2018, it was the market beginning to hedge against serious and rising risks of something that would force the Federal Reserve to turn around. When that might happen, or how many cuts would eventually follow, those were questions the immediate inversion couldn’t answer. All the curve said at that point was a serious chance Jay Powell was going to be forced into an involuntarily U-turn at some indeterminate...

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Proposed Negative Rates Really Expose The Bond Market’s Appreciation For What Is Nothing More Than Magic Number Theory

By far, the biggest problem in Economics is that it has no sense of itself. There are no self-correction mechanisms embedded within the discipline to make it disciplined. Without having any objective goals from which to measure, the goal is itself. Nobel Prize winning economist Ronald Coase talked about this deficiency in his Nobel Lecture: This neglect of other aspects of the system has been made easier by another feature of modern economic theory – the growing abstraction of the analysis,...

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Inflation Is (Still) Not About Consumer Prices

To most people, this inflation business seems pretty silly. There are those who argue that any inflation index whether the CPI, PCE Deflator or some other approach yet to be devised can accurately capture the concept. And they are absolutely right to question the enterprise. Most people feel inflation in the things they do most; food, health insurance, the cost of raising children, etc. Experience doesn’t always match the government’s posted numbers. This isn’t some conspiracy, it’s the...

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ZIRP At 20; The ZLB Is A Trap, But Not The One Central Bankers Think It Is

Were they rushed, or were they late? Middle 2000’s consensus put academic opinion on the latter. The Bank of Japan had been Japan’s central bank since 1882, but it hadn’t been allowed to become a modern one until years into the 1990’s crisis. When speaking on the topic, Economists mostly mean independence and mandate rather than monetary competence. This speaks to the now global problems we all face. Reforming the BoJ was part of the government’s committed effort to clean up its banking...

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