201606.28
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The Warning Embedded Within The Interest Rate Fallacy

On November 4, 2010, then-Federal Reserve Chairman Ben Bernanke wrote his infamous oped for the Washington Post “welcoming” the world to a second round of quantitative easing. The very fact that there was a second iteration belied the whole point of “quantitative”, but the mistakes about “easing” have proven far more problematic. There wasn’t anything…

201606.27
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Money Market Illiquidity Further Removes A Central Myth

It might be expected that monetary policy would fail to achieve its goal in attempting to manage the economy when it cannot even meet its own basic technical requirements. The main lever of Fed policy continues to be the federal funds rate even though it is entirely irrelevant, and has been for a long time….

201606.27
2
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Politics of the Monetary Noose

In June 2015, Pew Research Center conducted a poll of citizens in European countries in order to gauge public sentiment of the European integration project. They found what they thought was a rebound in favorability. The survey conducted in 2013 appeared then to have been the low point, with the 2014 update finding an uptick…

201606.27
2
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Liquidity And Risk

The real nature of liquidity is not what you see today but what we might find when the going gets tough. Though it is an intangible concept (not that that hasn’t kept economists from trying to quantify it), we can reasonably assume that if overall liquidity today appears impaired under relatively benign conditions, it will…

201606.26
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Bi-Weekly Economic Review

Economic Reports Scorecard While everyone was focused on the potentially negative impact of Brexit, the Census Bureau was reporting evidence of actual economic weakness in the form of the durable goods report. The report was weak pretty much across the board but the weakness in autos is particularly concerning. The auto industry, along with construction,…

201606.24
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Back To Our Regularly Scheduled Programming (UPDATED)

It was a nice diversion while it lasted, I suppose. From the moment of the unfortunate murder of the British MP, funding markets, in particular, had been furiously “selling dollars” to get back some of the pound that was falling as Brexit had gained momentum. Media commentary talks about it as if that were the…

201606.24
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Secular Stagnation Is Eurodollar Stagnation

Last week, the St. Louis Fed published an article based on a speech that Dr. Larry Summers gave to the Homer Jones Memorial Lecture series back in April. The article included the full text of Summers’ speech and importantly the supporting material and evidence he used in his argument for “secular stagnation.” Included is one…

201606.23
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What Current Interest Rates Really Mean

On June 14, the 10-year German bund yield traded briefly below zero for the first time. It was an inauspicious record but one that defines the contradictions at the center of all this economic and monetary controversy. On the one hand, that is what central banks tell us they are after especially with QE, to…

201606.20
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‘Selling Dollars’ Again

With the sudden interjection of uncertainty halting the surge in Brexit odds since the unfortunate attack on British MP Jo Cox last week, the financial world has benefitted from the pound’s resurrection. Sterling has had a very good couple of days in this reversal, especially today. As it rises it adds the same as we…

201606.20
2
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The European Basis For New Monetary Science

Looking back it almost sounds like a completely different world. In the end, however, the world hasn’t changed, perceptions have. On May 10, 2012, German newspaper Spiegel reported that Bundesbank’s (Germany’s central bank) chief of its economics department, Jens Ulbricht, testified in the German parliament that German inflation was likely to be, “somewhat above the…