201711.14
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Historical Precedence For How A Bond ‘Bubble’ Ends

The UK government tried very hard to hold on. They had been able to raise $200 million from JP Morgan, a significant sum at that time under those circumstances. The British had also secured an almost equal amount from banks in France. The new National Government had produced a budget slashing spending by £70 million,…

201710.30
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You Aren’t Supposed To Reject Falsification

Why don’t economists understand bonds? The long answer involves several detours into parts of Economics that have nothing to do with interest rates or even money. More so these places are dominated by discussions of stochastic calculus and partial differential equations. Thus, the short answer is: Affine models of the term structure of interest rates…

201710.26
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China’s (de)Dollar Bonds

The Chinese government has sold its first dollar bond issue in thirteen years. Given that fact alone, the idea is causing more than a little confusion, perhaps consternation. Why now? What are they really up to? It seems as if it is contradictory, especially given China’s very public positions against the dollar as hegemonic reserve…

201709.05
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Once Again, Not Korea but March

It’s hard not to put all emphasis on missile tests and other serious forms of sabre rattling. Even doing so, as the bond market may be doing right now, however, misses the underlying. Everything at the moment traces back to mid-March, which in hindsight was a very eventful month in full far away from the…

201708.28
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Deja Vu

According to orthodox theory, if interest rates are falling because of term premiums then that equates to stimulus. Term premiums are what economists have invented so as to undertake Fisherian decomposition of interest rates (so that they can try to understand the bond market; as you might guess it doesn’t work any better). It is,…

201708.22
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Context For The Inflation ‘Debate’

You can understand to some small degree economists’ collective confusion about inflation. They believe in wage dynamics, where a recession through mass layoffs creates slack and thus depresses wages. The recovery in a period of robust growth re-employs those unfortunate workers, and after enough time when that slack is reduced or even eliminated wages accelerate…

201708.14
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Data Dependent: Interest Rates Have Nowhere To Go

In October 2015, Federal Reserve Vice Chairman Bill Dudley admitted that the US economy might be slowing. In the typically understated fashion befitting the usual clownshow, he merely was acknowledging what was by then pretty obvious to anyone outside the economics profession. Dudley was at that moment, however, undaunted. His eye was cast toward the…

201707.18
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A Decade of Fallacy

Ten years ago yesterday, Bear Stearns sent a letter to shareholders of two specific hedge funds that it sponsored. Whenever anyone brings up the name now, you immediately know where this is going. That wasn’t the case in 2007, however. Whatever the world may think of Bear in hindsight, a decade ago it was a…

201707.14
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Retail Sales Conundrum

Retail sales were thoroughly disappointing in June. Whereas other accounts such as imports or durable goods had at least delivered a split decision between adjusted and unadjusted versions, for retail sales both views of them were ugly. Seasonally-adjusted first, spending last month was down for the second straight time. Worse than that, estimated sales were…

201706.22
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Is A Little Renewed Political Urgency Before Renewed Monetary Urgency Too Much To Ask For?

In the strict cohort of central bankers, at least the Fed isn’t yet the Bank of Japan. The BoJ is run by straight clowns, a sort of weird performance art maybe due to almost thirty years of accomplishing nothing. Federal Reserve officials can at least manage to sound legitimate if still acting without success. In…