The whole point of any “stimulus” is to buy time. The idea is to keep the economy busy or, in the case of more purely monetary policy, happy during that time so that the economy on the demand side can on its own heal. In the parlance of orthodox economics, “stimulus” reduces the output gap, the difference between current output [...]
November was the month where global bonds, particularly sovereign bonds, were routed in synchronized liquidation. As such, we would expect to find among various data sources evidence to suggest a monetary “dollar” background consistent with that fact. What that has meant in the months (and last several years) leading up to it was the foreign official sector in overdrive “selling [...]
The CPI continued its meandering in November, increasing 1.69% year-over-year in a very slight acceleration to October’s 1.64% gain. As oil and energy prices this year are compared to the worst levels last year, the CPI is brought back up not to what it would look like in an actually robust growth period but rather what it was in the [...]
For years it was uncontested convention that the lower the rate the better. Stimulus was, after all, intended as a borrower boost. Make the cost of adding debt low and lower, then it was assumed borrowers would borrow more than they otherwise might have with recovery the promising result. Every time rates went lower, the common refrain of “stimulus” went [...]
Personal Income and Spending continue to suggest only further weakness. While there is a whole lot of caution necessary when analyzing this data due to its susceptibility to large revisions, there is still only further deceleration on both sides of the consumer. Nominal Disposable Personal Income (DPI) was up just 3.4% year-over-year in September 2016, below the 3.8% average of [...]
In early July, the Bank of Japan may or may not have contemplated the mother of all “stimulus.” Rumors began to fly that the Japanese central bank was, in fact, seriously considering an actual monetary helicopter as a way to boost flagging confidence rightly suspicious of any more QQE (or NIRP). We won’t know for some time (when the meeting [...]
As I argued earlier, the 2-year change in the CPI (or PCE Deflator) is a useful assessment of not just inflation but money in general. It verifies in no uncertain terms what we suspect about “stimulus.” It is not just rare but practically unheard of where the inflation rate drops and then stays there. Yet, inflation has done so now [...]
The headline CPI accelerated to 1.46% year-over-year in September, the highest calculated inflation rate for this index since October 2014. That was up from 1.06% in August and seemingly quite different than the -0.04% last September. To many, that looks like and is believed to be progress, an end to the drag of the dollar and oil. In many ways [...]
There is validity in (not “to”) the myth of central banking, one that has important and very serious implications right down the smallest and most immediate terms. The first task of every central bank was currency elasticity, which simply meant the bank would endeavor to supply (at penalty rates, according to Bagehot, such that banks do not fund themselves on [...]
For a central bank, deflation is the starting point which makes inflation the emphasis. So long as there is a “small” amount of positive inflation then economists have suggested deflation, thus depression, becomes impossible. The reason for that belief is twofold, first having to do with the margin for “error”; that is a small positive inflation rate acts as a [...]
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