Inflation continues to fall. On a YOY basis CPI dropped from 4.96% to 4.13%. With this print, the probability of a Fed Pause went from 77% to 94%. Falling inflation rates are a result of A. more restrictive money or B. falling demand. This is not a binary question and there is a causal relationship. 11 months ago, we hit [...]
The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity reserves. As noted last week, [...]
The link between stock prices and oil has been especially high of late, and that has left quite a few traders and experts stumped. For a good long while any impact from oil was denied as only “transitory” or even helpful to consumers through some sort of “tax cut” effect. In January 2016, however, liquidations appeared regularly in one alongside [...]
In the 1920’s, it was the interruption of the distribution of gold flows via sterilizations and the creation and maintenance of foreign “reserves” and influencing the nascent wholesale markets of the age that served to maintain a high degree of leverage throughout the economy. That it did not show up in consumer prices is only due to the nature of [...]
After building up billions of dollars in reserves placed through NYC banks into Street loans, or call money, the crash of ’29 created a profound disturbance in not just stocks but banking. Here too we get little mainstream examination into the link between stocks and the liquidity event that unleashed at least three discrete and successive waves of bank failures; [...]
A full part of gold sterilization meant not just maintaining the total level of liquidity (though ignoring the distribution) but also in foreign “reserve” balances. The movements of gold created a trail of foreign exchange “reserves” which central banks around the world were using as tools to affect currency movements contravening of any gold pull or push. It was the [...]
The conventional view of asset bubbles is that they are difficult to discern even after the fact. The current policy position is one of bubbles that are “obvious.” Looking back at the late 1920’s, there is no doubt it took a similar track to that seen in the late 1990’s. But that, by itself, does not necessarily denote the presence [...]
Looking at the changing pattern of recoveries throughout domestic economic history, it is clear that there is a correlation between the level of monetarist intrusion and the shape of recovery (I would go so far as to claim a causative relationship, but at the very least there is no denying some kind of link). That observation extends to the 1930’s [...]
Bill Dudley, never one to shy from causing controversy, regained the throne of most honest Fed official. Speaking at an economics conference, the President of the New York Branch, the one with all the QE assets, Dudley admitted, "We don't understand fully how large-scale asset purchase programs work to ease financial market conditions, there's still a lot of debate ..." [...]
After the results from this summer, it was clear that if there was ever going to be a reduction in the pace of QE it would “have” to be accompanied by something more amenable to fickle “markets.” I leaned more toward the camp that saw taper coupled to a decrease in the IOER, particularly now that the reverse repo program [...]
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