201804.20
1
3

Transitory’s Japanese Cousin

Thomas Hoenig was President of the Federal Reserve’s Kansas City branch for two decades. He left that post in 2011 to become Vice Chairman of the FDIC. Before that, Mr. Hoenig as a voting member of the FOMC in 2010 cast the lone dissenting vote in each of the eight policy meetings that year (meaning…

201804.11
2
4

Inflation Hysteria Takes A Chinese Hit

Today is inflation day, as can happen on the occasional month. The US CPI came in without signs of acceleration despite the relinquishment of the Verizon effect on the statistical bucket. Financial markets are unenthused by all this, but you might not know why. The spread between 5- and 30-year Treasury yields, as well as…

201804.11
2
2

Inflation Hysteria Takes Another Big Hit

As it turns out, those “transitory” inflation factors were worth only about 25 bps on the core CPI rate. This isn’t at all surprising and was as usual entirely predictable. But when you don’t have any answers there is a lamentable tendency toward denial or deliberate evasion, even if that leads toward the ridiculous. Base…

201803.20
1
5

Choosing the Right Curves

The background for inflation hysteria was pretty simple. Globally synchronized growth meant acceleration in the US economy which would raise demand for labor. The unemployment rate, faulty as it has been, suggests that any further increase in labor utilization would just have to pressure wages – the competition for workers rises as the marginal supply…

201803.13
Off
7

Inflation Hysteria(s)

On May 16, 2000, the FOMC gathered around in Washington to debate taking more extreme measures. For nearly a year, Greenspan’s Federal Reserve had been “raising rates” in the now-familiar pattern. Adjusting their target for interest on federal funds, the Committee had by then increased it at all of the five previous policy meetings, each…

201803.09
Off
4

China Prices Include Lots of Base Effect, Still Undershoots

By far, the easiest to answer for today’s inflation/boom trifecta is China’s CPI. At 2.9% in February 2018, that’s the closest it has come to the government’s definition of price stability (3%) since October 2013. That, in the mainstream, demands the description “hot” if not “sizzling” even though it still undershoots. The primary reason behind…

201803.06
4
3

Questions Not of Success, But of the Effectiveness of Illusion

Last week, Bank of Japan Governor Haruhiko Kuroda unleashed a mini-controversy with remarks he now claims were taken somewhat out of context. On March 2, speaking before Japan’s parliament, the central banker sure sounded quite confident: Right now, the members of the policy board and I think that prices will move to reach 2 percent…

201802.14
7
3

So, Where Is It?

The Fed in its Beige Book as well as in the speeches of several of its officials has referenced a labor shortage for years now. On the one hand, that is understandable given the trajectory of the unemployment rate. All the way back in 2013, during the so-called taper tantrum, it was the rapid drop…

201802.09
5
7

Inflation? Not Even Reflation

The conventional interpretation of “reflation” in the second half of 2016 was that it was simply the opening act, the first step in the long-awaiting global recovery. That is what reflation technically means as distinct from recovery; something falls off, and to get back on track first there has to be acceleration to make up…