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 [...]
Maybe it is just too complicated to do much more, but for the most part central banks work in the here and now. They may stray from time to time into strategic thinking, but given the mathematical limitations of traditional statistics, weaknesses we all know too well in 2016, that is of limited value. Even in normal times monetary policy [...]
In April 2009, the new Obama administration created somewhat of a political controversy when it was originally reported by the Wall Street Journal that the US was providing $2 billion or more to fund offshore drilling – in Brazil. To many on the “right”, that seemed quite hypocritical given the public stance on all things oil. My interest is entirely [...]
The “first” part of the TIC data update for January was relatively straightforward, especially since the scale of the net transaction adjustments in both December and January really did match what happened in January (crossing into February). The Treasury Department’s estimate for foreign holdings of US dollar assets were nothing short of remarkable in all the ways that were expected [...]
If China is most representative of the current state of the “dollar” economy, Brazil is surely most representative of its worst case. The country’s economy has been like China in slowing down steadily over the past few years, but unlike China it has descended already into a nightmarish level of distress. In other words, Brazil already has a Great Recession [...]
While the eurodollar system has attained the full functions of a banking system in parallel to (and in many ways superseding) the onshore dollar version, at its core remains its primary purpose as a means to solve global payments. It is the idea of the dollar replacing gold and sterling, the reserve currency. The difference in recognizing the eurodollar as [...]
The Chinese currency is once more on top of the news heap, with everyone trying to figure out what is going on. At first, “devaluation” was almost welcomed back in August when it was viewed as some kind of belated PBOC indirect “stimulus.” Very quickly, however, that view was softened as the currency direction appeared very much related to financial [...]
The market for bankers’ acceptances was one of the first tasks of the Federal Reserve. There was a flourishing financial trade in acceptances in sterling which was purely a matter of the British pound being something like the global reserve currency, at least for a vast portion of global geography. With the United States becoming an industrial and trading power, [...]
Even a quick glance at recent t-bill rates commands further attention. There is obviously a lot going on in the bills market just in the past few months, which may only be unexpected in the sense that there isn’t a plain connection between US government bills and the fireworks elsewhere. T-bills used to be, however, the primary source of repo [...]
As gold established price behavior based on forward rate movements in 2013, it is clear that the ebb of each successive wave of collateral selling was met with less intensity on the price upswing. There are a number of reasons for that, including the price volatility on the downside and central banks conspiring to convince markets that “tail risks” are [...]
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