201804.16 11

Some First Principles Of A ‘Dollar Short’

On Friday I wrote: Again, the size of your reserves reflects, and is proportional to, your potential need for funding. You can’t accumulate that many unless you have a similarly arrayed “dollar short.” The bigger the stockpile the more potential for it to get out of hand if things go the wrong way (usually on…

201706.26
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Weird Obsessions

People often ask why I care so much about China. In some ways the answer is obvious, meaning that China is the world’s second largest economy (the largest under certain methods of measurement). Therefore, marginal changes in the Chinese economy are important to understanding our own global situation. But it goes much deeper than that….

201704.28 4

Case Study In Depression And Denial

Back on March 10, the New York Fed’s attempt at real-time GDP forecasting predicted that the Q1 2017 estimate would be 3.2%. That would have qualified as another decent quarter, the second out of the past three and somewhat in keeping with “reflation.” As we know today, the advance figure calculated by the Commerce Department…

201704.28
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The Weight of Economic Risks

The internals of the GDP report were as ugly as the headline. The major source of weakness was what was supposed to be the sole source of strength – consumers. Real Final Sales to Domestic Purchasers, a measure of all goods and services Americans bought regardless of where they originated, increased by just 1.51% (quarter-over-quarter…

201704.28
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This Is Not Expansion

Back in October, the Bureau of Economic Analysis released GDP figures that suggested what those behind “reflation” had hoped. After a near miss to start 2016, the economy had shaken off the effects of “transitory” weakness, mainly manufacturing and oil, poised to perform in a manner consistent with monetary policy rhetoric. The Federal Reserve had…

201704.27
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Tomorrow’s GDP Report Will Confirm The ‘Jobs Saved’ Economy Remains

The advance estimate for GDP is scheduled for release tomorrow, and by current estimates it should be a total washout. Yet another first quarter is expected to be a disaster, the fourth in a row and the third straight under the “residual seasonality” regime that was supposed to reveal the hidden economic strength obscured by…

201704.12
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Optimal Lunacy

In June 2012, Janet Yellen, then the Vice Chairman of the Federal Reserve, addressed an audience in Boston with what for the time seemed like a radical departure. It was the latest in a string of them, for conditions throughout the “recovery” period never did quite seem to hit the recovery stride. Because of that,…

201704.11
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‘Reflation’ Breakdown, This Time Without Interruption

In the early trading on Friday, it looked as if “reflation” might break down entirely. The flurry of information seemed to be uniformly bad, from Syria to payrolls there wasn’t much for optimism to remain relevant. All of a sudden, however, it all reversed so that trading in the latter part of the day was…

201704.05
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Translating Bonds And ‘Dollars’

More than ten years after Alan Greenspan confessed to not understanding bonds and interest rates, the same assumptions that underpinned Greenspan’s “conundrum” remain as convention. If the Fed raises the federal funds rate by target or by corridor, then all rates should rise. It is believed to be just that simple, a fact (the belief)…

201704.04
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A Most Unaware Hurrah

We had become either sensitive or desensitized, depending on your definitions, to quarter ends full of turmoil and intrigue. In the monetary world, especially last year, each of the four seemed more interesting than the one preceding it – which was saying something given the state of the world during that time. Most of all,…