201807.05
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Very Strong(ly Worried)

Inflation hysteria and the boom hysteria may both seem like they are one and the same thing. They are related, sure, and they represent similar objects. However, there are subtle differences. The mania over inflation, for example, has subsided while the one about the economy reaches its own feverish pitch. In early June, Newt Gingrich…

201807.05
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Talk About Binary; No In Between, Either Boom or Renewed Deflation

CNY has held up over the last few days after Chinese officials intervened. Central bank actions like these tend to work if only over the very shortest timeframes. The tentative calm there, however, hasn’t extended universally. Copper, for one, has fallen right out of its Reflation #3 range. Selling off solidly for almost a month…

201806.27
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Big Mama Leaves Huge Footprints Stepping All Over ‘Devaluation’

Not a good day to be a global central bank. Competitive devaluations all around? Kidding aside, it’s getting serious in China. CNY DOWN = BAD, so says Big Mama. “The kind of dollar selling from that bank was so aggressive that we knew instantly that it must be from the Big Mama,” said a Shanghai-based…

201806.27
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There Is Only One Global Trade War

IHS Markit reported last week that its composite Purchasing Managers Index (PMI) rebounded slightly in its first reading for June 2018. In January, the index had managed nearly 59, the highest in a very long time. It was taken as a definitive sign that Europe’s economy was not only booming, that boom was sustainable. Global…

201806.25 9

Revisiting China and ‘Devaluation’ As China Revisits ‘Devaluation’

When the Chinese yuan suddenly plummeted in mid-August 2015, the world looked on in stunned confusion. It didn’t make sense. The global economy was about to take off, they thought, and it wouldn’t be doing that without China’s vast anticipated contributions. Such a large move in such a short time frame for a major currency…

201804.16 12

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…