201801.12
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Good or Bad, But Surely Not Transitory

When Federal Reserve officials first started last year to mention wireless network data plans as a possible explanation for a fifth year of “transitory” factors holding back consumer price inflation, it seemed a bit transparent. One of the reasons for immediately doubting their sincerity was the history of that particular piece of the CPI (or…

201712.26 3

From ‘Definitely Transitory’ to ‘Imperfect Understanding’ In One Press Conference

When Janet Yellen spoke at her regular press conference following the FOMC decision in September 2017 to begin reducing the Fed’s balance sheet, the Chairman was forced to acknowledge that while the unemployment rate was well below what the central bank’s models view as inflationary it hadn’t yet shown up in the PCE Deflator. Of…

201712.14
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Inside and Outside, Market and Models Actually Agree On A Final Failing Grade For Yellen

It was another pretty embarrassing day for the Federal Reserve and its policymaking body the FOMC. The latter voted, as expected, to raise the federal funds corridor (or double floor, if you can’t get over IOER fail) by another 25 bps. The long end of the Treasury bond market, however, was bid pushing yields down…

201712.12
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Moving Toward The Right Way To Get Off The Wrong Track

Of the few economists honest about the economy, there has been a struggle to come up with an explanation for persisting economic struggles. That has led to a plethora of labels applied to the last decade. Brad Delong, for example, once called it the Lesser Depression. Larry Summers has revived Alan Hansen’s Secular Stagnation. I…

201712.11
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Severe Jolt In JOLTS

The biggest proponents of the BLS data have been FOMC policymakers. Right from the taper tantrum of 2013, the unemployment rate has given them, and the Economists who depend on their views for crafting their own, an almost definitive set of parameters for interpreting all other economic statistics. Everything is immediately filtered through the lens…

201711.21
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The Bond Market Does, In Fact, Use The Correct Start Date

First Bernanke, now Yellen. As I wrote earlier today, there is a growing tendency to revise economic history at least as it applies to official actions. Ben Bernanke defends QE from the perspective of 2009 forward, as if 2008 was all just someone else’s problem irrelevant to the world that came after. In effectively resigning…

201711.07
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Everything Now On Slack

The whole thing really does unravel at the unemployment rate. If it indicates the correct view of the economy, even close to “full employment”, then what follows is fairly typical and orthodox stuff. In the context of what the Fed is doing, short-term rate hikes are leading the longer end of the yield curve toward…

201710.20 3

Political Economics

Who President Trump ultimately picks as the next Federal Reserve Chairman doesn’t really matter. Unless he goes really far afield to someone totally unexpected, whoever that person will be will be largely more of the same. It won’t be a categorical change, a different philosophical direction that is badly needed. Still, politically, it does matter…

201709.29
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Non-Transitory Meandering

Monetary officials continue to maintain that inflation will eventually meet their 2% target on a sustained basis. They have no other choice, really, because in a monetary regime of rational expectations for it not to happen would require a radical overhaul of several core theories. Outside of just the two months earlier this year, the…

201709.27
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Yellen Is So Much Better, And Still Nowhere Near Good

I wrote earlier today that I believe Ben Bernanke one of the smartest men around. Whatever you might think of the usefulness of his career work, it is quite clear it was accomplished with some great talent. He occasionally offered some good, novel insight. I’m not so sure about Janet Yellen. While her trademark deer-in-the-headlights…