201805.16
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And Now For Something Completely Different

Back in February, Japan’s Cabinet Office reported that Real GDP in Japan had grown in Q4 2017 for the eighth consecutive quarter. It was the longest streak of non-negative GDP since the 1980’s. Predictably, this was hailed as some significant achievement, a true masterstroke of courage and perseverance. It was taken as a sign that…

201805.07 7

If There Was No QE, How Could There Be QT?

How big should the Fed’s balance sheet be? It’s a topic that has taken over a lot of academic discussions. Recall that before 2008 the level of bank reserves was practically nil. They didn’t play much of a role in any money market, required reserves or not (this should be a big clue). After four…

201805.02
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Making (of) A Statement

I am decidedly in favor of going back to the way it was twenty-five years ago. These constant communications from the Federal Reserve, designed to increase transparency, have accomplished the opposite. Alan Greenspan was made famous for first being an accidental genius (no, it wasn’t massive offshore monetary growth that made the Great “Moderation”, it…

201804.20
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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…

201803.21
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No Hawks Nor Doves, Just Dollar

On January 24, Treasury Secretary Steve Mnuchin either misspoke or let slip a Freudian sort of wish. Extolling a weak rather than strong dollar, it was seemingly a total break from longstanding official US policy. It’s not really a policy anyone takes too seriously, if for no other reason than the dollar isn’t really a…

201803.20
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The Real Basis For These ‘Rate Hikes’

Tomorrow, it is widely expected that the FOMC will vote for another 25 bps “rate hike.” The long end of the UST curve is already just as unenthused as ever, while the short end expects higher yields on money substitutes. The result is the very familiar collapse in the yield curve, one that like both…

201803.13
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The X’s and Y’s Of Jerome Powell & The Long End, As Calculated by Eurodollar Futures

For the end-of-bond-bull-market-crowd, 3% is a line in the sand. There is no inherent significance in that number, except that it’s a round one. The benchmark 10s as of now trade with regard to that level as if it’s a ceiling. That’s what makes it so momentous. In 2013, the yield finally broke 3% the…

201803.13
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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…

201803.05
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China Going Boom

For a very long time, they tried it “our” way. It isn’t working out so well for them any longer, so in one sense you can’t blame them for seeking answers elsewhere. It was a good run while it lasted. The big problem is that what “it” was wasn’t ever our way. Not really. The…

201802.28
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The Only Thing That Matters (Europe)

Effective June 10, 2014, the European Central Bank cut the interest rate it paid on its deposit account to less than zero. That instrument in forming the floor for what is a money market corridor in European policy, it was the world’s first major NIRP experiment. Europe’s economy had by GDP been growing again for…