In the middle of 1919, the United States was beset by a great many imbalances. Having just conducted a wartime economy, almost everything before then had been absorbed by the World War I effort. With fiscal restraint subsumed by national emergency, inflation was the central condition. Given that the Federal Reserve was by then merely a few years old, no [...]
It was announced yesterday that former New Jersey governor and one-time head of MF Global John Corzine won’t be allowed anywhere near clients in the futures business. Though a lifetime ban, the man is already 70 years old and the damage done. Perhaps there is some more comfort in the $5 million fine levied against him in addition to the [...]
Part 1 is here. Part 2 is here. From the point of the Great Crash forward the interbank market mostly ceased to exist. Having first learned the hard way about money and liquidity, the federal funds market as well as the trend for recirculating borrowed reserves largely died out. Banks overall carried massive reserve balances far in excess of what [...]
Part 1 is here. Having used monetary policy and proved its ability to manage big things and even force onto the monetary system and the economy big changes, the Federal Reserve grew in esteem and prestige so that what followed was the hardening assumption that monetary policy could be used similarly for all circumstances. It was not just the burgeoning class [...]
One of the biggest intellectual impediments to understanding where we are in the arc of monetary evolution is Positive Economics. As Milton Friedman described it in 1953, it was essentially the doctrine of trying to explain a lot knowing very little. In such a simple description it sounds ridiculous, but in the reality of complex systems growing only more complex [...]
Today was, apparently, the perfect storm of downbeat PMI’s. As usual, sentiment surveys have limited value except in cases of outliers or in unanimity. There was some of both across the world’s manufacturing updates. First, which was certainly most watched, China’s PMI fell to a three-year low below 50, further suggesting that there isn’t yet a bottom for how much [...]
Goldman Sachs reported weak earnings today, following Bank of America Merrill Lynch yesterday. The core problem at each is their dealer businesses, though it is difficult to get at that central function in the lumpy, conglomerated mess that passes for (incomplete) financial statements. Goldman’s FICC “revenue” dropped by almost a third in the second quarter from a Q2 2014 that [...]
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