Fretting on the Fed: Monitor No.5

Falling returns in the US. Tight money in China. An upswing in Japan. Deflation in India. Gold goes cold. Fretting the Fed on falling CPI and a flattening curve? No need to panic, just yet.

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17-06-20 M4 No5

Dies illa? Not just yet.

The First Time as Tragedy

In the past, our ready predisposition to fear the worst has proven to be well-founded. Indeed, through much of the two years leading up to the Great Crash of 2008, there was all too much evidence to ignore that a kind of collective madness had gripped the whole universe of investment world and had spilled out from thence into every plot of building land and every auction house in the real world.

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Uncertainty! GASP!

Amid the relative torpor of the US holiday, it might be the moment to wax a little philosophical and ask if you, the listener, have ever noticed that so much of what passes for economic wisdom today involves the persistent overuse of the word ‘uncertainty’? Continue reading

Time to Get Real

Having just managed to quell a dangerous rebellion among her fellow Committee members, it did not seem the most opportune time for Janet Yellen to start dreaming of the sort of post-war ‘demand management’ that would happily trade a few extra percentage points of price inflation in order to move a little further up the employment axis in that unshakable vision of the Phillips Curve that seems to dominate the modern central banker’s thought processes.

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Historical Norms? Really, Janet?

In the Q&A which followed the latest Federal Reserve exercise in ostrich imitation, Janet Yellen offered up this giant hostage to fortune, if only in the spirit of she-would-say-that-wouldn’t-she:

‘Overall, I would say that the threats to financial stability I would characterize, at this point, as moderate. In general, I would not say that asset valuations are out of line with historical norms.’

Patently, if she has somehow arrived at the determination that there is no indeterminably constituted asset bubble in operation, then it figures that non-bubble asset prices cannot be out of line with their norms. Chalk one up to answering one’s own question in the affirmative.

But how much truth is there in this claim? Not very much at all as you will discover if you click on the following link to read this extract of the latest monthly ‘Money, Macro & Markets‘:

MMM Sept 2016 Pt III

 

The Hitchhiker’s Guide to the Fed’s Toolkit

In light of the breathless anticipation which preceded the Fed Chair’s speech to her peers at Jackson Hole and cognisant of the mild state of befuddlement with which it was received, we felt it would be of interest to readers to have a translation, together with a gloss (each in bold), in order to try to remove some of the obscurities contained therein. Continue reading

A Trap of their Own Making

As we have laid out in some detail in our professional work, it is clear that Chinese banks have entirely lost their inhibitions about creating money these past twelve months. It is equally clear that once such money is called into existence, someone must be caught in the act of holding it when a balance sheet snapshot is taken, however eager their desire to ‘pass the bad or depreciating half-crown to the other fellow’ may be and thus regardless of what the fate of that money will be an instant after the shutter has closed on the statistical camera. Continue reading

Money, Macro & Markets – The Archive

Regular readers will know that the articles published here are but a small subset of the detailed work I undertake to analyse economic and political developments and their effects on markets. In order to give some idea of the scope of this, presented below is an archive of past issues of the Austrian School-informed, in-depth monthly publication, ‘Money, Macro & Markets’ in addition to which I compile twice monthly updates as the ‘Midweek Macro Musings’ which are also made available on a complimentary basis to subscribers to the former letter.

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I Love the Smell of Napalm in the Market

That usually perceptive and always interesting observer of the financial Zeitgeist, Bloomberg’s estimable Mark Gilbert, recently penned an article entitled: “Milton Friedman’s ‘Helicopter Money’ Is Looking Less Crazy.” In response, I mailed him the comments which follow (with light editing) here. Continue reading