Posts Tagged ‘inflation’

Notes From Underground: Mario, Don’t Try to Lay No Boogie Woogie On the King of Rock ‘n’ Roll

April 27, 2017

Mario Draghi’s nonsense is a compost heap as he tries to continue his efforts to build the ECB‘s balance sheet to the point of no escape. The ECB president danced around inflation questions by generally holding to the view that inflation across the entire euro zone would have to rise to the 2% level for the central bank’s mandate to be met. Currently, Draghi holds to the view that the recent elevated levels of inflation are transitory due to higher energy costs. It was noted that there has been a decline in service sector costs, which could put downward pressure on inflation once the energy prices pass through the data. Draghi also emphasized that with the current unemployment levels in some EU countries there was far too much slack which keeps wages from rising. A positive point for the ECB is that it does not follow NAIRU as a major gatekeeper of wage levels. In his typical effort to elevate his position, Draghi applauded the ECB for saving the EU financial system and economy, but until the politicians make the needed structural changes there will be continued “substantial monetary accommodation” so the ECB can meet its inflation mandate.

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Notes From Underground: Will the Year of the Rooster Deliver a Wakeup Call?

December 18, 2016

In a September 11 post, I criticized the Japanese Central Banks’s policy for its technical approach to attempt to steepen its 2/10 yield. I wrote the following:

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Notes From Underground: The Magnificent Seven … the Governors Fall In Line

September 21, 2016

The vote was the key to the FOMC statement. Three regional presidents voted to raise rates for various reasons but at least the votes reflected their speeches. The Magnificent 7 voted to maintain rates at the current levels and wait for more time for labor market conditions to tighten as wage growth accelerates. (I TELL YOU JANET IT IS ALWAYS SOMETHING.) So the governors, plus new dove James Bullard, held firm against the outlying presidents. There’s no inner court role for Mester, George or Rosengren. My problem is that Stanley Fischer and William Dudley, both vocal proponents of raising rates, voted with Chair Yellen. Make no mistake about it, THIS IS JANET YELLEN’S FED.

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Notes From Underground: Cramer Unsavory? I Think Not

January 14, 2016

Jim Bullard? Now There Is An Unsavory Chap

Today was not like the other days for the break in the equity markets came early. As all the global markets were in sell mode St. Louis Fed President James Bullard hit the airwaves with thoughts about being wrong in his inflation projections. It appears that the selloff in crude oil is providing the Fed hawk with concerns that the SUMMARY of ECONOMIC PROJECTIONS may be softer than the December FOMC meeting revealed. Bullard sounded as if he would not be in favor of the Fed raising rates because of the inflation rate turning away from the spurious 2 percent mandate. The unsavoriness of Bullard’s comment is not that he fears a downturn in inflation, and maybe lower growth, but that Bullard seemed to find his DOVISH posture as the U.S. markets were heading toward the August lows. Bullard in unsavory because he called out CNBC’s Jim Cramer for “cheerleading for low rates twenty-four hours a day.”

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Notes From Underground: A Few Things Before the Financial Ship Sails

October 12, 2015

When holiday markets quash volume and new items repetitive, it provides an opportunity to catch up with some general concepts in a style I like to call “Quick Hitters.”

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Notes From Underground: The Washington Redskins Should Change Its Name to the 37ers

September 20, 2015

Readers of NOTES FROM UNDERGROUND are aware that one of my major themes during the past six years has been Ben Bernanke’s pledge to Milton Friedman at MILT‘s 90th birthday. I’m paraphrasing, but Bernanke vowed the Fed would not make the mistakes of 1937 and raise rates in a period when fiscal policy was tight and monetary policy needed to be loose to sustain its velocity. In 1937 the combined policies of the FED and the Henry Morgenthau Treasury tightened together, which led to a renewed recession of the U.S. economy and a severe bout of renewed DEFLATION. It is the FED‘s and other central banks main thrust: To prevent a deflationary cycle taking hold. Bernanke is the ultimate 37er. For the FED, “whatever it takes” means inflation running hot so as to prevent any possibility of the LIQUIDATIONISTS and DEFLATION gaining a foothold in the economy.

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Notes From Underground: “It Was the Best of Times. It Was the Worst of Times”

December 28, 2014

As 2014 draws to a close, the financial landscape is definitely a tale of two disparate economies as the U.S. reports 5 percent GDP while Europe struggles to maintain zero growth and avoid “recession.” (I despise the official definition of a recession being two consecutive quarters of negative growth.) In Spain, Italy, Greece Portugal, France and other countries, double-digit unemployment defines a recession and the potential it brings for political turmoil.

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Notes From Underground: The Significance of Japan’s Monetary Action

November 11, 2014

A Reuters story today (“Kuroda Sprang Easing Surprise to Head Off Damaging Inflation Forecast”) suggested that the move by the BOJ was a rapid and expedient effort by Governor Kuroda to prevent the markets from believing that the previous Japanese actions to “ignite” inflation had been a failure. The BOJ had been trying to target 2 percent inflation but the recent fall in oil and energy prices was placing downward pressures on inflation, calling into question previous attempts by the Japanese authorities to raise inflation expectations.

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Notes From Underground: How Do Markets Test the FED?

June 23, 2014

In following up on the theme of the last three blog posts, it’s always a question how  markets test central bank policies. As is frequently mentioned, when investors fear that central banks will err on the side of LIQUIDITY EXUBERANCE precious metals and hard assets are bought in efforts to prevent the POSSIBLE EROSION of asset values. In times when the market perceives the FED to be ahead of the inflation curve, investors buy long-term bonds and lock up higher rates in a belief that an aggressive Fed will successfully slow the economy. Thus, locking up high rates now will generate a higher real yield as the economy begins to slow, resulting in a flattening of the yield curves. When the Fed is deemed to be behind the curve, investors sell long-dated debt in belief that the FED will at some point have to aggressively raise rates to stem incipient inflation, resulting in a steepening yield curve.

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Notes From Underground: Tidying Up Before the Yellen Press Conference

June 17, 2014

Has the Federal Reserve lost its MIND!?!? The front page of the Financial Times’ headline read: “Fed Fears Over Bond Fund Run.” Fed officials are publicly ruminating about the need to impose EXIT FEES on bond funds so as to prevent a RUN BY INVESTORS. The Federal Reserve worries that the massive buildup in bond funds makes the market vulnerable to a classic run in an event of a some type of market destabilizing event. The idea, according to ex-Governor Jeremy Stein, is to slow redemptions in a crisis because corporate bond funds are the “… essence of shadow banking … giving people a liquid claim of illiquid assets.”

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