George Soros’ successful bet against the British pound back in 1992 remains one of financial history’s epic tales. The short version of the story begins with Britain linking its currency, the pound, to the German deutschmark via the European Exchange Rate Mechanism (ERM). But Britain’s inflation rate was higher than Germany’s, which created a growing […]
Fed Starts To Walk Back Its Rate Hike. Next Step: More QE, Bigger Experiments
That didn’t take long. A month after the Fed’s dreaded quarter-point interest rate hike, the markets tank and out come the talking heads to promise that whatever is bothering traders, Daddy will make it right. Falling inflation expectations could mean policy rethink: Fed’s Bullard (Reuters) – The continued rout on global oil markets has caused […]
A Monster With A Key To Its Own Cage
Out on the fringes of monetary policy, a merger of sorts is taking place between the debt jubilee and Modern Monetary Theory (MMT). The result — likely to emerge sometime in 2016 — will make the past decade’s bank bailouts and QE programs look like kid stuff. Let’s start by defining these terms: The debt […]
Market Figures Out Fed No Longer Has Its Back
US stocks soared while the Fed was meeting to raise interest rates this week — though it’s not clear why that should be so since monetary tightening isn’t generally a good thing for stock prices. In any event, it didn’t last. Over the past 48 hours the Dow is down more than 3%, with many, […]
Is Anybody Okay Out There?
In normal times, the world’s major economies are a mixed bag. Some are up, some are down, some are placid, some are in crisis. It’s only at the boom/bust extremes that everyone finds themselves in more-or-less the same boat. This is looking like one of those times — and the boat is sinking. Japan, for […]
The Fed Just Whacked Corporate Earnings
The markets seemed to like what the Fed had to say yesterday, including the part about definitely, for sure, no kidding around this time raising interest rates in December. Especially elated were currency traders, who bid the US dollar up on the news. Somewhat less enthusiastic, however, are the corporate executives who have seen their […]
Can The US Raise Rates When Everyone Else Is Cutting Them?
It’s understandable (sort of) that the Fed wants to raise short-term interest rates so it can cut them again in the next downturn. But what if the next downturn is already here? That’s the signal being sent by the world’s other central banks: Sweden’s Central Bank Expands Stimulus Program (New York Times) – Sweden’s central […]
Europe Admits QE Has Failed, Promises More Of It
New Age monetary policy has begun to resemble the form of insanity in which a patient repeats the same behavior while expecting a different outcome. Throughout the developed world, interest rates are at record lows and central banks continue to pump out newly-created currency. Yet growth remains tepid, inflation is nonexistent and debt of every […]
Can You Imagine The Fed Raising Rates In This World? Everything Going Wrong At Once Edition
After the markets failed to embrace its most recent interest rate dither, the Fed dispatched pretty much its entire PR team to make sure we understood that rates would rise Next Month For Sure. Then everything kind of fell apart. Emerging market capital flight accelerated… Is this the mother of all warnings on EMs? (CNBC) […]
World Enters Twilight Zone Where Markets Demand Higher Interest Rates
So the Fed decides not to raise rates, and global stocks tank. Then they trot out their in-house PR staffer Jim Bullard to proclaim that rates will go up next month — and US stocks rally. What’s going on here? Traditionally — that is, since the world took on so much debt that central banks […]
Why The Big Banks Want Higher Interest Rates
Something strange is happening in the banking business. In theory, a low interest rate environment is good for banks because it allows them to borrow money for next to nothing and lend it to auto or home buyers for considerably more, making a nice fat spread. And that’s pretty much how it’s been going. U.S. […]
Higher Interest Rates? Not Next Month, Not Even Next Year, In Three Charts
Not only did the Fed vote to keep interest rates stable yesterday, it did so overwhelmingly — with just as many members apparently favoring lower rates as higher. Now all the people who bought the “rate normalization” promise/threat are backtracking. From today’s Bloomberg: Expecting a Fed Rate Increase by Halloween? Maybe Reconsider Federal Reserve Chair […]
The US Has Already Tightened — Which Explains A Lot
Next week we’ll find out if the longest-ever will-they-or-won’t-they drama involving a virtually insignificant quarter-point interest rate change will amount to anything. But either way, US monetary policy is already a lot tighter than it was a year ago. The Fed’s balance sheet, for instance, is a measure of how much new currency it is […]
Here’s The Argument That Wins In 2016
Vox is a fairly new website with a mission to not just report the news but explain it. A typical article will lead with a lot of background, bringing readers up to speed on what the subject is and why it matters before moving on to current events. All things considered, this is a great […]
The Fed Talks And The Market Tanks. That’s Different
Normally there’s a distinct pattern to the impact of Federal Reserve statements on the financial markets. The tone of equities trading in particular starts to improve as the moment of the announcement approaches; the words turn out to be blandly positive, full of promises of easy money and upbeat forecasts; and share prices soar for […]