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Tag Archives: eurodollar standard

When The ‘Risk-Free’ Rate Is Risk…

Treasury bill rates have been trading notably higher of late, with the 3-month bill equivalent yield as much as 37 bps this week. Though it was the highest rate since November 2008, a true reading of bill history shows that it is not a matter of Fedearl Reserve policy “normalization.” Trading in bills, especially the 3-month, makes indications of risk somewhat more obscured. For example, though “dollar” liquidity was clearly problematic and getting worse from mid-July 2015 all the way...

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More Bad Economic News From The Oil Patch

At the end of August, the US Energy Information Administration reported that it had been overstating domestic demand for oil and energy products to a considerable degree. Using imprecise and lagging data, the calculations for the amount of product being exported overseas was understated by an average of 16%. That meant more output was being used elsewhere, thus less product being used here. While that is a positive for US producers being able to ship wherever they can, it was a more savage...

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More Indications of Labor Slowing—-Yellen’s Favorite Index Hits The Skids

The Federal Reserve’s Labor Market Conditions Index (LMCI) fell to contraction again in August. After rebounding in July for the first positive reading of 2016, the LMCI dropped to -0.7 in the latest update. As usual, revisions have reshaped the levels of indicated problems throughout the past two years, but overall the trend remains. From this view of the labor market, the economy is surely slowing even if taking two years to suggest by how much. As I wrote earlier today, I believe that is...

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The Real Economy: What The Interest Rate Fallacy Truly Means

Just a little over a year ago, the Institute for Supply Management (ISM) released its purchasing manager index for the services sector for August 2015. Though the level was down slightly from July, coming amidst the immediate aftermath of the “shocking” financial quakes starting in China and spreading to markets all over the world, the 59.0 non-manufacturing PMI was welcome relief. In the mainstream narrative where the unemployment rate was meaningful, any positive indication about the...

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Slowing And Even Contracting——Hours And Earnings

The primary symptom of the economic malaise or depression that has developed since the Great Recession (which wasn’t a recession) is an economy that works less and thus earns less. Such a condition would suggest a shrunken system or at least vastly diminished potential. That much is well-established even in the orthodox literature though it isn’t ever talked about publicly. What happens, however, when an economy that is already working and earning less starts to reduce even further? I don’t...

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RIP: Oil ‘Supply Glut’

The most remarkable aspect of the WTI crude oil futures curve this month has been its amazing ability to maintain its shape no matter which direction or by how much. Previously, as “dollar” pressures either built or ebbed, the futures curve would either steepen at the front (liquidation pressure) or flatten toward more normal backwardation (easing of the “dollar” difficulties). That was the case since June 8 when the WTI curve was at its flattest in well over a year; but as funding pressures...

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The Monetary Wildfires In Canada

The massive wildfires in Alberta earlier this year had a tremendously negative effect upon not just the oil sector but all of Canada. Not surprisingly, Canadian GDP released today was abysmal. Falling 1.6% in Q2, that was the worst quarter since 2009. Fortunately for the Bank of Canada who had been “stimulating” again since last July when it cut the overnight rate by 25 bps to 0.50%, the wildfires give its policies some cover to explain what would have been otherwise already dismal....

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Trapped In Low Growth By Central Bank Ineptitude

The mainstream, dominant view of monetary policy remains as if it were “accommodative” or “stimulus.” Low rates and/or balance sheet expansion are treated as one and the same in terms of economic effects. The mountain of economic evidence since the end of the Great Recession, however, argues that that view is backward; starting with the observation that the Great Recession itself was no recession.  This is a universal problem and not just one for which the Federal Reserve and the United...

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It Was All A Dream—–Japan’s Monetary Fiasco Removes All Doubt

Last Friday the Statistics Bureau of the Japanese Ministry of Internal Affairs and Communication reported some more bad news for Prime Minister Abe and really Bank of Japan chief Kuroda. Month-over-month, the consumer price index was down again, leaving it 0.48% less in June 2016 than June 2015. This was the third consecutive month of increasingly negative year-over-year CPI estimates. When QQE was first implement back in April 2013, its staff economists guessed that it would take two years...

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What The FOMC Keeps Repeating Is What Matters, Not What It Changes

As usual, everyone is focused on the wrong part of the FOMC statement. There is already a lot being made about the one sentence inserted as “hawkish” sentiment that puts the economy, supposedly, back on its fruitful, “full employment” track. In a clear sigh of relief undoubtedly in relation to the scary May payroll report, the July 2016 FOMC statement confidently announces: Near-term risks to the economic outlook have diminished. Why anyone would give it any weight at all is a mystery. The...

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