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Tag Archives: Central Banks

The Fed’s  Doomsday Device

  Bezzle BALTIMORE –  Barron’s, in a lather, says the market is facing the “Two Horsemen of the Apocalypse.” Huh?   Only two? There were four last time!   Supposedly, the so-called Brexit – the vote in Britain this Thursday on whether to leave or remain in the European Union (EU) – and uncertainty over where the Fed will take U.S. interest rates are cutting down stocks faster than a Z-turn mower. But Brexit is a side show. As our contacts in London explained in last...

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Soft and Softer Silver Fundamentals

  Loose Monetary Policy Remains in Place Last week, we asked where then will silver go. Well, the price moved around this week, dipping on Thursday but then rebounding sharply on Friday. It closed up 13 cents from last week. The price of gold rose $24. This week, the Federal Reserve announced that it will not hike rates. Most economists (and traders) have long been expecting a hike (not us).  It was just a thought…. Cartoon by Bob Rich   A hike is tighter monetary...

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Janet Yellen’s $200-Trillion Debt Problem

  Blame “Brexit” BALTIMORE – The U.S. stock market broke its losing streak on Thursday [and even more so on Monday, ed.]. After five straight losing sessions, the Dow eked out a 92-point gain. The financial media didn’t know what to say about it. So, we ended up with the typical inanities, myths, and claptrap.   “Investors” are pushing the DJIA back up again..apparently any excuse will do at the moment. The idea may backfire though, as exactly the same thing happened shortly...

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Down Go the Hopes and Dreams of Three Generations

  A Sucker’s Deal The yield on the 10-Year Treasury note’s accelerating its descent toward zero.  The last we checked the yield was at about 1.56 percent.  But in every practical sense, for income investors, a yield of 1.56 percent may as well be zero.   Even though the US treasury note is like the one-eyed man in the land of the blind these days, it still is a guarantee to lose money in real terms if held to maturity – click to enlarge.   For example, at that rate, if...

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The Fed Has Lost Its “Myth Magic”

  Myths Are Worth Wondering About Wondering is what we do, here at the Diary, especially wondering about myths. “Myths” are not necessarily untrue. They just can’t be known or proven in the way, say, that Archimedes could prove that the king’s crown was made of gold.      Antiquity’s most famous patent troll Archimedes shortly after his famous epiphany in the bathtub   The Old Testament reports on God, for example, could be literally true, symbolically or metaphorically...

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Corporates are responding to the new ECB corporate sector purchase programme

We have observed a sharp increase in corporate bond issuance following the ECB’s announcement in March this year, but it is too early to see the effects on investment by non-financial corporations. With the ECB’s purchases of corporate bonds, which started on the 8th of June, the ECB’s interventions in bond markets have become much more targeted. The Corporate Sector Purchase Programme (CSPP) involves outright purchases of investment grade euro-denominated bonds issued by non-bank...

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Are central bank(er)s still credible?

Both the Fed and the ECB have managed to remain credible since the financial crisis, but their credibility levels have evolved differently. Since inflation in the US and the euro area has been similar in the past 8 years, the difference in the way that credibility has evolved is the result of the different macroeconomic policy mix applied. As policymakers prepare to go to unexplored lengths in using unconventional monetary measures (Gürkaynak and Davig 2015; Roubini 2016; Demertzis and...

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A Darwin Award for Capital Allocation

  Beyond Human Capacity Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy.  The inputs are too vast.  The relationships are too erratic.   The economy – complex and ever-changing interrelations. Image credit: Andrea Dionne   Quite frankly, keeping tabs on it all is beyond human capacity.  This also goes for the federal government.  Even with all their data gatherers and...

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Janet Yellen – Backtracking Again

  Muhammad Ali Could Take a Punch BALTIMORE – You had to admit. Muhammad Ali could take a punch. Unlike Donald Trump, Dick Cheney, George W. Bush, and Bill Clinton, he was a real war hero. He stood up and faced his enemies on the draft board, rather than dodging them.     An iconic photograph: Muhammad Ali after knocking out Sonny Liston. Photo credit: John Rooney / Associated Press   And when the feds walloped him as a criminal draft resister, Ali didn’t...

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Turning Stones Into Bread – The Japanese Miracle

  Stuffing the Futon Our friend Ramsey Su just asked what Haruhiko Kuroda and Shinzo Abe are going to do now in light of the strong yen (aside from perhaps doing the honorable thing). Isn’t it time to just “wipe out some debt with the stroke of a pen”?   The modern Samurai futon!   We will return to that question further below, but first a few words on the new Samurai futon. Apparently the Japanese are becoming more than a little antsy about Kuroda-san’s negative...

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