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More Thoughts about Potential for QE from the ECB

More Thoughts about Potential for QE from the ECB

By Marc Chandler There seems to be a stepped effort by ECB officials to talk the euro down. The process began with Draghi last week indicated that the euro has become a more salient factor as it poses a deflationary risk and threatens the fragile economic recovery.  Earlier today, Bundesbank President Weidmann specifically did not rule out quantitative easing but […]

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The big disconnect between leverage and spreads

The big disconnect between leverage and spreads

Market based information is telling us that spreads and leverage are now disconnected, fundamentals remain in-line with theory. Companies with higher net debt also have poorer liquidity positions.

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Interest rates and deflation

Interest rates and deflation

By Frances Coppola Scott Sumner argues that when the monetary base is fixed, low interest rates are deflationary. I’ve emphasised the fixed monetary base because it is an important condition. If the monetary base is NOT fixed then the relationship between low interest rates and deflation is much less clear. Logically, this makes sense. If the supply of base money […]

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Three PMI Surprises, but France Takes the Show

Three PMI Surprises, but France Takes the Show

By Marc Chandler There have been three flash PMI reports today, and each was surprising. China and Germany surprised on the downside while the French surprise was on the upside. HSBC’s flash read on China’s manufacturing sector weakened for the fifth consecutive month. The flash March reading of 48.1 compares with the final February of 48.5. The forward looking new […]

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Markets dismiss the risk of higher rates inhibiting growth

Markets dismiss the risk of higher rates inhibiting growth

Many continue to argue that the rate normalization taking place now will slow business activity in the US. Good luck betting on that however. There is no question that corporate America had benefited tremendously from extraordinarily low rates. Many US firms have locked in these rates over the past couple of years by refinancing – interest expense savings that go directly to the bottom line. But what will happen now as rates “normalize”?

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Economic consequences of income inequality

Economic consequences of income inequality

This is a loaded topic. This entry, however, is not intended to be political. Very few things in economics are good or bad in themselves, but rather can be good under certain conditions or bad under others. I want to try to tease out as logically as I can the conditions under which rising income inequality can be good or bad for the economy.

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Treasury market shifts as market prepares for rate “normalization”

Treasury market shifts as market prepares for rate “normalization”

Treasuries once again experienced what amounts to a sharp curve flattening in recent days. The market action resembled what took place after the initial announcement of taper back in December. The yields in the “belly” of the curve have risen sharply as the market prepares for rate “normalization”.

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How money matters: The Old Lady fails to get an “A”

How money matters: The Old Lady fails to get an “A”

Andrea Terzi Dr. Terzi is a Professor of Economics at Franklin University Switzerland and a Research Associate with the Levy Economics Institute of Bard College. One thing’s for sure: The financial crisis has dealt a deadly blow to what was until recently considered the state-of-the-art of monetary policy. Just compare the 1992 edition of Modern Money Mechanics, published by the […]

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The BoE’s sharp shock to monetary illusions

The BoE’s sharp shock to monetary illusions

I’m doffing my cap to the researchers at Threadneedle Street for a new paper “Money creation in the modern economy,” which gives a truly realistic explanation of how money is created, why this really matters, and why virtually everything that economic textbooks say about money is wrong. The bank is going gangbusters to get its message across, with an introductory paper on what money is, and two short videos on what money is and money creation, both shot in its gold vault. It clearly wants economic textbooks to throw out the neat, plausible but wrong rubbish they currently teach about money, and connect with the real world instead.

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The Fed and the Return of Ad Hockery

The Fed and the Return of Ad Hockery

By Marc Chandler There has been sharp rise in US interest rates and the dollar in the immediate response to the Federal Reserve’s statement. The key it seemed was the expectation that Fed funds would be at 1% at the end of next year. This is more than the market had expected. The December Fed funds futures were implying a […]

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Marc Faber: China’s Malinvestment Unwind ‘Will Be a Disaster’

Marc Faber: China’s Malinvestment Unwind ‘Will Be a Disaster’

Marc Faber appeared on Bloomberg Television yesterday to discuss the Chinese economy. While Faber generally seems to be a long-term bull on China, he had some disquieting things to say about the extent of malinvestment in China due to the recent round of government stimulus and infrastructure-oriented investment. Faber told Trish Regan and Matt Miller “I think that we had […]

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After Crimea: Next Moves

After Crimea: Next Moves

By Marc Chandler In response to the Crimean referendum, new sanctions have been announced. The European Union has announced sanctions against 21 Russian individuals. This was the bare minimum expected. It will include travel visa bans and asset freezes. The longer list, which reported will be used to escalate the pressure, includes 130 names. It is not thought to impact […]

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