Category: Weekly

The new normal that never was

The new normal that never was

The extended period of low growth following the Global Crisis was denoted the ‘New Normal’ by some. This column argues that the period is still ongoing, and would be more usefully described as the ‘New Abnormal’. Far from being an equilibrium, the low growth was achieved by progressively more aggressive and unprecedented monetary policy actions, in response to a series of financial panics. Furthermore, the aftershocks of the Crisis are still colliding with a series of profound structural changes to and instabilities in the global economy.

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Negative interest rates are just a tax on reserves that lowers net interest margins

Negative interest rates are just a tax on reserves that lowers net interest margins

The primacy of monetary policy continues unabated as central banks go further and further down the rat hole of increasingly desperate measures to boost demand. First, it was quantitative easing. Now, the latest scheme is negative interest rates. They tell us that monetary policy is not exhausted and that still more policy initiatives lie ahead, particularly helicopter money. However, we should be sceptical that any of these policies will gain meaningful traction before another economic downturn. Brief comments below

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The German current account surplus requires deficits elsewhere

The German current account surplus requires deficits elsewhere

Germany is a member of a currency union over which it has no monetary authority. So no one can accuse the country of ‘manipulating’ its currency. Yet, Germany is displaying huge current account surpluses that are illustrative of a dangerous imbalance which when corrected will cause violent disruptions to trade and lead to populist and autarkic political rhetoric. This is what awaits us when the global economy slows further.

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Is the Fed panicked about the downshift in the US economy?

Is the Fed panicked about the downshift in the US economy?

The minutes from the Federal Reserve Board’s last meeting have come out and they are dovish. While on the one hand, we should praise the Fed for showing it is data-dependent just as it has professed to be, on the other hand, the abrupt change in is somewhat alarming. I would suggest the Fed is not necessarily panicked but it is certainly […]

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The Eurozone has been infected by the US slowdown

The Eurozone has been infected by the US slowdown

Recent data releases related to the Eurozone have been disappointing. This column argues that momentum from the long-delayed 2014-15 recovery is faltering because the Eurozone economy is affected, with a lag, by the US slowdown. The traditional, lagged relationship between the EZ and US business cycles – which disappeared in the aftermath of the Global Crisis – is now reasserting itself.

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Britain, Brexit, and sovereignty

Britain, Brexit, and sovereignty

A destabilized Europe adversely impacts the UK within or without the EU. The UK is tied to Europe in ways that leaving the EU will not sever. Ironically, the UK may find it has less sovereignty if it leaves the EU than within it.

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Why China cares about Japan’s negative rates

Why China cares about Japan’s negative rates

By Frances Coppola originally posted at Coppola Comment Japan has just introduced negative rates on reserves, following the example of the Riksbank, the Danish National Bank, the ECB and the Swiss National Bank. The Bank of Japan has of course been doing QE in very large amounts for quite some time now, and interest rates have been close to zero […]

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My thoughts on the US Q4 2015 GDP numbers

My thoughts on the US Q4 2015 GDP numbers

The US economy is not in a recession right now and the latest numbers on US GDP confirm this view. And while the headline growth number was weak, the consumer spending and personal income numbers are supportive of 2%ish growth into 2016. Some brief comments below U.S. GDP growth came in at a very weak 0.7% annualized pace for Q4 […]

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Is there a US Goldilocks scenario possible for 2016?

Is there a US Goldilocks scenario possible for 2016?

The jobs report today was a strong one, underscoring the ability of the US economy to power through. Am I uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance? Yes – and I tend to think most of the risk is to the downside. Even so, there is a Goldilocks scenario […]

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The Saudis as the driving surplus oil producer

The Saudis as the driving surplus oil producer

As Brent crude hits 11-year lows, it’s worth thinking about why it is so low and what the likely outcomes will be. Warren Mosler has a view I think works regarding the Saudis as swing producer, targeting quantity instead of price and I want to run this concept by you to understand where this is headed. I believe oil is […]

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The Fed rate hike and the potential for US recession

The Fed rate hike and the potential for US recession

I am uneasy about where we are in the economic and credit cycle and the accuracy of the Fed’s forward guidance. I think we are above stall speed now. But I also think global policy divergence, slowing earnings growth and poor capex numbers could combine to bring on recession in 2016.

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When market contagion occurs, this is how it will happen

When market contagion occurs, this is how it will happen

Editor’s note: This post was originally published yesterday at Credit Writedowns Pro. I have been pretty sanguine about the markets and the US economy. Yes, the commodities complex is worsening, but that doesn’t mean this feeds through enough into other sectors to force the market down. And the real economy isn’t at stall speed yet either.We just aren’t there yet. Nevertheless, […]

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