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Tag Archives: interest rates
Are Petrocurrencies Heading For Extinction?
Are Petrocurrencies Heading For Extinction? Petrocurrencies are breaking away from their traditional tight link to oil prices, but all it would take for this link to return is for prices to fall bellow their current range. This seems to be the general consensus among bankers interviewed by Bloomberg’s Natasha Doff and Anna Andrianova. The change […]
Falling Interest Rates
Falling Interest Rates Amassing Unproductive Debt Last week, we discussed the marginal productivity of debt. This is how much each newly-borrowed dollar adds to GDP. And ever since the interest rate began its falling trend in 1981, marginal productivity of debt has tightly correlated with interest. The lower the interest rate, the less productive additional […]
Volatility and the Alchemy of Risk
Volatility and the Alchemy of Risk Reflexivity in the Shadows of Black Monday 1987 The Ouroboros, a Greek word meaning ‘tail devourer’, is the ancient symbol of a snake consuming its own body in perfect symmetry. The imagery of the Ouroboros evokes the infinite nature of creation from destruction. The sign appears across cultures and […]
The Upcoming Increase in Interest Rates
THE UPCOMING INCREASE IN INTEREST RATES Last week, both Janet Yellen of the Fed and Mark Carney of the Bank of England prepared financial markets for interest rate increases. The working assumption should be that this was coordinated, and that both the ECB and the Bank of Japan must be considering similar moves. Central banks […]
Financial Hell: 57% in Australia Cannot Afford An Extra $100 if Interest Rates Rise, Stress in Wealthiest Areas
Financial Hell: 57% in Australia Cannot Afford An Extra $100 if Interest Rates Rise, Stress in Wealthiest Areas A new study shows 57% of Australia mortgage holders could not handle a $100 increase in their loan repayment. Stress has turned up in even the wealthiest cities. But who is truly wealthy? Paper profits on homes with […]
The Courage to Normalize Monetary Policy
The Courage to Normalize Monetary Policy A decade after the onset of the global financial crisis, it seems more than appropriate for central bankers to move the levers of policy off their emergency settings. A world in recovery – no matter how anemic it may be – does not require a crisis-like approach to monetary […]
The Forthcoming Global Crisis
THE FORTHCOMING GLOBAL CRISIS The global economy is now in an expansionary phase, with bank credit being increasingly available for non-financial borrowers. This is always the prelude to the crisis phase of the credit cycle. Most national economies are directly boosted by China, the important exception being America. This is confirmed by dollar weakness, which […]
What A Fed Rate Hike Means For U.S. Shale
What A Fed Rate Hike Means For U.S. Shale North American shale oil and gas companies have proven that they can adapt their business model through the lower crude oil prices cycle. Now, the new challenge for shale producers is how to adjust their financial strategy when the Federal Reserve (Fed) raises interest rates. Since […]
Does the Central Bank Determine Interest Rates?
DOES THE CENTRAL BANK DETERMINE INTEREST RATES? According to mainstream thinking, the central bank is the key factor in determining interest rates. By setting short-term interest rates, the central bank, it is argued, through expectations about the future course of its interest rate policy can influence the entire interest rate structure. Thus according to the […]
This Fed is on a Mission
This Fed is on a Mission QE Unwind starts Oct. 1. Rate hike in Dec. Low inflation, no problem. The two-day meeting of the FOMC ended on Wednesday with a momentous announcement that has been telegraphed for months: the QE unwind begins October 1. It marks the end of an era. The unwind will proceed […]
Further Thoughts on Gibson’s Paradox
FURTHER THOUGHTS ON GIBSON’S PARADOX “The paradox is one of the most completely established empirical facts in the whole field of quantitative economics.” – John Maynard Keynes “The Gibson paradox remains an empirical phenomenon without a theoretical explanation” -Friedman and Schwartz “No problem in economics has been more hotly debated.” – Irving Fisher Introduction Two […]
Bank of America Stumbles On A $51 Trillion Problem
Bank of America Stumbles On A $51 Trillion Problem At the end of June, the Institute of International Finance delivered a troubling verdict: in a period of so-called “coordinated growth”, total global debt (including financial) hit a new all time high of $217 trillion in 2017, over 327% of global GDP, and up $50 trillion […]
Money Multiplier is Really About Credit Out of “Thin Air”
MONEY MULTIPLIER IS REALLY ABOUT CREDIT OUT OF “THIN AIR” According to traditional economics textbooks, the current monetary system amplifies the initial monetary injections of money. The popular story goes as follows: if the central bank injects $1 billion into the economy and banks have to hold 10% in reserve against their deposits the initial […]
