Home » Posts tagged 'europacific capital'

Tag Archives: europacific capital

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

The Fed’s Nightmare Scenario

February 22, 2016

The Fed’s Nightmare Scenario
Operating under the mistaken belief that a modest dose of inflation is either a prerequisite for, or a by-product of, economic growth, the nation’s top economists have been assuring us for quite some time that inflation will stay very low until the currently mediocre economy finally catches fire. As a result, they believe that the low inflation of the past few months has frustrated Federal Reserve policy makers, who have been supposedly chomping at the bit to keep hiking rates in order to restore confidence in the present and to build the ability to cut rates in the future if the nation were to ever, god forbid, enter another recession.
In the weeks leading up to the Fed’s December 16 decision to raise rates by 25 basis points (their first increase in nearly a decade) the consensus expectations on Wall Street was that the Fed would deliver three or four additional interest rate hikes in 2016. But with the global markets now in turmoil, GDP slowing, and the stock market off to one of its worst starts in memory, a consensus began to emerge that the Fed is reluctantly out of the rate hiking business for the rest of the year.
With such thoughts firmly entrenched, many were largely caught off guard by the arrival last Friday (February 19th) of new inflation data from the Labor Department that showed that the core consumer price index (CPI) rose in January at a 2.2 % annualized rate, the highest in more than 4 years, well past the 2.0% benchmark that the Fed has supposedly been so desperately trying to reach. It was received as welcome news.
A Reuter’s story that provided immediate reaction to the inflation data summed up the good feeling with a quote by Chris Rupkey, chief economist at MUFG Union Bank in New York, “It is a policymaker’s dream come true. They wanted more inflation and they got it.” The widely respected Jim Paulsen of Wells Capital Management said that the stronger inflation, combined with upticks in consumer spending and jobs data would force the Fed to get on with more rate hikes.

…click on the above link to read the rest of the article…

Meet QT; QE’s Evil Twin

September 5, 2015

Meet QT; QE’s Evil Twin

There is a growing sense across the financial spectrum that the world is about to turn some type of economic page. Unfortunately no one in the mainstream is too sure what the last chapter was about, and fewer still have any clue as to what the next chapter will bring. There is some agreement however, that the age of ever easing monetary policy in the U.S. will be ending at the same time that the Chinese economy (that had powered the commodity and emerging market booms) will be finally running out of gas. While I believe this theory gets both scenarios wrong (the Fed will not be tightening and China will not be falling off the economic map), there is a growing concern that the new chapter will introduce a new character into the economic drama. As introduced by researchers at Deutsche Bank, meet “Quantitative Tightening,” the pesky, problematic, and much less disciplined kid brother of “Quantitative Easing.”  Now that QE is ready to move out…QT is prepared to take over.

For much of the past generation foreign central banks, led by China, have accumulated vast quantities of foreign reserves. In August of last year the amount topped out at more than $12 trillion, an increase of five times over levels seen just 10 years earlier. During that time central banks added on average $824 billion in reserves per year. The vast majority of these reserves have been accumulated by China, Japan, Saudi Arabia, and the emerging market economies in Asia (Shrinking Currency Reserves Threaten Emerging Asia, BloombergBusiness, 4/6/15). It is widely accepted, although hard to quantify, that approximately two-thirds of these reserves are held in U.S. dollar denominated instruments (COFER, Washington DC: Intl. Monetary Fund, 1/3/13), the most common being U.S. Treasury debt.

…click on the above link to read the rest of the article…

 

 

 

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress