29 мая, 13:47

Bernanke, Paulson and Geithner: revisiting the 2008 financial crisis | Howard Davies

Three of the key players co-author a book about lessons of the past and make proposals for the futureJournalists, the adage goes, write the first rough draft of history. It’s a grand claim, but perhaps the best of them achieve something close to that. In the case of the great financial crisis of 2008, Andrew Ross Sorkin of the New York Times did so in his book Too Big to Fail, which remains a useful description of how it felt on Wall Street when the markets began to collapse. Sorkin had good access to the key people involved.The second draft of history is often written by the key people themselves. After the second world war, Winston Churchill confidently asserted that history would treat him kindly because “I propose to write that history”. When the financial crisis erupted, the same thought may have crossed the minds of Hank Paulson, Ben Bernanke and Tim Geithner, who were US Treasury secretary, chairman of the Federal Reserve Bank, and president of the New York Fed, respectively. All three published lengthy memoirs explaining why they did and didn’t, do what they did and didn’t do – inevitably, with a degree of self-justification in each case. Continue reading...

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06 декабря 2018, 22:45

Recession risk and the circularity problem, by Scott Sumner

[Trigger warning for acrophobics like me.] I have fond memories of growing up in the Midwest, and seeing big white mushroom-shaped water towers on the outskirts of small towns: Back in 1970, a friend of mine told me about some guys he knew that played a game of dare.  They’d go to the top of one of these, and then gradually crawl down as far as they dare, before climbing back up.  But if you make a mistake and go to far, over the horizon, then it’s all over.  I’m a bit acrophobic, so it makes me queasy every time I think about this story, which is several times a year. The reason I frequently think about this story is because it reminds me of the “circularity problem” in economics.  Consider the following parable: A great power elects a leader who is not well informed on economic theory.  He is inclined to adopt reckless economic policies, especially trade policies.  But this leader is also a former businessman, and pays a lot of attention to the performance of the stock market.  Indeed he views it as a sort of indicator of his effectiveness. Stock investors see a healthy economy, with the main risk being reckless trade policies imposed by the leader.  Whenever investors see the risk of these policies increasing, stock prices fall.  But they don’t fall very much, as investors know that the leader pays attention to the stock market, and in the end will likely pull back from reckless policies.  The leader knows that the stock market doesn’t like some of his polices, and uses it as a sort of gauge to determine if he’s gone too far. The problem here is that the stock market will only give “warnings” to the extent that they think things have already gone to the point where they won’t be corrected, and there’s increased risk that the economy will slide into recession.  Not a 100% risk of recession, but slightly higher than before.  Meanwhile the leader knows that stocks bounce around for lots of reasons, and that only a big drop is a clear sign that he’s gone too far and needs to pull back.  But investors know that the leader knows that investors are evaluating the risk of a policy accident. Think of an infinity of mirrors in a barbershop, another memory from my childhood. In 1997, Ben Bernanke and Michael Woodford wrote a paper on the “circularity problem”, where Fed policymakers look for market guidance that they are off course, and then correct policy on that basis.  Do you see the problem here?  If the markets know the Fed will correct, they’ll never give a warning in the first place.  As a result, I’ve always designed my NGDP futures targeting proposals with their paper in mind.  The key is not to have markets predict the outcome, but rather predict the instrument setting that leads to an on target outcome (which is also their view, BTW.) In the parable with the economically ill-informed leader who watches the stock market for guidance, no such mechanism is in place.  It’s still true that watching the market is probably better than ignoring the market, but it’s not true that the market will definitely give the leader sufficient guidance to avoid a big mistake, for the simple reason that if that were true then there would be no guidance in the first place—stocks would rise along a path reflecting the healthy state of the economy, complacently assuming the leader would in the end avoid major mistakes due to market guidance. In the water tower case, no one actually died (as far as I know).  But there might have been a point where it was too late to turn back, and the reckless young man (why is it always men?) slid at increasing speed to his death.  In macroeconomics, there may come a point where it’s too late for policymakers to get back on course in time to prevent a recession.  In that case, stocks may plunge as fast as that unfortunate daredevil on the water tower.  October 1929 and October 2008 were two such examples. PS.  I’d love to see a film like Free Solo, as I love mountains.  But when that camera looks straight down . . . (13 COMMENTS)

30 ноября 2018, 22:25

QE, QT, The Balance Sheet, & Monetization... Did The Fed Tell The Truth?

Authored by Chris Hamilton via Econimica blog, Back in 2009, then Federal Reserve chief, Ben Bernanke, was quite clear and adamant that the Federal Reserve would not monetize the US debt.  What did that mean?  Simply put, the Fed would not use money creation as a permanent source of financing for US government spending...(nor as a means to artificially boost asset prices???).  In his own words, testifying before Congress, on this clip..."The Fed will not monetize the debt...". Subsequently, in a November 2010 speech, then St. Louis Fed president James Bullard said: "The (FOMC) has often stated its intention to return the Fed balance sheet to normal, pre-crisis levels over time.  Once that is done, the Fed will be left with just as much debt held by the public as before the Fed took any of these actions." Seems with a bit of hindsight, almost ten years down the road, we should ask: Did the Fed monetize the debt?  Yes.  Will the Fed return its balance sheet to the $800 billion of publicly held debt it held prior to 2008?  Unequivocally, no!  The Fed is now communicating their goal is a balance sheet somewhere from 2x's to 3x's larger than in 2008 ($1.6 to $2.4 trillion...but I'll be amazed if they ever get it close to 4x's that of 2008, or $3.2 trillion).  At present, the Fed's balance sheet is still over 5x's that of 2008...Fed Chief Powell has signaled that the conclusion to the interest rate hike cycle appears to be dead ahead, with one to two more hikes remaining (perhaps December and March).  And from there, the next economic crisis in an acutely interest rate sensitive economy/financial system, will likely be at hand despite the slightest and slowest set of hikes in Fed history. But before the next chapter begins, let's finish the overview on the current chapter, particularly noting the moonshot in public debt (red line, chart below) and then checking the monetization question. 1- Fed holdings of Treasury's (blue line) and MBS (maroon line) versus private bank excess reserves (black line).  Since QE ended at year end 2014, Fed combined holdings of Treasury and MBS have fallen by less than $300 billion, bank excess reserves have fallen nearly $1.1 trillion.  The point?  Bank excess reserves continue falling faster than the Fed's balance sheet...or put otherwise, the banks are a like a sponge and the excess reserves being wrung out faster than the Fed's QT are  like an ongoing QE. 2- Fed balance sheet (brown line), bank excess reserves (black line), IOER (Interest paid On private bank Excess Reserves...blue shaded area), and monetization (amount above and beyond QE created and that held as excess reserves by banks...yellow line).  Quite noteworthy is the ongoing rise in monetization throughout the QE and post QE periods. 3- Same as above but starting from later half of 2014 with "QE end" and "QT begin" (quantitative tightening) callouts.  In 2016, the Fed began regular rate hikes (hiking IOER's), effectively stemming the flood of excess reserves and monetization (at least temporarily) and by late 2017 undertook quantitative tightening.  But still, the pace of tightening combined with higher IOER's hasn't kept pace with declining excess reserves resulting in the maintenance of monetization. 4- What impact could declining excess reserves (resulting in monetization...with who knows what amount of leverage) have on asset prices?  Chart below shows monetization (yellow line) versus the Wilshire 5000 (black line, representing all publicly traded US stock).  FYR - A trillion and a half dollars of monetization sitting with private banks, levered anywhere from 5 to 10 times, is a quick $7.5 to $15 trillion in purchasing power?!? 5- Same as above, but from 2015 (QE end) through present.  Note, the quantity of monetization has become rather stable at the present quantity...and the Wilshire has essentially become range-bound.  Correlation?  Causation? You decide. Conclusion: In the post QE era world, $1.5 trillion in direct monetization has already slipped into the economy/financial assets.  Banks still sit on another $1.6 trillion in excess reserves and the Fed pays them billions to neither lend nor invest those trillions.  However, as the Fed has now signaled they will soon cease raising rates, which is probably the pre-cursor of the next set of interest rate cuts...what are these mega-banks, presently sitting on trillions of inert dollars, to do?  Perhaps the Fed will continue to raise IOER's in an attempt to slow the release of reserves to be more in-line with the Fed's QT?  Or will the "sponge", still with $1.6 trillion in excess reserves (awaiting leverage) continue to be wrung out faster than the Fed's QT, rushing of in search of assets?  Of course, I don't know the answers but I hope to at least be asking some of the right questions.  I am quite confident this is not the cause of our problems but a coping mechanism for a terribly flawed system, as I've described previously, HERE and HERE.  

30 ноября 2018, 19:10

3 Things That Happened Just Before The 2008 Crisis Are Happening Again Right Now

Authored by Michael Snyder via The Economic Collapse blog, Real estate, oil and the employment numbers are all telling us the same thing, and that is really bad news for the U.S. economy.  It really does appear that economic activity is starting to slow down significantly, but just like in 2008 those that are running things don’t want to admit the reality of what we are facing.  Back then, Fed Chair Ben Bernanke insisted that the U.S. economy was not heading into a recession, and we later learned that a recession had already begun when he made that statement.  And as you will see at the end of this article, current Fed Chair Jerome Powell says that he is “very happy” with how the U.S. economy is performing, but he shouldn’t be so thrilled.  Signs of trouble are everywhere, and we just got several more pieces of troubling news. Thanks to aggressive rate hikes by the Federal Reserve, the average rate on a 30 year mortgage is now up to about 4.8 percent.  Just like in 2008, that is killing the housing market and it has us on the precipice of another real estate meltdown. And some of the markets that were once the hottest in the entire country are leading the way down.  For example, just check out what is happening in Manhattan… In the third quarter, the median price for a one-bedroom Manhattan home was $815,000, down 4% from the same period in 2017. The volume of sales fell 12.7%. Of course things are even worse at the high end of the market.  Some Manhattan townhouses are selling for millions of dollars less than what they were originally listed for. Sadly, Manhattan is far from alone.  Pending home sales are down all over the nation.  In October, U.S. pending home sales were down 4.6 percent on a year over year basis, and that was the tenth month in a row that we have seen a decline… Hope was high for a rebound (after new-home-sales slumped), but that was dashed as pending home sales plunged 2.6% MoM in October (well below the expected 0.5% MoM bounce). Additionally, Pending Home Sales fell 4.6% YoY – the 10th consecutive month of annual declines… When something happens for 10 months in a row, I think that you can safely say that a trend has started. Sales of new homes continue to plummet as well.  In fact, we just witnessed a 12 percent year over year decline for sales of new single family houses last month… Sales of new single-family houses plunged 12% in October, compared to a year ago, to a seasonally adjusted annual rate of 544,000 houses, according to estimates by the Census Bureau and the Department of Housing and Urban Development. With an inventory of new houses for sale at 336,000 (seasonally adjusted), the supply at the current rate of sales spiked to 7.4 months, from 6.5 months’ supply in September, and from 5.6 months’ supply a year ago. If all of this sounds eerily similar to 2008, that is because it is eerily similar to what happened just before and during the last financial crisis. Up until now, at least the economic optimists could point to the employment numbers as a reason for hope, but not anymore. In fact, initial claims for unemployment benefits have now risen for three weeks in a row… The number of Americans filing applications for jobless benefits increased to a six-month high last week, which could raise concerns that the labor market could be slowing. Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 234,000 for the week ended Nov. 24, the highest level since the mid-May, the Labor Department said on Thursday. Claims have now risen for three straight weeks. This is also similar to what we witnessed back in 2008.  Jobless claims started to creep up, and then when the crisis fully erupted there was an avalanche of job losses. And just like 10 years ago, we are starting to see a lot of big corporations start to announce major layoffs. General Motors greatly upset President Trump when they announced that they were cutting 14,000 jobs just before the holidays, but GM is far from alone.  For a list of some of the large firms that have just announced layoffs, please see my previous article entitled “U.S. Job Losses Accelerate: Here Are 10 Big Companies That Are Cutting Jobs Or Laying Off Workers”. A third parallel to 2008 is what is happening to the price of oil. In 2008, the price of oil shot up to a record high before falling precipitously. Well, now a similar thing has happened.  Earlier this year the price of oil shot up to $76 a barrel, but this week it slid beneath the all-important $50 barrier… Oil’s recent slide has shaved more than a third off its price. Crude fell more than 1% Thursday to as low as $49.41 a barrel. The last time oil closed below $50 was in October 4, 2017. By mid morning the price had climbed back to above $51. Concerns about oversupply have sent oil prices into a virtual freefall: Crude hit a four-year high above $76 a barrel less than two months ago. When economists are asked why the price of oil is falling, the primary answer they give is because global economic activity is softening. And that is definitely the case.  In fact, we just learned that economic confidence in the eurozone has declined for the 11th month in a row… Euro-area economic confidence slipped for an 11th straight month, further damping expectations that the currency bloc will rebound from a sharp growth slowdown and complicating the European Central Bank’s plans to pare back stimulus. In addition, we just got news that the Swiss and Swedish economies had negative growth in the third quarter. The economic news is bad across the board, and it appears to be undeniable that a global economic downturn has begun. But current Fed Chair Jerome Powell insists that he is “very happy about the state of the economy”… Jerome H. Powell, the Federal Reserve’s chairman, has also taken an optimistic line, declaring in Texas recently that he was “very happy about the state of the economy.” That is just great.  He can be as happy as he wants, and he can continue raising interest rates as he sticks his head in the sand, but nothing is going to change economic reality. Every single Fed rate hiking cycle in history has ended in a market crash and/or a recession, and this time won’t be any different. The Federal Reserve created the “boom” that we witnessed in recent years, but we must also hold them responsible for the “bust” that is about to happen.

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19 сентября 2018, 23:06

Rashomon in 2008, by Scott Sumner

There’s a classic Japanese film where four different viewers see the same event in four different ways. I am reminded of this when I consider all the different ways in which the events of 2008 are interpreted.  Obviously you have Keynesian, monetarist and Austrian views, as well as MMT, new classical, and many others.  And even within the Keynesian tradition, there are numerous perspectives.  Here’s Paul Krugman discussing Ben Bernanke: There’s an economic dispute underway about the causes of the Great Recession . . . on one side you have Dean Baker, who has long argued that the burst housing bubble was the main factor in both the slump and the slow recovery, with financial disruption a minor and transitory factor — a view I mostly agree with. On the other side we have none other than Ben Bernanke, who argues in a new paper that credit market disruption was indeed the big story. I believe they are both right, and both wrong.  In both cases, the criticism of the alternative view is persuasive.  For instance, Krugman’s right that Bernanke’s view doesn’t explain the persistence of the Great Recession: I have trouble seeing the “transmission mechanism” — the way in which the financial shock is supposed to have affected actual spending to the extent necessary to justify a finance-first account of the slump. Let me focus specifically on investment, which is what you’d expect a credit crunch to depress — and which did indeed plunge in the Great Recession. First, there was the housing bust, which led to a huge decline in residential investment, directly subtracting around 4 points from GDP: So can we attribute this decline to credit conditions? If so, why did residential investment remain depressed five years after credit markets normalized? I would add that the failure of Lehman occurred nine months into the recession, and several months into the most intense phase of the recession. But Krugman’s housing view also has problems, as the housing slump had been occurring for 2 years before any significant increase in unemployment.  The unemployment rate inched up from 4.7% in January 2006 to 5.0% in April 2008, even though by the latter date we’d already lost 3 of the 4 percentage points of GDP from depressed residential investment. If I were to defend their two hypotheses, I’d make essentially the same argument in both cases.  Both the housing slump and the credit crunch had the effect of reducing the Wicksellian equilibrium interest rate.  Thus in both cases, the Fed needed to reduce their target interest rate in tandem with the falling equilibrium rate in order to prevent a severe recession.  During 2007 and early 2008 they did this, but then the equilibrium rate fell increasingly far below the policy rate (then 2%.) In the end, I don’t find these explanations to be satisfactory, partly because I don’t share the same view as Krugman and Bernanke on what it means to say monetary policy caused something to happen. I don’t see the Fed as a helpless bystander, which might or might not act to prevent sharp changes in NGDP caused by exogenous shocks, but rather as being more like the captain of a supertanker, who has a duty to steer the nominal GDP of the economy. One can argue that this metaphor is inappropriate at the zero bound, but the US was not at the zero bound during 2008.  Indeed rates didn’t even fall to 0.25% until mid-December of 2008.  Thus the severe slump in NGDP during the second half of 2008 represented the outcome of an explicit Fed policy.  One can try to defend the Fed using arguments such as “recognition lags”, etc., but the merely redefines the type of mistake that was made, not the source of the problem. Unless I’m mistaken, the asset markets, Paul Krugman, and I all agree on one point; policy was clearly too tight in the second half of 2008, and that fact was obvious at the time.  In his memoir, Bernanke also acknowledges that policy was too tight in the period after Lehman failed. I’m guessing that Krugman and Bernanke would not agree with my claim that a more expansionary policy during 2008 would have been sufficient to prevent a severe recession, or at least that a more expansionary conventional monetary policy would have been sufficient.  In turn, I reject the notion that interest rates should be viewed as “conventional policy”.  In my view, open market operations (including QE) should be regarded as conventional monetary policy, and interest rates are one of many possible short run targets.  I would add that (because of the zero bound issue) interest rates are one of the least effective policy targets. The Great Recession would not have been “great” if any two the following three steps had been taken in early 2008: 1. A policy of 5% NGDP growth, with level targeting to correct short run deviations from the trend line. 2. A policy of targeting the market forecast of NGDP. 3.  A “whatever it takes” approach to open market operations, which means buying whatever quantity of assets that is necessary to keep expected future NGDP equal to the policy target. Instead of adopting at least two of these three highly effective policy tools, the Fed adopted zero of the three.  That’s why the recession was so deep. PS.  My hunch is that Bernanke would have favored the level targeting option (at least for prices), but could not get support from within the Fed.  I’m not sure of his views on the other two policy tools. PPS.  Holman Jenkins of the WSJ seems open to alternative perspectives on 2008: What bubble there was seemed confined to a few subprime hot zones mainly in the West and Southwest. Now comes the Mercatus Center’s Kevin Erdmann to complicate the story. The hottest markets in the country never stopped being hot because restrictive zoning and building regulations turn them into what he calls “closed-access cities,” such as New York and San Francisco, where it is legally impossible to supply the housing demanded by the nonrich. . . . He also shows, based on rents, construction and housing’s share of personal consumption, there never was a national oversupply of housing but the opposite: a shortage that continues today, centered on the closed-access cities that generate so much of U.S. economic activity. Every day the sun rises in the world capital markets on countless scenes of failed risk-taking without causing a general panic. This is where the housing story interacts with another strand of revisionism, led by Bentley University’s Scott Sumner, which faults the Ben Bernanke Fed for tightening all through the Great Recession, oblivious to plunging inflation and a rising public demand to hold cash. Here’s the great Toshiro Mifune, star of Rashomon: HT: Marcus Nunes, Kate DeLanoy, Ben Klutsey       (6 COMMENTS)

08 июня 2018, 12:22

Бен Бернанке: В 2020 году экономика США свалится с обрыва

zerohedge:  Похоже, что Бен Бернанке — клиент Bridgewater.Напомним, что ранее на этой неделе мы сообщили о том, что в письме от 31 мая “Ежедневные наблюдения” за авторством содиректора Bridgewater Грега Дженсена, разосланного отдельным клиентам, самый большой хедж-фонд в мире дал зловещую и даже леденящую душу оценку текущей экономической и финансовой ситуации в США, и пришел к выводу, что “мы по-медвежьи смотрим почти на все финансовые активы”.Коллега Рэя Далио перечислил несколько конкретных причин, почему его настрой стал таким беспрецедентно медвежьим, и отметил, что “рынки уже уязвимы, поскольку Федрезерв изымает ликвидность и повышает ставки, создавая дефицит кэша и делая его более привлекательным”. Он также написал о том, что “ценообразование опционов отражает низкий спрос инвесторов на защиту от возможного сдувания экономики, а также указывает на практическую невозможность дефляции, которая с высокой вероятностью проявится в следующем спаде”, но что действительно напугало Bridgewater – это то, что произойдет в 2020 году, когда влияние стимулов Трампа окажется на пике, и развернется в обратном направлении. Вот что написал Дженсен: “Такие сильные условия потребуют дальнейшего ужесточения Федрезерва, но почти никакого ужесточения за пределами окончания 2019 года не заложено в цены. В ценах не заложен значительный рост доходностей облигаций, что подразумевает продолжение уплощения кривой. Это, по-видимому, означает формирование неустойчивого набора условий, учитывая, что дефицит государственного бюджета будет продолжать расти даже после пика фискальных стимулов, и учитывая, что Федрезерв планирует продолжить сокращать свой баланс. Однако трудно представить, что найдется достаточное количество покупателей облигаций, когда кривая доходности будет продолжать уплощаться”.Результатом стало пессимистическое заключение хедж-фонда:“Мы по-медвежьи смотрим на финансовые активы, поскольку экономика США продвигается к концу цикла, ликвидность дренируется, а рынки включают в цену активов продолжение недавних условий, несмотря на меняющийся фон”.Сегодня никто иной, как бывший председатель Федрезерва Бен Бернанке, почти дословно повторил эту оценку, объяснив свой внезапный приступ пессимизма по поводу перспектив экономики теми же причинами.Тот самый Бернанке, который однажды за выступление перед аудиторией банкиров запросил $250 000, чтобы рассказать им о том, что процентные ставки никогда не нормализуются в течение его жизни, теперь полагает, что экономика США, которая в мае вошла в второй по продолжительности период экспансии в современной истории… … направляется к “моменту койота Вилли” в 2020 году, как раз в тот момент, когда состоятся выборы американского президента.Выступая в Американском Институте Предпринимательства, Бернанке повторил самую большую обеспокоенность Bridgewater по поводу режима овердрайва, в котором американская экономика будет пребывать в течение следующих 18 месяцев, заявив, что стимулирующее воздействие от налоговых стимулов Трампа на $1 + трлн. “усложняет всю работу Федрезерва”, потому что все это происходит в период очень низкой безработицы. Он также заявил, что, чем больший заряд получит экономика благодаря фискальным стимулам, тем больше будет падение, когда наступит похмелье.“То, что вы получаете, — это стимулы, реализуемые в самый неподходящий момент”, — сказал Бернанке в четверг во время обсуждения монетарной политики в Американском Институте Предпринимательства, являющемся аналитическим центром в Вашингтоне. “В экономике уже достигнута полная занятость”.Вероятно, вновь своровав мысли из записки Bridgewater, Бернанке заявил, что, хотя стимулы “в этом году и в следующем году окажут влияние на экономику очень сильно, затем в 2020 году Койот Вилли упадет с обрыва, и экономика будет смотреть вниз”, поскольку она столкнется с тем, что Bridgewater назвал “неустойчивым набором условий”. Ирония восхитительна: в конце концов именно Бен Бернанке постоянно обвинял Конгресс в том, что американские законодатели недостаточно сделали, чтобы ускорить рост экономики, когда он возглавлял центробанк (основной тезис его мемуаров 2015 года “Мужество действовать: воспоминание о кризисе и его последствиях”); и теперь три года спустя именно этот Бернанке обвиняет президента и Конгресс в том, что они сделали слишком много. Далее NYT:“Конгресс в значительной степени несет ответственность за неполное восстановление экономики после финансового кризиса 2008 года”, — написал в своих мемуарах, опубликованных в понедельник, бывший председатель Федрезерва Бен Бернанке.Г-н Бернанке, покинувший Федеральный Резерв в январе 2014 года после восьми лет работы в качестве председателя, говорит, что реакция американского центробанка на кризис была смелой и эффективной, но ее было недостаточно.“Я часто говорил, что денежно-кредитная политика не была панацеей — нам нужен Конгресс, чтобы тот сделал свою часть работы”, — говорит он. “После того, как кризис успокоился, эта помощь так и не подоспела”.И теперь, когда Конгресс более чем выполнил свою часть работы, Бернанке предсказывает экономический крах, который наступит менее чем через 2 года.Конечно же, еще бо́льшая ирония заключается в том, что реальная причина предстоящего коллапса имеет мало общего с Трампом, чей стимул в размере $1 трлн. — это сущий пустяк по сравнению с удвоением правительственного долга США предыдущей администрацией и ликвидностью в $20 трлн., которую Г-н Бернанке и его коллеги из глобальных центробанков ввели в систему после финансового кризиса, в результате чего, по словам Deutsche Bank, мир оказался в условиях метастабильности.Но теперь, когда в Белом Доме поселился козел отпущения, Федрезерв и, конечно же, человек, который создал все условия для того, чтобы взрыв текущего пузыря активов оказался беспрецедентным, а именно Бен “сабпрайм сдержан” Бернанке будут более чем счастливы возложить всю вину за предстоящую экономическую катастрофу на Дональда Трампа.Скажем иначе, в отличие от его преемницы Джанет Йеллен, которая произнесла знаменитые слова о том, что она полагает, что в течение ее жизни больше не будет финансовых кризисов, Бернанке только что спрогнозировал, что экономика обвалится всего через за два недолгих года – что намного меньше, чем 10 лет непрерывной экономической экспансии, недавно предсказанной Бюджетным Офисом Конгресса. За выступлением Бернанке последовала дискуссия, которую модерировал бывший член Комитета по открытым рынкам Федрезерва Кевин Уорш, который неоднократно и по делу обвинял Федеральный Резерв в том, что он раздул то, что вполне может оказаться последним пузырем. Являясь в настоящее время экономистом Стэнфордского университета, Уорш, которого когда-то считали главным претендентом на замену Джанет Йеллен, сказал, что он будет вести свободный разговор, основываясь на своих заготовленных тезисах, и пошутил: “Я не буду говорить так же свободно, как это сделал Бен, когда он говорил о моменте Койота Вилли и о том, что случится с экономикой в 2020 году”.Потому что для руководителей центральных банков взрыв многотриллионного пузыря, который они помогли создать, и трагические последствия, которые это взрыв будет иметь для экономики, — это просто шутка. Единственная “хорошая новость” заключается в том, что они, по крайней мере, могут теперь всю вину возложить на Трампа. Перевод 07.06.2018 г. Ben Bernanke: The US Economy Is Going To Go Off The Cliff In 2020

Выбор редакции
31 марта 2018, 02:37

Why stop at price level targeting?, by Scott Sumner

In a recent post, Atlanta Fed President Raphael Bostic advocated a price level target: I want to start my discussion in this post with two points I made in the previous two macroblog posts (here and here). First, I think a commitment to delivering a relatively predictable price-level path is a desirable feature of a well-constructed monetary framework. Price stability is in my view achieved if people can have confidence that the purchasing power of the dollars they hold today will fall within a certain range at any date in the future. My second point was that, as a matter of fact, the Federal Open Market Committee (FOMC) delivered on this definition of price stability during the years 1995-2012. (The FOMC formally adopted its 2 percent long-run inflation target in 2012.) On one level, I'm glad to see another Fed official advocate level targeting. But when I read his rationale for price level targeting, it actually better fits NGDP level targeting. Notice that Bostic argues that the Fed did achieve something close to price level targeting during 1995-2012. What he doesn't say is that monetary policy was clearly far too tight during 2008-12, and that growth in aggregate demand was much lower than desirable during this period. Indeed so much so that Ben Bernanke was calling for fiscal stimulus to help boost AD. Bernanke certainly did not believe that aggregate demand was adequate. So why not chose a monetary regime that would have delivered an appropriately expansionary policy during 2008-12? One other point. Bernanke has called for a price level targeting regime that kicks in when the Fed hits the zero bound. If that had been in effect in 2008, then the price level would have been too low during 2008-12. This illustrates a very important point; it's difficult to evaluate a policy alternative like price level targeting without knowing the specifics of where the Fed would set the trend line, if they did decide to adopt the policy. Whether the policy of 2008 was consistent with a 2% price level target depends entirely on where you set the baseline. Under Bernanke's proposed regime, actual policy was too tight during 2008-12. In contrast, Bostic thought policy was just fine, as he set the trend line at a lower level than the actual price level in 2008. HT: David Levey (5 COMMENTS)

28 марта 2018, 09:21

Ошибка главы ФРС: о чем забыл Джером Пауэлл?

Какова вероятность того, что председатель ФРС Джером Пауэлл ошибается? Каковы шансы того, что он ошибается в перспективах роста экономики, направлении ставки по федеральным фондам и самой инфляции? Эти шансы довольно высоки.

28 марта 2018, 09:21

Ошибка главы ФРС: о чем забыл Джером Пауэлл?

Какова вероятность того, что председатель ФРС Джером Пауэлл ошибается? Каковы шансы того, что он ошибается в перспективах роста экономики, направлении ставки по федеральным фондам и самой инфляции? Эти шансы довольно высоки.

27 марта 2018, 22:06

Bernanke Beliefs Busted: New Research Foretells QE Domination

Authored by Daniel Nevins via FFWiley.com, The title refers to a consensus-shattering paper that was unveiled at the University of Chicago last month before a Who’s Who of economists and central bankers. Paul Krugman gave the keynote, but the meeting’s focus was on the paper’s authors - two Wall Street big shots, Morgan Stanley’s David Greenlaw and Bank of America Merrill Lynch’s Ethan Harris, and two academics, James Hamilton and Kenneth West. To keep it simple, I’ll call them GHHW. The paper more or less shredded former Fed chief Ben Bernanke’s favorite defense of his quantitative easing (QE) programs - that QE lowered Treasury yields. In fact, if you believe in the accuracy of the type of analysis GHHW conducted, QE may have actually increased Treasury yields. By parsing data and financial news more thoroughly than in prior studies, the authors found that yields rose, on average, when bond traders were presented with news about QE. (I recommend Hamilton’s blog write-up for a quick summary, although if you’re also looking for key charts, see Exhibits 4.11 and 4.12 on page 82 of the paper.) But despite having the data to fully reverse the findings of other researchers, GHHW didn’t take it quite that far. (They were too polite for that.) Up against a strongly pro-QE crowd, they settled on the less ambitious conclusion that “the Fed’s balance sheet is a less reliable and effective tool than as perceived by many.” Between the lines, though, they painted a picture of QE being about as powerful as the host city’s passing game. (To save you the trouble of looking it up, Daaa Bears ranked last in the NFL.) As far as pre-GHHW “perceptions,” the authors described a consensus that QE lowered 10-year Treasury yields by about 100 basis points, an amount they then refuted. That 100 basis point consensus is consistent with a few different literature reviews, as pointed out by GHHW, and also with claims by FOMC members. It went undisputed by the attendees in Chicago who published their comments. (Three Fed regional bank presidents, an ECB Executive Board member and a few others delivered formal responses.) The new research is important, in my opinion, not so much for academic reasons but because I think it foretells the future. Before I explain why, though, I need to insert a disclaimer about the likely accuracy of any study that attributes yield changes to QE news of one type or another. That is, methods for establishing how much QE moved the bond market are essentially guesswork, even after GHHW’s improvements. Bond prices respond to traders and investors not only establishing new positions but also unwinding or rebuilding prior positions in combinations unknowable and for reasons derived from all past fundamental and technical information and ultimately also unknowable. Trades may occur because prices have gone up in the past, because they’ve gone down in the past, because the market is overbought or oversold, because a different market has become more or less attractive, because traders seek opportunities to lock in profits or cut losses, and for countless other reasons. As such, it’s easy to jump to the wrong conclusion by attaching a single fundamental cause to every price change—there’s no such thing as a sequence of single-cause price changes, and even if there were, we could only guess at the causes. Why GHHW Upsets the Playing Field All that said, let’s acknowledge that some researchers’ guesswork is better than others. I suspect GHHW are closest to the truth, partly because they were more careful than others, but also because a different type of result predicts their conclusions. I described that result in “QE’s Untold Story,” where I showed that commercial banks and broker-dealers extended credit between QEs by just as much as the Fed extended credit during QEs, and that the two sources of credit growth alternated depending on whether QE was “on” or “off.” Here’s the key chart from that analysis: As I described last year, the Fed grabbed the credit-growth baton for QE laps and returned it to commercial banks and broker-dealers for QE pauses, and whoever didn’t have the baton stood still, creating the “argyle effect” shown in the chart. Unlike GHHW, “QE’s Untold Story” didn’t separate short and long rates (the data didn’t allow for that), but it challenges the orthodox narrative from a different direction. Namely, it says if you draw a circle around banks, broker-dealers and the Fed, the amount of credit supplied to everyone outside the circle appeared to be unaffected by QE. Whereas the orthodox narrative holds that those outside the circle were forced to chase a restricted credit supply, the data tell a different story. Or, another way to say the same thing is that banks accepted reserves as an adequate replacement for assets transferred to the Fed—they didn’t seek to replace those assets on a like-for-like basis—and that decision would have diluted QE’s effects on yields. Some banks may have even welcomed the chance to replace long-term assets that were mismatched to their liabilities with different assets that carried no such mismatch risks. Also, the federal government’s decision to lengthen its debt profile would have diluted potential QE effects as well, as noted by GHHW and others. So plenty of other evidence shows why QE didn’t work as planned (it paints the bigger picture behind GHHW’s findings), it’s just that economists haven’t paid much attention to it. Macroeconomists, in particular, are known for reaching hasty and unrealistic conclusions, so it’s not surprising that they might paper over the holes in their QE studies or rely on theories that ignore the true mechanics of bank credit, which makes it difficult to grasp the relevance of the data in “QE’s Untold Story.” Getting banks right is especially important (see my articles “Learning from the 1980s” and “An Inflation Indicator to Watch” or for a fuller discussion, my book Economics for Independent Thinkers.) As Hamilton wrote on his blog, “Our study raises a caution about the event study methodology. There is a potential tendency to select dates after the fact that confirm the researcher’s prior beliefs about what the effect was supposed to have been.” In other words, economists tend to fit the “facts” to their theories rather than the other way around. Who Might GHHW Have Been Thinking Of? Hamilton didn’t name names, but consider that Ben Bernanke spent much of QEs 1, 2 and 3 selling the very conclusions GHHW debunked. Have a look at these excerpts from Bernanke’s speeches during his last few years at the Fed: “Securities purchases by the central bank affect the economy primarily by lowering interest rates on securities of longer maturities.” (11/19/2010-1) “The evidence suggests that such purchases significantly lowered longer-term interest rates in both the United States and the United Kingdom.” (11/19/2010-2) “Purchases of longer-term securities have not affected very short-term interest rates, which remain close to zero, but instead put downward pressure directly on longer-term interest rates.” (2/3/2011) “Generally, . . . research finds that the Federal Reserve’s large-scale purchases have significantly lowered long-term Treasury yields. . . . Three studies considering the cumulative influence of all the Federal Reserve’s asset purchases, including those made under the MEP, found total effects between 80 and 120 basis points on the 10-year Treasury yield. These effects are economically meaningful.” (8/31/2012) “A growing body of research supports the view that LSAPs are effective at bringing down term premiums and thus reducing longer-term rates.” (3/1/2013) “The preponderance of studies show that asset purchases push down longer-term interest rates and boost asset prices.” (1/3/2014) To his credit, Bernanke was crystal clear in explaining what he was trying to achieve and why he believes it worked. That made him an easy mark when GHHW, whether they intended to or not, took direct aim at his published positions. Bernanke needed their meticulous analysis like the North Side Gang needed Al Capone. And with that background in mind, let’s look to the future. What to Expect in the Next Deleveraging In the next severe economic downturn (whenever it occurs), central bankers are likely to embrace QE as readily as Bernanke did. They’ll first lower the fed funds rate as much as they can, but then they’ll feel the pressure to do more. (Sidenote: GHHW also disparaged negative interest rates.) They won’t say, “Look, the economy has too much debt and the best thing we can do is be patient and, well, do nothing more than we’ve already done.” That would violate the principles of today’s hyperactive interventionism - the chattering classes accept few excuses for policy inaction, and not knowing if a policy does more harm than good isn’t among them. So the question is this: When tomorrow’s quantitative easers succumb to the pressure to act, how will they explain their actions? Actions require narratives, and with GHHW having toppled Bernanke’s narrative with Chicago-strength winds, policy makers will need a new one. So what will it be? I would say one narrative is more likely than any other - that is, QE fell short of the objectives only because it wasn’t large enough, and to work properly it needs to be absolutely massive. Future Fed chiefs will argue that you can always bring yields under control if you just buy enough bonds, and to some degree they’re likely to be right. Their new motto will be “the bigger the better.” Speculative? Maybe so, but it’s also exactly what New York Fed President Bill Dudley told us to expect in his response to GHHW. He said, “If LSAPs are not as powerful as some of the event studies imply, the answer is not to simply discard the tool, but instead to look for ways to enhance its efficacy and use it more aggressively (emphasis mine).” Dudley then touted open-ended asset purchases, commonly known as QE infinity. And that’s not all. Consider the charts and speech by ECB Executive Board Member Benoît Cœuré, also delivered in response to GHHW. Cœuré showed that the Fed’s QE left about half of total Treasury issuance in private hands after accounting for foreign central bank holdings, whereas the ECB has soaked up so many bonds that private investors are left with possibly less than 10% of all German Bunds. He then shared data suggesting that the ECB bossed Bund yields by more than the Fed bossed Treasury yields, as you might have expected. He argued that the key to QE success is to use the oldest trick in market manipulation - buy such overwhelming amounts that everyone else has to forage for a puny remaining supply. (Alright, he may not have called it market manipulation, but the rest is an accurate summary.) In other words, Cœuré’s GHHW response was to pen an ode to QE domination, which seems the natural endgame. Conclusions To be sure, the central banking gods may have written a bigger QE into our future long before their emissaries convened in Chicago, but now their plans are even more clear. Expect the Fed to follow the ECB and Bank of Japan in making sure the next time it expands its balance sheet, it’ll achieve total domination. You might imagine the Fed’s balance sheet blanketing the bond market in a thick, full-length coat (thick enough to withstand those Chicago winds), one that’ll make the current balance sheet look ragged and threadbare by comparison. And you might also expect the irony to be lost on central bankers such as Dudley and Cœuré. Can the cautionary advice in a paper titled “A Skeptical View of the Impact of the Fed’s Balance Sheet” really lead to a more aggressive use of that balance sheet? In fact, I think it will.

26 марта 2018, 18:11

The Fed's Dot Plot Would Bury The Indebted US Consumer

Authored by Chris Wood via Grizzle.com, The new Federal Reserve chairman’s first FOMC meeting last week, and subsequent press conference, confirmed that Jerome Powell is not an egghead obsessed with macroeconomic models. This is refreshing given the highly academic nature of his predecessors Janet Yellen and Ben Bernanke, and suggests that he will alter his view on the economy based on the reported data rather than theoretical projections of the future. This also suggests that the so called ‘dot plots’, which are nothing more than the forecasts of individual Fed governors, should become less important. But for now the financial markets will still pay attention to those dots, most particularly as they are showing three rate hikes next year on top of the three projected this year (though that three has nearly become four). Fed Dot Plot: FOMC Members’ Fed Funds Rate Forecasts Note: Based on midpoint of Fed funds rate target range. Red dots denote median forecasts. Source: Federal Reserve The ‘Dot Plot’ Would Bury the Indebted US Consumer This would take the upper end of the federal funds rate target range to 3.0% by the end of 2019. That is a level of interest rates which Grizzle has a hard time believing will happen given the sensitivity of the indebted American economy to higher interest rates. But if short-term rates really go that high, the view here is that the yield curve will by then have inverted in terms of short-term interest rates moving above long-term interest rates. On this point, the yield curve has already begun to flatten again of late. The spread between the 10-year and the 2-year Treasury bond yields has declined from a recent high of 78bp reached in mid-February to 54bp (see following chart). US Yield Curve (10Y – 2Y Treasury Bond Yields) Source: Bloomberg Weak US Dollar Despite Hawkish Fed Meanwhile, it remains remarkable how the US dollar still cannot rally given the relative optimism on the American economy suggested by this week’s Fed statement and given the hawkish signal provided by the ‘dots’ with the US Dollar Index declining by 0.9% since the Fed rate hike on Wednesday. This is a further sign that investors should continue to assume for now that the US dollar remains weak (see following chart), which remains a positive for emerging markets. US Dollar Index Source: Bloomberg It is also not bullish for the dollar that the US Dollar Index speculative net futures position has switched from a net short of 5,787 contracts in late January to a net long of 847 contracts in the week ended 13 March (see following chart). CFTC US Dollar Index (DXY) Speculative Net Futures Positions Source: US Commodity Futures Trading Commission (CFTC), Bloomberg Rate Hikes Have Been a Catalyst for Gold It is also interesting how the gold price rallied by US$21 on the day of the Fed rate hike. This follows a pattern whereby gold sells off prior to monetary tightening and then rallies on the news. Indeed gold has rallied on each of the six rate hikes that have taken place so far in this Fed tightening cycle which began in December 2015 (see following chart). The obvious reason for gold’s relative resilience this year despite rising Fed tightening forecasts is the weak dollar and the growing belief that inflation is returning. But, whatever the reason, Grizzle remains positive on the yellow metal. If inflation really returns, an outcome about which skepticism is maintained here, gold will clearly do well. If it does not, then Fed policy is going to reverse dramatically since there is no way the indebted American economy can handle the higher level of real interest rates implied by the above mentioned ‘dots’. Gold Bullion Price and Fed Rate Hikes Source: Federal Reserve, Bloomberg US Economic Data — Examining Case For Monetary Tightening Meanwhile, the latest American wage data has, for now at least, eased monetary tightening concerns. This is because wage growth slowed. US average hourly earnings rose by 2.6%YoY in February, down from a downward revised 2.8%YoY in January (see following chart). US Average Hourly Earnings Growth and Change in Nonfarm Payrolls Source: US Bureau of Labour Statistics It is also a positive that job growth picked up markedly and the non-participation rate declined. Nonfarm payrolls increased by 313,000 jobs in February, up from 239,000 in January — the biggest increase since July 2016. Also, Americans not in the labour force declined from a record 95.7 million in January to 95.0 million in February, while the labour force participation rate increased from 62.7% to 63% (see following chart). This is a reminder that there remains considerable slack in the American labour market despite all the talk of “full employment”. US Labour Force Participation Rate and Americans Not in the Labour Force Source: US Bureau of Labour Statistics The next average hourly earnings growth data will be reported on April 6th. Meanwhile, if a guess had to be made as to the timing of the next monetary tightening scare, it would be the announcement of core CPI for March due on April 11th. This is because the base effect suggests that this month should show the greatest statistical evidence in 2018 of a pickup in price pressures. Core CPI declined by 0.1% MoM in March 2017, the only monthly decline in 2017. As for the February CPI inflation, core CPI inflation remained unchanged at 1.8% YoY, still below the Fed’s 2% target (see following chart). US Core CPI Inflation Source: Bureau of Labour Statistics Investors should also be aware that offshore dollar rates have picked up in recent weeks resulting in a widening of the so-called ‘Ted spread’ — which is the spread between the 3-month Libor and the 3-month Treasury bill rate. The 3-month Libor has risen by 58bp so far this year to 2.27%, while the Ted spread has risen from a low of 18bp in mid-November to 56bp (see following chart). The best guess as to why this is happening is due to the dollar funding pressures created by the repatriation of offshore US corporate cash as a result of the one-off tax rate offered to American corporates under the Trump administration’s tax reform to incentivize them to repatriate the estimated US$2.6 trillion of cash they hold offshore. Three-month USD Libor and the TED Spread

26 марта 2018, 16:28

What Fed Chair Powell Forgot To Mention

Authored by Economic Prism's MN Gordon, annotated by Acting-Man's Pater Tenebrarum, Son of the Imperial City What are the chances of Federal Reserve Chairman Jerome Powell being wrong?  The chances he’ll be wrong on the economy’s growth prospects, the direction of the federal funds rate, and inflation itself?  Our guess is his chances of being wrong are quite high. The new central planner-in-chief. Central banks are facing a special case of the socialist calculation problem pertaining to the financial system. Like the comrades in the former Eastern Bloc, who tried to adjust their plans based on prices they were able to observe in the capitalist West, their best bet is to simply follow market rates. Unfortunately market rates – especially at the short end of the yield curve – are subject to an observer-participant feedback loop with the Fed, so the dilemma cannot be entirely avoided. The   ritual pouring over reams of “data” may feel like a sensible activity, but ultimately it cannot solve the problem either. [PT] What you see, unfolding before your very eyes, is a great exercise in futility.  To this endeavor, the Federal Reserve has claimed central authority of the command center.  The federal funds rate, the Fed’s balance sheet, economic stagnation, massive asset bubbles, and the limits of central planners are the topics of focus.  Where to begin? Powell got into the central banking business through uncommon means.  To his credit, he’s not an economist.  This is a great improvement over former Fed Chair, and intellectual ditherer, Janet Yellen.  Like President Trump, we didn’t have the patience for her egghead PhD economist act. Powell, on the other hand, is a lawyer turned investment banker.  He didn’t spend his formative college years being indoctrinated at the church of Keynes.  But that doesn’t mean his brain hasn’t been equally softened over.  For Powell received an indoctrination of another sort – one that began the moment he inhaled his first breath. You see, Powell is a son of the Washington D.C. Imperial City.  He was born and raised in D.C. and has lived nearly his entire life there.  He knows how the nation’s capital works.  Namely, that ever expanding debt levels are needed to keep the banks of the Potomac River firm enough to support its giant command and control money suck operation. Money sucking operation on the banks of the Potomac [PT] Singleness of Purpose Several years ago, as visiting scholar at the Bipartisan Policy Center, a D.C. think tank, Powell tirelessly worked for an annual salary of $1.  Behind the scenes, he labored with a singleness of purpose to persuade members of Congress – one-by-one – to raise the debt ceiling. President Obama rewarded Powell with a nomination to the Federal Reserve Board of Governors.  President Trump, an ardent proponent of debt without limits, took a quick liking to Powell.  He cut Yellen loose the first chance he got. Powell is the perfect Fed Chairman at the imperfect time.  Not since Alan Greenspan has there been a Fed Chairman that truly understands the purpose of their job. Ben Bernanke and Yellen, in the interim, were true believers in the power of monetary policy.  They actually believed their policies were improving the world.  Clearly, they missed the point altogether. Powell, on the other hand, like Greenspan, understands that Fed policy serves one primary and one secondary purpose.  The primary purpose is to keep the gravy train flowing to the Fed’s member banks.  The secondary purpose is to keep the gravy train flowing to Washington.  The Fed attains both of these ends through similar means: by extracting maximum tribute from dollar holders across the planet. Plain and simple, central bank fiat money creation, multiplied by commercial banks through fractional-reserve banking, propagates financial and economic chaos. Long periods of money supply expansion and debt over-extension punctuated by abrupt, episodic contractions, has the effect of whipsawing the efforts of both the dollar savers and debtors to get ahead. A mountain of money – has it made us richer? Only some of us. Money printing cannot create an iota of real wealth, but among other pernicious effects, it certainly leads to a redistribution of existing wealth from later to earlier receivers. [PT] What Fed Chair Powell Forgot to Mention Presently, Fed policy is transition from the long money supply expansion period to the abrupt, rug-yank period of contraction.  This is when those who levered up their lifestyle – from jumbo mortgage home buyers, faux-wealth pretenders, and retail zombies – are bankrupted.  Shortly after, the ultra-wealthy swoop in to scoop up the wreckage at a discount, which further concentrates wealth during the subsequent money expansion period. To this end, Powell was on point at his first press conference as Fed Chairman on Wednesday.  Following the two-day FOMC meeting, he announced the Fed will raise the federal funds rate 25 basis points – 0.25 percent – to a range of 1.5 to 1.75 percent.  Then, following several utterances on inflation, unemployment, and the economy, Powell concluded his press conference opening remarks with the following words: “Finally, I’ll note that our program for reducing our balance sheet, which began in October, is proceeding smoothly.  Barring a very significant and unexpected weakening in the outlook, we do not intend to alter this program.  As we’ve said, changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy.  As always, the Committee would be prepared to use its full range of tools if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.” Say what? Powell manages to confuse the punters into selling. [PT] What Powell forgot to mention, yet is acutely aware of, is that the Fed’s quantitative tightening balance sheet reduction efforts will be flooding the bond market with massive amounts of government debt.  Who’s going to buy this debt?  And, on top of that, who’s going to fund the Treasury’s $1 trillion deficit? Obviously, someone will buy U.S. Treasuries.  But at what price, and what yield?We suspect this massive influx of government debt for sale will be bought at a much lower price and a much higher yield.  We also suspect these mechanics will mount as the year progresses and will, eventually, prick the many cheap credit asset bubbles that distort today’s economy. Then, when the economy begins shrinking or the market crashes, whichever comes first, Powell and the Fed, as buyers of last resort, will flood the financial system with an abundance of cheap credit, and transmit greater and greater economic disparities. Quite frankly, this is getting old.

24 марта 2018, 20:35

Regime Change At The Eccles Building: From Greed To Fear

Excerpted from Doug Noland's Credit Bubble Bulletin... Deutsche Bank (DB) dropped 13% this week to a 15-month low. DB is now down 28% y-t-d. European banks (STOXX) sank 5.0% this week. Hong Kong (Hang Seng) Financials were down 4.9%. Japan's TOPIX Bank index fell 3.3%. In the U.S., banks (BKX) were slammed 8.0%, the "worst loss in two years." The Broker/Dealers (XLF) fell 7.3%. It was also an active week in Washington. The Powell Federal Reserve raised short-term interest rates, and the new Chairman completed his first news conference. President Trump announced trade sanctions against China. There was more shuffling within the administration, including John Bolton replacing National Security Advisor H.R. McMaster. Let's start with the FOMC meeting. Analysts - along with the markets - were somewhat split between "hawkish" and "dovish." As expected, the Fed boosted short rates 25 bps. On the dovish side, the Fed's "dot plot" showed a median expectation of three rate increases in 2018 versus pre-meeting average market expectations of 3.5 - and fears of four hikes. The Fed upgraded its view of GDP prospects and lowered its forecast of the expected unemployment rate. Steady as she blows for normalization - markets not so much. Chairman Powell did nothing overtly to rattle the markets. The message, at least for the near-term, was continuity. He was clear and concise. There were, however, important subtleties. A couple of headlines worth noting: From the Financial Times: "Jay Powell Plays it Safe in Federal Reserve Debut." From Bloomberg, "Powell Disses Dots Again as He Stresses Limit of Fed's Knowledge" and "Powell Debuts as Show-Me Fed Chair in Shift From Theory, Models." Jerome Powell faces an extraordinary challenge as Fed Chairman. If he does not move quickly and aggressively to flood the global financial system with liquidity upon the onset of financial crisis, history books will surely have him tarred and feathered. Greenspan, Bernanke and Yellen hold responsibility for history's greatest Bubble. Yet it will be on Powell's watch when the Fed faces the harsh consequences. In the end, he'll be left with little alternative than more QE and zero rates - surely deemed too little too late in hindsight. Winless. I've been impressed with our new Fed Chairman. For the first time in (at least) a couple decades, I can listen intently to the head of the Federal Reserve (testimony and press conferences) without that recurring urge to roll my eyes. I feel respectful. Alan Greenspan was the master of obfuscation. His conversations seemed guided by some game theory, and I was too often left pondering what went unsaid - and why. Greenspan's ego, free-market ideology and personal ambitions over time fostered an overly-powerful cult status. ... Ben Bernanke had his own issues. Dr. Bernanke's formidable biases revolved around his academic research and unconventional theories. His limited experience with the markets only heightened the insecurities facing anyone replacing "The Maestro." ... The Wall Street Journal's Jon Hilzenrath once referred to Bernanke as a "gun slinger." This monetary cowboy was incapable of unbiased analysis and decision-making. As his inflationary experiment mutated beyond short-term crisis management measures, Bernanke increasingly dug in his heels. In the throes of untested monetary doctrine, he turned defensive and "100% certain" of too many things. For traders, it's seeing a losing short-term trade morph into a long-term "investment." With everything invested in his runaway global experiment, Dr. Bernanke lost touch with reality - not to mention monetary conventions. He turned hostage to the financial markets, somehow promising that he would not tolerate any tightening of financial conditions - let alone a bear market, recession or crisis. What unfolded was a complete breakdown of responsible central banking. Chair Yellen followed too comfortably in Dr. Bernanke's footsteps. The unassuming market darling that wouldn't dare do anything that might rock the boat; another seasoned academic with a theoretical framework that essentially posed no risk to raging market Bubbles. Gratified that unemployment was declining as core consumer inflation stayed below target, she discerned nothing problematic unfolding in the markets or economy that might risk future crisis. In the final analysis, it was a four-year term notable for a complete failure to tighten financial conditions when the backdrop beckoned for significant tightening measures. No "gun slinger", but a competent and pleasant enabler of vicious "Terminal Phase" Bubble excess. This history rehash is to emphasize the stark contrast between Chairman Powell and his predecessors. He's from a completely different mold. For the first time in decades, the Fed Chairman is not beholden to ideology, academic theory nor activist monetary doctrine. This allows straightforward answers to questions. No obfuscation necessary - no extoling nor canonizing. Academic dogma need not eclipse studious observation and common sense. Powell respects the institution. And I believe his leadership will promote a soberer perspective, clearer analysis and sounder policy from our central bank. While pundits underscore "continuity," the markets must contemplate what this means for the Greenspan/Bernanke/Yellen "market put". Of course, the Powell Fed's support will be there in the event of crisis. But the timing: how much time - and market value - will pass before central banks come to the rescue? Does Powell appreciate how previous Fed policies nurtured dangerous securities market excess? Would the Chairman prefer to return to more traditional central bank management - hesitant to resort to QE, rate cuts and other tools of market intervention? Would he rather let markets deal with volatility without members of the Fed jumping to render vocal support? ... I believe Chairman Powell understands the dangerous role the "Fed put" has played over the years. His bias would be to wean the markets off central bank liquidity, excessively low interest rates and aggressive "activist" market intervention. Markets would be healthier standing on their own - to reacquaint themselves with risk and prudence. ... The Libor/OIS interbank Credit spread widened further this week, indicative of tightening liquidity conditions. It's my view that risk premiums are now generally rising partially on concerns for the Fed and global central bank liquidity backstops. For years, the implied central bank market backstop worked to depress the cost of all varieties of market "insurance" - from the VIX in U.S. equities, to hedging costs in global equities, corporate Credit, sovereign debt and, last but certainly not least, the currencies. The scope of Bubbles has inflated tremendously, while confidence in the future efficacy of central bank support measures has just begun to wane. The cost of market protection is now rising rapidly, with profound ramifications for myriad interrelated global Bubbles. ... The rising cost of hedging, widening Credit spreads, waning demand for corporate Credit and abating general market liquidity now pose a major challenge for vulnerable global markets. No longer will it be so easy to dismiss risk. And with various risks now coming into clearer view on a daily basis, markets must confront the harsh reality of significantly higher hedging costs across the spectrum of risk markets. The Washington spectacle has finally become a major market issue. Tariffs and trade wars do matter, at this point more from a financial standpoint than economic. Members of the Trump cabinet matter. The composition of Trump's foreign policy team matters. The nature and strategies of his advisors and attorneys matter. The mid-terms will matter, perhaps profoundly. It is said that the President is becoming more comfortable in the job - and ready to call the shots. Markets are increasingly uncomfortable. With fragilities surfacing, global markets have turned increasingly vulnerable. The threat of foreign selling of U.S. Treasuries, corporate debt, equities and dollar balances is now real and consequential - just as liquidity becomes a festering issue. The stock market is sliding - prices along with its standing on the President's priority list. ... There's a general complacency deeply embedded in U.S. financial markets. No toxic securities Bubble at the brink. There is no Lehman vulnerable to a run and swift collapse. Interestingly, however, from the global financial markets Bubble perspective, there is Deutsche Bank and its double-digit stock decline this week. It seems to be the first place global players look when risk begins to be an issue, financial conditions start to tighten and risk premiums escalate. DB operates, after all, in the core of global derivatives markets and securities finance. Derivatives lurk at the epicenter of global financial crisis risk. It's right here where global central bank policies have fomented the greatest distortions and associated fragilities: The perception - the implied guarantees - of liquid and continuous markets. And when DB's stock is sinking (down 13%) and its CDS is blowing out (33bps this week!), then the issue of counterparty risk and derivative market dislocation begins to creep into market psychology (and positioning). Greed to Fear. "Risk On" shifting to "Risk Off." This week had the feel of de-risking/de-leveraging dynamics gathering important momentum. This was no VIX (24.87 close) accident. It was a general widening of Credit spreads, waning liquidity and overall market instability. Dollar weakness reemerged this week, which sparked a nice safe haven bid in gold and the precious metals. Crude surged. Curiously, it also awakened a bit of safe haven buying for Treasuries (pushing corporate Credit spreads wider). I couldn't help but to ponder the possibility that the rising cost of hedging dollar risk is a game changer for U.S. corporate debt. There's a huge amount of leverage there, along with big foreign ownership. It's certainly not a strong position for instigating tariffs and risking trade wars. It's instead a backdrop increasingly susceptible to panic selling, liquidity shocks and derivative issues.

23 марта 2018, 21:40

Globalization: What Did Paul Krugman Miss?

This is a very nice short framework-for-thinking-about-globalization-and-the-world piece by Paul Krugman: **Paul Krugman** (2018): [Globalization: What Did We Miss?](https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/PK_globalization.pdf) It is excellently written. It contains a number of important insights. But. I have, unusually, a number of complaints about [it](https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/PK_globalization.pdf). I will make them stridently: First, Paul Krugman claims that, in Heckscher-Ohlin models at least, from the early 1970s to the mid 1990s international trade put only a little bit of downward pressure on the wages of American "unskilled" and semi-skilled workers. I think that is wrong. I think that from the early 1970s to the mid-1990s international trade, at least working through the Heckscher-Ohlin channels, put less than zero downward pressure on the wages of American "unskilled" and semi-skilled workers. As I see it, it is important to note that "emerging markets" and "global north" are not static categories. Japan, Spain, Italy, Ireland were low-wage countries in the 1970s. From the early 1970s to the mid-1990s the relative wage levels of the then-current sources of America's manufacturing imports were rising more rapidly than new low-wage sources of manufacturing imports were being added. The typical American manufacturing worker faced less low-wage competition from imports in the mid-1990s than they had...

22 марта 2018, 10:56

S&P 500, WTI - текущая ситуация

               Приветствую всех своих читателей!                 Сегодня решил объединить и индекс и нефть, потому что во-первых хочется сразу после заседания ФРС подвести некие итоги, а во-вторых они ведь частенько корелируют, хоть и с лагом по времени, по этому хочется посмотреть как это выглядит сейчас.                Разумеется стоит смотреть последние статьи по индексу и нефти если не читали, а то смысловая нагрузка может потеряться                Индекс;     Нефть                Для начала по нефти хочу сказать, она пробила треугольник, о котором писал в прошлой статье и идет по цели, по дороге рисует дополнительные фигуры, и вот сейчас тоже на 60-ти минутном графике строит очередной «бычий флаг». При этом «древко» я замеряю от последнего импульса, хотя реально его можно взять пониже и тогда и цели будут серьезнее, но не спешу, хочу еще посмотреть. Кроме того между 64,06 и 66,02 по текущему майскому контракту CLK8 практически была пустота, и вот в текущий момент создают профиль, а на это как известно необходимо время.               Сам сократил позицию в 2 раза и поднял стоп до 62 (но держу я июньский контракт CLM8 — так что это в его ценах)               Разумеется все сделки транслирую в своем Чате, куда можно присоединяться. Или озвучиваю ежедневные видения по рынку и нефти у себя в Канале.               Нефть в нем транслирую с мая 17-го и результаты за прошлый год — 23260 баксов на 1 контракт               За январь взял 1810 баксов по нефти. Февраль вышел тоже 1810, март на текущий момент по закрытым сделкам 2020.               Теперь переходим к индексу и начнем с фактов:               1. Заседание ФРС прошло, ни каких особых сюрпризов оно не принесло, все в рамках ожидания, полагаю не стоит сосредотачиваться на итогах, думаю их все уже прекрасно знают и не раз написали и на СЛ. Меня вот больше волнует, что новый глава ФРС, такая же «вафля» как и предыдущая бабулька. То есть по сути он будет петь, что скажут. Это не фига не Бен Бернанке и тем более не Алан Грниспен, при которых рынок реально реагировал на серьезные решения и заявления               2. Индекс вчера резко вынесли до 2743 — это как раз серьезное сопротивление не раз обозначенное мною на этой неделе как уровень 2743-46, а по сути это минимумы прошлой недели 2745. И в настоящий момент давят снова вниз. Хотя вчера в диапазоне 2715-13 я видел покупателей, по сути регулярную сессию там резко тоже остановили и вывели выше 2720.               3. Сейчас важные уровни 2727 и 2743. Выше 2743 полагаю должен развиться импульсный рост пунктов на 100+ в течение нескольких сессий.                И вот тут стоит обратить внимание на то что нефть и индекс зачастую корелируют в движениях, но не всегда по времени одинаково.               Вот дневной график нефти               а вот дневной график индекса в котором как бы нет подобного движения вверх.               Но вот конкретно сейчас пока пишу статью индекс начинает разыгрывать другой график               Как видим на 4-х часах есть медвежий флаг и цели его 2675 — 2645. Не раз писал что под 2651 у быков начнутся проблемы, но это не значит что нельзя вынести этот уровень и быстро уйти назад.               Ровно так же это и не значит, что вообще туда зайдут. Возможно ограничатся уровнем 2702-696 либо нырнут скажем до 2692-84               На мой взгляд интрига заключается в том, что если все же собираются расти, то надо окончательно вынести попутчиков, что сейчас и делают, обмануть медведей, заманить их в ловушку и быстро уйти вверх. А вчера не пустили выше 2743 возможно еще и потому что по средам экспирации опционные на индекс. Полагаю, что многие участники рынка могли рассчитывать на большую волатильность и покупали стрэнглы скажем, а маркетмейкеры напротив продавали волатильность и всем желающим путы и колы за пределами консолидации. И конечно же им было выгодно оставить рынок в границах, обнулив покупки тем, кто покупал.               Кроме того на следующей неделе Пасха у католиков и Пейсах у иудеев, как следствие к этим событиям обычно начинается позитив.               Еще хочу добавить, что снижение понедельника было больше обусловлено проблемами у Фесбука, за которым пошли и другие акции, а вот он в свою очередь показал некий минимум, сформировал к нему вчера еще и HL на дневном, а на 60-ти минутном даже умудрился нарисовать фигуру «перевернутая голова и плечи» IH&S с целями 185,13 — что даст закрыть гэп (а такие «дырки» не оставляют на экстремума и он будет однозначно закрыт), а вторая цель выше 198 то есть новые максимумы в акции.              Сам по индексу в лонге и планирую добавлять по ситуации, либо снизу, либо на пробой 2743 например, или 2727 — тут пока мысли разные и оценивать уровни надо по их силе тоже.              Все свои актуальные мысли ежедневно выкладываю у себя в Канале и в Чате.                              На текущий момент:               Уровни сопротивлений: 2727, 2743, 2756, 2768, 2772, 2784, 2789, 2802, 2808-11, 2821-27, 2846              Уровни поддержек: 2712, 2707-04, 2697, 2686-81, 2651              Всем удачных торгов!             Итоги работы Чата за 2017 год по фьючерсу ES (в пунктах на один контракт) — 696 пунктов:              Общий январь-февраль 264,75              Март на текущий момент 80 пунктов на 1 контракт.             Подробная информация помесячно за прошлый год по ссылке             Для желающих присоединиться к чату, координаты ниже.               Для связи:                Whatsapp +792827944 ( ноль девять )                skype: ivandashkov                instagram: idashkov               Напоминаю, что помимо своего Чата, где транслирую ежедневно все свои сделки онлайн, еще открыт канал в Telegram где ежедневно пару тройку раз даю свое видение по рынку, но без рекомендаций и конкретики по сделкам.               Telegram @I_Dashkov

21 марта 2018, 21:25

Watch Live: New Fed Chair Powell Faces First Press Conference

The market is hoping for 'goldilocks' as Powell faces the press and hopes to offer a 'not too dovish' and 'not too hawkish' perspective after hiking rates, and carefully signalling uncertainty over how much more is to come. As a reminder of what just happened - The Fed hawkishly raised its rate-hike trajectory, raised GDP growth expectations, left the inflation outlook alone, but talked down the economic outlook in its statement - Powell has some 'splaining to do. Ian Shepherdson of Pantheon Macroeconomics notes that "only one FOMC member needs to add another hike to their 2018 profile to raise the median to four hikes this year; that looks like a very good bet for June. In the meantime, though, this is a pretty benign outcome for markets, for now." And we wonder who the 5% dot plot in 2020 is... Bloomberg's Steve Matthews notes that Powell's press conference will be interesting on lots of levels. For one, unlike Janet Yellen and Ben Bernanke, the new chairman tends to be very straightforward in his answers -- there are lots of yeses and nos. Such directness can be a little disquieting to markets -- stocks dropped after his first day of congressional testimony in February. Second, as Fed watcher Roberto Perli notes, new Fed chairs can have a tendency to be a little less polished at first. So fasten your seatbelts. So which will it be? Hawkish 'man of steel'?   Or market-pandering goldilocks?   Will he mention LIBOR's blowout? The Deficit? Fiscal Unsustainability? Trade wars? Record high sentiment? *  *  * Live Feed (due to start 1430ET)...

20 марта 2018, 17:34

Keep An Eye On Fed's Meeting

Keep An Eye On Fed's Meeting

20 марта 2018, 17:27

What Can We Expect from Fed Meeting?

We do anticipate plenty of reportage on this meeting of the Federal Open Market Committee (FOMC), even as the markets have long baked-in a quarter-point hike.

18 марта 2018, 07:20

Японский госдолг: быки и самураи

Минувшая неделя принесла с собой одну новость, оставшуюся практически незаметной, считает экономический обозреватель «БИЗНЕС Online» Александр Виноградов. А именно: за весь вторник, 13 марта, не было совершено ни одной сделки купли-продажи японских 10-летних казначейских облигаций. Почему это важно — в нашем материале.

15 марта 2018, 13:41

Что будет с золотом в следующий мировой кризис?

Москва, 15 марта - "Вести.Экономика". Как правило, в экономических кругах и в широкой общественности хорошо известно, что драгметаллы, в том числе золото, пользуются спросом во времена фискальной неопределенности. И для этого есть веская причина. 

01 июля 2017, 01:56

Бернанке: в США усиливается атмосфера антиутопии

Несмотря на длительное ралли фондового рынка США и рост показателей по ВВП, в американском обществе за последние годы заметно усилились негативные настроения, во многом благодаря которым к власти пришел президент, разделяющий антиутопические взгляды.

23 марта 2016, 14:15

HSBC и Citi думают о деньгах с вертолетов

HSBC, Citigroup и Commerzbank задумались о "деньгах с вертолетов". Идею прямого экстренного стимулирования потребительского спроса еще в 1969 г. предложил нобелевский лауреат Милтон Фридман.

23 марта 2016, 14:15

HSBC и Citi думают о деньгах с вертолетов

HSBC, Citigroup и Commerzbank задумались о "деньгах с вертолетов". Идею прямого экстренного стимулирования потребительского спроса еще в 1969 г. предложил нобелевский лауреат Милтон Фридман.

06 февраля 2016, 11:56

ФРС на Украине: идеальное порабощение

Глава Федрезерва Бен Бернанке сделал все, чтобы вызвать в "незалежной" хаос