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Showing posts from September, 2018

Fed Choice: Destroy Stocks or Destroy Housing

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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/fed-choice-destroy-stocks-or-destroy-housing?post=135926&uid=4798

If we are to believe reports regarding stocks and the housing market, the Fed could be in a box. It could destroy stocks, or destroy the housing market depending on which way interest rates go.

The recovery in stocks has been driven by financials. The reflation/inflation trade was all the rage when Donald Trump took office. But it is starting to look like this was just another bond tantrum that kind of came and went. Lots of people staked their reputations on this inflation trade.

JP Morgan has warned that a decline in rates could severely impact the stock market. It wants some inflation at this late date. But the Fed is not cooperating, as Tim Duy has said that inflation and unemployment are too low and are preventing the Fed from reaching its goals.




And it looks like we are seeing some problems on the demand side. Reta…

Where Does Japan's Economy Stand?

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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/global-markets/where-does-japans-economy-stand?post=135762&uid=4798

Where does Japan's economy stand? Well, we know from Scott Sumner that employment is high, unemployment is very low, and stimulus appears to be working. We can see that capacity utilization is quite high in Japan compared to the mid 70's for the United States:

So, based on low unemployment and high capacity utilization, where does Japan stand? Edward Lambert of Effective Demand Research said this in general about economies:

Let me boil this down… There is an equilibrium point between supply and demand that determines the scale of output and employment, all at the aggregate level. As Keynes saw it, supply and demand both increase as output increases, with more demand than supply. But demand increases at a slower rate than output, so that there is a point at which they cross and are in equilibrium. At this point, output…

The Trump Coup Could Impact Stocks

Update: Donald Trump's antiSemitism was muted so that he could gain favor with Israel. He gave Israel the embassy in Jerusalem, and Zionism appeals to POTUS as it is a powerful regime. Trump seems to like powerful regimes, mostly either undemocratic or lacking compassion, and Netanyahu posted a dreadful tweet on the official site that fits what Trump wants. Netanyahu said on August 29, 2018:

The weak crumble, are slaughtered and are erased from history while the strong, for good or for ill, survive. The strong are respected, and alliances are made with the strong, and in the end peace is made with the strong. This, of course, is a dreadful statement. Fascistic in tone. It was published to the official PM Twitter account on August 29, 2018.

So, there is a current Trump coup. Israel got what it wanted from Trump, an embassy. But Trump is a criminal in his own right, and it appears that Israel is staying clear of the controversy. With the conviction and guilty plea of Paul Manafort, t…

Crucial Economic Issues in the Age of Trump

I sent this email to Ellen Brown's public banking group. She had asked how I knew that the Fed tested counterparties by raising rates a bit. That was in response to this article I shared. http://www.talkmarkets.com/content/financial/feds-andolfatto-powell-and-the-secret-goal-of-the-fed?post=173896&uid=4798

It was a good question.

In response, I shared this. It doesn't answer all the issues, but gives an understanding of them and maybe a few questions that need to be discussed are revealed:


Good question, Ellen. Well, it is (testing the counterparties) because 1. the Fed is raising rates slowly, and 2. the long bond operates within a strict channel. Get much above 3 percent on the 10 year and it drifts lower. Art Cashin has said that going over 3 percent is a worry, and historically, he was very concerned about collateral in the past. I write about it here: http://www.talkmarkets.com/content/bonds/bond-vigilantes-liberty-street-fed-collateral-study-and-art-cashin?post=1675…