Some ideas for you all to chew on. Or not….
Articles written by: Cullen Roche
This is part 6, the final section, from the paper “Understanding the Modern Monetary System. To read the first sections please see Part 1 here, part 2a here, Part 2b here, part 3 here , part 4 here & part 5 here. Please feel free to ask questions in the comments or use the Ask Cullen section here. If you’re not familiar with MR terminology you might want to [...]
Just a brief update on global Citi Economic Surprise indices courtesy of Societe Generale. The general trend show a sharp weakening in European economic surprises which is the only index that has correlated well with equity market so far this year. Given the importance of psychology in price movements, it’s worth noting the potential risk of a negative surprise environment [...]
Good thoughts here from theoretical physicist Mark Buchanan. In a Bloomberg piece he warns us to beware of economists peddling elegant models: “If economists jettisoned elegance and got to work developing more realistic models, we might gain a better understanding of how crises happen, and learn how to anticipate similarly unstable episodes in the future. The theories won’t be pretty, [...]
This is part 5 from the paper “Understanding the Modern Monetary System. To read the first sections please see Part 1 here, part 2a here, Part 2b here, part 3 here & part 4 here. Please feel free to ask questions in the comments or use the Ask Cullen section here. If you’re not familiar with MR terminology you might want to review the glossary here. [...]
The economic system is similar to a machine. The metaphor of a car is useful to understand how all the pieces fit together. Monetary policy is akin to the brake and accelerator pads. When the central bank raises the Federal Funds Rate it does so typically to suppress inflationary pressures by making it less enticing for banks to issue loans (create money).
I’ll keep this short and sweet. I’m not a big fan of the Japanese economy at present or what the policymakers are doing to drive the economy/markets higher. I think they’ve made a mockery of their stock market and that this “wealth effect” is a misguided approach to fixing their woes. But I am equally critical of those who think [...]
There’s been some slowing in rail traffic data in recent weeks though the pace of growth remains positive. This week’s reading came in at 1.4% year over year which brings the 3 month moving average to 5.75%. This trend is likely to remain elevated for a few more weeks before the recent weakness begins to make the data look a [...]
This month’s investment outlook by Bill Gross isn’t so much an outlook as it is an introspection. The letter is a deeply thoughtful piece about just how good “great” investors really are. He asks an important question – are great investors merely lucky or good? Are they beneficiaries of a bit of luck and a fruitful investment period? This one’s [...]
Timely commentary from Richard Koo of Nomura here who says that the currency markets are misunderstanding the impact of QE. Given the BOJ’s open-ended commitment to QE that was just announced, it’s interesting to see how the markets are indeed responding to the big talk out of BOJ. Whether they can deliver is a whole different matter. Koo clearly thinks they can’t: