May 2017

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Japan has put together a string of five straight quarters of real growth, along with declining unemployment and minute amounts of inflation. Some have recently termed Abenomics “a big success.” If so, then worth noting is that Abenomics’ “three-legged stool” of fiscal reform, less regulation and expansive monetary policy has so far been carried out
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NGDP Outlook-May 21, 2017

The NGDP outlook has rebounded a bit from a low point for the current Quarter-2 of 2018 forecast that was seen in early May. Notably, the rebound preceded the recent volatility in US Equities. Recapping the recent moves in US equities: the S&P 500 tanked on May 17, falling about 1.7 percentage points. The drop

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In trying to “square the circle”, the Fed is courting disaster!

Tim Duy summarizes the problem as the Fed sees it: The Federal Reserve can’t catch a break on the inflation numbers, which are simply not helping in its drive to normalize monetary policy. Monetary policy makers have three possible responses to the weak inflation data. First, they can define down the extent of an acceptable

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The uselessness of the concept of potential output

The concept of potential output is one of the Fed´s “guiding lights”. Unfortunately, it doesn´t “illuminate” anything but dependence on it can cause grave policy mistakes. It seems, as illustrated in the charts below, that “potential” output is always “chasing” actual output. In the 90s and first half of the 00s, actual output was always
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Week ending Friday 19th May 2017 A mixed week in terms of economic news led the equity markets to end up nearly where they started, but politics made a big splash that was mostly dissipated. Underlying economic trends trump politics, it seems. The USD has maintained its recent run of weakness, undoubtedly helping equities too.

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“Curve-edge” analysis can mislead

Leading to conclusions such as this one: From the news: U.S. industrial output rose sharply in April, a sign of underlying strength in the economy. And Industrial production—a measure of output at factories, mines and utilities—jumped 1.0% from a month earlier, the Federal Reserve said Tuesday. That was the largest gain in more than three years

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NGDP Update May 2017

The NGDP outlook has held mostly steady over the past month, with the year-over-year figure for Q2 of 2018 fluctuation from a maximum of 3.9% to a minimum of 3.75%. This narrow range of variation came despite the introduction of the first estimate of NGDP for Q1 of 2017 on April 28th , which lowered

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Eric Rosengren is the Boston Fed President, and a man who has publicly fretted at the construction cranes populating his home city. True, property values have been soaring in the Boston market—witness nearby Newton, Mass., where an average home sells near a cool million. Boston is a city and region infamous for stipulations on property
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Week ending Friday 12th May 2017 Monday’s relief rally #2 on the establishment in France winning over LePen lasted about a week. All it took was a bit of dull data from US inflation and US retail sales to see US bond yields back to where they were at the start, or even lower. They

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Retail Sales indicate weakening economy

You wouldn´t guess that from the news: Retail sales improved in April, suggesting stronger U.S. consumer spending this spring that should bolster broader economic growth as unemployment stays low. In reality, what we see is that after a boost in the first two years of the expansion, which only partly compensated for the deep and

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