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China risks a ‘Minsky Moment’
China's debt build-up has provoked increasing concern amongst Beijing’s policy makers. The resultant excess capacity exports deflation to the rest of the world. This creates pressures for China’s competitors which could engender a tougher…
The yield curve has now flattened into the danger zone
Quick post here. I caught a tweet by Bloomberg's Lisa Abramowicz this morning noting that the yield curve was at its flattest since the Great Financial Crisis. Looking at the data, I noted that the 10-year bond is trading at only 49 basis…
Jeffrey Gundlach on today’s Fed meeting and bearish thoughts on stocks, equities, and Bitcoin
In his most recent interview, Jeffrey Gundlach says he sees stocks down for the year. He also outlines at what point he sees a bond bear market. Most ominously, however, he describes the Fed as being on autopilot, with this driving the…
Hyman Minsky and asset price inflation versus consumer price inflation
Hyman Minsky's financial theory of investment is unique. He looks at an economy as having two inherently different price systems. There's one price system for goods and services. And there's another one for assets. The econometrics that…
The US curve inversion has already begun – DiMartino Booth
Market data don't speak to full employment right now. Inflation expectations would be rising. They don't speak to the 4 or 5% GDP growth Larry Kudlow expects either. Instead we should be wary of potential stagnation, even recession. And a…
Pre-market: Goldman on how the Fed creates the next recession
Right now, many economists are talking about US growth through 2019 and a 3% unemployment rate. Goldman Sachs chief economist Jan Hatzius is one of them. The fly in the ointment is the Fed and its accelerated rate hike timetable.
Housing Is Not A Bubble, Therefore It’s A Bargain?: DiMartino Booth
Danielle's conclusion seems spot on: residential property in the US may not be in a bubble, but houses are certainly no bargain. Her view on housing is that housing affordability at the entry level has declined significantly.
Lael Brainard speech echoes Powell in hawkish Fed policy shift
Federal Reserve Governor Lael Brainard has given a defining speech that marks a regime shift in US monetary policy. She says that economic headwinds that favored caution have turned to tailwinds. The implication is a more aggressive…
The Fed’s emergency powers will make QE using municipal bonds attractive
In the next recession, muni bonds will be hit and local governments will default. The Fed will use Section 13(3) of the Federal Reserve Act to buy municipal paper. And if they need even more authority, Congress will grant it.
The Great American Pension Crisis is right around the corner
Many US public sector pension funds are underfunded. This will impact local governments' solvency in the next downturn. It could also threaten the safety and security of the municipal bond market. So the Fed may end up playing a role.