inflation expectations

If a central bank guarantees investors credibly that they can invest in certain debt instruments and not suffer principal or interest repayment risk, but only currency and inflation risk, some investors are almost definitely going to buy…

Last November, in anticipation of QE2, I wrote a post called “How Quantitative Easing and Permanent Zero are Toxic To Bank Net Interest Margins”. The gist of the post was that if the ‘extended period’ for low rates was too long, net…

All US government obligations are substantially identical promises to repay a specific amount of the currency unit of account backed by nothing but taxing authority. So, Treasury bonds don’t ‘fund’ anything. If the Treasury were allowed to…

Just following up on my last post about the expectations theory of interest rates, I wanted to explain why yield curve inversion signals recession – and why it hasn't this go round in the US.

On how the expectations theory of interest rates explains why debt-induced depressions are fundamentally deflationary in nature.

BRL is one of the worst EM performers today, and continues a string of underperformance (-10.8% vs. USD) that began with the unexpected 50 bp rate cut August 31. Since then, only HUF has done worse at -11.5%. It’s really a confluence of…

There is a road open for China involving controlled inflation that would lead to re-balancing, both domestically and internationally, which has some uncertainties. These must be compared to those of sustaining the export-led growth model,…

While rate easing and its cousin permanent zero might have some salutary effect in the short term, these policies are toxic to the financial sector and consumption demand. Likely, they will not spur the economy but lead to a deepening…

Investors shunning US debt ‘for whatever reason’ presupposes the outcome. I need to see the steps that get us from 2.25% 10-year rates to 4 or 5% without the Fed actively raising rates because the only way rates are going higher is because…

Politically the Fed is constrained. So this is the first salvo in a renewed easing campaign by the Fed. Right now everyone is acting like this isn’t QE. But I told you two months ago that it is.