Mish's Global Economic Trend Analysis |
- Super Taper Tantrum? How About an UnTaper Tantrum?
- Idiot's Solution to Negative Interest Rates: Abolish Cash, Tax Currency
- Empire State Manufacturing Index Back in Contraction, New Sales and Unfilled Orders Sharply Decline
- String of Good News Snaps at One: Industrial Production Down 0.6 Percent, First Quarterly Decline Since 2009
Super Taper Tantrum? How About an UnTaper Tantrum? Posted: 15 Apr 2015 07:39 PM PDT Generally, the IMF is wrong every which way about nearly everything. Thus, one has to wonder if the correct response to 'Super taper tantrum' ahead, warns IMF is along the lines of "No Worries Mate". José Viñals, the director of the IMF's monetary and capital markets department, warned of a "super taper tantrum" and spiking yields as the US central bank gets nearer to lifting rates from near-zero levels. "This is going to take place in uncharted territory," he said in an interview.IMF Chief Economist to the Rescue In many ways, that was one of the more sensible things the IMF has ever published. So what's up? Not to worry, Olivier Blanchard, the IMF chief economist, came to the rescue with his rebuttal. Releasing growth forecasts on Tuesday, Olivier Blanchard, the IMF chief economist, said: "I sense the macro risks are smaller than in October — there is no reason for doom and gloom." Taper Tantrum? Well, what if the Fed doesn't hike? How About an UnTaper Tantrum? I am increasingly convinced the US is headed for recession. In fact, I think it is quite possible recession has already started. So, can you have a taper tantrum based on hikes that do not occur (or do not occur at the rate that is priced in?) While pondering that question, here's another: Is it possible the US economy is so weak we have an untaper tantrum in the stock market when the Fed doesn't hike (or doesn't hike as much as everyone assumes they will)? The "UnTaper Tantrum" thesis seems more reasonable to me. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Thus, one has to wonder if the correct response to 'Super taper tantrum' ahead, warns IMF is along the lines of "No Worries Mate". José Viñals, the director of the IMF's monetary and capital markets department, warned of a "super taper tantrum" and spiking yields as the US central bank gets nearer to lifting rates from near-zero levels. "This is going to take place in uncharted territory," he said in an interview.IMF Chief Economist to the Rescue In many ways, that was one of the more sensible things the IMF has ever published. So what's up? Not to worry, Olivier Blanchard, the IMF chief economist, came to the rescue with his rebuttal. Releasing growth forecasts on Tuesday, Olivier Blanchard, the IMF chief economist, said: "I sense the macro risks are smaller than in October — there is no reason for doom and gloom." Taper Tantrum? Well, what if the Fed doesn't hike? How About an UnTaper Tantrum? I am increasingly convinced the US is headed for recession. In fact, I think it is quite possible recession has already started. So, can you have a taper tantrum based on hikes that do not occur (or do not occur at the rate that is priced in?) While pondering that question, here's another: Is it possible the US economy is so weak we have an "UnTaper Tantrum" in the stock market when the Fed doesn't hike (or doesn't hike as much as everyone assumes they will)? The "UnTaper Tantrum" thesis seems more reasonable to me. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Idiot's Solution to Negative Interest Rates: Abolish Cash, Tax Currency Posted: 15 Apr 2015 01:40 PM PDT Citibank's Global Chief Economist Willem Buiter is another in a line of economic idiots (sorry, but no other word is more accurate) who call for abolishing cash and taxing deposits. Bloomberg author Lorcan Roche Kelly fell for Buiter's nonsense hook line and sinker in Citi Economist Says It Might Be Time to Abolish Cash. Buiter proposes that interest rates should have been -6% during the crisis. Kelly is enough of an fool to say "It seems Buiter is correct". On May 28, 2014, economist Kenneth Rogoff proclaimed to the Financial Times, Paper money is unfit for a world of high crime and low inflation. While I would agree with the notion that fiat paper is unfit, thus requiring a return to the gold standard, that is not exactly what Rogoff had in mind. Buiter Calls for Helicopter Drop Buiter carried the idea even further, and actually did so in advance of Rogoff. On May 9, 2012, Buiter Central Banks Need To Drop Money From Helicopters, And Perhaps ABOLISH CURRENCY COMPLETELY. Negative Interest Rates I have discussed the stupidity of negative interest rates several times recently. The natural rate of interest can never be negative. For discussion, please see Stupidity of Negative Interest Rates Expands to Spain; Deflation Shock Thesis. Also see Thrown Under the Bus: Another Look at the Self-Serving Launch of Ben Bernanke's Blog and the Brookings Institute's Pandering Role. Pater Tenebrarum's article Ben Bernanke's Apologia for the Fed is a third discussion on the absurdity of negative rates. Idiotic Ideas Breed Idiotic Solutions To explain Buiter's solution, one only need look at his economically illiterate notions that consumer price deflation is a bad thing and something needs to be done about it. I repeat my Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit". Consumer Price Deflation NOT Damaging Even the BIS has concluded that routine consumer price deflation is no threat. For details, please see Historical Perspective on CPI Deflations: How Damaging are They? In the link at the top, Buiter lists reasons we need to do away with cash, then allegedly knocks them down. As is often the case with economic insanity, a Bloomberg lap dog sucks up total nonsense as if it was candy. Why We Are In This Mess We are in this mess precisely because the Fed had done nearly everything these idiots have dreamed up. The results were a dotcom bust, housing bubble, and now an asset bubble everyone but economic idiots can see. Bad Ideas Never Go away It's time for a recap of my Law of Bad Ideas.
Corollaries 3-6 are from Democrat Sponsored "Income Inequality"; Law of Bad Ideas, Yet Again. And speaking of income inequality, those who live day-to-day on cash (the poor), are those who would be most hurt by Buiter's asinine idea. I was surprised to learn no one had formulated a "Law of Bad Ideas" so I claimed it on February 14, 2014. Don't expect Buiter's idea to go away. Instead, expect it to be embraced by academia even though such ideas are precisely what is behind the very income inequality the Fed and academia are enraged over. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Empire State Manufacturing Index Back in Contraction, New Sales and Unfilled Orders Sharply Decline Posted: 15 Apr 2015 12:01 PM PDT Bad news in economic reports continues amidst occasional and one-time positive reports. The Bloomberg Empire State Manufacturing consensus was not only overoptimistic. The Empire State index points to month-to-month contraction for April, at minus 1.19 for only the second negative reading in the last 23 months. The other negative reading was in December which was just about the beginning of this indicator's slowdown.Empire State vs. Philly Fed The index has dipped twice without the US economy falling into recession. Unless orders pick up, which I doubt given strength in the US dollar, the third time may be it. The Philly Fed survey is out tomorrow. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Posted: 15 Apr 2015 11:05 AM PDT The string of good news in industrial production snapped at one month. The Fed's Industrial Production and Capacity Utilization report shows Industrial production decreased 0.6 percent in March after increasing 0.1 percent in February. For the first quarter of 2015 as a whole, industrial production declined at an annual rate of 1.0 percent, the first quarterly decrease since the second quarter of 2009. The decline last quarter resulted from a drop in oil and gas well drilling. Capacity Utilization Underperforms Expectations Economists at least got the direction correct. Nonetheless, the Bloomberg Industrial Production Consensus was -0.3 percent, once again too optimistic. In January, December and November were revised sharply lower. This month, January was revised lower. If March is revised lower next month, there was no string of good news on industrial production at all. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
Google Inc., 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States |