Edward Chancellor
Review via The Economist
The critics who label as artificial the low interest rates that have prevailed in the world economy in recent decades must therefore answer the question: low relative to what?
“The Price of Time” is the answer of Edward Chancellor, a historian and financier who has written a book by that name. Humans prefer jam today to jam tomorrow. Interest rates are the reward for deferring gratification, for renting out money that could have been spent today. When rates fall too low, grave consequences follow: financial instability, higher inequality and pain for savers. As he makes his case, Mr Chancellor’s panoptic survey of the history of interest, and what classical economists said about it, will not fail to dazzle. The argument, however, is seriously flawed.
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Peak Inflation Watch: 12 August 2022
The latest inflation numbers for the US suggest that the recent surge in pricing pressure has peaked… maybe. The bigger risk is that consumer inflation remains elevated. If so, that’s a significant headwind for the economy and financial markets, even if the consumer price index (CPI) is no longer accelerating.
Macro Briefing: 12 August 2022
* House expected to approve a climate and healthcare bill today
* Ukrainian nuclear plant faces ‘grave hour’ due to potential radiation leak
* UK economy contracts in second quarter
* US home prices rise to new record high in second quarter
* Eurozone industrial output rose more than expected in June
* Global population may be peaking at roughly 8 billion
* Arctic heating up 4x faster than Earth overall, research finds
* US jobless claims rise to highest level since November:
10-Year Treasury Yield ‘Fair Value’ Estimate: 11 August 2022
The US 10-year Treasury yield continues to trade below its recent peak. Yesterday’s softer-than-expected rise in consumer inflation for July supports a case for expecting the 10-year rate to stay below 3% for the near term. A similar analysis can be made based on today’s update of CapitalSpectator.com’s fair-value ensemble model for this benchmark yield.
Macro Briefing: 11 August 2022
* More rate hikes needed despite slowing inflation, say Fed officials
* Traders downgrade expectations for a 75-basis-points rate hike in September
* Atlanta Fed’s GDPNow model raises Q3 nowcast to solid +2.5%
* US average gasoline prices below $4 a gallon for first time in months
* Ford CEO doesn’t see lower costs for electric vehicle batteries on horizon
* Hot inflation could boost Social Security payments by $1700 on average in 2023
* July data for US consumer price data suggests inflation may have peaked:
Modest Rebound Expected For US Q3 GDP
Early estimates for US economic activity in the third quarter point to a mild recovery in output following two straight quarterly declines, based on the median for a set of nowcasts compiled by CapitalSpectator.com. The bounce is encouraging but should be viewed cautiously this early in the quarter. For the moment, however, a bit of relief appears to be brewing ahead of the government’s initial Q3 estimate, scheduled for release on Oct. 27 via the Bureau of Economic Analysis.
Macro Briefing: 10 August 2022
* Russia says oil flows to three central European nations have been halted
* Can Taiwan hold out against a Chinese invasion? Yes, a war game predicts
* China’s consumer inflation rises to highest level in two years
* Low water level in key rivers in Europe threaten to cripple trade
* US workers’ wages continue rising briskly, contributing to high US inflation
* US national average for gas falls below $4 a gallon for first time since March
* Rebound in value stocks continues to fade relative to growth shares:
Predicting Risk: Not Easy, But Easier Relative To Return, Part II
Predicting market risk is easier than predicting return, as demonstrated in the first installment of this series. The caveat is that we shouldn’t conflate easier with easy. Nonetheless, a simple model of using yesterday’s return volatility proves to be a reliable forecast for today. The key question: how far into the future can we effectively forecast vol with this naïve model? The short answer: the reliability fades, quickly.
Macro Briefing: 9 August 2022
* FBI searches Trump’s Mar-a-Lago home
* Consumer inflation expectations decline, NY Fed survey finds
* Small Business Optimism Index ticks up but still below 48yr average
* US housing sentiment falls to lowest level in a decade, Fannie Mae reports
* Housing inventory in US soars as homebuyers pull back
* Reducing inflation is going be challenging, says markets analyst Jim Bianco
* Public pension plans suffer worst annual performance since 2009
* 3mo/10yr US Treasury yield curve holds above zero, just barely:
US Stocks Led Markets Last Week As Commodities Tanked
American shares rose for a third straight week in trading through Friday’s close (Aug. 5), posting the leading performance for the major asset classes, based on a set of ETFs. Commodities, by contrast, lost ground, suffering the deepest loss last week.