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A major fiscal policy divergence is unfolding between Europe and the US
A major fiscal policy divergence is unfolding between Europe and the US. Europe is increasing government spending, while the US is moving toward austerity, largely influenced by declining Treasury yields. This is likely to drive a significant increase in interest rate differentials, making it fundamentally bullish for the euro against the US dollar.
Is the #Fed making the same error as the mid 1970s?
In the 1970s they also thought they had beat #inflation in 1974-1975, they lowered #rates and then inflation roared back to even higher levels in the late 1970s. Inflation on came down in early 1980s because of two factors.1) massive new oil (energy) supply from Alaska, Gulf of Mexico, North Sea and huge new fields in Mexico coming online.2) …
Is the #Fed making the same error as the mid 1970s? Read More »
How hot has the stock market been recently? Even the lowly Russell 2000 index has traversed back to its range highs, although it remains some distance from its all-time highs. The “Everything Rally” has brought even the small caps to the party.
Part of the reason is improving liquidity, a surprise trend, despite the Fed’s ongoing Quantitative Tightening (See chart titled “Overall Liquidity.”). However, the biggest reason is this: The stock market is having itself a Pivot Party. After a long hawkish campaign, the Fed pulled an about-face last week and hinted that rate cuts are next, starting …
People are looking at the Federal Reserve as the cause of inflation. That’s certainly been true. Over the last 15 years, since 2008, the Fed’s Balance Sheet has gone from under $1tn to over $8tn.
However what the Fed has done, is dwarfed by what the Treasury has done. At the start of 2008, 15 years ago, Federal Government debt was below $10 trillion. It’s now over $30 trillion. Money owed by the government is nothing more than a promise to print money tomorrow. Government debt can instantly traded back …