Dear Mr. Dudley,
Your recent comments following last week’s FOMC statement were, frankly, less than constructive.
In particular, your justifications for additional rate hikes to stave off rising unemployment and inflation came across as disingenuous.
Alarming Unemployment Rates
To be candid, the notion of “alarming unemployment” is a recent addition to economic discussions and one that raises eyebrows.
In years past, before the age of globalization, the fear of wage inflation due to full employment was the primary concern. Now, with the official unemployment rate sitting at 4.3 percent and wages still stagnant, it seems the Fed has concocted a new crisis to justify its actions. What should we make of this discrepancy?
First and foremost, the Fed’s unconventional monetary policies have entirely shifted the financial landscape, altering the relationship between the economy and the markets in unprecedented ways. The implausible has become the norm. Continue reading
As the White Rabbit from Lewis Carroll’s Alice in Wonderland famously said, “The hurrier I go, the behinder I get.” While the exact moment he utters these words is a mystery, one can imagine him saying this as Alice follows him down the rabbit hole.
Today’s workforce can certainly relate, as many find themselves working harder and yet somehow falling behind. The rationale for this may not be immediately clear. At first glance, some might mistakenly blame foreign competition for their economic struggles.
However, much like the whimsical world of Wonderland, the realities of today’s financial markets are often deceptive. The stock market hovers near all-time highs, yet 60% of Americans struggle to save even $500 for an unexpected expense. Continue reading
“The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it.” – John Steinbeck, The Grapes of Wrath
Surges in New Credit
Something peculiar and somewhat irrational occurred this week. On Tuesday, gold prices soared by over $13 per ounce. While this alone is not particularly shocking, it coincided precisely with a decline in the yield of the 10-Year Treasury note, falling to 2.15 percent.
Essentially, investors appeared to be simultaneously anticipating both inflation and deflation. Although this conclusion oversimplifies the situation, it underscores the strangeness of current market dynamics.
Later in the week, the opposite scenario unfolded. Gold nearly relinquished all its Tuesday gains while the yield on the 10-Year Treasury climbed back to 2.19 percent. What conclusions can be drawn from these fluctuations? Continue reading
Treasury yields are trying to convey a message, but precisely what remains ambiguous. Only the most inquisitive may take the time to decipher it.
Much like the persistent June gloom in Southern California, the implications of Treasury yields can be somewhat misleading. Are investors foreseeing deflation or inflation? Are yields adjusting due to another market phenomenon or perhaps central bank involvement?
This year, despite the much-discussed potential for “Trumpflation,” the yield on the 10-Year note has declined. On January 1st, the yield stood at 2.44 percent, but by the close on Thursday, it had dropped to 2.22 percent.
At first glance, it seems that concerns about inflation are far from urgent. Speculation suggests that investors expect Trump to struggle to push his spending bill through Congress. Without his supposed fiscal stimulus, the likelihood of inflation might seem reduced. But does this conjecture hold any significant weight? Continue reading
