Fed purchases of US Treasury and Agency bonds

Quantitative Tightening?

“At the heart of the challenge facing the Fed is a notion in economics that there is a short-run trade-off between unemployment and inflation…But the estimate of how low unemployment can go is imprecise and moves around depending on what else is happening in the economy…In the absence of hard-and-fast rules, Fed officials are watching wage gains”– you know all this.  The NFIB released more data on small business activity today and “the most positive news from the small business sector continued to be the demand for labor…Hiring might be higher if not for the difficulty in finding skilled workers.  The January survey found 26% of small business owners reported having job openings they cannot fill right now…’The percent of owners reporting higher worker compensation held at 25%, the best reading since late in 2007.’”  Also, the JOLTS survey released this morning shows “US job openings climbed to more than 5m in December…The figures, which eclipsed expectations for a rise to 4.98m, reached its highest level since January 2001…the monthly JOLTS survey is a favourite of Ms Yellen and the strong reading could prompt a relatively hawkish assessment of the labour force.”  Meanwhile, who says you have to raise rates before you sell the bond portfolio?  “A rate hike without draining reserves requires the use of facilities such as RRP, TDF, and others to temporarily drain reserves.  The permanent draining of reserves through letting the bonds runoff would start the process towards a system where a normal supply/demand market could exist for fed funds.”  QE “has added trillions of dollars of deposits to the banking system.  If those deposits were gone the fight for loans would be different…an overnight rate hike wouldn’t slow/tighten the channel of lending as much as a gradual balance sheet reduction.”  Meanwhile, here’s a bunch of graphs on the Fed’s current balance sheet, RRP balances, other central bank assets, etc.


No End In Sight

“As for staying power as an oil producer, North Dakota has 11 billion to 14 billion barrels of recoverable oil, according to the state, or 7.4 billion, according to the 2013 U.S. Geological Survey.  ‘That’s enough to keep the state drilling for the next 20 to 25 years, with existing wells expected to continue to produce oil for 45 years.’”  Furthermore, the IEA expects the supply growth of US shale to “slow to a trickle but regain momentum later, bringing its production to 5.2 million barrels per day (bpd) by 2020…The United States will remain the world’s top source of oil supply growth up to 2020.”  Meanwhile, Texas is producing the lion’s share of job cuts so far in the energy industry.


China: Slowing More Than Expected? Imports Fell 21% In January


USA: Google, Alibaba, Apple And…Warby Parker Who The Hell?


EU: Germany Can Smell Your Fear

But not the wine on Varoufakis’ breath.

Also, Greeks maybe like capital controls less than they like putting money in a Greek bank.


WM: Apparently There Is More Than One Reason Why Apple Likes Free Money Bonds In Switzerland

Kid Rock Demonstrates Price Rigidity Denial


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