Feldstein and the Fed

Marty Feldstein of Harvard has a reasonably succinct and good piece on why the Federal Reserve should raise interest rates in November. But, Jon Hilsenrath, writing after the September non-farm employment report, has ruled out a rate hike in November. He is the mouthpiece of the Fed or so it is believed.

Greg Ip has a good piece on what the weak Sterling would do to the UK economy. I largely agree.

The chart on Bawerk.Net on the ratio of household networth to GDP and their inflection point from the time Greenspan became the Fed chair are very revealing.

The Chief Fixed Income Strategist for HSBC has a crisp piece on why bond yields would not rise much, if at all, in the world. For the most part, I agree.

Some bond yields have begun to rise (Italy, Portugal) and some money market rates are rising. But, Italy and Portugal have specific issues. The former faces a troubled bank, a referendum that is coming up and the latter could face a credit-rating downgrade. Money market rates are rising in the US. Some have attributed it to an impending change in the calculation of NAV for US money market funds. It could also be due to dollar liquidity shortage.

Over and above these explanations, it is hard to provide much logic to market movements. I am not sure why the US dollar has appreciated against the Japanese yen. Perhaps, the answer is that the Japanese money supply is still expanding whereas the US is not printing money? I do not know.

But, for now,  I do not see bond yields rising in a sustainable manner at all.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s