Bryan's shared items
These three charts are pretty cool (courtesy of The Chart Store) — they show many hours you need to work in order to buy one unit of each of these — Oil, Gold and the4 CRB Commodities Index.
This introduces another element to commodity pricing — relative wage gains.
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click for larger charts
Greg Ip at The Economist:
Read this speech, then sell the dollar, The Economist: Ben Bernanke's speech on Tuesday got all the attention, but the speech later that day by Bill Dudley, head of the New York Fed, is more intriguing. In it he analyses the macroeconomic origins of the global imbalances that precipitated the crisis and prescribes the policy path forward....
In a nutshell, Mr Dudley tells us that aggressively easy monetary policy is essential to both the cyclical recovery and to a structural rebalancing of the American economy away from consumption and toward exports. This process will go more smoothly for everyone if emerging market economies (EMEs) cooperate and let their exchange rates appreciate (i.e. let the dollar fall), but absent such cooperation, don’t expect the Fed to change course. ...
EMEs have complained loudly that easy American monetary policy has fueled destabilizing flows of capital into their economies, driving their currencies up and the dollar down. That, Mr Dudley (uncharacteristically for the Fed) admits “is at least possible” but then, in effect, tells them to deal with it...
Not surprisingly, Mr Dudley would like the EMEs and the rich world to cooperatively “move toward arrangements that put us on a mutually sustainable path”. This, obviously, means the EMEs allowing the dollar to fall further against their currencies. Mr Dudley does not, however, answer the question on everyone’s mind. Given the economy’s latest soft patch, is the Fed prepared to force the issue with more QE? ...
It may not matter. As William Pesek over at Bloomberg observes, Asian currencies are already reacting as if QE3 is on its way;... it is ... possible that Fed is getting its way with words, such as Mr Dudley’s speech, as much as with actions.
We’ve updated our Treasury flow charts with new data from today’s release of the Federal Reserve’s Flow of Funds Accounts. The quarterly data are seasonally adjusted and annualized. They reveal quite an interesting picture.
In Q1 2011, the Fed’s QE2 purchases of Treasuries totaled $1.3 TN on a seasonally adjusted annual basis. This number far exceeds the QE2 total program and is one of the reasons why we tend to discount government statistics which have been seasonally adjusted, annualized, and sliced and diced eight ways to Sunday. It’s all we have to work with, however.
Rather than obsessing over absolute numbers, we focus on the relative movements and flows which are quite revealing. The Fed’s QE2 program has been quite successful in flushing households and nonprofits out of their Treasury holdings into asset classes such as mutual funds (see table F.100).
It’s also interesting that foreign flows into Treasuries has declined significantly since the start of QE2 and as a proportional source of financing for the U.S. budget deficit is at one of the lowest levels in years. Though the Fed will continue buying Treasuries with the proceeds from maturing securities — which we estimate to be around $230.4 BN from July1, 2011 to December 2012 — the end of QE2 will be a big test for the markets.
Unless credit markets begin to recover in a significant way, the source of new liquidity to drive major markets is in question, in our opinion. Flows into one market — whether it be equities, bonds, commodities, or foreign assets — will likely be at the expense at another and follow a zero-sum game.
The trick now for traders and investors will be to try and get ahead of the reallocation and determine which market gets sold and which receive the proceeds. Our best guess (and that’s all it is) is the first post QE2 trade will be commodities and Treasuries get sold and high quality/strong balance sheet corporate equities and bonds are bought. It’s about to get very interesting. Stay tuned.
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Today’s Chart of the Day comes from Chart of the Day:
“It currently takes a relatively low 106 ounces of gold to buy the median single-family home. This is dramatically less than the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down over 80% from its 2001 peak (to a level last seen in 1980) and remains well within the confines of a six-year accelerated downtrend and continues to close in on its 1980 trough.”
Home/Gold Ratio
(cost of the median single-family home in ounces of gold).
June 10, 2011
As we noted last month (Debt Ceiling Limits 1939- 2011), from our elected eejits of both parties, this is simply bad behavior/kabuki theater:
Back in late 2008 people asked me: is this a recession or a depression? I said that I would call it a depression if the unemployment rate kissed 12%. I said that I would call it a depression if the unemployment rate stayed above 10% for a year.
Neither of those has come to pass. But the unemployment rate has kissed 10%, and has stayed at or above 9% for two years now.
So I am moving the goalposts. I am adopting a suggestion in comments of Full Employment Hawk . Henceforth, I will call the current unpleasantness not "The Great Recession," but rather "The Little Depression."
