One year ago we showed the following chart to explain the relative strong dollar that was on everyone’s mind at the time. With a second leg higher in the US dollar imminent, this particular chart will be more important than ever. Claims to dollars, such as demand and time deposits, or even more opaque money-like…
FOMC have changed their normalizing strategy several times and we now see the contours of yet another shift. The Federal Reserve was supposed to reduce its elevated balance sheet before moving interest higher as it would be impossible to increase the fed funds rate in the old fashioned way when the market was saturated with…
We have seen several explanations for the financial crisis and its lingering effects depressing our global economy in its aftermath. Some are plain stupid, such as greed for some reason suddenly overwhelmed people working within finance, as if people in finance were not greedy before 2007. Others try to explain it through “liberalisation” which is…
In the 1970s economists started to incorporate rational expectations into their models and not long after the seminal Kydand & Prescott (1977) article named Rules Rather than Discretion: The Inconsistency of Optimal Plan was published. Their work has been driving the mainstream macroeconomic debate ever since. The question raised in this debate is how policy-makers…
Italy is big enough to matter (it is the eight largest economy on the planet), but so uneventful that most does not pay any attention to what is going on there. We contend that Italy will, during the next year or two, be on everyone’s radar screen as it has the potential to derail the…