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Salmo trutta

Salmo trutta
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  • Commercial And Industrial Loans Holding Steady [View article]
    No. The series is incomplete and misleading, i.e., an inaccurate representation of all deposit taking, money creating, institutional loans & investment activity.

    See the old logic: "Although the FOMC met every three to four weeks, it was concerned that developments between meetings might alter appropriate reserve provision. Consequently, in 1966 it introduced a “proviso clause” that set forth conditions under which the Trading Desk might modify the approach adopted at the preceding meeting.

    Bank credit (loans & investments), data still were available only with a lag. After some experimentation, the FOMC adopted what it called the bank credit proxy, consisting of daily average member bank deposits subject to reserve requirements.

    If the proxy moved outside the growth rate range discussed at the FOMC meeting, the Trading Desk would generally adjust the target level of free or net borrowed reserves modestly.

    Sometimes the proviso clause permitted either increases or decreases in the objective for free reserves. Frequently, it allowed adjustments only in one direction.

    Logically the bank credit proxy, which represented most of the liability side of the banks’ balance sheets, should have moved in a similar fashion to bank credit, which was most of the asset side of the banks’ balance sheets (other than reserves). I.e., loans=deposits.
    Apr 23 03:24 PM | Likes Like |Link to Comment
  • The Perils Of Pauline And The Power Of Monetary Policy [View article]

    In Keynesian economics aggregate demand is defined as equal to nominal-gDp. The velocity variable in their system is "backed into". I.e., income velocity Vi = nominal-gDp divided by M. So one reason that the calculation is wrong -- is that Vi is actually a contrived figure (make believe).

    The demand deposit turnover figure on the G.6 release (debit & deposit turnover) was an excellent indicator. See its time series description: “Changes in business activity are closely with changes in the volume of payments by check, by which the volume of bank debits provide the best available single indicator”. Note that a dollar bill which turns over 5 times can do the same “work” as one five dollar bill that turns over only once.

    Jim Grant who used to be Barron's "Current Yield" editor (now publishing Grant's "Interest Rate Observer"), put me in touch with William Bretz - who wrote the "Juncture Recognition" stock market letter. Bretz would call Ed Fry (Board of Governors economist that managed the series & tell him when he spotted reporting errors). Bretz schooled me on his thoughts about the series. And Grant snitched on me for having inside information before the data was published (back then I was an avid trader).

    The "Bank Credit Analyst" used to publish a time series on a [debits to loans ratio]. I believe that BCA's economists used a 10 month moving average. That's the lag I adopted to track real-output.

    The series was up for review to justify its publication every 5 years. I helped Ed Fry document the series usefulness. But Ed Fry discontinued the G.6 series in 1996 back when I wasn’t able to contribute.

    Thus: “The usefulness of the FR 2573 data in understanding the behavior of the monetary aggregates has diminished in recent years as the distinction between transaction accounts and savings accounts has become increasingly blurred. Further, the emphasis on monetary aggregates as policy targets has decreased. In addition, respondent participation has declined over the last several years. For these reasons, the Federal Reserve proposes to discontinue the survey and the related statistical release”

    The problem was that the manager of the G.6 series retired (which coincided with Clinton's cost cutting programs). Dr. Anderson disputes this as the reason. But the distinction between transaction & savings accounts amounted to less than a 5 percent error.

    And neither Dr. Paul Spindt, nor Dr. William Barnett, nor the FRB-STL's "Monetary Services Indexes" (MSI) created by Dr. Richard Anderson & Dr. Barry Jones understood how to use it. I.e., none of those professional economists used distributed lags to plot each series.

    All of this in spite of the fact that in 1931 a commission was established on Member Bank Reserve Requirements. The commission completed their recommendations on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements -- Analysis of Committee Proposal"

    It's 2nd proposal: "Requirements against debits to deposits"

    This research paper was "declassified" on March 23, 1983. By the time this paper was "declassified", RRs had become a "tax" [sic].

    Roc's in RRs = roc's in all transactions in Irving Fisher's "equation of exchange" (where nominal-gDp is a proxy). See-mail 11/16/06: “xxxx, this is an interesting idea. Since no one in the Fed tracks reserves…” senior V.P. economist on the Fed’s technical staff.

    And the lags for monetary flows (MVt) are not "long & variable". They have been mathematical constants for 100 years. This is the Gospel. No other metric has a higher R^2.

    Today, there are only a couple of different ways to evaluate Vt. Vt is largely a reflection of the volume of non-bank held lending/investing assets vs. commercial bank held assets as reported in the Z.1 release: “Financial Accounts of the United States" or the old "Flow of Funds” quarterly release. I.e., NB credit vs. CB credit.
    Apr 23 03:15 PM | 1 Like Like |Link to Comment
  • Is U.S. Inflation Headed Higher? [View article]
    The scientific evidence for the last 100 years is irrefutable. I.e., the trajectory in the rate-of-change (proxy for inflation indices), for MVt (the scientific method), projects a top in the inflation indices in May 2014. The seasonal factor's map (scientific proof), is simply the product of money flows. Money flows (proxy for real-output), peak in July.
    Apr 22 01:50 PM | Likes Like |Link to Comment
  • What Is Austrian Business Cycle Theory? [View article]
    No such thing as a business cycle. There are only policy errors.
    Apr 22 01:47 PM | 1 Like Like |Link to Comment
  • Commercial And Industrial Loans Holding Steady [View article]
    Tripe. Today, there are not 5,844 commercial banks - as the FRB_STL's data base reflects; rather there are another 1,271 S&Ls, 7,094 CUs, & 361 MSBs which are also technically, commercial banks (with the capacity to create new money and credit).

    The DIDMCA of March 31st 1980 legislation gave these depository financial institutions (DFIs), the power to create new money when they permitted the new instrumentality of: (1) negotiable order of withdrawals - (2) NOW, & automatic transfer service -ATS, accounts, etc.

    Thus, CB credit (C&I loans), should be expanded to include the CU's, S&L's, & MSB's assets.
    Apr 22 01:46 PM | Likes Like |Link to Comment
  • The Perils Of Pauline And The Power Of Monetary Policy [View article]

    May should be the top in the roc in the price indices (and inflation is the most important component in the determination of the long-term yields). You could scalp bonds on a short-term basis using a mid-May entry point (2 week move). But since I don't have a good velocity figure, you may want to make sure you have the edge.

    Safest entry point would be in July (the seasonal map shows the best trading swing will be from July to August).
    Apr 22 12:35 PM | 1 Like Like |Link to Comment
  • The Perils Of Pauline And The Power Of Monetary Policy [View article]
    Short-term sell in 2 weeks. Longer-term sell in mid-July.
    Apr 19 01:29 PM | 1 Like Like |Link to Comment
  • Yellen Talks About New Higher Capital Requirements For Banks [View article]
    "but also in the newly stimulated Eurodollar market"

    The E-D market was the direct result of the Pentagon running deficits. These deficits were so large that they overshadowed the private sector's surpluses. I.e., the U.S. ran net liquidity deficits that created a surfeit of foreign short-term claims against the U.S. dollar. But the private sector was not responsible. The private sector ran only 1 deficit in the years 1950-1967. It was the pentagon that was responsible for the dollar ceasing to be convertible into gold.
    Apr 19 11:54 AM | Likes Like |Link to Comment
  • Yellen Talks About New Higher Capital Requirements For Banks [View article]
    "Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that eventually became the largest holders of residential mortgages in the country"

    As predicted by Dr. Pritchard (Ph.D. economics, Chicago 1933), in June 1980:

    "One of the principal purposes of the Act (DIDMCA of March 31st 1980), was to provide the housing industry with a reliable source of funds. That may be achieved through various governmental and quasi-governmental corporations. But the role of the S&Ls in housing finance will probably diminish significantly. By becoming commercial banks and having a larger spectrum of loans to choose from, the S&Ls will act like banks and whenever possible eschew 'borrowing short and lending long' "
    Apr 18 06:46 PM | Likes Like |Link to Comment
  • Yellen Talks About New Higher Capital Requirements For Banks [View article]
    "What happened to this system?"

    We got:

    "A sworn fore of bureaucrats, Mr. Wriston often joked: “Regulators sit by while snails go by like rockets.” He devoted much of his career to diving through loopholes in bank holding-company legislation or wriggling free of interest-rate restrictions. As Mr. Zweig shows, Mr. Wriston presided over an encyclopedic range of innovations-among them negotiable CDs, term loans, syndicated loans, floating-rate notes and currency swaps-that ended forever the moribund banking of the 1950s and ushered in our razzle-dazzle age of finance"
    Apr 18 06:41 PM | Likes Like |Link to Comment
  • Yellen Talks About New Higher Capital Requirements For Banks [View article]
    "Communities needed "local" banks"

    That's how we got credit unions.
    Apr 18 06:37 PM | Likes Like |Link to Comment
  • Capital Markets Are Not Buying What Talking Heads Are Selling [View article]
    "The 10-yr note has rallied while the Fed has been curtailing its asset purchases and talk of accelerating growth has increased"

    QE, & declines in some inflation indices, combine to suppress yields:

    (1) Import (End Use): All commodities

    (2) Producer Price Index: All Commodities

    (3) S&P Case-Shiller 20-City Home Price Index©
    Apr 18 06:32 PM | Likes Like |Link to Comment
  • The Perils Of Pauline And The Power Of Monetary Policy [View article]
    I predicted the "flash crash" 6 months before & within one day:

    flow5 Message #10 - 05/03/10 07:30 PM
    The markets usually turn (pivot) on May 5th (+ or - 1 day).

    The exact same thing was said about "Black Monday". And the pundits claimed that "Black Monday" was also due to "program trading". The pundits also claimed Feb 27 2007 (like Black Monday), started across the ocean. In fact, both were home grown.

    And I hope no one ever fully understands my numbers.
    Apr 18 04:15 PM | 1 Like Like |Link to Comment
  • The Perils Of Pauline And The Power Of Monetary Policy [View article]
    "Best of all, no one has really come up with a convincing explanation for why this happened nor can anyone really guarantee it will not happen again"


    Written on Mar 30 11:31 am prior to the MAY 6th FLASH CRASH:

    "Contrary to economic theory, & Nobel laureate Dr. Milton Friedman, monetary lags are not "long & variable". The lags for monetary flows (MVt), i.e., the proxies for (1) real-growth, and for (2) inflation indices, are historically, always, fixed in length (mathematical constants). However the lag for nominal gdp (the FED's target??), varies widely."

    Assuming no quick countervailing stimulus:

    jan..... 0.54.... 0.25 top
    feb..... 0.50.... 0.10
    mar.... 0.54.... 0.08
    apr..... 0.46.... 0.09 top
    may.... 0.41.... 0.01 stocks fall

    Been saying this for the last 6 months. Should see shortly. Stock market makes a double top in Jan & Apr. Then the real-output of final goods & services falls/inverts from (9) to (1) from Apr to May.

    Recent history indicates that this will be a marked, short, one month drop, in rate-of-change for real-output (-8). So stocks follow the economy down
    Mar 30 11:31 am

    The FED was able to inject liquidity to offset this decline. The FALL in these numbers was later erased.
    Apr 18 01:56 PM | Likes Like |Link to Comment
  • Assessing The Recent Stock Market Damage [View article]
    "In the last tightening cycle, which occurred from June 2004 to July 2006, with the FF going from 1% to 5.25%, stocks rose"

    My point is that forward interest rate guidance (Optimal Control Path of Interest Rates), provides false signals. I.e., Keynes's liquidity preference curve (demand for money) is a false doctrine.

    The money supply (& commercial bank credit), can never be managed by any attempt to control the cost of credit (i.e., thru pegging the interest rate on governments; or thru "floors", "ceilings", "corridors", "brackets", IOR, etc).
    Apr 17 03:38 PM | Likes Like |Link to Comment