Consider the following graph of unrealized losses on securities held by reporting banks (from Rupkey/Financial Markets This Week): Source: Rupkey, “Financial Markets This Week,” March 20, 2023. This made me wonder what would make these unrealized losses go to zero? Obviously…
Pretty unique, in terms of size, and the combination of uninsured deposits and held-to-maturity securities. From the Economist:
Goldman Sachs raised the probability of recession from 25% to 35% in light of the SVB related turmoil (although their guess is still lower than the consensus). This prompted me to wonder what was the net effect of the turmoil and…
In a new paper prepared for the Handbook of Financial Integration, edited by Guglielmo Maria Caporale, Hiro Ito and I examine bond based measures of financial market integration (so, no quantity stock/flow measures, nor banking integration). In short, covered interest differentials…
From Jeanna Smialek in the NYT today: Randal K. Quarles, who was the Fed’s vice chair for supervision from 2017 to 2021, carried out a 2018 regulatory rollback law in an expansive way that some onlookers at the time warned would…
After last week’s financial turmoil, but before the CS/UBS deal, real rates and inflation breakevens were down, while risk and uncertainty indicators were up. Figure 1: Two year Treasury yield (teal, left scale), and 5 year Treasury-TIPS breakeven (pink, right scale),…
One major question posed by recent events is whether the issues SVB faced would’ve been caught had EGRRCPA not been passed (which raised the threshold for what qualifies as a SIFI). Bill Nelson at the Bank Policy Institute has an illuminating…
Deceleration was still in place, according to the WEI. Figure 4: Lewis-Mertens-Stock Weekly Economic Index (blue), OECD Weekly Tracker (tan), Baumeister-Leiva-Leon-Sims Weekly Economic Conditions Index for US plus 2% trend (green). Source: NY Fed via FRED, OECD, WECI, and author’s calculations. Still, nowcasts and tracking…
That’s economist Trump in 2018, as cited in Coy (2018). Now, from USITC “Economic Impact of Section 232 and 301 Tariffs on U.S. Industries” (page 22), a conflicting assessment. The Commission’s econometric model estimates that tariffs under sections 232 and 301…
With industrial production for February (0% m/m vs +0.2% Bloomberg consensus), we have the following picture of key indicators followed by the NBER BCDC, plus S&P Market Intelligence monthly GDP. Figure 1: Nonfarm payroll employment, NFP (dark blue), Bloomberg consensus of…
Near month, over past two years: Source: barchart.com, accessed 3/16/2023.
(1) do not make absolutist statements without knowing the nature of the data; (2) Do not abuse statistical terminology; (3) do not assert a conspiracy is in place just because the data do not conform to your preferred narrative. First, consider…
I keep on hearing this refrain from people like former senator Toomey (on Bloomberg TV today) that the 2018 deregulation had nothing to do with SVB’s travails; rather its problems (presumably also Credit Suisse’s too) was due to monetary and fiscal…
Term spreads rising slightly, yields (nominal, real) down, and risk measures up. One nominal rates have dived; real rates as well, suggesting the bulk of the movement is movement in perceived future economic activity. Figure 1: Top panel: 10yr-3mo Treasury spread (blue),…
Using CME futures, from 1:30CT today: Figure 1: Effective Fed funds (black), implied Fed funds as of March 15 1:30CT (red square), March 14 (pink square), March 8 (sky blue inverted triangle), and February 15 (green triangle). Source: Fed via FRED,…
Undershoots consensus at 0.4%. M/M headline at -0.1 vs 0.3%. Figure 1: Annualized month-on-month PPI inflation (black), core PPI (tan), and core goods PPI (green), all in %. Source: BLS, and author’s calculations. Instantaneous inflation (T=12, a=4) exhibits the same downward…
Five year Treasury-TIPS breakeven rises. EPU up on 13th, VIX down (but still elevated) today. 10yr-3mo spread remains very negative. Figure 1: Top panel: 10yr-3mo Treasury spread (blue), 10yr-2yr spread (tan), both in %; Middle panel: 5 year Treasury-TIPS spread (purple),…
M/M core CPI inflation surprised on the upside (0.5 ppts vs. 0.4 ppts Bloomberg consensus) while m/m headline at consensus. The path of the Fed funds as indicated by futures barely budged. Figure 1: Effective Fed funds (black), CME futures implied…
World of Government Bonds has this interesting page which notes all the inverted yield curves. Shown below are those for S&P ratings of A to AAA as of today. Source: World of Government Bonds, accessed 3/14/2023. What does this mean? In…
Before the The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, what economists/analysts were in support of a loosening of requirements. Peter J. Wallison (AEI) Norbert Michel and Salim Furth (Heritage) John Allison (Cato), Alex Pollock (R Street Institute),…
Today, we present a guest post written by Charles Engel, Donald D. Hester Distinguished Chair in Economics at UW Madison. I’d like to share some thoughts on the Silicon Valley Bank (SVB) failure. These may help clarify the extent to which…
On banking regulation, from Forbes: Thanks to Trump and his supporters this [Dodd-Frank capital and liquidity measures] all changed. Some of the key changes that EGRRCPA made were: Increasing the asset threshold for “systemically important financial institutions” or, “SIFIs,” from $50…
Comparing CME implied Fed funds for the March 22 and May 3 meetings shows a downshift, which seems attributable to developments surrounding SVB. Figure 1: Effective Fed funds (black), CME futures implied as of 3/13 12:20CT (red square), as of 3/10…
From Bloomberg yesterday: China reappointed several top economic officials in a leadership reshuffle Sunday, giving investors greater continuity as Beijing overhauls financial regulation and grapples with escalating tensions with the US. People’s Bank of China Governor Yi Gang, 65, will remain…
SVB was a collapse waiting to happen. One indicator is the increasing reliance on debt acquired on the capital markets (as opposed to deposits). From WSJ: SVB’s year-end balance sheet also showed $91.3 billion of securities that it classified as “held…
Ever wonder whether vehicle miles traveled (VMT) does a good job of predicting recessions? You should’ve stopped after looking at this Econbrowser post from January 4th, but I thought an update to most recent data would be of interest as we…
VIX and EPU up, inflation breakeven down, and term spreads diverge. Figure 1: Top panel: 10yr-3mo Treasury spread (blue), 10yr-2yr spread (tan), both in %; Middle panel: 5 year Treasury-TIPS spread (purple), 5 year spread adjusted for liquidity and risk premia…
The February Wisconsin Economic Outlook forecast was just released yesterday. So too were January 2023 estimates for Wisconsin employment (incorporating annual benchmark revisions). How does the outlook look, given the data revisions? Pretty good in the short term. Over the next…
NFP employment increase of 311K beat the Bloomberg consensus of 205K. This number confirms the continued strength in the economy overall, at least according to the key indicators followed by the NBER BCDC plus S&P Global (nee IHS Markit) monthly GDP.…
The FY 24 Budget was released today. Because the forecast was locked down in late November, and the macro outlook has changed so much, the administration felt compelled to add an “Update on the Administration’s Economic Assumptions”. Here’s the forecast (based…
This is a corrected title of a mendacious (and typically statistically incompetent) article by Craig Eyermann in an Independent Institute blogpost (previously highlighted as Ironman of PoliticalCalculations). He writes: After two years in power, President Joe Biden doesn’t have many positive…
Consider the following model (from Garin, Lester and Sims): Where Do the following graphs of GDP, productivity shocks (ΔA) and unemployment benefits (Δθ) make sense in the context of the neoclassical model? That is, do the series in the bottom two…
Olivier Blanchard and Larry Summers had an interesting exchange about interest rates and secular stagnation, and target inflation rates today, at PIIE. Blanchard mentioned the evolution of r vs. g as a key issue in thinking about secular stagnation, and this…
Following up on the proposition that the recession is seemingly always six months away (as noted in WSJ’s ‘Godot’ recession”), I thought it would be interesting to see if the market had been saying a similar thing. To wit, here’s the…
From WSJ: “It’s the ‘Godot’ recession,” said Ray Farris, chief economist at Credit Suisse. Mr. Farris found himself among a small minority of economists last fall who predicted the economy would narrowly skirt a downturn this year. Every six months, economists…
House Representative Gooden’s recent comments discussed in LA Times: On Wednesday, Rep. Lance Gooden (R-Texas) appeared on a Fox News show to discuss President Biden’s appointment of Dominic Ng to lead the country’s trade interest in Asia. House Republicans, including Gooden,…
I found this paragraph from a Re:Russia article of interest: The macroeconomic situation in 2023 will be fundamentally different to that of 2022. 2022 was the year of import sanctions, the destruction or adjustment of existing supply chains and the construction…
Year-on-year -2.1%. In “Russia’s economic contraction last year mitigated by government spending”, Bofit remarks on the y/y figure: Looking again to the GDP by end use figures, private consumption contracted last year by 1.8 %, while public consumption rose by 2.8…
We have a 2nd release for GDP, and nowcasts for Q1. We also have GDP+ and a guess for GDO for Q4. This is the picture, taking CBO’s estimate of potential GDP. Figure 1: GDP (blue), GDO (tan), GDP+ (teal), nowcast…
That’s what Ed Leamer noted back in 2007. Residential construction employment, spending, housing starts, new home sales, all normalized to 2021M11. Figure 1: Residential construction employment (blue), residential construction spending deflated by PCE (tan), housing starts (green), new homs sales of…
S&P Global (formerly Macroeconomic Advisers) released monthly GDP for January today, indicating a rebound in activity – 0.3% m/m growth. Adding this to a graph of key indicators followed by the NBER BCDC yields the following: Figure 1: Nonfarm payroll employment,…
Consider the following three examples of seasonally adjusted vs. not seasonally adjusted data. Figure 1: Nonfarm payroll employment, 000’s, seasonally adjusted (blue), not seasonally adjusted (tan). NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED, NBER. The deep trough…
Advance estimate for January 2023 goods exports out today. Big jump, compared to the pre-pandemic past, but not compared to the recent past. Figure 1: Month-on-month growth in US goods exports, seasonally adjusted (blue). NBER defined peak-to-trough recession dates shaded gray.…
Reader Steve Kopits writes about the debate over employment numbers: At the same time, I thought it possible that both surveys were in fact correct, but garbled with the effect of the recovery from the suppression, thereby creating misleading impressions because…
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared at Project Syndicate. February 27, 2023 — The popular…
Today, we present a guest post written by David Papell and Ruxandra Prodan, Professor and Instructional Associate Professor of Economics at the University of Houston. The Federal Open Market Committee (FOMC) raised the target range for the federal funds rate (FFR)…
Core PCE y/y 4.7% vs. 4.3% consensus, headline 5.4% vs. 5.0%. Figure 1: Month-on-month PCE inflation (black), Core PCE (teal), trimmed PCE (tan), and instantaneous PCE inflation, T=12,a=4 (purple). NBER defined peak-to-trough recession dates shaded gray. Red dashed line at expanded…
Nominal consumption above consensus (1.8% m/m vs. 1.3%). Personal income was 0.6% m/m, vs. consensus 1%. The NBER BCDC looks at real consumption and real income ex-current transers for conjunctural analysis. These are plotted below, along with with real manufacturing and…
We don’t have estimates of GDI, but if we assume nominal net operating surpluses remain constant at 2022Q3 levels ($6.2 trn out of $26 trn GDI SAAR), then we have the following picture. Figure 1: GDP (black), GDPNow of 2/16 (light…
(If you’re wondering about estimating seasonals — and you might be right wonder — then here’s the alternative.) QCEW data are not reported on a seasonally adjusted basis, which makes comparison with the other regularly reported BLS series, based on surveys,…