Monthly Archives:

July 2009

An Australian Bond Vigilante Discusses the Ashes

After narrowly avoiding defeat in Cardiff, England won the second Ashes test at Lord’s and is heading into the Edgbaston test match with a 1-0 lead. For those of you not familiar with cricket and this contest, see here. As the sole Australian and new member on the team I expected a bit of ribbing from my fellow Bond Vigilantes. But not this much. So rather than debate the possible outcome of th…

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Mr Bean, QE and US house prices

Mr Bean doesn’t say much publicly, so the bond market spent last week pouncing on every utterance of his UK tour (usually without much regard for the context in which things were said) in an effort to answer the key question of whether or not the Bank of England would continue its program of Quantitative Easing.

Yesterday morning we got a few more clues after the minutes of the last Monetary Po…

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Quantitative Easing Custard Pie

The day after Richard’s ‘walking on custard blog last week, the BoE announced that it was going to have a break from its QE program, at least until its quarterly Inflation Report comes out next month. The BoE had previously committed to buy back £125bn of gilts, £25bn short of the £150bn that the government had permitted. Market expectations had been for the BoE to announce that it would buy b…

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The Fed, deflation, and 1980s German electronica

The US bond market expects the Fed to start raising rates again at the start of 2010, if not earlier.  The bond market is usually right, but maybe not this time.  A speech last week by influential San Francisco Fed President Janet Yellen (seen as a possible candidate for Bernanke’s job, should he not get reappointed next year) suggested that keeping Fed funds rate at zero for several years is “…

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Quantitative easing – walking on custard

Economic theory is simple – increase the supply of something, and its price should fall.  Therefore to increase inflation, reduce the value of money by simply printing it. If this excess money is spent on a limited supply of goods and services, then inflation should pick up strongly.  However if the cash is not used,and instead sits in bank vaults or safe deposit boxes, then the inflationary im…

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