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If US long-term interest rates are falling because long-run inflation expectations are dimming, the Fed should wait before raising short-term interest rates. But what if our long-term rates are declining primarily because foreigners are pouring money into our long-bonds because rates in Japan and Germany are profoundly low? If it’s the latter, it might create…

The Friday File: This past Monday, Punxsutawney Phil the weather-predicting groundhog from Pennsylvania regrettably saw his shadow. This means winter will last six more long weeks. But don’t give up hope. Since 1887, Punxsutawney Phil has seen his shadow 80% of the time; he likes it cold. Perhaps because of this, his predictions are accurate…

Under normal conditions central banks alter short-term interest to change economic activity. During the Great Recession, short-term rates hit zero so the Fed began to reduce long-term interest rates via quantitative easing (QE). QE works in two ways. By driving down long-term rates, QE pushes up asset prices (stocks, bonds) thus boosting spending. And, by…

While all oil-producing nations are suffering as oil prices collapse, the hardest hit nation is Venezuela. It’s getting crushed as oil prices collapse since oil accounts for 95% of export earnings, 45% of budget revenues and 12% of GDP. If oil prices don’t rebound soon, Venezuela will default on its $35 billion in foreign debt,…

In 2015 about 500,000 households that lost their homes to foreclosure or a short sale back in 2007 will, if their finances are sufficiently solid, be able to again qualify for a conforming home loan. In all, over seven million such households will be added back to the pool of potential home buyers between now…

While the efficient markets hypothesis says that markets instantly and continually price into shares all known information, making it impossible to consistently beat the market using any rational strategy, it doesn’t suggest that markets are right. Last Wednesday markets plunged on the news that US corporate earnings were down due to, get this, weak oil…

The Fed paid banks $7 billion in interest on $3 trillion in excess reserves parked at the Fed. The primary way the Fed will raise short-term rates is by increasing the rate they pay banks on those reserves. Thus in 2015 interest payments may double. Luckily, the Fed can afford it; they returned a record…

While the unemployment rate has fallen dramatically from 10% in 10/09 to 5.6% today, the number of persons employed is barely 2 million higher than it was before the Great Recession began in January 2008. It’s because the labor force participation rate has plummeted. Turns out the largest percentage declines in the LFPR are among…

While oil prices here are down 56% since 7/1/14, the picture is vastly different elsewhere because oil is quoted in US dollars. Because the Canadian dollar has fallen vs. the US dollar, when converted into Canadian currency the decline has been less severe at just 49%, while in Russia, oil prices in Rubles are unchanged.…