Decoupling

Although I am not a forecaster, I periodically comment on what I would probably be looking at if I attempted to do so. Right now, the interesting thing is the possibility of a decoupling between Europe and the United States. The latest round of U.S. data has been strong, the Fed has hiked rates again, and Fed analysts apparently have thrown in the towel on recession risks (oh dear). Meanwhile, survey data out of Europe (particularly Germany) has been weak. The chart above shows what I hope is the current (not forward looking, which is less negative) demand for loans by firms in the euro area. (I write “hope” because I had to pick the series out of a somewhat confusing list on DB.nomics, and the ECB Bank Loan Survey only showed recent data to compare to. In case it is not obvious, I am not a European data maven — previously, I worked with commercial data sources where it was easier to pick out the “standard” series.)

Is it possible that Germany and/or the euro area have a recession without the United States having one? I am not forecasting that outcome, rather I want to discuss why the possibility is interesting from a bond market behavioural perspective. (Although if the U.S. continues to avoid recession — “ha ha” to all the yield curve fundamentalists.)

Random PPI Observations

I am working through my inflation book manuscript, and have not had much time to think about new articles. I added a subsection on producer price indices, and decided to go use that as my latest article here. I have added extra comments that is not in the manuscript since they are tentative.

Advantages To Procedural Changes In Bond Market?

From my recent Torrens Zoom call, I ran into questions about procedures in the government bond markets. The main question was whether I saw potential changes to the markets to improve things. The second was more of a concern about the complexity and opacity of the bond market.

Torrens Q&A Zoom Session

I just finished a Zoom call with some Torrens graduate students for a Q&A session. There will be a YouTube version of it available later.

I am just putting up a stub article for students who did not have their questions asked during the session. They can pose them either here or at my Substack.

Alex Douglas On Arches And Money

Alex Douglas just published a post on arches and money which I quite liked. It is an easy read, and I will just offer my spin on one of his points. It also leaks into a discussion of engineering, which I will digress into at the end of this post.

He draws on an excellent book — J.E. Gordon’s The New Science of Strong Materials: or, Why You Don’t Fall Through the Floor. (I have sentimental attachment to this book since I won a copy of it and “Structures: Or Why Things Don’t Fall Down” from a provincial high school physics contest. Both books gave me a good introduction to the non-electrical parts of engineering — possibly more than my undergrad electrical engineering degree, since Canadian accreditation bodies do not allow much space for non-EE content in undergraduate programmes.) In the book, an arch is termed an “apparent impossibility.”

Went Fishin'

Been quiet recently since I was off for a couple of weeks in Jolly Old England. This was a trip that was supposed to happen in 2020 but it was Overtaken By Unfortunate Global Events. 

The only economic content I can offer based on this trip was that I was impressed at the level of penetration of contactless payments (beyond retailers), and as usual, the U.K. seemed expensive. On a tourist purchasing power perspective, CAD is undervalued versus GBP (although one needs to take into account that VAT is built into prices in the UK, versus being added on top of displayed prices here). Since my mental GBP price anchoring is based on prices in the early 1990s, I also noted considerable inflation.

It looks like I have some consulting work that has built up over my absence, so I might not be back to a my target publishing routine for a week or two.