Contractions in Money Flows and Market Liquidity - Part 4
Summary
- A discussion of potential market inflection points and the perfect storm.
- Along with rising risk premia, multiple measures of money flow; market liquidity and economic conditions are in a contractionary trajectory.
- The potential for a dollar spike, commodities "flash crash" in December and further economic downturn exist.
- Greenspan and Bernanke's Conundrum; Demystifying the Conundrum; Final Destination?; Filling The Eurodollar gap.
- A discussion of potential market inflection points and the perfect storm.
- Along with rising risk premia, multiple measures of money flow; market liquidity and economic conditions are in a contractionary trajectory.
- The potential for a dollar spike, commodities "flash crash" in December and further economic downturn exist.
- Greenspan and Bernanke's Conundrum; Demystifying the Conundrum; Final Destination?; Filling The Eurodollar gap.
Greenspan and Bernanke's Condundrum
Both Greenspan and Bernanke had a conundrum. Greenspan 2006:
In this environment, long-term interest rates have trended lower in recent months even as the Federal Reserve has raised the level of the target federal funds rate by 150 basis points. This development contrasts with most experience... For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum.
The recent renewed decline was unexpected by most observers, including me. Why are longer-term interest rates so low? And why have they fallen even further recently, despite signs of strength in the US economy?
The furthering of Greenspan and Bernanke's conundrum may continue. That being, the Fed raises, economies decline further, potential stock market correction or worse yet, systemic collateral freeze or crisis, yet long term rates for UST's stay the same or decline. How?
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In this environment, long-term interest rates have trended lower in recent months even as the Federal Reserve has raised the level of the target federal funds rate by 150 basis points. This development contrasts with most experience... For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum.
The recent renewed decline was unexpected by most observers, including me. Why are longer-term interest rates so low? And why have they fallen even further recently, despite signs of strength in the US economy?
There is no cost involved and it has been our experience that if you exert control (by unchecking a box of two) over your communications settings in your Seeking Alpha profile, your email inbox will not be polluted with one bit of Spam (not even the cured pork shoulder variety. Tasty even.)
As we are now a "contributor" at Seeking Alpha, our published articles, instablog and comments can be found here. Please continue to follow The Nattering Naybob here and at Seeking Alpha. We thank you for your support.
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