Currency: medium of exchange, a unit of account, portable, durable, divisible, fungible Money: medium of exchange, a unit of account, portable, durable, divisible, fungible, AND store of value Most people do not understand the difference between currency and money. The U.S. dollar for instance is not money, it’s currency. The reason is quite simple, it …
The Powell Put is now obvious
Fed decided to keep the interest rate unchanged (as expected) and told the market exactly what It wanted to hear. According to Powell, the Fed are “data dependent” (as always) and are focusing on maximizing employment and stabilizing prices. No surprise as that’s the Fed’s objective. However, there are clear indications that Fed is now …
Fed meeting – I’m skeptical
The Fed will probably keep the interest rate where it is as well as softening its language to please investors. Chairman Powell is trying his best to convince the market that there are no problems and at the same time softening the policies. Why pause the tightening if there are no problems? I'm skeptical.
Shrinkflation – invisible inflation
The other day at the grocery store I decided to go wild and try a “new” coffee. Truth be told, it’s the same brand but with a slightly different taste profile. It appeared to be the exact same size, however the price was slightly less. I thought to myself: “sweet, I get the adventure of …
U.S. banks, too big to fail?
https://fred.stlouisfed.org/series/USNUM A well known saying in the financial world today is that the big banks are “too big to fail.” During the crisis of 2008, President Bush signed a $700 Billion bailout bill. The money was used to buy mortgage-backed securities that were in danger of defaulting. It took the debts off the books of …
What’s next for Fed?
I read the following article from WSJ the other day that I find rather interesting. Fed Officials Weigh Earlier-Than-Expected End to Bond Portfolio Runoff https://www.wsj.com/articles/fed-officials-weigh-earlier-than-expected-end-to-bond-portfolio-runoff-11548412201?ns=prod/accounts-wsj Comments: It looks like the Fed is paying more and more attention to the stock market’s performance. The classic “Fed put” seem to be reintroduced by Chairman Powell. As known, …
Inflation – Keynesian confusion
When most economists talk about inflation they talk about rising prices. However, rising prices is not inflation, it is merely the result. Similarly, most economists refer to deflation of falling prices. Again, falling prices is not deflation, it is the result. So, what is it a result of? The answer is the quantity of money …
GDP = ROE?
When measuring the size of the economy we usually look at gross domestic product (GDP.) Similarly, when we measure financial performance, we often look at ROE. What's the similarity?
