Which is of course a rather odd thing when the Fed has just engaged in QE Infinity and most of the debate surrounding Fed policy references the possibility of a "taper" of QE in the near future. I see this as corroborating evidence of the thesis that the Fed has to engage in a LOT more QE to sustainably stave off deflation. It needs to permanently monetize debt to produce a sufficient long term effect. It can do so via QE but this involves an abuse of the balance sheet and a permanent artificial expansion of the liabilities side of the Fed's ledger. The question is what political consequences this will have. Another issue is what the effect of this on monetary incentives is and whether the wealth redistribution engendered by this policy disturbs the natural innovation and production driving features of capitalism. Yet another question is whether this is "fair".
ps. just that the Fed needs to do a lot of QE does not mean it will strictly have to... The situation is complex because it incorporates the effect of market expectations. If the market expects the Fed to do an X amount of QE and acts on this expectation, this is equivalent to the Fed already doing that much QE. If it communicates with enough convincing power, it achieves the effect simply by broadcasting the signal. Read up on the views of Scott Sumner and his fellow Market Monetarists for more on this.
pps. my thesis is not very consistent with the recent movements in the US treasury market. So I suppose they carry an implicit prediction of this trend reversing in the near future. It wouldn't be the first time treasury yields made a "headfake" of this kind, though. A combination of disinflation + rising yields is probably more consistent with economic bullishness after an expected Fed response to the disinflation, so perhaps my theory can be combined with some optimism along these lines...
Doug Short: NYSE Margin Debt: Was April a Cyclical Peak?
In nominal terms, real margin debt at the end of May 2013, the latest available data, shows a slight month-over-month decline of 2.1% (1.9% in nominal terms). Will we look back at April as a cyclical peak for margin debt like we saw in 2000 and 2007? And does that anticipate a major market peak as we saw twice in the 21st century?See also the earlier: Margin Debt Hitting Levels Only Seen ONE Other Time in History! By Chris Kimble
Margin Debt continues to pose a highly ominous sign to the US stock market at this stage. I dislike the use of nominal values in these charts. A ratio of some kind would be more useful, but I'd have to think about which ratio is appropriate here. Margin debt to GDP seems too simplistic, since the stock market's size relative to GDP also quite wildly fluctuates (which, NB, is another reason to be suspicious of the market rally).
Quartz: The humanities are not in crisis. It’s just that more people are going to college
Even the chart that this rumor was originally based on shows a stabilization/stagnation of the % of people majoring in humanities and only a decline during the 70s.
Erick Erickson Sees Inflation, But The Only Thing That's Inflated Is His Derp
If food inflation was ever a big issue since the crisis, it doesn't seem to be one now, at least judging by bread and milk prices. Useful charts for debunking myths surrounding this topic. Not sure how happy I am with this popularization of the term derp in economic debate, but I don't intent to participate in its usage.
Zillow: Case-Shiller House Price Index expected to show over 12% year-over-year increase in May
Which would be rather odd considering home prices have barely outperformed CPI inflation historically. It is trivial to say such a dynamic would be short-lived unless the CPI also makes unusual jumps from here on. As my first link in this post displays, however, there is no indication of such a thing being in the cards whatsoever. See also: Asymptosis: What Caused the (Next) Housing Bubble? (Six Graphs)
It Takes A College Diploma To Convince People Not To Waste Money On Name-Brand Meds
Kind of illustrative of how brands and marketing work in general. I notice that people massively overpay for well known branded models of smartphones especially. I doubt this principle is solely at play in the medical product market.
Science Daily: Large-Scale Quantum Chip Validated: Prototype Quantum Optimization Chip Operates as Hoped
I suspect the development of quantum computing to become a major wake up call to those who assumed Moore's Law can only be broken to the downside. These are reputed to speed up certain operations as much as 3600 times.
This could turn out to be a pretty big deal considering a lot of people with loans like these are already in vulnerable position and student loans are the US government's largest asset class.
