Wednesday, June 05, 2013

Thursday: Weekly Unemployment Claims, Flow of Funds Report

by Bill McBride on 6/05/2013 07:18:00 PM

A few interesting articles ...

From Joseph Cotterill at Alphaville on the IMF report about the mishandling of the situation in Greece: Ignored Many Flaws — the report

Click for the IMF’s “ex post evaluation” of its role in the Greek bailout. Its mea culpa.

And if you thought we were being harsh here, parts of the real thing are excoriating.
So they needed to write down debt sooner, and severe austerity made the situation much worse. Hoocoodanode?

And from Tim Duy: Falling Inflation Expectations
...Yes, I know the Fed said they could move up or down. But I think the idea of "up" would only come after a "down." And clearly, if inflation expectations are any guide, market participants are getting the message that "down" is what is coming. And they are not getting that from just the hawkish policymakers. The doves too have been getting in on the action.

Moreover, I have to imagine that the recent market action in Tokyo has made some policymakers a little bit nervous about the limits to quantitative easing. The Nikkei's rise and fall seems to indicate that at some point asset purchases do in fact become destabilizing.

My view is that asset purchases would be most effective if coupled with fiscal stimulus. Working only through financial markets may be simply too restrictive to yield broad-based economic improvement. It is almost as if the Fed is trying to force a fire hose of policy through a garden hose. Keep turning up the volume, and eventually that hose bursts. And that might be what we are seeing in Japan.

Bottom Line: Inflation[sp] expectations are falling, and that by itself should complicate the Fed's expectation that they can start scaling back asset purchases at the end of the summer. But falling inflation expectations may complicate monetary policy more broadly by revealing the limits to quantitative easing. And Japan isn't helping.
And a funny (but still serious) piece from Noah Smith: What is "derp"? The answer is technical. It is always frustrating that so many pundits and policymakers don't change their views when confronted with contradictory data - Noah's post helps explain why.

Thursday economic releases:
• At 8:30 AM, the initial weekly unemployment claims report will be released. The consensus is for a decrease to 345 thousand from 354 thousand last week.

• At 10:00 AM, the Trulia Price Rent Monitors for May will be released. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

• At 12:00 PM, the Federal Reserve will release the Q1 Flow of Funds Accounts of the United States.