Friday, August 10, 2007

Nice Kasriel Rant!

Paul Kasriel is really one of the best! Make sure you read the entire piece and the rant ( it´s a rant by his standards) and click on the Headline.

Der Mann hat es einfach drauf! Kann jedem empfehlen das gesamte Werk zu lesen. Klickt dafür bitte auf die Überschrift.

...It is the combination of the behavior of a yield spread and the CPI-adjusted monetary base. The yield-spread variable is the difference between the yield on the Treasury 10-year security and the federal funds rate. The monetary base consists of the reserves created by the Federal Reserve for the banking system and the currency held by the public.

As the chart below shows, since 1970, whenever the four-quarter moving average of the yield spread has turned negative and, at the same time, the year-over-year change in the quarterly average of the CPI-adjusted monetary base has turned negative, a recession has occurred. Guess what? In each of the first two quarters of 2007, this combination of a negative yield spread and contracting real monetary base has obtained.

> Keep this in mind when everybody on Wall Street is spinning and pulling up several useless indicators that suggest the economy is doing ok........

> Behaltet das im Hinterkopf wenn alle demnächst wieder rosarot sehen und haufenweise Statistiken aus dem Hut zaubern die erklären sollen warum es der Wirtschaft doch gut geht..........
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