Up relative to yesterday (or the 19th), as expected given Powell’s statement. However, still way down relative to March 8th.
“Forecasting Summer School: Modeling and Forecasting the International Dimensions”
That’s the title of the 6th annual Forecasting Summer School, June 24-25, at the University of Virginia Darden School of Business, Charlottesville, where I’ll be the instructor. The deadline in March 27.
Swedish Inflation: Blame It on Biden!
The evidence is overwhelming. As Steven Kopits comments:
Yes, Powell and Yellen [are at fault for causing the inflation and resulting banking crisis]. Nothing new there.
And, yes, the US can export inflation. If a US fiscal impulse goes into a full employment (or upwardly constrained employment) economy, then the difference will show up in imports. We would expect to see a blow-out in the trade deficit and clogging of ports. Which we did. And we would expect that supply chains across the world would be under pressure with price increases across the globe. Which we did. So, yes, best I can tell, the US is able to export inflation.
What Would Interest Rates Have to Be for Unrealized Losses to Be Zero
Consider the following graph of unrealized losses on securities held by reporting banks (from Rupkey/Financial Markets This Week):
How Unique Was SVB?
Pretty unique, in terms of size, and the combination of uninsured deposits and held-to-maturity securities. From the Economist:
Recession Chances: Fed Pause vs. Banking Shock
Goldman Sachs raised the probability of recession from 25% to 35% in light of the SVB related turmoil (although their guess is still lower than the consensus). This prompted me to wonder what was the net effect of the turmoil and Fed response (less tightening) on economic activity.
Financial Market Integration Assessed
In a new paper prepared for the Handbook of Financial Integration, edited by Guglielmo Maria Caporale, Hiro Ito and I examine bond based measures of financial market integration (so, no quantity stock/flow measures, nor banking integration).
2018 Banking Deregulation and Randal Quarles
Rates, Break-evens, VIX & EPU, pre-CS/UBS
After last week’s financial turmoil, but before the CS/UBS deal, real rates and inflation breakevens were down, while risk and uncertainty indicators were up.
SVB, SIFIs, Dodd-Frank, EGRRCPA, HQLA and the LCR
One major question posed by recent events is whether the issues SVB faced would’ve been caught had EGRRCPA not been passed (which raised the threshold for what qualifies as a SIFI). Bill Nelson at the Bank Policy Institute has an illuminating post arguing that the liquidity coverage ratio (LCR), which would have applied to SVB had it been classified an SIFI, would not have been triggered. People like former Senator Toomey (a cosponsor of the 2018 act) have asserted that the LCR wouldn’t have caught SVB. Here’s the logic I think he, and others, is relying on.