Authored by Daniel Nevins via FFWiley.com,
In September, we proposed a theory of the Fed and suggested that the FOMC will soon worry mostly about financial imbalances without much concern for recession risks. We reached that conclusion by simply weighing the reputational pitfalls faced by the economists on the committee, but now we’ll add more meat to our argument, using financial flows data released last week.
Despite a resurgence in positve surprises in hard macro data, PMIs (and soft survey data) has been fading in recent months and Markit's preliminary December showed a notable divergence in the US economy as Manufacturing rebounded to 2017 highs and Servces slumped to 15-month lows.
Back in May when the Chinese domination over Bitcoin was ending, we predicted that it would shift over to Japan, specifically, we said that "just as the Chinese bubble frenzy in bitcoin is fading, it may be replaced with a new one, in which thousands of Mrs. Watanabe traders shift their attention away from the FX market and toward digital currencies" and added that "If the transition is seamless, there is no telling just how far this particular bubble can grow."
Authored by Stephen Roach via Project Syndicate,
Despite seemingly robust indicators, the world economy may not be nearly as resilient to shocks and systemic challenges as the consensus view seems to believe. In particular, the absence of a classic vigorous rebound from the Great Recession means that the global economy never recouped the growth lost in the worst downturn of modern times.
While the rest of Draghi's presser was uneventful, the two things investors were looking for were the ECB's revised GDP and inflation forecasts. And while the first saw a modest improvement across the board relative to the September forecast as follows: