Tuesday, June 7, 2022

Disinflation Needed A Lot Smaller Than Early 1980 Case — Brian Romanchuk

Marijn A. Bolhuis, Judd N. L. Cramer, and Lawrence H. Summers released a NBER working paper “Comparing Past and Present Inflation” (link) which constructs a alternate CPI index that is comparable to the present methodology. Historically, the housing component was based on house prices and included mortgage rates — which meant that the housing component of CPI mechanically follows interest rates....
Bond Economics
Disinflation Needed A Lot Smaller Than Early 1980 Case
Brian Romanchuk


Footsoldier said...

If it is true that global oil prices lag China's oil imports and industrial production and the exchange rate is also very important and when the Yuan falls it makes oil more expensive. They now have plenty of storage.

China industrial production




China Imports of Crude Petroleum (value)


Not to mention that China is pivoting towards Russia and probably getting a better deal.


Those charts you could interpret that the global oil price lag is going to show up at some point as CNY/USD, oil imports and production all fell recently and fell enough to make a difference.

Some say the lag shows up in 2 quarters or less than that.

If it causes the oil price to drop that should continue to help inflation and improve conditions.

Plus what was so important that Biden is going to fly to Saudi Arabia what will be discussed?

For me I think some of the smart money is on shorting oil.

Will be interesting to see how it plays out and if the lag turns up or not. If in fact China is driving the global oil price.

Footsoldier said...

US Rivals Shunning Dollar Lifts Yuan-Ruble Trading by 1,067% Volumes between Russian, Chinese currencies near $4 billion.


Ruble/ Yuan


Yuan has weakened against both the Dollar and the Ruble.

Which probably means China is buying and then using that massive storage capacity they have created. Making oil demand from China intermittent.

Or just because of the geopolitical situation getting a very good deal from Putin like they did from Iran. As Iran worked their way around the sanctions by undercutting everyone else.

It allowed China to buy cheap then store. When crude prices rose they could dump some of their surplus into the markets at a cheaper price to try and bring down the global price.

I can't wait to see how it all plays out.

Footsoldier said...

"The Gross Value Added metric of China industrial output often precedes the aggregated data on the Chinese PMI by at least a month, frequently by two.

Knowing the increase or decrease of industrial output in nominal, CNY amount is tantamount to understanding the incremental change or changes that have taken place in Chinese industry relative to the month or two previously.

It is easy to keep a currency-adjusted ratio between the Gross Value Added and the actual PMI data, which informs the Chinese elites of forthcoming industry numbers that will not be available to the general market for another month or two."

Anybody willing to try and produce that chart and I'll pay you a Billion kiltcoins for it ?

Kiltcoins are fully backed by Angus. Who can be found in the sheep's head pub on the Isle Of Skye. You can find him in the corner smoking a pipe and playing dominoes. In case you are worried about Kiltcoins keeping their value.

Footsoldier said...

Liquidity proxies are also showing tighter conditions ahead -- therefore the 10Yr Yield is more likely to fall than rise.


Musical chairs ?

Changing narrative to back fit the data ?

Or is the rollover in the 10 year actually coming.