Dollars and Jens
Friday, December 31, 2010
I was busy last week, and missed the update of the BEA's measure of third quarter GDP. A slight weakening of final sales was offset by an upward revision to inventory accumulation.
III 07IV 07I 08II 08III 08IV 08I 09II 09III 09IV 09I 10II 10III 10
Gross domestic product2.32.9-.7.6-4.0-6.8-4.9-.
Nondurable goods.27.07-.50.31-.91-.78.06-.
Durable goods.31.20-.92-.23-.95-1.79.35-.211.35-.
Change in private inventories-.28-.77-.49-.48-.12-2.31-1.09-
Fixed investment-.18-.76-.98-.69-1.83-4.01-5.71-1.26.12-.12.392.06.18
Net exports of goods and services.873.21.841.04-.631.502.881.47-1.371.90-.31-3.50-1.70
Government spending.


Tuesday, December 14, 2010
FOMC statement -- even less change than expected
The FOMC statement, as revised:

Information received since the Federal Open Market Committee met in September November confirms that the pace of recovery in output and employment continues to be slow economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment. Household spending is increasing gradually at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters continued to trend downward.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand continue expanding its holdings of securities as announced in November. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. In light of the improving economy, Mr. Hoenig also was concerned that this a continued high level of monetary accommodation increased would increase the risks of future economic and financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy.


Saturday, December 04, 2010
The Doomsday Trade
The idea of hedging against catastrophe, otherwise known as tail risk, has become the latest rage among hedge funds, according to money managers and traders.
It's a tail-risk bubble!

Okay, probably not, but it's a fun theory. The story is via Instapundit.


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