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As the world’s smartest and most influential economists scratch their collective heads amidst the growing realization by investors that once omnipotent, omniscient central bankers don’t really understand what it is that they are doing (presumably, if they did understand how this all works, they would have fixed things by now) … gold just sits there.

The British seem keen on exiting the European Union as bund yields in Germany go negative and, to the surprise of many, Fed Chief Janet Yellen, unarguably the world’s most important economist, gives the clear impression that she’s quite baffled by it all … it’s not all good.

Much Ado About the Fed’s LMCI

After Friday’s disastrous labor report, financial scribes are poring over other economic data (that is, when they’re not marveling at levitating stock prices) in an attempt to figure out what the heck is going on in the nation’s labor market and a few of them (see here and here) have homed in on the startling decline in the Federal Reserve’s all-encompassing Labor Market Conditions Index, reproduced below courtesy of the St. Louis Fed.

After this many months below zero on the y-axis, history shows that interest rate cuts are more likely than rate hikes, meaning that, absent a significant change to the slope of that curve, it’ll be “one and done” for this rate hike cycle.

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Vancouver’s World Class Freak Show

That’s one tough bubble they’ve got north of here in Canada’s housing market and, apparently, China’s got a lot to do with its durability as detailed in this story at Maclean’s.

Does anyone call it “Hongcouver” anymore? Maybe that name isn’t as funny as it once was…

There was neither the time nor the desire for an exhaustive analysis, but it didn’t take long to turn up the chart below from the Fed’s Survey of Consumer Finances that seems to contradict the conclusion of former Minneapolis Fed President Narayana Kocherlakota (from this Bloomberg story) that, from 2010 to 2013 “the rich didn’t fare particularly well” .

I guess it just depends on how rich you are and, just speculating here, but it’s likely that the top curve above would show an even bigger divergence from the others the more you separate the richest of the top 10 percent from the rest of that group.

Draghi on Root Causes

I get a kick out of someone with great authority (especially central bankers these days, given their quickly fading super powers) speaking confidently about the root causes of some problem as if you’re an uninformed ignoramus (i.e., not an economist) if you don’t see what is so obvious to them and people like them. Such is the case with ECB chief Mario Draghi’s explanation to the Germans about why interest rates are freakishly low.

To wit:

They (low interest rates) are the symptom of an underlying problem, which is insufficient investment demand across the world to absorb all the savings available in the economy. And so the right way to address the challenges raised by low rates is not to try and suppress the symptoms, but to address the underlying cause.

Got it?

It’s the ‘ol “lack of aggregate demand” root cause canard (i.e., as opposed to the more sensible reckless, multi-decade expansion of credit and debt that artificially raised aggregate demand) that future historians will someday have fun with, that is, after the current set of top economists and central bankers are completely discredited.

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