Macro Afternoon

A big beat on unemployment today has spiked the Aussie dollar but sent local shares lower as Chinese markets move higher on the back of a slightly stronger Yuan. Currency markets are gearing up for the BOE/ECB one-two punch followed by a US CPI uppercut with volatility poured into the AUD as a result.

The Shanghai Composite has reversed course, finally putting in a positive session, closing 1% higher at 2683 points. The Hang Seng Index is also doing much better, bursting out of its malaise by closing some 1.7% higher to 26795 points, having found a temporary bottom here on the daily chart:

S&P futures however are slowly retracing here with the Eurostoxx off by some 0.2% in anticipation of the central bank meetings tonight. The four hourly chart of the S&P500 is ready to get back above short term resistance at the 2890 level as it tries to make a comeback to the 2900 former high:

Japanese stocks have recovered from the previous stumble, with the Nikkei 225 closing 1% higher at 22821 points, still well above support and poised for a breakout. The USDJPY pair is slowly making its way higher above the 111 handle, but has slowed down as it nears the former midweek high at 111.60 that needs to be breached soon:

The ASX200 had the rug pulled out on expectatiosn of higher inflation and robust employment stats with a solid loss of 0.8%, taking it down to 6128 points. The Aussie dollar soared through overnhead resistance and almost hit the 72 handle vs USD as a result of the unemployment print but does it have the legs to get back above the former two week high at 72.40 or so:

The economic calendar three major events to watch out for tonight. First it’s the BOE interest rate meeting followed by the ECB meeting and Super Mario’s always fun to listen to press conference. Finally, its the monthly CPI print from the US. A great night for currency speculators!


  1. The Traveling Wilbur

    And the AUPoo is 9 pips from the 72 handle again.

    79 by New Years I tells ‘ya. (NOT investment advice)

    • Yeah yeah yeah but – seriously – why? What’s your base case? What probability do you assign it?

      • The Traveling Wilbur

        Well… I do figure the trade war will be over by then, and the RC will be out of the news around then, and Santa’s round the corner, and China won’t​ slow in the second half (’cause MB keep forecasting that and it never does (almost)), and MB actually revised their forecast for the AUD *up* before Trump’s recent shenanigans…

        So I figure closer to 79 than 70 by New Year’s for sure. Plus, everybody will be buying houses again by then. Can’t be unAustralian for too long shirley.

  2. Something for a large cup of cocoa.

    “..The article I refer to above is very disappointing. It claims to offer a synthesis between Modern Monetary Theory (MMT) and mainstream macroeconomics by way of highlighting “what really divides” the two schools of thought. You might be surprised to know that according to these authors there is not much difference – only that mainstream economists think that monetary policy should be privileged to look after full employment and price stability and MMT economists (apparently) think fiscal policy should have that role. The authors claim that for the on-looker these minor differences are opaque in terms of outcomes (if the policies are applied properly) and suggest that there is really no reason for any debate at all. Accordingly, the New Keynesian consensus is just fine and the mainstream economists knew all the MMT stuff all along. It is an extraordinary exercise in sleight of hand engineered by constructing the comparison in terms of two ‘approaches’ that cull the main aspects of each. The real issue is why would they waste their time. ..”

    • “The real issue is why would they waste their time. ..””

      I don’t think is more impossible to give a non non response to a clearly argued post by Bill e.g. why would anyone even think to challenge the dominate economic dogma of the last 40ish years considering all the refuted memes and tropes whilst the wheels fall off everything. I mean that would be irrational.

    • Yes I think their argument is pretty correct. Once you pare back MMT it is in most ways just a confusing restatement of various aspect of mainstream macroeconomics. It’s confusing imo because of weird and meaningless categories/detours like net financial assets and banks not lending reserves which are inconsequential to the point eventually being made which is that fiscal policy can steer aggregate demand.
      The only difference I’ve found with MMTers who understand their theory is that they claim monetary policy can have no effect or indeterminate effect on demand. So you can flood the economy with money and hold interest rates at zero at all times even when high a real rate of return is available in the economy.
      This is kind of the flip side of some freshwater economists who claim fiscal can’t steer demand

      • The Traveling Wilbur

        Sigh… so it’s like the difference (or not) between fresh-water pearls and salt-water pearls… similar shapes, colours and weights – but one is worth more than the other. And both are clam-sh1t.

      • Major differences are wrt austerity and trickle down w/ a side of the former being the medicine for when the rich screw up served to the immoral poor. After that one can ponder the post Keynesian treatment of models premised on all kinds of toilet time ponderings e.g. humans are thingy from a binary approach and extrapolated to incoherence.

        I mean Michał Kalecki, Piero Sraffa, Nicholas Kaldor, and Joan Robinson… sigh… Cambridge Capital controversy and neoclassical political machinations. So we got Friedman and the Chicago boys just like we got USD as reserve vs Bancor.

        It just gets a bit ludicrous after a bit when everything is the result of mainstream economics, the one that completely missed the GFC, too busy congratulating itself on proclaiming victory. But yeah MMT is not worth the time or PK, you know like the only ones that did sound alarms.

      • As noted before Skippy my main issue with MMT is the dismissal of the need to tax. Once you say the State doesn’t need to tax or maybe it does but only for “demand stabilisation reasons” not to pay for hospitals, then it’s just a counterproductive theory ready to be coopted by the Koch brothers.
        Kalecki and Kaldor were great economists. Sraffa didn’t see eye to eye with Keynes on his theory of the interest rate and was more classical but very interesting. Robinson I have reservations.

      • If at a sovereign level its issued as a tax credit whats the problem, I mean look at all the tax arb antics in America over some decades. This is why some including myself are calling for a full reformation, why are we carrying around old millstones or subsidizing one strata of wealth yet then deny distribution vectors effects. Um… QE without broad fiscal expenditure – JG per say.

        That’s not to say I don’t agree with many aspects sorts like TJN pointout wrt taxation from a democratic governance e.g. focal point for discussion i.e. we talk about thing because of it.

        Head desk, you pick Robinson out and then don’t quantify it, irksome to say the least.

        Persoanly the heterodox histrionics has more relevance than orthodox ex ante pettifoggery, decades of watching this unfold and some still fiddle with scientism and esoterica. What is it, lead in the water, SSRI’s, full immersion advertising starting with kids under 5, smart innovative inanimate stuff, politics that more resembles Saturday cartoons of the 70s…..

        I’m more pro activity like this –

      • Do you think a low tax fixation and theory to support it leads to more SSRI usage or less? I disliked her caricature of Marxian economics

      • I think SSRI’s is reflective of industry seeking short term profit in lieu of a long term solutions, CBT et al, as the result of cramming society through a purist Hayekian price discovery TINA die, and some bang on about force, because markets – die.

        Well Marx was an old boy, not unsurprising that a intellectual lady might take exception in some cases, not that I’m a huge fan of say dialectal materialism, yet that does not mean don’t I concur with other thoughts.

        Again I reference the book the Entrepreneurial State and the history which reflects that capacity when – some – see it palatable.

    • large cup of cocoa

      Whoa! Steady on! We’re not all economics bloggers you know. We can’t hack that pace.

  3. Was in a meeting with a few state gov types talking about developing a swath of land in Perth’s north. Government agency responsible for land development provided plans, projected rate of growth, etc. The suburb is 40+km away from CBD.

    Some of the projections showed 15,000 apartments in the next 20 or so years. Side comment was, “we can’t even sell apartments in CBD, how will we be able to sell them there”.

    Another comment was, “land sales are going backwards, for each one we lose two”. Yet, all the planning is still based on insane rate of growth of 80K people per year (60K Perth, 20k rural) for the next 20 years.

    Bureaucrats get it, put have to toe the party line.

    • Problem is these knuckleheads should be saying this is great with lots of affordable housing becoming available.
      Instead the braindeads will be wanting to turn off the tap and drip feed the land supply. There seems to be an expectation land and therfore real estate shoild be expensive and keep increasing in price ( not in value of course)

    • Now you understand how the ghost city of Ordo got built!! Australia is becoming more ‘Chinese’ every day…

  4. As MB has pointed out the population ponzi is the economic plan

    “a benefit-cost ratio above 0.8, meaning the cost of constructing and operating the line would exceed the value to taxpayers.”

    “Shortly after the government committed to the line in late 2012, a second analysis for Transport for NSW put the benefit-cost ratio at between 1.1 and 1.3. But those figures were reached only after other non-use and wider benefits such as those from higher-density living..”

    • Once you take into account how many restaurants have to close on ‘Eat Street’, and how hard it will be to get people to return after 3 years of construction hell, the benefit/cost ratio should be negative.

    • The same reaction was had all over the world. So what’s your point? 95% of the global population are “Big Brother”?

    • Problem is it’s getting more difficult to not use big brother these days even though I strongly despise these big tech corps

  5. Oh look. Really old rich guy from leafy waterfront suburb that never commutes, and never uses any of the public infrastructure, never uses the local environment, and has a wine cellar bigger than the units he wants people to live in, wants your life to be more vibrant. lol.

    Oh and here’s where mr more people please lives


    This is straya Kent’s, house prices double every 7 years. #fact.

    Oxford said it compared markets across OECD countries from 1970 to 2013 and found a clear negative relationship. Where valuations had risen 35 per cent or more above the long-term average over that period, real house prices fell 75 per cent of the time over the following five years, it said.

    “This points to many OECD countries seeing stagnant or negative real house price growth in the next few years: the scope for a further house price ‘melt-up’ in highly valued markets looks extremely limited,” Slater said.

    Stretched valuations also matter because house price changes can have a significant impact on economic activity, Oxford said, citing a sample of 83 house price booms. It also found house prices tended to fall after booms, and often substantially.