Macro Afternoon

See the latest Australian dollar analysis here:

Macro Morning

Yet another sea of red across Asian share markets although mainland Chinese and their Australian satellite bourses are looking to put in scratch sessions. The souring of risk sentiment on Wall Street is keeping all risk markets depressed with the defensive USD joining in with a stronger Yen as the Australian dollar gets smoked down to the 68 cent level. Oil prices are trying to stabilise with Brent crude retreating below the $109USD per barrel level. Meanwhile gold is now in rollover mode having broken key support levels as it prepares to breakdown below the $1800USD per ounce level:

Mainland Chinese share markets are slipping slightly going into the close with the Shanghai Composite down nearly 0.3% to 3389 points while the Hang Seng Index is slowly slipping away into another falling session, down more than 0.6%, currently at 21859 points. Japanese stock markets however are not liking the stronger Yen, with the Nikkei 225 index more than 1.6% lower at 25937 points while the USDJPY pair has retraced sharply below the 135 handle, having rejected last weeks high and barreling in on a new weekly low:

Australian stocks were able to escape the selling with the ASX200 looking set to finish 0.1% higher, currently at  6567 points. The Australian dollar was smacked down this afternoon with a sudden move towards the 68 handle for a new weekly low:

Eurostoxx and Wall Street futures are heading down sharply as we head into the European open, with the S&P500 four hourly futures chart showing price action ready to head towards the 3700 point level with momentum going into the oversold zone and ready to break lower:

The economic calendar finishes the week with two big releases, Euro-wide core inflation and the latest US ISM manufacturing print.

Latest posts by Chris Becker (see all)


  1. haroldusMEMBER

    Heady just bowled a couple of ripping off breaks to hit the stumps plus LBWs.

    We remarkably saw three innings before lunch (wrap straya up, bowl out Lankans, get winning runs).

    In the end, I think it was Greeny’s innings that was best.

    • MOTM awards are notoriously skewed towards batsmen.

      How do you take 9/120-odd and roll a team for effectively 20/300 and give the award to a bloke who makes 70-odd in one innings? If this had been a 1600-run fiesta, I bet the guy taking 8-for doesn’t get a look-in.

      Anyway just my 2c.

    • Mining BoganMEMBER

      That bloody game was supposed to last until the tour started.

      What the hell will I do now?

    • SweeperMEMBER

      I switched off after Smith’s latest tanty.
      the wins don’t count when you’ve got these histrionic drama queens.

      There is more theatrics in a single Smith/Marnus innings than the sum total of Alan Borders career.
      And it is unwatchable.
      Why are these people playing cricket? Choose a different sport.

      • haroldusMEMBER

        Also champ “Why are these people playing cricket”?

        Because in Smith’s case at least and at least apocryphally lasagne’s – they are totally obsessed with the game to the exclusion of other behaviours. Smith left school at Menai to play in England at 17 with the blessing of the principal.

      • haroldusMEMBER

        And finally champ, what other tanties are you referring to? Smith got sold down the river in a runout to a famously bad runner, who is a protected species.

        • SweeperMEMBER

          So what? How many times did Steve Waugh run his partner out and how often did you see them have a teary walking off.

          • SweeperMEMBER

            I’m comparing Waugh’s playing partners to Smith.
            None of them had tantrums after he ran them out. He ran AB out all the time.
            Anyway it was partly Smiths fault cause of his erratic body language.

          • haroldusMEMBER

            Smith was looking away and signalling ‘no’ before being called through.

            Also it has been commented on that this is the first time Smith has been upset at being run out, so it is a) not a common situation and b) particularly egregious in this case.

          • haroldusMEMBER

            Also champ “I’m comparing Waugh’s playing partners to Smith.”

            The point is Waugh was captain – who was going to spack out about it?

            And I’m sure AB did his loving/welcome dance everytime SW ran him out.

      • SweeperMEMBER

        The drama is Medvedevish and doesn’t belong in cricket. The stupid acrobatics whenever they score a run or leave a ball. When Border reached 10,000 runs he barely raised his bat. They clearly chose the wrong sport.

        • haroldusMEMBER

          Pant’s antics don’t belong in cricket? Kohli’s? Those guys push behaviour every match.

          Anyway we won’t ever agree except for refusing to watch strayan cricket. I’m gone when smith is gone although I may stick around for greeny. Smith lost a year of a career due to CA when international cricket imposed no bans like it. Despite other players tampering, repeatedly, including captains, repeatedly.

          And I was almost pretty gone with the shameful treatment of Symonds anyway.

    • happy valleyMEMBER

      Pie in the sky rubbish. How about they concentrate on the here and now and tell Albo to pull his digit out and invoke gas and coal reservation and a super profits tax. That would also give AEMO time to pay around with its 2050 modelling.

  2. happy valleyMEMBER

    Having orchestrated the housing price crash the RBA wants us to have, when will it have to suspend the auction market?

    • The Travelling PhantomMEMBER

      This time they won’t, even wolverine is expecting , and slightly cheering on the decline…even though partly just to spite the kouk

  3. MathiasMEMBER

    Someones been a naughty boy.

    Quote: ” It also has to be noted that John Barilaro is currently under investigation by the NSW ICAC for dodgy payments made by John Barilaro as a Minister to a company associated with federal MP Angus Taylor. Until NSW ICAC finish those investigations Barilaro shouldn’t be leaving the country long-term. ”

    Quote: ” John Barilaro had two intimate relationships with persons other than his wife – from 2017 to 2019 with a Ministerial Staffer from another Minister’s Office and from 2020 with another Ministerial Staffer, from his office, with whom he is currently partnered. He announced his split with his wife in late 2021. He lied to the ICAC. This is a matter of integrity and material to the appointment of a senior public servant. ”


    So he tried to bugger off to New York but they wouldnt let him through the airport. I really cant stop laughing lol.

      • MathiasMEMBER

        Quote: ” ‘JohnLovesToLick’: NSW Ex-Deputy Premier’s email address linked to adult cheating website Ashley Madison (‘life is short, have an affair’) as news emerges he’s dating a former staffer who left his office months prior to his resignation. ”

        What a very naughty man. Honestly, is Australias Politics this terrible? Unbelievable.

        • reusachtigeMEMBER

          Are you a bloke or a cuck? There’s nothing wrong with what he has done there. Good on him!

    • Absolute BeachMEMBER

      Thanks Mathias. I keenly await the flow of sordid details followed by the images of a teary Bruz heading off in the prison jumpsuit. Arrogant spanker

  4. US Federal Reserve Bank economists going Marxist on us

    Monday, May 30, 2022 bill Central banking, Inflation, Labour costs

    It only took about 6 decades or so. And, in between, there has been denial, fiction, and diversions. But here we are 2022 and work that was explicit in the 1960s is now being recognised by the central bank of the largest economy. In fact, the foundations of this new acceptance goes back to the C19th and was developed by you know who – K. Marx. Then a socialist in the 1940s wrote a path breaking article further building the foundations. And then a group of Marxist economists brought the ideas together as a coherent theory of inflation early 1970s as a counter to the growing Monetarist fiction that inflationary pressures were ultimately the product of irresponsible government policy designed to reduce unemployment below some ‘natural rate’. I am referring here to a Finance and Economics Discussion Series (FEDS) working paper – Who Killed the Phillips Curve? A Murder Mystery – published on May 20, 2022 by the Board of Governors of the US Federal Reserve System. I suppose it is progress but along the way – over those 6 decades – there have been a lot of casualties of the fiction central banks created in denial of these findings. – snip

    • SweeperMEMBER

      Tobin’s modified Phillips Curve using wages rather than consumer prices has been spot on for the last 40 years.
      So that is a strange argument.
      Friedman’s Natural rate hypothesis has been completely wrong. Where was the accelerating inflation in 2019 when unemployment was less than 4% and inflation was still less than 2.5%? Powell said the natural rate theory was nonsense and kept calling for tighter a labour market.

      • pfh007.comMEMBER

        You need to read the link.

        ‘…. Anyway, back to the US Federal Reserve economists who want to tell their readers they are on track to articulate what really caused the “the demise of the Phillips curve” (as in their model of the Phillips curve derived from Milton Friedman’s Monetarism).

        In a way, I am happy that these characters think they are coming up with some new understandings even though they are just reinventing the wheel.

        The important point is that they are now mainstreaming our work even if they don’t care to admit or even know that…”

        • SweeperMEMBER

          The Phillips Curve is forever copping it when all it does is note a trade off in wages growth and unemployment.
          The Old Keynesian and Tobin version said the trade off also exists over the long run – eg Friedman’s argument is crap.
          It is correct the CB can just target a level of unemployment in exchange for a little bit of inflation.
          Pre Pandemic In his own words Powell targeted a tighter labour market and abandoned NAIRU. There was no accelerating inflation.
          Add in Tobins qualifications on downward wage rigidity in the face of high unemployment due to churn and employers not wanting to cut wages, and the Phillips Curve is identical to the one Tobin described.
          Which also implies that low inflation target (meaning ceilings) have been a really really bad idea.
          As per Tobin the economy can be well below full employment even at a low stable rates of inflation.
          All this stuff has been out there.
          So I don’t see what is being criticised.

        • SweeperMEMBER

          “as in their model of the Phillips curve derived from Milton Friedman’s Monetarism”

          Friedman and Phelps concluded the Phillips Curve was a useless concept – it was vertical over long run.

          So my reading of that is the argument here is really with the natural rate hypothesis not the Phillips Curve.
          In which case this point was already made by Tobin and it doesn’t require a foray into Marxian economics.

          • “doesn’t require a foray into Marxian economics”

            Are you suggesting that everything Marx had to say is moot and it should just be summery dismissed in toto sweeper. Even when it seems he was right on somethings, but not everything. That would seem to be a form of Agnotology and contra any notion of intellectual/ethics forbearance. Then some people now days bang on about cancel culture …..

      • This should be read in conjunction with the above Mitchell piece.

        The Fed paper by David Ratner and Jae Sim describes how the declining labor bargaining power has changed inflation dynamics, but the models that the Fed and its peers like to use don’t acknowledge that.

        Note that it is not uncommon for the research arm of an economic institution to be intellectually ahead of its policy arm; the IMF’s researchers have published many forward-thinking papers that appear to have had little to no impact on how the IMF runs its programs. It seems the way theses analysts influence their institutions is by changing opinions among the economics community and then having that work its way back to their employers.

        … the slope of the Phillips curve — a measure of the responsiveness of inflation to a decline in labor market slack — has diminished very significantly since the 1960s. In other words, the Phillips curve appears to have become quite flat.–Janet L. Yellen (2019)

        A recent US Federal Reserve staff working paper written by David Ratner and Jae Sim (2022) has captured widespread attention, especially among economists, who, like ourselves, believe that a repeat of the anti-inflation policy scenario of the early 1980s of sharply raising central bank interest rates might prove inappropriate, if not catastrophic, as solution to dealing with the current inflationary environment. While inflation is hurting the poor disproportionally more because of their low incomes, a steep across-the-board rate hike may be a remedy that is worse than the disease, particularly since, as it has been well established (see, for instance, Storm 2022), we are not primarily facing with a demand-side inflation.

        Indeed, not only might the inflation rate be quite insensitive to falling aggregate demand pressures, but sharp and persistent increases in interest rates could devastate many poor working households which would face the specter of increasing unemployment. This concern is amplified by the fact that, unlike the situation in the early 1980s, these poor households now tend also to be very heavily indebted as a proportion of their personal disposable incomes and may face even greater risk of insolvency both because of higher interest rates and because of the increasing unemployment (see Costantini and Seccareccia, 2020).

        The US Fed as well as many other central banks internationally seem now to be united in favor of a steep hike in the Fed’s policy rate, as we witnessed with the most recent 0.75 percent jump on June 15. We are told, moreover, that there are many more increases to come since the Fed rate is, supposedly, still much below its “neutral” level. For a very recent plea in support of what may have been the “mother” of rate hikes in the United States, namely another “Volcker shock”, one has only to peruse the recent paper by Bolhuis, Cramer and Summers (2022) in which they suggest that, to get the current inflation rate down to align with the US Fed’s 2 percent inflation target, it would now “require nearly the same amount of disinflation as achieved under Chairman Volcker.” (2022, p. 1).

        Given the nature of the current supply shocks affecting our weak Covid-battered economies, orchestrating another Volcker-style scenario by creating yet another deep recession is chilling. Besides, it would appear to be somewhat in conflict with the above assessment of former US Fed Chair Janet Yellen in 2019 as well as with the research of these two US Fed economists, Ratner and Sim, who suggest that the slope of the Phillips Curve is actually relatively flat and it has remained so for decades, for reasons that have little to do directly with the Volcker shock of the early 1980s. – snip

        Lots of meat in there, plus comments help to flesh it out a bit more from a non captured audience …

      • The above post in mod should also be book ended with this post …

        This section from Michal Kalecki’s 1943 Essay on Politics and Ideology is so clear and relevant that it needs to be read widely. Thanks to New Economic Perspectives for flagging it.

        From Kalecki:

        1. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided adequate supplies of necessary foreign raw-materials may be obtained in exchange for exports.

        If the government undertakes public investment (e.g. builds schools, hospitals, and highways) or subsidizes mass consumption (by family allowances, reduction of indirect taxation, or subsidies to keep down the prices of necessities), and if, moreover, this expenditure is financed by borrowing and not by taxation (which could affect adversely private investment and consumption), the effective demand for goods and services may be increased up to a point where full employment is achieved. Such government expenditure increases employment, be it noted, not only directly but indirectly as well, since the higher incomes caused by it result in a secondary increase in demand for consumer and investment goods.

        2. It may be asked where the public will get the money to lend to the government if they do not curtail their investment and consumption. To understand this process it is best, I think, to imagine for a moment that the government pays its suppliers in government securities. The suppliers will, in general, not retain these securities but put them into circulation while buying other goods and services, and so on, until finally these securities will reach persons or firms which retain them as interest-yielding assets. In any period of time the total increase in government securities in the possession (transitory or final) of persons and firms will be equal to the goods and services sold to the government. Thus what the economy lends to the government are goods and services whose production is ‘financed’ by government securities. In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off; and this is equivalent to the imaginary process described above. – snip

        • SweeperMEMBER

          That was a brilliant article:

          “Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence”

          This is spot on.

          • SweeperMEMBER

            Since that linked comment is a glowing reference for MMT I am guessing that is directed at me? In my defence I have always followed empirics and that has always led back to Old Keynesianism
            Same with MMT I look at the empirics and it doesn’t make any sense.
            Rate hikes have caused recessions
            Money demand is unstable
            CBs do offset loose fiscal policy

            Then I look at the theory at ask why it is wrong.
            I have done this over and over and you never engage with the arguments.

          • Nothing was directed at you or anyone else, just providing evidence for the readership to make up their own minds. I understand you lay claim too – Old – Keynesianism, this is were we diverge. Keynes used to be a monetarist until he wasn’t and then changed his mind on many other aspects as well later on. So which Keynes are we talking about here, never mind the inclusion of many others at that time, and lastly those that continue on in that tradition.

            Personally I don’t put any one economist on a pedestal and then worship them or their works, reality is a bit more multivariable and time and space are not static. BTW MMT has never presented itself as a ideological or political agenda, only as a description by which policies can be debated. So the high emotions about it from some are a bit of a red flag.

          • SweeperMEMBER

            It’s just where I get to after reviewing the empirics. Paleo Keynesianism. Not part of a club or anything unlike MMT.

          • MMT has been around for more than a bit and is quite diverse in its assemblage of people, so unlike say AET, its not a belief system or a club. This is also why I in macro [not silly micro – waves at Noah et al] run with the PKE sorts.

            The neo-paleo-Keynesian (NPK) research program is unashamedly neo-classical. It seeks to reconcile Keynesian ideas with the microeconomics of general equilibrium theory; and it does so in a new way. As with new-classical and new-Keynesian economics, neo-paleo-Keynesianism constructs models of rational actors who interact in markets. In contrast to new classical and new-Keynesian programs, neo-paleo-Keynesianism contains two propositions that are absent from the hard core of these agendas: 1) there is a continuum of possible equilibrium unemployment rates and 2) the unemployment rate that prevails is determined by the ‘animal spirits’ of investors.

            If Keynes were alive today, one thing is certain; he would not be a Keynesian in the sense in which that term is used today. Keynes was notorious for changing his views on a daily basis and was said to be capable of holding several conflicting opinions at the same time.

            I don’t know about you sweeper but I don’t suffer from any emotional attachment of any sacred goats and just flinging the term – empirics – out there like it magically transfers gravitas or fact to opinion is contrary to the supposition. Especially when a major cornerstone is grounded/based on rational actor models. Its like some people have never heard of practitioner bias. Its as bad as a convo I had a few days ago and the other person kept banging on about LCAs [life cycle assessment] authoritatively, as in Empiric, which then transferred authority to them for dint of saying it. Sadly they had no clue about the dramas with LCAs, LCAs completed by 10 different parties could yield 10 different results e.g. yeah this is not Science anymore than all the bad maths and physics used by orthodox economics over the past decades.

            After all this time the idea you would persist in calling yourself, insert bolt on – Keynesian something or another when in reality its just plain old bastardized Keynesianism [U.S.] after 1955 and Paul Samuelson’s influence. You know the guy that thinks symbology of numbers can reveal the human condition or better yet when cornered stated on record that he preferred [WE need this] his preferred[tm] methodology just like some said at the time about Says Law[tm] not long ago.

          • Comment in mod Sweeper with no links or words that might hit tripwires ….

            I’ll just add to that before you were triggered by MMT that the comment l linked to started off saying:

            “OMG! When I was a first year graduate student in Economics I recall a professor stressing that you needed to mentally construct the “intuitive” economic model first mathematically and then prove it out with data. Trying to find a model to fit the data… “Data Mining”… was bad economic science.”

            They even go on further to flesh out the issues with that methodology and ultimately how in their payed employment looking at MMT methodology was superior in reconciling reality. This is something to think about considering the opinions leading up to and post GFC.