Summary: Repo fails were lower for the second straight week. That means we can check the correlations with other indications like bills, Treasury and Japanese, going in the other direction. Maybe more importantly, TIC figures show a massive deposit of USTs in the Cayman Islands. When? July, August, and September, the very period in question. The question for today’s DDA is how to connect all these pieces. We do just that with a big assist from…the ECB.

Summary: There will not be a BRICS currency. And that’s first assuming any of its members want one (spoiler: they don’t). Contrary to every mainstream belief, money is not a government matter. It is instead driven entirely by commercial, free market interests. We have centuries of development and evolution which stand as an unchallenged testament. The whole thing comes down to one single factor, a modern “Gresham’s Law” which explains the entire way the world, not just the monetary world, really works - has for centuries.

Summary: Dollar doom-ism is everywhere even though those allegedly on the wrong side of it are complaining about something VERY different. The BRICS, for example, are right now struggling mightily with currencies. Those have nothing to do with money printing and a falling dollar. From rupee to real, they are hitting record lows. The dollar “bull” is being unleashed on the world to the point nations are purposefully trying to avoid the reserve currency system not replace it. That’s a far more profound result than just a global recession question because it means we already don’t really have a reserve currency any longer.

Summary: It’s not just that JOLTS hiring was weak again, very nearly matching June’s shocking low, the consequences of that are piling up again in all-too familiar ways. The reason why the economy never recovered from 2008 was the lack of hiring following the crisis. We had already seen that once before in the 21st century, following the dot-com recession. The hiring rate here in 2024 is already worse than that time, around the same as coming out of the 2010s.

Summary: The question everyone should be asking after yesterday’s Fed debacle isn’t about “hawkishness” at all. The real issue is why officials didn’t say the labor market was entirely out of the woods. In fact, we know from the dots as well as Powell’s statements no matter how much they’d like to declare a soft landing they know only too well they really can’t. The labor data is still coming up the wrong way, including several metrics and perspectives even inflation-ist officials are having a really hard time setting aside.

Summary: Canada’s CPI becomes the latest to drop into the “undershoot” category raising the dangers of becoming the “bad” kind of disinflation. Economists in the country are already calling for a more aggressive response. But who should it be who does respond? This sounds like an absurd question since Canada’s weakness is the Bank of Canada’s territory. The evidence instead importantly shows it doesn’t matter what the BoC does. On the contrary, bad disinflation in Canada is actually everyone’s problem.

Summary: It’s always dangerous to wade too far into equities looking for useful macro or money signals. There is far too much noise in share especially indexes. However, at certain times substantial and critical divergences invite some careful scrutiny. We have those here with two of them, a curious pair each with compelling stories. The one a big-cap index, the other related to a widely-recognized cyclical industry. And both breakdown coincident to a number of other real economy developments.

Summary: While everyone has been watching US labor data and now fixated on the election, there have been some major developments. Energy markets are bracing for a supply surplus in the world’s most critical fuel. And swap spreads absolutely plunged throughout last week’s critical macro gauntlet and up through yesterday. All three major maturities including the 5-year for the first time set more record negatives.

Summary: With the election quickly settled, attention now naturally turns to the biggest question facing the incoming administration: can Trump pull it off? However anyone might judge the first term, this second one facing even greater challenges. Making the comparisons you can easily see the difference. The new President and his government will definitely have its work cut out for it. Hopefully, Trump will look back on 2016 for the one thing that could really help this time around facing an entirely different cyclical environment.

Summary: China began the month with some mild good news on its housing condition. It hasn’t been able to follow that up, however, with the latest credit data again majorly underperforming. That, plus the slow response on the bank plan from authorities, brings up the possibility of the credit and balance sheet math being against them. Not quite insurmountable, just far more difficult and time-consuming than may are hoping for.

Summary: Stocks and gold have been on an incredible run, though mostly just coincidence. Only one of them has fundamental purposes and it is critical to get those right. To understand that significance, we have to detour back to the Great Collapse and the Crash of ‘29 to untangle misconceptions about gold, money, banks, and equities. The missing perspective is the blackhole. Bullion is hedged for the next one to come along, whenever it might and whatever it might be.

Summary: A bunch of Q3 GDP data, including the US. Germany’s has displayed a plainly unnatural oscillation that opens the door to a much wider and more profound set of questions. Are their unit roots? If so, could these lead to difficulties in data masking the consequences in the real economy? The evidence does point in that direction with each major and minor revisions. Conclusively proof is elusive primarily because these series would be that proof.

Summary: Suddenly the 4-week bill yield crashes by 11 bps today. Why? To figure that out, we have a look at more repo fails plus journey across the Pacific to see what the Japanese are up to. Not the BoJ, though the central bank does provide a useful contrast to this review. There are bills on both sides plus term-SOFR. In the end, however, the 4w bill today might be a bet on not just a bad October payroll report, it could be even more consequential than that.

Summary: Term premiums are now positive and rising. This means something very different to academics than the other side of term premiums. That opposite side is all fundamentals. The story of and behind term premiums and why academics turn to them so often exposes a lot more than they realize. It isn’t the risks they associate, rather a clear dishonesty and desire to obscure the most inconvenient set of truths in everything.

Summary: Copper to gold hits another new low. Swap spreads set records. Crude oil crashes again. Why aren’t these markets buying at least the China stimulus? For one thing, the idea of “stimulus” has been so thoroughly tested there is no reason to. Anyone claiming “fiscal dominance” is inflationary aren’t seeing these deflation signals or why that is. The evidence is unusually clear and conclusive. What’s missing is only unambiguous proof “stimulus” in addition to be ineffective is actually harmful.

Summary: Repo fails are up again in the latest week, continuing their rising trend which dates back to early August. The events back then were closely tied to Japan’s carry trade. We have even more powerful evidence pointing to this from the Japanese perspective: three-month J-bills. Those rates are behaving in a way we’ve seen numerous times before and, more importantly, like fails they’re still doing it here toward the end of October.

Summary: Why doesn’t anyone monitor money? The short but truthful answer is practically no one really knows where to begin. How can this possibly be? The recent misadventure of White House Economics advisor Jared Bernstein is actually a good illustration of where the current state of knowledge stands. Surprising to most, Bernstein was far closer to the truth than any mainstream Economists or the throngs on social media who mocked him. We’ve got Minsky, Friedman base money, ghosts, MMT and, of course, the eurodollar perspective.

Summary: Evidence for the final stage of recession continues to pile up and in a variety of formats; that just makes the possibility all the more compelling. Another retail giant basically admitted consumers have changed because of unemployment prospects, though, as always, careful not to use that specific term. Doesn’t matter because that’s the way all the data keeps pointing, including the one curve which puts together the two friendliest data series on labor and still comes up with that final case.

Summary: Rather than merely review the deluge of macro data from today, it’s worth instead revisiting the topic of money elasticity. Since we're coming up on September, we'll focus on the downside or deflationary side of elasticity. It wrongly gets lumped together with bailouts, though it is understandable why that often is. Aside from it being wrong, though, history is absolutely conclusive on the matter - including the one time we all lived through.

Summary: We're finally on the cusp of rate cuts, therefore rate cut mania. This unqualified acceptance of interest rate policies is downright irrational. Not only is there overwhelming evidence against it, we even have a case where the rate cuts themselves were inarguable FAKE. Yet, sadly, predictably, they were widely hailed as if the naked emperor has been finely appointed by the most skilled tradesmen. He is; only their trade isn't tailoring.