Monday, August 31, 2015

The Liecovery Is Over. Before It Started.

To best get a handle on this pseudo-economy, I went back to capacity utilization versus interest rates. As we see below, and as one would expect, interest rates always peak with capacity utilization (inflationary pressures):

Extreme deflation visualized aka. 35 years of trade deficits:

Black line is capacity utilization imported from FRED. Red line is 1 year treasury yields:

"Splat" visualized:
The Yuan devaluation just massively increased deflationary pressures aka. foreign competition, which is why they did it...

TIP:TENZ Deflation expectations with short-term interest rates:

"We're decoupled. From reality"