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Economy in Brief
Philadelphia Fed Factory Conditions Improve; Prices Jump
The Philadelphia Fed reported that its General Factory Sector Business Conditions Index rose to 23.2 during April...
U.S. Initial Claims for Unemployment Insurance Are Little Changed
Initial unemployment insurance claims slipped to 232,000 (-6.1% y/y) during the week ended April 14...
U.K. Retail Sales Fall
U.K. GDP is expected to cool its jets when the first quarter GDP number is released...
U.S. Mortgage Loan Applications Rebound; Interest Rates Steady
The MBA total Mortgage Applications Volume Index increased 4.9% last week (1.0% y/y), ...
Japan’s Trade Surplus Returns Even As Trade Flows Slow
While the IMF has just lifted its outlook for growth in 2018, Japan is logging weaker and weaker export and import growth as the year progresses...
by Tom Moeller December 27, 2005
At 4.40%, current yields on 10 Year Treasury securities for the most part match the yields on the 2 Year. Fed Chairman Alan Greenspan, and many economists, have indicated that the yield curve's ability to signal changes in economic conditions has slackened as financial markets have broadened and become more complex.
Narrow Money, Broad Money, and the Transmission of Monetary Policy from the Federal Reserve Bank of Richmond is available here.
In the past the move of toward parity, let alone inversion, of the 10-2 Year spread has preceded recessions in the U.S. Without fail it has signaled a marked slowing of liquidity and recently the growth in the monetary base has slowed to 3% from 9% in 2002.
The slowing reflects the effects of higher interest rates on consumers' inclination to borrow and spend as well as banks' inclination to lend.
Certainly, the U.S. economy is "awash in cash." But in a twelve trillion dollar economy such as the U.S., growth is determined at the margin.