• 18 hours 2021 Could Be A Huge Year For Chinese Stocks
  • 2 days Shadowy Brokers Target Easy TikTok Money In New Scheme
  • 3 days Cannabis Sales Are Soaring In The United States
  • 4 days Biden Will Be A Boon For Solar Stocks
  • 5 days The Shroom Boom Is Here To Stay
  • 8 days The Gold Rally Has Finally Run Out Of Steam
  • 8 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 11 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 11 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 13 days Why 12 Million American Millionaires Isn’t Good News
  • 14 days Big Oil Is Paying The Price For Investing In Renewables
  • 15 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 16 days Did Amazon Just Democratize Prescription Drugs?
  • 17 days The Private Space Race Just Got Very Real
  • 19 days Short Sellers Are Willing Big In This Turbulent Market
  • 20 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 21 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 22 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 23 days Black Friday Could Be Retailers’ Only Hope
  • 24 days Why You Should Not Dump Your Stay At Home Stocks Just Yet
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

John Rubino

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners…

Contact Author

  1. Home
  2. Markets
  3. Other

The US Has Already Tightened -- Which Explains A Lot

Next week we'll find out if the longest-ever will-they-or-won't-they drama involving a virtually insignificant quarter-point interest rate change will amount to anything. But either way, US monetary policy is already a lot tighterthan it was a year ago.

The Fed's balance sheet, for instance, is a measure of how much new currency it is pumping into the banking system. And it's up only $79 billion, or 1.8%, in the past year. In real terms, that's flat to slightly negative.

Much bigger in the scheme of things is the dollar, which is up by about 20% versus most other major currencies (and a lot more versus emerging market currencies like the Brazilian real). A stronger currency makes loans harder to pay back (just as would a higher interest rate), exports harder to sell (because they're priced in a more expensive currency) and imports correspondingly cheaper.

Bearing this out is the latest reading for US import prices, which was down a shocking 11% year-over-year in August. Part of this was the falling price of oil, but not all of it. A lot is stuff coming in from weak-currency trading partners.

Goldman Sachs calculates that the above, along with the recent volatility in stock prices, works out to three 25 basis point increases in the Fed Funds rate.

Which makes those equity market gyrations look a lot like the taper tantrums that accompanied the end of the first couple of QE programs -- and led to more easing in short order. So the question becomes, can the Fed -- or any other major central bank -- ever again overtly tighten monetary policy, since just the hint of it seems to send the now-wildly-overleveraged speculating community into an epileptic seizure? The answer might be no, in which case 2016 will see some truly epic volatility as this notion percolates through the global financial psyche.

 

Back to homepage

Leave a comment

Leave a comment