More than a quarter of a century

10 year US treasury yield jinx

News is awash on the rise of the 10 year US treasuries to around 5% for the first time in 16 years, the first time since the global financial crisis. Check the intros of the stories in the links below.

A relentless global bond rout is piling pain on to investors who loaded up on fixed-income assets this year as they spied the end of central banks’ cycle of interest rate rises. The yield on 10-year US Treasuries climbed to around 5% — a level not seen since before the global financial crisis — on Thursday, capping a rise from around 3.5% at the start of the year that goes hand in hand with a sharp decline in prices. Full story here: https://on.ft.com/46Yzj4Q

Treasury yields have jumped today as stronger-than-expected US retail sales data breathed new life into a global bond rout. Investors are worried this latest sign of US consumers' resilience could mean the Federal Reserve might lift borrowing costs further in its fight against inflation. Get the full story here: https://on.ft.com/3rRErZB

Bond yields have been pushed to a 16-year high after data showed the US added 336,000 new jobs in September, far more than expected. The figures have also fuelled investor anxieties that interest rates will stay higher for longer.

Get the full story here: https://on.ft.com/45k26zt?segmentid=b118df58-92c2-d0b5-68bb-3059fe9219fa

Bond yields on both sides of the Atlantic have hit their highest levels for more than a decade today as a sell-off in global fixed income continues. Read the full story here: https://on.ft.com/45n8Nk5

The 10-year Treasury yield rose above 5% today for the first time in 16 years, extending a multi-week rout in bonds as investors bet that the US Federal Reserve would keep interest rates at their current high levels for longer. Read more: https://on.ft.com/3S6NiBn

A New Season Beckons II

Hello everyone. I hope everything is ok.

The ideas in my previous article
A New Season Beckons still apply.

The picture is becoming more clearer as the days go by.

As the world goes through some tumultuous transition, mixed market signals will be received. As always these signals will become clearer in hindsight. For some that can be a bit too late hence the quest to make out the information at hand. I will she'd more light in future posts.

Cheers.

A New Season Beckons

It's been a while since my last post. A lot has been happening out there and in my life. In the part of the world where I live, this time of the year signifies the transition from the cold season to a warm season (and then hot season). It's a time of reinvigoration, refocusing and introspection on the purpose of life icluding what should drive us and the teleological objectives which position ourselves within the reality around us.

As a new season beckons us, we should not lose sight of what is required of us notwithstanding the vagaries of life which might push us towards unexpected and unpleasant stations in life.

Locally, (in Zimbabwe) the introduction of gold coins has created a buzz. I will touch on it soon. I had done some research on these matters as an independent scholar. I will explain in this issue soon. The local macroeconomic instability in prices, exchange rates and money supply growth is touching a raw nerve within households, firms, the government and individuals alike. The stability in these macroeconomic variables is something the authorities are sweating over in light of the various macroeconomic policy interventions. I will touch on that soon.

Internationally, the war in Ukraine has created global imbalances in the international goods and financial markets which has translated into food shortages and price inflation. If not attended to, the price inflation would translate into stagflation, something the world economies are not yet ready to grasp with (considering the available policy tools in existence). I will also touch on this soon.

22022022

Interesting note concerning today, that is, 22022022. I found this on social media.

Biden 2020 Part II

 Here is a previous post from 2016 concerning Joe Biden reminiscing about about a missed opportunity to campaign for the US presidency in 2016 and a possible 2020 run. In a few hours the polls open in America with more than half of the expected votes already been cast in early voting (more than 93 million by 2 November). The outcome of the polls are uncertain with Biden leading in most opinion polls. As we know already, opinion polls can be misleading in the context of these kind of polls.

Fiscal Policy and Economics and Financial Literacy

Here is a paper for which the working paper I once referred to before.

The title of the paper is THE IMPACT OF ECONOMICS AND FINANCIAL LITERACY IN HOW PEOPLE PERCEIVE THE EFFECTIVENESS OF THE FISCAL POLICY OF ZIMBABWE: CASE STUDY OF HARARE.

The citation for the paper is:

Ngonidzashe Mukwepa (2020). The Impact of Economics and Financial Literacy in How People Perceive the Effectiveness of the Fiscal Policy of Zimbabwe: Case Study of Harare. Review of Knowledge Economy, 7(1): 31-42. DOI: 10.18488/journal.67.2020.71.31.42

The major objectives of the paper are:

1 To investigate how people understand and respond to Fiscal Policy (FP) actions. 

2 To investigate the influence of financial and economics literacy on how people understand and respond to FP actions.

3 To investigate how confident people are about the institutional frameworks in charge of formulating and implementing FP actions.

In summary this paper investigates the relationship between the perceived Zimbabwean Fiscal Policy outcomes and the preferences of the people of Zimbabwe, resident in the city of Harare in the context of the Fiscal Policy Framework of Zimbabwe. It looks at how people are aware and confident about the FP actions and institutional frameworks in charge of formulating and implementing FP actions and also how the activities of people complement the FP actions. It looks at the influence of financial and economics literacy on how people understand and respond to FP actions. To make the investigation robust, data was obtained from across different occupations. Governments get elected to a large extent on the basis of their FP. The nature of FP is political on its own. Hence it is important gauge what areas of the FP process need to be adjusted to ensure that the people become positive about those in charge of the FP formulation and implementation together with the FP tools being used. Results obtained from the investigation showed areas where there is rent seeking and time inconsistency showing that serious reforms of the FPF of Zimbabwe are needed to ensure that optimal macroeconomic outcomes are achieved. A serious lack of awareness of the setup of the FP framework of Zimbabwe showed that there must be widespread and effective communication by the authorities on the nature of the FP operations being implemented to ensure that people on the ground complement government efforts to improve the economic performance of Zimbabwe.

This paper is an important component in the literature of the economics and financial literacy of the FP of Zimbabwe.

Econometric History important

The following quote from Dave Giles is insightful.

If you follow this blog (or if you look at the "History of Econometrics" label in the word cloud in the right side-bar), you'll know that I have more than a passing interest in the history of our discipline. There's so much to be learned from this history. Among other things, we can gain insights into why certain methods became popular, and we can reduce the risk of repeating earlier mistake!

Econometrics and Mathematical Economics is very important in providing rigour to empirical undertakings. What's important is to ensure that the methods employed don't bring a disconnect between reality and the conclusions from the investigation. Many at times model over or under specifications do occur resulting in spurious conclusions. The emerging econometrics imperialism in scholastic output is a major contribution to such realisations.

Therefore innovations in research methods will provide proper balance in the future regarding the place of Econometrics and Mathematical Economics in credible research scholarship.

Global Recession ahead....

Check out this article on the indicators implying that a global recession is happening sooner or later.

Have the lessons from the Great Recession been incorporated. I don't think so because it is business as usual with big capital.

1st US rate cut in a decade.

On 31 July 2018 the US Fed cut interest rates for the first time in a decade. Federal Reserve Chairman Jerome Powell said the first interest rate cut since the financial crisis was to “insure against downside risks.” The rate cut was a quarter basis points.

This year the Fed's interest rate expectations have changed from a steady tightening path to a holding pattern and now with this interest rate cut decision more cuts are expected before the year ends. Indeed the US interest rate futures have priced in three rate cuts this year - in July, September and December.

A lot of confounding signals are beneath the Fed's decision. The Fed's Independence recently has been under a lot of spotlight because of the political pressure from the Trump adminstration to cut rates. The Independence of the Fed has been the corner stone of the recent mainstream monetary economic thinking. The former Fed Chairs of the Board of Governor's including the likes of Bernanke, Yellen, Greenspan and Volker have penned an opinion piece in the Wall Street Journal articulating the importance of maintaining the Independence of the Fed. The Independence interpreted as the absence of political interference in the operation of monetary policy.

Normally an interest rate cut is initiated to stimulate a slackening economic environment. With the lowest US unemployment in 50 years and Wall Street at a record high, one wouldn't expect a rate cut at this stage but a counter argument can be made when considering some forward-looking economic indicators of the US which have recently dipped indicating that maybe a recession is imminent now than ever. In some OECD countries such as Germany, the GDP growth is now approaching the negative territory signally that a downturn is catching up on the industrially developed countries. The interest rate yield curve inversion is also indicating that a recession is imminent. An inverted yield curve means that investors expect interest rates to fall, which typically happens in an economic downturn. It usually tends to take some time for example 12 to 18 months.  Therefore the downside risks to future growth rather than the economy being already weak as indicated above influenced the Fed's decision.

An interest rate cut will raise the prices of various financial assets. This impact is noticeable especially when there is a policy transmission channel which impacts on the pricing of these assets. Therefore it is important for there to be a convergence between policy rates and the market rates. The US government can use the occurrence of low interest rates to raise cheap debt as they would be able to lock in these rates into the debt. The impact of the Fed decision on emerging countries and Africa could be long term investment portfolio reallocation in most cases to their detriment together with cutbacks in grants and aid in anticipation of a recession. It's been over a decade since the last global recession. On average recessions occur roughly after every 7 years hence this cycle post the last recession has been comparatively longer. This line of thinking assumes that the phenomena of boom and bust is still in existence.

The severity of the last Great Recession should inspire policy makers the world over to answer the question of whether lessons learnt of that crisis have been incorporated in how they manage macroeconomic cycles. It is important that macroeconomic policy making is not riddled with the politics and intellectual flaws of yester years.

Debt deleveraging etc

Check out this interesting article

New Working Paper

Check out my working paper The Impact of Economics and Financial Literacy in How People Perceive the Effectiveness of the Fiscal Policy of Zimbabwe: Case Study of Harare at SSRN.

Thoughts in space

At times the thought of the truth behind reality drains one to the point of devoting all of their time and effort to know that "complete" truth (if that can be naturally uncovered). In life, people spend a lot of time on falsehoods when the truth is actually there in front of them. To develop mentally one must be strong and be ready to accept knew ideas. It is of no consequence for one to claim to know everything when in fact you don't know that much. Really, one must not play to the terraces but one must be set on a path defined by logic. One's standard might not be your standard but hey what is your standard really. Growth is great but development is better.

Great quotes

Check out this great post on philosophical quotes

A rethink on African economic development

It's been a while from my last post. New days, new ideas. Looking at the state of development economics today, I would say that progress has not been in a direction which would solve the burning questions of today. So many myths out there are being taken as facts, something which I find very appalling. The question on why African countries have not achieved an acceptable economic growth and development trajectory in my opinion has not be dealt with with the required justice. It is easy to blame local politicians and aptitude of Africans in general but the reality as I see it is different from the pronouncements of the mainstream economic thought.

I cannot say much at the moment, but sooner or later I will layout my comprehensive ideas on the subject.

The economic situation at hand

A lot has happened in economics/finance in Zim of late. Some of these 'debates,' really are at times misplaced. Maybe I have a different view of sorts but hey, objectivity must be the mainstay always. Be it the bond notes, currency question and the general economic direction the country must follow, it is important to keep our heads up always. If we look at the bond notes, really the success or failure of the bond notes was not really about whether their value was expected to 'rapidly' depreciate or not. It was really about the contagion effect on the rest of the economy their introduction was expected to achieve. This is what actually happened. We now see pricing misalignment everywhere depending on which payment mode one wishes to use. Cash shortages have intensified and the US dollar has simply vanished from the general public circulation.

All these are costs of the bond notes. The authorities must intensify their efforts of arresting the real problems facing the economy so that macroeconomic stability is achieved. Analyzing possible solution is a task for another day but either way it is everyone's duty to ponder and think how this problem before us can be solved.

Few thoughts...

Just a few words but important thought. In life, the road to success is narrow and long but to failure is wide and short. The best person who can believe in you is yourself. Therefore take time to understand yourself so that you can prime yourself for the success to come. There you go!

Good Quote

Check out this nice post!

Inventing the wheel in Economics

Check out this article by Nick Mangwana. It's a good read. Let us not 'invent' something which is alrealdy known.

2017: Never stop developing!

This post is an adaptation from early last year. What has changed is time and the vision has been reinvigorated.

Focus, is the key word. A continuous approach is important.

"2017. New year; a renewed emphasis on my goals. My works should be my spokesperson. If you can't take charge of your life in this day and age, disaster awaits you. There is a lot to look forward to and a lot to do now. Each passing second defines a whole age to come. Every second counts. Discipline is the key. Focus focus...... remain focussed."