As most market participants are aware, the Federal Reserve has been following a very strict taper schedule which is modeled out in the chart below. What may be underappreciated is the fact that through April 25th, the Fed’s balance sheet has risen by nearly $273 billion year-to-date.
With yet another month of data indicating falling real wages in Japan and amid further currency depreciation in China, we got to thinking that maybe these two countries are in a race to win the most exemplar financial repressor award for 2014.
Many are shocked to learn that the Fed’s payment of 25bps of interest on excess reserves (a clear banking subsidy) is available to foreign banks, and they have parked substantial sums with the Fed.
Today’s 1st quarter US GDP report came in much lower than consensus estimates were forecasting and were much lower than we were expecting even though we thought estimates were too high (see US GDP Likely To Disappoint). 1Q14 GDP was barely positive at 0.1% QoQ annualized rate.
We employ a modified point and figure approach as our preferred technical analysis tool. We take in the price of every security in the MSCI World Index and convert is into USD. Next we take in the price of all the various indexes and aggregates and convert them into USD.