There was a time when economic data suggested the obvious and visual guidance to investors. Growing inflation - then you need to raise in order to prevent overheating. Reduced unemployment and rising wages - so you need to expect growth of GDP and other pleasant things.
There was a time when the actions of central banks flowed logically from the macroeconomic realities, but because investors are tracked and dennye important to know how those or other indicators affect the exchange rate.
Now everything is different. Now the data on GDP growth, trade balance and unemployment have practically no effect on mood, and indicators such as the level of government debt, the state of the current account and budget deficits, and does become a nobody interesting relic. In fact, why focus on the budget revenues, if the remaining amount can always be obtained by conventional emission elegantly disguised as a program "assets redemption"?
The general public believes that the Fed is focused on three main indicators - inflation, GDP growth and the unemployment rate, because it is one of these indicators on a quarterly updated macroeconomic forecasts. This is so, but the basis of these indicators lie deeper processes.
In a previous article we have tried from a practical angle to look at the situation in the US housing market. Today, take a look at what the dynamics with the growth of the average wage and, as a consequence, if the current level of income to ensure the growth of inflation.
Compare the growth of labor productivity, which is calculated as the total real output to the number of hours worked and labor costs, which is considered as the total amount of the payment related to the number of working hours. You can see that the last 20 quarters after a kind of "recession completion 'wages did not increase the overall growth performance.
This means that the wait for the growth of consumer demand and thus inflation nowhere, and the ways in which you can provoke a rise in prices - it is either currency weakening monetary methods or support demand through a system of grants and loans, which are essentially the same.
Backlog of remuneration from the overall performance began in the first half of the 70s, when to replace the Bretton Wood came Jamaican financial system with floating exchange rates. It was then up like mushrooms after the rain began to grow hedge funds, and profit center distribution definitively shifted from industrial to financial capital.
This point is very well understood by Fed officials, who are constantly conducting research on productivity and wage growth. They are looking for a way to accelerate the growth of incomes of citizens and take control without the risk of inflation to slip into hyperinflation, but are afraid to touch the foundations of the system, and it is impossible to solve the problem without changing the system.
Accordingly, the inflation sentiment weak, and in fact take inflation nowhere - three waves of "quantitative easing" is simply not reached the grassroots sectors of the economy, and could not be reached because the money is issued not left outside the financial sector.
Inflation expectations are currently weak. The yield on 5-year bonds the TIPS, which is calculated with adjusted for inflation and the real mood is the benchmark investors reduced:
Bonds TIPS quite accurately track the actual inflation expectations, and the decline of profitability clearly indicates that investors do not believe the current oil growth in the near future, expect the development of deflationary tendencies.
So on Friday we saw a weak report on retail sales, and yesterday - slowing inflation. This is - a natural process, and along with weak GDP data and the completion of the seasonal surge in employment should be expected worsening of all basic indicators of the US economy.
Posted on Monday, US Treasury report on the inflow of foreign capital has shown that the flow became negative for the first time. This did not happen even during the crisis 2008 / 09g, and gets out of the treasuries of flight lines - in the last 12 months through June investments of foreigners in US securities fell by another 105 billion, falling to - $ 241.7 billion.
This means that a rate hike in September, will not, and even in December, the move is questionable. Yesterday the head of the New York Fed Dudley supported the dollar, saying that "... The US economy is in good condition, the rate of income and employment are high ..." but Dudley only does a good face on a bad game, but it is, in fact engaged in any official from Fed leadership.
The decision to raise the rate if it suddenly happens, will not cost solution, but purely political. The dollar thus in growth will not go, even if it will pull the upper stage "Angara" rocket. This means that in the coming months, the dollar index will be under strong pressure, regardless of "minutes", comments on meetings, projections and activities of the old woman Yellen.
To break this script can greatly change the geopolitical situation, when political risks outweigh the economic risks, but to predict such events could only Vanga, Nostradamus, and a little fellow Kudrin.