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2017-06-18 — alhambrapartners.com

The similarities are remarkable, particularly in this "reflation" view. It proves, I suppose, irresistible because of human nature; again the belief that lack of full recovery is somehow impossible. At some point after so many years, "we" believe recovery just has to kick in if for no other reason than luck, and therefore amplify whatever small positive indication into the convincing proof it never was. Belief in authorities certainly plays a role, but as the history of all these curves really shows, that belief isn't permanent. The longer it goes without recovery, the lower curves drop in each cycle, meaning the more jaded (for every good reason) these markets become. It is not so much despair vs. reflation or hope, rather it's making peace with reality.

To today's policymakers, the yield curve as well as eurodollar futures are some kind of mystery. They aren't. They simply prove that these people who claimed to have studied all the necessary facets of the Great Depression didn't actually do that. How else could 2008 have happened, let alone the aftermath? They surely didn't listen to Friedman.

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