There were several posts I almost wrote this week. In each case, I waited for a specific confirmation. In each case, the event or news release I was looking for went in the opposite direction.

Treasuries

I already commented on this and its relationship to housing. The 10 year yield is an important measure of the health of the US. It’s a mishmash of inflation expectations, risk aversion, and deficit risks. It has an impact on housing rates and various non-consumer borrowing rates. Because of its perceived importance, it impacts sentiment and therefore ends up impacting otherwise unrelated markets. As a consequence, the move up to 4% was viewed as a sign of trouble. The last 10 year auction was watched by everyone. It went well, and there was a large collective sigh.

Inflation

This downturn was the result of decades of building a massive unserviceable debt bubble. That bubble is still deflating. That provides extreme deflationary pressures. Much of the monetary policy responses have been to counteract the deflation. When nearly everything measurable is actively being manipulated, it becomes difficult to get the policy right. As a consequence, we can expect both periods of inflation and deflation while a much greater unwind is taking place. We can also expect huge shifts in wealth toward those highest up on the money supply chain (government employees, government contractors, and banks, except much of the wealth gain by banks is wasted filling debt holes).

Recently, it looked like the tug-of-war between inflation and deflation was shifting back towards inflation. I waited to see the latest consumer credit numbers. While expectations were for a modest decrease ($0.5 billion), the actual decrease was substantially larger (roughly $11.5 billion, depending on the specific metric you use). Such a significant monthly decrease in consumer credit is not inflationary.

Employment

The last monthly employment report showed jobs growth. It was a rather strong report. The sustainability of jobs growth, however, is largely dependent upon the stability of the jobs market. The trend of increased stability took a breather this week.

Greece

I’m just waiting for the headline announcing the complete collapse of Greece. That, or a finalized bailout. Every time one seems certain, the situation reverses. The general trend has been toward collapse. Still, I constantly feel like we are one headline away from being certain of the outcome.

The “Recovery” vs The Recovery

Each one of these things would help solidify or disrupt the year-long “nascent recovery” (sorry, I get a kick out of the phrase) we’ve gone through. Some, like employment, seem like they’ll require a large shock from something new going wrong to truly reverse. Others, like Greece, will require a miracle to avoid a death spiral. I suppose time will provide clarity for either direction.