Economics

When thinking about Trumpism, it’s hard to come upon a unifying theme. But here’s a shot: inflation. Every one of Trump’s domestic policies should raise prices. Let’s recap: Throwing 2-3 million low-paid workers out of the country? Fewer workers should result in higher wages. Unless those workers return to their home countries to produce goods for export […]

The UK vote on Brexit presents some fascinating political questions. Will Scotland now leave the United Kingdom? Will Northern Irish Catholics tolerate border controls with the Republic of Ireland? Let’s leave those aside and focus on the economic issues. Is Britain worse off leaving the EU? There are good libertarian arguments for leaving the EU […]

I’m going to keep it short today, but I’m getting sick of hearing about the Fed’s easy money. How is Fed policy easy, exactly? Let’s start with whether prices are rising too quickly, signalling an overheating economy. Below is inflation in consumer prices since the 1960’s. Aside from the 2008 panic, we’re experiencing the lowest […]

For those who think the Fed is printing money willy nilly, stoking future inflation, think about what that means. Companies are the only organizations seemingly revaluing their “currencies”. More money from central banks chasing fewer equity securities means prices should be higher, as they are now. Is that how monetary policy is working at the […]

There are a lot of questions as to the relationships between Fed money printing, interest rates and stock market returns. Most commentators seem of the opinion that easy Fed policy is blowing a stock market bubble, which will eventually burst. I’ve taken a bullish stance based on my understanding of monetary policy. Low interest rates are […]

I was reading Scott Sumner’s explanation of the hot potato effect, intrigued by how Fed policy is affecting asset prices. This is the $64,000 question: are low interest rates keeping asset prices artificially high, portending another bubble bursting? I’ve read a lot on this score, mainly from folks terrified by high PE/CAPE ratios. I personally believe the […]

People seem really worried about a bubble in stocks. What do they recommend? That the Fed raise rates now to pop the bubble. Recently Ben Bernanke has weighed in on whether monetary policy is the right tool to correct for financial imbalances. Scott Sumner has a nice reply on how the Fed’s popping the stock market […]

I’ve been reading former Fed Chairman Ben Bernanke’s new blog with fascination. His first posts have been interesting, but also seem like an excuse for overly tight Fed policy. On interest rates (part 1, part 2, part 3), he gives a good defense of why the Fed has kept rates low: …raising interest rates prematurely […]

I’ve been thinking a lot about how economics resembles a biological system. In biology, introduce a new species into an environment and the other organisms must adjust to it. I touched on this in my post on how monetary policy is like the movie Speed. The speed of the bus stays the same, everyone else better get […]

I was watching CNN today about the terrible tragedy of flight 9525, where co-pilot Andreas Lubitz deliberately crashed a plane into the Alps, killing all 150 people on board. First off, this is an awful story. It’s one that evokes sadness, frustration, anger and vivid mental imagery. I can see and hear the captain trying to […]