Economics

The fear mongers are out in force. Since job numbers have been improving, everyone seems certain that interest rates will rise. What does that mean? Just perusing Yahoo! Finance, rate hikes seem likely to tank stock markets and housing prices. After all, conventional wisdom says stocks are high because bond yields are low, and housing prices are […]

In this article, Paul Krugman uses a simple scatter plot of government spending vs. real GDP growth to prove that austerity doesn’t work. In his response in Forbes, Benn Steil invokes Scott Sumner, reproducing Krugman’s graphic without Eurozone countries. The thought is that monetary offset negates fiscal stimulus. Steil believes you should exclude countries without […]

For those of you who missed the 1990’s, the movie Speed inexplicably became a box office hit. The villain, played by Dennis Hopper, attaches a bomb to a bus that will explode if it goes under 50 mph. What follows is a trail of destruction through Los Angeles as Keanu Reeves and Sandra Bullock keep the bus […]

I recently had a thoughtful comment on LinkedIn in reply to Replacing the Fed with a computer from someone on the far-opposite spectrum on monetary policy thinking as me. To see the whole discussion click here. Now, I don’t think a fix-amount-of-currency monetary policy could work because of human psychology, but I love thought experiments. Therefore, I wanted […]

The March jobs report came out today, and the economy racked up another impressive number. This was somewhat surprising as all the previous economic reports this week suggested weakness and depressed prices. Indeed, the jobs report contained a nugget of bad news as wages only increased 2% over the past year. Questions remain around when […]

A lot of investors are looking at the CAPE or historical P/E ratios and scratching their heads. They’re wondering when the dreaded reversion to mean will happen. Because it always happens, right? Well, not necessarily. The CAPE has been rising in a long-term trend since the early 1980’s. There have been ups and downs, for […]

There has been a lot of discussion as to when US interest rates will return to “normal”. I’m shocked that a lot of so-called experts agree that interest rates will get back to normal when the Fed tightens. Nothing could be further from the truth. To illustrate, below is a tale of two interest rates. […]

Something interesting is happening in equities and housing markets. Prices look bubbly to a lot of commentators, who are throwing their hands up in confusion. Stocks must be overvalued, overdue for a correction. Housing will correct too, presumably. The question on everyone’s mind: what the hell is going on? There are a couple theories out […]

I received this thoughtful comment from a reader on SeekingAlpha, and thought I would respond with a post. He’s asking about my article on The division between capital & labor matters now more than ever Joe, It seems to me that in addition to the two roles you mention for the role of money, one;1) […]

And good riddance! When different economies line up under the same currency, eventually bad things happen. One polity eventually wants lower (or higher) prices. Either the first nation suffers runaway inflation or the second suffers deflation and depression. This was true of the international gold standard (France forced its lower prices on the rest of […]