I was recently flattered to be asked how I envisaged the dreaded ‘helicopter money’ working if it were not to simply add further to commercial banks’ already crippling mass of deadweight liabilities and assets, given that not only would printing it up in physical form be tortuous but that cash itself is only one conveniently heinous crime away from being proscribed altogether. Continue reading
In light of the breathless anticipation which preceded the Fed Chair’s speech to her peers at Jackson Hole and cognisant of the mild state of befuddlement with which it was received, we felt it would be of interest to readers to have a translation, together with a gloss (each in bold), in order to try to remove some of the obscurities contained therein. Continue reading
As we have laid out in some detail in our professional work, it is clear that Chinese banks have entirely lost their inhibitions about creating money these past twelve months. It is equally clear that once such money is called into existence, someone must be caught in the act of holding it when a balance sheet snapshot is taken, however eager their desire to ‘pass the bad or depreciating half-crown to the other fellow’ may be and thus regardless of what the fate of that money will be an instant after the shutter has closed on the statistical camera. Continue reading
Ah, Brexit! What is there left to say that not already been said, most of it either out of folly or falsehood? As regards the overall political backdrop to this lightning bolt of mass discontent, the only thing that is clear is that there is no clarity—neither within Britain nor without. If, as the Good Book tells us, a house divided against itself cannot stand—hard hats on, people! Continue reading
The following article is (after very light editing) something your author wrote early in October of 2008, when the padlocks on the Lehman office building doors were still swinging. The reader will, he hopes, find that most of the presentiments expressed and the analysis submitted sadly turned out to be more accurate than otherwise.
It is to our collective detriment that, eight long, painful, underemployed, increasingly indebted, more societally divisive years on, few if any of these lessons seem to have been drawn by the Powers-that-Be.
It is certainly the case that the recently reported NFP numbers were poor. Compared to a mean/median of 193k a month in private job additions over this past six years or so, June’s paltry total – of 65k after we add back the 40k Verizon strikers – was 1.9 standard deviations away from what we have become used to.
Indeed, taking the raw, 25k increment, this was the worst showing since early 2010, capping off a three-month run which has been the worst since 2012. If we compare instead aggregate hours scaled for population, it can be argued that the figure has been edging into a zone which has been typical of past recessions – though, with frequent short-lived spikes in the record, this indicator needs the confirmation of subsequent bad months ahead. Continue reading
TOMORROW, AND TOMORROW, AND TOMORROW
So, one last time, let us lay out the argument developed above in the hope of eliminating all obscurity, for it is a pivotal one and therefore one which must be well understood if we are to challenge the very substance of the perilous theorizing of our Lords and Masters.
With positive real rates – which, we must again emphasize, simply imply that the instantaneous price ratio between goods today and goods tomorrow is greater than unity – the primal temptation is for the consumer to eat as much as he can, even including his seed corn, and so to yield to the pleasures of the moment in disregard of the needs of the morrow.
NO REMEDY IN THIS CONSUMPTION OF THE PURSE
But the sort of reasoning we developed in the last of this series is alien to much of today’s mainstream, many of whose members succumb to the long-dispelled, circular fallacies of the productivity argument. Yet more of them adhere to what Dennis Robertson wickedly derided as Keynes’ Cheshire Cat theory of ‘liquidity preference’ (‘The rate of interest is what it is because it is expected to be other than it is. But if it is not expected to be other than it is, there is nothing to tell us why it is what it is… [it is] a grin without a cat’).
THE NET THAT SHALL ENMESH THEM ALL
Now, the foregoing may be all well and good, but it is also the case that any such consignment of goods is open to a multitude of what economists call ‘rivalrous’ uses. If this is not true for that rare, individual batch of highly purpose-specific goods which we may have under consideration in some particular instance it will nonetheless still hold for the earlier, typically less use-constrained goods of which that batch is partially comprised, as well as for the later, more shop-ready goods to which it will in turn give rise and whose own market valuation, as we have seen, will help determine the price of their antecedents
THE CASE FOR POSITIVE INTEREST
An Austrian rebuttal of Summers et al, in four parts
THE TIME IS OUT OF JOINT
Over the years, any number of psychological experiments have been conducted in order to validate – or at least to give a veneer of academic corroboration to – a truth already well established by practical experience; namely, that we humans must continually struggle to overcome our basic animal instinct to seek instant gratification of our wants.