Amid the relative torpor of the US holiday, it might be the moment to wax a little philosophical and ask if you, the listener, have ever noticed that so much of what passes for economic wisdom today involves the persistent overuse of the word ‘uncertainty’? Continue reading
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
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
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.
At root, MMM is based on the belief that the Credit Cycle is the Business Cycle; that fluctuations in money and credit are what give rise to instabilities in economies. It is our lot to live in a period where the checks and balances on such turbulence are much less robust than ever before; one where the deliberate violation of such restraint as does remain has become the very goal of active policy. To try to understand the interplay between money, asset markets, and the real world is the crux of what we do.
There is not much here that is a dull repetition of the mainstream economics practised so widely today. It may be a strange confession for the author of a publication called ‘Money, Macro & Markets’, but we like to start thinking about things from the individual perspective before working upwards to the collective – from micro to macro as it were. No spurious pseudo-science, just the rigorous application of logic tempered in the forge of experience.
For more detail, please download the Intro:-
Regular readers will know that the articles published here are but a small subset of the detailed work I undertake to analyse economic and political developments and their effects on markets. In order to give some idea of the scope of this, presented below is an archive of past issues of the Austrian School-informed, in-depth monthly publication, ‘Money, Macro & Markets’ in addition to which I compile twice monthly updates as the ‘Midweek Macro Musings’ which are also made available on a complimentary basis to subscribers to the former letter.
September 2016 – US equity (over)valuation: Eurozone policy overkill: Japan’s dire fiscal status
July 2016 – Liquidity traps: Post-Brexit UK: Chinese credit
June 2016 – US Labour Market: Productivity Unpuzzled
May 2016 – IMF Ship of Fools: China the Next Sucker
April 2016 – UK deficit – Fred Karney’s Circus: China’s Drain: US – All in Order
March 2016 – ECB Overkill: The Farm Patch goes Oil Patch: Beijing Fingers in the Dam: Drilling Down
February 2016 – China Hopium Wars: USA Top-end Teetering: Saudi’s Empty Quarters: Is Cheap Oil Good?
January 2016 – China promises reform (again): The Fed finally does it: Carney sees no signal: ECB running out of debtors
November 2015 – Hocus Pocus: UK Sells the Family Silver to Europe: USA ABCT: China JIitters
October 2015 – Against Stupidity: Tail-chasing at the Fed: Lipstick on the Chinese Pig: Stocks (& Bonds) for the Long Run
September 2015 – Mississippi Bubble Chinese-style: Reserves & Repos Cheatsheet: Shuddup, already!
August 2015 – China’s Fake Boom: FRB Wash, Spin, Repeat: UK World per capita Deficit Champs: Euro Money Explosion: Real Commodities still not cheap
July 2015 – China & the Water(ed) Margin: Spending the Swiss Hoards: Behind the Fed Curve: CPI Mania goes Global: US Equity Valuations
June 2015 – China Running to Stand Still: USA Fewer Grasshoppers per Ant: UK New Regime, Old problems: Europe’s Rational(ized) Bubble
For subscription details, please refer to the HindeSight Letters page.