As a sort of Keynes-manqué, Stephanie Kelton’s moment in the limelight is being granted her for much the same reason as was that of her more illustrious predecessor: she is telling free-spending politicians what they always want to hear – viz., that their habitual incontinence is statesmanship of the highest order. Continue reading
Category Archives: Inflation
Hoping for Growth. Searching for Value.
Thanks very much to my old friend, Steve Sedgwick at Squawk Box Europe for the chat this morning. We looked at Growth v Value, the US v ROW, we touched on bonds and borrowing, money supply, inflation, lockdown, commodities & gold – all in under 10 minutes!
To fill out what all might seem a bit rushed on the soundfile, here are the notes I sent to accompany our chat, complete with a little extra gloss for you to read at your leisure:-
Saturn Devours His Children
A recent Wall St Journal article gave vent to a scare-story full of Underconsumptionist claptrap, carried under the catchy headline: “The Coronavirus Savings Glut”. Ironically, and only a day later, the paper ran a second piece entitled “How Coronavirus Upended a Trillion-Dollar Corporate Borrowing Binge and Kicked Off a Wave of Bankruptcies”.
Huh? Does the Journal think we have too many savings or too few? Who can say? The only thing that is clear is that editorial consistency comes a distant second to clickbait and column inches.
Meanwhile, politicians everywhere have been urging those they have at last let out of Lockdown to get out and ‘spend’ as a means of speeding the recovery. Nor have the various banks’ Talking Heads been slow to chime in with predictably supportive exhortations for their various home governments to adopt policies aimed at ‘driving demand’.
[A version of this article is also available as a PODCAST] Continue reading
After the Fall of Caffa
While politicians anxiously check the shifting weather-vanes of public opinion and scientists squabble over facts as well as interpretations, central banks are resolutely doing what they do best – wildly exceeding their briefs and trying to drown all problems in a flood of newly-created money. As ever, the underconsumptionists worry that a lack of demand will usher in deflation, in spite of all such efforts. Some of us, however, worry more about what it will do to supply. Here, we explain why [For those who would like a podcast version please follow this LINK]:-
Free Lunch Finance
The poster girl of the voguish crankdom that is Modern Monetary Theory (“MMT”) – Stephanie Kelton, has been out pimping her new book – “The Deficit Myth” – with a great deal of help from the unofficial PR department which she seems to have, nestled within the House Organ of Davos, the execrable FT.
Here, Professor Kelton – for all the puffery about how fearless and radical is her approach – is pushing at an open door: a gaping aperture in the last bastion of economic rationality that is being held open by no less than Fed Chairman Jerome Powell, a man who recently went on record to boast: “We will never run out of money.”
Money v Supply
With many commodity prices touching multi-year lows and with mounting fears for real estate valuations and car-lease residuals, numerous commentators seem convinced that ours is now a deflationary future. QE failed to raise CPI by anywhere near what the spin promised, they say, partly because it was ‘unsupported’ by fiscal policy. Therefore, if we don’t get Roosevelt, we’ll get Brüning, they conclude, and, meanwhile, we need the Fed to cut rates below zero, said one prominent pundit on April 5th. We replied:-
Turning Japanese
A noted [monetary extremist] resident at GMU’s Mercatus Center fretted on March 20th that Japan’s efforts during 2001-06 to have the central bank finance deficits ‘didn’t work’ – i.e., they failed to ignite meaningful levels of wealth-sapping inflation.
The reason? As our sage tells us, was that there was ‘no commitment… to a permanent expansion of the monetary base’ as expounded in the ratiocinations of that dark genius of modern central bank theorising, Michael Woodford. We replied:-
What IS a ‘Market’?
In response to an FT article of January 23rd entitled, “The new kings of the bond market”, which suggested that banks had ceded their command over fixed income to exchange-traded funds and active portfolio traders, we responded with a riff on the sorry consequences of recent financial developments: a bromide which turned out to be singularly well-timed in view of the extraordinary upheavals suffered just a few, short weeks later:-
Turnaround Tuesday
After the excitement of the past few sessions, it was not entirely unexpected that what we old market stagers used to call, ‘Turnaround Tuesday’, would deliver its traditional mix of reflection, position rebalancing, and general counter-trend moves of either the stop-profit or the ‘Why do I always buy the top?’, buyers’ regret kind. [First Published June 4th] Continue reading
MMT: The Court Astrologer’s Dream
It’s not Modern; it’s not Monetary; and it’s really not much of a Theory
If ever there was a prime example of a belief in the Fairy Gov-a-Mother being mixed with a bad case of warmed-over monetary crankdom, the suddenly, newly- fashionable doctrine which masquerades under the portentous-sounding name of ‘Modern Monetary Theory’ – ‘MMT’, for short – must surely qualify.
For a shortened version of this as a podcast, go to: Soundcloud Apple Podcasts under ‘Cantillon Effects’ or TuneIn at:- https://bit.ly/2CXfEpy