You can understand to some small degree economists’ collective confusion about inflation. They believe in wage dynamics, where a recession through mass layoffs creates slack and thus depresses wages. The recovery in a period of robust growth re-employs those unfortunate workers, and after enough time when that slack is reduced or even eliminated wages accelerate again (increased competition for labor). [...]
The American banking system had been primarily a domestic one throughout its early development. Despite, or because of, the rapid growth in the later 19th century, banking was orientated almost entirely inward to finance the needs of that growth. But as a growing national as well as industrial power, the US adopted several measures early in the 20th century to [...]
In April 2011, the European Central Bank’s staff and Governing Council were all optimistic. They had suffered through the panic and Great “Recession” and then the relapse in 2010 that birthed the term PIIGS. Despite all that and with considerable effort on their part (especially the purchasing of bonds), they thought there was reason to be quite optimistic. Inflation by [...]
In 1871, W. Stanley Jevons in the preface to his book The Theory of Political Economy writes of a fundamental human issue with Economics. He makes a distinction between it and other sciences which do not suffer, as he said a century and a half ago, “the weight of authority.” Finding such words from so long ago from when Economics [...]
Why are profit margins persistently high? With decent earnings this quarter, corporate profits as a % of GDP will approach (maybe exceed) 10% again. That is abnormally high compared to the period 1960 to 2000. Margins actually started to rise in the mid-80s but really accelerated after 2000 and outside of the 2008 crisis have remained high. Why? What changed in [...]
The price of oil can’t seem to climb out of the $40’s despite a lot going for it at the moment. Oil prices matter right now as much as three years ago when they signaled serious trouble ahead. For them to get above $50 and then continue on would indicate for a lot of important places what everyone has expected [...]
The world of eurodollars is always going to be hidden. What goes on, really goes on, often sees no light of day. The most basic financing transactions are typically bilateral, meaning that the only people who really know the terms and the reasons are the two counterparties engaged. That is also true if one of those counterparties just happens to [...]
There is no change to the risk budget this month. For the moderate risk investor, the allocation between risk assets and bonds is unchanged at 50/50. There are other changes to the portfolio though so please read on. As I write this the stock market is in the process of taking a dive (well if 1.4% is a "dive") and [...]
The Fed voted for the first federal funds increase in almost a decade on December 15, 2015. It was the official end of ZIRP, and though taking so many additional years to happen, to many it marked the start of recovery. The yield on the 2-year Treasury Note was 98 bps that day. A lot has happened between now and [...]
Industrial Production disappointed in the US last month, dragged down by auto production. Despite the return of an oil sector tailwind, IP was up just 2.2% year-over-year in July 2017 according to Federal Reserve statistics. It marks the fourth consecutive month stuck around 2% growth. The lack of further acceleration is unusual in the historical context, especially following an extended [...]
Stay In Touch