In the late 1990’s, economists attempted to get reacquainted with something that they previously believed was an artifact of long ago history. The plight of Japan during that decade had revived fears of deflation and depression. Some economists, those daring enough to challenge entrenched notions, began even to contemplate whether or not it could happen here. Writing in the New [...]
The mainstream, dominant view of monetary policy remains as if it were “accommodative” or “stimulus.” Low rates and/or balance sheet expansion are treated as one and the same in terms of economic effects. The mountain of economic evidence since the end of the Great Recession, however, argues that that view is backward; starting with the observation that the Great Recession [...]
Given it is payroll Friday, it has to be a chart related to the futility of focusing on the headline number. There is any number of ways with which to accomplish this, but it serves well to highlight the relationship already presented in my view of this specific view of the payroll report. Economists often claim that the participation problem [...]
Last Friday the Statistics Bureau of the Japanese Ministry of Internal Affairs and Communication reported some more bad news for Prime Minister Abe and really Bank of Japan chief Kuroda. Month-over-month, the consumer price index was down again, leaving it 0.48% less in June 2016 than June 2015. This was the third consecutive month of increasingly negative year-over-year CPI estimates. [...]
A few days ago I examined the relationship between the stock market PE and CPI inflation. The reason was the sudden renewed emphasis on low inflation in the context of trying to justify increasingly outlying earnings multiples in stocks. Earnings fell sharply in 2015, but prices really didn’t; there was, at most, only more volatility spread across sideways trading (even [...]
Nominal disposable income in Japan fell 4.4% year-over-year in May 2016. In what can only be a sign of the times being far too familiar in Japanese, real disposable income was thus slightly better at “only” -3.9%. For all the hundreds of trillions in new Japanese bank reserves provided by so many QE’s I have lost count, “real” in Japan [...]
Last week, the St. Louis Fed published an article based on a speech that Dr. Larry Summers gave to the Homer Jones Memorial Lecture series back in April. The article included the full text of Summers’ speech and importantly the supporting material and evidence he used in his argument for “secular stagnation.” Included is one chart that is among the [...]
It is human nature to extrapolate in straight lines, to take what is as what should forever be. In economic statistics, tail risks continue to live outside the tails because the math can never get past that limitation. No matter how sophisticated the “jump diffusion” tendencies, no one can predict inflections. This is not to say there aren’t warnings, usually [...]
Some legitimate scientists are legitimately worried about the spread of information. The lack of boundaries afforded by an open internet has left the world awash in it, and with no shortage of opinion. This is a good thing. However, there is a downside in that unfiltered and unrefined information as it can be used to mislead both the person wielding [...]
What if the FOMC and the wider Federal Reserve apparatus had heeded Greenspan’s uncertainty? There is grave danger in wandering too far into counterfactuals, but there is some value, I think, in the exercise in this context. What we are really talking about is time, and it is time that is most relevant today as the greatest economic cost. This [...]
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