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Tag Archives: Economics

Sugar Rush! Why The Economy Will Run Hot, Then Crash.

The expected “sugar rush” from more stimulus is why the economy will “run hot” then crash. As every parent knows, giving a child too much “sugar” leads to a “rush” of energy. Then comes the crash, where you find them in some odd place taking a nap. The Coming Economic “Rush” Recently, JP Morgan joined the rest of the Wall Street banks in predicting a surge in economic activity for 2021 of 6.4%. Of course, the entire reasoning behind the rise in activity was due to “stimulus.” “In a note to...

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Shedlock: Spending Surge Coming With More Stimulus Money

Personal income jumped a whopping 10% in January on another round of free money. With another round of $895 billion coming soon, spending will surge as more stimulus money floods the system. Personal Income Jumps 10% In January The Bea’s Personal Income and Outlays Report for January 2021 notes that personal income increased $1,954.7 billion (10.0 percent) in January. Disposable personal income (DPI) increased $1,963.2 billion (11.4 percent) and personal consumption expenditures...

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Will The Economy Replace Ten Million Jobs By 2022?

“Employment will bounce back to pre-pandemic levels by December 31st, 2021.” – Bank of America Popular forecasts call for a return to pre-pandemic levels of employment and economic activity by yearend. Really? We are not so sure.  The economy lost over 22M jobs between February 2020 and today. The recovery has gained 12M jobs leaving a deficit of 10.7M jobs to replace. This post evaluates trends in employment, hiring, and worker job concerns to determine if this robust forecast to gain...

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Powell Is Wrong. More Stimulus Won’t Create Employment

As discussed in Friday’s #Macroview, stimulus, mainly when it comes from debt, does not create organic economic growth. In the second part of this analysis, we delve into why Powell is wrong when he says more stimulus will solve the employment problem. Let’s start with the two most essential snippets from Fed Chair Jerome Powell’s speech last week: “Correcting this misclassification and counting those who have left the labor force since last February as unemployed would boost the unemployment...

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#MacroView: Why Stimulus Doesn’t Lead To Organic Growth

There is a growing consensus in Washington the only way to fix the worst economic downturn in more than 70 years is by giving out more free money.  From Joe Biden, to Janet Yellen, to most members of Congress, there is a demand for more “stimulus.”  However, the reason the previous programs failed is the stimulus doesn’t lead to organic growth. Let me explain. Joseph Carson, the former Chief Economist at Alliance Bernstein, recently noted: “Suppose Congress passes something close to Biden’s...

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Blackbeard Research: Misunderstood Dynamics Of Negative Yields

The Misunderstood Dynamics Of Negative Yields I submit to you that there is a difference between “money” and “currency.” What is the purpose of currency? Currency is the medium by which an economy can transmit economic value between its agents and standardize the exchange of unlike items; that is, currency establishes a system that improves upon barter economics. In its truest sense, currency is a voucher of retained economic productivity. When a person does labor that brings...

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The Fed, Zombies, & The Pathway To Japanification

We recently penned an article discussing the “moral hazard” fostered by the Fed’s ongoing monetary interventions. However, this story is fraught with zombies and the path to “Japanification.”  The Fed recognizes their ongoing monetary interventions have created financial risks in terms of asset bubbles. They are also aware that most policy tools are likely ineffective at mitigating financial risks in the future. Such leaves them being dependent on expanding their balance sheet as their...

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#MacroView: 2021 – A Disappointment Of Growth And Disinflation

As we head into 2021, there is a large consensus that the massive monetary interventions in 2020 will lead to an explosion of economic growth, inflation, and higher interest rates. We suspect that the outcome of more debt-driven spending will lead to a disappointment in growth and disinflation instead. Milton Friedman once said: “Inflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output.” ...

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The Illusion Of Soaring Savings Amid Rising Economic Uncertainty

The following chart, making the rounds lately, suggests an unprecedented level of savings among Americans. The problem is that it is an illusion amid the reality of rising economic uncertainty. The Savings Mirage To understand why the “savings rate” is not what it appears to be, you must understand its underlying construction. The website HowMuch.com recently provided that calculation of us. While the table is dated, the point is that for most, there is often little left for “savings.”...

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