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Tag Archives: Keynes

The Yield Curve Inverted Months Earlier Than Most Think

The inverted yield curve is one of the more reliable recession indicators. I discussed it at length last December. At that point, we had not yet seen a full inversion. Now we have, and it appears the curve was “inverted” back then, and we just didn’t know it. The Powell Fed spent 2018 gradually raising rates and reducing the balance sheet assets it had accumulated in the QE years. This amounted to an additional tightening. In fact, the balance sheet reduction may have had more impact than...

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Are We In A Recession Yet?

I’m often asked if recession is coming. For quite some time now, my answer has been: “Yes, but not just yet.” That’s still what I think today, but more of the early warning signals I have used in the past are beginning to flash again. I see some leading indicators weakening. I see smart people like Dave Rosenberg argue we may already be in recession today. And I see Wall Street not really caring either way, so long as it gets enough rate cuts to prop up asset prices. None of that is...

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The Problem With Keynesian Economics

In The General Theory of Employment, Interest and Money, John Maynard Keynes wrote: “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” I think Lord Keynes himself would appreciate the irony that he has become the...

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1995 Rate Cut & The Case For The Final Leg Of The Bull Market

Market participants want to believe today’s bull market is similar to 1995. In 1995, July to be specific, the Fed cut rates as the stock market was setting a new record high. The next Fed meeting is July 31st, and the market is currently trading near record highs. As Upfina recently tweeted: Powell stated, “An ounce of prevention is worth a pound of cure.” That implies the Fed is going with insurance cuts like it did during 1995 in which it successfully prevented a recession. — UPFINA...

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The 3-Big Lies About Tax Cuts & The Economic Impact

“The greatest trick the Devil ever pulled was convincing the world he didn’t exist.” – The Usual Suspects (1995) Just recently, Politico ran a story by Brain Faler entitled: “Big Businesses Paying Even Less Than Expected Under GOP Law.” To wit: “The U.S. Treasury saw a 31 percent drop in corporate tax revenues last year, almost twice the decline official budget forecasters had predicted. Receipts were projected to rebound sharply this year, but so far they’ve only continued to fall, down...

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One Trick Pony: The Fed Is Pushing On A String

Last week, I discussed the Fed’s recent comments suggesting they might be closer to cutting rates and restarting “QE” than not. “In short, the proximity of interest rates to the ELB (Effective Lower Bound) has become the preeminent monetary policy challenge of our time, tainting all manner of issues with ELB risk and imbuing many old challenges with greater significance.   “Perhaps it is time to retire the term ‘unconventional’ when referring to tools that were used in the crisis. We...

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Hope For The Best, Plan For The Worst

Around 46 BC, Cicero wrote to a friend saying, “you must hope for the best.” To be happy in life we must always have “hope.” It is “hope” which is the beacon that lights the pathway from the darkness that eventually befalls everyone at one point or another in their life. However, when it comes to financial planning and investing we should consider Benjamin Disraeli’s version from “The Wondrous Tale Of Alroy:” “I am prepared for the worst, but hope for the best.”  During very late stage bull...

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Video: Monetary Policy since the Crisis

On May 30, I did a “webinar” with INET’s Young Scholar’s Intiative. The subject was central banking since the financial crisis of a decade ago, and how it forces us to rethink some long-held ideas about money and the real economy — the dstinction between a demand-determined short run and a supply-determined long run; the neutrality of money in the long run; the absence of tradeoffs between unemployment, inflation and other macroeconomic goals; the reduction of monetary policy choices to...

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Monthly Macro Monitor: Well Worried

Don’t waste your time worrying about things that are well worried. Well worried. One of the best turns of phrase I’ve ever heard in this business that has more than its fair share of adages and idioms. It is also one of the first – and best – lessons I learned from my original mentor in this business. The things you see in the headlines, the things everyone is already worried about, aren’t usually worth fretting over. The market may not be perfectly efficient...

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Economic Theories & Debt Driven Realities

One of the most highly debated topics over the past few months has been the rise of Modern Monetary Theory (MMT). The economic theory has been around for quite some time but was shoved into prominence recently by Congressional Representative Alexandria Ocasio-Cortez’s “New Green Deal” which is heavily dependent on massive levels of Government funding. There is much debate on both sides of the argument but, as is the case with all economic theories, supporters tend to latch onto the ideas...

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