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Tag Archives: Macroeconomics

The macroeconomic elite is definitely wrong about something

Ben Southwood directed me to a paper by Lawrence Christiano, with the following executive summary: The Great Recession was particularly severe and has endured far longer than most recessions. Economists now believe it was caused by a perfect storm of declining home prices, a financial system heavily invested in house-related assets and a shadow banking system highly vulnerable to bank runs or rollover risk....

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Putting America’s Record-Breaking $20 Trillion Debt In Global Context

The U.S. federal government just passed a record $20 trillion in publicly held debt. That’s bigger than the entire economy of every country in the European Union, combined. As HowMuch.net notes, the debt will only grow higher unless President Trump and the U.S. Congress can agree to unprecedented spending cuts combined with tax increases.  Don’t count on that happening anytime soon. Most people think that an eye-popping $20+ trillion debt is insurmountable, and in fact, it is the largest in...

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The Sermon On The Mount[ain Of Debt]

Via Global Macro Monitor, “Blessed are the young, for they shall inherit the national debt.” – President Herbert Hoover The Hoover administration thought there was no room and was ideologically opposed to fiscal expansion to stimulate aggregate demand.  Furthermore, Keynesian theory was not even developed at the time.  The General Theory of Employment, Interest and Money  was not published until February 1936. A policy error, partially due out of  ignorance, that led to the Great Depression,...

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“Japan Has No Illusions That Rates Will Ever Rise”: Is This What The Endgame Looks Like

By Victor Shvets of Macquarie Capital Japan Debt Mountain: does it matter? For almost 25 years, Japan’s debt burden has been the poster child of what would happen to others if capital is misallocated, bubbles burst and then clearance and required reforms are either delayed or not implemented. Indeed, at more than 5x GDP, Japan is shouldering a greater debt burden than other key jurisdictions. It is also facing severe demographic challenges, while its labour market remains constrained and the...

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Beckworth interviews Summers

David Beckworth's recent interview of Larry Summers was a treat for two reasons; there was lots of thought-provoking discussion, and I found a written transcript of the interview. Here's an excerpt (discussing secular stagnation): You have a demassification of the economy. Think about Amazon rather than malls. Think about the fact that an office building for lawyers now require 600 square feet of space per...

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“Lies, Lies, & OMFG More Lies!”

Authored by Jim Quinn via The Burning Platform blog, “There are three types of lies — lies, damn lies, and statistics.” – Benjamin Disraeli Every month the government apparatchiks at the Bureau of Lies and Scams (BLS) dutifully announces inflation is still running below 2%. Janet Yellen then gives a speech where she notes her concern inflation is too low and she needs to keep interest rates near zero to save humanity from the scourge of too low inflation. I don’t know how I could survive...

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What Does The QE Experience Say About Rates In A Shrinking Fed Balance Sheet World?

Authored by Bryce Coward via Knowledge Leaders Capital blog, The Federal Reserve is likely to decide next week to begin letting assets roll of its balance sheet as bonds mature, instead of reinvesting the proceeds. This means that the balance sheet will begin to shrink in size and other market participants will be forced to absorb the supply of new issuance of treasury and mortgage backed securities. Conventional analysis of supply and demand dynamics might suggest the exiting of a large...

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Macro events (in big economies) don’t have micro causes

A new paper by Vipin Veetil and Richard Wagner discusses a heterodox theory of business cycles, and then uses this theory to criticize NGDP targeting. Here is the abstract: This paper argues that NGDP targeting is unlikely to produce macroeconomic stability. Contrary to the policy objective, NGDP targeting may increase macroeconomic turbulence. DSGE models that prove the effectiveness of NGDP...

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China Capitulation: Corriente Advisors’ Mark Hart Ends 7-Year Bet On A “Massive Yuan Devaluation”

China bears like Kyle Bass claimed victory last year after bets that the Chinese yuan would weaken paid off handsomely – particularly if they were supercharged by leverage. Hopefully, for their sake, yuan decided to lock in those gains early this year. Because since January, China’s currency has whipsawed higher, reversing most of its 2016 depreciation as the US dollar has endured a period of broad weakness, and Chinese policy makers have turned their attention to managing the currency’s...

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The world is becoming desperate about deflation

The Great Recession may be over, but eight years later we can still see the deep scars and unhealed wounds it left on the global economy. In an attempt to prevent an unpleasant revisit to the Stone Age, global governments have bailed out banks and the private sector. These bailouts and subsequent stimuli swelled global government debt, which jumped 75%, to $58 trillion in 2014 from $33 trillion in 2007. (These numbers, from McKinsey & Co., are the latest, but it’s fair to say they have...

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