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Tag Archives: Nominal GDP

Japan’s “curious” lack of inflation

Commenter Cove77 directed me to an article in The Economist, discussing the “curious” lack of inflation in Japan: Entrenched expectations built up through decades of little to no inflation play a big role in explaining why rising producer costs have not fed through to consumer prices. Domestic companies are notoriously unwilling to pass on increases in the prices of imports to consumers. At a press conference in October Kuroda Haruhiko, the governor of the Bank...

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Why is inflation bad?

With the 12-month rate of CPI inflation now at 6.2%, inflation is once again in the news. Should we worry about inflation? If so, why? I have what might seem like contradictory views on inflation. On the one hand, I’m an inflation hawk who came of age in the 1970s and I view the high inflation of that decade as a major policy mistake. On the other hand, I’ve argued that inflation doesn’t really matter, that the so-called “welfare costs of inflation” are better...

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The Fed is trying to solve the wrong problem

Back in 2008, the Fed thought the “real problem” was banking distress, and instituted a set of policies based on that assumption. These policies were aimed at injecting reserves into the banking system without the reserves leaking out and stimulating the broader economy. That’s precisely why a policy of interest on reserves was adopted on October 8, 2008. In fact, the real problem was nominal—falling nominal GDP. When the Fed figured that out in 2009, they began to...

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Asset Prices Are ‘Prices’ Too…

Authored by Thorstein Polleit via The Mises Institute, We live in inflationary times. Some people might consider this statement controversial. This is because these days inflation is widely understood as a rise in the consumer price index (CPI) of more than 2 percent per year. However, there are convincing reasons to question this viewpoint. On the one hand, the CPI does not include “assets” such as, for instance, stocks, housing, real estate, etc. As a result, the price developments of...

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Stockman On America’s Fiscal Sundown, Part 1

Authored by David Stockman via Contra Corner blog, The Senate Finance Committee tax bill is not supply side and it's not even a tax cut; it's a gimmick-ridden policy mongrel that smells to high heaven of political desperation and cynicism. Contrary to the Donald's delusional promise that the American people will get some tax cut sugar plums for Christmas, we are reasonably confident that this misbegotten exercise in reverse-robin hood economics won't reach his desk. But whether it passes in...

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Deutsche Asks A Stunning Question: “Is This The Beginning Of The End Of Fiat Money?”

One month ago, Deutsche Bank's unorthodox credit analyst, Jim Reid published a phenomenal report, one which just a few years ago would have been anathema, as it dealt with two formerly taboo topics: is a financial crisis coming (yes), and what are the catalysts that have led the world to its current pre-crisis state, to which Reid had three simple answers: central banks, financial bubbles and record amounts of debt.  Just as striking was Reid's nuanced observation that it was the modern...

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Buffett’s Wrong – Why Market Valuations Are Not Justified By Low Interest Rates

As is his way, Billionaire investor Warren Buffett calmed an anxious nation earlier this month with his comments that: "Valuations make sense with interest rates where they are." And it seemed to work as stocks hit new record highs and Americans have never, ever been more sure that stocks will continue rising for the next 12 months... Why wouldn't they - Buffett knows all, right? Wrong, says John Hussman... Via Hussman Funds.com It’s such a comforting, even satisfying assumption; the idea...

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“How Does This Ever End?” An Interview With Lacy Hunt

The US economy is struggling with too much debt at every level. A debt jubilee isn’t going to solve it; and shifting demographics will likely make it worse. So, is America headed for two decades of lost growth like Japan? Dr. Lacy Hunt, who was interviewed by Erik Townsend on the latter's MacroVoices podcast, considers the endgame for the US economy... Well, we could get lucky, Hunt says. "The US economy could experience a modern equivalent of the California gold rush. In the 1820's and...

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David Rosenberg: “This Is A Bubble Of Historic Proportions”

Shortly after we remarked most recently on the unprecedented Canadian housing bubble that has migrated from Vancouver to Toronto, Gluskin Sheff's Chief Economist David Rosenberg joined the growing chorus of calls for government intervention into the Toronto housing market. In an interview on BNN, Rosenberg, who correctly called the U.S. housing bubble in 2005 when still at Merrill Lynch, said the massive deviation from historical norms has him drawing comparisons between the two situations....

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