121–130 of 313 posts
Earlier quoted context omitted.
No one sane thinks it will be sunny forever, and there is great economic cost in carrying around a bunch of umbrellas when the sun is shining overhead.
You should take a look at mainstream suggestions during 2006-07.
The only school that has any explanation for this is the Austrian School of Economics. Their theory of the business cycle is the reason they successfully predict every crisis to the tee (except for timing, no one can do that), while other economists are just blown away in surprise that it even happened. Mises and Hayek wrote big and hard to read books about it, but two that explain this to the layman are "Meltdown" b…
The Austrian School seems to have been wrong about the last 15 years' money printing causing inflation. In particular, the general Austrian school would have predicted a lot more inflation by now. The prediction on this has fared so poorly that the last 15 years has given rise to a school nearly diametrically opposite to the Austrian school: modern monetary theory. (My understanding of the Austrian response to this i…
So the governments of the world have been the ones buying. https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
The fed put 4 trillion on the books during the financial crisis and 10 years later they started normalization and barely made a dent. This number should be 0. Now in a few months they've spent 2 trillion buying what nobody on the market is buying.
How do you make sense of the market when the government is basically preventing the crash. It's not possible to make sense right now.
We aren't seeing real market numbers. We aren't seeing real tbill rates. We arent seeing real economic numbers like unemployment because the governments have been hiding % under participation rate.
If you are referencing to the fallout from covid, it's essentially the effect of global commerce coming to screeching halt.
As CEO of GS said, no one has a clue on what's going to happen in Q2 and beyond, and if they say they do, they are BS'g.
It's a Black swan event. Most forecasting models are ineffective. Whether it would be a V, U, L recession is anyone's guess. As it all depends on how politicians react, ie. How late they are to lockdown and how long they will be in that state. Which perhaps is outside the realm of traditional economics. Hence my suggestion.
"All" you have to do is watch "How the economic machine works (in 30 minutes)" by Ray Dalio: https://www.youtube.com/watch?v=PHe0bXAIuk0 Read his insights and watch his interviews. That's a good basic start. Everything more then that: Nobody really knows. I have read countless of books, but one thing you have to know: It is a market - period. Something has value just because another person wants to buy it (at a given…
Dalio runs the world's largest hedge fund and it's entirely focused on predicting what the macroeconomy will do, based on studying the last thousand years or so of economic history.
Making sense in what fashion, to what end? Investment opportunities? Proposed public policy changes? Where to look for a job? To a large degree the economy is unknowable. That's why you can get two economists in a room and receive seven opinions. Don't get me wrong; there's good value there. It's just that economics is an odd mix of philosophy and math. On my more cranky days I call it astrology for people who know c…
Earlier quoted context omitted.
This crisis was not caused by the Corona virus. It is only the pin that burst a bubble that was already there, and if no virus would have happened, something else would have burst it. Austrians see the depression as a necessary correction, and the bubble as a problem. I actually sat down for a few hours to calculate what would have happened if this pandemic happened in the 50s, and no one could work (especially true…
Less a pin to a bubble, more a wrecking ball to a house made of sticks Effectively shutting down more than half of all business is slightly more than bursting a bubble. It is world war II scale event, with exception that there is no war that could take all the unemployed hands to the front and to producing weapons.
But let's not forget that this wasn't caused by the virus itelf, it was consciously decided by politicians to trade an (unknown in magnitude) risk for a huge recession.
Earlier quoted context omitted.
I disagree that ABC is the only school of thought that has an explanation. Almost every economic school of thought can discuss decreases in aggregate demand and aggregate supply. Not every school of thought may have theories regarding the drivers thereof, which is a feature ABC spends a lot of time on, but some do and most can assess and even build predictions for anticipation. As an example where ABC will go off the…
The thrust of ABC is that artificially cheap credit, induced by the central bank, causes malinvestment. Interest rates are signals of risk. When you artificially lower interest rates, people take on more debt than they normally would and invest in capital improvements that only make sense in a low interest rate environment. When the central bank attempts to raise those interest rates to the natural level, or there’s…
The central bank is not the only interest rate driver, as the last 5 years have shown, especially for rates of long tenure bonds. But, regardless of drivers, malinvestment certainly does occur.
Published ~2005, it (arguably) makes sense of the previous several decades of western economics.
https://www.johnralstonsaul.com/non-fiction-books/the-collap...