91–100 of 247 posts
Adjusted household income has been essentially flat since the 70s. The percentage of those households with two earners has gone from 25% to 60% during that time. Productivity has grown nearly every year during that time. This, combined with our rising income inequality, means that the economy is not okay for most people even if a few widely-watched numbers are high. It should not come as a surprise that such an econo…
Earlier quoted context omitted.
Active traders tend to lose money relative to the “rest of us” passive index investors.
I get the sense that that relationship will reverse itself as soon as the market turns down. Bear in mind that a day trader can cash out in a second; you and I will will have to wait two business days.
Why the delay?
I've been reading through Anna Schwartz's papers on monetary economics and I think they're the real story on what economists still don't get about the 2008 crisis. If you read through the old monetarist research, you see that change in money supply has a better correlation with recession than basically anything else. This holds true even when you control for the possibility of reverse causation, when you make sure th…
The problem with the old monetarists was always that they assumed a constant demand of money (or velocity) how they called it. Now they had some empirical reasons for this (see PhD under Friedman) but they missed something that earlier economists had already figured out. Namely that monetary demand can shift for all kinds of reasons and that any good monetary system needs to adjusts to that.
However they were totally correct on interest rate and that interest rate are a terrible guide for monetary policy.
When you actually study New-Keynesian it is perfectly clear that it is not the interest rate that sets monetary policy (or indicts it) but rather interest rate relative to the natural rate. Why New-Keynesian never explain this to anybody when giving interviews or anything like that boggles my mind sometimes.
So in New-Keynesiansim everything hinges on your assumption of the natural rate. 1% interest rate can be contracting or expeditionary depending on the natural rate.
What happened in 2008 is actually quite simple, the Fed had the interest rate fixed and didn't lower it (inflation fears because of oil prices, see FOMC meeting late 2008).
While in the real economy the natural rate was making the Fed policy more and more contractility.
Modern monetarists (Market Monetarists) like Scott Sumner have been point this out since 2009 of course.
Keynesian Economics are the economics of political convenience. If something goes wrong, we can juice the economy by engaging in extaordinary activities which generate the illusion of wealth resulting in increased spending. These ideas were very popular until Great Britain encountered stagflation - conditions under which both economic recession and inflation coincided and traditional Keynesian levers and predictions…
To me the biggest mystery about the 2008 crisis is why so much QE has resulted in so little inflation. The only convincing arguments I have heard so far is that: 1. at the same time banks were forced to significantly deleverage, so while the fed was pouring money into the systems, banks were effectively pouring money out of the system. 2. inflation happened but it was all concentrated into financial assets, real esta…
It’s simple; a lot of the QE from US left US and went to emerging markets, when there was an interest rate difference between those markets and US’s 0 percent. Overtime, the profits earned from those overseas investments stayed overseas. However, when China’s stock market collapsed in 2015 and more money started flowing back into US, US raise interest rate in late 2015. This prompted more return of money back into US…
To me the biggest mystery about the 2008 crisis is why so much QE has resulted in so little inflation. The only convincing arguments I have heard so far is that: 1. at the same time banks were forced to significantly deleverage, so while the fed was pouring money into the systems, banks were effectively pouring money out of the system. 2. inflation happened but it was all concentrated into financial assets, real esta…
It’s simple; a lot of the QE from US left US and went to emerging markets, when there was an interest rate difference between those markets and US’s 0 percent. Overtime, the profits earned from those overseas investments stayed overseas. However, when China’s stock market collapsed in 2015 and more money started flowing back into US, US raise interest rate in late 2015. This prompted more return of money back into US…
And why China is in deep trouble because they have 3Trillion (supposedly) in foreign reserves, but IMF said China needs at least 2.5Trillion for normal import/export operations. So really, they only have 500B in foreign reserves. And now they're going through reserves even faster, selling dollars to prop up yuan, since yuan has now fallen 10% within the last few months.
It's a pleasure to read an article by a writer who understands of the history economic thought, though I suspect I will disagree with him on a lot of things. Anyway, this is interesting. I'll look up these economists. On the face of it, I think it's interesting how economists are hesitant to consider money real. Money is fictional to most economists. What's real is consumer surplus, utility or some other abstract way…
>It is the month of August; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.
>Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
>The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher. The Butcher takes the 100 dollar bill and runs to pay his debt to the pig raiser. The pig raiser takes the 100 dollar bill and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town’s prostitute that, in these hard times, gave her “services” on credit. The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.
>The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.
>No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.
To me the biggest mystery about the 2008 crisis is why so much QE has resulted in so little inflation. The only convincing arguments I have heard so far is that: 1. at the same time banks were forced to significantly deleverage, so while the fed was pouring money into the systems, banks were effectively pouring money out of the system. 2. inflation happened but it was all concentrated into financial assets, real esta…
Another explanation I’ve heard is widespread adoption of new technologies that have a lot of deflationary force behind them. E.g. Amazon giving consumers extreme price discovery, forcing companies to compete on price. Fracking and other new extraction technologies keeping oil prices down. Businesses adopting new tech to lower costs. Globalization (enabled by tech) keeping wage growth in check. https://www.advisorpers…
Earlier quoted context omitted.
Active traders tend to lose money relative to the “rest of us” passive index investors.
This is something that will not work forever. If 100% of investors were passive, they would get fleeced. Passive investing works thanks to active investing. Funny huh?
My own theory after digging sometime into Economics is that no one seems to have a clear idea what on earth we are actually doing. We all seems to have our own theory, and they all seems to answer half of the question. And in practice none of them currently models the world we have now. And it will take a long time before any of those theory are proved to be correct this time around. May be we can finally say Keynesi…
> My own theory after digging sometime into Economics is that no one seems to have a clear idea what on earth we are actually doing. I still remember the moment I realized this. It was on the first day of my first class in Economics 101, when the professor began by telling us that economics was a science built upon the assumption that people are rational actors. I thought about all the people I'd ever known, and all…
That's like saying, well I was reading a programming book about a Ruby and then I laugh at the professor threw the book in his face and said 'One can never make an Operating system with this'.
Honesty, if you truly believe that about economics then you simply have never spent time to actually learn and engage with a wide verity of economics that exists.