2018

Yellen is confused & confuses

She made two apparently contradictory statements on Friday (Sept 14). In one: Former Federal Reserve Chairwoman Janet Yellen said Friday that she is concerned the economy might overheat. “At a time like this, I would be worried that the economy is in a situation where it could overheat,” Yellen told reporters on the sidelines of a conference at The Brookings Institution. “I don’t think it would be very rapid but I think it could occur,” she said. Yellen said her view is based on the empirical relationship between inflation and unemployment — known as the Phillips curve, a closely watched… Read More

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Retail Sales, rising on “gas fumes”

The chart shows that overall retail sales swings to the tune of gasoline prices. The pick-up in overall sales for the past two years shows the close connection between the two. If you take away the gasoline price factor, the US consumer does not look so good. Retail sales are materially worse now than during 2014, before the “Yellen slump” set in. The economy is better than it was in 2015 and 2016, but that is not saying much. The reality is the economy is in depression mode. Early moves to “reflate” were quickly aborted. If you take Lael Brainard´s… Read More

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CPI Core Sans Shelter Rising at 0.6% Annually

There are many who labor in relative obscurity in econo-land, much to the loss of macroeconomics. Kevin Erdmann, author of the blog The Idiosyncratic Whisk, has consistently produced the most insightful commentary on housing and finance on the web, and probably anywhere for that matter. One of Erdmann’s monthly  “chores” is to produce the CPI core sans shelter index. The CPI core minus shelter costs rose at a 0.6% annual rate in the last six months, reports Erdmann. The chart shows the year-on-year core CPI less shelter. If the US has an inflation problem, obviously housing is playing a major… Read More

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“Get ready for here I come”

(Temptations) In the discussion, “Is the world ready for the next downturn”? Thomas Mayer, former Deutsch Bank Chief-Economist, points out: As long as Keynesian economics is the shared mental model of most economists and almost all central bankers and politicians, we proceed from one financial crisis to another. The list is already fairly long: the stock market crash of 1987, the savings and loan crisis of the early 1990s, the bond market crash of 1994, the emerging market crisis of 1998, the dot.com crash of 2000–2003, and the financial crisis of 2007–2008. The list will only end when economists and… Read More

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Ten years later, they still have the wrong perspective on the 2008 crisis

BEN S. BERNANKE, TIMOTHY F. GEITHNER and HENRY M. PAULSON Jr, remember the 10-yr anniversary of Lehman: Although we and other financial regulators did not foresee the crisis, we moved aggressively to stop it. Acting in its traditional role as lender of last resort, the Federal Reserve provided massive quantities of short-term loans to financial institutions facing runs, while cutting interest rates nearly to zero. The Treasury Department stopped a run on money market funds by providing a backstop for investors. The Treasury also managed the takeover of the mortgage giants Fannie Mae and Freddie Mac, and worked with the… Read More

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I was but an earnest graduate in public policy school, hip-deep in academic tomes and pondering worldly thoughts, when a grizzled John Gronouski, WWII vet, former postmaster general and Ambassador to Poland, gave me that advice. Funny what one remembers from years past and classes gone by, and disco nights better not had. But through the decades that sage wisdom stuck.  Maybe I did learn something in school. Of course, newspapers have declined, but the online world is alive with classified-site Craigslist and several national job websites, such as Indeed.com. The New York Times took a page from Gronouski’s book… Read More

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The employment report was not “solid”, but had “toxic” elements

According to the BLS: The Civilian Labor Force dropped by 469 thousand The number of employed people dropped by 423 thousand Those not in the labor force rose by 692 thousand The unemployment rate stood pat at 3.9% because the Labor Force Participation & the Employment-Population Ratio dropped by the same amount, 0.2 percentage points (if only the LFPR had dropped, pundits would be “worried” by another drop in the unemployment rate). It´s interesting to note that since early 2014, the “narrative” has changed. While in 2014-15 the average monthly increase in non-farm (NFP) employment was 237 thousand, we heard… Read More

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Has The Fed Drawn Precisely and Exactly the Wrong Lessons From 2008?

One might think so from reading the buzz-causing Some Implications of Uncertainty and Misperception for Monetary Policy just issued by the US Federal Reserve. Briefly, the Fed staffers posit, “because monetary policy acts with a lag, waiting for inflation to materialize before reacting is undesirable, particularly when economic conditions are such that outsized deviations of inflation from its target are a plausible outcome.” “Outsized deviations”!  We are but fleeting moments from that old standby, “runaway inflation.” I rather suspect this new Fed study is but a sophisticated version of the Inflation Boogeyman, and another paean to the usual central-banker tight-money… Read More

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Is the US Economy really “Booming”?

Bloomberg’s Noah Smith, while rarely worth reading, is usually among the least-bad writers at what once was a serious financial news outlet. However, his post on Bloomberg last week: “Why the US economy is having a boom” is wrong enough to call for a response. In this post, Smith makes the case that the US economy is having a boom, and then goes on to detail what lies behind this boom. Before going through his case, let’s start by asking the question: “Is the US economy in a boom?” The word “boom” evokes some temporary period of above-average economic growth. The Roaring… Read More

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