The Best of Times During the Worst of Times
While most people generally understand that the stock market and the economy do not move in lock step, there is still an underlying belief that a strong market reflects a strong economy. But according to that logic, our current economy must be historically strong.
A Black Swan with Teeth
For years I have been warning that during the age of permanent stimulus (which began in earnest with the Federal Reserve’s reaction to the dotcom crash of 2000), each successive economic contraction would have to be met with ever larger, increasingly ineffective, doses of monetary and fiscal stimulus to keep the economy from spiraling into depression.
The Problem Is the Bubble, Not the Pin
With the markets shell shocked by of the worst weeks on record, analysts are split on whether investors are simply overreacting to the coronavirus epidemic or if we are confronting an actual existential threat to the global economy.
Clash of the Titans
In the decades that I have been listening to politicians clumsily trying to explain the economy there has never been a period, with the possible exception of the early Reagan years, in which major party leaders were able to present a solid grasp of economic principles.
This Is Not a Printing Press
Early last week, the Chairman announced a new, as yet unnamed, Fed program through which the bank will now buy regular amounts of short-term U.S. government debt. Seeking to counter the rumblings that a new form of quantitative easing would be seen as an admission that the economy may be in trouble...
A dollar in secular decline may be the final piece in the puzzle that shows the insanity of our current fiscal and monetary policy. The U.S. bubble economy rests on the foundation of the dollar's status as the reserve currency. If that status is lost, the entire house of cards may just come crashing down.
Trump Kills the Tea Party
After claiming to be the greatest at just about everything, Donald Trump has finally found an area where he can stake a credible claim. By negotiating a disastrous budget deal with Democrats, the President could become the greatest creator of government debt in the history of the country.
The Fed Stops Pretending
While many savvy economists should have seen this coming, as late as October of last year, almost no one in the financial world thought that the Fed would so easily abandon its long-held bias without a gale force recession blowing them off course. But, in reality, all it took was a light breeze to force a 180-degree turnaround.
Trump's China Blunder
General George Custer met his doom charging into a battle he thought he could win, against an opponent he did not understand. Based on his views about the fast-emerging trade war with China, it looks to me that Donald Trump, is charging into an economic version of the Little Bighorn.
Growth That’s Bought But Not Paid For
Very clear warning signs are now flashing that the U.S. economy could be heading for trouble and that the longest expansion in recent memory may soon end. But as usual, financial media and mainstream investors are once again flushed with optimism as the stock market plows higher.
Fed Statement Commentary
The Fed's tightening campaign, which was supposed to restore a semblance of monetary normalcy, after a decade of extraordinary stimulus, is officially over. The curtain came down far earlier than just about anyone in the mainstream had predicted.
Democrats’ Children’s Crusade Sets up 2020 Election
Over the years, I have always thought that the left’s obsession with global warming was really just an excuse to push through a fully socialist economic agenda. After all, the radical changes that would be required for businesses and consumers to rapidly reduce our carbon footprint could only come about through government mandates and force.
Fed Statement Commentary
While some may have been confused by Fed Chairman Powell's circular statements in yesterday's press conference, the takeaway should be abundantly clear: the period of Fed tightening, is over. The Fed will now hold steady on interest rates, and when they move again, they are more likely to lower rates than to raise them.
The Branded Economy
Last week Donald Trump, in his own estimation, succeeded in replacing what he claimed to be the "worst trade deal in history" with what he claims was "the best trade deal in history." If true, this would not only make good on one of his central campaign promises, but it would be a genuinely significant development.
A Pound of Cure
This week, as investors and economists fixate on record highs set by major stock market indices, they have ignored much more significant developments that emerged from the Federal Reserve's annual meeting in Jackson Hole, Wyoming. Fed Chairman Jerome Powell delivered a speech that somehow was almost universally interpreted as a reiteration of his commitment to continue to raise rates throughout the next few years. "Steady as she goes" was the takeaway from just about any news outlet. But the Chairman's actual message was essentially the opposite of what the media reported.
A Trade War Won’t Be Good for the Dollar
On Wall Street, it's best not to think too hard or to look too closely into the mouths of gift horses. Since making predictions based on actual economic understanding is rare, analysts typically look to provide explanations after the fact. Within the financial services industry, currency traders are perhaps the greatest practitioners of this craft. While they often get the fundamentals completely wrong, it never seems to stop them from offering bizarre theories to explain currency movements.
Making Italy Great Again
This week, market watchers around the world are justifiably fixated with the high-stakes, high-drama political developments unfolding in Italy. While a political crisis in the world's 9th largest economy (International Monetary Fund figures, 4/17/18) would normally not be enough to cause an international meltdown, given how thin the global economic ice has become as a result of ever-increasing debt loads, even small disruptions can create systemic problems.
Trump "Victories" on Trade are Anything But
Earlier this year when President Trump began beating the drums loudly, causing fear of a trade war (and assuring us that such a conflict could be easily won), I cautioned that he had no idea the trouble he was courting . Based on his spectacular misunderstanding of the power dynamic built in to international trade, he was also in danger of bringing a knife to a gunfight.
Trump Plays with Fire on Trade
With his announcement last week of broad tariffs on imported steel and aluminum, President Trump launched what could be the first salvo of an all-out global trade war. Seemingly itching for a fight, he gleefully tweeted that "Trade wars are good, and easy to win."
Raising Rates Reflect Bigger Debt Not Faster Growth
While investors are justifiably focused on what may be the opening crescendo of a long overdue sell-off in stocks, there is not, as of yet, as feverish a discussion of the parallel sell-offs in bonds and the U.S. dollar, which have been underway for at least a year and a half in bonds and 14 months for the dollar.
The Fed May Show Trump No Love
Typically, U.S. Presidents are wary of claiming stock market performance as a referendum on their success. Most have seemed to understand that taking credit also means accepting blame, and no one would want to make the tortured argument that the positive moves reflect well on their presidency but that the negative moves do not.
Here Comes Quantitative Tightening
All of a sudden the Fed got a little tougher. Perhaps the success of the hit movie Wonder Woman has inspired Fed Chairwoman Janet Yellen to discard her prior timidity to show us how much monetary muscle she can flex when the time comes for action.
Damn the Deficits, Huge Tax Cuts Ahead!
Donald Trump has made good on one of his most audacious campaign promises by submitting what he describes as the biggest tax cut in U.S. History. For once, at least, this does not appear to be Trumpian braggadocio. It really may be the mother of all tax cuts.
Trumpcare: Different Plan, Same Problems
With his widely followed, and positively reviewed, address to Congress last week, President Trump showed how easy it could be to unite Washington around a big-budget centrist agenda on health care, immigration, taxes, infrastructure and the military.
Trump Deficits Will Be Huge
There is much we don't know about how the Trump presidency will play out. Will the Wall get built? Who will pay for it? Will it have at least some fencing? Will repeal and replace happen at exactly the same time? Will Trump throw a ceremonial switch? Will there be a Trump National Golf Course in Sochi? It's anyone's guess.
Midnight in America
Stunned political analysts are missing the most plausible argument explaining Donald Trump's unexpected victory. The misreading of the American electorate stems from the political class' acceptance of mistaken (and increasingly insane) economic dogma that has arisen over the past generation.