Dec 122012
 
Printing more will do what, exactly?

So we have just started Year 5 of N-ZIRP, the Fed’s near-zero-interest-rate policy, and it is working so well that the Fed will have to keep printing money. What’s wrong with this picture? In fact, despite a massive expansion of the Fed’s balance sheet, and some of the lowest interest [continue reading . . . ]






Oct 302012
 
Fix the fisc? Not a chance

In the decade through Fiscal 2008, Uncle Sam spent at the rate of about 19.4% of U.S. gross domestic product (GDP), and took money in at the rate of about 18.3% of GDP, resulting in annual deficits of about 1.1% of GDP. In Fiscal 1999, at the start of that [continue reading . . . ]






Sep 172012
 
QE and financial repression

Say what you please about Ben Bernanke’s unconventional monetary policies (quantitative easing, QE for short, and Operation Twist), they’ve been good for the stock market. The first chart shows that stock prices have roughly doubled, give or take a few percentage points, since Dr. Ben launched the first round of [continue reading . . . ]






Sep 042012
 

Fix Medicare, primarily by restricting end-of-life care, as insurance companies do now. Fix Social Security by minor changes to (1) the payroll tax, (2) the benefit formula for high-income beneficiaries and (3) the retirement age. Fix the hopeless hairball that is the U.S. tax code primarily by (1) broadening the [continue reading . . . ]






Jun 052012
 

Martin Wolf, much-honored chief economics commentator of the Financial Times, has been my beacon during the financial crisis. So it is especially discouraging to read his June 6, 2012, column, headlined “Panic has become all too rational”. Wolf argues that the advanced economies are caught in a “contained depression,” that [continue reading . . . ]






May 302012
 

Uh, oh. That’s what I find myself muttering these days when I fire up the news browser or open my morning papers. The economic news leaves me with a sense of dread. I find three developments especially worrisome: 1. Europe’s slow-motion economic crisis, now more than three years old, rumbles [continue reading . . . ]






May 162012
 

Are America’s best days in the rear-view mirror? The Economist‘s Lexington columnist reminds us (May 12, 2012, print edition) that bouts of what it labels “declinism” are, well, almost as American as apple pie. It wasn’t so long ago that Japan was buying up iconic U.S. real estate (New York [continue reading . . . ]






Apr 262012
 
Low U.S. rates = default?

Prompted by reading, I’ve been thinking about an essay arguing that today’s exceptionally low interest rates are a form of default. The idea is far from original. Op-ed pieces in the Financial Times and the Wall Street Journal have seeded my thinking. An op-ed in today’s Wall Street Journal by [continue reading . . . ]






Jul 032011
 

The bad news is that the United States – indeed, much of the developed world – is in the midst of a “contained depression.” The private sector continues to de-leverage. Unemployment remains high. Pay for most is static or declining. Deflation remains a bigger threat than inflation. Depressions eventually end, [continue reading . . . ]






May 052011
 
New normal

Mohamed El-Erian and Bill Gross of Pacific Investment Management Company (Pimco), the world’s largest fixed-income manager, to the best of my knowledge originated the phrase “new normal” to indicate that things fundamentally changed following the Panic of September 2008 and its aftermath. After studying a number of their writings, freely [continue reading . . . ]






Apr 262011
 

The U.S. is in such dire financial shape that it must raise taxes on the middle class as well as the rich AND curtail, via means-testing, giant entitlement programs, including Social Security and Medicare. That’s the Easter Sunday sermon from supply-side guru and former OMB director David A. Stockman via [continue reading . . . ]