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August 2017

The Fed and the Phillips Curve

Deflation is the Order of the Day The Fed was established in December, 1913 after the Panic of 1907 (the latest in a series of financial panics dating back to the middle of the 19th century) put the economy into a severe recession via bank runs and subsequent bank failures.  The Fed’s original purpose was to provide the nation with a safer, more flexible, and more stable monetary and financial …Read More

Waiting for Market Rationality

Equity markets have yet to recognize the fragility and softness of the underlying economy, although they do appear to be somewhat sensitive to geopolitical issues (North Korea). The incoming data continue to confirm: that the consumer has little spending capacity remaining; that inflation’s roar is nowhere to be found (except, perhaps, in hot dogs); that the detail underlying the headline employment number (209,000) show labor market deterioration; that the equity …Read More

The Economy from 50,000 Feet

A few friends have expressed the belief that interest rates have nowhere to go but up. This, of course, has been the mantra of the market for the past several years, and, perhaps, my friends have been listening too long to the talking heads on bubblevision. Here’s why it won’t happen: Today’s U.S. economy has many similarities to that of 1990s Japan. These include asset bubbles (equities), high debt burdens …Read More