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In the Slow Growth World: Is “Full” Employment No Longer a National Priority?

At the end of January, we learned that the preliminary GDP growth estimate for Q4/16 was 1.9% and that labor costs and wages rose less than expected (despite the fact that the minimum wage rose in 19 states). Given the “animal spirits” so evident in the post-election markets, such data may be a shock to many.  But, if you are a reader of my columns, it shouldn’t have been a …Read More

Is Optimism a Key Ingredient in Economic Growth?

Most of the sentiment measuring surveys posted dramatically higher results after the election on optimism over what a Trump Administration might do for the economy. But, there is a big difference between hope and reality. Beginning in mid-December, the U.S. equity markets shifted into neutral, and have slowly drifted lower, perhaps waiting for the political changeover. The Fed is now in tightening mode. In my experience, the Fed tightens and …Read More

Does 2.3 percent economic growth justify Dow 20,000?

A survey of 53 economists by Blue Chip Economic Indicators forecast 2.3 percent economic growth for 2017, up from an estimated 1.6 percent in 2016. While better, 2.3 percent is still low by post-World War II standards. Consensus found that inflation would tick up to 2.4 percent, industrial production would begin to grow again (+1.6 percent) after stagnating in 2016, business investment (+2.7 percent) would finally be positive (after several …Read More

The Topsy-Turvy Economy

The financial markets are hooked on easy money, low interest rates, and growth via debt issuance. Yet, it has become obvious to some market players, economists, and maybe even the Federal Reserve’s Federal Open Market Committee (the rate setting cabal), that current monetary policy is now hurting, not helping, the economy. Of course, monetary historians know that monetary policy was never meant to act alone, or in a vacuum, as …Read More

Painted into a Corner A Review of the Economic Environment Entering Q4/16

While Q3 started out much better than the very slow economy of the first half of 2016, August’s data was very weak although there was some bounce in September.  So, we enter Q4 with some serious concerns about the fragile state of the economy, where an outside shock or policy mistake could have serious consequences.  Unfortunately, the policy tools, or lack thereof, that are available should the economy slip into …Read More

The 1937 mistake – will Fed make it again?

The markets breathed a sigh of relief (up 164 followed by 99 Dow points) when, in the middle of September, the Fed decided not to raise the federal funds rate. The DJIA was as high as 18,538 on Sept. 6, but fell 504 points over the next six trading days, including three days in a row of significant gyrations (down 395, up 240, down 258). The past week continued the …Read More