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Tag Archives: Janet Yellen

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

Deflation’s Persistence Implies Yields Will Be Lower for Longer

Despite what you hear from the TV pundits, the U.S.’s second quarter ended on weakness, and there is little evidence that economic acceleration occurred.  In previous years, slow GDP growth in Q1 was followed by 3%+ in Q2.  Not this time!  The Atlanta Fed GDPNow model, which uses a lot of sentiment indicators, is all the way down to 2.4% for Q2.  I suspect that the Commerce Department’s initial GDP …Read More

On a Recession Watch

For the first time since the industrial revolution, the U.S. faces two significant growth issues: 1) a declining labor force; and 2) a job skills mismatch.  The declining labor force is demographic in nature and is occurring in every industrial economy; likely a function of the long-term success of capitalism.   The skills mismatch is a function of technological change that is so rapid that the skills of the existing labor …Read More

At Recession’s Onset, There is No Bell, Bugle, or National Anthem

From my reading of the business media, there are few business economists who believe, like I do, that the probability of a recession in the next 12 months is greater than 50%.  A recession is generally viewed as two consecutive quarters of negative real GDP growth. Looking forward, a recession isn’t inevitable, as there have been ‘soft landings’ in the post-World War II era.  Nevertheless, from my lens, there doesn’t …Read More

Hope is Not a Good Investment Strategy

According to the Bespoke Investment Group, every year, Wall Street analysts declare that the stock market will rise, and since 2000, the annual average forecast has been for a 9.5% gain.  The reality is that the market has only risen at a 3.9% rate over this time frame.  The 2008 forecast was for a market increase of 11%; the reality was -38%.  To say that Wall Street promotes the stock …Read More

Market Melt-Up: Caution – Sentiment in Nosebleed Territory

Since my last column, the Dow Jones Industrial Average (DJIA) did indeed hit 20,000 and has since gone well beyond.  Most of the post-election run-up initially appeared to have occurred in the November 8th to December 20th period when the index went from 18,333 to 19,975, a rise of 1,642 points (7.9%).  Over the next 44 days, until February 2, the DJIA was flat, actually losing 116 points.  But since …Read More