Herbert Stein, former Chair of the U.S. Council of Economic Advisors for R.M. Nixon, reminded his colleagues that “if something cannot go on forever, it will stop”. History is littered with speculators who went broke, betting against clearly unsustainable trends but forgetting that forever is a long time. Which brings us to the Chinese Real […]
The Congressional Budget Office has issued some dire forecasts about the U.S. economy, which is causing alarm in some quarters. But do those forecasts make sense? As Andrew Van Dam wrote in the Washington Post: “CBO now projects growth will slow to 1.1 percent in 2023 and an average of 1.2 percent in 2024 and 2025 — […]
In a companion CFE blogpost, we acknowledge that the supersized fiscal stimulus enacted earlier this year invites serious angst about accelerating inflation. We make the case that the inflation risks are less worrisome than many conventional economists make them out to be. That said, we certainly accept that such risks are there. But the April […]
Was the recently enacted Biden stimulus package too large? Is it likely to produce an economic boom so large that it does real damage? And is that damage even more likely if President Biden is able to get a lot more spending through Congress? We don’t think so. Using orthodox analysis, it is easy to […]
There is much excited talk in the press these days about the rise in ten-year yields to 1.5 percent and the rise to 2 percent for the breakeven inflation rates expressed when we comparing Treasury nominal and TIPS yields. The bond vigilantes are back! Another Great Inflation around the corner!
In December of 2019, the U.S. unemployment rate stood at 3.6% and prime age labor force participation, at 82.9%, was at an 11 year high. Today, December 2020 jobs figures were released, with unemployment at 6.7% and participation at 81%, both making it clear that today’s economic backdrop is bleak. These data also make clear that engineering an extended period of strong growth is highly justifiable.
In the spring of 2009, amid the darkest moments of the Great Recession, I published a book and a blogpost. The book, reviewed here, championed the notion that mainstream macroeconomic thinking failed to appreciate, for good and ill, the central role that finance plays in capitalist economies.
No sooner was the ink dry on the March 27 $2 trillion stimulus package than Washington began work on the next stimulus. This is the right thing to do. Deficit hawks who worry about the debt-GDP ratio should want it, because without further stimulus, the debt-GDP ratio will soar because of crumbling GDP. Both President […]
Two burning questions confront all of us: How big is our public health problem? How sharp is our economic retrenchment? We think that the toolkit of economic forecasters has something to offer on the scale of the public health problem. Ignore the frantic quotes focused on reported COVID-19 cases—the numbers are all but meaningless. Instead, […]
The global COVID-19 outbreak now sports exponential growth rates for cases and deaths on every continent save Antarctica. Students of the economy must add that we are also in the midst of an unprecedented blow to global output, income, and employment. In financial markets, the pace of decline for equity and corporate bond prices exceeds […]
Crude oil prices plunged on Monday, as Saudi Arabia has announced that they will ramp up production to punish recalcitrant OPEC members, including and especially Russia. Rising supply alongside a virus driven swoon for global demand is a prescription for collapse, and that is what is unfolding. We would argue, however, that the Saudi move […]
President Trump tweeted on Christmas Eve that he was “all alone (poor me).” It was a sentiment with which Fed Chairman Jerome Powell could sympathize. As 2018 came to a close, the president blasted Powell for raising interest rates and causing the stock market to plunge. Wall Street pundits warned that swooning share prices suggest […]