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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/economics--politics-education/interest-rates-are-not-a-leading-indicator?post=133305&uid=4798

Interest rates are not a leading indicator. Or at least they are not a dependable leading indicator. Scott Sumner posts that that bond market was a leading indicator of the 1st quarter GDP decline to .7 percent. He went on to comment about hard data. More on that later.

However, we should take a look at the graph showing the overlapping 10 year and the real GDP:


It is certainly true that in the Great Recession and in other recessions, the decline in real GDP was in no way preceded by a decline in the 10 year yield. And it is true that in in the Great Recession, the decline in the 10 year was a lagging indicator. And, the decline in the 10 year yield between 1980 and 1998 took place while real GDP was actually increasing.

Sumner would have difficulty making a case for the 10 year yield being a leadin…

Retail is experiencing problems. Those problems relative to auto sales and restaurant activity which have been covered by the main stream media. Make no mistake, these sections of retail are leading indicators of problems ahead. They need to be watched carefully and they could cause fear and risk off in stocks.

 There are mixed signals regarding the state of retail, especially regarding job openings. According to economist Tim Duy, job openings seem to be strong:

But there is a definite slowdown in hiring and this is showing a bad trend in retail:

So, layoffs have not started. But that doesn't mean that retail is not slowing. It is. And for the auto industry, the sales force is making fewer commissions. That is like a partial layoff. Waiters and waitresses make money through tips. If there are fewer customers and fewer tips, those act as a partial layoff as well. 

We can see the trend happening over years, that labor is being crushed by the capitalists, eventually resulting in di…

It is time to tell it like it is. Self driving cars are practically useless. They are dangerously useless too. I have looked at the top ten major reasons they are useless and the case to be made is strong. I personally believe self driving cars are a scam, and we will see that they are so useless that you have to consider the scam angle when deciding where to put your money. The government should consider that as well. It is difficult to see how driverless cars are any more than a money grab and a con of immense magnitude.

The immensity of the scam is obvious when we see hundreds upon hundreds of articles supporting self driving cars. Self driving cars are a totalitarian concept. Totalitarian minds will do everything in their power to impose self driving cars on the populace. It is how they think, and it is similar to making cash obsolete. The totalitarian nature of both is easy to spot. Totalitarianism is not progress.

An example of this is the first reason why self driving cars are…

The stock market does not fear nuclear war. It fears a Fed not responsive to its every need, but does not care about nuclear war. There are two solid reasons for this. And we have a scenario in which this brinkmanship played out, the 1962 Cuban Missile Crisis.
Lars Christensen coined the phrase "Market Monetarist" and claims to be one. He wrote an interesting article about the Cuban crisis. I remember the crisis. I was 13 years old. It left a mark on me and on most who lived during that time, because no one knew that the Russians and Americas would back off from nuclear destruction. The blockade of Cuba seemed to portend the imminent destruction of the world.
Christensen said this about the crisis, implying that the Fed was more lucky than good in keeping a floor under the stock market:
In 1961 US NGDP growth had been accelerating significantly – with NGDP growth going from only 0.5% y/y in Q1 1961 to 9% y/y in Q1 of 1962. That reflects a rather massive monetary expansion. Howe…

I know what Jamie Dimon wants from housing. But first, here is what he said he wants in a recent article from Business Insider:

"Seven major federal regulators and a long list of state and local regulators have overlapping jurisdiction on mortgage laws and wrote a plethora of new rules and regulations appropriately focused on educating and protecting customers. While some of the rules are beneficial, many were hastily developed and layered upon existing rules without coordination or calibration as to the potential effects."The result is a complex, highly risky and unpredictable operating environment that exposes lenders and servicers to disproportionate legal liability and materially increases operational risks and costs." That appears to be a sophisticated analysis. He is the leading banker in the nation so who could find fault with the statement? Only, this was not the only statement he made. Other statements were very revealing.

He said that mortgages are unavailable…

Donald Trump is pushing for bilateral trade agreements. He believes that the United States can take on any nation one on one, using its leverage to forge advantageous trade agreements with other nations.

Looking at history, Germany pre WW2 trade agreements were bilateral. Hitler scrapped broad trade agreements. POTUS is borrowing from that play book. So, we should look at what may be gained or lost from that type of trade approach. There are similarities and differences between Trump bilateral trade and Germany's bilateral trade prior to WW2.

The arguments have been made that Germany ultimately became aggressive in its worldview because it needed raw materials and it had an economy that was overheated by war preparation. Certainly it took other things, such as racism, white supremacy, and the desire to unify all Germans to push Hitler to war with Poland. But the essential economic foundation for war was most likely an overheated economy and the need for raw materials.

Bilateral a…

Scott Sumner has given us a 15 minute lesson on what is important in understanding the field of macroeconomics. After this discussion there is some interesting interaction with Fed VP Stephen Williamson, some insights from him and an economic rant. But first, in order to make sense of Professor Sumner's arguments, it would be helpful to look at the definition of macroeconomics:
Macroeconomics (from the Greek prefix makro- meaning "large" and economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole...
Macroeconomists study aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions...
While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of…