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This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/kaleckis-end-of-the-business-cycle-bond-wars?post=165494&uid=4798


Michal Kalecki was a distinguished Polish economist who discovered insights into functioning of capitalism and the business cycle. He understood that full employment was anathema to the capitalist system, and that allowing a certain level of unemployment was key to preservation of the capitalist class. This is, of course, why I have warned that the greatest job of the Fed is to prune wages, and slow the economy as full employment approaches.

From Kalecki's point of view, capitalists want to limit government spending except for armaments, which benefit the class. Recent tax cuts have shown that the Republicans, especially, have bloated armament spending while destabilizing the stock and bond markets with volatility, and with tax breaks that cannot easily be paid back. This instability could hasten the demise of the curre…

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/global-markets/attacking-the-everything-bubble-without-killing-the-economy?post=190774&uid=4798

Mish Shedlock is a regular founding contributor to Talkmarkets. His insights are very interesting and his column here is always worth the read. I agree with him on most issues.

But he advocates similar ideas to the Fed line of raising interest rates. I think that advocacy is wrong. I believe that there are other ways of cooling the financial system, according to economist Thomas Palley, without across the board raising of interest rates.

Before discussing that, here is a look at issues that concern Mish. There are at least two reasons Mish thinks the way he does on the need to raising interest rates:

1. Mish does not believe that the Fed should commit to future booms to offset large financial busts because we already have too much asset inflation, and inflating assets more will be more deflationary in…

This article was first published by me on Talkmarkets:


Did Goldman Sachs have anything to do with market volatility? Does a bear...? I think that you have to connect a few dots, but very few, to prove that Goldman Sachs, or at least its alumni, was instrumental in helping to create market volatility.

Whether for good or bad, those who did not listen to Lloyd Blankfein and bet on low VIX volatility, apparently lost their shirts.

First, we have to look at the many statements that Lloyd Blankfein, Goldman CEO said regarding the lack of volatility and the lack of profits at the firm. Here is a brief list:

Lloyd Blankfein: It's Quiet Out There...Too Quiet

Why Lloyd Blankfein Is Fretting About Low Low Rates

Goldman Sachs CEO Lloyd Blankfein Looks Like the Runt of Wall Street Litter

Ouch.

Whether for good or bad, those who did not listen to Lloyd Blankfein and bet on low VIX volatility, apparently lost their shirts in the big downturn.



So, was Lloyd just a prophet, doing God's work as …

This article was first published by me on Talkmarkets. The issue is still relevant, as we need to track corporate debt considering that companies received massive tax breaks and should shun some debt going forward: https://talkmarkets.com/content/financial/trump-tax-cuts-and-yellens-new-normal?post=159912&uid=4798

This discussion will get to trump's tax cuts and how they fit in with the present day financial situation. But first it is necessary to report on Janet Yellen. Yellen, on her way out as Fed Chairman, affirmed the New Normal in response to Neel Kashkari's fear of rising 10 year rates. She had this to say:

I think there are good reasons to think that the relationship between the slope of the yield curve and the business cycle may have changed. Both agree that the yield curve is flattening, that long term rates are not going up anytime soon. Yet Yellen offered this additional insight, that it no longer mattered much what the slope of the yield curve looks like becau…

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/bonds/saving-the-economy-ngdp-targeting-for-the-people?post=158919&uid=4798

Nominal GDP Targeting, or NGDPT, is the cornerstone economic doctrine of the school of economics called Market Monetarism. NGDPT is the solution for the Fed who was watching inflation in 2008 when the Great Recession creeped up on them unannounced.

Those watching NGDP, like Scott Sumner and his friends, understood that the economy was in trouble. The Fed had no clue because it was tracking inflation which had not declined while nominal GDP was in steep decline.

So, after the crash, the Fed indeed began to buy assets, through QE, as a means of bringing up asset values. And yet, inflation has still trended below the 2 percent target. So, the Fed has inflated assets, while wages and inflation overall have stagnated.

While this asset purchasing is not in and of itself NGDPT, it is approved of by Market Monetarist Scott Sumn…

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/mutual-funds/is-usa-low-capacity-utilization-low-enough-to-prevent-recession?post=157626&uid=4798

Low capacity utilization and weak labor are with us in full force. Capacity utilization still runs below the fifty year average of 80.31 percent in the United States:
As an economic indicator:

Running above an 80-85 percent capacity utilization rate can signal high demand for the products being produced and that capacity is about to be maxed out. When capacity utilization rates get close to 100 percent product, consistency can suffer and the business can lose some control over production or customer service. However we very well may be at a point where our low capacity utilization is simply not low enough:

Low capacity utilization will more often than not lead to lower prices, which in turn will stimulate demand and increase the capacity utilization. Many businesses increase prices in an attempt to i…

This article was first published by me on Talkmarkets: https://talkmarkets.com/content/economics--politics/for-all-you-inflation-fearmongers-dr-lambert-has-an-answer?post=157380&uid=4798

We can see by the latest reading on the FRED chart that the velocity of money continues to decline. Even with Trump's reflation, we had a sliver of an uptick in the third quarter of 2017 from 1.425 to 1.427. But the chart still looks dismal:


Dr Edward Lambert of Effective Demand Research has an answer for those crying inflation in a response to a question on his article comments:

...If money supply times velocity matches growth in employment, there would be no inflation. But it seems that M*V not only matches growth in employed but doubles it.The only answer I can think of is that M*V is measured upon number of employed, and capacity building. Labor wages are stagnant. Supply-side is optimized and maximized. Inflation is muted to the point that it equals increases in employed people.Before 198…