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Showing posts from April, 2019

Kalecki's End of the Business Cycle and Bond Wars

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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…

Attacking the Everything Bubble Without Killing the Economy

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…

Did Goldman Sachs Have Anything to Do with Market Volatility?

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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 …

Trump Tax Cuts and Yellen's New Normal

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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…