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The US Productivity Slowdown After 2005

1 day ago

Posted on 14 April 2021
by Timothy Taylor, Conversable Economist

In the long run, a rising standard of living is all about productivity growth. When the average person in a country produces more per hour worked, then it becomes possible for the average person to consume more per hour worked. Yes, there is a meaningful and necessary role for redistribution to the needy. But the main reason why societies get rich is by redistributing more: rather, societies are able to redistribute more because rising productivity expands the size of the overall pie. Please share this article – Go to very top of page, right hand side, for social media buttons.In the latest issue of the Monthly Labor Review from the US Bureau of Labor Statistics, Shawn Sprague provides an overview in "The U.S.

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March Jobs Report – Millions Missing From The Roles

1 day ago

Posted on 14 April 2021
by Lance Roberts, Clarity Financial

Recently, the March jobs report showed a whopping 916,000 new jobs. Interestingly, there were some anomalies in the data and millions missing from the official count.As shown, there has been a substantial reduction in the unemployment rate back to 6%. Historically, an unemployment rate of 5% was considered “full employment." However, for the Federal Reserve to have “cover" to continue current monetary interventions, a new standard has been set at the previous lows of 3.8%.Please share this article – Go to very top of page, right hand side, for social media buttons.The reality is there is a multitude of problems with how the entire series is “guessed at." As noted previously by Morningside Hill:The Bureau of Labor

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Tiny Housing Bubbles

3 days ago

Posted on 11 April 2021
by John Mauldin, Thoughts from the Frontline

Recently I searched the Thoughts from the Frontline archives to see how often I used the word “bubble." It was more than I thought, and I wasn’t quoting Don Ho. The bubbles I talked about were anything but tiny. Most of them subsequently popped, too.Please share this article – Go to very top of page, right hand side, for social media buttons.Recently I searched the Thoughts from the Frontline archives to see how often I used the word “bubble." It was more than I thought, and I wasn’t quoting Don Ho. The bubbles I talked about were anything but tiny. Most of them subsequently popped, too.For most people, buying a home is the biggest single purchase they ever make. It continues to represent the largest part of their

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Debt Fueled Spending Won’t Create Growth

3 days ago

Posted on 12 April 2021
by Lance Roberts, Clarity Financial

More debt equals less growth. In October, I discussed the “2nd Derivative Effect" and the ongoing cost of the stimulus. With the passage of the $1.9 trillion “American Rescue Plan," will the math of debt to growth change?Please share this article – Go to very top of page, right hand side, for social media buttons.Now, even Deutsche Bank credit strategist, Stuart Sparks, got the memo.“History teaches us that although investments in productive capacity can in principle raise potential growth and r* in such a way that the debt incurred to finance fiscal stimulus is paid down over time (r-g

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Power And The Dialect Of Economics

3 days ago

Posted on 11 April 2021

by Blair Fix, Economics from the Top Down

A few months ago, I went down a rabbit hole analyzing word frequency in economics textbooks. Henry Leveson-Gower, editor of The Mint Magazine, thought the results were interesting and asked me to write up a short piece. The Mint article is now up, and is called ‘Power: don’t mention it’. What follows is my original manuscript.

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If you’ve ever taken Economics 101, then you’re familiar with its jargon. In the course, you probably heard the words ‘supply and demand’ and ‘marginal utility’ uttered hundreds of times. As you figured out what these words meant, you gradually learned to speak a dialect that I call

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Ergodicity In Economics

5 days ago

Posted on 09 April 2021

Written by Lars P. Syll

Paul Samuelson once famously claimed that the ‘ergodic hypothesis’ is essential for advancing economics from the realm of history to the realm of science. But is it really tenable to assume – as Samuelson and most other mainstream economists – that ergodicity is essential to economics?

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What is ergodicity?

Ergodicity is a difficult concept that many students of econom(etr)ics have problems with understanding. Trying to explain it, you often find yourself getting lost in mathematical-statistical subtleties difficult for most students to grasp.

In the video below, Luca Dellanna has made an admirably simplified and pedagogical

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Bank Capital Requirement

5 days ago

Posted on 08 April 2021
by Miles Kimball, Confessions of a Supply-Side Liberal

Higher Capital Requirement May Be Privately Costly to Banks, But Their Financial Stability Benefits Come at a Near Zero Cost to SocietyIn general, I am a fan of Greg Ip. So I was disappointed to see him falling into accepting the bank lobbyists’ line that higher capital requirements are bad for the economy. (See below.) In fact, higher capital requirements cut into bank profits but improve financial stability at no cost to society as a whole. The cost to bank profits is made up for by less chance of taxpayers being left holding the bag on large losses.Please share this article – Go to very top of page, right hand side, for social media buttons.Link to the article shown aboveLink to the article shown just

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Foreign Debt Forgiveness Would Cost Americans Very Little

6 days ago

It is easy to assume that sovereign debt forgiveness involves a collective transfer of wealth from the creditor country to the debt-owing country, but this is only true under specific – and unrealistic – conditions. In today’s environment, sovereign debt forgiveness mainly represents a transfer within the creditor country. It benefits farmers and manufacturers in the creditor country at the expense of the country’s nonproductive savers.Please share this article – Go to very top of page, right hand side, for social media buttons.In light of the ongoing coronavirus pandemic and the resulting economic fallout, it is useful to consider what Washington’s policy stance should be toward debt forgiveness. Argentina and Ecuador each recently completed a long, drawn-out restructuring of their

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Short-Period And Long-Period Analysis: Neoclassical Versus Historical

6 days ago

Posted on 07 April 2021
by Philip Pilkington

Article of the Week from Fixing the EconomistsIn my previous post I was concerned with summarising Lawson’s argument regarding the term “neoclassical" for an audience that was not going to read his paper in full. Thus, I did not wish to insert too much of my own thoughts on the matter. However, I would now like to deal with something which I only mentioned in passing in last week’s post.Please share this article – Go to very top of page, right hand side, for social media buttons.Toward the end of the paper Lawson makes a distinction between three different groups. He writes:In short, I am suggesting that there are three basic divisions of modern economics that can be discerned in the actual practices of modern economists. These are:1)

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COVID19 Update: Sweden And Nordics 02April 2021

7 days ago

Posted on 09 April 2021
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

Sweden continues to perform poorly compared to peer countries, irrespective of how one defines Nordic countries as a groupPlease share this article – Go to very top of page, right hand side, for social media buttons.As table above shows, Sweden is the worst performer, by a large margin than any other Nordic or Northern European country when it comes to deaths from Covid19 pandemic.Per charts below, adjusting for population differences, Sweden performs worse than any Nordic group of countries configuration imaginable in cases and deaths counts:These facts are now recognized by policymakers in Sweden itself, even though the country continues to be a poster-child for the Covid19 denialists around the world..

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The Exponential Ride

12 days ago

Posted on 04 April 2021
by John Mauldin, Thoughts from the Frontline

The last year brought exponential growth in, among other things, use of the word "exponential." It is now the go-to term when you want to say something is "growing super-fast."Please share this article – Go to very top of page, right hand side, for social media buttons.I’ve got to admit it’s getting better (Better)A little better all the time (It can’t get no worse)I have to admit it’s getting better (Better)It’s getting better since you’ve been mineGetting so much better all the time- Getting Better, Paul McCartney and John Lennon, 1967, "Sgt. Pepper’s Lonely Hearts Club Band" album[embedded content]The last year brought exponential growth in, among other things, use of the word "exponential." It is now the go-to

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Economic Justice And Human Ecology

12 days ago

Posted on 03 April 2021
by Carmine Gorga, The Somist Institute

A lovely expression has been around for quite a few years: Econ-Ecol. When I heard it, I become full of hope that such a marriage was indeed going to be consecrated any time soon. I even published in a peer-reviewed journal a paper titled Economics for Physicists and Ecologists.The initial enthusiastic reaction from one economist made me think that we would soon get there. Instead, I had to assume that, since this economist did not find in the paper a continuation of the linear math practiced by economists, he lost interest. And other economists, evidently, never have even looked into this paper.Please share this article – Go to very top of page, right hand side, for social media buttons.The math of Concordian economics

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What Is Neoclassical Economics? Are Many Heterodox Economists Actually Neoclassical?

13 days ago

Posted on 01 April 2021
by Philip Pilkington

Article of the Week from Fixing the EconomistsAfter my recent post on a paper by Tony Lawson I was corresponding with the author and he suggested that I might want to take a look at a paper he has written from the September issue of the Cambridge Journal of Economics. The paper is entitled What is this ‘School’ Called Neoclassical?Please share this article – Go to very top of page, right hand side, for social media buttons.In the previous post on Lawson I wrote the following:I should say that while agree with Lawson’s arguments against the ideology crowd, which I shall lay out shortly, I do not agree that the term “neoclassical" does not denote a tendency in economics that has fed into the very formalism that, as we shall see, Lawson

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Solar Is Now ‘Cheapest Electricity In History’: IEA

14 days ago

Posted on 31 March 2021

Written by Econintersect Guest

— this post authored by Simon Evans and Josh Gabbatiss, Carbon Brief and World Economic Forum

The world’s best solar power schemes now offer the "cheapest … electricity in history" with the technology cheaper than coal and gas in most major countries.

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Solar power is now the cheapest electricity in history, according to the International Energy Agency.
The IEA’s World Energy Outlook 2020 looks at the future of energy, the renewable transition and the likely impact on climate change.
The world’s best solar power schemes now offer the "cheapest … electricity in history" with the technology cheaper than coal and gas in

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Even Higher Growth In 2021?

16 days ago

Posted on 31 March 2021
by UPFINA

Article of the Week from UPFINASome investors are already looking past the coming spike in economic growth. They might be biased towards secular growth stocks with recurring sales or they might want to take profits on their cyclical winners. The trade in cyclical stocks is definitely less crowded than the bubble in cloud and EV stocks was last year. That being said, you shouldn’t have expected as much euphoria in a hotel stock as an EV stock. Speculators claim EVs are the future which to them means no price is too high.Please share this article – Go to very top of page, right hand side, for social media buttons.Regardless of the sentiment among equity investors, Wall Street estimates for 2021 GDP growth keep increasing and so is the 10 year yield.

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The 1970s Never Ended

18 days ago

Posted on 28 March 2021
by John Mauldin, Thoughts from the Frontline

Big economic storms are rare and usually end quickly, but they tend to have long-lasting effects. Today I want to talk about a storm 50 years ago that still affects us now. Important things happened in the 1970s.Please share this article – Go to very top of page, right hand side, for social media buttons.I personally remember that decade well. I was in my 20s and they were formative years. I met people and learned things that led me where I am now. The funny part is its larger events, important as they were in hindsight, didn’t get nearly as much attention at the time. Those events did not even register to me as important. We didn’t have social media and 24-hour news networks. The “well-informed" people read local

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Learning From Econophysics’ Mistakes

19 days ago

Posted on 26 March 2021

by Blair Fix, Economics from the Top Down

Energizing Exchange: Learning from Econophysics’ Mistakes

Let’s talk econophysics. If you’re not familiar, ‘econophysics’ is an attempt to understand economic phenomena (like the distribution of income) using the tools of statistical mechanics. The field has been around for a few decades, but has received little attention from mainstream economists. I think this neglect is a shame.

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As someone trained in both the natural and social sciences, I welcome physicists’ foray into economics. That’s not because I think their approach is correct. In fact, I think it is fundamentally flawed. But it is only by engaging with

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Has Krugman Finally Turned On ISLM?

22 days ago

Posted on 25 March 2021
by Philip Pilkington

Article of the Week from Fixing the EconomistsBack in 2013 Paul Krugman, as part of an ongoing debate with MMT/MMR advocate Cullen Roche, said that the ISLM is not a good approach to macroeconomics. Hurrah! Right? Well, maybe not.Please share this article – Go to very top of page, right hand side, for social media buttons.In fact, New Keynesians do not generally use the ISLM in its original form any more. A good example of this is a paper by David Romer entitled Keynesian Macroeconomics Without the LM Curve. What Romer does in that paper is essentially replace the classic LM curve in the ISLM with a Taylor Rule interest rate target.From a Post-Keynesian/MMT perspective this is certainly more accurate than the classic ISLM, but it raises

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Is Hyperinflation Really A Threat?

23 days ago

Posted on 23 March 2021
by Lance Roberts, Clarity Financial

Is hyperinflation a threat? While I was on vacation this past week, I got into a discussion on the issue.Please share this article – Go to very top of page, right hand side, for social media buttons.While the discussion ebbed between a broken financial system and capitalism’s failure, the gist was hyperinflation was coming. The measure of money in the system, known as M2, is skyrocketing, which certainly supports his concern. Now, with the Biden administration adding another $1.9 trillion into the economy, those concerns have risen.In a recent Bloomberg interview, Larry Summers stated:“There is a chance that macroeconomic stimulus on a scale closer to World War II levels will set off inflationary pressures of a kind not

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Broken Debt

26 days ago

Posted on 21 March 2021
by John Mauldin, Thoughts from the Frontline

Modern technology is amazing but our ancient forebears built some wondrous things, too. Long-ago historians organized them into “Seven Wonders of the Ancient World." (Of course, their “world" was the Mediterranean and Middle East. Other wonders existed elsewhere.)Please share this article – Go to very top of page, right hand side, for social media buttons.Last week I noted how some call compound interest the Eighth Wonder of the World. Is it really on par with the Colossus of Rhodes? Maybe.But today the Colossus is gone. So are the Hanging Gardens of Babylon. In fact, six of the seven wonders are now dust, and the Great Pyramid is slowly joining them. Compound interest seems headed in the same direction. Great

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Negative Interest Rates: Practical, But Limited

28 days ago

Posted on 19 March 2021
by Timothy Taylor, Conversable Economist

For a lot of people, the idea of negative interest rates sounds as if it must violate some law of nature, like a perpetual motion machine. Why would any depositor put money into an investment that promised a negative return?Please share this article – Go to very top of page, right hand side, for social media buttons.Well, starting way back in 2012, a substantial number of central banks around the world including the European Central Bank, the Swiss National Bank, the Bank of Japan, and the Sveriges Riksbank (the central bank of Sweden) have pushed the specific interest rates on which they focus monetary policy into negative territory for the last several years. Lu’s Brandão-Marques, Marco Casiraghi, Gaston Gelos,

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Mathesis Universalis: Lawson’s Criticisms Fall Short Of Their Real Target

29 days ago

Posted on 18 March 2021
by Philip Pilkington

Article of the Week from Fixing the EconomistsLars Syll has linked to a really interesting paper by Tony Lawson amidst a discussion about maths and modelling in economics. The paper really is worth a read in its entirety. It is entitled Mathematical Modelling and Ideology in the Economics Academy: Competing Explanations of the Failings of the Modern Discipline? and can be found for free download here. In it Lawson deals with what makes mainstream economics so desperately poor and he ultimately undertakes an examination of what I called “Brain-Slug Economics" elsewhere.Please share this article – Go to very top of page, right hand side, for social media buttons.He notes that his critics often chastise him for not arguing that neoclassical

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Assessing The Community Reinvestment Act’s Role In The Financial Crisis

29 days ago

Posted on 17 March 2021
by Federal Reserve

— this post authored by Neil Bhutta and Daniel Ringo, FEDS NotesOverview An important question arising out of the financial crisis is whether the Community Reinvestment Act (CRA) played a significant role in the subprime mortgage boom and bust by pushing banks to make loans to risky borrowers.1 The CRA directs federal banking regulators to encourage banks to "help meet the credit needs" of their communities, particularly low- and moderate-income neighborhoods. Thus, a number of observers have argued that the CRA may have compelled banks to take excessive risk in order to expand their lending to lower-income communities and comply with the act.Please share this article – Go to very top of page, right hand side, for social media buttons.In

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Covid19 Update: U.S. Vs EU27 14March 2021

March 17, 2021

Posted on 17 March 2021
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

In this post, let’s take a look at the U.S. vs EU27 comparatives in the ongoing COVID-19 pandemic.Please share this article – Go to very top of page, right hand side, for social media buttons.So, five charts and a table, followed by "bonus" chart at the end.Starting with weekly cases:Since the start of the pandemic, the U.S. has experienced three waves, against the EU27’s two. The EU27’s 2nd wave appears to have crested in week 45 of 2020, while the U.S.’ current wave continued to rise through week 1 of 2021. Over the last 4 weeks, however, the U.S. case counts have been running 783,315 lower than those of the EU27 on cumulated basis. Furthermore, starting from week 8 of 2021, there is some early evidence of

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Countries Most Impacted By COVID19: Status 13 March 2021

March 15, 2021

Posted on 15 March 2021
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

Here is my latest update of the status of the pandemic in the world’s most impacted countries and regions.Please share this article – Go to very top of page, right hand side, for social media buttons..World’s 5 worst impacted countries by the number of cases per capita (the first table above), with rank 1 = worst:AndoraMontenegroGibraltarCzechiaSan MarinoThe U.S. ranks 9th worst in the world – the only country with more than 100 million population. There are three countries with population over 10 million but below 100 million on the list: Belgium (15th) and Portugal (11th), plus Czechia.World’s 5 worst impacted countries by the number of deaths per capita (the second table above), with rank 1 =

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Inflation Is Broken

March 14, 2021

Posted on 14 March 2021
by John Mauldin, Thoughts from the Frontline

I have been writing for many years that the US in particular and the Western “developed" world in general were approaching a time where none of our choices would be good.Please share this article – Go to very top of page, right hand side, for social media buttons.We have arrived. Any choice the government and central banks of the US and the rest of the world make will ultimately lead to a crisis. Just as the choices that Greenspan and Bernanke made about monetary policy created the Great Recession, Yellen and Powell’s choices will eventually lead us to the next crisis and ultimately to what I call The Great Reset.I believe we have passed the point of no return. Changing policy now would create a recession as big

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Swimming Against The Tide Of History: Krugman-Galbraith 1996

March 11, 2021

Posted on 11 March 2021
by Philip Pilkington

Article of the Week from Fixing the EconomistsLars Syll has brought my attention to a very interesting exchange between Jamie Galbraith and Paul Krugman from 1996 that is archived on the latter’s website (or a website created for him, I cannot tell). Much of the discussion is on long dead arguments from the 1990s that now look as antiquated as early episodes of Friends. But there are two things that are interesting about the debate.Please share this article – Go to very top of page, right hand side, for social media buttons.First of all, in retrospect, it looks to me like Krugman is on the wrong side of pretty much every issue. He seems cavalier about the rising income inequality in the US – something he has since renounced (but only

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Everything Is Broken

March 7, 2021

Posted on 06 March 2021
by John Mauldin, Thoughts from the Frontline

Broken lines, broken strings, Broken threads, broken springs, Broken idols, broken heads, People sleeping in broken beds- Bob Dylan, “Everything is Broken" from the album Oh Mercy, 1989Please share this article – Go to very top of page, right hand side, for social media buttons.I was on a client call earlier this week with Steve Blumenthal. The gentleman is at that stage in life where he needs cash income and not risk. Steve commented, “The bond market is broken."And indeed, the traditional fixed income bond market is broken, thanks to the Fed. We were able to suggest some alternatives (they are out there) that could help solve his problem.But it got me to thinking… What else is broken? And the more I thought,

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Radically Progressive Degrowth: Reducing Resource Use By Eliminating Inequality

March 5, 2021

Posted on 05 March 2021

by Blair Fix

Pity the billionaires. High in the towers on Billionaires’ Row, life is hard. The pencil-thin buildings groan as they sway in the wind, keeping penthouse dwellers up at night. Water pipes break, ruining posh decor. And elevators are unreliable, interrupting billionaires’ highly productive lives. So reads Stefanos Chen’s recent piece about the pitfalls of sky-high living.

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Chen admits (thankfully) that "the plight of billionaires won’t garner much sympathy." He is correct. As I read Chen’s piece, I shed no tears. Instead, I was fantasizing about an alternative world, one in which the super-rich would be problem free … because they wouldn’t

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Friedman Vs Phillips: A Historic Divide

March 4, 2021

Posted on 04 March 2021
from Voxeu.org

— this post authored by Manoj Pradhan and Charles GoodhartMilton Friedman and Bill Phillips most likely assumed that their separate methods for predicting inflation would lead to much the same outcomes. Recently, however, monetary aggregates and the Phillips curve have provided extremely disparate signals. This column discusses recent economic developments leading to these disparate signals, concluding that inflation will most likely end up somewhere between the predictions of the two models – which is almost certainly higher than what central banks and the IMF are expecting.Milton Friedman and Bill Phillips most likely assumed that their separate methods for predicting inflation would lead to much the same outcomes. However, monetary

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