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Articles by Global Economic Intersection Analysis Blog Feed

Depending On The Undependable

4 days ago

Posted on 16 February 2020
by John Mauldin, Thoughts from the Frontline

The welfare of a nation can scarcely be inferred from a measure of [GDP].". . . – Simon Kuznets (who developed GDP), 1934At the risk of restating the obvious, production should result in a product the producer can recognize. That’s the case even for intangible products. Artists know their songs even if hearing a pirate copy.Please share this article – Go to very top of page, right hand side, for social media buttons.This also applies to a country’s aggregate production, i.e., Gross Domestic Product. Of course, we can’t expect the government to count every single widget we make. Nor should we want them to; the collection process would be pretty intrusive. But they should be able to make a reasonably close

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In The Short-Run We Are All Dead: Probability Theory And Short-Termist Investment

7 days ago

Posted on 13 February 2020
by Philip Pilkington

Article of the Week from Fixing the EconomistsKeynes famously said that in the long-run we are all dead. What he was counseling against was the tendency on the part of economists to discuss economic processes in terms of the so-called ‘long-run’. This idea, which I have written about more extensively here, often leads economists to think in the most metaphysical of terms, concocting imaginary worlds in which logical processes work themselves out with ease and then conflating an confusing these imaginary worlds with reality.Please share this article – Go to very top of page, right hand side, for social media buttons.Keynes’ implicit advice was that economists should largely concern themselves with the short-run.In 2013 I attended a

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Employment ‘Ain’t What We Thought It Was’

8 days ago

Posted on 12 February 2020
by UPFINA

Big Negative Benchmark RevisionJob creation from April 2018 to March 2019 was revised lower by 514,000. This was the biggest downgrade in payrolls growth since 2009. However, this wasn’t a shock to investors because the BLS pegged the revision at -501,000 a few months ago.Please share this article – Go to very top of page, right hand side, for social media buttons.This update incorporated the revision into the data for the first time. Interestingly, this change left February 2019 with just 1,000 jobs created which means the record long streak of positive job creation just barely continued. This shows how chance has played a role in this streak.Source: Oxford EconomicsThe chart above shows the pre-benchmark and post-benchmark revisions to job

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The Hits To GDP

11 days ago

Posted on 09 February 2020
by John Mauldin, Thoughts from the Frontline

Thoughts from the FrontlineEconomists and investors are rightly obsessed with growth. We always want more of it. We worry it won’t come or, worse, might turn into contraction. Economists of all stripes, from Paul Krugman to Lacy Hunt, recognize economic growth cures all manner of ills.Please share this article – Go to very top of page, right hand side, for social media buttons.Yet, exactly what is growth? We think we know, but in reality, it is a sticky question. We usually measure it with Gross Domestic Product. But that’s a statistic which, like the inflation numbers I questioned last month, is both hypothetical and subjective. Like inflation, there is a great deal of disagreement and discussion among those

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The Economy Is Not The Most Important Issue Facing The Country

12 days ago

Posted on 08 February 2020

by UPFINA

Weekend reading from UPFINA

In the week of January 31st, the MBA applications composite index increased 5% weekly after increasing 7.2%. The purchase index fell 10% after rising 5%. On a yearly basis, growth was higher as it was 11%. In the past 3 weeks, average yearly growth has been 12%. The housing market looks to be continuing where it left off last year.

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The refinance index was up 15% weekly after increasing 5%. Low rates are motivating people to refinance again. In the week of February 6th, the average 30 year fixed mortgage rate fell to 3.45% which is just 4 basis points above the record low in July 2016.

As you can see from the chart

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The Coming Global Economic Upturn

12 days ago

Posted on 08 February 2020
by Callum Thomas

There are a few misconceptions about the global economic outlook that I want to set straight. Between historical realities, current trends, and leading indicators there is a lot of room for confusion and outright misinformation. To make matters worse, the daily news flow and war of attention only adds to the obfuscation. Please share this article – Go to very top of page, right hand side, for social media buttons.So with my usual style of more charts, less words, more data, less opinion, I want to share with you how I am seeing the data flow and how to reconcile the objectively weak – recessionary – data of the past year, with the unequivocally bullish growth outlook.And to front-foot the issue, yes coronavirus is a potential tail risk

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Purchasing Power Parity PPP And The Exchange Rate

14 days ago

Posted on 06 February 2020

by Philip Pilkington

Fixing the Economists Article of the Week

There is a theory that floats around out there called the ‘Purchasing Power Parity theory of the Exchange Rate’ – or something to that effect, the name seems to change depending on what source you go to.

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The theory, stripped right down, amounts to something like this: the ‘correct’ value of the exchange rate will be the old exchange rate times the change in the price level in one of the two countries involved divided by the change in the price level of the other of the two countries involved.

by pilkingtonphil

Let’s take a concrete example to be a bit clearer: the exchange rate between

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Dismissing The Experts

18 days ago

Posted on 02 February 2020
by John Mauldin, Thoughts from the Frontline

Regular readers know I often criticize so-called "experts," usually economists or central bankers whose flawed decisions are punishing the rest of us. I find their expertise is not nearly as reliable as they seem to think.Please share this article – Go to very top of page, right hand side, for social media buttons.At the same time, I rely on experts whose judgment I respect. I know they aren’t perfect – usually because they know and disclose their own limitations, and limitations of the data they rely on. I take ideas from many sources, load them in my mental blender and produce what is hopefully a smooth, tasty concoction you read in my letters.The interesting part, one that often slips my mind, is that

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The Most Valuable Chart Of The Year

19 days ago

Posted on 01 February 2020
by UPFINA

Weekend Reading From UPFINAWe believe the table below is the most valuable chart of the year. As you can see, it ranks economic data across 5 factors: timeliness, revisions, volatility, surprise, and correlation.Please share this article – Go to very top of page, right hand side, for social media buttons.The reports in red are soft data reports and the ones in black are hard data. Right off the bat, soft data reports have an edge because they usually come out before hard data. On the other hand, you can say they are hampered by the fact that expectations have less information to go by.For example, the ADP report comes out before the non-farm payrolls report. The ADP report can help alter expectations for non-farm payrolls which makes them less

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GDP Number Hides Serious Economic Weakness

20 days ago

Posted on 30 January 2020
by Rick Davis, Consumer Metrics Institute

January 30, 2020 – BEA Reports that Fourth Quarter 2019 GDP Grew at a 2.08% RateIn their first (preliminary) estimate of the US GDP for the fourth quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.08% annual rate, down -0.01 percentage points (pp) from the prior quarter.Please share this article – Go to very top of page, right hand side, for social media buttons.This is one of the more misleading headline numbers we have ever seen. It simply does not reflect the overall weakness in the data. The key growth of consumer spending was down nearly a full percentage point (-0.91pp) from the prior quarter. Commercial and private fixed investments were stagnant, and

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An Excellent Guide To Using Gretl

21 days ago

Posted on 29 January 2020
by Philip Pilkington

For those that don’t know Gretl is a freeware econometrics package. Despite not costing anything I’ve found it to be a very useful econometrics program that can do pretty much anything – or, at least, anything that I’ve ever wanted it to do.Please share this article – Go to very top of page, right hand side, for social media buttons.Gretl can be a bit daunting to use, however. This especially so given it’s ‘stripped down’ presentational format (which I rather like, but others may not). Anyway, the author Hishamh over at the Economics Malaysia blog has put together a series of post that guides the user through all the major uses of Gretl. The posts, complete with screenshots, are indispensable and I will here run quickly through what

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Review Of Primary Race And Yield Capping

22 days ago

Posted on 29 January 2020
by UPFINA

UPFINA Article of the WeekNovember’s new home sales were revised lower and December’s reading missed the low end of the estimate range. Specifically, in November, sales were revised down by 22,000 to 697,000. New home sales in December were 694,000 which missed estimates for 728,000 and the lowest estimate which was 719,000. This was the weakest new home sales reading since July.Please share this article – Go to very top of page, right hand side, for social media buttons.That doesn’t jive with the spike in starts, but the housing market isn’t as hot as starts suggest. This is still a slow and steady housing market though. That’s supported by the quarterly average of new home sales. The quarterly average was 699,000 which is 1,000 above Q3 and is

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Nose Blind To Inflation

25 days ago

Posted on 26 January 2020
by John Mauldin, Thoughts from the Frontline

The human brain excels at taking shortcuts. Processing all the information our senses collect takes a lot of energy, so repetitive data gets lower priority. Things we see often fade into the background so we can notice new stuff.Please share this article – Go to very top of page, right hand side, for social media buttons.This is where we get phenomena like "nose blindness." We stop perceiving familiar smells like our pets, perfume, cigarettes, and even our own body odors. But others do smell them, which can get awkward.I think something like that may explain why the Federal Reserve doesn’t see the inflation others notice. Their data says inflation isn’t a problem, so they ignore indications otherwise. We see

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Further Problems With The Static Framework Of The ISLM

28 days ago

Posted on 22 January 2020
by Philip Pilkington

Fixing the Economists Article of the WeekLast week I did a short post on how the ISLM model misrepresents how interest rates function because it views them as static. Today I would like to make a further, if more difficult point: namely, that the very way in which the interest rate stimulates investment is inherently limited in that it cannot produce cyclical upswings in effective demand – and thus, cannot produce cyclical upswings in output. In doing this I will be drawing on Jan Kregel’s excellent paper Of Prodigal Sons and Bastard Progeny which in turn draws on some of Joan Robinson’s own writings on the ISLM.Please share this article – Go to very top of page, right hand side, for social media buttons. As Kregel shows in the

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How The Heat Affects Economic Data

29 days ago

Posted on 22 January 2020
by UPFINA

Article of the Week from UPFINAInvestors are predisposed to ignore weather as an excuse for bad earnings. However, in some cases highly unusual weather patters impact economic data in a way that must be accepted as a one time event that doesn’t imply a cyclical phase change. The most obvious is during hurricanes motor vehicle sales fall and then in the month following the storm sales increase because cars that were destroyed need to be replaced. This past December was a historically hot month which led to an increase in housing starts and a decrease in utilities production. Before we get to those reports, let’s look at the weather.Please share this article – Go to very top of page, right hand side, for social media buttons.As you can see from

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Looking On The Bright Side

January 19, 2020

Posted on 19 January 2020
by John Mauldin, Thoughts from the Frontline

We haven’t had a lot of good news lately. Or, more precisely, we haven’t seen a lot of good news lately, though it does exist. We don’t see it because both regular media and social media usually focus on the bad.Please share this article – Go to very top of page, right hand side, for social media buttons.That’s not entirely wrong. The survival imperative makes humans watch for threats, and sometimes threats are real. I write about them often, most recently in my Decade of Living Dangerously forecast (see Part 1 and Part 2). Yet good things are happening, too, and will keep happening as we move through the 2020s. Occasionally I like to note them, and that’s what we will do today.I often say I’m short-term bearish

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Problems With Static Interest Rates In The ISLM

January 16, 2020

Posted on 15 January 2020
by Philip Pilkington

Fixing the Economists Article of the WeekThe ISLM takes quite a beating from Post-Keynesians – and, I would argue, rightly so. There are any number of reasons for this but let me just here highlight one that is not very regularly talked about.Please share this article – Go to very top of page, right hand side, for social media buttons.As is well-known and can be seen in the below diagram the ISLM considers output to be a function of the interest rate. At a higher level of interest rates output is thought to be lower and at a lower level of interest rates output is thought to be higher.The problem with this presentation? It is not true. You see, even if we allow that interest rates have a substantial effect on output, it is not so

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Why Wage Growth Crashed In December

January 15, 2020

Posted on 15 January 2020

by UPFINA

UPFINA Article of the Week

Even though headline job growth missed estimates and the revisions were negative, it still was a solid report because the misses were small. As we will delve into later in this article, the real weakness was in wage growth.

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Job creation in October was revised down 4,000 to 152,000. Job growth in November was revised down 10,000 to 256,000. That report was driven by the end of the GM strike.

November manufacturing job creation was revised up 4,000 to 58,000 which wouldn’t be possible without that one time event.

In December, there were 145,000 jobs added which missed estimates by 13,000. A 14,000 negative revision and

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Decade Of Living Dangerously, Part 2

January 12, 2020

Posted on 12 January 2020
by John Mauldin, Thoughts from the Frontline

If living dangerously is your goal, just keep adding reasonable, manageable, prudent risks. Eventually they’ll add up to serious danger.Please share this article – Go to very top of page, right hand side, for social media buttons.Hyman Minsky showed how stability leads to instability. Humans have a way of reinterpreting stable periods that seemingly redefines words like reasonable, manageable, and prudent. That’s why we continue chasing yield and risk until we go too far.To think that we have somehow eliminated recessions and risk, or that central banks and the government have somehow become adept at managing the business cycle, is simply foolish. Yet we keep doing it, every single time.Debt seems harmless

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Eight Centuries Of Global Real Interest Rates

January 12, 2020

Posted on 11 January 2020
by Constantin Gurdgiev, TrueEconomics.Blogspot.in

There is a smashingly good paper out from the Bank of England, titled "Eight Centuries of Global Real Interest Rates, R-G, and the ‘Suprasecular’ Decline, 1311 – 2018", Staff Working Paper No. 845, by Paul Schmelzing. Using "archival, printed primary, and secondary sources, this paper reconstructs global real interest rates on an annual basis going back to the 14th century, covering 78% of advanced economy GDP over time."Please share this article – Go to very top of page, right hand side, for social media buttons.Key findings:"… across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates have not been ‘stable’, and…"… since the major monetary upheavals of the

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Most Weakness Since The Financial Crisis

January 9, 2020

On December 11th, the Fed didn’t hike or cut rates. It released its Minutes from that meeting on Friday which we will review here. We conclude with discussion of the latest PMI reports and industrial production.Please share this article – Go to very top of page, right hand side, for social media buttons.The Fed discussed the rise in the stock market when the Minutes stated, “A few participants raised the concern that keeping interest rates low over a long period might encourage excessive risk-taking, which could exacerbate imbalances in the financial sector." Low rates “could make the next recession more severe than otherwise" if risk-taking leads to financial instability.On the one hand, the stock market doing so well limits the odds of a cut in the intermediate term. On the other hand,

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Steve Keen’s AS-AD Curves And A Suggestion For A New Stock-Flow Equilibrium Approach

January 9, 2020

Posted on 09 January 2020

by Philip Pilkington

Article of the Week from Fixing the Economists

A commenter on Lord Keynes’ blog recently called my attention to something rather interesting; namely, that Steve Keen seems to be using some sort of supply and demand framework to determine price in the macroeconomy in his models. Let me just say that I do not follow Steve’s work all that closely and so I apologise if this is old news and has since been overcome. With that caveat, a few comments.

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The moment I heard this I thought, "Ah, Steve must be using the old aggregate supply/aggregate demand (AS-AD) framework … "; indeed, I responded as such to the commenter. He then directed

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Decade Of Living Dangerously, Part 1

January 5, 2020

Posted on 05 January 2020
by John Mauldin, Thoughts from the Frontline

Welcome to the 2020s. Some weren’t sure we would make it this far, but we did. Now we face a new decade and new challenges. How we handle them will determine what kind of conversation we have in 2030.Please share this article – Go to very top of page, right hand side, for social media buttons.This concern for the future is one of the things that separates humans from animals. Dogs don’t worry about tomorrow, much less next year. They live completely in the present, giving it their all (an ability I sometimes envy).Being human, I have to think about the future. And being a writer, people want to know what I think. So today and next week I’ll outline what I expect for both the year 2020 and the decade of the

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Capital Sins: To What End Should Economic Life Be Directed?

January 2, 2020

Posted on 02 January 2020
by Philip Pilkington

Fixing the Economists Article of the WeekVictoria Chick published an interesting paper in the journal Economic Thought on the World Economic Association website entitled Economics and the Good Life: Keynes and Schumacher. In it she explores what both men thought that the end goal of economics should be. As she says in the paper she finds rather a lot of overlap but also some differences in approach. I will here run through both of these here.Both men share the ideal of bringing economic life closer to how they think that people should live. Broadly speaking both think that people should engage in less stultifying work and spend more time doing things that will provide some sort of inner contentment or enjoyment. The manner in which

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Weakness In Business Investment Reviewed

January 1, 2020

Posted on 01 January 2020
by UPFINA

UPFINA Article of the WeekAs usual, there are a couple reasons the headline growth rate in new durable goods orders shouldn’t be taken at face value. That’s good because growth dramatically missed even the lowest estimates. Specifically, headline monthly new orders growth was -2% which missed the consensus of 1.5% and the lowest estimate which was 0.9%. Even the headline revision was bad as October’s growth rate was revised down from 0.6% to 0.2%. The October revision was hurt by the extension of the GM strike.Please share this article – Go to very top of page, right hand side, for social media buttons.The most obvious impact that doesn’t reflect cyclical changes to the economy was the 72.7% decline in defense aircraft parts orders. Excluding

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What Happened To Science And Research Funding?

December 26, 2019

Posted on 26 December 2019
by Philip Pilkington

Article of the Week from Fixing the EconomistsI’ll never forget the reaction of a scientist I once met, a chemist who had transitioned into corporate management, when I told her that I was an economist. “Oh," she said, “so you’d know something about corporations and how they structure scientific research then, right?" I was somewhat surprised at the question as it’s one that I’ve literally never been asked before. I said that I knew a little bit about it and asked her why she was so curious.Please share this article – Go to very top of page, right hand side, for social media buttons.“Well," she said, “one of the reasons I went from being a researcher to being a corporate manager was because I wanted to know what on earth was going on

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The Impact Of Negative Interest Rates On Banks And Firms

December 26, 2019

Posted on 25 December 2019
from Voxeu.org

— this post authored by Carlo Altavilla, Lorenzo Burlon, Mariassunta Giannetti, and Sarah HoltonEconomists and policymakers continue to question the effectiveness of monetary policy when an economy faces near-zero or sub-zero interest rates. Sceptics argue that central banks cannot stimulate lending, and may indeed decrease the loan supply, by setting negative interest rates. This column shows that negative rates do not impede the transmission of monetary policy from banks to deposit holders because firms do not withdraw cash in response to negative rates the way households might. In fact, sub-zero rates may even stimulate the economy by encouraging firms to invest.Please share this article – Go to very top of page, right hand side, for

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Can The Fed Help Turn The Economy Around?

December 25, 2019

Posted on 25 December 2019
by UPFINA

UPFINA Article of the WeekWe have already reviewed the leading economic index in a previous article. The chart below brings new context by showing its historical yearly growth rate and the Fed funds rate.Please share this article – Go to very top of page, right hand side, for social media buttons.The green boxes show Fed easing helping the economy avoid recessions. The mid-cycle easing in the mid-1990s successfully rekindled growth in the leading index. The box in the late 1990s simply delayed the 2001 recession. The current box is the third one on the right.We’ve seen 2 prior mid-cycle slowdowns reverse in this expansion without Fed rate cuts to help them, but rates were lower. We think the leading index will turn up with these rate cuts

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Third Quarter GDP Revision: Mixed Messages

December 21, 2019

Posted on 20 December 2019
by Rick Davis, Consumer Metrics Institute

BEA Revises Third Quarter 2019 GDP Growth Downward to 2.09%In their third and final estimate of the US GDP for the third quarter of 2019, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +2.09% annual rate, down -0.04 percentage points (pp) from their previous estimate but still up 0.08pp from the prior quarter.Please share this article – Go to very top of page, right hand side, for social media buttons.Although the headline number changed by only -0.04pp, there were two material shifts in the composition of that number. The growth rate for consumer spending on services was revised upward by +0.22pp to +1.02%, while the growth rate for inventories was revised downward by a nearly

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Is Real Communication Possible? Berkeley’s Particularism And Lacans Semantic Slippage

December 19, 2019

Posted on 19 December 2019
by Philip Pilkington

Fixing the Economists Article of the WeekI’m currently rereading George Berkeley’s A Treatise Concerning the Principles of Human Knowledge as a friend of mine and I are considering writing a short book on Berkeley in the near future. In it we are hoping to discuss all of Berkeley’s work, including the little known fact that Berkeley was something of a Chartalist and advocated something very similar to Keynesian full employment policies.Please share this article – Go to very top of page, right hand side, for social media buttons.I’m hoping to also show that Berkeley’s Chartalism – which first and foremost views money as a mere symbol – is tied to his immaterialist philosophy that holds that material substance does not exist. I will

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