Category: Economic Theory
The analysis published under this category are as follows.
Friday, July 05, 2019
Modern Monetary Theory – Applications in the 21st Century / Economics / Economic Theory
By: Andy_Sutton
Perhaps one of the biggest frauds perpetrated on the citizens of the world in the 20th century was Keynesianism. For those of you who are new to the discourse, Keynesianism was essentially the ramblings of a well-respected (at the time) economist named John Maynard Keynes and it dealt with deficit spending at the level of the federal government. It was a justification for something governments around the world were beginning to do anyway. The point of Keynes’ work was to give this very dangerous and ill-advised practice legitimacy. Sadly, it worked, and 85 years later, the developed nations of the world are mired in debt the likes of which the world has never before seen and may well never see again.
Before we get to the true purpose of this paper: an analysis of MMT, we must lay some foundational work. Please bear with us. If you have been an active reader of our previous articles and research, feel free to proceed directly to the portion where MMT is addressed.
Interestingly enough, the topic of this paper; (another consequence of treating economics as a debating society instead of a science) the foundations of modern monetary theory (hereafter MMT) actually originated long before Keynes wrote his seminal work in 1936. MMT as it is being rehashed today was actually first described by a German economist name Georg Friedrich Knapp in 1905. Originally coined ‘chartalism’ by Knapp, this perversion of economics was pushed in Knapp’s 1905 ‘State Theory of Money’. The term comes from the Latin root charta, which means ‘token’ or ‘ticket’.
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Sunday, June 16, 2019
Why Hedge Fund Manager Ray Dalio Is Wrong on Capitalism / Economics / Economic Theory
By: John_Mauldin
Ray Dalio is the thoughtful, somewhat controversial founder of the world’s largest hedge fund, Bridgewater Associates, which he started in 1975.
While much of his writing is private, I (and many others) peruse every word we can of his and the Bridgewater team’s thinking. I find it to be some of the most interesting market commentary I read.
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Thursday, May 30, 2019
This Is Why US Monetary Policy Is So Ineffective / Interest-Rates / Economic Theory
By: John_Mauldin
Back in the 1980s and 1990s, many people thought excessive government spending and the resulting debt would bring inflation or even hyperinflation.
We wanted a hawkish Federal Reserve or, better yet, a gold standard to prevent it. Reality turned out differently.
Federal debt rose steadily, inflation didn’t. Here’s a chart of the on-budget public debt since 1970:
Thursday, May 23, 2019
Capitalism Works, Ravenous Capitalism Doesn’t / Economics / Economic Theory
By: Raymond_Matison
For more than a century, capitalism has proven to be successful in expanding the efficient manufacture of goods and agricultural products, increasing jobs and incomes, promoting technological innovation, decreasing poverty and improving the general welfare of humans globally. By contrast, socialism and communism with its centrally planned economy and collectivism historically have produced misery, war, need and poverty through oppressive totalitarian governments.
Super hedge fund manager Ray Dalio, the president of Bridgewater Associates, the very successful and largest hedge fund in America recently released a thoughtful and timely report stating that “capitalism is broken” - pointing to, among other things, the gross income disparity between high and low earners. Ray Dalio’s judgment of broken capitalism relates to his observation that the vast majority of wages going to the top 5% wage earners does not benefit the overall economy, destabilizes society and is destructive to capitalism. The fact that a true-blue capitalist wrote the article should alert industrialists, globalists, bankers and all capitalists that perhaps “capitalism with American characteristics” has veered off its previously successful course. Capitalism does work; but ravenous capitalism is indeed self-destructive. The bounty of capitalism must be shared not only with its owners or investors, but also with its other “significant partners” – the nation’s workers.
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Wednesday, May 08, 2019
How Fed Interest Rate Cycles Exponentially Reduce Long Term Wealth Creation / Interest-Rates / Economic Theory
By: Dan_Amerman
The most historically reliable way to create long term wealth is the reinvestment of cash flows over time, as earnings are earned on earnings, which are earned on earnings.
Compound interest is the best known example, but the same principle of compounding cash flows is also the most powerful and stable source of wealth with the stocks and real estate over the long term as well.
Reinvested (and increasing) dividends are a more important and stable source of stock market wealth than price gains. Reinvested (and increasing) net cash flows are the most stable and important source of wealth with real estate and REIT investments as well.
However, what was taken for granted for many decades - is no longer available. As a result of Federal Reserve policies, only a small fraction of the historically average power of this wealth building engine still remains. In this analysis we will examine the mathematical implications of publicly stated Fed intentions if there is another recession, and look at the extraordinary implications for investors.
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Friday, May 03, 2019
Universal Basic Income Would Be a Social and Economic Disaster / Economics / Economic Theory
By: Jared_Dillian
I am never going to retire. Oh sure, I say that now, but what about when I am 80? No. I will never stop working.
Every morning, I get out of bed when the alarm goes off, take a shower, put on dress clothes (a suit, usually), and drive 35 minutes to work in an office that I rent in an office building.
I write newsletters. I can just as easily do that on the couch, in a pair of gym shorts, with a cup of coffee. Why spend over an hour a day commuting and dealing with all the brain damage of putting on a suit and going to work?
Friday, April 12, 2019
America Has a Monopoly Problem / Economics / Economic Theory
By: John_Mauldin
Without realizing it, we’ve become a nation of monopolies. A large and growing part of our economy is “owned” by a handful of companies that face little competition.They have no incentive to deliver better products or to get more efficient. They simply rake in cash from people who have no choice but to hand it over.
This would be impossible if we had true capitalism.
Even if we admit some businesses are natural monopolies, most aren’t. Most of them found some non-capitalistic flaw to exploit.
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Wednesday, March 27, 2019
The Fed Broke This Economic Cycle—and It’s a Game Changer for Investors / Economics / Economic Theory
By: John_Mauldin
Here’s a quote from my friend Peter Boockvar that has drawn an enormous amount of interest:“We no longer have business cycles, we have credit cycles.”
Let’s cut that small but meaty sound bite into pieces. What do we mean by “business cycle,” exactly? Well, it looks something like this.
A growing economy peaks, contracts to a trough (what we call “recession”), recovers to enter prosperity, and hits a higher peak. Then the process repeats.
Tuesday, February 19, 2019
Here’s Why The Left’s New Economic Policies Are Just Stupid / Politics / Economic Theory
By: Jared_Dillian
Somewhere in the last 30–40 years, we have become economically illiterate.Elizabeth Warren wants wealth taxes that would impose asset forfeitures of 2–3% on households with more than $50 million in assets.
There are practical and legal problems with their implementation. But she wants to implement them anyway.
Alexandria Ocasio-Cortez wants a 70% income tax rate on incomes over $10 million. This would be the highest income tax rate in the OECD. And yet, it would affect only 16,000 households and only return marginal rates to historical levels, anyway.
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Thursday, February 14, 2019
Capitalism Isn’t Bad, It’s Just Broken / Economics / Economic Theory
By: John_Mauldin
The Soviet Union’s collapse ended the socialism vs. capitalism argument.
Semi-free markets spread through Eastern Europe. Collectivist economies everywhere began turning free. Capitalism seemingly won.
Even communist China adopted a form of free market capitalism. Although, as they say, it has “Chinese characteristics.”
With all its faults and problems, capitalism generated the greatest accumulation of wealth in human history. It has freed millions of people from abject poverty.
Wednesday, July 11, 2018
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril / Economics / Economic Theory
By: Dan_Amerman
Would you have appreciated a single number that could have given you a clear and unmistakable warning before the tech stock bubble collapsed? How about an unequivocal mathematical warning in 2006 that major financial trouble was on the way, well before the problems of 2007 and 2008?
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Sunday, June 17, 2018
The Corruption of Capitalism / Economics / Economic Theory
By: Harry_Dent
I call it “killing the golden goose.”David Stockman, a speaker at this year’s Irrational Economic Summit, calls it “the corruption of capitalism.”
Andrew O’Hehir, a contributor for Salon, recently interviewed Yanis Varoufakis about the story behind Greece’s financial crash. He was the prime minister during the height of the Greek crisis, elected in early 2015 in response to the Greece debt default crisis.
And in July of 2015, Varoufakis resigned after the ECB (European Central Bank) and IMF (International Monetary Fund) forced a bailout package that went against what he and his SYRIZA party had promised the Greek people.
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Wednesday, June 06, 2018
Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 / Economics / Economic Theory
By: F_F_Wiley
Have you ever lacked for information about America’s various debt burdens? Twenty-odd years ago, if you paid any attention to debt, you might have relied on original source data to stay current. But the times they are-a-changing, aren’t they? In today’s high-tech, data-rich world, anyone who follows financial news should know roughly where we stand with our borrowings. Whether you’re a mainstream media addict or a blog junkie, your daily dose includes more commentary than ever before on which types of borrowers are increasing their leverage and by how much.
For example, don’t bother to sit down and ready yourself before reading the following observations about debt ratios, they should come as no big surprise (but note that we’re comparing debt to the highest prior GDP reading, or peak GDP):
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Monday, May 21, 2018
5 Effects Of Currency Fluctuations On The Economy / Economics / Economic Theory
By: Submissions
Currency fluctuations are some of the most analyzed aspects of any economy. Slight changes in the value of a currency can send reverberations across the economy. In fact, some currency fluctuations levels can have drastic effects on the health of an economy. Markets like forex and other trading sectors are heavily reliant on how strong or weak a particular currency is. The strength of a currency can also determine how a particular country handles international trade. Indeed, five of the strongest currencies in the world are so influential in the world that many aspects of the global economy are almost tied to them. There are several effects of fluctuations of currencies. Below are some of the most important.
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Monday, February 05, 2018
The Meaning of Economic Philosophy / Economics / Economic Theory
By: Submissions
Dr. Gero Jenner writes:In ‘The Open Society and its Enemies’, Karl Popper strongly defended the position that major interventions in the economy, especially when ideologically motivated, are usually disastrous and should therefore be avoided. Popper wrote his famous work towards the end of the thirties. On the one hand, he saw the devastating effects of textbook-based economies, where the working masses were tied into an economic strait-jacket by a Politburo, on the other hand, Popper was well aware of the dangers of that kind of capitalism, which tended to place the interests of a few monopolists above those of the general population. Against such aberrations, Popper propagated what he called ’social engineering‘, namely, a model of small steps, where every previous economic intervention is painstakingly scrutinized in view of its effects before any further action is embarked upon. Popper seemed to regard the economy in the same way as a highly complex machinery which a layman cannot tackle without causing the greatest damage.
Tuesday, November 28, 2017
Why a Corporate Tax Cut Won’t Boost Economic Growth / Economics / Economic Theory
By: John_Mauldin
BY PATRICK WATSON : The House and Senate are considering tax legislation that will add $1.5 trillion to annual deficits over the next 10 years, according to their own numbers.
This is okay, we're told, because the tax cuts will stoke economic growth, delivering added tax revenue that offsets the rate reductions.
Note the bigger point here.
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Thursday, September 28, 2017
The Koyaanisqatsi Economy / Economics / Economic Theory
By: Raul_I_Meijer
The film Koyaanisqatsi was released in 1982. The title means ‘life out of balance’ in the language of the Hopi, a Native American tribe who live(d) mainly in what is now north-east Arizona. It is directed by Godfrey Reggio with music by Philip Glass and cinematography by Ron Fricke. There are no actors, and no dialogue. Philip Glass’s music underlies a series of film fragments that contrast the beauty of American nature with the noise and pollution mankind has added to it. Wikipedia:
Read full article... Read full article...The film consists primarily of slow motion and time-lapse footage of cities and many natural landscapes across the United States. The visual tone poem contains neither dialogue nor a vocalized narration: its tone is set by the juxtaposition of images and music. Reggio explained the lack of dialogue by stating “it’s not for lack of love of the language that these films have no words. It’s because, from my point of view, our language is in a state of vast humiliation. It no longer describes the world in which we live.”
Monday, July 17, 2017
Too Much Capital / Stock-Markets / Economic Theory
By: Submissions
Henri Schneider writes: Truisms and banalities: Investors must be able to assess the productivity of their capital. This is done by comparing returns to interest rates. But what, if all interest rates are rigged? What if they are artificially lower than they should be? Then, not only too much capital is invested, but it is invested in the wrong places. Even more pressing: what if there is simply too much capital in the financial system?
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Monday, July 17, 2017
Why Jobs Growth No Longer Induces Wage Growth in America / Economics / Economic Theory
By: Dan_Steinbock
Or The Eclipse of the Phillips Curve in AmericaWhile the Fed’s continued tightening may suppress growth in emerging economies, US labor market may not be as strong as recent reports suggest.
US experienced strong job growth in June, when the economy created 222,000 net new jobs, which exceeded analyst expectations. At the Federal Reserve, the jobs report boosted confidence US economy is on the track for new rate hikes in the fall.
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Thursday, February 09, 2017
Retroeconomics – Global Challenge for Economic Development / Economics / Economic Theory
By: Submissions
Vladimer Papava writes: In many and mostly poor countries, their economies have been using obsolete technologies. As a result, all of these countries do not have a real chance to be successful in any long-term economic growth. The usage of obsolete technologies by any company can create the illusion that this or that business is prosperous. At the level of international competition, however, it is obvious that these types of companies do not have any chance for success.
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