Gross Domestic Product

The Source of Failure: We Optimize What We Measure

The problems we face cannot be fixed with policy tweaks and minor reforms. Yet policy tweaks and minor reforms are all we can manage when the pie is shrinking and every vested interest is fighting to maintain their share of the pie. Our failure stems from a much deeper problem: we optimize what we measure. If we measure the wrong things, and focus on measuring process rather than outcome, we end up with precisely what we have now: a set of perverse incentives that encourage self-destructive behaviors and policies.

Despite Depression, Greece Forced To Hike VAT, Add New Taxes

The IMF wants debt relief now, but Germany wants the IMF to hold off until Merkel wins reelection. Meanwhile, the Greek depression resumes. These tax hikes are insane. The key question remains: Is the IMF bluffing about debt relief or not?

Weekend Reading: Yellen’s Line In The Sand

The central bank already missed the “window of opportunity” for normalizing rates in a manner that doesn’t hamper the recovery. While the big news for the market was the release of the April 27th FOMC minutes which once again suggested the Federal Reserve may be on a path to hike rates sooner rather than later. The reality is simple, with the markets hovering on critical support, a Presidential election just around the corner and no real evidence of economic recovery, the likelihood of a rate hike in June is approaching zero.

Frontrunning: May 18

  • Stocks sag as U.S. rate rise expectations revive (Reuters)
  • Clinton, Sanders hit final stretch of nominating contest (Reuters)
  • Bernie Sanders Wins in Oregon, But He Needed Kentucky, Too (NBC)
  • Clinton less than 100 delegates from nomination (The Hill)
  • Trump needs 66 delegates to officially clinch nomination (The Hill)
  • Japan GDP Rebound Not Enough to Stave Off Stimulus (WSJ)

The Endgame

There is a growing fear in financial and monetary circles that there is something deeply wrong with the global economy. Publicly, officials and practitioners alike have become confused by policy failures, and privately, occasionally even downright pessimistic, at a loss to see a statist solution. It is hardly exaggerating to say there is a growing feeling of impending doom. In short, growing evidence of price inflation and stagnant production can be expected to materially increase the risk of a global banking and currency meltdown. The best escape-route is ownership of anything other than purely financial assets and fiat currency deposits. No wonder the price of gold, which is the soundest of moneys, appears to have entered a new bull market.

Central Banks And The Rise Of Extremism

Perhaps the world will have to wait it out to finally be graced with leaders who are willing to stand by their convictions and make hard, maybe even unpopular, choices. Such leaders might have to risk sacrificing everything political to be crowned the next true champions of conviction, giving us all a shot at a once again storied fate. Where does that leave us? Apparently angry. Very, very angry.

China Stops Trying To Fool The World; World Is Sorry

China is the latest in a growing line of “command and control” economies that have risen to prominence, captured the imagination of people who find free markets too messy for comfort, and then blown up when it turns out that dictators have no idea how to allocate capital.

Greek Parliament Passes Further Austerity Measures To Unlock €4BN Bailout Loan

After some pointless debate, Greece promised to do even more of what has not worked at all in the past 5 years just to access some more European "bailout" money, the bulk of which will promptly be used to repay (after some more posturing by the Eurogroup in the coming weeks) maturing debt, held by the ECB.

These 9 Charts Explain The Global Economic Slowdown (And Why Central Banks Can't Fix It)

GDP growth has only two basic components: growth in productivity and growth in the workforce size. That’s it. There are two and only two ways you can grow an economy: increase the (working-age) population or productivity. There is no magic fairy dust you can sprinkle on an economy to make it grow.. and the following rather disconcerting charts showing the continuing decline in productivity and major shifts in demographics that are worsening the situation.

No Wonder We're Poorer: Wages' Share Of GDP Has Fallen for 46 Years

The problem is that limiting financialization will implode the system. The status quo now depends on financialization for its profits and taxes, and so ripping the heart out of financial skims and scams will also rip the heart out of the entire status quo. And so 95% of us will continue to get poorer, no matter who's in office.