• Tim Knight from...
    09/01/2014 - 12:24
    Although I never thought it was possible, it makes me angry to write this book review. I'm not angry because I don't like the book. On the contrary, this is the best economics book I've ever...

Nominal GDP

Tyler Durden's picture

Europe: Stagnation, Default, Or Devaluation





Last week’s Jackson Hole meeting helped to highlight a simple reality: unlike other parts of the world, the eurozone remains mired in a deflationary bust six years after the 2008 financial crisis. The only official solutions to this bust seem to be a) to print more money and b) to expand government debt. Nothing Mr Draghi said in his Jackson Hole speech changed this reality.

At this stage, the path of least resistance is for the eurozone, and especially France, to continue disappointing economically, for the euro to weaken, and for Europe to remain a source of, rather than a destination for, international capital.

 
Tyler Durden's picture

The Broken Links In The Fed's Chain Of Cause & Effect





The Federal Reserve’s prevailing view of the world seems to be that a) QE lowers interest rates, b) lower interest rates stimulate jobs and economic activity, c) the only risk from QE will be at the point when unemployment is low enough to trigger inflation, and d) the Fed can safely encourage years of yield-seeking speculation – of the same sort that produced the worst economic collapse since the Depression – on the belief that this time is different. From the foregoing discussion, it should be clear that this chain of cause and effect is a very mixed bag of fact and fiction.

 
Tyler Durden's picture

Scottish Independence 'Yes' Vote Is A "High Risk" Event, Citi Warns





A "Yes" vote for Scottish independence represents a "high risk" event according to Citi's Michael Saunders. With the so-called 'neverendum' now less than a month away, Citi continues to highlight three particular concerns if Scotland does vote for independence: Scotland’s relatively weak fiscal position, Scotland’s large banking system and uncertainties over the currency arrangements of an independent Scotland. The Scottish Government seems to be seeking a policy of "sterlingisation" - which even their economic advisors judge "is not likely to be a long-term solution." For now a "no" vote is most likely, however, even if the Scottish referendum does not pass, the UK political landscape is likely to remain in a state of flux.

 
Tyler Durden's picture

Today’s Mindless Rally: Its Jackson Hole, Stupid!





There is no reason rooted in the real world for today’s frothy stock market rally. In every single region of the planet, the post-crisis, central bank fueled expansion cycle - tepid as it was in the global aggregate - is faltering badly. So with the global expansion cycle faltering, profit ratios at all-time highs and PE multiples in the nose-bleed section of history - nearly 20X reported earnings for the S&P 500 - there is only one thing left for the Wall Street robots to do. Namely, vigorously buy the latest dip because the Fed has yet another new sheriff heading for Jackson Hole purportedly bearing dovish tidings. To wit, after 6 years of pinning money market rates to the economic floorboard at zero, Janet Yellen espies an economy still encumbered by “slack”, and will therefore be inclined to keep Wall Street gamblers in free money for a while longer.

 
Tyler Durden's picture

Japan’s Keynesian Demise: A Cautionary Tale For Our Times





The ragged Keynesian excuse that all will be well in Japan once the jump in the consumption tax from 5% to 8% is fully digested is false. Here’s the problem: this is just the beginning of an endless march upwards of Japan’s tax burden to close the yawning fiscal gap left after the current round of tax increases, and to finance its growing retirement colony. There is no possibility that Abenomics will result in “escape velocity” Japan style and that Japan can grow its way out of it enormous fiscal trap. Instead, nominal and real growth will remain pinned to the flatline owing to peak debt, soaring retirements, a shrinking tax base and a tax burden which will rise as far as the eye can see. Call that a Keynesian dystopia. It is a cautionary tale for our times. And Japan, unfortunately, is just patient zero.

 
Tyler Durden's picture

3 Things Worth Thinking About





The first half of this week has been very interesting from an economic, financial and geopolitical viewpoint. Despite what appears to be globally increasing risks, the financial markets have seemed relatively unfazed. Historically, such calm has always existed prior to the eventual storm. This week’s “3 Things” takes a look at some of the “rising risks” that we believe are being ignored which could potentially be harmful to individual's portfolios.

 
Tyler Durden's picture

There Goes Q2 GDP - Wholesale Inventories Miss By Most In 16 Months





Against expectations of a further rise in inventory build of 0.7%, wholesale inventories rose only 0.3% in June (the same pace as in May) missing by the most since February 2013. With GDP now basically an exercise in inventory expansion and contraction (Q2 inventory estimate amounte to 40% of GDP), this 'miss' offers little hope for the initial Q2 rebound to hold its exuberance. In addition, wholesale sales also missed (up only 0.2% against expectations of a 0.7% rise) with growth slowing for the 3rd month in a row.

 
Tyler Durden's picture

The Coming Slump





There is a growing certainty in the global economic outlook that is deeply alarming. The welfare-driven nations continue to impoverish their people by debauching their currencies. As Japan’s desperate monetary expansion now shows, far from improving her economic outlook, she is moving into a deepening slump, for which this article provides the explanation. Unfortunately we are all on the path to the same destructive process.

 
Tyler Durden's picture

China PMI Jumps To 2 Year Highs (Jobs Contract For 27 Months), Japan PMI Slips (Jobs Worst In 11 Months)





China's official manufacturing PMI beat expectations by the most since Nov 2013 and jumped to its highest since April 2012 - sure it did after all the forget-the-reforms liquidity, QE-lite, and local government spending dragged forward. Perhaps worryingly the steel industry saw domestic and export new orders crater (from 55.7 to 48.2 in July). The employment sub-index fell once again (now in contraction since May 2012) as large enterprises dominated the upbeat report (medium and small clinging to 50.1 PMIs). Japan's PMI dropped for the first time in 3 months from 50.8 to 50.5 with output contracting and payrolls only marginally positive (slowest since August 2013). And then to end the night, Markit/HSBC's China Manufacturing PMI drops from its Flash 52.0 to 51.7 - perfectly in line with the government's data.

 
Tyler Durden's picture

GDP Deja Vu Stunner: Over Half Of US Growth In The Past Year Is From Inventory Accumulation





As we showed in December of 2013, where the scramble to accumulate inventory in hopes that it will be sold, profitably, sooner or later to buyers either domestic or foreign, is most visible, is in the data from the past 4 quarters, or the trailing year starting in Q2 2013 and ending with the just released revised Q2 2014 number. The result is that of the $675 billion rise in nominal GDP in the past year, a whopping 52%, or over half, is due to nothing else but inventory hoarding.

 
Phoenix Capital Research's picture

Based on the Non-Massaged Data, the US is Back in Recession





One of the biggest games played by the bean counters in Washington in the US is the overstatement of GDP growth by understating inflation.

 
 
Tyler Durden's picture

China Manufacturing PMI Explodes To 18-Month High, Employment Drops 9th Straight Month





Having shown 11 awkward-to-explain charts of the Chinese economy, exposed the liquidity crisis that still lingers just under the surface, and exposed the "discrepancies that abound" in China's data, it was only right and proper in this new topsy-turvy normal that HSBC China Manufacturing PMI - after 8 months of missed expectations (but a very recent surge to the highest levels in 2014) - should smash expectations and surge to 52.0, its highest sicne Jan 2012 (and 2nd highest since the recovery began). Despite this exuberant data, employment fell for the 9th straight month.

 
Tyler Durden's picture

Krugman’s Latest Debt Denial: Why His Two Magic Numbers Don’t Cut It





Professor Krugman is at it again - conjuring fairy tales about a benign long-term fiscal outlook. Notwithstanding that the public debt has surged from 40% to 75% of GDP during the six short years since 2008, he claims there is no reason to fret and that there is no debt spiral anywhere in the future. In part that’s because the Keynesian priesthood has declared that interest rates have down-shifted on a permanent basis. Under a regime of even modest monetary normalization over the next quarter century, current fiscal policy will lead to interest rates that are far higher, not lower, than the growth rate of nominal income. So its time to put Greece right back into the front and center of the US fiscal picture.

 
Tyler Durden's picture

Chinese Premier Li Admits Central Planning May Not Be Optimal





In an odd admission of the possible fallibility of a centrally-planned economy, none other than Chinese Premier Li recently noted, "we should never assume that we few at the top have more insight or power but should try to mobilize the intelligence and creativity of the many thousands of our people so as to create unrivaled value." Perhaps the Federal Reserve would do well to listen. However, Li did not excuse himself from the need to spin how well things were going. On the heels of our 11 awkward Chinese fact charts, Li explains "the Chinese market is booming, the economy strong [sic]. Enterprises are the mainstay of the market." However, as Diapason Commodities' Sean Corrigan, when trying to confirm this 'fact', "discrepancies abound."

 
Tyler Durden's picture

Krugman: CBO Doesn't Know How To Read Its Own Report





Paul Krugman reads the latest long-term forecast from the US Congressional Budget Office (CBO) and he likes what he sees. Even though the chart below is the CBO’s projections for the growth of federal debt, described by CBO as "a path that would ultimately be unsustainable," Krugman nonetheless offers a rosy commentary...

 
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