• Trump’s working class sellout, tactical nuclear weapons, government shutdown, tax reform and immigration






    Since Donald Trump became president, his core economic agenda has been sidetracked repeatedly by so-called cultural issues. However, now the administration is stepping up its tax reform effort. Even so, other issues threaten to derail this agenda item too. Moreover, it’s not even clear we’re talking about tax reform here. Thoughts below

    Trump’s working class sellout, tactical nuclear weapons, government shutdown, tax reform and immigration
  • On the coming failure of Trump’s tax plan






    Recently I wrote that Donald Trump has failed to deliver any signs that tangible economic benefits are coming down the pike for his working class and blue collar base of support. It seems Trump has ‘sold out’ and is turning to corporate tax cuts at the expense of middle class tax relief. Some comments below






    Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)
  • The oil price cliff dive will end the prospect of double-barrelled tightening






    A pause is being considered at the Fed, even by hawkish FOMC members. The oil price crash now gathering steam makes this pause more likely. Maybe Bullard’s infamous low dot on the Fed’s Summary of Economic Projections is the right way to look at Fed policy.






    The oil price cliff dive will end the prospect of double-barrelled tightening
  • How Brexit makes Britain poorer, forcing Carney to stay his hand






    The risk in the UK is an inflationary recession. For now, Mark Carney is resisting a rate hike. But how long will the Bank of England hold out? And how long can British consumers keep spending if real wages are falling? Two things would ease this pressure. One is some sort of fiscal support for real wages. The second is the fall in oil prices. As in the US, I see oil prices as key.






    How Brexit makes Britain poorer, forcing Carney to stay his hand
  • Could the UK be headed for an inflationary recession?






    The Bank of England kept its key policy rate unchanged at a record low 0.25% . Three dissents show how a weak currency and rising inflation are making it harder to keep rates low. The worst case scenario is an inflationary recession, which would topple Theresa May.






    Could the UK be headed for an inflationary recession?
  • What are credit markets signalling about the US economy?






    The US economy has been very resilient during this post-crisis business cycle, as we are now into our ninth year of economic expansion. Soon we could hit a record for the length of an expansion. Yet, with that backdrop, 10-year Treasury yields were at 2.13% this morning – even as the Fed signals more hikes to come in 2017 as well as reverse QE. I think the bond market is signalling continued low growth and low inflation. Some thoughts below






    What are credit markets signalling about the US economy?
  • On the Fed’s pause due to dual-barrelled monetary tightening






    Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered waters of dual-barrelled tightening, with the attendant risks that entails. Some comments below






    On the Fed’s pause due to dual-barrelled monetary tightening
  • All politics are local: understanding Trump’s threats and misunderstanding Merkel’s disappointment






    What Angela Merkel was doing this past weekend when she spoke of the need for Europe to “take our fate into our own hands” was using an international issue for domestic purposes.






    All politics are local: understanding Trump’s threats and misunderstanding Merkel’s disappointment
  • The threat of an overheated German economy






    The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates and engaged in 60 billion Euros of QE to boot, overheating in Germany is a reasonable fear. Some thoughts below






    The threat of an overheated German economy
  • More Europe






    At the height of the European Sovereign Debt Crisis, German leader Angela Merkel was openly calling for ‘more Europe, not less’. With Emmanuel Macron elected to the Presidency of France on that platform, Merkel has perhaps her only chance to make good on that vision. First she needs to get re-elected though. But if she gets that far — and her party’s election win last night in Schleswig-Holstein suggests she will — she has to meet Macron with a reformer’s fervour or lose Europe to nationalism.






    More Europe

All Content

Hurricane Irma, jobless claims and economic growth






Irma, the devastating hurricane that hit Florida with its full force, was not as destructive as it could have been. But the impact on the economy, beginning with unemployment, has already been felt. As the Hurricane made its way toward the US mainland, damage estimates ratcheted up. But the ‘Bermuda High’ dampened the impact. Here’s how Bloomberg describes it: The […]

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Policy divergence revisited

Policy divergence revisited






Three years ago, the Fed had begun tightening and all other central banks were still on easy street. Now, we are at an inflection point where other central banks are likely to tighten more than the Fed. That’s negative for the US dollar and positive for longer duration US Treasuries.






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Trump’s working class sellout, tactical nuclear weapons, government shutdown, tax reform and immigration

Trump’s working class sellout, tactical nuclear weapons, government shutdown, tax reform and immigration






Since Donald Trump became president, his core economic agenda has been sidetracked repeatedly by so-called cultural issues. However, now the administration is stepping up its tax reform effort. Even so, other issues threaten to derail this agenda item too. Moreover, it’s not even clear we’re talking about tax reform here. Thoughts below






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Quick thoughts on the failure of Fed-engineered unemployment






I am a sceptic of thinking about low unemployment as a bad thing – which is what people who think about policy in terms of the Phillips curve do. Now a study by the Philly Fed is saying that the Phillips Curve is a poor forecasting tool. Will this have any meaningful impact on policy? Some thoughts below






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Republican presidential candidate Donald Trump speaks to supporters as he takes the stage for a campaign event in Dallas, Monday, Sept. 14, 2015. (AP Photo/LM Otero)

On the coming failure of Trump’s tax plan






Recently I wrote that Donald Trump has failed to deliver any signs that tangible economic benefits are coming down the pike for his working class and blue collar base of support. It seems Trump has ‘sold out’ and is turning to corporate tax cuts at the expense of middle class tax relief. Some comments below






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The failure of the Trump presidency






We are only seven months into Donald Trump’s presidency. And I think we can call it a failure. I’ll have a lot more to say on that momentarily. But I want to flag this as not being a dealbreaker for the US or global economy because people put too much emphasis on the political economy in Washington. But Donald Trump is failing.






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The limits of monetary policy in today’s fiat currency world

The limits of monetary policy in today’s fiat currency world






As the Federal Reserve meets at Jackson Hole this week, I thought now would be a good time to talk about the limits of monetary policy – and why monetary policy alone cannot restore robust growth. And as I write this I want to make clear the goal of policy and the assumptions I am making.






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Understanding what a neutral macro-economic policy looks like






This is going to be a quick follow-on to the last post on monetary policy as the only game in town. I feel like the obvious question that post doesn’t answer is this one: what other policy tools we should use? And I want to tee up that question with this post.






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Some thoughts on full employment and this asset-based economic recovery

Some thoughts on full employment and this asset-based economic recovery






I see that Dartmouth economics professor Danny Blanchflower is talking about slack in the US labour market because he believes the Fed is premature in assessing its full employment mandate as fulfilled. I have a few thoughts on this issue I want to flesh out below and the crux of my narrative revolves around the over-dependence on monetary policy as a policy lever.






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An anecdote on the German housing bubble

An anecdote on the German housing bubble






I don’t know if there is a German housing bubble or even whether there will be one. I do know that we hear a lot about it in the press – the result of zero, even negative, interest rates. So let me give you a little anecdote from my trip to Germany last week.






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How the Fed handles financial stability is key to avoiding a crisis

How the Fed handles financial stability is key to avoiding a crisis






I’ve got two objectives here. One is to talk about the Fed and the other is to discuss the evolution of the US economy. Most of what I want to say is upbeat, both on the Fed and the economy. And I’ll lead with that. I do have some doubts about the long-term though – and I want to give […]

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US economic growth still in the 2ish% channel

US economic growth still in the 2ish% channel






In the aftermath of the shale oil bust that sent the US economy to stall speed in 2015, growth has rebounded, but only to a sort of 2%ish level. Continued low inflation insures further low nominal GDP growth aka secular stagnation. But so far, this stagnation has not made the economy more susceptible to recession. Some brief thoughts below Here’s […]

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