Category Archive: 5) Global Macro

Income Inequality and the Decline of the Middle Class in Two Charts

These two charts of average incomes of U.S. households by quintile (bottom 20%, middle 60% (20%+20%+20%) and top 20%) have both good news and bad news. (Charts are from the non-partisan Congressional Budget Office -- CBO).

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The Accelerating Decay of the Middle Class

Ironically, their ample compensation allows them to avoid the poor-quality services they've designed for everyone below them. If we define middle class by the security of household income and what that income can buy rather than by an income level, what do we conclude? 

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What Tokyo Eurodollar Redistribution Really Means For ‘Green Shoots’

Last April, monetary officials in Japan were publicly contemplating ending asset purchases under QQE. This April, they are more quietly wondering what other financial assets they might have to buy just to keep it all going a little longer. I’d suggest something like the clouds passing over the islands or the ocean water surrounding them. Nobody would notice either way and it would be equally as effective.

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The Erosion of Everyday Life

Working hard and doing what you're told is no longer yielding the promised American Dream of security, agency and liberty. Volume One of Fernand Braudel's oft-recommended (by me) trilogy Civilization & Capitalism, 15th to 18th Century is titled The Structures of Everyday Life. The book describes how life slowly became better and freer as the roots of modern capitalism and liberty spread in western Europe, slowly destabilizing and obsoleting the...

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There Are Two Little Problems with “Taxing the Rich” to Pay for “Free Everything”

No super-wealthy individual or household is going to pay billions in additional taxes when $10 to $20 million will purchase political adjustments. The 2020 election cycle has begun, and a popular campaign promise is "free everything" paid for by new taxes on the super-wealthy. Who doesn't like free stuff? Who will vote for whomever offers them free stuff? No wonder it's a popular campaign promise.

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Globally Synchronized…

The economic sickness is predictably spreading. While unexpected in most of the world which still, somehow, depends on central banking forecasts, it really has been almost inevitable. From the very start, just the utterance of the word “decoupling” was the kiss of death.

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Durably Sideways

Next month, in the durable goods series, the Census Bureau will release the results of its annual benchmark changes. In May 2019, the agency will revise the seasonal adjustments going back to January 2002. Unadjusted data will not be, well, further adjusted.

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Push Them Hard Enough and the Productive Class Will Opt Out of Servitude

People love their big paychecks, but they also value their sanity. One of the most astonishing manifestations of disconnected-from-reality hubris is public authorities' sublime confidence that employers and entrepreneurs will continue starting and operating enterprises no matter how difficult and costly it becomes to keep the doors open, much less net a profit.

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The Feedback Loop of Doom: When Mobile Creatives and Capital Abandon Unaffordable, Dysfunctional Cities

When the 4% who generate the jobs and tax revenues have had enough and leave, the effects quickly impact the 64%. At the end of any trend, everyone's a true believer: this trend is so enduring, so broad-based, so based on unchanging fundamentals that it will never ever reverse.

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If “Getting Ahead” Depends on Asset Bubbles, It’s Not “Getting Ahead,” It’s Gambling

Given that the economy is now totally and completely dependent on inflating asset bubbles, it makes no sense to invest for the long-term. Beneath the endlessly hyped expansion in gross domestic product (GDP) of the past two decades, the economy has changed dramatically. The American Dream boils down to social and economic mobility, a.k.a. getting ahead through hard work, merit and wise investments in oneself and one's family.

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The Eurodollar, Unfortunately, Is What Is Rebalancing China’s Services Economy

If the “equation” CNY DOWN = BAD is valid, and it is, then what drives CNY downward in the first place? In conventional Economics, authorities command the currency to affect the level of exports. In reality, that’s not at all how it works. The eurodollar system of shadow money is almost purely calculated risk versus return.

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How Empires Fall: Moral Decay

There is a name for this institutionalized, commoditized fraud: moral decay. Moral decay is an interesting phenomenon: we spot it easily in our partisan-politics opponents and BAU (business as usual) government/private-sector dealings (are those $3,000 Pentagon hammers now $5,000 each or $10,000 each? It's hard to keep current...), and we're suitably indignant when non-partisan corruption is discovered in supposed meritocracies such as the college...

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America’s Forced Financial Flight: Fleeing Unaffordable and Dysfunctional Cities

The forced flight from unaffordable and dysfunctional urban regions is as yet a trickle, but watch what happens when a recession causes widespread layoffs in high-wage sectors. For hundreds of years, rural poverty has driven people to urban areas: cities offer paying work and abundant opportunities to get ahead, and these financial incentives have transformed the human populace from largely rural to largely urban in the developed world.

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China: Q1 growth beats expectations

The Chinese economy grew at a faster rate than expected in the first quarter as policy stimulus effects kick in.The National Bureau of Statistics of China published Q1 GDP figures along with some key economic indicators for March. The data generally surprised on the upside. While we had previously flagged the upside risk to our earlier GDP forecast following the rebound in PMIs and strong credit numbers, the latest data releases still surprised to...

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Business cycle could define Trump’s re-election chances

President Trump’s focus on getting re-elected in November 2020 may have implications for his economic policy choices.As we move closer to the 2020 presidential election, Trump has been blatantly leaning on the Federal Reserve to be more accommodative and has been trying to appoint nominees who share his preference for loose monetary policy to the Fed board.

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China’s Blowout IP, Frugal Stimulus, and Sinking Capex

It had been 55 months, nearly five years since China’s vast and troubled industrial sector had seen growth better than 8%. Not since the first sparks of the rising dollar, Euro$ #3’s worst, had Industrial Production been better than that mark. What used to be a floor had seemingly become an unbreakable ceiling over this past half a decade. According to Chinese estimates, IP in March 2019 was 8.5% more than it was in March 2018. That was far more...

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The Next Financial Crisis Won’t Be Caused by Fraud: This Time Will Be Different

Financial crises come in two flavors: fraud and credit-valuation over-reach.Fraud-based financial crises may differ in particulars, but they share many traits: perverse incentives are institutionalized; the perverse incentives reward figuring out how to evade oversight via fraud, embezzlement, masking risk, etc. which are soon commoditized; regulations are gutted by insider-funded lobbying; regulators fail to do their job in hopes of getting...

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Green Shoot or Domestic Stall?

According to revised figures, things were really looking up for US industry. For the month of April 2018, the Federal Reserve’s Diffusion Index (3-month) for Industrial Production hit 68.2. Like a lot of other sentiment indicators, this was the highest in so long it had to be something. For this particular index, it hadn’t seen better than 68 since way back in March 2010, back when the economy looked briefly like it might actually recover.

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Coloring One Green Shoot

China’s Passenger Car Association reported last week that retail sales of various vehicles totaled 1.78 million units in March 2019. The total was 12% less than the number of automobiles sold in March 2018. This matches the government’s data, both sets very clear as to when Chinese economic struggles accelerated: May 2018.

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No Fix for Recession: Without a Financial Crisis, There’s No Central Bank Policy Fix

There are no extreme "fixes" to secular declines in sales, profits, employment, tax revenues and asset prices. The saying "never let a crisis go to waste" embodies several truths worth pondering as the stock market nears new highs. One truth is that extreme policies that would raise objections in typical times can be swept into law in the "we have to do something" panic of a crisis.

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