Tag Archive: GDP

The Dollar-driven Cage Match: Xi vs Li in China With Nowhere Else To Go

China’s growing troubles go way back long before trade wars ever showed up. It was Euro$ #2 that set this course in motion, and then Euro$ #3 which proved the country’s helplessness. It proved it not just to anyone willing to honestly evaluate the situation, it also established the danger to one key faction of Chinese officials.

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Motte and Bailey Fallacy, Report 13 Oct

This week, we will delve into something really abstract. Not like monetary economics, which is so simple even a caveman can do it. We refer to a clever rhetorical trick. It’s when someone makes a broad and important assertion, in very general terms. But when challenged, the assertion is switched for one that is entirely uncontroversial but also narrow and unimportant.

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GDP Profits Hold The Answers To All Questions

Revisions to second quarter GDP were exceedingly small. The BEA reduced the estimate by a little less than $800 million out of nearly $20 trillion (seasonally-adjusted annual rate). The growth rate therefore declined from 2.03502% (continuously compounded annual rate) to 2.01824%.

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The Fake Economy, Report 21 Jul

Folks in the liberty movement often say that the economy is fake. But this does not persuade anyone. It’s just preaching to the choir! We hope that this series on GDP provides more effective ammunition to argue with the Left-Right-Wall-Street-Main-Street-Capitalists-Socialists.

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More Squeeze, Less Juice, Report 7 Jul

We have been writing on the flaws in GDP: that it is no measure of the economy, because it looks only at cash and not the balance sheet, and that there are positive feedback loops. “OK, Mr. Smarty Pants,” you’re thinking (yes, we know you’re thinking this), “if GDP is not a good measure of the economy, then what is?!”

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GDP Begets More GDP (Positive Feedback), Report 30 June

Last week, we discussed the fundamental flaw in GDP. GDP is a perfect tool for central planning tools. But for measuring the economy, not so much. This is because it looks only at cash revenues. It does not look at the balance sheet. It does not take into account capital consumption or debt accumulation. Any Keynesian fool can add to GDP by borrowing to spend. But that is not economic growth.

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What Gets Measures Gets Improved, Report 23 June

Let’s start with Frederic Bastiat’s 170-year old parable of the broken window. A shopkeeper has a broken window. The shopkeeper is, of course, upset at the loss of six francs (0.06oz gold, or about $75). Bastiat discusses a then-popular facile argument: the glass guy is making money (to which all we can say is, “plus ça change, plus c’est la même chose”).

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More What’s Behind Yield Curve: Now Two Straight Negative Quarters For Corporate Profit

The Bureau of Economic Analysis (BEA) piled on more bad news to the otherwise pleasing GDP headline for the first quarter. In its first revision to the preliminary estimate, the government agency said output advanced just a little less than first thought. This wasn’t actually the substance of their message.

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Not Buying The New Stimulus

What just happened in Europe? The short answer is T-LTRO. The ECB is getting back to being “accommodative” again. This isn’t what was supposed to be happening at this point in time. Quite the contrary, Europe’s central bank had been expecting to end all its programs and begin normalizing interest rates.

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Is Capital Creation Beating Capital Consumption? Report 3 Mar

We have written numerous articles about capital consumption. Our monetary system has a falling interest rate, which causes both capital churn and conversion of one party’s wealth into another’s income. It also has too-low interest, which encourages borrowing to consume (which, as everyone knows, adds to Gross Domestic Product—GDP).

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It’s Not That There Might Be One, It’s That There Might Be Another One

It was a tense exchange. When even politicians can sense that there’s trouble brewing, there really is trouble brewing. Typically the last to figure these things out, if parliamentarians are up in arms it already isn’t good, to put it mildly. Well, not quite the last to know, there are always central bankers faithfully pulling up the rear of recognizing disappointing reality.

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China’s Eurodollar Story Reaches Its Final Chapters

Imagine yourself as a rural Chinese farmer. Even the term “farmer” makes it sound better than it really is. This is a life out of the 19th century, subsistence at best the daily struggle just to survive. Flourishing is a dream.

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Insight Japan

As I wrote yesterday, “In the West, consumer prices overall are pushed around by oil. In the East, by food.” In neither case is inflation buoyed by “money printing.” Central banks both West and East are doing things, of course, but none of them amount to increasing the effective supply of money. Failure of inflation, more so economy, the predictable cost.

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Living In The Present

It’s that time of year again, time to cast the runes, consult the iChing, shake the Magic Eight Ball and read the tea leaves. What will happen in 2019? Will it be as bad as 2018 when positive returns were hard to come by, as rare as affordable health care or Miami Dolphin playoff games? Will China’s economy succumb to the pressure of US tariffs and make a deal?

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‘Paris’ Technocrats Face Another Drop

How quickly things change. Only a few days ago, a fuel tax in France was blamed for widespread rioting. Today, Emmanuel Macron’s government under siege threatens to break its fiscal budget. Having given up on gasoline and diesel, the French government now promises wage increases and tax cuts.

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Harmful Modern Myths And Legends

Loreley Rock near Sankt Goarshausen sits at a narrow curve on the Rhine River in Germany. The shape of the bluff produces a faint echo in the wind, supposedly the last whispers of a beautiful maiden who threw herself from it in despair once spurned by her paramour. She was transformed into a siren, legend says, a tantalizing wail which cries out and lures fishermen and tradesmen on the great river to their death.

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Illicit Arbitrage Cut by Tax Cuts and Jobs Act, Report 3 Sep 2018

This week, we are back to our ongoing series on capital destruction. Let’s consider the simple transaction of issuing a bond. Party X sells a bond to Party Y. We will first offer something entirely uncontroversial. If the interest rate rises after Y buys the bond, then Y takes a loss. Or if the interest rate falls, then Y makes a capital gain. This is simply saying that the bond price moves inverse to the interest rate.

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‘Mispriced’ Bonds Are Everywhere

The US yield curve isn’t the only one on the precipice. There are any number of them that are getting attention for all the wrong reasons. At least those rationalizations provided by mainstream Economists and the central bankers they parrot. As noted yesterday, the UST 2s10s is now the most requested data out of FRED. It’s not just that the UST curve is askew, it’s more important given how many of them are.

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Global PMI’s Hang In There And That’s The Bad News

At this particular juncture eight months into 2018, the only thing that will help is abrupt and serious acceleration. On this side of May 29, it is way past time for it to get real. The global economy either synchronizes in a major, unambiguous breakout or markets retrench even more.

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