economics

When commodities are weak, the US Dollar is strong as producer economies underperform. They then set interest rates lower, and lose capital to the US safe haven. US Dollar based borrowing in these countries will sometimes precipitate a crisis at the same time as a strengthening US Dollar makes it harder to repay loans.

On the one hand, equity markets benefit from higher-than-expected inflation via nominal GDP, but on the other, they also suffer from higher-than-expected costs. This combination of features is often what leads equities to look like a real growth asset, i.e., one that benefits from real growth conditions rather than nominal ones. While this serves

Two Economies, Not One

As I have written in previous posts, the are two economies, not one. One is the Flow Economy that produces goods and services. The other is the Balance Sheet Economy that stores wealth

Processes and values define how resources—many of which can be bought and sold, hired and fired—are combined to create value.

Where they are wrong is it’s not the low interest rates in themselves that have caused high asset prices. It’s the low volatility environment engineered by the government’s promise to do whatever is required. Low rates and high inflation would hurt asset prices. Low rates and deflation would hurt asset prices. It’s the unstable economic state

Back during the March 2020 sharp stock market crash, investors initially fled into bonds as one would expect in a risk-off crisis, meaning that bond yields went down and bond prices went up. But then as the dollar index spiked, the crisis became bad enough that there became a large number of forced sellers of bonds in order to get dollars and

Their impact on trade is not directly though relative price changes but rather indirectly by changing the relationship between consumption and GDP.

In April, U.S. Treasury Secretary Janet Yellen warned that China’s overinvestment in steel, electric vehicles, and many other goods was threatening to cause “economic dislocation” around the globe. “China is now simply too large for the rest of the world to absorb this enormous capacity,” Yellen said.

the men who can manage men manage the men who can manage only things, and the men who can manage money manage all.”