economics

The growth rate has to be less than the discount rate for the equation to work, but an even tighter constraint is that the growth rate used has to be lower than the nominal growth rate of the economy, since no asset can have cash flows growing faster than that rate forever.

Transition to QT Framework: QT is about reversing QE’s excesses and restoring balance-sheet normalcy.

QT 1.0 mostly let the portfolio “run off” (without reinvestment) but was muted by Treasury issuance patterns.

QT 2.0 takes a more active role—it seeks not only to shrink the balance sheet but also to alter its composition by favoring short-term

But in any case, machines, inventions and discoveries increase real wages.

When most business cycle analysts address the economy’s overall performance, they focus on gross domestic product (GDP) and largely ignore aggregate profits. This is like assessing a firm’s health by looking at its sales but not at its bottom line. In fact, any comprehensive analysis of business cycle dynamics must consider aggregate profits. For

with electricity rose from less than 10 percent in 1935 to nearly 50 percent by 1945.

This positive impact of liquidity on term premia is channeled through the demand rather than the supply of bonds. This is because Treasuries represent ‘safe’ assets and declines in liquidity raise systemic risks sufficiently to trigger an increase in the demand for safety. Evidence their strong positive co-movement shown in the chart below. This

When deflation is a threat, however, this decoupling can last for several years.

Overall, I continue to view the US economy as being of two speeds. Demographic segments and industries that are on the receiving side of the large deficits are generally doing well. On the other hand, segments and industries that are more affected by the Fed’s tight monetary policy (such as housing and commercial real estate and younger or

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