Big Picture: Central Bank balance sheet growth accelerates YTD: Now at $21.4 trillion

A new flood of liquidity is being unleashed. Where will it go? (below is from the Bloomberg article)

Meanwhile, while we were thinking about the election, the trade war had already begun.

From "US Steel Could Rise. . ." in Barron's this weekend. (The Mr. Longhi quoted is president of US Steel.)

"The-Policy-That-Must-Not-Be-Named" is finally unmasked.

It's "Monetization."  Japan has finally abandoned the pretense that central bank's printing of money to fund the government is a temporary measure designed to control the level of interest rates.  Will the markets find this candor "refreshing?"

from A6 in today's Wall Street Journal:

Shakespeare's take on the Fed's failure to raise rates

Thus conscience does make cowards of us all,

And thus the native hue of resolution

Is sicklied o'er with the pale cast of thought,

And enterprise of great pith and moment

With this regard their currents turn awry

And lose the name of action.




(Hamlet, Act III, Scene 1)

Net US international investment position continues down

Our net position is now -$7.3 trillion. Our national business model is broken, with too much consumption and not enough investment. What is worse, foreign flows are being used for even greater consumption. Present flows inward will need to be balanced with future flows outward. It is a formula for national impoverishment. Are we doomed? You be the judge.

The Economist, too, is living in a fantasy land: "The audacity of hope"

President Obama has rightly and repeatedly pointed out that anyone who believes the economy is not doing well is "living in a fantasy land."

The Economist has moved to this fantasy land. The current issue has a report on guaranteed incomes. ("Sighing for paradise to come") In it there is graph with the tongue-in-cheek title of "The audacity of hope." (That is also the title of Obama's 2006 book.) It shows that the median salaries of full-time workers in the US are basically unchanged since 2000 A.D. despite a 15% increase in GDP/capital. (Britain did better than the US in both GDP/capita and earnings.)

On top of that, of course, is the fact that fewer workers have full-time jobs and the numbers of those outside the workforce has grown considerably.



To misquote T.S. Eliot, "I'll show you malaise in a handful of dust." (I guess misquoting Eliot is one of the things people in a fantasy land do.)

"Trump's Great Economic Divide" (headline from the WSJ)

Today's "Ahead of the Tape" column in the WSJ mocks Trump's pessimistic view of the economy by contrasting his pessimism with the positive level of consumer sentiment. The journalist quips that the "gulf between scary headlines and current sentiment is 'yuge.'" Steven Russolillo, the journalist, provides a graph of the Michigan Index of Consumer Sentiment to illustrate his point that consumers are confident.

He should have shaded in the recession period and he would have noted that this is more of a coincident rather than a leading indicator. Here is the same graph with the recessions shaded.

(Also note that the journalist omitted the last data point, which turns down, so that his graph give the impression confidence is going up.)

In fact, one notices that sentiments tends to peak one year before a recession. . . But wait! The index peaked about a year ago! Does this mean we are now entering a recession? That we will know only in retrospect. In the meantime, we all should beware lest we let our politics cloud our economic analysis. (Remember Capt. Renaud's line about politics in Casablanca? "I have no conviction, if that's what you mean. I blow with the wind, and the prevailing wind happens to be from Vichy." He would have made a good economist, I think.)

My personal view is that our current economic setup is doomed, but that has little to do with either democrats or republicans.