These are kinda long, but some of you might be in to it.
I'm a big fan of this guy, even though he has gotten the crap beat out of him the last 6 years for being too bearish. I think he has a better grasp on whats going on than most. I think he just couldn't make himself believe the Fed would actually keep doing what its been doing since 2009. In his defense, it is without historic precedence. Also, I believe he will be proven right in the next year or two.
https://www.youtube.com/watch?v=TYkCaUB1BQY
https://www.youtube.com/watch?v=wmUCjOjOeCo
Wab
I watched the first vid. Interesting. I plan to watch at least another piece or two by him. I do not know if I’ll end up agreeing with everything he might say. But he seemed for the most part to have a number of reasoned observations backed up by data that he had processed through the lenses of standard economic methodologies.
I should say that at first I thought that he was some type of economic public policy guy, but then I realized that he really did not seem to fit that mold. I then thought he was some kind of an industry sector or perhaps even a specific company investment advisor. I then waited to see if he was going to tell us about an upcoming special opportunity to purchase some Acme Corp limited availability Class D shares. Nope.
I guess he is some sort of an investment advisor with a focus on macro level economic issues.
Much of what he presented, to my ear, was a “Here is what is going on, some of it is a bit nuts if you ask me, but here is perhaps how you might want to think about it”.
BTW, starting a conference by stating that the purpose of finance should be to fund productive activity in the economy is probably going to get him labeled as a communist in some circles.
But let us move on.
His criticism of QE/QEII is not necessarily unique, and yes there is wide agreement that at some point monetary policy becomes in effect close to pointless. His suggestion that at levels above nominal 6% GDP, the effectiveness of QE drops off like crazy (and ends up boosting the stock market), is perhaps reasonable (I had always thought that economists who thought along these lines said that the number was closer to 3 – 4%, but I have a pretty poor memory on this sort of stuff).
I think every main stream economist believes that there are diminishing returns. There are disagreements as to the trigger points and the long term impact. A question that he didn’t address was in an environment where fiscal policy is an utter no go, what other choice is there?
I thought that his explanation of high corporate profit levels with low wage rates was perhaps his weakest point. I think he needed to go beyond an explanation in which he says that he thinks it has all been a result of unbalanced equilibrium forces working themselves out. (Am I mischaracterizing him here? Could be, listened to him over the screams of kids at the pool).
For example, I thought that within his chart of the 3 year change in government and personal savings compared to the numbers for 3 year growth in corporate profits, that there was what looked like a period of about 10 years that showed the exact opposite of what he was claiming. At least that is what it looked like to me.
Not to discount his reasoning behind his thoughts on high corporate profit levels with low wage rates, I think a reasonable explanation of what has been going on could include the following (and other) factors:
• The growth of monopolization within certain sectors
• Weakened unions
• The shrinking middle class
• Globalization
• The lack of effective regulation and oversight of the financial sector
• And etc. etc.
Going down to these levels may not be his thing. He did seem like a high level kind of guy.
I think that he was spot on when he called for more Gross Domestic Investment in order to generate real GDP growth. What I didn’t hear was what his views were on how to do that. Modifying monetary policy may be a prerequisite to any plan, but I think he should have explained himself on how to increase productive economic activity. After all, it is probably the main public policy issue that economists disagree on.
I am wondering if he avoids economically partisan topics that are only tangential to the main point he is trying to convey.
BTW: loved his point on the multiplier effect of the bank reserve requirement. Reminded me of a very old argument I had had as a kid. I had forgotten all about it.
