Category Archives: Government

Credit Impulse

The credit impulse isn’t the sudden urge to borrow – it is the additional income and concomitant spending that results from an increase in aggregate debt. Spending capacity = net income + credit impulse. Credit impulse (annual) = current debt amount – year ago debt amount. Not complicated.

The credit impulse is how easy money creates economic expansion as economic entities – households, corporations, governments, etc. are able to spend more than they earn.

The downside is that, sooner or later, the entities reach the limit of their ability to borrow. The credit impulse disappears and the economy shrivels. Incomes diminish and defaults begin as entities can no longer service their debt. Credit becomes very difficult to obtain, lenders fail as capital losses mount and the economy accelerates downhill as the credit impulse goes negative as borrowers are unable to roll over their debt.

Let’er Rip, Potato Chip

Larry Kudlow, newly minted economic advisor, was on CNBC last night, advising that the Fed should “Let the economy rip.”

Larry, if you want to see what happens when a country monetizes its deficits, look south.

Oh Dear

Apparently President Trump has chosen Larry Kudlow as his top economic advisor. All I can say is ROFLOL.

If he wanted a TV personality, the least he could have done is choose one with brains, for example Kathleen Hays. Even Maria Bartiromo would have been a better choice. I can’t believe I wrote that, even if it is true.

Credit Impulse

US household debt ended the year at $13.15 billion, a y-o-y increase of $402 billion and a record. This means that about 2% of GDP came from the increase in household debt alone. It is likely that when corporate and government debt increases are taken into account that the economy is operating at a substantial loss.

Cohn Out! Yes!

NYT is reporting that Gary Cohn is out as Trump’s economic advisor. Thank goodness, the last thing the country needs is Goldman Sachs setting economic policy in Goldman Sachs’s interest.

The vampire squid just had a tentacle chopped off.

A Little Late

Maybe a few folks at the BIS now realize that the light at the end of the tunnel is, in fact, a train.

The previous analysis suggests that there is a prima facie case for monetary policy to pay closer attention to the financial cycle than in the past. We may have been underestimating the influence of benign disinflationary forces and overestimating the ability of monetary policy to fine-tune inflation, especially to push it up towards targets in the face of powerful headwinds. If so, we may also have been underestimating the collateral damage that such strategies may generate in terms of financial and macroeconomic stability over longer horizons, especially by amplifying the financial cycle.

Hunger Games

I believed, and still believe, that Trump was the only choice. But, I have to say, the man is an economic idiot.

There are no winners in trade wars. Everybody loses. Look up “comparative advantage,” one of the few ideas from economics which is both counter-intuitive and actually useful.

Then there is the bubble in which he seems to take pride. And p*ss*ing away money on the military. Oh well.


From USA Today:

An armed school deputy rushed to the Florida high school building where terrified students ran from a killer with an assault rifle, but then sat outside for about four minutes and never went inside.

The school resource deputy for Marjory Stoneman Douglas High School, Scot Peterson, was under investigation for his response to the shooting but then decided to resign his post, Broward County Sheriff Scott Israel said Thursday……..

Israel said surveillance footage captured Peterson responding to the building where the shooting was unfolding. He said the deputy got there within a minute and a half of when the gunfire started. He positioned himself outside the building but never went in, Israel said.

The shooting lasted a total of six minutes. Peterson sat outside the building for four of those minutes, Israel said. In the end, 17 people were killed.

Peterson, 54, started working for the Broward County Sheriff’s Office in 1985 and since 2009 has been a school resource officer at the high school, appointed to keep the school and its students safe. In 2016, his annual salary was more than $75,600.

Apparently Peterson will be eligible for full retirement benefits. This is why government does not keep your children safe. This is why government employees do not give a damn about you or your children – there is no accountability and their pay and benefits far exceed those of the private sector.

Fed Minutes

Another day, more blather from the Fed. Risk is “on” with a vengeance as the Fed continues to demonstrate its unwillingness to “take away the punch bowl” as Fed Chairman Martin put it.  Apparently there is no such thing, in their minds, as too much stimulus. We’ll see about that. In my view, a financial catastrophe is almost inevitable at this point. Overpriced stocks and the fear of inflation have always been a toxic mixture. Add in the overhang of aggregate debt somewhere in the neighborhood of 350-400% of GDP and you have a recipe for a protracted decline to well below fair value, unlike 1987’s brief shock.


I Spoke Too Soon

I thought the massive crush of the short VIX ETFs and serious losses for anyone short volatility would have discouraged the VIX sellers.

Well, no. They’re back, using VIX slams to pump the market today and yesterday. Sigh.

Why are we wasting money on a do-nothing SEC and CFTC who are allowing this kind of conduct?