Income Inequality, Taxation, and Redistribution. One of our favorite economic parables is the Fish Story, from Paul Zane Pilzer’s 1990 book, “Unlimited Wealth.” It is an excellent tool for thinking about wealth creation, inequality and redistribution.
No Recession on the Horizon. One by one, the pessimistic theories have been proven wrong. Yes, the US will eventually fall back into a recession. But we don’t see it happening this year or next, and probably not in 2021, either.
Another Fed Rate Cut on the Way. In our opinion, this rate cut is completely unnecessary. The unemployment rate is 3.5%, much lower than the 4.2% that Fed policymakers think it will average over the long run. Nominal GDP – real GDP growth plus inflation – is up 5.0% annualized in the past two years, well above the level of short-term rates. The M2 measure of the money supply is up 6.5% from a year ago, a healthy acceleration from the 3.4% increase the year before.
More Tepid GDP Growth in Q3. Given that the economy grew at a tepid 2.0% annual rate in Q2, we’re sure you’ll hear plenty of angst about slow growth. But we don’t believe these past quarters represent a permanent shift to slower growth.
Trade Clouds Parting. Trade disputes have been an ongoing soap opera since President Trump took office… But over the past few months, we think a trend toward a settlement of these disputes has emerged.
Labor Market Continues to Roar. In spite of all the fear-mongering about a recession, Friday’s employment report clearly showed we are not in an economic downturn. The best news in the report was that the unemployment rate fell to 3.5%, the lowest most Americans have seen in their lifetimes.