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.
Repo Turmoil. The jump in the overnight repo and federal funds rates was at the “tail” of the market. The reason most trading saw little impact is because there are $1.4 trillion of “excess reserves” in the banking system. So, contrary to much of the press coverage of this issue, the NY Fed repo operations were not due to a shortage of reserves.
Fear the Spending, Not the Debt. None of this means US fiscal policy is in a good place; it’s just that the debt is manageable, we’re not going bankrupt. The real fiscal problem is the level of spending and the need to fix entitlements: Social Security, Medicare, Medicaid, and “Obamacare.” …The problem is that out of control spending gradually erodes the character of the American people. It pushes citizens toward dependence on government checks for their income, rather than their own efforts. In a democracy, we want our fellow citizens to know the value of hard work, shrewd investment, and entrepreneurship
We’re All Keynesians Now. Thanks to these supply-side policies, the U.S. does not face a recession. New technology is continuing to lower costs, increase profit margins, and boost earnings.
Rorschach Economics. These tests come to mind because lately, three dominant types of economic thought seem to analyze every data point and come to conclusions that always support their particular interpretation of the US economy.