Cullen Roche: Pragmatic Capitalism

Deutsche Bank put out an imprecise piece of research saying that higher debt levels mean higher government interest payments. This isn’t really true because the government can technically set its interest rates at whatever it wants. For instance, there was nothing stopping the Fed from keeping rates at 0% forever.¹ What DB was really implying was that there is a direct connection between debt and inflation (which interest rates are primarily a function of). But this is not really a good...

Someone emailed me with a very good question yesterday: “Did we really go through a once-in-a-lifetime Great Recession in 2008, or is the global economy overleveraged to an even greater extent, just in different ways?” My basic view of the Great Financial Crisis is that is was not unique in that it was a debt crisis, it was unique in that it was a debt crisis attached to such a significant household asset. Back in the old days we used to have regular panics or Depressions. The reason for...

The main goal of this website over the years has been to search for an operationally sound and empirically supported perspective of how the monetary system works. I’ve debunked tons of myths in the process of this search, but the inflation truthers have been hard to convince for some reason. Strangely, there are still people out there who believe that the BLS lies about inflation stats and that all the data is manipulated. But I have some hard truths for the inflation truthers. Hard truth...

Everyone deserves second chances in life. And everyone is a work in progress. Those are the big lessons for me after watching Tiger Woods win The Masters today. It took me a long time to learn to like golf. It’s a frustrating game that requires a terrible amount of patience. But as I get older it dawns on me – golf is a lot like life in that you spend huge amounts of time waiting to become average at something only to get glimmers of hope bunched in with persistent disappointments. And...

Hyman Minsky’s Financial Instability Hypothesis (FIH) has been an influential component of how I think of the financial markets and the economy. The FIH, in a nutshell, says that capitalist economies will, at times, deviate from an equilibrium into substantial inflations and deflations. In other words, booms can beget booms which can beget busts which beget busts. This view, that booms lead to busts, has garnered renewed interest in the wake of the GFC where a housing boom clearly led to a...

Due to high demand I am going to bring back the Pragmatic Capitalism discussion forum. Many of you know I’ve had problems with forums and comments sections in the past and I’ve tried to move commentary to Twitter mostly, but I have to be honest – Twitter has increasingly devolved into an anonymous argument spewing mess. While it has valuable features I feel like it’s hard to maintain a continuous and useful dialogue with people. So, let’s try this again. The new Asgaros Forum on WordPress...

I joined the great Joe Weisenthal and Tracy Alloway on Bloomberg’s Odd Lots Podcast to discuss MMT. We covered my journey learning MMT during the financial crisis, the good in MMT and why I’ve become more critical of it over the years. Overall I think it’s a really balanced and objective discussion. I hope you enjoy it.

Here are some things I think I am thinking about: 1) Ahhhh, the yield curve inverted again!  There have been lots of scary articles about how the yield curve is inverting and that that means recession because, well, yield curve inversions pretty much always lead recessions. I wrote about this a few years back and my conclusions were simple: An inverted curve usually leads by 18-24 months so you have quite a long time to be worried, or, um, not worry. According to the Cleveland Fed today’s...

To The Senators of the United States of America: This letter will be a swift and thorough explanation for why voting NO on Stephen Moore should be one of the easiest decisions you have ever made. Mr. Moore is a well known TV pundit and political commentator. We should be clear – despite often being referred to as an “economist” Mr. Moore is not, in fact, a PhD holding economist. And his basic misunderstanding of economics has been on consistent display over the last 30+ years. His...

NB – About 10 years ago I wrote an MMT primer after first being introduced to the theory. I initially thought the theory was coherent and operationally sound, but it turns out that I was wrong. In fact, my primer wasn’t a complete primer because MMT is MUCH more complex than I initially thought (and also much more wrong than I initially thought).  Over the course of those 10 years I still haven’t seen a succinct primer so there is still tons of confusion about the theory. In fact, almost...