Cullen Roche: Pragmatic Capitalism

Interest rates are one of the most important prices in the economy, but how are they determined and what is the mechanism by which they change? In this video we touch on the operational dynamics behind interest rate changes and how they filter through the economy. [embedded content] About Post Author ...

I often talk about the importance of understanding banking and the relationship between inside money and outside money. And a common theme in this topic is that the money multiplier concept isn’t quite right. In fact, the textbook treatment of this direct causal relationship is completely wrong. But if the money multiplier is a myth and banks don’t multiply their reserves and deposits then why do banks even need deposits? This new video answers one of the most common questions when...

I’m excited to share a new research paper with you all. It’s the first one I’ve published in 6 years and it’s one of the few things I’ve written that I believe deserves the formalities of a paper. It’s called “All Duration Investing” and what I’ve done in this paper is quantified the actual “durations” of all asset classes. What’s nice about this approach is that you can now structure different asset classes in specific time horizons using a financial planning foundation. This allows us...

A surprisingly controversial debate broke out in recent days when Joe Biden said there was no inflation. He was referring to the month over month reading which showed a slight decline in prices. The BLS measures inflation on a monthly basis and while the 12 month year over year comparison showed a 8.5% increase the monthly price was flat on a month over month basis. Twitter seemed especially argumentative about this point. I know, I know – it’s shocking to hear that people on Twitter...

Here are some things I think I am thinking about: 1) Inflation has peaked. This morning’s CPI report is more evidence that disinflation is going to become a more prolonged and entrenched trend in the coming years. I said back in January that I thought inflation had peaked and so far we’ve had falling rates of core CPI and PCE inflation since then. It’s still early and it’s not necessarily going to be a quick process because we have a good amount of upward pressure from some...

New episode of Three Minute Money here. Is the USA in a recession? While the media has traditionally referred to a recession as 2 quarters of negative GDP the White House and NBER disagree that the recent 2 quarter decline is consistent with a recession. In this video we explore the technical definition of a recession and the primary indicators that the NBER uses to define a recession. We also explore why this feels like a recession even if it might not technically be a recession. Useful...

Here are some things I think I am thinking about: 1) Are we in a recession?  Today’s GDP reading officially shows two quarters of negative GDP. This has been a traditional media measure of “recession”, but the NBER has always been pretty vague about what a recession is. But one thing they’re clear about is that they they do not consider two quarters of negative GDP to be a recession. Instead, they say a recession is when there’s been a significant decline in economic activity. What to make...

Here are some things I think I am thinking about: 1) The Money Multiplier Lives! Longtime readers are probably very tired of watching me try (unsuccessfully) to kill the money multiplier. I’ve written countless articles about it, a book with an entire section on it and I’ve also started posting short videos for people with no attention span (I know, that’s all of us now). So I was really sad to see it crop up again today in an article in the Financial Times by Sheila Bair who wrote:...

Here’s a new Three Minute Money episode. We’re still cranking through some basics, but this one needs reiterating because the money multiplier seems to be immortal. Ideas like “fractional reserve banking” and the Fed controlling the money supply through reserve creation still run rampant in economic and financial circles. This video goes into some detail on the mechanics and why it’s incorrect to think of money creation as starting with the Federal Reserve and being “multiplied” across the...

The most recent headline CPI came in at 9.1% so it might seem odd to think that the risk of disinflation and deflation is rising. But while the CPI is a rear-view looking indicator many forward looking indicators are starting to tell a very different story – a story of falling demand and falling prices. The economic and inflation story of the last 36 months is simple: We had a global pandemic that we responded to by printing $7 trillion while we also shutdown huge portions of the global...