Post-Keynesian

In Mark Twain's novels, Huckleberry Finn is just a kid in what you might think is the most despised group in society. His mother ran away, and his father, who rarely is home to look after him, is the town drunk. Huck does not go to school, dresses in rags, and often sleeps outside in some barrel down by the waterfront. But Huck is quite conscious that some hard-working adults are looked down on worse than him by respectable people. 'That's all right. Now, where you going to sleep?' 'In...

Recently I have been looking at whether inflation might be in the pipeline. The jury is still out on that, but caution would be wise given the current situation. That leads to a rather obvious question: what should investors do during an inflation? First off, if we are to be naive stock investors, how much does inflation impact stock market returns? We can see the impact in the following chart. But this chart simply does not capture the pain investors feel during proper...

I appeared on the Bullhouse podcast again to discuss some of the recent work I have done on inflation. I also talk about how the impact of COVID19 and the policy responses to it risk resulting in major labour shortages and a return to a 1970s-style inflationary regime. Podcast: Inflation and Labour Shortages

The Four Circuits of Capital Marx describes three circuits of capital in the opening chapters of Volume 2 of Capital. But when I draw a diagram, as above, a fourth circuit seems to be missing. So I have added the circuit of advanced capital. The circuit of advanced capital begins with commodities, consisting of means of production and labor power, in the hands of or under the direction of capitalists. They have purchased these commodities with monetary advances. The capitalists, at this...

In our last post we saw that private sector indices for used car prices and for rent prices were highly predictive of future changes in the corresponding CPI component indices. The next logical step is obvious: we should use this information to build an aggregate CPI index that factors in this forward-looking information to get a prediction of inflation over the next six months. In all honesty, I was a little reticent to do this. Not to put too fine a point on it, but it is a...

Back in early August, my old colleague James Montier and I released a White Paper on inflation. In it we argued that our baseline scenario was that we would see transitory inflation caused by the extreme supply shocks caused by the lockdowns. We drew an analogy to the end of rationing in Britain after WWII, where we saw temporary price increases in the markets for rationed goods. Further, we argued that any sustained inflation would require a wage-price spiral. That is, in order...

Figure 1: Convergence to a Pattern of Switch Points over the Axis for the Rate of Profits1.0 Introduction This post illustrates how to find fluke switch points. As usual, I proceed by example, in this case, as taken from my paper in Structural Change and Economic Dynamics. 2.0 Technoplogy In this example of a capitalist economy, two commodities, iron and corn, are produced. One process is known for producing iron. In the iron industry, workers use inputs of iron and corn to produce an...

Yesterday I appeared on the Bullhouse podcast with Kenna for a very interesting discussion about a wide range of financial and economic topics. We discussed a number of different topics. Some of these were as follows: Whether there is a property bubble in the US and internationally right now.The potential bubble in the junk bond market and its implications.Why the risks in the market for rental properties are idiosyncratic this time around.How real estate is now a financial...

In the last piece on detecting housing market bubbles, I an through some of the problems with using standard-scoring. Here I will provide two solutions; one complex, the other simple. But before we move forward with this, we must understand one other problem when it comes to determining whether a housing bubble is indeed a housing bubble. This problem is not, like standard-scoring, related to how we manipulate the data. Rather it is related to how we define a housing bubble itself....

In a recent piece in Newsweek that got some attention, I made the case that the United States is currently experiencing a housing bubble. The next logical question is obvious: are other countries? After all, the 2008 meltdown was a global crisis; the US was not alone in its housing bubble. In order to try to detect housing bubbles ideally we would like some sort of systematic framework that we can deploy. The problems with using this approach when it comes to hosuing bubbles,...