Post-Keynesian

In a post last week, I raised the possibility that the vaccines might not get the virus under control this winter. Since the markets still seem to be pricing in vaccine success, this could have implications for investors. How might we think this through in more depth? One way to do this is by looking at the Google Mobility Index and seeing if it is any good at explaining EPS growth in the S&P. Here I take an aggregate construction from the index that encompasses all of the...

Two weeks ago I wrote a piece for Newsweek outlining potential troubles in the junk bond market. I pointed out that there is a strong possibility that enormous junk bond issuance is floating companies that otherwise would have gone bankrupt due to the lockdown measures. Here is that piece: The Next Financial Crisis is Coming But that is not the only bubble on the horizon. The lockdowns and work-from-home appears to have driven investors pretty kooky because we also have what...

Ben Franklin was one the founding fathers of the United States. He participated in the constitutional convention. He was the first Postmaster General. He did experiments with electricity, when the Leyden jar was a new thing. There is a story about flying a kite in a thunderstorm. He also wrote about the wealth of nations: "Finally, there seem to be but three ways for a nation to acquire wealth. The first is by war, as the Romans did, in plundering their conquered neighbors. This is...

For the last year and a half the biggest sentiment driver in markets has undoutedly been COVID-19. This is perfectly reasonable as the virus is probably the biggest single driver of variables that matter in financial markets – from inflation expectations to earnings. Yet it has been striking that most financial analysts have been outsourcing their analysis of the trajectory of the virus to those in public health. In theory this is reasonable. Many are assuming that the public...

Figure 1: A Pattern Diagram1.0 Introduction Aside, perhaps from the above visualization, nothing novel is presented in this post. It follows an example presented by Freni (1991). I know of this example from problems 7.7 and 7.29 in Kurz and Salvadori (1995). The oddities of this example can be seen in an earlier and more complicated example from D'Agata (1983). This is an example of intensive rent. When the requirements for use are large enough, capitalists will use more than one process...

In my previous post, I laid out some issues with the methodology being used to explore the relationship between inflation and asset prices. One issue that I raised was with respect to the observation that inflation below 1% seemed to lead to lower stock market earnings. In the previous post I pointed out that this was likely misleading: it was unlikely that the low price growth itself was giving rise to such poor earnings; it was far more likely that this was mainly being driven...

Many today are examining the impact that inflation has on asset prices. One of the best papers on the topic is by Harvey et al and it is well worth a look. What I am going to write here does not refute these sorts of analyses, but I think it raises issues that at least serve to lower our confidence in the findings. The issues that I want to explore are as much methodological as they are empirical, but these two aspects can be approached simultaneously. When analysing equity...

[embedded content]John Eatwell On The Bomb Sraffa Planted At The Foundations Of EconomicsJames Galbraith on Dismal Economics, reviewing books by Mason Gaffney and Fred Harrison, Stephen Marglin, Alessandro Roncaglia, and Robert Skidelsky. Jane Gleeson-White, in the Guardian, on accounting, unpaid care work, and the biosphere. A blog post pointing out Bob Murphy's confusions and mistakes on the implications of the Cambridge Capital Controversy for the Austrian school. Compare and...

In what follows, I want to draw out some implications of an interesting post by Greg Obenshain at Verdad Capital. In the post, Obenshain laid out data showing a number of things about Treasury bonds. Most notably, that they are a great investment if you are worried about the prospect of a recession or depression – and this is so no matter at what starting yield you are investing. One of the exhibits Obenshain showed, however, did not get sufficient attention. I think that it may...

To me, this is an easy question. SNALT, for a capitalist economy, is: L = a0 (I - A)-1y The notation is from Luigi Pasinetti's Lectures on the Theory of Production. The idea can be empirically applied with data from national income and product accounts (NIPAs), using techniques explained in, for example, Ronald Miller and Peter Blair's Input-Output Analysis