Inflation

Posted on 16 July 2018 by Erik Hare | 4 Comments

In 1981, America stood at a genuine crossroads of the Postwar era. It seemed as though everything had been floundering for nearly a decade. Watergate, oil price shocks, and inflation were eating away at the faith and the paychecks of American workers. Millions of them had entered the workforce as Baby Boomers came of age, only to find that working life was no longer a ticket to any kind of American Dream.

Into this rode a hero as if on horseback. The assault on runaway inflation had been orchestrated since 1979, but it was about to come to full fruition. No, that hero wasn’t Ronald Reagan, it was Federal Reserve Chairman Paul Volcker. Interest rates rose to 21%, the highest the Fed has ever seen. It worked. Volcker would eventually be mythologized heavily for his role in killing inflation once and for all.

It’s an important story because inflation, the villain of the 1970s, is definitely back.

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Trade War Without Ammo

Posted on 11 July 2018 by Erik Hare | 9 Comments

The trade war is definitely on, no matter how Wall Street wants to deny it. Serious investors have downplayed recent events as part of a grand strategy, a negotiating tool that will all work out in the end. The reality, that there isn’t really a good strategy in place here but simply petty tactics, has not sunk in yet, at least in America. But the rest of the world knows better.

For the purposes of this discussion, the European Union will be diminished to Germany. After all, this is the economic engine that powers the continent right now, and Merkel’s leadership is critical. Where is Germany going? The long and short of it, the strategic and the tactical, is to the east. This response is proof enough that there is no US strategy which makes any sense.

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When Economics Fails

Posted on 4 June 2018 by Erik Hare | 2 Comments

I have been working on this, now what feels like a year overdue. Look for more this week.

Economics is nothing more nor less than the study of the primary way in which people connect with society and get on with their lives.

In everyday life, you may interact with a few people – family, colleagues, and friends. But through the process of eating and paying the mortgage you interact, at some distance, with hundreds more. Because this interaction is entirely through something called “money,” a way of keeping score, it’s very tempting to look at it entirely through numbers. The dizzying details of tens of millions of exchanges every day makes a top-view in bulk the most desired method of analyzing how things are going.

Yet this process has proven wrong over and over again. The failure of economics, particularly macro-economics, is the primary reason why the only true study of an economy has to be a People’s Economics.

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US vs The World

Posted on 1 June 2018 by Erik Hare | Leave a comment

The Bureau of Labor Statistics (BLS) announced the addition of 223k jobs in May, bringing the unemployment rate down to 3.8 percent. Labor markets are tighter than they have been since the Managed Depression started in 2000, and there is upward pressure on wages. What could possibly screw it all up?

How about a global trade war pitting the US against every other nation on the planet?

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Unlimited Credit

Posted on 23 May 2018 by Erik Hare | Leave a comment

This post from November 2015 is becoming more important as the federal deficit ratchets up and private credit is turning back up. I am leaving in the references to Sanders and progressive counters because they may well be current again.

If you’re like most people, you probably think that you can never have too much access to credit. After all, you never know what might go horribly wrong or when an opportunity to really follow your dream might come up. A little scratch ready in the background might be the difference between the good life and something much less.

Then again, a lot of credit has a corrosive effect. In a world saturated with borrowing everything is judged against the expected return if the money was simply loaned out at market rates. It seems reasonable that where a little credit is a good thing a lot of credit, defining everything in the world, is the biggest enemy of both long-term thinking and a society looking to maximize happiness and human potential.

Logic says that where a little credit is good a lot could be bad, meaning there is an optimal point. Where is that? Where are we with respect to a good level of credit? It turns out that train left the station a very long time ago – and this may explain a lot of the problems in this economy.

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