Given that delayed future pain I’ve been waiting even hoping for is finally arriving in the markets and economy I thought some of my friends and family might like to know to whom I look to for related news and analysis. My only claim to credibility is that I studied economics and worked in finance just long enough to come to terms with the absolute charade that flows from how government and academia believe markets work.
We live in a world rife with autocoprophagia.
YUM!
In my experience driven opinion, mainstream financial news is designed to drive investment activity, political ideology and confer status onto people who’ve studied the pseudoscience called economics at a few institutions of power, not as might be expected, to inform or educate. All the thinkers I look to in this space make efforts to incorporate banking, money and debt (which neoclassical economics ignores) and they do not believe in equilibrium which most powerfully enables mathematically based hypnotic trances on the public and civil service. After all, a little psychological equilibrium would be nice wouldn't it.
That said, there are some people actually trying to simply articulate and educate a wider audience on a model or models much closer to the world we actually live in. Here is my short list:
How The Economic Machine Works by Ray Dalio - Ray Dalio in my opinion is the best mixture of clear and accurate. Financially, he’s a made man who seems to be trying to give back before he leaves this world. The above is a great 30 min overview of how the financial world really works.
His recent analysis on the Fed and costs we will bear.
Stoic Finance - This news with clear and relatively more accurate explanations. The link is to a recent discussion of how US housing will fall over.
Epsilon Theory - These guys are brilliant (an advanced read generally) but they talk about all the technical, social and political underpinnings of all things finance. They emphasize the psychologically emergent meme spreading nature of investing trends.
A recent relevant excerpt that is the core of all current chaos:
So long as the academic Fed continues to use a set of essentially linear, monotonic models to understand the relationship between the price of money and real world economic behaviors, their predictions will be just as wrong in the hiking stage of ZIRP monetary policy as they were in the cutting stage.
The Fed will overestimate the impact of rate hikes on curtailing inflation in exactly the same way they overestimated the impact of rate cuts on stimulating inflation.
Will hiking rates off the near-zero line make a difference in economic behaviors? Oh yes! Just not the behaviors that the Fed (and the White House) expect.
Cutting rates from 4% to 0% did not spur real world inflationary behaviors, it spurred market world financialization behaviors.
What is financialization?
Financialization is profit margin growth without labor productivity growth.
That sounds like a small thing, but I tell you it is EVERYTHING.
Financialization is the smiley-face perversion of Smith’s invisible hand and Schumpeter’s creative destruction, where profit margin growth is both pulled forward from future real growth and pulled away from current economic risk-taking.
Financialization is tax and balance sheet arbitrage to leverage laws passed by bought-and-paid-for politicians.
Financialization is stock buybacks to sterilize stock-based comp awarded to entrenched management.
Financialization is the acquisition and burying of smaller competitors to create an insurmountable, anti-competitive moat of scale in every economic sector.
Financialization is the zombiefication of an economy and the oligarchification of a society.
What has the last decade-plus of Fed interest rate cuts and balance sheet expansion given us? Not stable prices with healthy 2% inflation expectations. LOL.
No, the last decade-plus of Fed monetary policy has given us this, the worst stretch of labor productivity growth in the history of the United States of America, not coincidentally occurring alongside the greatest stretch of financial asset appreciation in the history of the United States of America.
[mic drop, exit stage left. RUN!]
If you want to dig even deeper I recommend the books below - all are focused on debt:
David Graeber (5000 Years of Debt) - His research ends standard stories about the foundations of economic activity. Hint: the foundations are social relationships involving debt not so much barter. Debt is actually much more sophisticated than barter and exchange and has deep roots in moral behavior and psychology.
This Time Is Different: Eight Centuries of Financial Folly - Title Speaks for Itself
Elliott-- I very much enjoyed this piece. I'll buy a couple of the books you mentioned. Rob