Extreme policies produce extreme attitudes among investors. Now the nearly six years of zero interest rate policies, accompanied by quantitative easing, that we have seen in most Western economies are producing such an extreme attitude – in the world’s bond markets. Bond investors’ appetites for high yields have grown so far that they are seeking […]

When I wrote two years ago that the Eurozone resembled the Hindenburg approaching the docking mast at Lakehurst, New Jersey, Euroskeptics cheered and only those committed to the worst features of Europhilia suggested that I had underestimated Europe’s capacity for recovery. Through gritted teeth, I am now forced to admit that the Europhiles were right, […]

This column is being written before final Indian election results are available, let alone a government being selected. However if exit polls are confirmed and Narenda Modi has won a majority that allows him to govern for five years, then he has potentially the most important job in the world. Let me explain why, and […]

Nobel Prize winning (1992) economist Gary Becker, who died last weekend, extended economic theory into areas such as racism, crime, and family formation in which it hadn’t been thought relevant. Critics, whether of religious or other persuasions, complained that Becker’s analysis dehumanized us by leaving out many other factors that were of equal or greater […]

It is becoming increasingly clear that size, in government and business, was a fetish of the early and middle 20th century, caused by the peculiar technological capabilities of that period. Humanity had gained access to enormous power sources, so production could be aggregated into enormous units, but we did not yet have the informational capabilities […]

For the last couple of decades, U.S. budgets have been prepared on a 10-year basis, with the Congressional Budget Office scoring the 10-year deficit, while the sustainability of social security and other entitlement programs is calculated on the basis of their deficit projected 75 years ahead. Politicians have learned to game this system, inventing new […]

Monetary economists around 2009-10 were sure of one thing: the Fed’s unprecedented creation of “narrow money” in the form of bank reserves would show up fairly quickly in a burst of inflation. Clearly, they were wrong; the Fed has created $2.7 trillion of bank reserves, increasing the monetary base by $3 trillion or 319% since […]

The American Enterprise Institute has now joined much of the Fed, Christine Lagarde of the IMF and the commentariat in warning of the imminence of deflation, and the dire consequences that would ensue from even a mild decline in prices. I frankly don’t believe a word of it. We are in uncharted waters of monetary […]

The Financial Times revealed this week that trades in index credit default swap options had managed to avoid being listed on exchanges, with all the transparency requirements that brings, instead being allowed to continue trading on an over-the-counter basis. The amount outstanding is relatively small in relation to the $25 trillion of CDS outstanding, but […]

Thomas Piketty’s “Capital in the Twenty First Century” has received rave reviews among the sort of commentators who are looking always for reasons to dump capitalism in the dustbin of history and resuscitate the Marxism they enjoyed in college (there are a LOT of these people). His central thesis is that if the return on […]