Cantillon Effects - Latest Commentary

Far too many commentators seem unable to decide whether to fret that we owe too much or that we are borrowing too little. They all seem to regard saving as a vice, not a virtue. Such confusions are symptomatic of a society uncertain of what it should believe in and in whom it should place its trust. Those at the head of that society believe only that THEY should maintain their place there and are willing to unleash dangerous forces – economic, political, and social – to try to do so.

While politicians anxiously check the shifting weather-vanes of public opinion and scientists squabble over facts as well as interpretations, central banks are resolutely doing what they do best - wildly exceeding their briefs and trying to drown all problems in a flood of newly-created money. As ever, the underconsumptionists worry that a lack of demand will usher in deflation, in spite of all such efforts. Some of us, however, worry more about what it will do to supply. Here, we explain why.

The MMT crowd want to give the government unlimited power to borrow and spend money; half their audience thinks this is great because -along with everyone else- it already owes so much money that it can't possibly allow interest rates ever to rise; and Kenneth Rogoff wants to PAY the state to borrow, not charge it for the privilege. Running the printing presses hard, behind the scenes, stands everyone's favourite open-handed uncle - Fed Chairman Jay Powell.

Should we be more worried about #Covid19 or about the response of the authorities to its outbreak? Is the media, once again, doing us a disservice in adopting an undifferentiated, car-crash approach to events? What does all this tell us about science and the role accorded to those calling themselves, 'scientists'?

Beguiled by Their Own Augury If the wizards who populate our central banks had wanted to ignite a further wave of speculation in an already overheated market, they certainly succeeded in that aim by holding out the promise of imminent ease. But can our Mickey get the buckets and brooms to behave again before his master returns to chide him?

We often talk of consumers as those 'driving the economy' or of representing its largest component. Official policy is usually aimed at stimulating as much consumption as possible, usually through forcing the interest rate lower in order to encourage borrowing. But does the concept make any sense and does that policy do more harm than good? Part 1 of 2.

We continue on from the first episode to look more closely at the difficulties which arise when the interest rate is not left to co-ordinate consumption and production through time and to direct the necessary capital formation as it is undertaken by entrepreneurs. We end with a summary of the main conclusions to be drawn.

In the latest 'Cantillon Effects', I take a non-too favourable look at two plainly interlinked economic canards: the concept of the Consumer-with-a-Capital-C and the circus that is MMT

Ray Dalio is currently popping up everywhere to tell us how to right the wrongs from which he imagines society is suffering. But, to the extent they are actually given more than the vaguest form, his thoughts express little more than the vanity of a man who fondly imagines his undoubted success in his own, narrow field of expertise gives him something useful to say on wider matters of concern.

The phrase on everyone's lips at the moment is 'yield curve' - largely for its supposedly unerring ability to predict a recession if not, as its most extreme devotees seem to imply, actually to cause one. But is that a valid interpretation of what is afoot in financial markets today and does that jibe with how the real economy is developing? Listen to hear our thoughts on the matter. You may well be surprised...

Here in the new Chinese Year of the Pig, we find ourselves surrounded by much madness, cultural, political, and - of course - financial. Old errors and past failures are being dusted off and burnished up, ready to be repeated. THIS time it will be different, we are told - but only if some of those pigs first learn to fly

MMT has recently enjoyed a sudden resurgence in popularity. but, like so many other systems which claim to reveal previously undiscovered truths, it turns out to be nothing more than a retread of a number of age-old fallacies, only appealing because it seems to promise the Provider State unlimited power to interfere in our lives. We discuss its failings here.