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[27 Jun 2016 | No Comment | ]

Earlier this year, NHL hockey fans were asked to vote for the captains of the four teams to face off in this year’s new All-Star tourney. Three of the picks were players you’d expect: Jaromir Jagr from the Florida Panthers, Alex Ovechkin from the Washington Capitals, and Patrick Kane from the Chicago Blackhawks: True Gods of the Rink, who have scored hundreds of points.

But not the fourth. In a huge surprise, the fans gave the most votes to a long-time journeyman enforcer named John Scott. At age 33, earning the …

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[31 May 2016 | No Comment | ]

One of the recurring pessimistic themes of the past several years is that Greece is about to default on its debt. Now that Greece is negotiating again, this fear is back. Some wonder if a major European financial firm, like Deutsche Bank, will also fail.
A big problem with this theory is that Greece already defaulted on about half of its debt to private creditors in 2012, back when private European banks both owned a larger share of Greek debt and were more thinly capitalized. A great wave of bank defaults …

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[27 Apr 2016 | No Comment | ]

Almost twenty-five years ago, President Reagan went to the British House of Commons and said “freedom and democracy will leave Marxism and Leninism on the ash heap of history.” Reagan chose his words carefully, using a phrase – the ash heap of history – very similar to the one used by the Russian Communist revolutionary Leon Trotsky against his political enemies. Within a decade, the Berlin Wall was no more and neither was the Soviet Union.
Now it appears OPEC, another nemesis of the US from the prior century is heading …

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[20 Apr 2016 | No Comment | ]

Remember the recession of 2011, or 2014, or 2015?
Each of those years started out with either a contraction or anemic first quarter economic growth. But despite these slowdowns, the US economy didn’t fall into recession. Instead, it was just more Plow Horse growth.
Since the end of the recession in mid-2009, real GDP has grown at a 2.1% annual rate. The average annualized growth rate across 2011, 2014, and 2015? You guessed it: 2.1%. In other words, first quarter weakness was meaningless.

Keep this in mind when you hear the US barely …

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[10 Feb 2016 | No Comment | ]

The number one reason the US has a Plow Horse economy rather than a Race Horse economy is the growth in the size and scope of the federal government, which sits like a grossly overweight jockey atop an otherwise healthy thoroughbred.

After being limited in the 1980s under President Reagan and then in the 1990s in President Clinton’s first six years in office, it started creeping upward again.
At first, it didn’t seem like a big deal. The economy was booming in the late 1990s, and so the increase in spending was …

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[8 Jan 2016 | No Comment | ]

The Arab Spring is turning into an Islamic Winter, with some added cold wind, reminiscent of the Cold War – as Russia and Iran are seemingly aligned against a US-backed Saudi Arabia and Turkey. The intricacies of the religious, political, military, and historical events taking place are enough to give any normal person a headache. “Outrageously unstable,” is an understatement. Millions of refugees are voting with their feet.

To make matters worse, China is in trouble. We don’t expect a collapse, but central-planning always fails. Joseph Stiglitz, former World Bank Chief …

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[19 Nov 2015 | No Comment | ]

Over the past several years, we have battled one economic scare story after another, from the damage that commercial real estate was going to cause, to the double-dip recession that was supposed to happen when the “hidden inventory” of unsold homes finally came to market. We’ve thrown cold water on recession talk when the Federal Reserve decided to taper and end quantitative easing and when bad weather temporarily hit the data.
We’ve been optimists. Not wild-eyed optimists looking for unicorns and rainbows, but clear-eyed optimists forecasting a resilient Plow Horse economy.

Faced …

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[2 Nov 2015 | No Comment | ]

The most important economic report of the next couple of weeks is not the GDP report on Thursday, which, as we said last week, is likely to show mediocre real growth of 1.5%. Strip out inventories, trade, and government and “core” real GDP growth should be around 3.5%.

Instead, the most important report is the October employment data set for release on November 6. Data already released suggest that nonfarm payrolls expanded about 235,000 in October and the unemployment rate ticked down to 5%, the lowest level since 2008. With ISM …

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[25 Sep 2015 | No Comment | ]

Back in 2008, rather than fix mark-to-market accounting, Treasury Secretary Hank Paulsen, Federal Reserve Board Chair Ben Bernanke, and other members of the financial market crisis team, chose to use a government-funded bazooka. A $700 billion bank bailout named The Troubled Asset Relief Program, or TARP.

President Bush, who authorized this approach, later explained it by saying he “abandoned free market principles to save the free market.” That statement makes no sense. Either you believe in free markets, or you don’t. Violating a free market means it’s not free. More truthfully, …

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[11 Aug 2015 | No Comment | ]

Ever since Quantitative Easing began, a group of so-called Monetarist/Austrian thinkers have predicted “hyper-inflation” and the demise of the dollar as the world’s “reserve currency.”
In spite of the fact that gold has fallen and inflation remains low, scare stories about other countries dumping their Treasury securities, US interest rates skyrocketing, and a return of the trauma of 2008 proliferate. And, if that’s not enough, according to the pouting pundits of pessimism, the Federal Reserve won’t able to address the problem because long-term rates will be headed up, rather than down.

Now, …