<![CDATA[Hedgehogs.net: '' related content]]> http://www.hedgehogs.net/tag/economic+theories?view=rss http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11549345/richmond-fed-manufacturing-slowed-in-september Mon, 28 Sep 2015 06:54:49 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11549345/richmond-fed-manufacturing-slowed-in-september <![CDATA[Richmond Fed: Manufacturing Slowed in September]]> Today the Richmond Fed Manufacturing Composite Index dropped 5 points -5 from last month's 0. Investing.com had forecast an increase to 4. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 2.5, still indicating expansion.

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11547176/what-to-do-when-the-natural-rate-of-interest-declines Sun, 20 Sep 2015 21:22:23 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11547176/what-to-do-when-the-natural-rate-of-interest-declines <![CDATA[What to do when the natural rate of interest declines]]> Increase the inflation target, according to this new paper, which uses the dynamic model of aggregate demand and aggregate supply from my favorite intermediate macroeconomics textbook.

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11547176
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11541870/a-career-in-economics Sun, 06 Sep 2015 02:41:43 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11541870/a-career-in-economics <![CDATA[A Career in Economics]]>

A career in Economics...it's much more than you think from American Economic Association on Vimeo.

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11541870
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11541440/fed-apologist-ritholtz-interviews-fed-apologist-mcculley Sun, 06 Sep 2015 01:23:48 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11541440/fed-apologist-ritholtz-interviews-fed-apologist-mcculley <![CDATA[Fed Apologist Ritholtz Interviews Fed Apologist McCulley]]>
The Podcast is over two hours long, so let's just go with Ritholtz's brief summary: McCulley Demands Apology on Behalf of the Fed.
McCulley noted those who claimed QE and ZIRP were going to cause inflation and the collapse of the dollar were totally wrong, and he demanded these critics of the Federal Reserve owe former Ben Bernanke an apology. Had the Fed Chief listened to them, we would have found ourselves in a modern day depression.

He is leery of those who believe the Government and Federal Reserve should have let the crisis run its course on its own, with zero interventions. He is especially harsh on the Austerians, whom he said made the recovery weaker than it need be by thwarting traditional Keynesian stimulus.

The full podcast is available on iTunes, SoundCloud and on Bloomberg.
Rebuttal

In a blend of a monetarist and Keynesian thinking, McCulley supports Fed policies of QE and is "especially harsh on the Austerians, whom he said made the recovery weaker than it need be by thwarting traditional Keynesian stimulus."

For starters, I dispute the notion that without QE and intervention that "we would have found ourselves in a modern day depression" as Ritholtz maintains. Ritholtz's claim is a poorly-formed hypothesis presented as fact.

Yes, it's true that many in the Austrian camp predicted a dollar crash and high inflation. But I am in the Austrian camp and debt deflation has been my model, and still is my model.

As for an apology, what about an apology from the Fed for blowing serial bubble after bubble of increasing amplitude?

It's inane to demand an apology from those who warned in advance, and correctly so, of the housing bubble and subsequent crash.

In a twist of irony, McCulley gloats over the alleged lack of inflation, but it's pretty clear he has his blinders on as to what inflation is and ways it can be spotted. In the case of Fed policy, inflation did not manifest itself in the CPI, but rather in asset bubbles, again and again.

Challenge to Keynesians

Only Keynesian and Monetarist fools (there is no more polite word), believe a low CPI is a big concern.

I repeat my Challenge to Keynesians "Prove Rising Prices Provide an Overall Economic Benefit".

Consumer Price Deflation NOT Damaging

Even the BIS has concluded that routine consumer price deflation is no threat. For details, please see Historical Perspective on CPI Deflations: How Damaging are They?

Income Inequality and Leverage

China and the emerging markets are imploding right now. Leverage is as high as ever. Fed policy induced corporations to go into debt to buy back their own shares at absurd prices.

Janet Yellen pisses and moans about income inequality, as does Ritholtz. Both are blind to the fact the Fed is the direct sponsor of it all.

Unfounded Gloat

This Keynesian gloat about the Fed saving the world is laughable because the final chapter has not been written. Assets are arguably as overpriced now as they were in 2000, and 2007. As with Japan, another lost decade in the US is likely.

Demanding an apology on behalf of the Fed is like demanding an apology on behalf of a doctor who cuts off the wrong leg of a cancerous patient if the doctor gets it right the second time.

It's the Fed that owes us all an apology.

Barry, Paul, where the hell is that apology?

But Keynesians and Monetarists don't apologize. They just demand more and more stimulus and debt in the inane belief the cure for a debt problem is more spending and more debt.

The average 7th grader can easily see the fallacies of such nonsense.

Unfortunately, as students progress through high school and college, repeated brainwashing by professors in academic wonderland about the alleged benefits of easy money has warped a lot of minds, in this case, the minds of the interviewer and the interviewee.

Mike "Mish" Shedlock ]]>
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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11540564/fed-apologist-ritholtz-interviews-fed-apologist-mcculley Sat, 05 Sep 2015 22:23:22 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11540564/fed-apologist-ritholtz-interviews-fed-apologist-mcculley <![CDATA[Fed Apologist Ritholtz Interviews Fed Apologist McCulley]]> In a blend of a monetarist and Keynesian thinking, McCulley supports Fed policies of QE and is "especially harsh on the Austerians, whom he said made the recovery weaker than it need be by thwarting traditional Keynesian stimulus."

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11540564
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11540246/september-is-on-the-table-spy-dji-ixic-usd-tlt-tlo Sat, 05 Sep 2015 20:04:08 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11540246/september-is-on-the-table-spy-dji-ixic-usd-tlt-tlo <![CDATA[September is on the table (SPY, DJI, IXIC, USD, TLT, TLO)]]> ticking clocks

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11540246
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11538258/federal-reserve-vice-chairman-stanley-fischer-at-the-federal-reserve-bank-of-kansas-city-economic-symposium-jackson-hole-wyoming-august-29-2015-us-inflation-developments Sun, 30 Aug 2015 16:56:37 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11538258/federal-reserve-vice-chairman-stanley-fischer-at-the-federal-reserve-bank-of-kansas-city-economic-symposium-jackson-hole-wyoming-august-29-2015-us-inflation-developments <![CDATA[Federal Reserve Vice Chairman Stanley Fischer At The Federal Reserve Bank Of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 29, 2015, U.S. Inflation Developments]]> I am delighted to be here in Jackson Hole in the company of such distinguished panelists and such a distinguished group of participants.

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11533813/regression-to-trend-a-look-at-longterm-market-performance Fri, 21 Aug 2015 02:21:33 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11533813/regression-to-trend-a-look-at-longterm-market-performance <![CDATA[Regression to Trend: A Look at Long-Term Market Performance]]> Quick take: At the end of July the inflation-adjusted S&P 500 index price was 90% above its long-term trend, a slight decline from the previous month.

About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.

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http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11529870/real-prices-and-pricetorent-ratio-in-may Sun, 02 Aug 2015 04:20:41 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11529870/real-prices-and-pricetorent-ratio-in-may <![CDATA[Real Prices and Price-to-Rent Ratio in May]]> A great discussion from Nick Timiraos at the WSJ: Are Home Prices Again Breaking Records? Not Really
The National Association of Realtors‘ monthly home sales report made a big splash last week with news that median home prices in June had broken the record set in 2006 at the peak of the housing bubble, reaching a nominal high of $236,400.

Does this mean we have another problem on our hands? Not really.
...[see data and graphs]
...
There may be other reasons to worry about housing affordability by comparing prices with incomes or prices with rents for a given market. But crude comparisons of nominal home prices with their 2006 and 2007 levels shouldn’t be used to make cavalier claims about a new bubble.
The price-to-rent does seem a little high (last graph below), but the speculation associated with a bubble isn't present. No worries.

The year-over-year increase in prices is mostly moving sideways now at a little over 4%. In October 2013, the National index was up 10.9% year-over-year (YoY). In May 2015, the index was up 4.4% YoY.

Here is the YoY change since last May for the National Index:

MonthYoY Change
May-147.1%
Jun-146.3%
Jul-145.6%
Aug-145.1%
Sep-144.8%
Oct-144.7%
Nov-144.6%
Dec-144.6%
Jan-154.4%
Feb-154.3%
Mar-154.2%
Apr-154.3%
May-154.4%

Most of the slowdown on a YoY basis is now behind us (I don't expect price to go negative this year). This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (38%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through March) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to June 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to April 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to June 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to October 2003.

In real terms, house prices are back to 2003 levels.

Note: CPI less Shelter is down 1.6% year-over-year, so this is pushing up real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to March 2003 levels, the Composite 20 index is back to March 2003 levels, and the CoreLogic index is back to August 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to 2003 levels - and the price-to-rent ratio maybe moving a little sideways now.

]]>
11529870
http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11529807/real-prices-and-pricetorent-ratio-in-may Sun, 02 Aug 2015 02:20:17 +0100 http://www.hedgehogs.net/pg/newsfeeds/hhwebadmin/item/11529807/real-prices-and-pricetorent-ratio-in-may <![CDATA[Real Prices and Price-to-Rent Ratio in May]]> A great discussion from Nick Timiraos at the WSJ: Are Home Prices Again Breaking Records? Not Really
The National Association of Realtors‘ monthly home sales report made a big splash last week with news that median home prices in June had broken the record set in 2006 at the peak of the housing bubble, reaching a nominal high of $236,400.

Does this mean we have another problem on our hands? Not really.
...[see data and graphs]
...
There may be other reasons to worry about housing affordability by comparing prices with incomes or prices with rents for a given market. But crude comparisons of nominal home prices with their 2006 and 2007 levels shouldn’t be used to make cavalier claims about a new bubble.
The price-to-rent does seem a little high (last graph below), but the speculation associated with a bubble isn't present. No worries.

The year-over-year increase in prices is mostly moving sideways now at a little over 4%. In October 2013, the National index was up 10.9% year-over-year (YoY). In May 2015, the index was up 4.4% YoY.

Here is the YoY change since last May for the National Index:

MonthYoY Change
May-147.1%
Jun-146.3%
Jul-145.6%
Aug-145.1%
Sep-144.8%
Oct-144.7%
Nov-144.6%
Dec-144.6%
Jan-154.4%
Feb-154.3%
Mar-154.2%
Apr-154.3%
May-154.4%

Most of the slowdown on a YoY basis is now behind us (I don't expect price to go negative this year). This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $276,000 today adjusted for inflation (38%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.6% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak.

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through March) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to June 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to April 2005.

Real House Prices

Real House PricesThe second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to June 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to October 2003.

In real terms, house prices are back to 2003 levels.

Note: CPI less Shelter is down 1.6% year-over-year, so this is pushing up real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to March 2003 levels, the Composite 20 index is back to March 2003 levels, and the CoreLogic index is back to August 2003.

In real terms, and as a price-to-rent ratio, prices are mostly back to 2003 levels - and the price-to-rent ratio maybe moving a little sideways now.

]]>
11529807