Richard Field
@tyillc
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Director Institute for Financial Transparency Author of Transparency Games RT not endorsement
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For all those PhD Economists who blocked me on twitter because they found my comments on
#transparency
hard to take. Here is the new model for Economics based on the Information Matrix you'll have to live with and master. You can thank me later.
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I would like to thank Paul Krugman for reminding us just how divorced from reality Economists and the Economics Profession are and why they should never be listened to.
In the example below, he does something Economists are trained to never do. He reveals the assumptions he
An inflation update: in the past I've focused on a measure that excludes lagging shelter and used cars as well as food and energy. Just to note that it adds to the evidence that inflation has been largely defeated
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WOW!!! My local community bank just sent me an email about Silicon Valley Bank and explaining how they are well capitalized AFTER marking their portfolio to market. It is incredible banks feel the need to send this email (btw, not surprised smaller banks are solvent).
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Not a lawyer, but it appears the Supreme Court's overturning the Chevron Doctrine effectively eliminates almost all of the programs the Fed has used to bailout the banks since 2008 ... Fed has relied on a very ambiguous statute to say it has the authority to implement these
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Fed officials have been saying Fed is going to raise rates to 2.5% to 3% by end of year. Why wait? Market already expects this level of rate increases. Fed should do it all at the next FOMC meeting.
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The last three weeks have been remarkable ... why ... leading economic figures have come out and said the narratives pushed in Econ classes and policies pushed by orthodox economists for the last 40+ years have been wrong ...
This started with Nobel prize winner Angus Deaton
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@ericawerner
@JStein_WaPo
Obviously Lindsey Graham is appalled by the size of the Covid package. Dems should pay for it by repealing the GOP tax cuts benefitting individuals earning over $350,000/year. That would lower the effective size of covid package to a few billion.
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Think how cheap it was for the bankers/1% to buy Yale's reputation and set up a "center" to say "saving the banks in 2008 was the best possible policy response" ... and have PhD Economists lining up to say "yes it was" ... a true show of how little Economists know about the
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For those who think discussing the response to the Great Financial Crisis is simply arguing about history, we still have those same policies in place today. The crisis hasn't ended and the damage to the real economy/society from those policies continues to grow exponentially.
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hmmm ... Boeing is a case study in what happens when financial engineering replaces real engineering ...
Boeing continues to be a real-time case study in what happens to an organization as it overtaken by feelings of powerlessness and uncertainty.
To succeed, Kelly Ortberg must stem the vulnerability now shared by employees, customers, passengers, creditors, regulators ...
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@D_Blanchflower
@UKLabour
Labour's leaders remind me of the dog that chases a car and when he finally catches it has no idea what to do ...
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Myth: We need our existing banks.
Fact: Banks designed to absorb losses and protect the real economy. Those banks that fail can be replaced.
Real world example: Iceland. Closed all of its existing banks and opened new banks in 2008/2009. Economy avoided severe recession.
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Few realize the Fed has now dealt with the problem of the underwater assets on the banks balance sheets freeing itself up to raise rates significantly higher ...
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Only PhD Economists are speculating about why Fed hikes haven't done much to slow the economy. Lesson from being at the Fed from 1980-82: monetary policy doesn't slow supply side/energy price driven inflation. It is only capable of crashing not fine-tuning the economy.
The most puzzling chart in economics right now. Much speculation about why Fed hikes haven't done much to slow the economy, but too much focuses on businesses and consumers; housing is where monetary policy usually has the most traction 1/
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Fantastic quote that summarizes everything you need to know about the modern Economics profession ... please keep in mind, Joan Robinson debunked the narratives the profession is now pushing and observed the only reason to learn economics is to not be fooled by Economists ...
From David Graeber's classic work called "Against Economcs."
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Fed's Jackson Hole conference summary:
1) Our models don't work;
2) We are navigating by the stars on a cloudy night;
3) We need a new playbook.
Bottom line: central bankers are clueless when they set monetary policy.
Time to set nominal rates at 5% for next 2-3 decades
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Interesting quote:
MICHAEL HUDSON: The problem is not only the Federal Reserve economists, it’s the whole academic economic theory that’s being taught today.
Today’s economic theory — it’s junk economics, basically. It imagines that the root of all inflation is labor wanting
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In 2008, I pointed out there are two models for how to respond to a financial crisis. The Japanese Model of saving the banks and plunging the real economy into economic malaise for decades. The Swedish Model of using the financial system as it is designed to absorb losses and
At its height, in 1989, real estate in Tokyo sold for as much as $139,000 a square foot—more than 350 times as much as choice property in Manhattan. – Vanity Fair
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Central banks around the world are now on the same page. They are prepared to burn down their economies under the misguided belief this is better than admitting they can do very little to moderate supply side/energy price driven inflation.
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Reread Powell's speech. One item stood out. He feels confident he can lower demand to offset supply side and energy price driven inflation. These inflation drivers are running close to 7% today. So to offset would require a 7% decline in demand. Severe recession incoming
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How many economic myths need to be debunked before it is realized Astrology has more science to it than Economics?
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@SimonBowmaker
It appears both groups of Economists have lost track of the real focus of Economics. The focus isn't who is the best mathematician or has the neatest data set. The focus is explaining the real economy and policies needed to produce better outcomes.
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@KateAronoff
No sign US won't open its pocketbook to help those in Asheville and surrounding areas ...
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Fed says JP Morgan isn't adequately capitalized. Let that sink in.
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Myth: Fed has allowed inflation to get out of control.
Fact: Fed has never and will never be able to control supply side/energy price driven inflation.
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Biggest disappointment in FOMC actions today was its failure to raise reserve requirements to the level that would make paying interest on reserves unnecessary. Fed needs to stop giving taxpayer money to the banks. Costing taxpayers hundreds of billions annually.
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Terrific article on a study by Fed Economists who see parallels between the "depression" of 1920/1921 and today. In both cases, the Fed raised rates into the tail end of a bullwhip effect triggered by a pandemic. Their findings: hard landing awaits us.
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@chigrl
@Financialjuice1
Yes! Fed officials have begun to realize they have already screwed up. Apparently no one bothered to point out raising mortgage rates to 6% would lower what people could pay for a house by over 25%. Plus they missed the oncoming recession.
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Keep reading about how OPEC+ pushing up the price of oil is going to cause the Fed to raise rates in the hope this keeps inflation down. Has anyone considered what a bad idea it might be to outsource control of US monetary policy to the OPEC+ nations?
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@biancoresearch
@BloombergTV
Stop the losses for whom? Who was at risk? These were the same questions the market faced in the fall of 2008. Opacity prevented our knowing then and it is preventing our knowing now.
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Fed is going to buy outstanding corporate bonds .... how exactly does this help the issuing company? Sounds more like an investor bailout.
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Great quote ... even in the 1940s central bankers knew monetary policy was most likely ineffective ... then came the 1980s myth Volcker and the Fed slayed inflation ... I was at the Fed at the time and this myth is entirely untrue ... we couldn't find any relationship between
Looking through Fed reports from the 1940s, it strikes me that they had in many ways a better understanding of the financial system.
Inflation has never been solely about monetary policy. A CB convincing you that inflation will be at 2% does not ensure that it will be.
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Said this last week, but when Powell speaks tomorrow we are either going to get a rally in the financial markets or the rush to the exits will begin in earnest.
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In the 1980s, when it began to listen to Economists ... whose narratives about maximizing shareholder value and comparative advantage never disclosed all the assumptions that had to be true for their narratives to be a good idea to implement ...
The world has taken a wrong turn.
It is hard to tell exactly when.
But it is unmistakable by now.
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A lot of people have been making similar suggestions about letting individuals from Hong Kong resettle in the US. US history shows such waves of mass migration have had a very positive impact. There are plenty of reasons to think this would happen again.
What can the US do about Hong Kong? We should try to offer resettlement to those that want to leave. But where?
Redevelop Oakland International Airport as a charter city.
- Bay Area has largest Cantonese community in US
- Area is tech hub
- Airport already struggling pre-COVID
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Fed announces willingness to purchase almost any asset. Wall Street lines up to unload opaque securities to the dumbest buyer in the market at prices well above what they are worth.
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So have we finally reached the point in time where it can be acknowledged the response to the Great Financial Crisis was not only a failure, but actually has made addressing the underlying problems much worse?
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Myth: PhD Economists know anything about macro economics.
Fact: They missed Great Financial Crisis and championed policies that made it worse.
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Pointed this out for years, but there is no reason for the Fed to pay Interest on Reserves. If it wants the banking system to hold more reserves, it can simply raise reserve requirements. What the Fed is actually doing is giving taxpayer money to bankers ...
The Federal Reserve is losing $758 million PER DAY paying interest to commercial banks on reverse repos and interest on reserves. The losses just reached $100 Billion with a B.
Before all of these wild games started, the Fed would send it's profits to the US Treasury each year.
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If raising interest rates to 2% causes the US real economy to enter into a recession, the economy is currently in far, far, far worse shape than both fiscal and monetary policymakers are letting on.
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Has Modern Monetary Theory's (MMT's) 15 minutes of fame ended now that inflation is exceeding Fed's target inflation rate of 2%? I ask because MMT says inflation exceeding a target inflation rate is the brake on government spending.
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Fabulous column by James K. Galbraith. For example:
"Consider just how often mainstream economists get things wrong – not only small things, but very big ones. Remember their famous failure to foresee the 2007-09 financial crisis, or the woefully ill-advised turn to austerity in
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@lanheechen
Same thing was said about the interstate highway system and going to the moon. It is impossible to know all the new types of businesses/industries the Green New Deal will create. So any statement that its costs will exceed its benefits is opinion and not fact.
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Having been at the Fed when Volcker was inflicting a severe recession, it was clear inside the Fed this recession wasn't slowing inflation. Rather, what slowed inflation was OPEC falling apart. But never let the facts get in the way of a good narrative ...
"Paul Volcker had to inflict a severe recession on the US to undo the mistakes of his predecessor Arthur Burns, who allowed inflation to get out of control in the 1970s. Powell is amply aware of the history. Nonetheless, he's risking a repeat."
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In case anyone is wondering, dramatically increasing the number of immigrants would lower wage inflation while at the same time being a tremendous economic stimulus.
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hmmm ... has anyone considered perhaps the Great Financial Crisis didn't end ... maybe all ZIRP/QE did was buy time to deal with the bad debt in the system ... maybe this debt wasn't dealt with and as a result it has grown exponentially ...
After
@DeutscheBank
, now Deutsche Pfandbriefbank, a German bank that specialises in real estate, warns of the "greatest real estate crisis since the financial crisis" - A "phenomenon" that threatens banks worldwide.
|
@CNNBusiness
#RealEstate
#DebtCrisis
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wait for it ... when you outsource your manufacturing you also outsource your technical know how ... who could have guessed all those manufacturing workers knew something of value ... of all the bad ideas pushed by Economists, maximizing shareholder value is highly competitive
We began manufacturing in America in 2022. We will make over a million bottles domestically in our first year.
I’ve learned first hand why it is so hard to build things in America.
For us, the biggest barrier hasn’t been wages or regulation.
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@NaomiAKlein
by continuing to pursue path of being GOP lite, Dems continue to relegate themselves to being minority party.
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As always, William White is worth the time to listen to. Please note his observation central banks lowered interest rates to avoid triggering losses on debt that can never be repaid.
William White, former Bank of Canada deputy governor, discusses the risks that central banks face in creating a “debt trap” with
@AmandaLang
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Economics will never be the same. The Great Financial Crisis showed macro economists don't understand how the financial system or the economy work. Decade after crisis started and no explanation for why crises occur, how to predict (& hence avoid in future) or how to end.
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Great article on Deutsche Bank and how it hid $1.6b loss on its municipal bond portfolio. Please note how regulators had no idea of losses on this portfolio. Further evidence regulators are not fit for purpose of derisking banks.
#Transparency
needed.
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Fascinating to me why anyone would want to invest in China right now. Xi intent on popping property bubble. Given amount of debt outstanding, are any Chinese banks solvent? Also embarking on wealth redistribution from company owners.
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@FixTheNation
@Chris_Moss8
@Tryng2lookahead
@JulianMI2
@dominant_trade
@nglinsman
@Halsrethink
@marykissel
@gbponz
@chigrl
@darioperkins
@JackFarley96
@FedGuy12
@PPGMacro
@pboockvar
@DiMartinoBooth
Since Greenspan was Fed chair, Fed has failed at every action/decision if the goal was improving the real economy and keeping society together. If the goal was benefitting the 1%, undermining the real economy and dividing society, then the Fed has been a smashing success.
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For those who missed it, today is the 13th anniversary of the start of the Great Financial Crisis. A crisis policymakers made worse by their response. A crisis that is still with us today (see QE/ZIRP).
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Actually, it would be better to characterize Fed's Jackson Hole conference as "the Priesthood of the Economic PhDs gather to promote a new BS narrative so nobody notices monetary policy doesn't work".
The Fed's Jackson Hole conference sometimes gets treated as the Super Bowl of central banking when it might be better characterized as "nirvana for nerds" given the wonky paper discussions
Here's our preview of this year's event
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A veritable who's who of macro economists who didn't see the Great Financial Crisis coming and then endorsed policies that overturned the social contract by making the crisis worse for the real economy and society. But other than that, their work should be celebrated....
My Nobel Econ feeling: Blanchard, Fischer, Romer, Woodford, Mankiw, Taylor, Kiyotaki, Helpman, Yellen or Acemoglu. Ok I am macro-biased ☺️
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GOP keeps proposing tax plans benefitting the rich and resents when an organization points out this fact.
Republicans angry at economists for calculating that Republicans would cut taxes for the rich
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I realize people don't want to accept Fed just reduced the value of their homes by close to 30%, but that is what mortgage rate increase did. Most homes are sold based on max payment buyers can afford. Higher rates mean the max payment now supports a much lower mortgage amount.
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How many professors of Economics (and or Finance) and Banking saw the Great Financial Crisis coming and warned about it? Shouldn't that be a minimum requirement for anyone holding this job title?
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A decade plus after the start of the Great Financial Crisis, it is pretty clear to save the banks, the central bankers broke the financial markets. Now they are trying to figure out how to fix what they broke without revealing the banks are still insolvent.
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@BaldingsWorld
Banks in China are likely insolvent due to their exposure to real estate ... China doesn't have deposit insurance, so running to get your money out is a sensible strategy ...
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Yet another observation by Milton Friedman that isn't right ... see supply side driven inflation ....
“Inflation is always and everywhere a monetary phenomenon.” — Milton Freidman
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The Great Financial Crisis hasn't ended. The solvency problems it revealed and its policies response have created are currently concealed by low interest rates and will re-surface in the next episode of financial stress.
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A universal truth about debt forgiveness: it improves the prospects of the borrower and hence the real economy.
So one has to ask why wasn't debt forgiveness pursued by US, UK and EU in the wake of the Great Financial Crisis ... it was in Iceland and not surprisingly, Iceland
2/8
The paper finds, not surprisingly, that partial debt forgiveness improves the prospects of an overly-indebted country. Countries that went through a Brady-type restructuring experienced substantial declines in public and external debt burdens relative to those that didn't.
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@INArteCarloDoss
Do you remember MIT's Billion Price index ... it was discontinued as it showed what inflation truly was ...
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Fed officials have decided higher unemployment is a good idea. Allow me a modest proposal. First people to lose their jobs are at Fed and its Regional Banks. Start with everyone with a PhD. They think being unemployed is a good idea. No reason they shouldn't experience it.
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Depressing to see all the accolades poring forth on Biden's renominating Powell for another term as Fed chair. Apparently very few people look at Fed policy and see the damage it has done to the real economy (growth of debt zombies) and society (growth in inequality).
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My tweet set off a very good discussion. Some defended Krugman's assumptions. Others said his assumptions are problematic. Economists don't want to disclose their assumptions because it shifts the discussion to the reasonableness of their assumptions and not their conclusions.
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Central bankers never had the tools to "save the world economy" during the Great Financial Crisis. What they did have was the ability to save the banks and transfer the burden of excess debt to the real economy.
Central Bankers Are Sick of Rescuing World Economy Alone “While Powell has warned U.S. fiscal position is unsustainable in long-run, he said last week it’s ‘not a good thing to have monetary policy being the main game in town.’” And who created dependency?
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@rulajebreal
A bomb exploding in Beirut doesn't mean its citizens have been butchered. Reports out of Beirut indicate the citizens have left the areas being bombed.
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For years have pointed out if Economists disclosed their assumptions, no one would listen to them. Last week, Yellen came out and said Economists assumptions underlying competitive advantage were wrong. Why? China achieve its advantage via mercantilism. In addition,
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@tom_peters
Life in the USA became unmoored in the early 1980s with the adoption of shareholder value maximization and the resulting financialization of everything ... led directly to the growth in inequality and the collapse of "society" you and I grew up with ...
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Been making this argument for 3+ decades ... America managed to outsource the Arsenal of Democracy under the misguided narratives of "maximizing shareholder value" and "competitive advantage" ... result was making managers inter-generationally wealthy, undermining the real
What do Boeing, the collapsed bridge in Baltimore, shortages of critical pharmaceuticals, Donald Trump's ridiculous new SPAC, an unprecedented amount of speculation and concentration in stock markets have in common? We need more real engineering, less financial engineering
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Prior to the adoption of QE, I pointed out it wouldn't have any positive impact on the economy, but would have plenty of negative impacts ... a decade plus later, it appears a consensus is forming I was right ...
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Afghanistan and the Great Financial Crisis share a common trait. The so-called experts in the US government didn't understand what was going on and their response made a bad situation dramatically worse.
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For years, pointed out the growth in corporate debt zombies ... from 4% in 2008 to 20% in 2020 ... it appears this exponential growth has continued with 40% of private credit borrowers no longer able to service their debt ... not only do these debt zombies undermine the real
This is what scares me about the private credit market.
40% of private credit borrowers no longer have the ability to service their interest payments
This is double the rate from just 2 years ago.
Yet financial advisors are piling their clients into these investments.
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The official beginning of the Great Financial Crisis. BNP Paribas admits it cannot price opaque subprime mortgage backed securities. The "complete evaporation of liquidity" is the RESULT of this opacity.
ON THIS DAY in 2007, BNP Paribas put out its epochal press release noting "the complete evaporation of liquidity in certain market segments of the US securitisation market."
View this document and more in our financial crisis Resource Library:
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The Phillips Curve only exists in theory. There is no evidence of a tradeoff between unemployment and inflation in the real world. Time for the Economics profession and Wall Street to let this bad idea go ...
"Key measures of inflation have reaccelerated in recent months...The implication for investors is that the Fed will keep rates high until nonfarm payrolls go negative, because that is what is needed to get inflation under control:" Apollo's Slok
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@SusanneTrimbath
That type of thinking is so pervasive with our financial regulators in addition to the Economics/Finance profession. It is literally impossible to have a discussion when the belief in Perfect Information ("perfect capital markets") is unquestioned.
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Trying to think if there was anyone who did greater harm to the US than Bernanke and the response to the Great Financial Crisis he led ... naturally a movie coming out that will avoid mentioning he undermined the financial markets and society with bailouts and policies like
First look at Nicholas Cage as Ben Bernanke in The Courage to Act (2024)
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@RameshPonnuru
@BCAppelbaum
@TimAlberta
Confirms GOP has never seen a GOP president proposed bill increasing deficit it doesn't like.
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Deutsche Bank loses $1.6 billion on trade they hid from regulators for a decade. For almost every year of that decade, regulators have run stress tests on $DB and said it can withstand financial armageddon. Is this remotely believable when regulators don't know hidden losses?
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To its credit, MMT has established raising unemployment in the hope of slowing down inflation is a truly bad idea! Particularly when there are alternatives that are likely to be much more successful and less harmful to the real economy and society.
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hmmm ... did anyone mention the Fed was created by an Act of Congress and not an Act of God so the Fed has been a political entity since Day 1 ... did anyone mention Congress has oversight of the Fed ... did anyone mention the only beneficiaries of the myth of Fed independence
Bill Dudley, former head of
@NewYorkFed
, is a day late and a dollar short with this story. He’s worried about politicizing the Fed? Read article by
@vtg2
to see how Mr. Dudley views the role of our nation’s central bank.
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Powell's comment yesterday millions might not have a job to return to was equivalent of yelling fire in a theatre. No jobs implies massive problems in credit markets (housing, commercial real estate) and by extension stock markets. Markets down 7%+ since.
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Been asking who is holding the losses ....
When you see an office building that previously sold for $183,000,000 sell for $54,000,000 but you don’t hear who took that hit and there’s no bankruptcy involved… good chance it was a pension fund.
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Friedman's advice is golden in that he is wrong on all three parts of his solution. But then, he had a history of being wrong. For example, business should maximize shareholder value. Awful advice as US military is discovering as the Arsenal of Democracy now depends on China
In 1979, my friend, mentor, and Nobelist Milton Friedman proposed a 3-STEP SOLUTION to REVIVE the US economy:
1) CUT DOWN GOVERNMENT SPENDING.
2) RESTRAIN MONETARY POLICY.
3) ELIMINATE AS MANY REGULATIONS AS POSSIBLE.
Friedman’s advice remains GOLDEN.
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Since the beginning of the Great Financial Crisis, I have tried to explain to the Economics profession how the US financial system is designed. Thought this was important because it isn't part of the curriculum to get an Economics PhD. 1/
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And to think how much money Senator Romney made at Bain Capital for outsourcing US manufacturing to China ....
Components of China’s grand strategy:
- Monopolizing key industries & raw materials
- Belt and Road
- Buying farmland around military bases
- Stealing U.S. technology
- Spreading CCP propaganda
We urgently need a comprehensive China strategy to deal with China's ambition.
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Unfortunately, since 1980 the US has allowed itself to be "deceived by economists" ...
"The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."
-Joan Robinson
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Once again Anna Schwartz, economists and the premier Great Depression scholar, was right. She publicly criticized the Bernanke led response to the Great Financial Crisis and said what should have been done instead.
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The mistake being to assume a PhD is synonymous with expertise. When it comes to understanding our financial system, how it is designed to work, why we have financial crises and how to end these crises, an Economics PhD has been shown to confer zero expertise.
The Bill Clinton, George W, and Barack Obama administrations were catastrophic because they operated under the assumption that experts and not the people should rule. The simple question is whether we have the courage to learn from our mistakes. Can we?
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Fascinating facts: to win the Economics Nobel you have to publish in an Econ PhD reviewed journal.
This assures the Economics PhDs that no outsider can introduce a new idea.
Hence, an idea like the Information Matrix that transforms Economics can be safely ignored by the
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For all those Economic PhDs who have pushed back at my statement "monetary policy is a great narrative with no real world applicability other than crashing an economy", please read Former Fed Governor Tarullo's comments ....
"After eight years at the Fed...my conclusion was that there is no well-elaborated and empirically grounded theory that explains contemporary inflation dynamics in a way useful to real-time policymaking"
#econtwitter
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Biggest difference between FDR's and Biden's speeches saying banks are safe: after FDR's speech, people put their money back into banks; after Biden's speech, people looking to move their money out of small and regional banks.
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hmmm ... If central banks buying lots of government bonds results in high or hyperinflation, why didn't QE result in high or hyperinflation in either Japan or US ...
7. The MMT argument, again repeated in some tweets, that there is no problem because the Fed can buy the bonds, is a non-starter. Either the Fed indeed buys the bonds and issues money, and (given the size of the primary deficits), this likely results in high or hyperinflation.
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