November 2014 Longbrake Letter
Markets have shrugged off recent anxieties and have stabilized because market participants still want to believe in market-friendly outcomes. “Hope” is ascendant. But, unfavorable demographic trends, a global excess supply of goods and services relative to underlying demand, monetary profligacy, negative real rates of interest, and huge and rising debt-to-GDP ratios collectively are the hallmarks of a slowly developing global deflationary bust. The climactic moment of capitulation and realization that the status quo is neither fixable nor sustainable is not yet at hand. Also in this month’s letter, Bill Longbrake provides a brief update on economic developments in the U.S., examines U.S. housing and fiscal policy, and discusses the plunge in global oil prices. Read this month's letter.
October 2014 Longbrake Letter
In recent days market sentiment has shifted from optimism and complacency to pessimism and fear. Significant and troublesome imbalances have been building in the global economy for a long time but the threats they pose to global economic well-being have largely been ignored. But now the possibilities of much slower growth in China, failure of Abenomics in Japan, and deflation in Europe, not to mention the existential threat to the euro and the European Union, are being discussed more openly. In this month’s letter Bill Longbrake explains why unfavorable demographic trends, excess supply of goods and services relative to underlying demand, monetary profligacy, negative real rates of interest, and huge and rising debt-to-GDP ratios collectively are fostering a global deflationary bust in which increases in prices and output slow, or even fall, and bankruptcy potential rises for firms and countries. Read this month's letter.
September 2014 Longbrake Letter
In this month’s letter, Bill Longbrake discusses how the U.S. economy is gradually gaining momentum, while downside risks are diminishing. There are signs that the virtuous circle of higher employment, higher income, higher spending and higher investment may finally be getting underway. But, the pace of improvement remains painfully slow with little indication that the still very large output gap will close quickly. Bill provides detailed commentary about trends in GDP, employment, consumer income and spending, prospects for interest rates and the backlog of tax and spending issues that await the lame duck session of Congress after the November congressional elections. Read this month's letter.
May 2014 Longbrake Letter
First Quarter real GDP growth was a barely visible 0.1 percent and appears likely to be revised down to -0.6 or -0.7 percent. In this month’s letter Bill Longbrake explains why significant shortfalls in both residential and business investment were not solely due to bad weather and bode poorly for growth reaching expected levels during the remainder of 2014. Bill’s special topic this month is burgeoning income and wealth inequality and Thomas Piketty’s new book, Capital in the Twenty-First Century, in which Piketty forecasts inexorable increases in income and wealth inequality in industrialized countries with insidious and deleterious impacts on democratic values of justice and fairness. Read this month's letter.
April 2014 Longbrake Letter
Now that spring has sprung, the U.S. economy is beginning to look a little more spritely. But someone forgot to tell the stock market. Perhaps the stock market’s recent snit is reflecting nascent anxieties that faster economic growth will unleash inflation. In this month’s letter, Bill Longbrake discusses recent improvements in economic activity and examines whether inflation will be the next big problem faced by the U.S. economy, or whether deflation is really the greater threat. To read this month's letter, click here.
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