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Macro Observations

Analysis, Ideas and Reflections on Macroeconomic Topics




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Clash of Empires: Currencies and Power in a Multipolar World
Empires usually start off as road-building exercises. Which explains why, in Europe, everyone says that “all roads lead to Rome”. And when they don’t build roads, empires build canals: the French built the Suez Canal (only to see the British buy Egypt’s stake once the hard work had been done), the Americans built the Panama Canal and, less happily, the Soviets built the Aral Sea Canals (which ended up triggering one of the greatest ecological disasters of all time).
Gavekal, March 2019 , by Charles Gave & Louis-Vincent Gave

China’s Gangbusters Loan Growth
China likes doing things on a grand scale; its recent stimulus is no exception.
Fisher Investments MarketMinder, 03/04/2019 , Editorial Staff

The Broken Window Fallacy
"In 1850, the French economist Frederic Bastiat introduces the concept of opportunity cost with a fallacy in Chapter I of his book “Ce qu’on voit et ce qu’on ne voit pas” (What we see and what we don’t see). In Bastiat’s tale, a man’s son breaks a pane of glass, which ultimately stimulates the economy."
Gavekal Intelligence Software, The Quant Corner, February 2019 , Didier Darcet

Shallower Cycles?
"Less vigorous expansions spread over longer periods would entail a fundamental change in the risk/return dynamics of markets and a resulting shift in expectations."
Lobnek Wealth Management, February 2019 , Altug Ulkumen

Economics Is Easy When You Don’t Have To Try
The real question is why no one says anything. They can continue to make these grossly untrue, often contradictory statements without fear of having to explain themselves. Don’t even think about repercussions. Even in front of politicians ostensibly being there on behalf of the public, pedigree still matters more than results.
Alhambra Investment Partners, December 7, 2018 , Jeffrey P. Snider

Does the Yield Curve Really Forecast Recession?
It's well known that in the United States recessions are often preceded by an inversion of the yield curve. Is there any economic rationale for this?
Federal Reserve Bank of St. Louis, Economic Synopses, No. 30, 2018 , David Andolfatto, Andrew Spewak

The history (and future) of inflation ...
It may not feel like it, but we live in inflationary times relative to long-term history.
Deutsche Bank, Thematic Research, September 19, 2018 , Jim Reid, Craig Nicol, Nick Burns, Sahil Mahtani

Notes on The Bitcoin Standard
"Bitcoin, as designed, is deflationary."
Man on the Margin, July 16, 2018 , Michael Kendall

The Oxymoron of World Trade
Oxymorons are powerful combinations of contradictory meanings. We encounter oxymorons in every human form of expression attempting a description of reality, whether it be in works of tragedy (“fearful bravery” in Shakespeare’s Julius Caesar), in our daily lives (work that is “almost done”), or even in the projected future of human societies (“artificial intelligence”).
Gavekal Intelligence Software, The Quant Corner, September 2018 , Didier Darcet

Information in the Yield Curve about Future Recessions
"Furthermore, when interpreting the yield curve evidence, one should keep in mind the adage “correlation is not causation.”
Federal Reserve Bank of San Francisco, Economic Letter, August 27, 2018 , Michael D. Bauer and Thomas M. Mertens