Aftermath
Deflation is every central banker‘s biggest fear because it increases the real value of debt, which leads to defaults that jeopardize bank solvency.
Price deflation adds real value to citizens’ standard of living that the government cannot tax.
When the Fed attempts to normalize its balance sheet, it doesn’t sell securities, it simply lets them expire and runoff its balance sheet.
Inflation is always and everywhere a psychological phenomena.
Once a nation’s debt-to-equity ratio surpasses 90%, the stimulative impact of added debt is negative.
It takes roughly 4% in rate cuts to take the United States out of a recession.
During the Civil War in the 1860s, US national debt rose from $65,000,000 to $2.7 billion, a 4000% increase.
Due to the United States’ involvement in World War I under Woodrow Wilson, the US deficit rose from $2.8 billion to $27.4 billion, an increase in the deficit of 845%, in the span of a couple years.
FDR marked a significant departure from the previous economic pattern of only expanding the Fed’s balance sheet during times of war.
FDR expanded the national deficit from $19 billion to $42 billion, a 120% increase.
Today, as the boomers hit retirement, Social Security is cash flow negative.
Strong real growth is the best cure for high debt-to-GDP ratios.
As long as nominal GDP increases faster than the deficit plus interest expense, the debt-to-GDP ratio declines, even if real GDP growth is weak.
Modern economics and government spending is based on the Keynesian multiplier, which suggests for every one dollar of government spending, more than one dollar of economic value is created.
Inflation is an all-purpose remedy for government debt.
There are two ways to beat the market other than sheer luck:
- Inside information
- Market timing
The holy Grail of investing is to have positive alpha and a beta of one. That means you’re taking market risk but getting an above-average market return.
The two reasons for active manager under performance are behavioral psychology and skew.
A proper investment thesis is only half of what is required to make money. The other half is getting the entry point right.
Risk parity is an asset allocation plan that aims to maximize returns for a given level of volatility.
Smart beta investment portfolios are long-only rules-based investment strategies that aim to outperform a capitalization-weighted benchmark.
According to modern monetary theorist, money creation poses no constraint on government spending.
The real source of money status is not state power, it’s confidence.
Confidence and velocity are inversely correlated and, together, are the Achilles heel of MMT.
The official unemployment rate is calculated using a narrow definition limited to those with jobs or actively seeking work.
A Guaranteed Basic Income (GBI) doesn’t discourage working because there are no conditions or income qualifications—it’s for everyone.
Instead of a guaranteed basic income, the left will likely propose a guaranteed government job, which is the acceptable face of a guaranteed basic income.
If the government guaranteed a job with a basic income and benefits, every private employer would be driven to at least match its wage and benefits.
Higher money velocity increases nominal GDP, meanwhile, growth in real GDP is constrained by debt.
If nominal GDP rises faster than real GDP, the difference is inflation.
Two super-linear functions increasing by different exponents determine the maximum size and height of natural or man-made objects.
A bank balance sheet can only be so leveraged before confidence is lost and the bank tumbles into failure.
Much of the wealth of the richest Americans is never taxed because they hold their wealth in real estate and stocks and pass them to their beneficiaries tax-free.
Hard assets and hard work are the only stores of value.