About the Spellman ReportLew Spellman is a Professor of Finance at the University of Texas McCombs School of Business. The Spellman Report seeks to interpret current and future trends in the economy and financial markets from the perspective of history, theory, policy and market expectations.
- The Vulnerability of Private Wealth to Government Financial Stress
- QEs, Currency Wars, the Trillion Dollar Platinum Coin and the Route to “Modern” Inflation
- VIDEO – Texas Financial Market Roundtable 2012
- Roadblocks to Recovery an Interview with Dr. Lacy Hunt
- Frank Beck on Investing in Uncertain Times
Tag Archives: monetary policy
At the moment, the question of whether or not the Fed should be raising interest rates has become a much ballyhooed event for which every investor, financial writer, and taxi cab driver has an opinion. It’s supposedly based on the best estimates of what money variables need to be in order to align aggregate spending with the upper supply side level that won’t trip off too much inflation. While the Fed would like to be scientific about it, the dramatic effects of globalism places the decision more in the realm of art than science and the Fed is not comfortable with art. Continue reading
Driving the economy to fuller employment is a macroeconomic policy success. But it comes at a cost of higher employee costs and generally reduced profit and stock returns. Some firms, in this global economy, produce with foreign labor and benefit from weaker foreign currencies. Hence, there will be both purring cats and offsetting dogs in diversified portfolios. Investment returns call for targeting those firms gaining cost advantages via foreign labor. Continue reading
Baby Boomer entitlements are now upon us with an acceleration in the government debt overhang. In a novel approach to debt containment, the European Central Bank pays high enough prices for existing debt to create a cash bonus to issuers of debt but with adverse incentives and unfortunate side effects.
We must conclude, the rules of propriety have changed regarding debt. We were naïve to believe that when governments borrowed they intended to tax in the future and retire debt. Instead reliance is being placed on the central banks to not just neutralize debtor governments’ debt but award governments a monetary subsidy to keep on issuing debt. Continue reading
The developed world economies have high government debt loads and as a result retard economic growth. The adoption of central bank quantitative ease (QE) is billed as a monetary policy but in reality is a fiscal policy of debt service reduction. QE creates microscopic bond market yield that in turn creates capital flight. This further lowers income and raises the debt ratio. So efforts to do “Whatever it takes” to save the sovereign are too late and counterproductive. Continue reading
It’s long been in the DNA of market observers that when money growth outpaces the economy’s growth, booms are created and so are busts. The latest is the oil boombustology with greater impact than is commonly understood. This raises the question of what is left of growth in the US economy without oil expansion. Continue reading
With the U. S. economy having achieved lift-off momentum, the Federal Reserve has ended it epic and historic bond buy known as quantitative ease. The corollary reflex is that interest rates will return to our historic sense of normal, but that is not occurring. The Fed is not all-powerful and is losing pricing control to collective global forces. Continue reading
Economies have natural self-correction mechanisms to keep the economic train on the tracks and moving at accustomed speed unless undercut by governments. In their desperation for tax revenues, Euro zone governments have “outed” their foreign depositors to the foreigners’ home taxing authority. Thus, the slow moving train wreck has just picked up speed. Continue reading
A printing press is a handy thing to have. When a government or central bank can fund itself with money or claims on money, it can buy a lot of things and solve a host of problems, all without the need to tax. I wish I had one. Continue reading