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November 17, 2017 | Flaws of Neoliberalism are showing

Some readers might not be familiar with the term “neoliberalism” and its exact meaning. That’s because the media seldom uses this word to describe an economic and political philosophy. Instead, media writers often refer to Adam Smith’s “invisible hand” that is purported to guide the economy without any human intervention. In a recent Guardian piece, […]

November 10, 2017 | The Retail Industry is in Big Trouble

A Bloomberg story about difficulties in the retail industry caught my eye, as I’ve written about struggles of retail stores and shopping malls before, in a Weekend Note in December 2015. At that time, shares of the on-line behemoth Amazon Inc. were trading on the stock market at $666. Recently they touched $1,135, a total value […]

November 3, 2017 | Trump Tax Reform, Will it be Enough?

Under this current tax reform proposal the center piece is the reduction in the corporate tax rate from 35% to 20%. There’s also an increase in exemption for the estate tax to $11.2 million or $22 million for a couple. Above that amount people would pay 40% on their estate although the estate tax would […]

October 27, 2017 | The Bank of Canada Cannot Decide Which Way To Go

Following Wednesday’s announcement the Loonie traded a full cent lower against the US dollar. That move tells us that the announcement caught traders by surprise. Source: Thomson ONE It has been quite a roller coaster ride for the Loonie since May 3 when it closed below 73 cents, early September at 82 cents and now […]

October 21, 2017 | The Last Big Loophole Closes on Canadian Housing Finance

The Canadian housing market’s been on a tear for almost twenty years. Prices have tripled since 2000. Easy credit conditions have been feeding fuel to the fire. Source: Bank for International Settlements, The MacBeth Group In an October 3 speech regulator-in-chief Rudin issued a clear warning to aggressive lenders: “We clearly see the potential risks […]

October 13, 2017 | Richard Thaler Prize in Economics

Source: Geoff Pugh Mainstream economics assumes that every economic agent has certain attributes that are far from human. For example, the rational agent acts rationally, has perfect knowledge of the future, acts selfishly, lives forever, never has to repay loans, never spends more than he can afford and so on. This approach is called “rational […]

October 7, 2017 | The Chair of the Fed is up for Grabs

Janet Yellen challenged President Trump in public after he was elected but before his inauguration. As I noted here in January, she said in her press conference after hiking rates on December 14, 2016: “So I would say that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment. […]

September 29, 2017 | Koo Balance Sheet Recession in Canada

Let’s start by taking a look at what happened in Japan. The bubble that burst in Japan’s stock market was massive while the real estate bubble was comparable to more recent housing bubbles in Canada and Australia. Source: Bank for International Settlements, The MacBeth Group In an interview with Richard Koo, published in MacLean’s in […]

September 22, 2017 | The Federal Reserve Announced the End of QE

Source: St. Louis Fed – FRED The base money, which is mostly securities owned by the Fed, ballooned to more than $4 Trillion in 2014, from a much lower level of $800 billion in 2008. A five-fold increase in six years. This expansion came to be known as Quantitative Easing (QE), although the Fed prefers […]

September 15, 2017 | Money Creation is Not What People Think

Basic introductory economics uses a description of the lending process called “banks as financial intermediaries”. In this version banks take deposits from savers, and then loan that money out to others, while keeping a portion in reserve as required by regulators. Some people are savers, wealthy people who have excess funds. The bank loans their […]

September 8, 2017 | Cryptocurrency Mania

Sources: investing.com, The MacBeth Group If you held $1,000 of Bitcoin in July 2010 and kept it, you would be worth $40 million today. But buyers today, at these prices, are betting that there will be a bigger fool to bid up the value even further later, much like tulip bulbs in 1600 or Toronto […]

September 1, 2017 | The Brexit Process

Sources: ThomsonOne, The MacBeth Group The British Prime Minister, Theresa May, triggered the Brexit process in late March 2017.  Since then the march to Brexit, and possibly a “hard” Brexit, has continued. The pound sterling looks headed for parity with the Euro, compared to a high of 1.42 before the referendum. How did things get […]