My statements about transparency can be summarized as: In the presence of transparency, buyer and seller can Trust, but Verify the stories told by the issuer/Wall Street. They have the info they need to assess the risk/reward/value of a security. Their independent assessments are close enough so they are willing to engage in a trade without any governmental assistance even during a financial crisis. Worth repeating: trading in markets with transparency doesn't freeze. In the presence of opacity, buyers and sellers cannot Trust, but Verify the valuation stories told by the issuer/Wall Street. When the valuation story told by Wall Street is called into doubt, buyer and seller assessments can be so far apart no trade is possible and the market freezes. Government intervention is required to "unfreeze" the market. Perhaps more importantly, to the extent owners of opaque securities can, they "run" to get their money back when the valuation story is called into doubt. This is true for all opaque securities. These observations find their theoretical support in the Information Matrix. The Information Matrix underlies 100% of finance and most economic theories. These theories don't state their assumption trades happen in the "Perfect Information" quadrant - perfect information here being buyer and seller have the necessary info they need to know what they own. instituteforfinancialtranspa…

I would like to thank Paul Krugman for reminding us just how divorced from reality Economists and the Economics Profession are and why they should never be listened to. In the example below, he does something Economists are trained to never do. He reveals the assumptions he makes to assert inflation has been largely defeated. Of course, his assumptions are absurd. However, the Economics profession specializes in making absurd assumptions. They even have a name for these absurd assumptions: priors. "Priors" sounds harmless until you realize they are absurd assumptions carefully chosen to push a point of view.

WOW!!! My local community bank just sent me an email about Silicon Valley Bank and explaining how they are well capitalized AFTER marking their portfolio to market. It is incredible banks feel the need to send this email (btw, not surprised smaller banks are solvent).

Not a lawyer, but it appears the Supreme Court's overturning the Chevron Doctrine effectively eliminates almost all of the programs the Fed has used to bailout the banks since 2008 ... Fed has relied on a very ambiguous statute to say it has the authority to implement these programs ...

Fed officials have been saying Fed is going to raise rates to 2.5% to 3% by end of year. Why wait? Market already expects this level of rate increases. Fed should do it all at the next FOMC meeting.

But magically no one is holding the losses ... clearly, someone is ... the amount of losses being hidden in the US and global financial system is staggering ...

The last three weeks have been remarkable ... why ... leading economic figures have come out and said the narratives pushed in Econ classes and policies pushed by orthodox economists for the last 40+ years have been wrong ... This started with Nobel prize winner Angus Deaton observing the Economics profession not only didn't predict the Great Financial Crisis but contributed to its occurring. It went on with Janet Yellen observing the Economics profession cheered the idea of saying Thank You for cheap goods without understanding the "cost" of these goods was outsourcing your industrial base and making yourself dependent on another country that might not have your best interests at heart. And then it culminated in Mario Draghi linking both of these together and observing this also undermined society. In effect, these three individuals have said "Economists you screwed up so badly you need to shut-up for a long period of time while we figure out and implement policies to recover from your policy recommendations" ...

For all those PhD Economists who blocked me on twitter because they found my comments on #transparency hard to take. Here is the new model for Economics based on the Information Matrix you'll have to live with and master. You can thank me later. instituteforfinancialtranspa…

Obviously Lindsey Graham is appalled by the size of the Covid package. Dems should pay for it by repealing the GOP tax cuts benefitting individuals earning over $350,000/year. That would lower the effective size of covid package to a few billion.

Think how cheap it was for the bankers/1% to buy Yale's reputation and set up a "center" to say "saving the banks in 2008 was the best possible policy response" ... and have PhD Economists lining up to say "yes it was" ... a true show of how little Economists know about the design of our financial system.

For those who think discussing the response to the Great Financial Crisis is simply arguing about history, we still have those same policies in place today. The crisis hasn't ended and the damage to the real economy/society from those policies continues to grow exponentially.

hmmm ... Boeing is a case study in what happens when financial engineering replaces real engineering ...

Labour's leaders remind me of the dog that chases a car and when he finally catches it has no idea what to do ...

Myth: We need our existing banks. Fact: Banks designed to absorb losses and protect the real economy. Those banks that fail can be replaced. Real world example: Iceland. Closed all of its existing banks and opened new banks in 2008/2009. Economy avoided severe recession.

Few realize the Fed has now dealt with the problem of the underwater assets on the banks balance sheets freeing itself up to raise rates significantly higher ...

Only PhD Economists are speculating about why Fed hikes haven't done much to slow the economy. Lesson from being at the Fed from 1980-82: monetary policy doesn't slow supply side/energy price driven inflation. It is only capable of crashing not fine-tuning the economy.

Fantastic quote that summarizes everything you need to know about the modern Economics profession ... please keep in mind, Joan Robinson debunked the narratives the profession is now pushing and observed the only reason to learn economics is to not be fooled by Economists ...

Fed's Jackson Hole conference summary: 1) Our models don't work; 2) We are navigating by the stars on a cloudy night; 3) We need a new playbook. Bottom line: central bankers are clueless when they set monetary policy. Time to set nominal rates at 5% for next 2-3 decades and end central bankers blindly betting the economy on misguided monetary policies.

Interesting quote: MICHAEL HUDSON: The problem is not only the Federal Reserve economists, it’s the whole academic economic theory that’s being taught today. Today’s economic theory — it’s junk economics, basically. It imagines that the root of all inflation is labor wanting more wages, and the solution to any inflation — and in fact to any economic problem — is to pay labor less. This is the kind of junk economics that came out of the University of Chicago — the monetarist ideas of Milton Friedman ...

In 2008, I pointed out there are two models for how to respond to a financial crisis. The Japanese Model of saving the banks and plunging the real economy into economic malaise for decades. The Swedish Model of using the financial system as it is designed to absorb losses and save the real economy/society. US chose the Japanese Model.

Obama's choice to not use the financial system as designed to protect society and the real economy directly led to the rise of populism and a decline in long-run US economic performance.

Central banks around the world are now on the same page. They are prepared to burn down their economies under the misguided belief this is better than admitting they can do very little to moderate supply side/energy price driven inflation.

Reread Powell's speech. One item stood out. He feels confident he can lower demand to offset supply side and energy price driven inflation. These inflation drivers are running close to 7% today. So to offset would require a 7% decline in demand. Severe recession incoming

Or why didn't Japan see inflation for over 3+ decades ... Musk's comment is ideology based and not factually based ...

Shorter: Yale desperate to sell its PE portfolio before PE managers have to recognize all the losses they are hiding under mark to make believe ...

How many economic myths need to be debunked before it is realized Astrology has more science to it than Economics?

It appears both groups of Economists have lost track of the real focus of Economics. The focus isn't who is the best mathematician or has the neatest data set. The focus is explaining the real economy and policies needed to produce better outcomes.

No sign US won't open its pocketbook to help those in Asheville and surrounding areas ...

Fed says JP Morgan isn't adequately capitalized. Let that sink in.

We live in the "narrative" era. Many cannot be bothered to look at what Obama actually did (versus the mythology surrounding his presidency). In the 1930s, FDR put society and the real economy first. In 2009, Obama put bankers and the 1% first. With that, the Democrats took over as the party of the rich. No surprise Trump could run as a populist and make substantial inroads into the traditional Democratic voter base.

Myth: Fed has allowed inflation to get out of control. Fact: Fed has never and will never be able to control supply side/energy price driven inflation.

Biggest disappointment in FOMC actions today was its failure to raise reserve requirements to the level that would make paying interest on reserves unnecessary. Fed needs to stop giving taxpayer money to the banks. Costing taxpayers hundreds of billions annually.

Probably worth mentioning if you reduce federal government spending by $2 trillion, you shrink the US economy by almost 10%. Is there any reason to think this is a good idea? This type of decline in the economy is at best a deep recession and at worst triggers a depression. On top of that, this decline in the economy is highly likely to trigger a financial crisis as many individual and corporate borrowers will have no income from which to make debt payments. Some of are curious how exactly is this supposed to be turned around without massive government spending?

Structured finance securities are back and more opaque than ever ... remarkable how asset managers willingly blindly bet investors' money on securities designed to hide their true level of risk and guarantee investors are not properly compensated for the risk they are taking on ...

Terrific article on a study by Fed Economists who see parallels between the "depression" of 1920/1921 and today. In both cases, the Fed raised rates into the tail end of a bullwhip effect triggered by a pandemic. Their findings: hard landing awaits us. theintercept.com/2022/09/09/…

Yes! Fed officials have begun to realize they have already screwed up. Apparently no one bothered to point out raising mortgage rates to 6% would lower what people could pay for a house by over 25%. Plus they missed the oncoming recession.

Keep reading about how OPEC+ pushing up the price of oil is going to cause the Fed to raise rates in the hope this keeps inflation down. Has anyone considered what a bad idea it might be to outsource control of US monetary policy to the OPEC+ nations?

Stop the losses for whom? Who was at risk? These were the same questions the market faced in the fall of 2008. Opacity prevented our knowing then and it is preventing our knowing now.

Fed is going to buy outstanding corporate bonds .... how exactly does this help the issuing company? Sounds more like an investor bailout.

Great quote ... even in the 1940s central bankers knew monetary policy was most likely ineffective ... then came the 1980s myth Volcker and the Fed slayed inflation ... I was at the Fed at the time and this myth is entirely untrue ... we couldn't find any relationship between what we did and inflation ...

Said this last week, but when Powell speaks tomorrow we are either going to get a rally in the financial markets or the rush to the exits will begin in earnest.

In the 1980s, when it began to listen to Economists ... whose narratives about maximizing shareholder value and comparative advantage never disclosed all the assumptions that had to be true for their narratives to be a good idea to implement ...

Fed announces willingness to purchase almost any asset. Wall Street lines up to unload opaque securities to the dumbest buyer in the market at prices well above what they are worth.

A lot of people have been making similar suggestions about letting individuals from Hong Kong resettle in the US. US history shows such waves of mass migration have had a very positive impact. There are plenty of reasons to think this would happen again.

So have we finally reached the point in time where it can be acknowledged the response to the Great Financial Crisis was not only a failure, but actually has made addressing the underlying problems much worse?

And Tennesseans shouldn't receive any federal funds in excess of what they pay in federal taxes ...

Myth: PhD Economists know anything about macro economics. Fact: They missed Great Financial Crisis and championed policies that made it worse.

If raising interest rates to 2% causes the US real economy to enter into a recession, the economy is currently in far, far, far worse shape than both fiscal and monetary policymakers are letting on.

Pointed this out for years, but there is no reason for the Fed to pay Interest on Reserves. If it wants the banking system to hold more reserves, it can simply raise reserve requirements. What the Fed is actually doing is giving taxpayer money to bankers ...

Has Modern Monetary Theory's (MMT's) 15 minutes of fame ended now that inflation is exceeding Fed's target inflation rate of 2%? I ask because MMT says inflation exceeding a target inflation rate is the brake on government spending.

Fabulous column by James K. Galbraith. For example: "Consider just how often mainstream economists get things wrong – not only small things, but very big ones. Remember their famous failure to foresee the 2007-09 financial crisis, or the woefully ill-advised turn to austerity in 2010? What about the predictably perverse effect of sanctions on Russia? The misdiagnosis of inflation in 2021-22 was merely the latest episode in a long-running series of failures. The question we should be asking, then, is whether there is something wrong with mainstream economics. Mainstream economists should perhaps re-examine their core beliefs, or maybe we need a new “mainstream” altogether." Something I have been pointing out since before the Great Financial Crisis began (editor's note: if you follow me, you know I foresaw the crisis and offered a way to avoid it, said austerity was a bad idea in theory let alone practice, and pointed out pandemic triggered bullwhip effect's impact on inflation). project-syndicate.org/commen…

A short thread debunking the myth monetary policy works. 1/

A wonderful example of lying with statistics.

Same thing was said about the interstate highway system and going to the moon. It is impossible to know all the new types of businesses/industries the Green New Deal will create. So any statement that its costs will exceed its benefits is opinion and not fact.

So who is holding the losses on US Treasuries ....

Having been at the Fed when Volcker was inflicting a severe recession, it was clear inside the Fed this recession wasn't slowing inflation. Rather, what slowed inflation was OPEC falling apart. But never let the facts get in the way of a good narrative ...

Left out of Wang's thesis is the role of the finance bros ... US has become a finance bros society that favors financial engineering ...

In case anyone is wondering, dramatically increasing the number of immigrants would lower wage inflation while at the same time being a tremendous economic stimulus.

hmmm ... has anyone considered perhaps the Great Financial Crisis didn't end ... maybe all ZIRP/QE did was buy time to deal with the bad debt in the system ... maybe this debt wasn't dealt with and as a result it has grown exponentially ...

According to Google: "In 2023, a significant 70% of Honda vehicles and 100% of Acura vehicles sold in the U.S. were made in America, making Honda one of the top brands for American-made vehicles." So primary way tariffs impact Honda is it raises prices under the tariff protection ....

wait for it ... when you outsource your manufacturing you also outsource your technical know how ... who could have guessed all those manufacturing workers knew something of value ... of all the bad ideas pushed by Economists, maximizing shareholder value is highly competitive for the absolute worst ...

by continuing to pursue path of being GOP lite, Dems continue to relegate themselves to being minority party.

As always, William White is worth the time to listen to. Please note his observation central banks lowered interest rates to avoid triggering losses on debt that can never be repaid.

Economics will never be the same. The Great Financial Crisis showed macro economists don't understand how the financial system or the economy work. Decade after crisis started and no explanation for why crises occur, how to predict (& hence avoid in future) or how to end.

There was never a doubt the Chinese government would use its control over US military supply chains to advance its interests over ours. The idea of outsourcing the Arsenal of Democracy in the name of maximizing shareholder value will go down as one of the great unforced errors of all time.

Great article on Deutsche Bank and how it hid $1.6b loss on its municipal bond portfolio. Please note how regulators had no idea of losses on this portfolio. Further evidence regulators are not fit for purpose of derisking banks. #Transparency needed. wsj.com/articles/deutsche-ba…

What would have happened if Bush didn't bail out the big banks? Banks would have absorbed the losses in the financial system. Most of the large banks would have been closed and replaced with hundreds of smaller banks. The era of financialization would have ended ... focus on making things rather than financial engineering. House prices would not have increased as much as ZIRP would not have been pursued. Inequality would be dramatically lower. And a host of other benefits ...

Fascinating to me why anyone would want to invest in China right now. Xi intent on popping property bubble. Given amount of debt outstanding, are any Chinese banks solvent? Also embarking on wealth redistribution from company owners.

Since Greenspan was Fed chair, Fed has failed at every action/decision if the goal was improving the real economy and keeping society together. If the goal was benefitting the 1%, undermining the real economy and dividing society, then the Fed has been a smashing success.

Actually, it would be better to characterize Fed's Jackson Hole conference as "the Priesthood of the Economic PhDs gather to promote a new BS narrative so nobody notices monetary policy doesn't work".

For those who missed it, today is the 13th anniversary of the start of the Great Financial Crisis. A crisis policymakers made worse by their response. A crisis that is still with us today (see QE/ZIRP).

Wedded to the idea the Phillips Curve exists outside of Econ 101. It truly doesn't. A fact that has been well known at the Fed since early 1981 when inflation didn't slow from high interest rates ... turns out the driver of inflation is important ... when inflation is supply side/energy price driven, interest rates are ineffective ...

A veritable who's who of macro economists who didn't see the Great Financial Crisis coming and then endorsed policies that overturned the social contract by making the crisis worse for the real economy and society. But other than that, their work should be celebrated....

GOP keeps proposing tax plans benefitting the rich and resents when an organization points out this fact.

I realize people don't want to accept Fed just reduced the value of their homes by close to 30%, but that is what mortgage rate increase did. Most homes are sold based on max payment buyers can afford. Higher rates mean the max payment now supports a much lower mortgage amount.

Starting point for why China is catching up to the US in technology (and pretty much everything else) : US MIT graduates go to work on Wall Street where they add no value to the real economy ... China MIT equivalent graduates go to work in industry where they actually put their training to use producing products that benefit the real economy.

It only took 4+ decades for Private Equity to arrive at the point where the only way it can create any value is by actually making a business successful ...

How many professors of Economics (and or Finance) and Banking saw the Great Financial Crisis coming and warned about it? Shouldn't that be a minimum requirement for anyone holding this job title?

A decade plus after the start of the Great Financial Crisis, it is pretty clear to save the banks, the central bankers broke the financial markets. Now they are trying to figure out how to fix what they broke without revealing the banks are still insolvent.

Banks in China are likely insolvent due to their exposure to real estate ... China doesn't have deposit insurance, so running to get your money out is a sensible strategy ...

After 45+ years supporting the hollowing out/off-shoring of American manufacturing, PhD Economists suddenly realize that was a horrible industrial policy ... guess all those laid-offs workers pointing out how bad it was didn't get their attention ...

Yet another observation by Milton Friedman that isn't right ... see supply side driven inflation ....

A universal truth about debt forgiveness: it improves the prospects of the borrower and hence the real economy. So one has to ask why wasn't debt forgiveness pursued by US, UK and EU in the wake of the Great Financial Crisis ... it was in Iceland and not surprisingly, Iceland experienced a quick recovery without engaging in dysfunctional policies like ZIRP/QE ...

The Great Financial Crisis hasn't ended. The solvency problems it revealed and its policies response have created are currently concealed by low interest rates and will re-surface in the next episode of financial stress.

Do you remember MIT's Billion Price index ... it was discontinued as it showed what inflation truly was ...

Vivid example of why stock buybacks should never have been legalized in the 1980s ...

Fed officials have decided higher unemployment is a good idea. Allow me a modest proposal. First people to lose their jobs are at Fed and its Regional Banks. Start with everyone with a PhD. They think being unemployed is a good idea. No reason they shouldn't experience it.

Depressing to see all the accolades poring forth on Biden's renominating Powell for another term as Fed chair. Apparently very few people look at Fed policy and see the damage it has done to the real economy (growth of debt zombies) and society (growth in inequality).

My tweet set off a very good discussion. Some defended Krugman's assumptions. Others said his assumptions are problematic. Economists don't want to disclose their assumptions because it shifts the discussion to the reasonableness of their assumptions and not their conclusions.

Actually, you can sort out BEFORE taking action ... if you have children you know there are two sides to any conflict and it is important to hear both before taking action ... same thing with sorting out which government programs to keep or get rid of ...

A bomb exploding in Beirut doesn't mean its citizens have been butchered. Reports out of Beirut indicate the citizens have left the areas being bombed.

Keep asking yourself if Bitcoin is such a wonderful asset to own, why would crypto promoters want the US to be buying this asset ... answer ... these promoters have run out of suckers and need the US Treasury to give them valuable real dollars in exchange for a "scam" ...

For years have pointed out if Economists disclosed their assumptions, no one would listen to them. Last week, Yellen came out and said Economists assumptions underlying competitive advantage were wrong. Why? China achieve its advantage via mercantilism. In addition, Economists couldn't be bother with what happens if you outsource your manufacturing base? hmmm ... imagine if Economists had disclosed their underlying assumption was mercantilism doesn't exist and outsourcing your manufacturing made you dependent on the kindness of strangers ...

Central bankers never had the tools to "save the world economy" during the Great Financial Crisis. What they did have was the ability to save the banks and transfer the burden of excess debt to the real economy.

Life in the USA became unmoored in the early 1980s with the adoption of shareholder value maximization and the resulting financialization of everything ... led directly to the growth in inequality and the collapse of "society" you and I grew up with ...

Been making this argument for 3+ decades ... America managed to outsource the Arsenal of Democracy under the misguided narratives of "maximizing shareholder value" and "competitive advantage" ... result was making managers inter-generationally wealthy, undermining the real economy and society ...

Prior to the adoption of QE, I pointed out it wouldn't have any positive impact on the economy, but would have plenty of negative impacts ... a decade plus later, it appears a consensus is forming I was right ... bloomberg.com/opinion/articl…

The official beginning of the Great Financial Crisis. BNP Paribas admits it cannot price opaque subprime mortgage backed securities. The "complete evaporation of liquidity" is the RESULT of this opacity.

Afghanistan and the Great Financial Crisis share a common trait. The so-called experts in the US government didn't understand what was going on and their response made a bad situation dramatically worse.

For years, pointed out the growth in corporate debt zombies ... from 4% in 2008 to 20% in 2020 ... it appears this exponential growth has continued with 40% of private credit borrowers no longer able to service their debt ... not only do these debt zombies undermine the real economy, but also raises the question of who is holding the losses on their debt ...

The Phillips Curve only exists in theory. There is no evidence of a tradeoff between unemployment and inflation in the real world. Time for the Economics profession and Wall Street to let this bad idea go ...