Hello. I’m Burnham Banks and I studied economics in the late 80s and early 90s. I’m still studying economics today and am still no wiser. This blog is a journal, a record of my thoughts and experiences. If we are destined to repeat our mistakes, we should at least repeat them faithfully. If not, then perhaps the past is a mischievous guide and we should try something new.

The Limits of Monetary Policy? The Price of Fiscal Policy.

Since the ECB announced a rate cut of 0.1% taking the desposit facility rate to -0.50% and a resumption of bond purchases at a rate of 20 billion EUR per month, the 10 year bund yield has predictably moved from -0.71% to -0.45%, a 0.26% rise, substantial when yields are that low. The ECB’s move
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ECB to disappoint. Lagarde expects fiscal policy to do the lifting.

I’ve been of the view, like so many other investors, that the would be dovish and a) launch LTRO early, b) cut rates, and c) do some form of QE (the market thinks outright QE, I thought unconstrained LTRO.) This view has led me to be long EUR duration from Bunds to Italian and Portuguese
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Inequality

Inequality has reached acutely high levels. There are costs. The most fundamental impact of inequality as it reaches this level of wealth concentration, (over 40% of the world’s wealth is owned by the top 1% of the population and over 80% of the world’s wealth is owned by the top 10% of the population), is
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Recession yes, but not from the Inverted Yield Curve

I don’t know how yield curves get inverted but when they do, recessions tend to follow after. Why? Banks borrow short term and lend longer term and an inverted curve means that the bank credit market fails to clear. It results in a credit shortage which chokes off growth. We will still get our recession,
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China US Trade War, Trade – War

I have argued since 2013 that the world had been in a trade war since at least 2009, perhaps 2007. This war was fought at various times in the FX theatre and through the re-shoring of manufacturing. Re-shoring represented a reorganization of global supply chains to locate them in the countries of the parent companies.
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