{"id":39885,"date":"2018-10-30T06:46:56","date_gmt":"2018-10-30T11:46:56","guid":{"rendered":"http:\/\/olduvai.ca\/?p=39885"},"modified":"2018-10-30T06:47:04","modified_gmt":"2018-10-30T11:47:04","slug":"not-waving-but-drowning-stocks-debt-and-inflation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=39885","title":{"rendered":"Not Waving But Drowning&#8211;Stocks, Debt and Inflation?"},"content":{"rendered":"<header class=\"wrapper entry-header page-header\">\n<div class=\"title-with-sep single-title\">\n<h3 class=\"entry-title\"><a href=\"https:\/\/www.cobdencentre.org\/2018\/10\/not-waving-but-drowning-stocks-debt-and-inflation\/\">NOT WAVING BUT DROWNING \u2013 STOCKS, DEBT AND INFLATION?<\/a><\/h3>\n<\/div>\n<\/header>\n<div class=\"wrapper\">\n<div class=\"grids\">\n<div class=\"grid-8 column-1\">\n<div class=\"single-box clearfix entry-content\">\n<ul>\n<li>The US stock market is close to being in a corrective phase -10% off its highs<\/li>\n<li>Global debt has passed $63trln \u2013 well above the levels on 2007<\/li>\n<li>Interest rates are still historically low, especially given the point in the economic cycle<\/li>\n<li>Predictions of a bear-market may be premature, but the headwinds are building<\/li>\n<\/ul>\n<p>The recent decline in the US stock market, after the longest bull-market in history, has prompted many commentators to focus on the negative factors which could sow the seeds of the next recession. Among the main concerns is the inexorable rise in debt since the great financial recession (GFR) of 2008. According to May 2018 data from the IMF, global debt now stands at $63trln, with emerging economy debt expansion, over the last decade, more than offsetting the marking time among developed nations. The\u00a0<strong><a href=\"https:\/\/www.imf.org\/en\/Publications\/WP\/Issues\/2018\/05\/14\/Global-Debt-Database-Methodology-and-Sources-45838\">IMF \u2013 Global Debt Database: Methodology and Sources WP\/18\/111<\/a><\/strong>\u00a0\u2013 looks at the topic in more detail.<\/p>\n<p>The title of this week\u2019s Macro letter comes from the poet Stevie Smith: \u2013<\/p>\n<p><em>I was much further out than you thought<\/em><\/p>\n<p><em>And not waving but drowning.<\/em><\/p>\n<p>It seems an appropriate metaphor for valuation and leverage in asset markets. In 2013\u00a0<strong>Thomas Pickety<\/strong>\u00a0published\u00a0<strong><a href=\"https:\/\/www.amazon.co.uk\/Capital-Twenty-First-Century-Thomas-Piketty\/dp\/067443000X\">\u2018Capital in the 21<sup>st<\/sup>\u00a0Century\u2019<\/a><\/strong>\u00a0in which he observed that income inequality was rising due to the higher return on unearned income relative to labour. He and his co-authors gathering together one of the longest historical data-set on interest rates and wages \u2013 an incredible achievement. Their conclusion was that the average return on capital had been roughly 5% over the very long run.<\/p>\n<p>This is not the place to argue about the pros and cons of Pickety\u2019s conclusions, suffice to say that, during the last 50 years, inflation indices have tended to understate what most of us regard as our own\u00a0<em>personal<\/em>\u00a0inflation rate, whilst the yield offered by government bonds has been insufficient to match the increase in our cost of living.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>NOT WAVING BUT DROWNING \u2013 STOCKS, DEBT AND INFLATION? The US stock market is close to being in a corrective phase -10% off its highs Global debt has passed $63trln \u2013 well above the levels on 2007 Interest rates are still historically low, especially given the point in the economic cycle Predictions of a bear-market [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[7380,3487,195,1849,364,418,426,431,434,534,753,22677],"class_list":["post-39885","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cobden-centre","tag-cycles","tag-debt","tag-financial-markets","tag-global-debt","tag-imf","tag-inflation","tag-interest-rates","tag-international-monetary-fund","tag-monetary-policy","tag-stocks","tag-thomas-pickety"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39885","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=39885"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39885\/revisions"}],"predecessor-version":[{"id":39886,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39885\/revisions\/39886"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}