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Friday, May 22, 2015

Friday news

Off to work, here's stuff:

BI - Rosie says this is the sweet spot for stock returns. Quote:
In periods when real GDP growth is running between 2% and 3% at the same time that core inflation is between 1% and 2%, the average annual advance in the S&P 500 is 14.4%.

Note that if growth were to move up a notice to a 3% to 4% range while maintaining core inflation between 1% and 2%, that average annual stock price gain rises to 22.6%.

Fore the bears, the only periods when the stock market enters negative price territory — and this is true under any inflation scenario — is when real GDP growth is 1% YoY or lower (thankfully we are just under 3% right now).

At no time, under any inflation segment, did the stock market fail to rise with real growth minimally at 2%. That is reassuring.
Checkmate, doomtards. Now buy SPY and quit your panty piddling.

Krugman - conservatives and Keynes. Quote:
We’ve noted that after World War II there was a concerted, disgraceful effort by conservatives and business interests to prevent the teaching of Keynesian economics in the universities, an effort that succeeded in killing the first real Keynesian textbook. Samuelson, luckily, managed to get past that barrier — and many were the complaints. ...

What’s it all about, then? The best stories seem to involve ulterior political motives. Keynesian economics, if true, would mean that governments don’t have to be deeply concerned about business confidence, and don’t have to respond to recessions by slashing social programs. Therefore it must not be true, and must be opposed. ...

If you think I’m being too flip, too conspiracy-minded, or both, OK — but what’s your explanation? For conservative hostility to Keynes is not an intellectual fad of the moment. It has absolutely consistent for generations, and is clearly very deep-seated.
You already know what it is, Kruggers: conservatives want to destroy the social safety net and enslave the poors. The way you do that is by using a non-Keynesian pro-cyclical strategy with the business cycle to ratchet down benefits year after year. Reagan's crew explicitly said this 35 years ago.

Bron Suchecki - Indian gold monetization scheme doesn't make sense. Well, he works at the Perth Mint so I guess he'd know:
Another issue is that “there is no guarantee that tax sleuths will not come calling hot on deposit, asking for the source” of funds that purchased the gold, as First Post notes. In addition, they note that the need to melt the jewellery “is abshagun, inauspicious and a strict no-no”.

The melting issue comes up a lot in the comments to the draft, but one helpful suggestion to “change the draft to deposit jewellery and get monthly interest on it” seems to miss the point of the whole scheme, which is for the gold to be used by jewellers. It also shows the difficultly in marketing this idea when people can’t see why it makes no commercial sense for a bank to pay interest on stored jewellery which it cannot use.

It is also a bit of a concern that the Government’s draft says that “banks may sell the gold to generate foreign currency. The foreign currency thus generated can then be used for onward lending to exporters / importers” which is basically saying the bank will go naked short gold (and no, they couldn’t hedge it as the cost of the hedge would eliminate the profit on lending cash – hence why the call for subsidies).
Then he goes into a lot of detail about how the system won't actually mean a drop in gold imports at all - unless, of course, the banks go naked short gold in rupees, which would be scary but it's not as if I'd put that past India. Bron, Rajan is an economist: I think he knows how lending works. So he must want the banks to go naked short gold in rupees, there's no other explanation.

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