From Plunger’s weekend report … I suggest some of you go read Lacy Hunt’s quarterly reports since 2017. Being an economist, he has a forward looking way of thinking about the current economic landscape. It includes MMT, which Plunger discussed, but many other valuable insights that will help you see the forest for the trees. A re-occuring theme he highlights in many of his reports is increased government debt, slower economic growth, dis-inflation or deflation, and lower yields. Interestingly, he also mentions the Fed is likely using the wrong tools to conduct monetary policy because of its obvious lags. Bottom line, it is clear he believes we are entering very challenging times ahead because of Fed and government ineptness!

 

And, his viewpoint from his 3rd Quarter 2018 report, which matches what we saw in the 4th Quarter 2018, however, I would argue the “bumpy landing” has not occurred yet, even with December’s sell-off:

“The U.S. economy appears to be on a steadily declining path to recession and disinflation/deflation. This may seem improbable in the face
of record year-over-year growth in nominal GDP over the past decade (Chart 1). Additionally, the U.S. has experienced record stock prices, record confidence levels, a steady upward march of coincident economic indicators and the lowest unemployment rate (3.7%) reported in the past 49 years. These statistical measures, along with many others, however, carry no weight regarding future economic activity. Monetary policy has played a major role in determining recessions. But, unlike the past, the government’s debt level has reached such extreme heights that, like monetary policy, it is also serving to restrain economic growth going forward. An analysis of these factors leads to the inescapable conclusion that a bumpy landing is in store for the U.S. economy.”

 

From his 2nd Quarter 2018 report, strong hints of deflation:

“The slowdown in money growth, combined with secular weakness in velocity, indicates that the global aggregate demand curve over time will
shift inward, simultaneously weakening inflation and economic growth. Since inflation is a moneyprice-wage spiral, the longer-term inflation risks are clearly to the downside. Monetary policy operations will restrain future economic growth and the impact will be surprising due to the longlagged effects.”

 

From his 1st Quarter 2018 report, it’s all about debt and the law of diminishing returns:

“While many believe that surging debt will boost economic growth, the law of diminishing returns indicates that extreme indebtedness will
impede economic growth and ultimately result in economic decline. Diminishing returns is about economic growth and thus highly important in
economics since the standard of living cannot be raised without increasing output. The application of diminishing returns means a disproportionate growth in debt will produce similar results for all countries in extreme debt, regardless of their idiosyncratic conditions. Thus, no matter how U.S., Japanese, Chinese, European or emerging market debt is financed or owned, and regardless of the economic system, the path is stagnation and then decline. Even central bank funding of debt will not negate diminishing returns.”

 

http://www.hoisingtonmgt.com/economic_overview.html