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Ben Inker of Grantham Mayo sees profitability at U.S. companies at a high because of savings in labor costs while consumption has not declined because of government transfer payments and fiscal policy. He sees profits of U.S. companies declining in 2012-2013. This makes the U.S. stocks less likely to perform well in the future, especially the stocks outside of the blue chips which he sees as highly overvalued. A better choice in his view is in Europe and Japan which are undervalued. His funds have 39% in U.S. stocks and most of it in blue chip stocks. His view is that interest rate policy will not have a large effect as the changes will be very gradual, and going from zero percent interest rates to one percent interest rates will not lead to much change in economic activity. From his point of view the largest risk is in shrinking of profits at U.S. companies as the deficit comes down, because today workers are able to maintain consumption because of fiscal policy and companies are able to cut costs. In Europe the austerity cuts are being taken seriously and this will impact profits, so the U.S. will look better in 2012. But value will prevail in the long run as European and Japanese stocks are undervalued and the U.S runup leaves stocks overvalued in terms of future stream of profits....

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The number of workers out of work in the US for 3 to 6 months increases sharply from Spring 2022, as the labor market cools. Fed's Jay Powell's effort to cool the labor market with higher interest rates appears to be working.

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It is a serious problem when big banks such as JP Morgan Chase offer 1-2% in interest on deposits when the Fed has increased market rates to above 5%. The average for all banks is only 0.73%. Consider that JP Morgan Chase made $14 billion in profit in 2022. This reduces the interest earned by the vast majority of average Americans who have savings at American banks and reduces their wealth further increasing inequality in the US.

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Much of inflation's rise in the US has been transitory after all, says Greg Ip in the WSJ, yet credit Jay Powell at the Fed for his resolute fight against inflation. Gasoline that was over $5.00 a gallon in June when inflation was at 9.1% following Russia's Ukraine war is now $3.27 according to AAA, and this is an important reason why inflation is at 6.5% in December 2023. Demand for autos after pandemic and lockdowns coupled with supply chain problems caused auto prices and used car prices to rise sharply. This is now reversing with price declines. Ultra low interest rates caused a jump in home prices- this is reversing with Jay Powell and the Fed increasing interest rates sharply.

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This analysis by Mackintosh in WSJ points out that the low to negative interest  policy of the ECB has hurt savers, bank profits, and makes the ECB unpopular, yet it has shown tangible signs of success in creating jobs. This is true even though unemployment in the EU is still over 10% in some countries. He says that the unemployment is back to where it was in Nov. 1998 before the euro. There are 7.5 million jobs created in EU since beginning of 2014, the point at which ECB went to ultra low interest rates. This is above the 6.3 million created in the U.S. upto 1st quarter 2016. Big difference now is that companies and households are borrowing as rates fell. Inflation at 0.2% in August 2016 for EU is a weak spot, but considering where the EU was just 2-3 years before in 2013, the change is a largely positive one.

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John Taylor on the dual mandate for inflation and unemployment and discretionary policies by the U.S. Federal Reserve that ended up creating booms and busts in the U.S. economy. He advocates replacing the dual mandate of "maximum employment" and "stable prices," which was inserted into the Federal Reserve Act in the 1970's, with a single mandate for "long-run price stability." Taylor points out that this will still give the Fed flexibility, as it is focussed on long run price stability. The Fed does not have to overreact to short run increases in inflation. And he points out that this actually will work well for unemployment as the booms caused by an overextended period of low interest rates such as that in 2003-2005, have led to booms followed by busts with high unemployment.

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China's central bank PBOC reduces interest rates to reduce borrowing costs of heavily indebted households. Households in China carry more debt than households in the US. Mortgage costs are a key part of the debt for households in China. It points to slowing of the economy in 2023.

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Kenneth Rogoff, Harvard University economist, author of the well researched book on the 2008 financial crisis, "This Time Is Different," gives his thoughts on the economic prospects for the U.S under the new Trump administration. He says 4% GDP growth and 3% inflation is possible temporarily for a while with stimulus policies, less regulation, and increased private investment. After 8 years of not investing in much needed infrastructure because of concerns about the deficit, the timing is right for such investments, especially as the economic effects of the crisis of 2008 gradually fade.  This is about taking advantage of ultra low interest rates to invest in infrastructure. He says it helps that Trump policies are pro-business. He sees drawbacks as the stimulus program adds a 25% increase with extra debt, adding $5 trillion over 10 years, but adds that for many years Nobel prize winning economist Krugman and others have said that there is good reason to increase borrowing to invest, and this is now being tried. Inflation remains an uncertainty- if there are large quantities of underutilized and unemployed resources it would raise prices less than its effect to increase output. The reverse would apply if the U.S. economy is closer to full capacity. One factor that would help- increasing confidence for business and increasing investment. Against this what he calls optimistic view or spin, is the idea of mistakes under a Trump administration, errors made and a degree of incompetence which he says is a real possibility. Overall his view is that some risks are appropriate now, and from his deep study of financial crises sees the slow growth of the last 8 years a result of a financial crisis that now begins to fade, creating the possibility of higher growth under prudent policies.  ...

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Bank of Japan negative interest policies for two decades was a kind of experiment and a failed one, says this report in WSJ. It caused a form of financial repression where households were made to subsidize companies. Households lost net interest income in the period 2000-2020 in the amount of trillions of yen, says Deputy Governor Himino of BOJ, as interest on household savings was so low or negligible. A similar situation hurt savers and retired people in the US. With inflation at 2% Japan is ending its period of negative interest rates, a welcome change that will benefit tens of millions of people with household savings giving a return, including the 45 million retired people one third of the population who depend on savings income.

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"Made in China 2025" is a plan by China to build competitive companies in new technology industries such as advanced microchips, driverless cars, robotics. This is one area in which there is a huge difference in trade matters more than the tariffs issue, because the U.S. sees this as an effort to dominate these industries with state subsidized loans at low interest rates. The Trump administration has threatened to impose 25% tariffs on imports from China in these industries to protect U.S. companies. The U.S. insists there should be a level playing field for U.S. companies.

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Lower prices of European stocks makes them more attractive. Cuts in interest rates by European central banks are another factor in pushing the French stocks CAC index and the German stocks DAX index by 8% and 9% respectively. This compares to the S&P 500 Index for US up by 2.45% by February 7, 2025.

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U.S. Federal Reserve policies that focus on bringing down the unemployment rate, with special focus on the long term unemployed. The Fed's view is that unemployment is high across all sectors and industries and not based primarily on structural factors such as mismatch in skills. Structural unemployment cannot be reduced through interest rate or monetary policy.

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Demand for lumber is at new highs with the increase in demand for housing. Demand for housing is up because of low interest rates in the U.S. Much of this demand is from people working from home who are less affected by loss of incomes that is affecting construction restaurant, tourism, and industries where work is outdoors or where people interaction is high.

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By taking action in Venezuela in a way that benefits the Venezuelan people (and similar action in the long run interests of the Iranian people to dedicate most of the resources for development and increase share of oil revenues without discounting and removing sanctions ill effects on economy and quality of life) major new changes can improve quality of life in the world.  Venezuelan production which was 3 million barrels a day has declined to 900,000 without US investment and technological upgrades. With US investment this can be increased to put additional oil supplies on the market lost in the war with Iran and smaller traffic through the Straits of Hormuz. Venezuelan crude is best suited to US refineries which frees up shale oil for export to meet needs of India and Europe. China which had hyper growth through massive oil consumption would reduce its growth rate and its impact on climate change as it adjusts to the loss of 3 million barrels a day it no longer gets from Iran. Slower growth rate in China is good for the climate as it is the hyper growth of China that put the most pressure on climate even as Europe and the US had cut  fossil fuels consumption over the last decade. China made 2 coal plants a week and 95% of all new global coal construction in 2023. India needs additional oil supplies as it increases its growth rate from a much lower point of development (and electricity poverty) than China. By simply settling for normal development compared to hyper development targets( China has reached a point of Oil Fairness Percentage where each country gets to use the same percentage of oil as its population is as a percentage of world population- the number being about 17% for China for both, with the number being 18% for India and it having a shortfall of 12% based on its oil consumption being only 6% of the world total). China can reduce oil and coal consumption reducing pressure on oil prices and absorbing most of the impact from the loss of Iranian oil. China and Russia + (old Soviet territory) Canada, Australia, Brazil, Argentina, make up about 40% of the world's territorial landmass, would be large beneficiaries with improved climatic conditions from burning less coal. They are now highly developed countries and do not need hyper growth which requires China to build 2 coal plants a week and consume excessive amounts of crude oil and coal based on artificially set targets that make no sense by destroying the climate when no child in China lacks electricity to read. Marathon Philipps Valero with over half a million barrels of refining capacity for heavy Venezuelan crude can now put this to use using the imports by US of lower priced (by $9 to Brent crude) Venezuelan crude oil. In a few months of 2025 US has imported 280,000 barrels a day of Venezuelan crude in February 2026 alone some of it going to the large Valero refinery in Port Arthur, Texas. American oil refiners make larger margins using the Venezuelan crude than they make on light crude from shale oil producers in the US. What this does is to increase the supply of crude and refined oil products on the market as the light crude get shipped overseas to India and Europe- including countries like Spain which took in 100,000 barrels a day of shale crude from US in February 2026. ...

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Bond issuance for African countries will continue in 2015 at a slower pace with the expectation of U.S. Fed raising interest rates in late 2015. In 2013 African countries raised $11 billion, and in 2014 $8 billion, compared to $1 billion in 2000, as these countries from Nigeria to Ghana raised money to finance infrastructure development. Ivory Coast plans to raise $1 billion in coming months, Tanzania plas to issue a dollar denominated bond. Senegal, Angola, Kenya and Ethiopia are issuing bonds to western investors and competing with other developing countries such as Bolivia, Guatemala and Romania for investors. Analysts say countries such as Ivory Coast, with a growth rate of 8% and prudently managed finances are considered "good issuers" in today's market.

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Inflation is outpacing wages in the US by 4% in July 2022. Consumers are cutting back on spending. The US Fed is looking at another 0.75 percentage point increase in the interest rate in July 2022.

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The Labor Department reports 295,000 seasonally adjusted jobs created in Feb. 2015, with the unemployment rate dropping to 5.5%. This opens the path for the U.S. Fed to increase interest rates as early as June 2015.

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The unemployment rate of 5.9% in the US in June 2021 is still higher than the pre-pandemic rate of 3.5%. It is also different in other ways that are not so apparent. There are 9 million Americans looking for jobs. They are also looking for jobs outside industries that were hit hard during the pandemic, or pursuing better jobs with less commute and more remote work, and jobs outside of warehousing which requires less of the skills and training they have or in remote locations far from where they live. Economists like to use terms such as "mismatch" to describe this as in this report in WSJ. This does not bring home to us the enormous human toll of the pandemic. A recent survey of US workers for April by the Federal Reserve Bank of Dallas found that 31% of people do not want to return to their old jobs up from 20% in July 2020. One in three from one in five last year are looking for something different than the the jobs that were hit hard in each successive wave of the coronavirus pandemic. Other surveys have found that 70% of workers who last worked for the leisure and hospitality industries are looking for something in a different industry. Leisure and hospitality that includes restaurants and hotels, airports, were hammered in this pandemic. And 55% of job applicants in one survey were found to be looking for remote work. Economists also see the macroeconomy in terms of supply and demand for labor, in terms of interest rates with low interest rates as a way to tackle unemployment, yet this has limited value in real life situations in the economy when it is affected by a number of factors, including some unusual factors such as the pandemic and man made events such as the global financial crisis of 2009 from banking missteps. The federal government has to take steps of its own to support Americans as these changes take place in the economic situation and Americans are in need of help with adjustments. ...

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Malkiel says both sides in the investor debate are right. Those saying the CAPE ratio in the U.S. at 25, well above long run average of 15, are right to point this out. So are the others in the debate who point to the lack of alternatives for investors when the 10 year Treasury bond is at 2.4% and short term rates essentially at zero. Stock prices reflect the discounted present value of future cash flows from dividends and capital gains. This discount rate in 2014 has to take into acount the rate on low risk securities such as 10 year U.S. Treasury bonds and and a premium for riskiness of the stock market. Add three or four percentage points to this and one gets a low discount rate for future earnings that helps support reasoning for higher stock prices, says Malkiel. On the issue of low interest rates Malkiel's view is that they will be around for a long period because the unutilized productive labor capacity and low growth are likely to persist for a long period. Here he supports Fed chairwoman Yellen's view based on the U6 labor utilization. He also sees the long run equity returns from today's prices to be much lower than the 10% long run average. By accomodating both sides Malkiel supports a broadly diversified portfolio with adequate room for emerging markets and international stocks....

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As the U.S. economy continues to gain in job growth with unemployment at 3.8% in May 2018, wage gains remain low. Wage growth over the past year is about 2.7%. Labor participation rate is at 62.7%. Reasons given for low wage growth are the lack of wage increases for people who stay at their current jobs, the digital disruption lowering wages, decline of union bargaining, and low productivity growth. This gives the Federal Reserve more room to increase interest rates gradually.

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Former U.S. Federal Reserve chairpersons Volcker, Greenspan, Bernanke and Yellen, are together at the International House, on the campus of Columbia University, in April 2016, in a forum hosted by journalist Fareed Zakaria. The discussion covers topics related to the financial crisis of 2008 and its aftermath, with quantitative easing, Fed communication as policy tool, and the gradual increase in interest rates.

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Allan Meltzer says a Fed QE III woud be bad monetary policy. He puts several questions to Bernanke- how the Fed and Ben Bernanke can know now what is the right interest rate policy in mid 2013, and what reason can the Fed give for adding excess reserves when U.S. banks have $1.6 trillion in idle reserves at the Fed. Meltzer cautions the Fed and other policymakers not to pay attention only to short term forecasts, which can be susceptible to large errors. And calls for attention to the long term consequences of their actions. One point he emphasizes is that the unemployment problem cannot be resolved with short term policy actions nor can it be resolved in a short time. It will take population growth, falling housing prices and rising rents to create opportunities for new construction. Another change is the transition to a less consumption driven and more export oriented economy. This transition which has started will also take time. He urges the Congress and the administration to focus on: reducing corporate tax rates by closing loopholes, long-term reductions in entitlement spending, a 5 year moratatorium on new regulations, and the Fed adopting an explicit inflation target between 0% and 2%....

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The S&P 500 index gained 5.9% the week of October 29th for its best gain since November 2022. For 2023 it has gained 14%. A jobs report showing less job growth of 150,000 slightly higher unemployment at 3.9% and slowing inflation, led the US Fed to pause raising interest rates. This has created optimism that inflation would gradually decline which is good for the economy.

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The PCE personal consumption expenditures index of the US Commerce Department is likely to come down slower than the CPI index by October 2023. The US Fed prefers to use the PCE index and this could lead to the Fed staying with higher interest rates for longer, says the WSJ. Medical care costs are likely to accelerate by the end of 2023, as housing costs decline. The PCE has a larger weighting for medical care costs than the CPI index. 

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Which may not be a bad thing as it would keep inflation in check and shift to a new way of handling the economy with higher employment and wages and moderate to low inflation. The US may be facing inflation on a bumpy path to 2% or more likely stay near 3%. The 2% target of the Fed was from an earlier era when wages were stuck for most factory workers. The increase in wages was needed so that workers could improve their standard of living that was being eroded and after years of stagnant wages. Inflation at around 3% may be where inflation would be in the current environment. This also means higher interest rates on savings which form the most important source of income next to social security for retirees and older workers with larger savings. This also provides an incentive to younger workers to save that did not exist when interest rates were brought to zero to tackle recurring financial crises caused by banks and external events.