First, I didn't get into it in my first round but Guy Noir has repeated support for his view that I have knocked down previously. He wrote this time:
Corporate earnings have been trending down for quite a while.He statesd this fact as "evidence" of the poor shape the economy is in.
But he raised this same point just over two weeks ago. He is confused with weakness in specific sectors versus what happens when there is a recession,where a downturn is across the board.
I go into the confusion in detail here:The Nature of the Business Cycle and the Current State of the Economy.
Also entering the fray is Neil
NeilAugust 23, 2016 at 3:26 PMWhat I think Robert is ignoring, or at least not addressing to the public at large, is the extraordinarily easy monetary policy that persists at the Fed in the face of these booming asset prices and low unemployment numbers. The last time the capital goods sector looked like this, in 2007, the Fed funds rate was at 5.25%. Now it's under 0.5%. This is not your fathers' or your grandfathers' business cycle folks.
Danger PioneerAugust 23, 2016 at 6:17 PM@Neil - the absolute interest rate is mostly irrelevant - the interest rate only matters in context of what it is relative to what the natural interest rate would be if there were no central bank ... what matters far more is the rate of increase in money supply (which Mr. Wenzel does not at all ignore) ... looking at the Fed-set interest rate in a vacuum is mostly useless
Further, you can't compare interest rates over two different periods. Who is to say by how much interest rates are pushed down by Fed activity? You can come up with a number.
I recall having a discussion about this with Murray Rothbard in the early 1980s when interest rates were going in the other direction, skyrocketing, and analysts were saying, "Well, this will stop. They have not been much higher ever before."
We both agreed, "Who is to say how high rates can go? Historical levels have nothing to do with where they go from here."
I hasten to add, up or down.
Nest comes in Hollow Daze.
Hollow DazeAugust 23, 2016 at 7:48 PM@Danger Pioneer - What would the natural interest rate be if there were no central bank? When companies borrow money to buy back stock or hedge funds borrow to fund leveraged bets , do you really think they care about the "rate of increase in money supply"? Do you really think 5.25% vs. 0.05% rates is a meaningless comparison?@Danger Pioneer isn't saying that corporations don't care about the rate, All he is saying is that there is a market interest rate that can't be known when the Fed manipulates the money supply. We know it will be higher than the current rate but there is absolutely no way to determine by how much. That is all he is saying and he is correct.