Saturday, April 2, 2016

Krugman and DeLong, Like Austrian-Lites, Think We Are in a Depression

Which means they are all confused about the nature of the business cycle  and the economy in front of them,



  1. I do not think we are in a depression but there is evidence that the economy is not booming and humming as well as you think. From a David Stockman article the other day:

    As we have indicated repeatedly, S&P 500 earnings—–as measured by the honest GAAP accounting that the SEC demands on penalty of jail——-have now fallen 18.5% from their peak. The latter was registered in the LTM period ending in September 2014 and clocked in at $106 per share.

    As is shown in the graph below, the index was trading at 1950 at that time. The valuation multiple at a sporty 18.4X, therefore, was already pushing the envelope given the extended age of the expansion.

    Indeed, even back then there were plenty of headwinds becoming evident. These included global commodity deflation, a rapid slowdown in the pace of capital spending and the vast build-up of debt and structural barriers to growth throughout China and its EM supply train, as well as Japan, Europe and the US.

    In the interim it has all been downhill on the profit and macroeconomic front. By the March 2015 LTM period, S&P reported profits had dropped to $99 per share and have just kept sliding, posting at only $86.44 per share for the December 2015 LTM period just completed.

    1. And what theory is it you hold that explains this?

  2. But but but ... massive government spending ... deficits are meaningless ... inflation ... these are all good things according to Krugman, right? So he's gotten everything he's called for. How can he even think we might be headed for a depression?

  3. when krugman and peter schiff agree on something chances are they're right ...