Recent Posts

Monday, August 25, 2014

Link: More SFC Papers

Here is a link to an updated list of articles using Stock-Flow Consistent (SFC) models at I expect to write a couple posts on SFC models soon.

(Link courtesy of Tom Hickey at Mike Norman Economics.)

Sunday, August 24, 2014

Sustained Growth On A Finite Planet

In recent years, it has been increasingly popular to make statements along the line that exponential* economic growth cannot forever in a finite planet. (One of the more popular examples of this argument was the essay Exponential Economist Meets Finite Physicist, by Tom Murphy, an Associate Professor of Physics at the University of California, San Diego.) I follow what I would describe as a minimal Peak Oil viewpoint, but I believe that this framing of the issue in terms of a finite planet is largely incorrect in terms of analysing the economy. My reading of the situation is that under a non-catastrophic Peak Oil scenario, economic growth in the developed world will continue much as it has been doing for a fairly long horizon (30 to 50 years?). Much longer horizons (100 years, for example) is when very serious problems would show up in the economic data.

Wednesday, August 20, 2014

Book Review: The Undercover Economist Strikes Back

The Undercover Economist Strikes Back (How to Run - Or Ruin - An Economy) by Tim Harford is an interesting popular introduction to macroeconomics. Tim Harford has written previous popularisations about microeconomics; in this book he takes a stab at trying to explain macro. The book is well written for its target audience, but it glosses over the theoretical divide within the field.

Sunday, August 17, 2014

Understanding Central Bank Control Of Interest Rates

One topic that periodically comes up is the issue of whether bond yields are "controlled" by the central bank, or whether they are set by "market forces". The typical context of the discussion is whether the bond markets can force governments to follow certain policies. I am in the camp that the central bank does "control" bond yields, but there are some subtleties in understanding how that control is defined.

Saturday, August 16, 2014

Canadian Labour Data: Second Time Lucky

Chart: Canadian Aggregate Employment Growth

The do-over for the July Labour Force Survey for July 2014 was much better than the first go - 42,000 jobs were created in this version, instead of just 200. But as the chart above shows, the year-on-year growth rate for employment is still below 1%. And the details of the report are less buoyant the aggregate job number suggests, as growth was dominated by part-time positions.

Wednesday, August 13, 2014

Erratic Linker Carry Means Breakeven Inflation Matters, Not The Real Yield

One of the non-intuitive aspects of the analysis of inflation-linked bonds (also known as index-linked bonds, or even linkers) – is that their “real yield”* is almost a point of trivia for their valuation. Linker valuation is best understood by looking at their implied breakeven inflation rate.

Tuesday, August 12, 2014

Market Update

Chart: 10-Year Government of Canada Bond Yield

Just a short comment today. I was getting some charts together to discuss the ugly Canadian July Labour Force Survey, but it appears the data were so ugly that they were wrong. The data will be re-released on Friday, August 15 (at least my charts are ready). I will instead make some comments about the global bond market rally.