Slow Recovery or Secular Stagnation?

Recently there’s been a lot of talk about so-called “secular stagnation.” The term refers to a condition in which an economy isn’t just recovering slowly (say, from a deep financial crisis) but is permanently stuck in a mode characterized by very low growth, low inflation (or outright deflation), and stubborn, high unemployment. The purpose of this and the next few posts is to assess the merit of this idea. But, first, let’s look at its provenance, since that is likely to shed light on the subject. read more »

Should We Worry About Liquidity? (Part 3)

We’ve been talking about liquidity and how it happens – or doesn’t – in the markets where bonds are actually traded. This is because our immediate concern is the junk bond markets, which seem likely to be the first tripwire in the next financial crisis. We examined the current mismatch between the people who need liquidity (gigantic bond funds, e.g.) and the people who provide it – the much-diminished bond dealers. read more »

Should We Worry About Liquidity? (Part 2)

People think bonds are boring, but that’s only because they haven’t read Alain Badiou.(1) In any event, the subject of bond trading makes the subject of bonds in general seem positively sexy. But, like it or not, if we want to understand whether we should be worried about liquidity in the bond markets, we have to understand something about how bonds are bought and sold. read more »

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