Disciplined Systematic Global Macro Views

The problem of secular stagflation runs through all conversations of global macro investing. Call it the “new economy”, the “new normal”, or something else, but this is the benchmark theme that needs to be used to assess current management strategy and portfolio structure. Any discussion of secular stagnation needs to divide the conversation into three parts: long-run growth, the deviation or gap away from the long-run (cyclical), and level changes in growth. Confusion occurs when the debate does not make a distinction between these three.

Most of the discussion concerning macroeconomics is approximately cyclical variation across the trend and not the craze itself. This focus is misplaced. Of course, policy-makers and buyer are always looking at what is going on in the short-run, but a lot of money and the entire prosperity of the economy are driven by growth trend.

Cycles get headlines but development development drives long-term financial well being. Any policy-maker who’s not engaged in discussion on the development trend is really losing his time. Not that the cyclical will take care of itself always, but inventory or credit distortions do have a real way of solving themselves. The one-off level changes also cannot be solved. It could be regarded as a dead-weight loss.

You cannot reunite part of overall economy that is damaged in a bubble. The long-run growth trend in America may very well be lower because there are strong headwinds that are not easily solved. There is a slowdown in the development of productive inputs and there’s a decreasing of total factor efficiency. The post-WWII period was a unique amount of high efficiency that is improbable to be repeated.

These headwinds cannot be easily solved and will not be resolved by just reducing interest rates. The demographics are working against higher development also. Workers are getting older and their consumption patterns are changing. The development and productivity increase from advanced schooling are also behind us. The educational requirements are higher now to become more productive, but the percentage who can go for advanced schooling is hitting limits.

Clearly, the boom in education post-WWII was significant. There is a major step-up in education and knowledge but current increases are more marginal. Income inequality has devastated the middle class, which impacts consumption and productivity patterns. This hurts growth. How big is the public debt is an online move on any marginal federal government investments.

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Government investment will usually have lower earnings on capital, particularly if it is focused on redistribution and not infrastructure development. How you may spend the money issues. If this tendency is lower for the united states and the developed world, come back on capital will be lower. a lot of money is likely to be manufactured in those places where craze growth is higher. Long-term interest rates shall be lower, which leads to lower destined problems in rates. This issue of low rates impacts our ability to get out of any cyclical growth shortfalls or gaps.

There is less room for policy-makers to maneuver. Finally, crises or shocks that lower the known degree of GDP will have a long-term effect. Some formerly productive assets will never be put back to work. Some poses will not be recouped. On top of this backdrop there is certainly the fact that monetary policy, through excessively low rates, will raise the potential for bubbles which may mask these secular trends. How can you trade stagnation when a bubble is pressing asset prices higher? You must accept bubble risk. Clients demand come back, therefore the short-run can’t be forgotten. That is a sobering tale but one that need to be digested.

Is interest income gained in the US subject to withholding taxes when paid to a foreign person? Yes, it’s possible that the payer of the eye income would be asked to withhold some fees from the source of the interest income that is being paid to a taxpayer. Do quitclaim deeds free you from taxes on the property you have relinquished? No. You’ll still owe the amount of money and the creditor can go after you for payment. Furthermore, whoever you moved the land will come after you if they paid you hardly any money for the land because the land can be taken from them by the town for delinquent fees.

Disciplined Systematic Global Macro Views
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