Good Thursday AM,

Off to a late start. A few thoughts from Dan Rawitch and then a good piece on the Stimulus from Bloomberg (it’s a bit technical 🙂 ).

Jobless claims and housing starts were horrible and should be helping bonds. The problem is that when a market is bearish, it ignores any helpful news and overreacts to other news. Jobless claims are signaling that we still have a big problem in our economy. Without rising wages and a rising work force, we will not have production and without production we will not have consumption and without consumption… GDP falls and deflation rears its ugly head. I remain long-term bullish, short term bearish and mid-term, confused.

With the economy seemingly ready to cook, naturally there’s going to be more talk about whether the Fed needs to hike interest rates sooner than planned, or that Biden should pare back his spending plans. Things might get so good that we need to cool things down.

But maybe the answer is to spend even more, and for the Fed to ease more.  After all, when we talk about the economy “overheating” or inflation emerging, what are we talking about? We’re talking about the emergence of bottlenecks or the lack of productive capacity to absorb all this spending.  After years of perpetual underinvestment, is the answer to curtail spending (either by raising interest rates) or for the government to ease back? Or is the answer to expand productive capacity?

In Chapter 22 of The General Theory (which my colleague Matt Boesler posted years ago).

Please stay healthy and make today great!