Pragmatic Capitalism

Practical Views on Money & Finance


Did Keynes Understand Endogenous Money?

One of the core understandings of MR is the endogeneity of money. Endogenous money is based on the understanding that the money supply is high powered money + broad money and that these variables are determined by the private sector’s demand for money. That is, almost all of the money in our monetary system is created… Read More

“Loans Create Deposits” – In Context

Loans create deposits. We’ve heard it many times now. But how well is it understood? The phrase is typically invoked accurately, in conjunction with a rejection of the ‘money multiplier’ fable found in economic textbooks.

Barrons Doesn’t Do Monetary Realism

Just when you think the word might be spreading….It was interesting that Barrons ran this great quote from a regular reader here at Pragcap last week:  We must be careful comparing the federal government with a household (or state or business) because Washington has no solvency constraint. The federal government can’t run out of money… Read More

QE & Stock Prices – A Review of Recent Data

One of the primary goals of Quantitative Easing is the portfolio rebalancing effect and subsequent wealth effect that supposedly occurs as the Fed reduces outstanding private sector bond holdings and forces investors to chase returns up the risk spectrum into other asset classes to replace lost potential real returns.  I won’t discuss the aspects of… Read More

Robert Shiller: Don’t Invest in Housing

Robert Shiller of Yale was on Bloomberg yesterday discussing housing and his general outlook. But the most interesting comments were with regards to his general view of housing as it pertains to your overall portfolio. Shiller said that investing in housing was a “fad” and not a great historical investment. Of course, if you’re familiar… Read More

Some Brief Thoughts on the CBO’s New Budget Projections

Understanding the importance of the Federal budget Deficit in recent years is really very simple.   In a healthy economic environment private investment is one of the primary drivers of economic growth and improvements in living standards.  But what happened in the Great Recession was highly unusual.  Private investment collapsed in an almost unprecedented fashion.… Read More

Back in the Saddle….

Sorry for the slowdown at the site.  I got interrupted by the rare vacation.  Things will be back to normal once I decompress and wake up to the reality that is “work”.  But first, some travel thoughts: Asia is an incredible place.  It was my first time there and I can’t say enough good things… Read More

Weekend Reading: There’s More to Life than Happiness

A big part of my work has been influenced by the French philosopher Volney who stated that human beings strive to become happy through becoming better and more virtuous. In Empire of Ruins he wrote that the purpose of life was: “To render you more happy…by rendering you better and more virtuous. It is to… Read More

GDP Declines -0.1% in Q4

I am kind of out of the loop here due to travel so my apologies on such a brief post.   As you likely know by now, Q4 GDP fell by -0.1%.  A decline in the rate was expected, but worse than analyst expectations of 1% growth.  The decline was primarily driven by declines in government spending and… Read More