Will ‘The Big Change’ Macro Theory Go Bust?

Will ‘The Big Change’ Macro Theory Go Bust?

In "Trial By Fire: Are Corporate Profits About To Plunge?" I made a casual observation about the size of earnings declines witnessed during recent recessions. Outsized EPS drops in 2001, 2008 and 2020 don't suggest we’ve been particularly successful in "smoothing out" the business cycle. You can have a look for yourself in the linked article, but long story short, peak-to-trough earnings declines are getting larger and the rebounds more cartoonish. There's widespread agreement that the latit
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8 thoughts on “Will ‘The Big Change’ Macro Theory Go Bust?

  1. Thanks, H. It’s interesting how there seems to be a consensus about the comments by Goldman, B of A, etal. Whether it’s new world order, the Big Change, or whatever, I feel we’ve been inclined to lean this way since Obama promoted the TPP and the republicans thumbed their nose at it. Taking actual steps down this path again comes at a time when Biden, in Asia this morning, initiated discussion about an Indo-Pacific trade group that includes Japan, South Korea, India, and other countries. I believe it is twelve or thirteen in all.

    This is coming at a time when China, more and more, is moving to close its society and economy. They really seem to think this is necessary and that they can do this and manage the consequences. I also saw a story this morning that pointed out how Chinese authorities are cutting passports, disallowing students, business travelers, and Chinese people with relatives abroad from travelling to western countries. This had happened before with students. But now it seems to be happening more and more across other groups in China.

    The US has been talking for a long time about relocating supply chains. The pandemic underscored the need. We had the initiative for the TPP in Obama’s time, which was shot down by republicans. Now comes Biden with a separate initiative, but I’m afraid it may be too late to make a difference.

    Clearly, we need to change our supply chains. With China, I’m afraid, the US is vulnerable. But you can’t just change a supply chain overnight.

  2. I’m going to go out on a limb here and call BS on the following items for the 2020s:
    1. 99%
    2. Redistribution
    3. Taxation
    4. Inclusion
    5. Web3

    If the common folk do finally get out their pitchforks, it’ll be in support of dictatorships that ultimately further entrench the 1%.

    1. I would add “isolation.” We may not do another Iraq/Afghanistan, but engagement (not necessarily hot military conflict) in Europe and Asia will likely expand.

  3. H-Man, it appears that history is simply repeating while we wish for a different outcome. All the solutions require pain. Higher inflation = Higher interest rates. When you charge more for money, there is always pain for the borrower. At the end of day, the pain is currently tolerable — nobody is screaming but that time of full angst is rapidly approaching. When inflation abates, the pain will end. Until then the consumer will deal with the pain.

    1. IMO the history that is repeating is the history of the 1920’s. Inflation will abate soon enough, but the pain wil not abate for many years. We had FDR to help us through those former times in the ICU. The best prospect we have at this time is Donald Trump. I hope prayer works.

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