Imagine taking dollar bills and inserting them into a shredder. This is how you might think about a concept economists call “deadweight loss.” As its name suggests, a deadweight loss occurs when there’s an irrevocable loss of economic output. Deadweight losses can occur under a variety of [...]
What the SAHM Rule Is (or Isn’t) Telling Us
For two years, market observers have been predicting a recession. Why? They’ve pointed to what’s known as an inverted yield curve—when short-term interest rates are higher than long-term rates. Historically, this has been a bad omen for the economy, and that’s why investors have been worried. The [...]
Understanding Inflation, and Guarding Against It
Among the topics that receive attention in the world of personal finance, inflation was for many years near the bottom of the list. Between 2010 and 2019, inflation was so low, averaging just 1.8% per year, that the Federal Reserve was actually struggling to lift it. Throughout 2019, the Fed lowered [...]
Suddenly more interesting
In a typical year, the bond market doesn’t attract much interest. That is by design. The role of bonds in a portfolio is to serve as a bulwark against the unpredictability of stocks. They’re supposed to be boring. All that changed this year. Owing to rising interest rates, the most common total [...]
Walking the highwire
I have to say, I don’t envy the folks in Washington. Last year, many accused Federal Reserve policymakers of being asleep at the wheel as they downplayed the risk of rising inflation. This year, of course, it’s been the opposite: The Fed has been in overdrive, raising interest rates aggressively. So [...]
