Posts for Tag: US Economy

The Troll Economy in Seven Charts

I wrote this essay for CFA Institute and first published it on the Enterprising Investor. It includes one of the few mixtapes on earth that qualifies for continuing education credits.

By troll economy, I mean that of the United States of America, of course.

Anybody who doesn’t think the United States is a special place has never tried real barbecue (BBQ). But BBQ’s just the beginning. Let’s start with geopolitics. As the excellent book The Accidental Superpower notes, most Americans have no grasp of the bounty they are blessed with. Author Peter Zeihan, who will be speaking at the 69th CFA Institute Annual Conference in May, points out that the United States just happens to have the world’s best piece of arable land — the American Midwest — located conveniently amid the world’s largest navigable network of waterways.

If you forget every other nice thing you know about the United States but remember that, you still walk away thinking the country is disproportionately blessed by good fortune. Add to that some simple observations about US ports — the Chesapeake Bay alone “boasts longer stretches of prime port property than the entire continental coast of Asia from Vladivostok to Lahore” — and you can’t help but feel pretty positive about the country’s long-term competitiveness.


And that competitiveness has come again to troll those who have forecast the imminent death of US economic expansion, fueled as it may be by monetary voodoo and financial engineering. New data released on Friday add just another piece of color to a picture that is far from bleak.


It’s also an objective reality that the workers who have been on the sidelines are re-entering the labor force, at least to some degree.

And though wages haven’t grown yet, there’s ample reason to believe they should (and will).


But the economy is not the market, and this rosy picture hasn’t (yet) translated into what matters most for investors: growth. We can talk about the gap between expectations and performance — and there are some positive stories there — but the fact remains that revenues are not growing in aggregate.

Take a look at the last big piece I did — 34 Charts: This Time is Different — to get some more color there.

But let’s all close our eyes for a minute and think about what it might mean to live in a world where Americans who want jobs have them and their wages start growing.


And the word gets out about this thing called inflation. At just such a time, it would be convenient to remember a thing called the Phillips Curve, which suggests that wage inflation will accelerate as unemployment continues to fall.


In just such a circumstance, it’s likely that current projections about the path of rate hikes by the US Federal Reserve will be seen as impossibly dovish, unless of course the Fed chooses to ignore its long-time targets: 5% unemployment and 2% inflation.

Why might it do that? Perhaps it will focus on the still-tepid global economy. Vice chair Stanley Fischer insists the Fed must look beyond its borders but also remember that it is not the world’s central bank.

In either circumstance, America could frustrate the rest of the globe. A Fed that’s forced towards hawkishness as domestic job gains and inflation continue to materialize would be a headwind to the rest of the world unless it follows suit.


That might happen! But we’re still a long way from any sort of conclusive directional proof. It’s also hard to imagine a Fed that ignores rapidly increasing inflation and a tightening labor market in deference to global growth risks for very long. Especially if you take a moment to consider the current domestic political climate.

In any case, an imminent recession does not seem to be in the cards for the United States. No reason not to stay vigilant — these things revert quickly — but the immediate risks are elsewhere. What if the troll economy forces rates upward unexpectedly and well before the rest of the world is ready? That’s the risk I’d ponder as you head off for the weekend.

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Many thanks for reading! For fun this week, I also made you a playlist. I hope you enjoy the first (and maybe only) edition of Weekend Beats.