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John Mauldin's Outside the Box

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  • Should the Fed be Responsibly Irresponsible?

    This week I offer two short essays for your reading pleasure in Outside the Box. The first is from Ambrose Evans-Pritchard writing in the London Telegraph. He gives some more specifics about the situation in Europe I wrote about this weekend.

    He ends with the following sober quote: 'My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin.' This is a must read.

    And the second piece? Last week in Outside the Box we looked at an 'Austrian' (economic) view of the inflation/deflation debate from my friends at Hoisington. This week we look at the 180 degree opposite with Keynesian aficionado Paul McCulley, who argues that the Fed should be Responsibly Irresponsible and target higher inflation. This essay has brought some rather heated arguments in print and from some of the people who will be with Paul and me at the annual Maine fishing trip. And you can bet I will put them all together with a little wine to see how the argument ensues. I will report back.

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  • Roadmap To Inflation And Sources Of Cheap Insurance

    What happens when inflation once again returns. As this week's Outside the Box writer, James Montier, writes, we may want to start thinking now about inflation insurance and he mentions a few ways to do so. But this letter is a must read for his bringing to light a speech by Fed chairman Ben Bernanke in 2000 given to the Japanese, where he suggest inflation targeting:

    'In the speech, he laid out a menu of policy options that are available to the monetary authorities at the zero bound. First, aggressive currency depreciation, as per Romer's analysis of the end of the Great Depression. Second on Bernanke's list is the introduction of an inflation target to help mould the public's expectations about the central bank's desire for inflation. He mentions the range of 3-4%!'

    I think you will find this week's OTB to be exceptionally thought provoking. Montier is one of my favorite economic thinkers (and a good friend). He works for Societe Generale in London in their Cross Asset Research group....