I’ve attached Hoisington Investment Management Company’s June 30 newsletter. Hoisington runs over $4.5 billion in fixed income portfolios and publishes one of the clearest, most insightful newsletters regarding macro-economic issues that I’ve seen.
The article begins by parsing the two most prevalent theories for economic contractions. We’ve heard (ad nauseam) about the Keynesian theories and the Friedmanite extension of Keynes’ ideas. They basically promote policies that raise aggregate demand while increasing the stock of money. Helicopter Ben and the European Union have staked an awful lot on these theories actually functioning in the real world.
Hoisington introduces a third school of economics — the Fisherian. Fisher believed that “an excessive buildup of debt relative to GDP is the key factor in causing major contractions [in the economy]. ” I know wacky ideas like that tend to be poo-pooed these days as the ramblings of tea-party politicians and the like, but Fisher did most of his work in the pre-tea party decade of the 1930’s. During the rhetorically-laced battle over the debt ceiling and the potential of QE3, the section on Fisherian economics presents an even-handed alternative viewpoint.
Hoisington then goes on to dissect why our fiscal policy has failed to have its desired effect. Here again, there doesn’t seem to be a political agenda. Rather, it comes across as a well thought-out, fact-laced discussion.
I’m not going to lie… the newsletter is six pages of pretty heavy lifting. But, it is understandable and (more importantly) sheds light on some very complicated issues while weaving in the potential impact on those of us in the real world (as opposed to Washington). I hope you enjoy it!