For an entire society or indeed for any corporation, a “productive debt” can be loosely defined as a debt that brings in more future purchasing power than what you borrow.

Lets suppose you lend me 1000$. For arguments sake, lets suppose the “basket of goods and services” that I consume costs 10$. You are lending me 1000$, which is equivalent to 100 baskets. You will charge interest on that debt. …


It’s a hell of a balancing act and I admire the boldness of this initiative, as well as the general boldness of the Biden Team. I admit I am a fan. But there are things to know and risks to grasp, especially for people with funds in financial markets. At roughly 10% of GDP, Biden’s almost 2000 billion (2 trillion) stimulus package is massive. Obama’s package was roughly 5% of GDP in 2009. There are 2 views of inflation and stimulus packages, which are not necessarily mutually exclusive, but one places proportionally more weight on the “output gap” and “overheating”…


Bond yields are rising swiftly after hitting rock bottom about 6 months ago. Although yields are still now very low compared to the past 10 years, the rapid change in yields is disruptive to all markets and could disrupt housing as well. All this is causing a growing headache for central banks, with 3 combined issues: expectations, credibility, risk.

When federal bond yields rise, all asset markets are impacted. Since bond yields influence all other asset returns, this in turn adds upward pressure to corporate bond yields, thus making debt servicing harder. …


Is there a “limit to growth” as exposed in the Meadows Report? Our global system works on “growth” of production to generate employment and income, which takes several forms: wages, incomes for enterpreneurs and stock holders, capital gains, rent and interest income, which themselves finance State income (taxes!) and other institutional incomes. Private and public pension funds run on “total returns” from assets, themselves tied closely or loosely in the long run to the underlying “cake” that we all “eat”, which is also called Gross Domestic Product: the total economic value generated per year.

Grinding to a halt: Total Factor Productivity for USA, Germany, UK, France, Japan, OECD

The total “cake” we produce and…


Interest rates are at long term historical lows and stock pricing is historically high, based on various metrics. Why and what is likely to happen?

Asset prices and “yields” go in opposite directions

It is important to start with the basics: asset prices and “interest rates” go in opposite directions, or more precisely, asset prices and “expected yields” go in opposite directions. Indeed, if you pay the very same asset 100$ instead of 200$, it is a better “deal” at 100$: you pay less for the same future expected value. Hence, when asset prices go UP, expected yields go down…


The virus issues are causing a complete and extremely rapid social breakdown into fear, panic, paranoia, and finger pointing. This is due to a combo of social media, major media outlets, and politicians all accepting the complete breakdown os social fabric while being inept or clueless (or both) OR adding fuel to the fire of division and paranoia (Trump style). I would dare say all are wrong in their respective approaches, but we could “hold things together” for a while by helping individuals directly.

And I am FOR the closing of schools and many other measures. But there are things…


The “virus recession” and the policy response to it is going to bring record deficits in dollar terms AND near-record levels in % of GDP as well. For many countries, this comes on top of an already-high government debt. Many people seem to wonder if there is some magic and we can just go on like this no problem. Here is a text to think clearly on this topic.

What does NOT matter is the dollar amount of debt. This must stop. If a person earning 10 million per year and without any other debts has a debt of 1…


As I wrote in my last few posts, the impact of “the virus recession” is likely to be brutal and huge, BUT short-lived. This is because the “fundamentals” were generally fine before the recession started and are likely to be generally fine once it is over. There are however a few risks that this recession could bring about and must be kept in mind, especially in terms of what to expect once we enter 2021.

Governments and central banks are all over this and will throw everything they have and the kitchen sink at it in their “whatever it takes”…


Before the outbreak of the virus, all was well and fine in general as far as “the economy” goes: low unemployment, plenty of jobs, etc. Sure there were structural challenges for all countries, but we were not in crisis mode and global recession. Will this pass quickly? Will it all be “water under the bridge”?

The Economic Fundamentals

The fundamentals of “the economy” are that we produce stuff, called “goods and services” and we consume that “stuff” directly or indirectly in one way or another. …


About 20% of all global government debt has negative yields. This means that buyers who hold to maturity LOSE nominal dollars, and lose even more in real terms, since inflation is still positive in most areas of the world. This is the new normal, and it is about to get much worse.

Yields everywhere are dropping to record lows. What is driving this and what are the consequences?

Drivers and consequences

Government bond yields are proxies for inflation and inflation expectations, as well as future growth projections... and… monetary interventions, as Central Banks can “print money” free of charge (the…

Pascal Bedard

Sharing thoughts on economics, finance, business, trading, and life lessons. Founder of www.PascalBedard.com

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