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. …


As I wrote in my last 2 posts, “Central Banks vs Bond Markets” and “Biden’s Stimulus Plan, Inflation, and Interest Rates”, there is a realistic risk of inflation and an interest rate shock for 2023, with potentially serious consequences for all markets and the real economy, and perhaps also politics. Lets explore 3 possible scenarios, with numbers.

Although inflation “predictions” are notoriously wrong and generally simply based on a slow-moving “auto-regressive process” (i.e. that inflation is most explained by past inflation), still, assumptions are what make the difference between scenarios. …


It’s a hell of a balancing act. 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”, the other puts proportionally more weight on inflation expectations and institutional credibility. Lets explore both angles…

Timing matters: Obama passed his stimulus package while the economy was still sinking and very deep in the hole in 2009, while Biden is passing his…


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…


But relax: it is a low probability event!

As I explained in several past posts, ultimately the Central Bank of any country can stabilize market conditions when the shit hits the fan under ONE very important condition: inflation is under control or at least tolerable. This is the case now, as can be seen by the graph of the inflation in core personal consumption expenditure:

FRED tool of Federal Reserve of Saint Louis

In a rare and quite low probability event, something extreme happened in short term government debt (“Treasuries”) in March 2020: lots of sellers started selling their T-bills en-masse to get the cash for short term…


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…


Each year, the standard flu kills about 45 000 people in the USA alone. We barely talk about it. The path of the standard flu expansion and deaths in the population would look much like the coronavirus graph if we traced it. Now we are trying to “flatten the curve” of the Coronavirus expansion with various “social distancing” policies. What is the cost?

Of course the Covid-19 case has novelties relative to the standard seasonal flu and they are non-negligible:

  1. There are no vaccines.
  2. It is not fully understood.
  3. It spreads more quickly and easily.

There‘s more, like it seems…

Pascal Bedard

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

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