Fantastic interview with Warren Mosler. He discusses QE, earnings, cash flows, demand leakages, and the potential fiscal cliff.
I completely agree with his take that current levels of deficit spending are still sufficient to maintain aggregate demand (and hence corporate revenues and profits) to a level that is 'good for stocks'. I don't think we are seeing a 'major top' in the stock market. I think the real risk to the stock market and the economy is the *potential* 'fiscal cliff'. But as I said here at the beginning of June this would be the mostly widely telegraphed macro event ever. And like Mosler says, I am highly doubtful that is being 'priced in' to stocks right now.
Which means that I think the current pullback since May (and that we are still potentially in) is a correction and the cyclical bull market will continue, not the start of a cyclical bear market.
Early Thought follow up… A conversation with Warren Mosler
Please click on the link below to listen to a conversation with Warren Mosler. Topics include: Demand leakage (how to fix end-demand), Fed Policy (QE is counterproductive) and overall market/econ outlook for US, Europe and China.
Warren Mosler Interview Audio