A historical look at US public debt
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Tuesday, August 31, 2010
"Depression" - it's "official"
David Rosenberg, market guru, has officially declared that the US economy is in a state of depression, and he sees the economic superpowers woes worsening.
On the heels of that bleak forecast, the statistics for existing home sales for July were released and the numbers were ugly. The weak housing market collapsed. Reflecting the worst slump in American history, existing housing sales had plummeted a stunning 27 percent and there's no sign on the horizon that sales will stabilize any time soon.
Citing the period from 1929 to 1932 and the eerie similarities, Rosenberg said, "We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3 percent." The same happened during the early 1930s stock market rebound of 50 percent after the 1929 crash.
The Great Depression followed the brief economic upswing.
As long as two years ago, one of Britain's top economists predicted a decade-long depression, $45 trillion in debt defaults and unemployment in the US and UK approaching 25% or higher.
During October 2008, economist Fred Harrison told the Foreign Press Association in London,""The massive contraction in demand caused by this 'wealth effect' will condemn the western economy to a decade-long depression."
Read more about the depression gurus
Comment: These gurus seem all very much being in the business of predicting the past. The simple fact is, a fact that each speculator should write on his mirror: you can't predict the future with certainty. Of course, one must have a descartable model in one's head and keep on reforumulating the model as present becomes past and act according to circumstances and take heed never to fall in love with one's predictive model.
On the heels of that bleak forecast, the statistics for existing home sales for July were released and the numbers were ugly. The weak housing market collapsed. Reflecting the worst slump in American history, existing housing sales had plummeted a stunning 27 percent and there's no sign on the horizon that sales will stabilize any time soon.
Citing the period from 1929 to 1932 and the eerie similarities, Rosenberg said, "We may well be reliving history here. If you're keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3 percent." The same happened during the early 1930s stock market rebound of 50 percent after the 1929 crash.
The Great Depression followed the brief economic upswing.
As long as two years ago, one of Britain's top economists predicted a decade-long depression, $45 trillion in debt defaults and unemployment in the US and UK approaching 25% or higher.
During October 2008, economist Fred Harrison told the Foreign Press Association in London,""The massive contraction in demand caused by this 'wealth effect' will condemn the western economy to a decade-long depression."
Read more about the depression gurus
Comment: These gurus seem all very much being in the business of predicting the past. The simple fact is, a fact that each speculator should write on his mirror: you can't predict the future with certainty. Of course, one must have a descartable model in one's head and keep on reforumulating the model as present becomes past and act according to circumstances and take heed never to fall in love with one's predictive model.
Bullish on gold
"... Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.
Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.
“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt..."
Full text
Comment: With the old bubbles gone bust, a new one is in the making.
Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.
“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt..."
Full text
Comment: With the old bubbles gone bust, a new one is in the making.
Japan's downfall
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This is what ignorance leads to and when you follow false prophet and incompetent academics, i.e. ignoring the Austrian school of economics and choosing the dumb-witted interpretation of Keynes by US "top school" economists.
Monday, August 30, 2010
Fed is finished
"... Federal Reserve officials face another round of reports projected to show weakening growth amid skepticism they have the firepower to deliver on Chairman Ben S. Bernanke’s pledge to avoid a relapse into recession.
Bernanke, in his Aug. 27 speech to central bankers and economists in Jackson Hole, Wyoming, made his strongest statement yet that the Fed alone can’t keep the recovery going. “Strong and stable” growth will “require appropriate and effective responses from economic policy makers across a wide spectrum” as well as private-sector leaders, he said.
While Bernanke said the Fed’s remaining tools, including asset purchases, will work if needed, some attendees at the annual symposium said during the weekend that the effects of such quantitative-easing measures may be weak or that fiscal policy should play a bigger role. Pressure for action may build this week as economists predict data to show hiring, manufacturing and household purchases cooled further in August.
“There’s now a cost-benefit analysis for future actions which I’d contrast with the ‘whatever it takes’ philosophy of the crisis,” Stanford University Professor John Taylor, creator of an interest-rate formula used by central banks, said in an interview. “The benefits of additional quantitative easing are quite small.” --
Full text
Comment: I'm amazed how things unfold according to the scenario of the Austrian school of economics.
Bernanke, in his Aug. 27 speech to central bankers and economists in Jackson Hole, Wyoming, made his strongest statement yet that the Fed alone can’t keep the recovery going. “Strong and stable” growth will “require appropriate and effective responses from economic policy makers across a wide spectrum” as well as private-sector leaders, he said.
While Bernanke said the Fed’s remaining tools, including asset purchases, will work if needed, some attendees at the annual symposium said during the weekend that the effects of such quantitative-easing measures may be weak or that fiscal policy should play a bigger role. Pressure for action may build this week as economists predict data to show hiring, manufacturing and household purchases cooled further in August.
“There’s now a cost-benefit analysis for future actions which I’d contrast with the ‘whatever it takes’ philosophy of the crisis,” Stanford University Professor John Taylor, creator of an interest-rate formula used by central banks, said in an interview. “The benefits of additional quantitative easing are quite small.” --
Full text
Comment: I'm amazed how things unfold according to the scenario of the Austrian school of economics.
Sunday, August 29, 2010
Interventionist spiral
Bank of Japan to hold emergency policy meeting
Bank of Japan announces plans to hold emergency policy meeting on Monday as yen keeps rising
, On Sunday August 29, 2010, 6:55 pm EDT
The Bank of Japan said it will hold an emergency meeting on Monday as political pressure mounts for the central bank to ease monetary policy in the face of a surging yen.Full text
Comment: Japan has followed the Keynesian recipe exactly as the cookbook says. Now they are in a total mess, with each intervention provoking a new one, and so on, until things will come to their final collapse. How ridiculous! How tragic! I actually thought that the Japanese were smarter.
Slump will go on
The NYT reports from the central bankers meeting in Jackson Hole:
“... I’m more worried than I have ever been about the future of the U.S. economy,” said Allen Sinai, co-founder of the consulting firm Decision Economics and a longtime participant in the symposium. “The challenge is unique: poor and diminishing growth, a sticky unemployment rate, sky-high deficits and a sovereign debt that makes us one of the most fiscally irresponsible countries in the world.”
Ms. Reinhart’s paper drew upon research she conducted with the Harvard economist Kenneth S. Rogoff for their book “This Time Is Different: Eight Centuries of Financial Folly,” published last year by Princeton University Press. Her husband, Vincent R. Reinhart, a former director of monetary affairs at the Fed, was the co-author of the paper.
The Reinharts examined 15 severe financial crises since World War II as well as the worldwide economic contractions that followed the 1929 stock market crash, the 1973 oil shock and the 2007 implosion of the subprime mortgage market.
In the decade following the crises, growth rates were significantly lower and unemployment rates were significantly higher. Housing prices took years to recover, and it took about seven years on average for households and companies to reduce their debts and restore their balance sheets. In general, the crises were preceded by decade-long expansions of credit and borrowing, and were followed by lengthy periods of retrenchment that lasted nearly as long.
“Large destabilizing events, such as those analyzed here, evidently produce changes in the performance of key macroeconomic indicators over the longer term, well after the upheaval of the crisis is over,” Ms. Reinhart wrote..."
Read more
Comment: The rule is obvious: debt expansion means boom, debt contraction means bust. Debt expansion cannot go on forevever, thus each of these periods ends in a bust. Rule # 2: The longer the boom, the deeper the bust. Over he past several decades we have an almost unprecedented boom fuelled by credit expansion. It will take a lot of sweat, blood and tears to get sound again.
“... I’m more worried than I have ever been about the future of the U.S. economy,” said Allen Sinai, co-founder of the consulting firm Decision Economics and a longtime participant in the symposium. “The challenge is unique: poor and diminishing growth, a sticky unemployment rate, sky-high deficits and a sovereign debt that makes us one of the most fiscally irresponsible countries in the world.”
Ms. Reinhart’s paper drew upon research she conducted with the Harvard economist Kenneth S. Rogoff for their book “This Time Is Different: Eight Centuries of Financial Folly,” published last year by Princeton University Press. Her husband, Vincent R. Reinhart, a former director of monetary affairs at the Fed, was the co-author of the paper.
The Reinharts examined 15 severe financial crises since World War II as well as the worldwide economic contractions that followed the 1929 stock market crash, the 1973 oil shock and the 2007 implosion of the subprime mortgage market.
In the decade following the crises, growth rates were significantly lower and unemployment rates were significantly higher. Housing prices took years to recover, and it took about seven years on average for households and companies to reduce their debts and restore their balance sheets. In general, the crises were preceded by decade-long expansions of credit and borrowing, and were followed by lengthy periods of retrenchment that lasted nearly as long.
“Large destabilizing events, such as those analyzed here, evidently produce changes in the performance of key macroeconomic indicators over the longer term, well after the upheaval of the crisis is over,” Ms. Reinhart wrote..."
Read more
Comment: The rule is obvious: debt expansion means boom, debt contraction means bust. Debt expansion cannot go on forevever, thus each of these periods ends in a bust. Rule # 2: The longer the boom, the deeper the bust. Over he past several decades we have an almost unprecedented boom fuelled by credit expansion. It will take a lot of sweat, blood and tears to get sound again.
Basle I, Basle II, Basle III, making things worse
Global politics and complicated risk management formulas will collide in Switzerland next month as regulators from around the world try to reach an agreement on new banking rules aimed at preventing another financial crisis.
The stakes are so high that the leaders of the U.S., France, Germany and Japan have become involved, elevating what might otherwise be dismissed as a technocratic exercise. The outcome is bound to affect the profitability and structure of the world's largest banks, many of which have put decisions on hold until the new rules are in place.
Negotiators want to hammer out most of the details by a mid-September meeting in Basel, Switzerland, so they can deliver a package that the leaders of the Group of 20 largest industrialized nations can bless at a summit in South Korea in November..."
Read more
Comment: No bailout, the immediate threat of bankruptcy for banks would be the best line of defense against excessive risk-taking. Yet the more the banking system has been nationalised, the more rules and regulations are necessary. The way to serfdom and inefficiency is paved with good bureaucratic intentions. The whole system has been put on the slippery slope, and there won't be any more halting soon.
The stakes are so high that the leaders of the U.S., France, Germany and Japan have become involved, elevating what might otherwise be dismissed as a technocratic exercise. The outcome is bound to affect the profitability and structure of the world's largest banks, many of which have put decisions on hold until the new rules are in place.
Negotiators want to hammer out most of the details by a mid-September meeting in Basel, Switzerland, so they can deliver a package that the leaders of the Group of 20 largest industrialized nations can bless at a summit in South Korea in November..."
Read more
Comment: No bailout, the immediate threat of bankruptcy for banks would be the best line of defense against excessive risk-taking. Yet the more the banking system has been nationalised, the more rules and regulations are necessary. The way to serfdom and inefficiency is paved with good bureaucratic intentions. The whole system has been put on the slippery slope, and there won't be any more halting soon.
Austrian renaissance
Peter J. Boettke, shuffling around in a maroon velour track suit or faux-leather rubber shoes he calls "dress Crocs," hardly seems like the type to lead a revolution.
T.J. Kirkpatrick for The Wall Street Journal
Peter J. Boettke of George Mason University is the emerging standardbearer for a revived Austrian school of economics.
But the 50-year-old professor of economics at George Mason University in Virginia is emerging as the intellectual standard-bearer for the Austrian school of economics that opposes government intervention in markets and decries federal spending to prop up demand during times of crisis. Mr. Boettke, whose latest research explores people's ability to self-regulate, also is minting a new generation of disciples who are spreading the Austrian approach throughout academia, where it had long been left for dead.
Read more
Comment: Although Peter is not the "best" Austrian, he is surely one of the best represantatives and surely a great promoter of our cause. Best wishes for bearing the flag.
T.J. Kirkpatrick for The Wall Street Journal
Peter J. Boettke of George Mason University is the emerging standardbearer for a revived Austrian school of economics.
But the 50-year-old professor of economics at George Mason University in Virginia is emerging as the intellectual standard-bearer for the Austrian school of economics that opposes government intervention in markets and decries federal spending to prop up demand during times of crisis. Mr. Boettke, whose latest research explores people's ability to self-regulate, also is minting a new generation of disciples who are spreading the Austrian approach throughout academia, where it had long been left for dead.
Read more
Comment: Although Peter is not the "best" Austrian, he is surely one of the best represantatives and surely a great promoter of our cause. Best wishes for bearing the flag.
Why we need private money and free banking
Michael Rezoff explains
"... important political figures throughout the world are agitating for changes in the international financial system. These changes would (i) reduce the role of the dollar, (ii) increase the role of developing states, (iii) reduce the role of the United States, (iv) aim for a global currency, (v) increase the role of international financial institutions, (vi) increase the role of France, Germany, and the BRIC countries, and (vii) aim for global uniformity. These changes would maintain the existing system of central banks and fiat currencies...
This, I say, is something we don’t need. We don’t need no stinkin’ gold standard that is another version of government-controlled currencies, accompanied by government suppression of monetary freedom and privately or market-produced money...
What we need is market-produced money. This may take a number of possible forms, such as e-money backed by metals such as silver and gold, or silver coin, or gold coin and bullion for larger transactions.
Market-produced money differs radically from government-controlled and government-produced money. With market-produced money, there cannot be a systematically injurious deflation or harmful shortage of money. If the demand for money exceeds the supply to the point where the costs of a money shortage to demanders are exceeding the costs of producing more money, the market will produce more money and eliminate the shortage...
The Great Depression occurred at a time when the gold backing of government money was extensive. The current hardships are occurring at a time when gold is far, far less important in America’s monetary system. The common feature of these large depressions is not the presence or absence of gold backing. It is the presence of government-controlled money, with or without gold backing..."
Read full text
Comment: The more I think about it, the more plausible it appears to be that free banking is the natural form of money creation and the more I have investigated matters, the more I find that private money creation through free banking is the best way to do away with inflation and the business cycle.
Read more here: The Theory of Free Banking
"... important political figures throughout the world are agitating for changes in the international financial system. These changes would (i) reduce the role of the dollar, (ii) increase the role of developing states, (iii) reduce the role of the United States, (iv) aim for a global currency, (v) increase the role of international financial institutions, (vi) increase the role of France, Germany, and the BRIC countries, and (vii) aim for global uniformity. These changes would maintain the existing system of central banks and fiat currencies...
This, I say, is something we don’t need. We don’t need no stinkin’ gold standard that is another version of government-controlled currencies, accompanied by government suppression of monetary freedom and privately or market-produced money...
What we need is market-produced money. This may take a number of possible forms, such as e-money backed by metals such as silver and gold, or silver coin, or gold coin and bullion for larger transactions.
Market-produced money differs radically from government-controlled and government-produced money. With market-produced money, there cannot be a systematically injurious deflation or harmful shortage of money. If the demand for money exceeds the supply to the point where the costs of a money shortage to demanders are exceeding the costs of producing more money, the market will produce more money and eliminate the shortage...
The Great Depression occurred at a time when the gold backing of government money was extensive. The current hardships are occurring at a time when gold is far, far less important in America’s monetary system. The common feature of these large depressions is not the presence or absence of gold backing. It is the presence of government-controlled money, with or without gold backing..."
Read full text
Comment: The more I think about it, the more plausible it appears to be that free banking is the natural form of money creation and the more I have investigated matters, the more I find that private money creation through free banking is the best way to do away with inflation and the business cycle.
Read more here: The Theory of Free Banking
Will quantitative easing destroy the US dollar?
John Hussman of Hussman Funds thinks so:
"... My impression is that Ben Bernanke has little sense of the damage he is about to provoke. A central banker who talks about throwing money from helicopters is not only arrogant but foolish..."
Read more
Comment: The effort is worthwhile to study Hussman's argumentation in his article. He is quite good at explaining what drives exchange rate movements - worthwhile indeed the effort spent in reading Hussman's article. Reading it is highly recommended.
"... My impression is that Ben Bernanke has little sense of the damage he is about to provoke. A central banker who talks about throwing money from helicopters is not only arrogant but foolish..."
Read more
Comment: The effort is worthwhile to study Hussman's argumentation in his article. He is quite good at explaining what drives exchange rate movements - worthwhile indeed the effort spent in reading Hussman's article. Reading it is highly recommended.
Saturday, August 28, 2010
Words and deeds
Gary North translates Ben Bernanke:
"It is far easier to translate Bernanke than Greenspan. Both men had this task: to deceive the public. Greenspan adopted verbal obfuscation as his technique. Bernanke has adopted boredom.
I hope this exercise will help you understand his speech of August 27...."
Read more
Comment: Greenspan knew he was Fed chairman in order to cheat; Bernanke believes he is at the helm of the Federal Reserve to save the world.
See also The case for Ben Bernanke as a mad scientist
Backgrounder: Antony Mueller: Trouble at the Fed
"It is far easier to translate Bernanke than Greenspan. Both men had this task: to deceive the public. Greenspan adopted verbal obfuscation as his technique. Bernanke has adopted boredom.
I hope this exercise will help you understand his speech of August 27...."
Read more
Comment: Greenspan knew he was Fed chairman in order to cheat; Bernanke believes he is at the helm of the Federal Reserve to save the world.
See also The case for Ben Bernanke as a mad scientist
Backgrounder: Antony Mueller: Trouble at the Fed
Friday, August 27, 2010
A bigger stimulus
Paul Krugman has the answer to our plight: an even bigger stimulus
"... Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly."
Full text
Comment: I won't criticize Krugman - he doesn't know any other than to say the things he says. Who is to criticize are those who believe what he says even if they know better or should know better even after a short reflection.
"... Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly."
Full text
Comment: I won't criticize Krugman - he doesn't know any other than to say the things he says. Who is to criticize are those who believe what he says even if they know better or should know better even after a short reflection.
I can do little to help but a lot to destroy
Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery, and outlined steps it might take if the growth slows.
“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” the Fed Chairman said today in opening remarks to central bankers from around the world at the Kansas City Fed’s annual monetary symposium held in Jackson Hole, Wyoming.
Full text
Comment: The Fed chairman tries hard to keep up appearances. While he should know that his institution is built on deceit, the more so he has to act like a "honest Ben". He fakes that the Fed had the tools to prevent deflation and adds morphine that no inflation is in sight. Truth is that the Fed can't prevent deflation in the end and what most likely Fed actions will provoke is more of an asset bubble, particularly in bonds. As of now the asset market suck up a lot of the liquidity that the Fed has created and lending insitutions sit on tons of cash. The US central bank has created an explosive situation and each day we are moving closer the a deflationary implosion or a hyperinflationary explosion. The odds are still up for both sides of the coin.
“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly,” the Fed Chairman said today in opening remarks to central bankers from around the world at the Kansas City Fed’s annual monetary symposium held in Jackson Hole, Wyoming.
Full text
Comment: The Fed chairman tries hard to keep up appearances. While he should know that his institution is built on deceit, the more so he has to act like a "honest Ben". He fakes that the Fed had the tools to prevent deflation and adds morphine that no inflation is in sight. Truth is that the Fed can't prevent deflation in the end and what most likely Fed actions will provoke is more of an asset bubble, particularly in bonds. As of now the asset market suck up a lot of the liquidity that the Fed has created and lending insitutions sit on tons of cash. The US central bank has created an explosive situation and each day we are moving closer the a deflationary implosion or a hyperinflationary explosion. The odds are still up for both sides of the coin.
End of the bond bubble?
Comment: The burst of the bubble is long overdue. It makes no sense that so much is invested in government bonds at such low interest rate when the issuer of this debt is basically bankrupt.
Thursday, August 26, 2010
US slump goes on
-- A slowdown in U.S. business investment may soon hit the job market, further hindering a recovery in the world’s largest economy.
Capital spending, one of the few bright spots in the recovery, declined in July, according to Commerce Department figures released yesterday in Washington. Sales of new homes fell to the lowest level since data began in 1963, another report from the same agency showed, indicating a lack of jobs is crippling housing. --
Full text
Comments:
"The financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation..." September 2008
http://mises.org/daily/3111
"The recent improvement of the global economy, with particularly high economic-growth numbers for the United States, is just one more deception in a long series of deceptions that have plagued policy makers and investors. While official statistics register a rising gross domestic product, the long-term production potential of many economies around the world is actually contracting. The present economic expansion is brought about by massive stimulus policies. This kind of economic expansion does not constitute genuine economic growth..." March 2010
http://mises.org/daily/4158
Capital spending, one of the few bright spots in the recovery, declined in July, according to Commerce Department figures released yesterday in Washington. Sales of new homes fell to the lowest level since data began in 1963, another report from the same agency showed, indicating a lack of jobs is crippling housing. --
Full text
Comments:
"The financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation..." September 2008
http://mises.org/daily/3111
"The recent improvement of the global economy, with particularly high economic-growth numbers for the United States, is just one more deception in a long series of deceptions that have plagued policy makers and investors. While official statistics register a rising gross domestic product, the long-term production potential of many economies around the world is actually contracting. The present economic expansion is brought about by massive stimulus policies. This kind of economic expansion does not constitute genuine economic growth..." March 2010
http://mises.org/daily/4158
Wednesday, August 25, 2010
Regime uncertainty
Robert Higgs explains:
"Regime uncertainty has gained increasing recognition as the current economic troubles have persisted with little or no improvement since the economy reached a cyclical trough early in 2009. As described in my 1997 paper, regime uncertainty pertains to ..."
Read full text
Comment: If you meet someone who talks about the Great Depression or the current crisis or the stimulus program, ask him whether he knows about Higgs' thesis of regime uncertainty. Higgs' concept of regime uncertainty is the most relevant explanation why the Great Depression lasted so long and for that matter it is of utmost importance for our present situation.
"Regime uncertainty has gained increasing recognition as the current economic troubles have persisted with little or no improvement since the economy reached a cyclical trough early in 2009. As described in my 1997 paper, regime uncertainty pertains to ..."
Read full text
Comment: If you meet someone who talks about the Great Depression or the current crisis or the stimulus program, ask him whether he knows about Higgs' thesis of regime uncertainty. Higgs' concept of regime uncertainty is the most relevant explanation why the Great Depression lasted so long and for that matter it is of utmost importance for our present situation.
It's all clear for Mogambo
Mogambo Guru writes:
"... Peter Schiff of Euro Pacific Capital notes that the Federal Reserve, and the idiots like Paul Krugman who genuflect at the altar of Keynes, is not done with destroying the economy, but that “Bernanke and his supporters have said that their stimulus will be withdrawn as soon as the recovery takes hold in earnest.”
... And just when it seemed that things could not get worse, it gets worse, as he figures that the reality is that “The 2008 recession never ended. It was merely interrupted by trillions of dollars of stimulus that purchased GDP ‘growth’ with borrowed money.”
Exactly! Let me stop whining about that stupid motorcycle for just a minute so that I can say that, as far as I, too, am concerned, the whole boom of the last 30 years was the result of “trillions of dollars of stimulus,” as the despicable Alan Greenspan had the Federal Reserve keep creating more and more money the whole time, and now the absurd Ben Bernanke, erstwhile head of the obviously-worthless economics department at Princeton, is exponentially worse as the new chairman of the Federal Reserve! We’re freaking doomed!
Read more
Comment: Calm down, Mogambo. Your message is well understood. You don't need to convince many more. Let's bettter think how we can avoid of being freaking doomed.
"... Peter Schiff of Euro Pacific Capital notes that the Federal Reserve, and the idiots like Paul Krugman who genuflect at the altar of Keynes, is not done with destroying the economy, but that “Bernanke and his supporters have said that their stimulus will be withdrawn as soon as the recovery takes hold in earnest.”
... And just when it seemed that things could not get worse, it gets worse, as he figures that the reality is that “The 2008 recession never ended. It was merely interrupted by trillions of dollars of stimulus that purchased GDP ‘growth’ with borrowed money.”
Exactly! Let me stop whining about that stupid motorcycle for just a minute so that I can say that, as far as I, too, am concerned, the whole boom of the last 30 years was the result of “trillions of dollars of stimulus,” as the despicable Alan Greenspan had the Federal Reserve keep creating more and more money the whole time, and now the absurd Ben Bernanke, erstwhile head of the obviously-worthless economics department at Princeton, is exponentially worse as the new chairman of the Federal Reserve! We’re freaking doomed!
Read more
Comment: Calm down, Mogambo. Your message is well understood. You don't need to convince many more. Let's bettter think how we can avoid of being freaking doomed.
Tuesday, August 24, 2010
Hyperinflationary Great Depression
A "hyperinflationary great depression", that is what John Williams sees coming:
"... The government is effectively bankrupt. Using GAAP accounting principles, the annual deficit is running in the range of $4 trillion to $5 trillion. That's beyond containment. The government can't cover it with taxes. They'd still be in deficit if they took 100% of personal income and corporate profits. They'd also still be in deficit if they cut every penny of government spending except for Social Security and Medicare. Washington lacks the will to slash its social programs severely, to change its approach to ever bigger government. The only option left going forward is for the government eventually to print the money for the obligations it cannot otherwise cover, which sets up a hyperinflation..."
Read more
Comment: No doubt, something big is coming. The situation is very bad because there is so little one can do to avoid the catastrophe. It is impossible to maintain financial health at an individual level when the whole monetary system is unsound.
"... The government is effectively bankrupt. Using GAAP accounting principles, the annual deficit is running in the range of $4 trillion to $5 trillion. That's beyond containment. The government can't cover it with taxes. They'd still be in deficit if they took 100% of personal income and corporate profits. They'd also still be in deficit if they cut every penny of government spending except for Social Security and Medicare. Washington lacks the will to slash its social programs severely, to change its approach to ever bigger government. The only option left going forward is for the government eventually to print the money for the obligations it cannot otherwise cover, which sets up a hyperinflation..."
Read more
Comment: No doubt, something big is coming. The situation is very bad because there is so little one can do to avoid the catastrophe. It is impossible to maintain financial health at an individual level when the whole monetary system is unsound.
Monday, August 23, 2010
First we'll take Manhattan - then we'll take Berlin
Or is the other way round? Listen to Celente for an answer:
And Now We're Headed For The GREATEST Depression, Says Gerald Celente
The fake "recovery" was nice while it lasted, says famous apocalyptic forecaster Gerald Celente, founder of the Trends Research Institute. But now the fun's over, and we're headed for what Celente describes as the "Greatest Depression."
Specifically, the always startling Celente says the country is headed for rising unemployment, poverty, and violent class warfare as the government efforts to keep the economy going begin to fail.
The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives. But now a collusion of state and corporate interests that Celente describes as "fascism" have conspired to help only the biggest companies and the richest Americans. This has put a shocking amount of the country's wealth in the hands of a privileged few and left the rest of the country to subsist on chicken-feed wages and low job satisfaction as Wal-Mart "associates" -- or worse.
Read more and watch the prophet doom online
And Now We're Headed For The GREATEST Depression, Says Gerald Celente
The fake "recovery" was nice while it lasted, says famous apocalyptic forecaster Gerald Celente, founder of the Trends Research Institute. But now the fun's over, and we're headed for what Celente describes as the "Greatest Depression."
Specifically, the always startling Celente says the country is headed for rising unemployment, poverty, and violent class warfare as the government efforts to keep the economy going begin to fail.
The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives. But now a collusion of state and corporate interests that Celente describes as "fascism" have conspired to help only the biggest companies and the richest Americans. This has put a shocking amount of the country's wealth in the hands of a privileged few and left the rest of the country to subsist on chicken-feed wages and low job satisfaction as Wal-Mart "associates" -- or worse.
Read more and watch the prophet doom online
Prophet of the euro crash
Brendan Brown predicts the euro crash.
He is the author of “Euro Crash: The Implications of Monetary Failure in Europe” and is chief economist at Mitsubishi UFJ Securities International Plc.:
"The growing failure of European monetary union can’t be measured by superficial yardsticks such as the number of tiny euro-area economies at risk of meltdown or of monthly turbulence in currency markets. The main development has been the dashing of hopes for monetary stability.
The euro crisis isn’t over and confidence in the European Central Bank has faded. The ECB now presides over a bloated balance sheet that has expanded to about 2 trillion euros ($2.54 trillion) from 1.084 trillion in June 2006 and camouflages the massive creation of monetary reserves..."
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Comment: The problem is: against which currency would the euro crash? The US dollar? Yen? For one currency to go down another currency must go up. I should be glad to move some of my euros to a safe place (other than gold), but I still haven't found it among other currencies.
He is the author of “Euro Crash: The Implications of Monetary Failure in Europe” and is chief economist at Mitsubishi UFJ Securities International Plc.:
"The growing failure of European monetary union can’t be measured by superficial yardsticks such as the number of tiny euro-area economies at risk of meltdown or of monthly turbulence in currency markets. The main development has been the dashing of hopes for monetary stability.
The euro crisis isn’t over and confidence in the European Central Bank has faded. The ECB now presides over a bloated balance sheet that has expanded to about 2 trillion euros ($2.54 trillion) from 1.084 trillion in June 2006 and camouflages the massive creation of monetary reserves..."
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Comment: The problem is: against which currency would the euro crash? The US dollar? Yen? For one currency to go down another currency must go up. I should be glad to move some of my euros to a safe place (other than gold), but I still haven't found it among other currencies.
Stimuli without sting
-- Initial claims for unemployment benefits surged to 500,000 in mid-August, a level more typical of a recession than a recovery. The bad news confirmed what conservative economists have been saying for some time: The biggest Keynesian stimulus in U.S. history was a bust. --
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Backgrounder: The Stimulus Scam Mises Daily: Friday, March 12, 2010 by Antony P. Mueller
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Backgrounder: The Stimulus Scam Mises Daily: Friday, March 12, 2010 by Antony P. Mueller
Thursday, August 19, 2010
In Deutschland we trust
-- Germany’s 30-year bond yield dropped below that level for a second day after touching 2.96 percent yesterday. The sluggish global recovery from recession means German consumer prices will rise just 0.9 percent this year, according to International Monetary Fund forecasts, less than half the average since 1980. In the U.S., Pacific Investment Management Co. sees a 25 percent chance of a sustained period of falling prices, and the two-year Treasury note yield has also declined to a record low. --
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Comment: As of now the deflationists have the upper hand. Will they be right? Nobody knows for sure at the moment. Over the past three years a double strategy (gold, natural resources and bonds) have fared best, banking on both possibilities with the idea of unloading one of these two sides when the picture clears.
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Comment: As of now the deflationists have the upper hand. Will they be right? Nobody knows for sure at the moment. Over the past three years a double strategy (gold, natural resources and bonds) have fared best, banking on both possibilities with the idea of unloading one of these two sides when the picture clears.
Game over
Time is running out for the West
The Great Recession has dramatically shrunk the time left for the big AAA states to prevent a full-blown sovereign debt crisis as their demographic time-bomb threatens, US rating agency Moody's has warned.
By Ambrose Evans-Pritchard
Published: 7:36PM BST 17 Aug 2010
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The Great Recession has dramatically shrunk the time left for the big AAA states to prevent a full-blown sovereign debt crisis as their demographic time-bomb threatens, US rating agency Moody's has warned.
By Ambrose Evans-Pritchard
Published: 7:36PM BST 17 Aug 2010
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Tuesday, August 17, 2010
Shilling's case for deflation
Deflation's Coming, Says Gary Shilling, And It's Going To Clobber The Stock Market
Posted Aug 12, 2010 03:16pm EDT by Henry Blodget in Investing, Recession
All through the market rally and budding economic recovery of the past 18 months, most people concluded that the crisis was over and it was time to start worrying about inflation again. But strategist Gary Shilling of A. Gary Shilling & Co. stuck by his guns:
It was DEFLATION we needed to worry about, Gary said. And it was BONDS, not stocks, that investors should be buying.
Well, Gary's bearishness on the stock market caused him to miss a nice run, but he has been dead right about bonds. And he has also been right about the potential for deflation--as evidenced by the recent Consumer Price Index numbers and the fact that most other strategists have come to agree with him.
So what's Gary's current outlook?
Same as it ever was:
Prepare for chronic deflation, buy bonds, and sell stocks.
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Comment: I do not know whether it will be hyperinflation or deflation, yet I do know that it will be a disaster. As of now I am preparing for both: inflation and deflation. Nobody knows for sure to which side the ball at the top of pyramid will fall.
Posted Aug 12, 2010 03:16pm EDT by Henry Blodget in Investing, Recession
All through the market rally and budding economic recovery of the past 18 months, most people concluded that the crisis was over and it was time to start worrying about inflation again. But strategist Gary Shilling of A. Gary Shilling & Co. stuck by his guns:
It was DEFLATION we needed to worry about, Gary said. And it was BONDS, not stocks, that investors should be buying.
Well, Gary's bearishness on the stock market caused him to miss a nice run, but he has been dead right about bonds. And he has also been right about the potential for deflation--as evidenced by the recent Consumer Price Index numbers and the fact that most other strategists have come to agree with him.
So what's Gary's current outlook?
Same as it ever was:
Prepare for chronic deflation, buy bonds, and sell stocks.
Full text
Comment: I do not know whether it will be hyperinflation or deflation, yet I do know that it will be a disaster. As of now I am preparing for both: inflation and deflation. Nobody knows for sure to which side the ball at the top of pyramid will fall.
Ten reasons why a crash may be coming
WSJ: Is a Crash Coming? Ten Reasons to Be Cautious
Comment: The problem is that there is no safe place. OK, let's get out of the stock market: yet then I'm stuck with currencies and exposed to inflation and I'll lose my shirt because my bonds also evaporate. And when deflation comes, my bonds most likely won't be redeemed and one business after the next will go bankrupt. Because there is no way to hide, we're all caught. Modern Leviathan won't collapse without taking all of us down with him.
Comment: The problem is that there is no safe place. OK, let's get out of the stock market: yet then I'm stuck with currencies and exposed to inflation and I'll lose my shirt because my bonds also evaporate. And when deflation comes, my bonds most likely won't be redeemed and one business after the next will go bankrupt. Because there is no way to hide, we're all caught. Modern Leviathan won't collapse without taking all of us down with him.
Dream on Bernanke, Krugman, yet be prepared for a rude awakening
China Drains Obama Stimulus Meant for U.S. Economy: Commentary by Andy Xie
By Andy Xie - Aug 17, 2010 4:00 PM GMT-0300
Business ExchangeTwitterDeliciousDiggFacebookLinkedInNewsvinePropellerYahoo! BuzzPrint The global economy is like fried ice cream: If you don’t act fast, it turns into a mess.
American pundits, Nobel laureates included, are predicting Japan-style deflation for the U.S. and Europe. They are urging the Federal Reserve to pursue another round of quantitative easing to stop the onset of an Ice Age for Western economies. The Fed didn’t oblige at its last meeting, but it threw a bone to the deflation crowd by promising not to pull money out of its previous round of asset purchases to stimulate a recovery.
On the other side of the world, consumer prices are surging. Emerging markets as a whole now have an inflation rate of more than 5 percent. India is registering price increases of more than 13 percent. China’s are more than 3 percent. But it surely feels a lot higher for average Chinese.
Much of the “heat” comes from the property market in emerging markets. Million-dollar flats in Mumbai have panoramic views of the city’s slums. Hong Kong’s real-estate prices have almost reclaimed their 1997 peak, though the economy has barely grown since then in per-capita terms. Overpaid bankers who pay 15 percent income tax in Hong Kong are stretched to buy Beijing or Shanghai properties. Moscow is somehow always near the top of the list of the world’s most expensive cities.
The emerging markets are on fire.
Rude Awakening
Deflation prophets in the West are in for a rude awakening. Eastern fire will turn Western ice into a mess, and 2012 looks like it will be the year of melting. The fuel for the fire is coming from deflation-fighting stimulus programs, such as that of U.S. President Barack Obama.
Stimulus is prescribed as a panacea for recession. In today’s global economy, it isn’t effective in the best of circumstances and is outright wrong for what ails the West now.
Read full text
Comment: What the present crisis really has in common with the Great Depression is the incompetence of the leading American economists at this time. Back then it was mainly Irving Fisher, today it is Bernanke, Krugman, Stiglitz, Blinder, ....
By Andy Xie - Aug 17, 2010 4:00 PM GMT-0300
Business ExchangeTwitterDeliciousDiggFacebookLinkedInNewsvinePropellerYahoo! BuzzPrint The global economy is like fried ice cream: If you don’t act fast, it turns into a mess.
American pundits, Nobel laureates included, are predicting Japan-style deflation for the U.S. and Europe. They are urging the Federal Reserve to pursue another round of quantitative easing to stop the onset of an Ice Age for Western economies. The Fed didn’t oblige at its last meeting, but it threw a bone to the deflation crowd by promising not to pull money out of its previous round of asset purchases to stimulate a recovery.
On the other side of the world, consumer prices are surging. Emerging markets as a whole now have an inflation rate of more than 5 percent. India is registering price increases of more than 13 percent. China’s are more than 3 percent. But it surely feels a lot higher for average Chinese.
Much of the “heat” comes from the property market in emerging markets. Million-dollar flats in Mumbai have panoramic views of the city’s slums. Hong Kong’s real-estate prices have almost reclaimed their 1997 peak, though the economy has barely grown since then in per-capita terms. Overpaid bankers who pay 15 percent income tax in Hong Kong are stretched to buy Beijing or Shanghai properties. Moscow is somehow always near the top of the list of the world’s most expensive cities.
The emerging markets are on fire.
Rude Awakening
Deflation prophets in the West are in for a rude awakening. Eastern fire will turn Western ice into a mess, and 2012 looks like it will be the year of melting. The fuel for the fire is coming from deflation-fighting stimulus programs, such as that of U.S. President Barack Obama.
Stimulus is prescribed as a panacea for recession. In today’s global economy, it isn’t effective in the best of circumstances and is outright wrong for what ails the West now.
Read full text
Comment: What the present crisis really has in common with the Great Depression is the incompetence of the leading American economists at this time. Back then it was mainly Irving Fisher, today it is Bernanke, Krugman, Stiglitz, Blinder, ....
Moneteziation continues
The Federal Reserve bought $2.551 billion of Treasuries in the first outright purchase of U.S. government debt since October to prevent money from being drained from the financial system.
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Comment: One of the criteria of wisdom is not to sacrifice the good in the long run for a short-lived benefit in the present. By this criterion the Fed's policy is very unwise.
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Comment: One of the criteria of wisdom is not to sacrifice the good in the long run for a short-lived benefit in the present. By this criterion the Fed's policy is very unwise.
Monday, August 16, 2010
China loves the euro
China, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S.
Full story
Full story
Saturday, August 14, 2010
Pubic debt and growth
Put differently, our “high vulnerability” region for lower growth (the area under the curve to the right of the 90% line) comprises only about 8% of the sample population. The standard considerations about type I and type II errors apply here.6 If we raise the upper bucket cut-off much above 90%, then we are relegating the high-debt analysis to case studies (the UK in 1946-1950 and Japan in recent years).
Only about 2% of the observations are at debt-GDP levels at or above 120% – and that includes the aforementioned cases. If debt levels above 90% are indeed as benign as some suggest, one might have expected to see a higher incidence of these over the long course of history. Certainly our read of the evidence, as underscored by the central theme of our 2009 book, hardly suggests that politicians are universally too cautious in accumulating high debt levels. Quite the contrary, far too often they take undue risks with debt build-ups, relying implicitly perhaps on the fact these risks often take a very long time to materialise. If debt-to-GDP levels over 90% are so benign, then generations of politicians must have been overlooking proverbial money on the street.
We do not pretend to argue that growth will be normal at 89% and subpar (about 1% lower) at 91% debt/GDP any more than a car crash is unlikely at 54mph and near certain at 56mph. However, mapping the theoretical notion of “vulnerability regions” to bad outcomes by necessity involves defining thresholds, just as traffic signs in the US specify 55mph (these methodology issues are discussed in Kaminsky and Reinhart 1999).
Figure 2. The 90% debt/GDP threshold: 1946-2009, advanced economies
Probability density function
Notes: The advanced economy sample is the complete IMF grouping (Switzerland and Iceland were added). It includes Australia. Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the UK, and the US. Sources: Reinhart and Rogoff (2009 and 2010a).
Friday, August 13, 2010
The wisdom of Morgan Stanley
-- The dollar will strengthen to a four-year high of $1.19 per euro, last seen in June, as either the U.S. economy recovers or Europe follows it lower, according to Morgan Stanley. --
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Comment: Strange logic.
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Comment: Strange logic.
German economy powers ahead
Bloomberg:
Germany’s economy grew in the second quarter at the fastest pace since the country’s reunification two decades ago, driving faster-than-forecast expansion in the 16-nation euro area...
In annualized terms, the German economy expanded about 9 percent in the second quarter, said Andreas Scheuerle, an economist at Dekabank in Frankfurt. That puts it on a footing with emerging markets like China and India. --
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Comment: Very strange, indeed, because according to Nobel prize pundit and NYT columnist and Princeton economics professor and textbook writer and bestseller author Paul Krugman Germany should be in depression by now because it has failed to follow his advice of implementing a stimulus package of Krugmaniac dimensions. Sorry, Paul, wrong againg, don't worry, it's not the first time, and it won't be the last. Your record of being wrong keepts growing with you popularity. Only in America.
Germany’s economy grew in the second quarter at the fastest pace since the country’s reunification two decades ago, driving faster-than-forecast expansion in the 16-nation euro area...
In annualized terms, the German economy expanded about 9 percent in the second quarter, said Andreas Scheuerle, an economist at Dekabank in Frankfurt. That puts it on a footing with emerging markets like China and India. --
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Comment: Very strange, indeed, because according to Nobel prize pundit and NYT columnist and Princeton economics professor and textbook writer and bestseller author Paul Krugman Germany should be in depression by now because it has failed to follow his advice of implementing a stimulus package of Krugmaniac dimensions. Sorry, Paul, wrong againg, don't worry, it's not the first time, and it won't be the last. Your record of being wrong keepts growing with you popularity. Only in America.
Consider the things to come
The Dollar's Third and Final Act
by Jeff Fisher
The US credit system is in the midst of its third credit crisis since the advent of the Federal Reserve. The first credit crisis was a deflation that morphed into the Great Depression. (See Rothbard's: America's Great Depression.)
The second credit crisis manifested itself in the stagflation of the 1970s. (See Rothbard's: For a New Liberty Chapter 9.)
This credit crisis began in 2000 and was greatly exacerbated by the housing bubble of 2001 to 2007.
A good discussion is Peter Schiff's: Crash Proof and Crash Proof 2.0.
All three episodes were the inevitable result of the prior credit inflation orchestrated by the Federal Reserve System.
The seeds of the Great Depression were planted during WWI and the 1920s.The 1970s stagflation followed the credit boom of the 1950s and 1960s that were fueled by Johnson's Wars and Welfare State and the Federal Reserve's policy of not letting the money supply contract in the 1970s.
The Credit boom of the 1980s, 1990s, and early 2000s is haunting the markets today.
This writer believes that this credit crisis will be the Dollar's third and final act.
The best-case scenario, in which the financial system and Dollar survive, is very unlikely but it would be very painful for most investors.
Best Case Scenario for US Markets:
Dow/Gold ratio will trade 1.0, possible gold target of $10,000/oz.
Dow/Silver ratio will trade 40.0, possible silver target $250/oz.
Severe credit market conditions with interest rates over 10%.
Some companies will survive, many banks and credit dependent businesses would fail.
The DJIA could trade in a range of 5,000 to 10,000.
Likely Scenario for US Markets:
The most likely scenario is an inflationary Great Depression, in this writer's opinion.
John William's outlines his expectations and I believe they are worth reading: www.shadowstats.comPeter Schiff discusses this possibility in Crash Proof 2.0.
The US has never experienced a credit bust that has followed this path.
Dow/Silver ratio well below 20: silver target well above $600/oz.
Collapse of the credit market. Interest rates only capped by fiat.
Collapse of the US treasury market.
Most companies fail.
Only the best businesses with no need for credit survive.Examples: CL, XOM, KO, PEP, PG
Banking system shut to depositors.
Nationalization of many businesses and all pension assets.
Very unstable political situation, collapse of US empire along the lines of the USSR.
Additional Thoughts:
The US economy will suffer much more than most expect for several reasons.
1. The US economy has no savings and has had no internally generated savings for at least a decade.
3. In order for the US economy to become productive, savings will have to soar relative to consumption. Those savings will have to be invested in productive investments. This restructuring of the economy will take a long time. The greatest threat to this adjustment would be persistent government deficits.
4. Government spending will punish the economy unless it is quickly reduced on a scale never seen in US history. If government refuses to contract, the depression will be all the more severe and the economy will become essentially a command economy.
In summary, for the US economy to improve many unlikely things must occur.
Savings must rise, productive capital must be accumulated, government must shrink to a fraction of its present size in real terms, and the Fed must stabilize the Dollar.
In order to see a real recover in the US economy radical action will need to be taken.
A renaissance in thinking will have to occur.
Centuries ago men realized that for there to be peace, Church and State had to be separated.
In order for civilization to survive going forward, the Market and State must be separated.
The role of government in the economy must be eliminated.
The age of central banks and central planning must end.
August 13, 2010
Jeff Fisher [send him mail] is an independent investor and professional trader living in Austin, TX. Formerly, he co-managed a successful hedge fund.
Thursday, August 12, 2010
Chinese wealth
BEIJING (Reuters) – China's richest citizens are even wealthier than the statistics suggest, and may hold as much as 9.3 trillion yuan ($1.4 trillion) of hidden assets, according to a Credit Suisse-sponsored study by a top economic think-tank.
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Tuesday, August 10, 2010
Monetization of government debt
Bloomberg: Federal Reserve officials will maintain their holdings of securities to prevent money from being drained out of the financial system in their first attempt to bolster the economy in more than a year.
The central bank said it will reinvest principal payments on its mortgage holdings into long-term Treasury securities. The Fed retained a commitment to keep its benchmark interest rate close to zero for an “extended period.”
“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Federal Open Market Committee said in a statement after meeting today in Washington. “To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level.” --
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Official Fed Statement
Comment: Silly is who silly does. The Fed has produced the mess, and now it makes sure that the mess will continue. First Greenspan, Bernanke & co created bubbles, fabricated bailouts, printed money like crazy and put the economy on an unsustainable path. When the bust came the monetary authorities continued to do the same, and this time even more so. When they noted that there remedies don't work, they decided: maybe more of the same will do the job. This way they will go on with a monetary policy that exists in heaping the next problem above the mountain of the existing problems that have been created before by the same kind of measures. Bernanke plays according to the model of his macroeconomic textbook where all kinds of macro aggregates act but no human beings exist and no learning takes place.
The central bank said it will reinvest principal payments on its mortgage holdings into long-term Treasury securities. The Fed retained a commitment to keep its benchmark interest rate close to zero for an “extended period.”
“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Federal Open Market Committee said in a statement after meeting today in Washington. “To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level.” --
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Official Fed Statement
Comment: Silly is who silly does. The Fed has produced the mess, and now it makes sure that the mess will continue. First Greenspan, Bernanke & co created bubbles, fabricated bailouts, printed money like crazy and put the economy on an unsustainable path. When the bust came the monetary authorities continued to do the same, and this time even more so. When they noted that there remedies don't work, they decided: maybe more of the same will do the job. This way they will go on with a monetary policy that exists in heaping the next problem above the mountain of the existing problems that have been created before by the same kind of measures. Bernanke plays according to the model of his macroeconomic textbook where all kinds of macro aggregates act but no human beings exist and no learning takes place.
Sunday, August 8, 2010
Not just made uniform but made uniformly dumb
Angelo M. Codevilla explais:
"... Never has there been so little diversity within America's upper crust. Always, in America as elsewhere, some people have been wealthier and more powerful than others. But until our own time America's upper crust was a mixture of people who had gained prominence in a variety of ways, who drew their money and status from different sources and were not predictably of one mind on any given matter. The Boston Brahmins, the New York financiers, the land barons of California, Texas, and Florida, the industrialists of Pittsburgh, the Southern aristocracy, and the hardscrabble politicians who made it big in Chicago or Memphis had little contact with one another. Few had much contact with government, and "bureaucrat" was a dirty word for all. So was "social engineering." Nor had the schools and universities that formed yesterday's upper crust imposed a single orthodoxy about the origins of man, about American history, and about how America should be governed. All that has changed.
Today's ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters -- speaking the "in" language -- serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct. Many began their careers in government and leveraged their way into the private sector. Some, e.g., Secretary of the Treasury Timothy Geithner, never held a non-government job. Hence whether formally in government, out of it, or halfway, America's ruling class speaks the language and has the tastes, habits, and tools of bureaucrats. It rules uneasily over the majority of Americans not oriented to government...."
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Comment: Nowhere else, as far as my experience of travels around the world goes, have I seen more conformity of thought than in the US and as to my academic experience, this conclusion is even worse. Almost all of the prominent institutions of American academia have degenerated into marketing organizations. These universities have ceased to be places of higher learning long ago and tansmogrified into an highly effective power network. That may be good for the individual in order to make money and obtain power, but it a catastrophe for the nation and the ideals of knowledge and education.
"... Never has there been so little diversity within America's upper crust. Always, in America as elsewhere, some people have been wealthier and more powerful than others. But until our own time America's upper crust was a mixture of people who had gained prominence in a variety of ways, who drew their money and status from different sources and were not predictably of one mind on any given matter. The Boston Brahmins, the New York financiers, the land barons of California, Texas, and Florida, the industrialists of Pittsburgh, the Southern aristocracy, and the hardscrabble politicians who made it big in Chicago or Memphis had little contact with one another. Few had much contact with government, and "bureaucrat" was a dirty word for all. So was "social engineering." Nor had the schools and universities that formed yesterday's upper crust imposed a single orthodoxy about the origins of man, about American history, and about how America should be governed. All that has changed.
Today's ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters -- speaking the "in" language -- serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct. Many began their careers in government and leveraged their way into the private sector. Some, e.g., Secretary of the Treasury Timothy Geithner, never held a non-government job. Hence whether formally in government, out of it, or halfway, America's ruling class speaks the language and has the tastes, habits, and tools of bureaucrats. It rules uneasily over the majority of Americans not oriented to government...."
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Comment: Nowhere else, as far as my experience of travels around the world goes, have I seen more conformity of thought than in the US and as to my academic experience, this conclusion is even worse. Almost all of the prominent institutions of American academia have degenerated into marketing organizations. These universities have ceased to be places of higher learning long ago and tansmogrified into an highly effective power network. That may be good for the individual in order to make money and obtain power, but it a catastrophe for the nation and the ideals of knowledge and education.
Saturday, August 7, 2010
Give it a damn - the wars must go on
Look Out Below! America's Infrastructure Is Crumbling
by Eric Kelderman, Stateline.org Staff Writer
The numbers are staggering. More than one in four of America's nearly 600,000 bridges need significant repairs or are burdened with more traffic than they were designed to carry, according to the U.S. Department of Transportation.
A third of the country's major roadways are in substandard condition -- a significant factor in a third of the more than 43,000 traffic fatalities each year, according to the Federal Highway Administration. Traffic jams waste 4 billion hours of commuters' time and nearly 3 billion gallons of gasoline a year, the Texas Transportation Institute calculates.
Dams, too, are at risk. The number of dams that could fail has grown 134% since 1999 to 3,346, and more than 1,300 of those are "high-hazard," meaning their collapse would threaten lives, the Association of State Dam Safety Officials (ASDSO) found. More than a third of dam failures or near failures since 1874 have happened in the last decade.
Comment: Infrastructure makes and breaks an economy. It's the first thing that counts. There is nothing that could compensate for a deficient infrastructure. Infrastrucure isn't everything, but without a solid infrastructure there is nothing else (of economic strength).
You're right, Ron Smith, thanks
Ron Smith writes in the Baltimore Sun:
"... We are led by fools who ignore the ample evidence history provides about the collapse of spendthrift societies. Such events abound. How is it they expect our overspending to end in other than disaster? You'd have to ask them, I guess. Or perhaps read the fantasies of Paul Krugman, the economist/columnist who believes the biggest problem with the stimulus spending is that there hasn't been nearly enough of it. His name is rarely mentioned without the fact that he is a Nobel Prize winner. He could have a room full of prizes, but anyone with a lick of common sense knows he's wrong on this. The few economists that warned that the credit explosion of recent years would hasten and deepen financial disaster were mainly from the so-called Austrian school and were derided by their Keynesian counterparts as kooks. Who looks kooky now?..."
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"... We are led by fools who ignore the ample evidence history provides about the collapse of spendthrift societies. Such events abound. How is it they expect our overspending to end in other than disaster? You'd have to ask them, I guess. Or perhaps read the fantasies of Paul Krugman, the economist/columnist who believes the biggest problem with the stimulus spending is that there hasn't been nearly enough of it. His name is rarely mentioned without the fact that he is a Nobel Prize winner. He could have a room full of prizes, but anyone with a lick of common sense knows he's wrong on this. The few economists that warned that the credit explosion of recent years would hasten and deepen financial disaster were mainly from the so-called Austrian school and were derided by their Keynesian counterparts as kooks. Who looks kooky now?..."
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Friday, August 6, 2010
Running for the exit
WASHINGTON, DC – Christina Romer, one of President Obama's top economic advisers, is leaving her position as chairwoman of the White House's Council of Economic Advisers, calling her service "the honor of a lifetime." She is expected to return to her position as a professor of economics at the University of California, Berkeley. In a statement, President Obama applauded Romer and said "family commitments" caused her to step down. However, National Journal reports that tensions within Obama's economic team precipitated her departure. Here's why:
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Comment: Romer is typical for the dismal state of modern (mainstream) economics. As it finally dawned upon her that her theories not only do not work but make things worse, she runs for the exit and continues to play her games at the blackboard in front of ignorant students. She is like a surgeon who, after killing thousands of patients in the operation room, goes back to teaching the next generation how to do the same.
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Comment: Romer is typical for the dismal state of modern (mainstream) economics. As it finally dawned upon her that her theories not only do not work but make things worse, she runs for the exit and continues to play her games at the blackboard in front of ignorant students. She is like a surgeon who, after killing thousands of patients in the operation room, goes back to teaching the next generation how to do the same.
Dollar heads lower
-- The dollar tumbled to an eight-month low against the yen and dropped versus the euro as a government report showed the world’s largest economy lost more jobs in July than economists forecast. --
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Comment: Repatriation in its early stages. It is high time that many of the emerging markets better convert dollars into grain and soybeans.
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Comment: Repatriation in its early stages. It is high time that many of the emerging markets better convert dollars into grain and soybeans.
End of cheap food
-- The world may face another food crisis if the surge in wheat sparked by Russia’s export ban drives the prices of other staples higher, according to an executive from Indonesia, Asia’s largest buyer of the grain.
“There will be a domino reaction and we expect corn demand will rise, pushing prices higher, and feed industries will buy more corn and soybeans,” Franciscus Welirang, chairman of the Flour Mills Association in Indonesia, said in an interview today. “It’s the end of cheap wheat.” --
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Comment: Imagine when all those countries that have accumulated trillions of dollars in international reserves begin to buy food for their people.
“There will be a domino reaction and we expect corn demand will rise, pushing prices higher, and feed industries will buy more corn and soybeans,” Franciscus Welirang, chairman of the Flour Mills Association in Indonesia, said in an interview today. “It’s the end of cheap wheat.” --
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Comment: Imagine when all those countries that have accumulated trillions of dollars in international reserves begin to buy food for their people.
Bang harder
Look at this man. This is Nobel Prize-winning economist Joseph E. Stiglitz.He said the U.S. economy faces an “anemic recovery” and the government will need to enact another round of “better designed” stimulus measures.
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Comment: Stiglitz' advice is like telling a man who has banged his head bloody to do it again and next time much harder.
The fake Nobel price of economics falls into the same category as that for peace.
The Soviet army is alive and well: its top generals meet every year at the AEA to speakeasy who has done most damage to the US economy over the past years. This person then gets suggested for the next Nobel Prize in economics. Stiglitz, like Krugman, has ranked on high on the list and he has kept on the sacred tradition to work to the best of his disabilities towards the destruction of the US economy may Stalin and Trotzki help me.
Thursday, August 5, 2010
This lady is trying to save the US economy
Read more about Michelle's devotion to save the world economy and recently harshly battered Spain.
On academic cheaters and crooks
Stanford economist John Taylor writes:
"... the New York Times published an article about simulations of the effects of fiscal stimulus packages and financial interventions using an old Keynesian model. The simulations were reported in an unpublished working paper by Alan Blinder and Mark Zandi. I offered a short quote for the article saying simply that the reported results were completely different from my own empirical work on the policy responses to the crisis.
I have now had a chance to read the paper and have more to say. First, I do not think the paper tells us anything about the impact of these policies. It simply runs the policies through a model (Zandi’s model) and reports what the model says would happen. It does not look at what actually happened, and it does not look at other models, only Zandi’s own model. I have explained the defects with this type of exercise many times, most recently in testimony at a July 1, 2010 House Budget Committee hearing where Zandi also appeared. I showed that the results are entirely dependent on the model: old Keynesian models (such as Zandi’s model) show large effects and new Keynesian models show small effects. So there is nothing new in the fiscal stimulus part of this paper.
Second, I looked at how they assessed the impact of the financial market interventions. Again they do not directly assess the interventions. They just simulate the model with and without the interventions. They say that they have equations in the model which include the financial interventions as variables, but they do not report the size or significance of the coefficients or how they obtained them.
Third, the working paper makes no mention of previously published papers in the literature which get different results. It is rather standard in research to provide a literature review and to explain why the results are different from previous published papers. For the record there are different results in papers by John Cogan, Volcker Wieland, Tobias Cwik and me in the Journal of Economic Dynamics and Control, by John Williams and me in the American Economic Journal; Macroeconomics, or by me published by the Bank of Canada or the St. Louis Fed
Finally, when I read the paper I discovered in an appendix that Blinder and Zandi find that policy was not as good as the model shows and was in fact quite poor when one does a more comprehensive evaluation. They say in Appendix A that “Poor policymaking prior to TARP helped turn a serious but seemingly controllable financial crisis into an out-of-control panic. Policymakers’ uneven treatment of troubled institutions (e.g., saving Bear Stearns but letting Lehman fail) created confusion about the rules of the game and uncertainty among shareholders, who dumped their stock, and creditors, who demanded more collateral to provide liquidity to financial institutions.” I completely agree with this statement, but how can one then argue that policy interventions worked, when, in fact, viewed in their entirety they caused the problem? --
Read more about these cheaters and crooks
"... the New York Times published an article about simulations of the effects of fiscal stimulus packages and financial interventions using an old Keynesian model. The simulations were reported in an unpublished working paper by Alan Blinder and Mark Zandi. I offered a short quote for the article saying simply that the reported results were completely different from my own empirical work on the policy responses to the crisis.
I have now had a chance to read the paper and have more to say. First, I do not think the paper tells us anything about the impact of these policies. It simply runs the policies through a model (Zandi’s model) and reports what the model says would happen. It does not look at what actually happened, and it does not look at other models, only Zandi’s own model. I have explained the defects with this type of exercise many times, most recently in testimony at a July 1, 2010 House Budget Committee hearing where Zandi also appeared. I showed that the results are entirely dependent on the model: old Keynesian models (such as Zandi’s model) show large effects and new Keynesian models show small effects. So there is nothing new in the fiscal stimulus part of this paper.
Second, I looked at how they assessed the impact of the financial market interventions. Again they do not directly assess the interventions. They just simulate the model with and without the interventions. They say that they have equations in the model which include the financial interventions as variables, but they do not report the size or significance of the coefficients or how they obtained them.
Third, the working paper makes no mention of previously published papers in the literature which get different results. It is rather standard in research to provide a literature review and to explain why the results are different from previous published papers. For the record there are different results in papers by John Cogan, Volcker Wieland, Tobias Cwik and me in the Journal of Economic Dynamics and Control, by John Williams and me in the American Economic Journal; Macroeconomics, or by me published by the Bank of Canada or the St. Louis Fed
Finally, when I read the paper I discovered in an appendix that Blinder and Zandi find that policy was not as good as the model shows and was in fact quite poor when one does a more comprehensive evaluation. They say in Appendix A that “Poor policymaking prior to TARP helped turn a serious but seemingly controllable financial crisis into an out-of-control panic. Policymakers’ uneven treatment of troubled institutions (e.g., saving Bear Stearns but letting Lehman fail) created confusion about the rules of the game and uncertainty among shareholders, who dumped their stock, and creditors, who demanded more collateral to provide liquidity to financial institutions.” I completely agree with this statement, but how can one then argue that policy interventions worked, when, in fact, viewed in their entirety they caused the problem? --
Read more about these cheaters and crooks
German business confidence rebounds
The mess they made
Writes Jamus Lim at the World Bank Blog:
"One of the interesting byproducts of the global financial crisis has been the induced crisis in the economics profession. More precisely, there has been a minor intellectual crisis in macroeconomic thought, with an erosion of what had been previously believed to have been a new synthesis in macroeconomics. This consensus was perhaps best exemplified by Olivier Blanchard's ill-timed state of macro paper that (in)famously declared that the "state of macro is good." Since then, economists have decried how state-of-the-art monetary theory is useless, real business cycle models are simply silly, and that financial models are often theoretical flights of fancy (Mark Thoma links to many more contributions than you could possibly want or imagine).
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Comment: By trying to become ever more "scientific", by using ever more math, by ignorantly denouncing Austrian economics, this is the state modern so-called "mainstream" (aka fake) macroeconomics now is in.
"One of the interesting byproducts of the global financial crisis has been the induced crisis in the economics profession. More precisely, there has been a minor intellectual crisis in macroeconomic thought, with an erosion of what had been previously believed to have been a new synthesis in macroeconomics. This consensus was perhaps best exemplified by Olivier Blanchard's ill-timed state of macro paper that (in)famously declared that the "state of macro is good." Since then, economists have decried how state-of-the-art monetary theory is useless, real business cycle models are simply silly, and that financial models are often theoretical flights of fancy (Mark Thoma links to many more contributions than you could possibly want or imagine).
Read more
Comment: By trying to become ever more "scientific", by using ever more math, by ignorantly denouncing Austrian economics, this is the state modern so-called "mainstream" (aka fake) macroeconomics now is in.
Prelude to price inflation
The difference
keep international trade intact:
Read this from The Economist:
"DURING the Great Depression, America’s protectionist Smoot-Hawley Act of 1930 raised tariffs on more than 900 goods. A series of retaliatory actions by other countries followed. The effect on global commerce was devastating. In the three years to June 1932, the volume of world trade shrank by over a quarter. No wonder, then, that the spectre of the worst recession since the Depression led many to fear another descent into protectionism and a similar decline in trade.
At first, the recession did hit trade hard. Global GDP fell by 0.6% in 2009 while the volume of world exports dropped by 12.2%. But whereas the Depression saw trade decline for at least four years, this time the rebound has been quick, and sharp. By May this year, emerging-economy members of the G20 were importing and exporting around 10% more than their pre-crisis peaks (see chart). Rich-world trade has recovered from the trough too, though it has not yet made up all the ground lost since the credit crunch began..."
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Comment: Forget about stimuli which only have made things worse. Praise our leaders that at least one thing they did not dare to mess up: international trade. Yet we're not yet safe: because governments in a completely UNNECESSARY way added one stimulus program upon the next, they are now fully in debt and may --- God forbid -- resort to protection. Note the irony: At first international trade saved us. Yet authorities learnt this right lesson along with many false lessons. The false lessons that they have learnt may lead them to negate the only right lessons they had learnt so far.
The lunatics are on the run
Sometimes I think: maybe I am too harsh in my judgement about what many of the most prominent economists say. Yet then again, after a short while only, I read horrible statements again and again I'm confronted with bottomless confusion when these apparently prominent economists lift their voices.
In the meanwhile I just sit back and laugh when I read things like that:
http://www.economist.com/economics/by-invitation/questions/are_current_deficit_reduction_plans_likely_boost_growth
In the meanwhile I just sit back and laugh when I read things like that:
http://www.economist.com/economics/by-invitation/questions/are_current_deficit_reduction_plans_likely_boost_growth
Return of Leviathan
The Economist:
Governments seem to have forgotten that picking industrial winners nearly always fails
Aug 5th 2010
How to become the best paid executive
Oracle Corp., the world’s second- biggest software maker, may face total damages of $1 billion in a U.S. Justice Department lawsuit claiming it overcharged the government, legal experts said.
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Division bell
-- More Americans than projected filed applications for unemployment insurance last week, indicating employers kept cutting staff as the recovery showed signs of slowing. --
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In the meantime:
-- European Central Bank President Jean- Claude Trichet said the euro-area economy is strengthening faster than forecast and money markets are improving as the region recovers from its sovereign debt crisis. --
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Comment: The attack on the euro earlier this year proves one major point: rarely before have so many fools big-mouthed so much. Anyone remember Roubini who said a day before the euro's take-off that the European currency has to fall much more? And, of course, it is futile to quote all the wrong statements by Krugman which would fill a book. Rarely before have we had so many bad economists at prominent places in the US, and Bernanke is no exception.
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In the meantime:
-- European Central Bank President Jean- Claude Trichet said the euro-area economy is strengthening faster than forecast and money markets are improving as the region recovers from its sovereign debt crisis. --
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Comment: The attack on the euro earlier this year proves one major point: rarely before have so many fools big-mouthed so much. Anyone remember Roubini who said a day before the euro's take-off that the European currency has to fall much more? And, of course, it is futile to quote all the wrong statements by Krugman which would fill a book. Rarely before have we had so many bad economists at prominent places in the US, and Bernanke is no exception.
Tuesday, August 3, 2010
End of the rating monopoly
From The Financial Times
China rating agency condemns rivals
By Jamil Anderlini in Beijing
Published: July 21 2010 16:22 | Last updated: July 21 2010 16:22
Published: July 21 2010 16:22 | Last updated: July 21 2010 16:22
The head of China’s largest credit rating agency has slammed his western counterparts for causing the global financial crisis and said that as the world’s largest creditor nation China should have a bigger say in how governments and their debt are rated.
“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview. “China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged.”
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“The financial crisis was caused because rating agencies didn’t properly disclose risk and this brought the entire US financial system to the verge of collapse, causing huge damage to the US and its strategic interests,” Mr Guan said.
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There is also a view among many investors that the agencies would shy away from withdrawing triple A ratings to countries such as the US and UK because of the political pressure that would bear down on them in the event of such actions.
Last week, privately-owned Dagong published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency.
The results were very different from those published by Moody’s, Standard & Poor’s and Fitch, with China ranking higher than the United States, Britain, Japan, France and most other major economies, reflecting Dagong’s belief that China is more politically and economically stable than all of these countries.
Mr Guan said his company’s methodology has been developed over the last five years and reflects a more objective assessment of a government’s fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth.
“The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings ,” Mr Guan said. “Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable.”
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“The western rating agencies are politicised and highly ideological and they do not adhere to objective standards,” Guan Jianzhong, chairman of Dagong Global Credit Rating, told the Financial Times in an interview. “China is the biggest creditor nation in the world and with the rise and national rejuvenation of China we should have our say in how the credit risks of states are judged.”
...
“The financial crisis was caused because rating agencies didn’t properly disclose risk and this brought the entire US financial system to the verge of collapse, causing huge damage to the US and its strategic interests,” Mr Guan said.
...
There is also a view among many investors that the agencies would shy away from withdrawing triple A ratings to countries such as the US and UK because of the political pressure that would bear down on them in the event of such actions.
Last week, privately-owned Dagong published its own sovereign credit ranking in what it said was a first for a non-western credit rating agency.
The results were very different from those published by Moody’s, Standard & Poor’s and Fitch, with China ranking higher than the United States, Britain, Japan, France and most other major economies, reflecting Dagong’s belief that China is more politically and economically stable than all of these countries.
Mr Guan said his company’s methodology has been developed over the last five years and reflects a more objective assessment of a government’s fiscal position, ability to govern, economic power, foreign reserves, debt burden and ability to create future wealth.
“The US is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings ,” Mr Guan said. “Actually, the huge military expenditure of the US is not created by themselves but comes from borrowed money, which is not sustainable.”
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Good products need no stimulus
Bayerische Motoren Werke AG, the world’s top manufacturer of luxury cars, reported its biggest profit in 2 1/2 years after demand for the new 5 Series surged and sales advanced in China and the U.S.
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Comment: Bad economists like Krugman and Bernanke see the world exclusively in terms of statistical aggregates. They believe that it is "aggregate demand" which moves the world, while in fact the world is moved by entrepreneurial action, by the tinkerer, by the small businessman, whose outcomes are judged and thereby promoted or rejected by the billions of individual consumers around the globe who decide what to buy and what not to buy.
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Comment: Bad economists like Krugman and Bernanke see the world exclusively in terms of statistical aggregates. They believe that it is "aggregate demand" which moves the world, while in fact the world is moved by entrepreneurial action, by the tinkerer, by the small businessman, whose outcomes are judged and thereby promoted or rejected by the billions of individual consumers around the globe who decide what to buy and what not to buy.
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