Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Hmm ... I own my own printing press and everyone prizes the currency I print out very highly. It's recognized and accepted around the world. Many prefer it to their own. As a matter of fact, they're now willing to trade me three barrels of oil for the same piece of paper that fetched only one barrel a year ago. That's power.
Now, I have huge (Trump-size) continuing obligations in the form of infrastructure, social programs and defense needs to fund on an ongoing basis. How best to manage this enormous fiscal responsibility? I could (1) simply print more paper currency to satisfy my creditors or (2) tax my citizens more highly or (3) borrow in the open markets by issuing bonds, promising to pay-back those bonds on-demand with paper currency from my printing press. I carry that debt on my books as $$ owed back to myself, since I hold the keys to the printing press.
I chose the third option as preferable to the other two. Remember - I'm not like you and your neighbor. I have my own printing press. You don't.
Well, Dex, you still have the opportunity to provide anything substantive that you care to. Not holding my breath on that. You are very good at ducking, weaving, and evading substantive and intelligent discussion though, I'll give you that.
Allow me to state this diplomatically: put up or shut up.
Well, Dex, you still have the opportunity to provide anything substantive that you care to. Not holding my breath on that. You are very good at ducking, weaving, and evading substantive and intelligent discussion though, I'll give you that.
Let me be diplomatic on this: put up or shut up.
First show me your hall monitor badge that proves you are the judge and jury over who is ducking, weaving, and evading substantive and intelligent discussion.
That's what makes this thread fun to read. I hadn't commented since the beginning and I read the whole thing last night and it made me laugh on a very sad market day. Gotta hand it to @davidrmoran, though...he never fails to get the party started! And you're right, I should not "chime in dismissively" when I have not been involved in this crazy discussion (funny comment...liked that a lot)...but maybe I think enough is enough and it's getting too personal. @Old_Joe Roll the credits, please?
Also, in my defense, I have been out of town looking at houses...didn't know I had to stay at home chained to my computer...sorry!
I do agree with what @LewisBraham said...all the way back on Page 1...everyone wants stuff, but no one wants to pay for it. How true, in government and in life!
It is hard for me to fathom how posting an economist's column gets any party started, really; I just thought investors here might be interested in how things actually work and what to sensibly worry about, and what not. Debt less than the savings glut, for example.
It is hard for me to fathom how posting an economist's column gets any party started, really; I just thought investors here might be interested in how things actually work and what to sensibly worry about, and what not. Debt less than the savings glut, for example.
"Quantitative easing, by the way, is just more of the same. If you are claiming that the Fed has created artificially easy credit, you have to explain how it can do that year after year without producing inflation or an overheating economy. Nobody has ever produced a coherent story about how Fed policy can drive interest rates below their natural level without inflationary effects."
A couple of reasons: -If the velocity of money falls enough - no inflation. -Inflation isn't just about the FED - Shortage - labor shortage, material shortage, factory shortage can cause it - none of which is happening. -Fall in demand -Lack of disposable income -Some of the instruments and money the FED bought went to financial institutions who just invested it -The FED bought US gov't debt, which if it didn't the marketplace would have wanted higher interest rates for it - then possible inflation as corp had to compete in the marketplace for financing.
I'm a nobody so I guess nobody has just produced a coherent story about how Fed policy can drive interest rates below their natural level without inflationary effects.
Paul Robin Krugman (born February 28, 1953) is an American economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, Distinguished Scholar at the Luxembourg Income Study Center at the CUNY Graduate Center, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography.
Krugman is ranked among the most influential economic thinkers in the US [and] has written over 20 books, including scholarly works, textbooks and books for a more general audience, and has published over 200 scholarly articles in professional journals and edited volumes.
Krugman earned his B.A. summa cum laude in economics from Yale University in 1974 and his PhD in economics from the Massachusetts Institute of Technology (MIT) in 1977 with a thesis titled Essays on flexible exchange rates.
But he's an "idiot". Because Dex says so. No citations, no data, no nothing.
Say there Dex, maybe you could at least give us an idea of your financial education, background and accomplishments, since you would have us believe that you are qualified to judge Mr. Krugman.
Paul Robin Krugman (born February 28, 1953) is an American economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, Distinguished Scholar at the Luxembourg Income Study Center at the CUNY Graduate Center, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography.
Krugman is ranked among the most influential economic thinkers in the US [and] has written over 20 books, including scholarly works, textbooks and books for a more general audience, and has published over 200 scholarly articles in professional journals and edited volumes.
Krugman earned his B.A. summa cum laude in economics from Yale University in 1974 and his PhD in economics from the Massachusetts Institute of Technology (MIT) in 1977 with a thesis titled Essays on flexible exchange rates.
But he's an "idiot". Because Dex says so. No citations, no data, no nothing.
Say there Dex, maybe you could at least give us an idea of your financial education, background and accomplishments, since you would have us believe that you are qualified to judge Mr. Krugman.
Paul Robin Krugman (born February 28, 1953) is an American economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, Distinguished Scholar at the Luxembourg Income Study Center at the CUNY Graduate Center, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography.
Krugman is ranked among the most influential economic thinkers in the US [and] has written over 20 books, including scholarly works, textbooks and books for a more general audience, and has published over 200 scholarly articles in professional journals and edited volumes.
Krugman earned his B.A. summa cum laude in economics from Yale University in 1974 and his PhD in economics from the Massachusetts Institute of Technology (MIT) in 1977 with a thesis titled Essays on flexible exchange rates.
But he's an "idiot". Because Dex says so. No citations, no data, no nothing.
Say there Dex, maybe you could at least give us an idea of your financial education, background and accomplishments, since you would have us believe that you are qualified to judge Mr. Krugman.
"False reports that Paul Krugman has filed for bankruptcy spread across the Internet on Monday morning.
The rumor came from the satirical news site The Daily Currant, which said that the Nobel Prize-winning economist had accrued over $7 million in debt. The fake story was picked up by Austria's Format online magazine, which then reported as true by Boston.com and Breitbart.com."
Say there Dex... ever think of checking your sources? They sure saw you coming!
One statement Dex made about the debt I would like to refute: "Amazing what people will support to protect their entitlements/SS and their war mongering ways. They will say it is to help the poor, yet the only one it helps to bail out the bankers and the investors in those banks." While a significant amount of debt was incurred to bail out the banks in 2009 almost all of that debt was paid back with interest: politifact.com/new-hampshire/statements/2012/oct/25/barack-obama/barack-obama-says-banks-paid-back-all-federal-bail/ Whether or not the bailout was a good idea or not is another question. If we hadn't bailed out the banks we would've entered a Great Depression II and investors like Dex and many other members of this board opposed to debt would've been wiped out. Contrary to popular belief among the libertarian set, not bailing out the banks would've been a boon for hardcore socialist ideology in America as the terrible economic dislocations that would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks. That would most likely have been some greater form of redistribution to the poor whose numbers would've grown dramatically. It's interesting to note that membership in the Communist party in America calling for revolution grew significantly during the Great Depression prior to the New Deal. Roosevelt recognized this--that the level of unrest was dangerous with actual riots and violent strikes--when he passed the New Deal. Again contrary to popular belief, the "entitlement" programs he and subsequently LBJ created have actually saved and fostered our capitalist system by creating a safety net so that the poor don't pick up the gun and pitchfork when things get bad. Liberal ideology, which Krugman espouses, fosters capitalism, by softening the blows from the natural boom and bust cycles capitalism eternally repeats. FDR who was born rich and entitled wanted to avoid revolution not create one. Similarly the debt Krugman believes is needed to spur economic growth is to avoid the social unrest austerity inevitably causes.
"....Say there Dex, maybe you could at least give us an idea of your financial education, background and accomplishments, since you would have us believe that you are qualified to judge Mr. Krugman.
You first, what qualifies you to comment about anything? Please provide links to verifiable sources. We will also need your personal information for verification.
You are very good at ducking, weaving, and evading substantive and intelligent discussion you pick and choose what link you will address.
What substantive contribution do you make except derailing the thread with your 'hall monitor' behavior?
Although davidrmoran, posts about 'The Idiot', he at least has a point of view and is willing to put something of himself into the thread. He is not afraid to put his neck out (and usually have it cut off).
Wow. My beheading is an awfully nice image from you, dude, so surely *that* concludes this discussion. (And the links you post got nothing, just the usual apocalyptic rightwingnut crap; Zodeaux, seriously? Did you read what you posted past the headline?)
Well Dex, when the day comes that I refer to someone with credentials like Mr. Krugman as an idiot, I certainly will feel it necessary to provide accurate sources to buttress that argument.
As a seasoned observer of humanity though, I do feel qualified to judge another citizen based on my observance of their actions. And I do believe that I know an idiot when I see one.
More cartoons: what a useful and enlightening statement.
"Whether or not the bailout was a good idea or not is another question. If we hadn't bailed out the banks we would've entered a Great Depression II and investors like Dex and many other members of this board opposed to debt would've been wiped out."
There's really no proof of that, though. If I'm a bank and I made bad investments, am I going to tell you that the world will end if you don't bail out my mistakes? Sure. Things would not be good, but banks have failed before and the sun still came up the next morning. Ultimately, the desire was to restart things as quickly as possible and in the way that was most easily accepted. That was QE1. Then there was QE2 and then there was QE3 and Operation Twist was in there somewhere. Now we have discussions of QE4 and other measures of easing from a market that now has come to expect the Fed to come to bail everyone out. The fact that QE1 lead to QE2 means that QE1 did not work. If QE 2 had the desired effect, we wouldn't have needed QE3 and we wouldn't have one of the largest and most respected hedge fund managers in the US talking about the possibility that the Fed's next move is QE4. This is - as far as I'm concerned - a monetary "Hotel California".
A somewhat longer period where the rot could have been cleared out of the system with some easing measures would have taken longer and been very difficult but we would have eventually moved on with something of a fresh state and not found ourselves in a situation with several years of QE and ZIRP and an economy where people are very concerned about a mere 25-50 basis point increase in interest rates.
There have been instances in the past where assets were taken from irresponsible hands, sold and found their way into new hands. There are crises where losers are losers and inevitably, someone becomes a winner from picking off assets thrown out. Instead, the losers won and not only did they win, they get to play the "Armageddon Card" every time someone says boo to them. Meanwhile, they show that they couldn't care less about changing their ways.
How about a record of some of JP Morgan's many fines since the crisis:
I'll continue to view the bank bailouts as primarily a long-term positive for the banks. If you consider "Too Big To Fail" healthy, then well, everything has gotten even better as these entities are now even bigger.
That said, the world is what it is. What happened happened. As much as I dislike aspects of what occurred, I think my concern becomes where does this country go from here?
"Contrary to popular belief among the libertarian set, not bailing out the banks would've been a boon for hardcore socialist ideology in America as the terrible economic dislocations that would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks"
Everything has to be political. There are some people who are democratic who may not agree with you. I know, it's weird, but trust me on this. The whole grouping views into political parties as if everyone under a particular political party must share the same view is a little...tired? Politics in this country. So divisive. Honestly.
"would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks."
Because giving money to people would have not produced as positive results as giving money to JP Morgan, who the government can make money off of with all of the fines that they have to pay? I mean, honestly, the banks do sort of pay the government dividends in a sense with all of the fines that they continue to throw off several years later.
In all seriousness, we've spent pretty much all of our efforts on boosting asset prices in the last several years. As I've noted previously, this too will end, much like housing goes up forever until it doesn't, much like .com stocks were going to go up forever until they didn't, etc. We have spent so much focus on asset prices and special interests and corporations and we had a tremendous opportunity to put money to work in the real economy on things like infrastructure and the window to do that in a meaningful way has probably passed.
There is an aspect of me that believes that you build a solid foundation for a country (and that's not saying, "asset prices to the moon will fix everything!", that's making difficult decisions and keeping infrastructure, education and other "on the ground" aspects of your country modern and competitive) and the gains and prosperity follow. If you believe that prosperity comes from "asset prices to the moon!", history has shown more than a few instances where that hasn't exactly ended well. This will be another one.
We will not fix the country's core problems today, tomorrow or probably a few years from now. We have a broken political system who lets their political ideology get in the way of really caring about anything but themselves, in most cases. We will not fix problems, we will create bubbles because they're popular and everyone's happy until they break and by that time the politician is on the way out.
And really... if you need any further evidence about the state of things, the fact that Trump is doing as well as he is is not because he's the best politician that this country has to offer (perhaps the most recent winner of "Celebrity Apprentice" can find their way into a position in his administration), it's because there are a lot of people who are really, really angry about how things are and he knows it and he plays to it. Whether you agree with them or not, it's worth considering that there are that many people who are clearly not happy to the point where they're voting for "The Donald" of all people.
"...avoid the social unrest austerity inevitably causes."
Like in Baltimore and Ferguson?
I mean, honestly, the wealth gap in this country and the focus on asset prices instead of the country as a whole (what % of assets in this country are owned by the 1%?) is going to result in more social unrest as time goes by either way.
And to Lewis, I respect your thoughts and enjoy your articles, I just had a few disagreements.
@Scott- I have no problems with anything that you said, above. Much better than cartoons, btw. I especially like your observation that "The whole grouping views into political parties as if everyone under a particular political party must share the same view is a little...tired?" Well past "tired", I think.
I'll continue to view the bank bailouts as primarily a long-term positive for the banks. If you consider "Too Big To Fail" healthy, then well, everything has gotten even better as these entities are now even bigger.
I'd also add, look at the Federal Reserve Balance sheet for such items as mortgaged backed securities. They bought those from the banks, in part, to shore up their balance sheets. And we shouldn't need to re-hash how those came to be.
@Scott- I have no problems with anything that you said, above. Much better than cartoons, btw. I especially like your observation that "The whole grouping views into political parties as if everyone under a particular political party must share the same view is a little...tired?" Well past "tired", I think.
Thanks. Honestly, this discussion got off track and I admittedly get upset - ultimately I deleted a couple of posts on this thread - and not because they were rude or anything but because I've tried to not get wrapped up in these discussions on here. I may not agree with members of this board on some things, but I think what concerns me is where we go from here and nothing really is giving me much confidence. The upset doesn't come from a political place - as I've said before - I really have no interest in politics and despise how politics have become religion in this country - I think it's divisive at best and destructive at worst. It comes from a place - and perhaps being younger than most on this board I have a different perspective - of having genuine concern about the country's direction.
And yes, there have been plenty of times where people have said, "I'm concerned about where things are going", but this time - when we're at ZIRP and things are turning over (btw, nice bounce today - not), where do you go from there if that becomes the reality. Where do you go when taking interest rates down doesn't get the intended effect, even at zero. Do you go, "Oh well" and let the cards fall as they may, or do you take monetary policy (yet again) to new and extreme levels? There is the possibility, although people tend to dismiss this entirely without hesitation, that on this trek into uncharted territory, something gets disorderly. We have a Fed who believes that the economy is an air conditioner that can be dialed up and down at their whim, when it's something so much more complex and volatile than that.
In a way, I don't find things surprising because as I said earlier everything that has been done is monetary painkillers for cancer rather than direct treatment. Then the patient gets hooked on painkillers and needs more and more each time and still has cancer.
Confidence is an underlying aspect of many financial decisions that people make on a daily basis. If people are not confident in the economy or their leaders they may not make major purchases or minor ones. Homeownership in this country is at a level where it hasn't been for decades and instead people talk about the "rental economy", which ... is good for landlords with rents at record highs, but that's less money for people to spend on other things and money they won't see again. I talk about investing primarily in needs and needs costs (rents, health insurance, etc) are soaring and crowding out money that would otherwise be spent on other, more discretionary things.
In terms of confidence, people may not invest or they have such a short-term time frame that nothing is safe from being sold when there's the slightest hint of panic. We live in a world where the average holding time of an investment has gone from years to days. Perhaps there is something to a tax on trades or perhaps lowering the dividend tax in an attempt to encourage reinvestment of dividends and compounding interest with a longer-term view. Perhaps we do need to force market participants to slow down. But where does that money go and which special interests involve themselves in the details of the rules? I mean, ultimately it's probably futile to even begin to think about such things.
Companies do buybacks instead of building factories (which has been discussed at length here and elsewhere.)
It's not a matter of "all debt is bad" necessarily as much as show me the results and who decides the Goldilocks level of debt that is "just right" - politicians who are thrilled that they can spend, spend, spend? The special interest groups I'm sure are thrilled about that, too. There is the reality that politicians are human and care more and more about their career and special interests and handing them the reigns and seeing decreasing results for many in the real economy is not working. We could have spent so much money in the last several years on things that would be lasting - improving infrastructure, among other things. People a decade ago would have been shocked by billions. Now billions to bailout someone would probably not be nearly as much surprise. The psychology of money changes, and not really for the better. Having politicians who want to sell our emergency oil reserve when oil is at record lows rather than buying the **** out of it at record lows does not result in confidence.
Further social unrest would not surprise me. Show me - whether you're Republican, Democrat or Martian - that you can produce real results on the ground and not just throw money at problems that come back again and again and again. I'm not seeing the results in the real economy - again, after several years of the easiest monetary policy in this nation's history, the fact that we are this concerned about raising rates maybe 25-50 basis points should be really concerning, no matter what political party you are.
All the financial engineering in the world doesn't fix the fact that Sears has terrible stores because they neglected the stores were neglected in favor of trying to make 2 + 2 = 5. All the financial engineering in the world isn't going to fix the problems that still exist on many Main Streets in towns in America today, either. Certainly Sears and the US government are not the same, but ultimately neglecting the core of the economy in the hopes that financial engineering pixie dust will make everything better will ultimately just wear off eventually, too - and it already looks like that's starting. We're always searching - more and more in modern day than in past generations, by far - for that shortcut to make 2 + 2 = 5 rather than taking the time and effort and care to get to where the country needs to be. People in this government (and others, certainly) would rather the reality they would like be bought now and the costs will be faced later than have the patience and courage to make difficult decisions to create something lasting and that's frankly sad.
As I said above, I'm of the view that you build a strong foundation for an economy and the prosperity comes out of that. Bubbles are not helping the average person on the street. Buybacks instead of building factories and the like is really short-term and that's where this country has gone, to an extremely short-term mentality that is honestly, all about pulling forward from tomorrow because we never want to have a bad today and heaven forbid whoever may be in office has to make difficult, unpopular decisions. In terms of asset prices going up, give me trillions of dollars and I can throw a great party too. But when it's all said and done, there is a bill and there is a hangover.
There is no free lunch - that is a mentality that I will say that I honestly disagree with and it seems to be pervasive and I'm not talking about people on here in regards to that. Again, it's not that "all debt is bad" as much as I dislike the feeling that many people in government - among other places - act as if there's no eventual cost to ramping debt and that there's no such thing as malinvestment. Ramping asset prices are fleeting and then we're back at square one (and no, we don't get a do-over on all the sugar high stimulus that wore off.)
Lewis noted: "Contrary to popular belief among the libertarian set, not bailing out the banks would've been a boon for hardcore socialist ideology in America as the terrible economic dislocations that would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks."
If all the QE and ZIRP of the last several years results in another major downturn when we're at ZIRP, you'll still have unrest and people are going be asking where their bailout is. That's just the reality.
I mean, the fact that we are at ZIRP and there is this much concern about 25-50 basis points really does put us in what I'd rightly consider uncharted territory. If the Fed did raise interest rates 50 basis points and the economy ground to a halt, as far as I'm concerned, the recovery story is over. People who are taking advantage of ZIRP may disagree with it, but you play the market and world you're given and a lot of people are not only not complaining about the status quo, they want it to continue. Heck, the market is addicted to status quo. That said, when the market can't take a 50 basis point rise in interest rates, cheerleaders are going to have a really, really difficult time explaining that.
Really, if the market heads South in a significant fashion yet again and we have the third major downturn in 15 years, you're going to have a very hard time convincing anyone to come back to asset markets and have the confidence to invest in anything.
But you know what, that might happen, because we have this view that "rising asset prices" makes everything okay. It does until it doesn't. Pointing to the stock market as an indicator that everything is sound with the real economy is unsatisfactory because rising asset prices in and of themselves without really building the underlying economy up and making difficult decisions is an instance of castles built on sand, as far as I'm concerned.
As far as I'm concerned, the upset that I have is that asset prices mask an economy that is not strong and that people don't have the confidence in that they should at this point and after everything that has been thrown at it. If that's the case, where do we go when we're in uncharted territory. Do we ever really change? I wouldn't bet on it.
Honestly, be what political party you want, believe in the Magic Money Tree if you want. As far as I'm concerned, the upset that I have is that asset prices mask an economy that is not strong and that people don't have the confidence in that they should at this point and after everything that has been thrown at it.
The fact is we passed the point of no return as I posted on the first page here. You might be interested in this.
Glubb was also able to identify several epochs leading to the rise, climax and eventual decline of historical empires.
These according to him are:
The Age of Pioneers
This period is marked by the protagonist generation preparing the foundations of the new empire. This pioneering generation are considered as hardworking, daring innovative and ambitious. This generation were also the underdogs who were never considered by the then pre-existing world power as relevant in the scheme of affairs. The pioneering American immigrants were looked down upon by the British, the Arabs were relegated as backward by the Persians and Romans until the advent of a unifying religion in the form of Islam.
The Age of Conquest
According to Glubb, Conquest may or may not be Military in definition alone. The Islamic Caliphate grew by Military conquest so also was the case of the Mongols. The Roman conquest was a combination of both Military and high level diplomacy borrowed from the Greek model. The British Empire relied on commerce alongside Military expeditions while that of the United States was a conquest of a whole continent by a few brave and hardy immigrants.
The Age of Commerce
Closely following the Age of Conquest is that of Commerce. The advantages of a large extensive land mass territory opens up any new Nation to natural resources locate there within and also allows for a large economic bloc. The splinter societies and realms that existed prior to the expansion of the Roman Empire were open to a larger market with little or no trade barriers. The Roman empire stretching from Syria to Britain was much an economic bloc.
The Age of Intellect
With a booming economy , competition is natural to follow and as such technological innovations and development begin to take shape. This is age also sees more technology transfer to the Military thereby consolidating power for the central administrative body of the Empire.
The Age of Affluence
This age marks the period of an improved standard of living for citizens within the realm of the Empire. Unfortunately, this leads to a widening gap between the rich and the poor. An elitist society then emerges within the Empire which so happens to control vast resources of the empire.
The Age of Decadence The last and final stage of all Empires is marked by a lowering of moral virtues and principles usually championed by the super affluent group and the middle-class. Their show of wealth and conspicuous consumption lifestyles will natural lead to an uprising by the poorer sections of society to revolt. It is pertinent to state that most Empires are destroyed from within. A sort of implosion occurs usually instigated by the less privileged members of that society. The last stage of the empire are usually marked by the following social upheavals: Society moral standards are greatly lowered A large and undisciplined Army Glorification of celebrities Economic meltdown brought about by a devaluation of the currency.
"The fact is we passed the point of no return as I posted on the first page here."
That's kind of my concern (or to put it better, my "worst case scenario") in a way, too, but it's not only the erosion of a lot of qualities that used to make this country great (and I'm not pointing political fingers, this has been going on for a long time), but the idea that I continue to have a fear that a burst bubble at ZIRP is in a way the "ultimate bubble" because the only approach will be "reflation or bust" (which is risky at best and could easily get disorderly) and things look different (not good different) in the global economy on the other side of that.
"The fact is we passed the point of no return as I posted on the first page here."
That's kind of my concern in a way, too, but it's not only the erosion of a lot of qualities that used to make this country great (and I'm not pointing political fingers, this has been going on for a long time), but the idea that I continue to have a fear that a burst bubble at ZIRP is in a way the "ultimate bubble" because the only approach will be "reflation or bust" (which is risky at best and reckless at worst) and things look different (not good different) in the global economy on the other side of that.
If you mean deflation or stagnation after the bubble then that is what we will have.
It won't be a dramatic burst but a slow grind.
Some of the reasons I agave above in telling Krugman why the Fed actions did not create inflation.
Others are: Wage stagnation Exporting of jobs Productivity increases e.g. self driving cars Technological singularity Increased taxes Future VAT
"The fact is we passed the point of no return as I posted on the first page here."
That's kind of my concern in a way, too, but it's not only the erosion of a lot of qualities that used to make this country great (and I'm not pointing political fingers, this has been going on for a long time), but the idea that I continue to have a fear that a burst bubble at ZIRP is in a way the "ultimate bubble" because the only approach will be "reflation or bust" (which is risky at best and reckless at worst) and things look different (not good different) in the global economy on the other side of that.
If you mean deflation or stagnation after the bubble then that is what we will have.
Actually my concern is that the worst case scenario is worse than that and changes how the global economy looks on the other side. But we'll see and it's hope for the best and prepare for the worst.
@scott, do you read deeply in this area? I think you would find some meat for thought and further modulated thinking. You clearly are thoroughgoingly thoughtful.
>> not just throw money at problems that come back again and again and again. I'm not seeing the results in the real economy -
You're not talking here about temporary SNAP families that get off it in a few months, right?, or those of us (large numbers) who got unemployment benefits, and then extensions, and then another extension, until we could get a new job, or like that, are you?
What *are* you talking about here? There are all sorts of results in the real economy from gov programs. You are familiar with the incredible ACA difference numbers, right?
Comments
Hmm ... I own my own printing press and everyone prizes the currency I print out very highly. It's recognized and accepted around the world. Many prefer it to their own. As a matter of fact, they're now willing to trade me three barrels of oil for the same piece of paper that fetched only one barrel a year ago. That's power.
Now, I have huge (Trump-size) continuing obligations in the form of infrastructure, social programs and defense needs to fund on an ongoing basis. How best to manage this enormous fiscal responsibility? I could (1) simply print more paper currency to satisfy my creditors or (2) tax my citizens more highly or (3) borrow in the open markets by issuing bonds, promising to pay-back those bonds on-demand with paper currency from my printing press. I carry that debt on my books as $$ owed back to myself, since I hold the keys to the printing press.
I chose the third option as preferable to the other two. Remember - I'm not like you and your neighbor. I have my own printing press. You don't.
Allow me to state this diplomatically: put up or shut up.
Absent of that my friend, have a very good night.
And now you invoke hall monitor image, lolz
You got nothing. The very definition of ducking and evading.
Whatever, give it up and move on.
That's what makes this thread fun to read. I hadn't commented since the beginning and I read the whole thing last night and it made me laugh on a very sad market day. Gotta hand it to @davidrmoran, though...he never fails to get the party started! And you're right, I should not "chime in dismissively" when I have not been involved in this crazy discussion (funny comment...liked that a lot)...but maybe I think enough is enough and it's getting too personal. @Old_Joe Roll the credits, please?
Also, in my defense, I have been out of town looking at houses...didn't know I had to stay at home chained to my computer...sorry!
I do agree with what @LewisBraham said...all the way back on Page 1...everyone wants stuff, but no one wants to pay for it. How true, in government and in life!
Three very good postings today at http://krugman.blogs.nytimes.com/ , all slightly wonkish though.
A couple of reasons:
-If the velocity of money falls enough - no inflation.
-Inflation isn't just about the FED - Shortage - labor shortage, material shortage, factory shortage can cause it - none of which is happening.
-Fall in demand
-Lack of disposable income
-Some of the instruments and money the FED bought went to financial institutions who just invested it
-The FED bought US gov't debt, which if it didn't the marketplace would have wanted higher interest rates for it - then possible inflation as corp had to compete in the marketplace for financing.
I'm a nobody so I guess nobody has just produced a coherent story about how Fed policy can drive interest rates below their natural level without inflationary effects.
And let's not forget ... Krugman is an idiot.
Paul Robin Krugman (born February 28, 1953) is an American economist, Professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, Distinguished Scholar at the Luxembourg Income Study Center at the CUNY Graduate Center, and an op-ed columnist for The New York Times. In 2008, Krugman won the Nobel Memorial Prize in Economic Sciences for his contributions to New Trade Theory and New Economic Geography.
Krugman is ranked among the most influential economic thinkers in the US [and] has written over 20 books, including scholarly works, textbooks and books for a more general audience, and has published over 200 scholarly articles in professional journals and edited volumes.
Krugman earned his B.A. summa cum laude in economics from Yale University in 1974 and his PhD in economics from the Massachusetts Institute of Technology (MIT) in 1977 with a thesis titled Essays on flexible exchange rates.
But he's an "idiot". Because Dex says so. No citations, no data, no nothing.
Say there Dex, maybe you could at least give us an idea of your financial education, background and accomplishments, since you would have us believe that you are qualified to judge Mr. Krugman.
https://thepatriotperspective.wordpress.com/tag/paul-krugman-is-an-idiot/
http://dailycurrant.com/2013/03/06/paul-krugman-declares-personal-bankruptcy/
Krugman is an ...
The rumor came from the satirical news site The Daily Currant, which said that the Nobel Prize-winning economist had accrued over $7 million in debt. The fake story was picked up by Austria's Format online magazine, which then reported as true by Boston.com and Breitbart.com."
Say there Dex... ever think of checking your sources? They sure saw you coming!
Whether or not the bailout was a good idea or not is another question. If we hadn't bailed out the banks we would've entered a Great Depression II and investors like Dex and many other members of this board opposed to debt would've been wiped out. Contrary to popular belief among the libertarian set, not bailing out the banks would've been a boon for hardcore socialist ideology in America as the terrible economic dislocations that would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks. That would most likely have been some greater form of redistribution to the poor whose numbers would've grown dramatically. It's interesting to note that membership in the Communist party in America calling for revolution grew significantly during the Great Depression prior to the New Deal. Roosevelt recognized this--that the level of unrest was dangerous with actual riots and violent strikes--when he passed the New Deal. Again contrary to popular belief, the "entitlement" programs he and subsequently LBJ created have actually saved and fostered our capitalist system by creating a safety net so that the poor don't pick up the gun and pitchfork when things get bad. Liberal ideology, which Krugman espouses, fosters capitalism, by softening the blows from the natural boom and bust cycles capitalism eternally repeats. FDR who was born rich and entitled wanted to avoid revolution not create one. Similarly the debt Krugman believes is needed to spur economic growth is to avoid the social unrest austerity inevitably causes.
You are very good at ducking, weaving, and evading substantive and intelligent discussion you pick and choose what link you will address.
What substantive contribution do you make except derailing the thread with your 'hall monitor' behavior?
Although davidrmoran, posts about 'The Idiot', he at least has a point of view and is willing to put something of himself into the thread. He is not afraid to put his neck out (and usually have it cut off).
As a seasoned observer of humanity though, I do feel qualified to judge another citizen based on my observance of their actions. And I do believe that I know an idiot when I see one.
More cartoons: what a useful and enlightening statement.
Who is having the last word?
There's really no proof of that, though. If I'm a bank and I made bad investments, am I going to tell you that the world will end if you don't bail out my mistakes? Sure. Things would not be good, but banks have failed before and the sun still came up the next morning. Ultimately, the desire was to restart things as quickly as possible and in the way that was most easily accepted. That was QE1. Then there was QE2 and then there was QE3 and Operation Twist was in there somewhere. Now we have discussions of QE4 and other measures of easing from a market that now has come to expect the Fed to come to bail everyone out. The fact that QE1 lead to QE2 means that QE1 did not work. If QE 2 had the desired effect, we wouldn't have needed QE3 and we wouldn't have one of the largest and most respected hedge fund managers in the US talking about the possibility that the Fed's next move is QE4. This is - as far as I'm concerned - a monetary "Hotel California".
A somewhat longer period where the rot could have been cleared out of the system with some easing measures would have taken longer and been very difficult but we would have eventually moved on with something of a fresh state and not found ourselves in a situation with several years of QE and ZIRP and an economy where people are very concerned about a mere 25-50 basis point increase in interest rates.
There have been instances in the past where assets were taken from irresponsible hands, sold and found their way into new hands. There are crises where losers are losers and inevitably, someone becomes a winner from picking off assets thrown out. Instead, the losers won and not only did they win, they get to play the "Armageddon Card" every time someone says boo to them. Meanwhile, they show that they couldn't care less about changing their ways.
How about a record of some of JP Morgan's many fines since the crisis:
http://www.dividend.com/dividend-education/a-brief-history-of-jp-morgans-massive-fines-jpm/
Also, I'm sure the citizens of Jefferson County are pleased with JPM:
http://www.businessinsider.com/the-incredible-story-of-the-jefferson-county-bankruptcy-one-of-the-greatest-financial-ripoffs-of-all-time-2011-10
I'll continue to view the bank bailouts as primarily a long-term positive for the banks. If you consider "Too Big To Fail" healthy, then well, everything has gotten even better as these entities are now even bigger.
That said, the world is what it is. What happened happened. As much as I dislike aspects of what occurred, I think my concern becomes where does this country go from here?
"Contrary to popular belief among the libertarian set, not bailing out the banks would've been a boon for hardcore socialist ideology in America as the terrible economic dislocations that would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks"
Everything has to be political. There are some people who are democratic who may not agree with you. I know, it's weird, but trust me on this. The whole grouping views into political parties as if everyone under a particular political party must share the same view is a little...tired? Politics in this country. So divisive. Honestly.
"would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks."
Because giving money to people would have not produced as positive results as giving money to JP Morgan, who the government can make money off of with all of the fines that they have to pay? I mean, honestly, the banks do sort of pay the government dividends in a sense with all of the fines that they continue to throw off several years later.
In all seriousness, we've spent pretty much all of our efforts on boosting asset prices in the last several years. As I've noted previously, this too will end, much like housing goes up forever until it doesn't, much like .com stocks were going to go up forever until they didn't, etc. We have spent so much focus on asset prices and special interests and corporations and we had a tremendous opportunity to put money to work in the real economy on things like infrastructure and the window to do that in a meaningful way has probably passed.
There is an aspect of me that believes that you build a solid foundation for a country (and that's not saying, "asset prices to the moon will fix everything!", that's making difficult decisions and keeping infrastructure, education and other "on the ground" aspects of your country modern and competitive) and the gains and prosperity follow. If you believe that prosperity comes from "asset prices to the moon!", history has shown more than a few instances where that hasn't exactly ended well. This will be another one.
We will not fix the country's core problems today, tomorrow or probably a few years from now. We have a broken political system who lets their political ideology get in the way of really caring about anything but themselves, in most cases. We will not fix problems, we will create bubbles because they're popular and everyone's happy until they break and by that time the politician is on the way out.
And really... if you need any further evidence about the state of things, the fact that Trump is doing as well as he is is not because he's the best politician that this country has to offer (perhaps the most recent winner of "Celebrity Apprentice" can find their way into a position in his administration), it's because there are a lot of people who are really, really angry about how things are and he knows it and he plays to it. Whether you agree with them or not, it's worth considering that there are that many people who are clearly not happy to the point where they're voting for "The Donald" of all people.
"...avoid the social unrest austerity inevitably causes."
Like in Baltimore and Ferguson?
I mean, honestly, the wealth gap in this country and the focus on asset prices instead of the country as a whole (what % of assets in this country are owned by the 1%?) is going to result in more social unrest as time goes by either way.
And to Lewis, I respect your thoughts and enjoy your articles, I just had a few disagreements.
And yes, there have been plenty of times where people have said, "I'm concerned about where things are going", but this time - when we're at ZIRP and things are turning over (btw, nice bounce today - not), where do you go from there if that becomes the reality. Where do you go when taking interest rates down doesn't get the intended effect, even at zero. Do you go, "Oh well" and let the cards fall as they may, or do you take monetary policy (yet again) to new and extreme levels? There is the possibility, although people tend to dismiss this entirely without hesitation, that on this trek into uncharted territory, something gets disorderly. We have a Fed who believes that the economy is an air conditioner that can be dialed up and down at their whim, when it's something so much more complex and volatile than that.
In a way, I don't find things surprising because as I said earlier everything that has been done is monetary painkillers for cancer rather than direct treatment. Then the patient gets hooked on painkillers and needs more and more each time and still has cancer.
Confidence is an underlying aspect of many financial decisions that people make on a daily basis. If people are not confident in the economy or their leaders they may not make major purchases or minor ones. Homeownership in this country is at a level where it hasn't been for decades and instead people talk about the "rental economy", which ... is good for landlords with rents at record highs, but that's less money for people to spend on other things and money they won't see again. I talk about investing primarily in needs and needs costs (rents, health insurance, etc) are soaring and crowding out money that would otherwise be spent on other, more discretionary things.
In terms of confidence, people may not invest or they have such a short-term time frame that nothing is safe from being sold when there's the slightest hint of panic. We live in a world where the average holding time of an investment has gone from years to days. Perhaps there is something to a tax on trades or perhaps lowering the dividend tax in an attempt to encourage reinvestment of dividends and compounding interest with a longer-term view. Perhaps we do need to force market participants to slow down. But where does that money go and which special interests involve themselves in the details of the rules? I mean, ultimately it's probably futile to even begin to think about such things.
Companies do buybacks instead of building factories (which has been discussed at length here and elsewhere.)
It's not a matter of "all debt is bad" necessarily as much as show me the results and who decides the Goldilocks level of debt that is "just right" - politicians who are thrilled that they can spend, spend, spend? The special interest groups I'm sure are thrilled about that, too. There is the reality that politicians are human and care more and more about their career and special interests and handing them the reigns and seeing decreasing results for many in the real economy is not working. We could have spent so much money in the last several years on things that would be lasting - improving infrastructure, among other things. People a decade ago would have been shocked by billions. Now billions to bailout someone would probably not be nearly as much surprise. The psychology of money changes, and not really for the better. Having politicians who want to sell our emergency oil reserve when oil is at record lows rather than buying the **** out of it at record lows does not result in confidence.
Further social unrest would not surprise me. Show me - whether you're Republican, Democrat or Martian - that you can produce real results on the ground and not just throw money at problems that come back again and again and again. I'm not seeing the results in the real economy - again, after several years of the easiest monetary policy in this nation's history, the fact that we are this concerned about raising rates maybe 25-50 basis points should be really concerning, no matter what political party you are.
All the financial engineering in the world doesn't fix the fact that Sears has terrible stores because they neglected the stores were neglected in favor of trying to make 2 + 2 = 5. All the financial engineering in the world isn't going to fix the problems that still exist on many Main Streets in towns in America today, either. Certainly Sears and the US government are not the same, but ultimately neglecting the core of the economy in the hopes that financial engineering pixie dust will make everything better will ultimately just wear off eventually, too - and it already looks like that's starting. We're always searching - more and more in modern day than in past generations, by far - for that shortcut to make 2 + 2 = 5 rather than taking the time and effort and care to get to where the country needs to be. People in this government (and others, certainly) would rather the reality they would like be bought now and the costs will be faced later than have the patience and courage to make difficult decisions to create something lasting and that's frankly sad.
As I said above, I'm of the view that you build a strong foundation for an economy and the prosperity comes out of that. Bubbles are not helping the average person on the street. Buybacks instead of building factories and the like is really short-term and that's where this country has gone, to an extremely short-term mentality that is honestly, all about pulling forward from tomorrow because we never want to have a bad today and heaven forbid whoever may be in office has to make difficult, unpopular decisions. In terms of asset prices going up, give me trillions of dollars and I can throw a great party too. But when it's all said and done, there is a bill and there is a hangover.
There is no free lunch - that is a mentality that I will say that I honestly disagree with and it seems to be pervasive and I'm not talking about people on here in regards to that. Again, it's not that "all debt is bad" as much as I dislike the feeling that many people in government - among other places - act as if there's no eventual cost to ramping debt and that there's no such thing as malinvestment. Ramping asset prices are fleeting and then we're back at square one (and no, we don't get a do-over on all the sugar high stimulus that wore off.)
Lewis noted: "Contrary to popular belief among the libertarian set, not bailing out the banks would've been a boon for hardcore socialist ideology in America as the terrible economic dislocations that would've occurred would've sparked social unrest demanding for a true bailout of the American people as opposed to banks."
If all the QE and ZIRP of the last several years results in another major downturn when we're at ZIRP, you'll still have unrest and people are going be asking where their bailout is. That's just the reality.
I mean, the fact that we are at ZIRP and there is this much concern about 25-50 basis points really does put us in what I'd rightly consider uncharted territory. If the Fed did raise interest rates 50 basis points and the economy ground to a halt, as far as I'm concerned, the recovery story is over. People who are taking advantage of ZIRP may disagree with it, but you play the market and world you're given and a lot of people are not only not complaining about the status quo, they want it to continue. Heck, the market is addicted to status quo. That said, when the market can't take a 50 basis point rise in interest rates, cheerleaders are going to have a really, really difficult time explaining that.
Really, if the market heads South in a significant fashion yet again and we have the third major downturn in 15 years, you're going to have a very hard time convincing anyone to come back to asset markets and have the confidence to invest in anything.
But you know what, that might happen, because we have this view that "rising asset prices" makes everything okay. It does until it doesn't. Pointing to the stock market as an indicator that everything is sound with the real economy is unsatisfactory because rising asset prices in and of themselves without really building the underlying economy up and making difficult decisions is an instance of castles built on sand, as far as I'm concerned.
As far as I'm concerned, the upset that I have is that asset prices mask an economy that is not strong and that people don't have the confidence in that they should at this point and after everything that has been thrown at it. If that's the case, where do we go when we're in uncharted territory. Do we ever really change? I wouldn't bet on it.
You might be interested in this.
Glubb was also able to identify several epochs leading to the rise, climax and eventual decline of historical empires.
These according to him are:
The Age of Pioneers
This period is marked by the protagonist generation preparing the foundations of the new empire. This pioneering generation are considered as hardworking, daring innovative and ambitious. This generation were also the underdogs who were never considered by the then pre-existing world power as relevant in the scheme of affairs. The pioneering American immigrants were looked down upon by the British, the Arabs were relegated as backward by the Persians and Romans until the advent of a unifying religion in the form of Islam.
The Age of Conquest
According to Glubb, Conquest may or may not be Military in definition alone. The Islamic Caliphate grew by Military conquest so also was the case of the Mongols. The Roman conquest was a combination of both Military and high level diplomacy borrowed from the Greek model. The British Empire relied on commerce alongside Military expeditions while that of the United States was a conquest of a whole continent by a few brave and hardy immigrants.
The Age of Commerce
Closely following the Age of Conquest is that of Commerce. The advantages of a large extensive land mass territory opens up any new Nation to natural resources locate there within and also allows for a large economic bloc. The splinter societies and realms that existed prior to the expansion of the Roman Empire were open to a larger market with little or no trade barriers. The Roman empire stretching from Syria to Britain was much an economic bloc.
The Age of Intellect
With a booming economy , competition is natural to follow and as such technological innovations and development begin to take shape.
This is age also sees more technology transfer to the Military thereby consolidating power for the central administrative body of the Empire.
The Age of Affluence
This age marks the period of an improved standard of living for citizens within the realm of the Empire. Unfortunately, this leads to a widening gap between the rich and the poor. An elitist society then emerges within the Empire which so happens to control vast resources of the empire.
The Age of Decadence
The last and final stage of all Empires is marked by a lowering of moral virtues and principles usually championed by the super affluent group and the middle-class. Their show of wealth and conspicuous consumption lifestyles will natural lead to an uprising by the poorer sections of society to revolt.
It is pertinent to state that most Empires are destroyed from within. A sort of implosion occurs usually instigated by the less privileged members of that society.
The last stage of the empire are usually marked by the following social upheavals:
Society moral standards are greatly lowered
A large and undisciplined Army
Glorification of celebrities
Economic meltdown brought about by a devaluation of the currency.
http://www.nairaland.com/1494266/fate-empires-sir-john-glubb
http://www.ucg.org/the-good-news/the-life-cycles-of-empires-lessons-for-america-today
http://www.goodreads.com/book/show/6177860-the-fate-of-empires-and-search-for-survival
That's kind of my concern (or to put it better, my "worst case scenario") in a way, too, but it's not only the erosion of a lot of qualities that used to make this country great (and I'm not pointing political fingers, this has been going on for a long time), but the idea that I continue to have a fear that a burst bubble at ZIRP is in a way the "ultimate bubble" because the only approach will be "reflation or bust" (which is risky at best and could easily get disorderly) and things look different (not good different) in the global economy on the other side of that.
It won't be a dramatic burst but a slow grind.
Some of the reasons I agave above in telling Krugman why the Fed actions did not create inflation.
Others are:
Wage stagnation
Exporting of jobs
Productivity increases e.g. self driving cars
Technological singularity
Increased taxes
Future VAT
>> not just throw money at problems that come back again and again and again. I'm not seeing the results in the real economy -
You're not talking here about temporary SNAP families that get off it in a few months, right?, or those of us (large numbers) who got unemployment benefits, and then extensions, and then another extension, until we could get a new job, or like that, are you?
What *are* you talking about here? There are all sorts of results in the real economy from gov programs. You are familiar with the incredible ACA difference numbers, right?