Rupert Murdoch Interview: 'Economy Weak; Danger of Inflation Great' 33 comments
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Rupert Murdoch (NWS) has joined the choir of somewhat rational voices trying to get heard over the Treasury's printing presses. In an interview before Fox Business Network, the media tycoon claims the stimulus package is sensible, however the danger comes from the government's set up of "long-term, big permanent programs", that will raise deficits (TD: not to mention that the entanglement of the government's bailout programs from financial "assets" will take decades if not centuries), and observes that the banking system internationally is still very "fragile."
Interview excerpts:
On the government’s role going forward:
“Whether we like it or not, there’s going to be increased regulation, and the government inserting a lot of taxpayer money into business. It’s inevitable that they’re going to play a bigger part. We have to accept it. On the other hand, we also have to agree that outside of that, we want to avoid over-regulating. We’ve got to stay believing in the free market system.”
On whether there should be more regulation since free markets haven’t worked:
“I wouldn’t agree with that. It’s very easy to blame the free market but how did we get the housing bubble? We got it because of Congress pushing Fannie Mae and Freddie Mac into lending money to people who couldn’t afford it and blowing up the price of housing; a Fed which was too loose with the money. It just led to this very naturally. When you get a bubble, it has to be lanced and it’s painful. That’s what we’re going through.”
“I do [think we’re overreacting to the bursting of the bubble]. If we let things take their course, we’ll come through this a lot better.”
On the idea that private capital doesn’t exist on the level needed to create jobs:
“It [private capital] won’t if the government is borrowing $2 trillion. It will suck any spare private capital out of the market. That is another great danger.”
On whether private capital cannot compete with the government:
“No, I don’t think so. The government has to borrow money, whether it’s borrowing from the Chinese or from you and I, when you buy T-bills. Those rates will go up as they find it harder and harder to borrow. The danger is we’re going to have great inflation.”
On the overall U.S. economy:
“It’s weak. People are frightened. People have seen their net worth has decreased a lot so they’re tightening their belts and starting to save money – not a bad thing in itself but of course it takes demand out of the High Street which is painful on a lot of industries. It’s also painful on a lot of people who export to us so it’s not all felt here.”
On whether we could get out of this without big government involvement:
“No. It’s such a globalized situation with the banks, some of it of their own making but some of it by non-banking situations. Something had to be done there but beyond that, no; I think the stimulus package in itself is okay to add some stimulus perhaps but it should be just spend it once, but instead its setting up long-term, big permanent programs that are going to leave us with a deficit of over a trillion dollars a year as far as the eye can see, certainly for ten or fifteen years.”
“Our kids and our grandkids are going to be paying taxes just to pay the interest on that, forever. Even those figures are based on optimistic assumptions about how growth will return.”
On whether the bank stress tests will prove anything we don’t already know:
“They may. They will get confidential figures from the banks. The government feels, the Fed feels, and the Treasury Department, that the banking system internationally is still very fragile. They want to know what they’re facing. That’s why they are having these stress tests.”
[Video here]
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michaelJ, demand-side monetary policy has already been conclusively proven not to work from 1962 to 78, yet the administration is trying it again. the results will be the same.
msoori & michaeilJ, I suggest you read all the Friedman (milton the genius, not thomas the funny ignorant idealist) you can, because he was right about everything except the labor unions
On Apr 28 11:10 AM wisdom.vs.information wrote:
> attacking Fox after reading an interview with Murdoch?! did you actually
> read the interview, msoori? if you do not understand economics, i
> guess clowns like colbert and stewart would be reassuring
>
> michaelJ, demand-side monetary policy has already been conclusively
> proven not to work from 1962 to 78, yet the administration is trying
> it again. the results will be the same.
>
> msoori & michaeilJ, I suggest you read all the Friedman (milton
> the genius, not thomas the funny ignorant idealist) you can, because
> he was right about everything except the labor unions
>
“Many economists, and the Japanese government as well, say the classic theory of business cycles no longer applies to Japan, which has minimized instability factors and learned to drive slowly but steadily when necessary.”
Japan Times, December 26, 1989
The Nikkei 225 Index hit a record high 38,915 .87 on December 29, 1989
The Nikkei 225 Index was 8,500 on April 28, 2009
For years, conservatives were forced to listen to NBC, CBS, ABC, PBS, CNN belittle conservatives and applaud liberals.
Murdoch was smart enough to realize this imbalance and exploit it for enormous personal gain.
Where was Murdoch's voice when Dubya was handing out billions in TARP money back in 2008?
Oh...I forgot, the one rock solid constant of the past 3 decades:
"It's OK If You Are Republican"
If you've made a lot of money in the last few years, anywhere from millions to billions of dollars (Murdock's case), deflation will be a very good thing because your money will be worth more.
Fixed income investments will soar in value and real estate wont fall off the face of the earth (if you own it), even though it will be worth less in yesterdays dollars. But deflated dollars will be worth much more in a deflationary future.
It seems that fear of inflation is a liberal, 'do good' fear and not a valid concern of the John Galts of the world.
Why should John Galt care about the masses of poor people who will be hurt by deflation more than inflation? en.wikipedia.org/wiki/...
A double dose of FOX news for you tonight (or FOX snooze, same difference).
A double dose of FOX news for you tonight (or FOX snooze, same difference).
On Apr 28 01:52 PM carey_jim wrote:
> It's interesting to me that so many wealthy people are more worried
> about deflation than inflation.
>
> If you've made a lot of money in the last few years, anywhere from
> millions to billions of dollars (Murdock's case), deflation will
> be a very good thing because your money will be worth more.
>
> Fixed income investments will soar in value and real estate wont
> fall off the face of the earth (if you own it), even though it will
> be worth less in yesterdays dollars. But deflated dollars will be
> worth much more in a deflationary future.
>
> It seems that fear of inflation is a liberal, 'do good' fear and
> not a valid concern of the John Galts of the world.
>
> Why should John Galt care about the masses of poor people who will
> be hurt by deflation more than inflation? en.wikipedia.org/wiki/...
Moderate deflation can be just as beneficial as moderate inflation.
I don't know what's in it for Murdoch to push inflation over deflation. Why should he care?
By the way, responsible and intelligent dialog is the only thing that is interesting about this site to me, not popularity. I couldn't care less if someone is in the top 10 or unrated. It has no effect whatsoever on how I read his/her posts.
On Apr 28 03:30 PM dcb wrote:
> Deflation is a fear of those who have spent too much. Because the
> fed serves the banking industry is will do everything it can to promote
> inflation which bails out the banks. So, that is the message you
> hear over and over by the media. In fact the great majority of Americans
> are helped by deflation. It is one of those things that they feel
> that if they say often enough you will be stupid enough to believe
> it. That way you think they are doing you a favor while they f....
> you up the butt.
Fox is in the first group (pandering is what Murdoch does best), and they are giving the second group (the people we need) a bad name.
It is time for the Republican party to dump this element and put forth strong, intelligent candidates who put forth carefully thought out conservative proposals. Not the people who struggle just to get a degree in journalism for crying out loud.
On Apr 28 12:39 PM yellowhoard wrote:
> Sure Fox leans to the right. That's why they have the highest ratings.
>
>
> For years, conservatives were forced to listen to NBC, CBS, ABC,
> PBS, CNN belittle conservatives and applaud liberals.
>
> Murdoch was smart enough to realize this imbalance and exploit it
> for enormous personal gain.
>
It was not government or it agencies forcing big finance in these constructions. If was not government forcing them to use off balance sheet assets, it was not government forcing them to use 30* leverage.
As long as we make a very limited analyze of the real causes - how can we think we are able to find the correct solution to future prevention.
Long live partisan obstruction of truth (and now I am sarcastic)
Personally, I thought Liam Halligan from Prosperity Capital Management was more "wickedly good" than Hendry in his arguments, but that is because I thought his take in the debate was better grounded. I agree that inflation is benign now and we might have a short period of disinflation or deflation. Hendry validates Halligan's inflation argument by saying, it's too early for that (i.e., inflation).
Comparing Japan to the US is not the right comparison for a number of reasons. Japan is almost concentrically an export-driven econonmy, whereas the US has a very diversified economy. Japan does not have a creative destruction process that allows weak companies / industries to fail and new companies / industries to rise from their ashes. The USA PREVIOUSLY HAD a creative destruction process until the administrations of late. Most importantly, Japan has never been the reserve currency of the world and Japan's anti-deflationary pump-priming was not done in concert with every other major government in the world.
The last point is the one that greatly weakens Hendry's argument that quantitative easing (QE) doesn't work. It has never been tried in the country whose currency is the currency of reserve. Prior to the US being the currency of reserve, the currency of reserve was gold or a gold-backed currency. I believe QE will not work, but for different reasons. The massive negative deflationary wave of CDO write-offs and bankruptcies' negative monetary multiplier effect run their course, the massive wave of the flood of money caused by the gov't's printing presses will have an overwhelmingly opposite effect in stagnative price hikes. It's like a car stuck in the mud spinning its tires; you rock back and forth until you get traction, once you get traction you fly out of the rut, but if you're in an unkown woodlot, you're likely to bolt right into a tree - read inflation!
I used to believe that the greenback was going to crash as a result of all the US' printing of money. It was the comments by China Premier Wen Jiabao that got me re-thinking that. Wen called for the new currency of reserve to be the IMF's SDRs (Special Drawing Rights) which are made up of a currency basket approx 44% greenbacks, 34% Euro, 11% Japan Yen and 11% Great Britain Pound.
All four of these regions are undergoing massive fiscal and monetary expansion policies, quantitative easing, bond issuances, money-printing, etc. Now I am thinking, if every major economic zone has the printing press cranked in unison, they will depreciate more or less together and the general populous will not notice their currencies depreciation in relative terms because all the other majors will be depreciating along with it.
This in the mid- to long-term is inflationary, no doubt about it! We may still only have stagnant growth especially considering real growth, but it will take more dollars to buy things. Maybe the figures will be fudged in the CPI numbers, but Joe-consumer will feel it when shelling out at the grocery counter, at the fuel pumps and when he's figuring out how big of a check to write the gov't for his tax bill. The commodities that we import will cost more greenbacks, thus for the long-term, the place to be is in hard assets, in currencies of countries with great commodity wealth that shun quantitative easing, foods and precious metals.
Meanwhile, on the jobs front, high unemployment will remain. We'll get back to 3% to 4% economic growth within a couple years, but it will be nominal growth, not real growth and inflation will have reared its ugly head again. Real economic growth at average post-world war II levels will be years away.
We've had a thirty-year credit bubble, pricked by the bursting of a seven-year housing bubble and the gov't's solution is to reflate to try to create a new credit bubble. Credit doesn't create growth, especially when that credit is from hot new bills printed off the presses. Meanwhile, the gov't is postponing the reckoning we need to allow the creative destruction process to work its magic so new growth industries can emerge and the economy can realign itself with a higher savings rate, not debasement and higher tax rates.