John Polomny

The Economy's Next Move: 'Sugar High' Followed by Dollar Crash

Sugar high=commodities bubble. Buying gold and moving assets out of the dollar seems to be a prudent move if the US is going down the road to a banana republic.

Why We Need the Stimulus Package

Another poor attempt to refute the Austrian school. I am not sure if Mr. Delong is a Keynsian or a Chicago school adherent as he cites Freidman. The reason why Mr. Delong thinks that Say's law is false is because the government is interfering in the market. Say's law basically states that their can never be a glut but that is in the contest of a free maket which we do not have. Take housing for an example. There is a glut of housing because the government, through poorly thought out legislation, specifically ordering banks to loan money to minorities who are mostly subprime (CRA) and could not pay. The creation of Freddie Mac and Fannie Mae which subsidized home ownwership combined with 50 year lows on interest rates by the Federal Reserve created the glut in housing not real supply and demand. Now that the crack up from the artificial boom has taken place because of governments efforts to deny the market we are supposed to believe government interfering in the market by trying to prop housing prices up is a refuting of Say's law. If prices drop suffciently their will be demand for houses. I have plenty of capital to buy houses which I would like to rent to people who cannot and should not buy a house. The prices are still too high to provide a decent return on my capital, time, and aggravation. If they drop suffciently demand will be there. Mr. Delong supports government intervention in markets like todays announcement that the governmet will help 9 million people stay in homes that they cannot afford. When the government intervention in the market creates unintended consequences like a housing bust and glut of homes he sees this as refuting Austrian economics. I would suggest that we have a real free market first and then we can argue the merits of Say's law. As long as we have a government intent on interfering in the markets and a Federal Reserve that uses monetary policy to create artificial booms we will continue to repeat these mistakes.

The Shedlock-Schiff Affair: A Chronicle

I wonder if Mish or the WSJ have talked to any Euro Pac clients that were taking Schiffs advice back in 2002 and are up massively or any who became clients in Nov 2008 at the bottom. Some of the stocks Schiff recommends are up over 100% just since then. The timeframes measured have to be taken into account. Its interesting as I have read Mish for a while and he hasn't always been spot on either with his predictions but the difference between Mr Schiff and him is Mr. Schiff admits when he is wrong and why he was wrong. As a matter of fact critcs of Mish on his blog will be very quickly shouted down by his sychophants and even banned from posting by Mish himself.

Why Are Investors Swallowing the Deflation Myth?

Did you read Mr. Kings paper? Inflation is the one outcome that the Central bank can 100% ensure. Do not sit here and tell me the FED cannot create inflation as they did it in the 1930's. The money supply went from around $20 billion in 1933 to around $30 billion in 1936. PPI went from around 10 to about 15 over the same time period. The DJIA went from around 100 to about 150 from 1933 to 1936. This is consistent with Mr. King's assertions in his paper. This was not real economic growth because if you look at the data you will see that beginning in 1937 the monetary spigot was shut off and all of the above indicaters went into reverse. You are confusing the time lag in the application of the policy with a failure in the policy. You can go to the St. Louis Fed website and look at the monetary aggregates they are published every week and they are up over 10% year over year.


On Jan 21 12:55 PM patio wrote:

> To date, the losses in housing value and stocks equals $10T, expected
> to be $12T by mid-2009. $12T of wealth, poof. Thats just in the US,
> now add in global wealth losses.
> Now explain to me how the Fed, and other central banks globally are
> going to print enough money, that actually goes beyond banks into
> the system, to replace that lost money?
> Everything being done is to avoid a car wreck, while choosing cancer
> instead, and hoping the chemo over time cures the cancer. The Fed
> doesn't have the power to resolve decades of easy credit, and the
> over-leveraging malaise it has created. Perhaps the power to soften
> the crash...perhaps.

Why Are Investors Swallowing the Deflation Myth?

Everytime that one of these articles comes out I post a link to Mervyn King's (Former UK Central Banker) research paper 'No money, No Inflation" I always get many more thumbs down but I wonder if anyone ever reads it. The paper shows that in a fractional reserve type system that creating inflation has been done many times in many countries over the years, usually with a time lag, and can be done by the US and UK central banks. This article is exactly correct in that the central bank can create money out of thin air and directly buy assets. The Fed has committed to buying $500 billion in MBS securities and who knows how many treasury bonds. Thats why the yeilds on these have come in. With productive capacity contracting and money being created (all money aggregates MZM, TMS, M1, M2 are up) of course prices will eventually move higher.

8 Important Facts About the Federal Reserve

Uh yes. The FED is buying $500 billion in MBS. Somebody owns them and they will take that money and spend it or invest it in corporate bonds. municipal bonds, or whatever. The FED can continue to expand its balance sheet and buy assets. Libor and the TED spread are both comng down so the credit matkets are lossening not tightening. Go to the St. Louis FED website and look at the data.


On Jan 18 10:23 AM patio wrote:

> "Initially, this means we will soon experience another period of
> easy credit and unsustainable economic growth."
> Uhh, no. Credit card companies are pulling back credit, banks aren't
> lending unless the borrower meets strict criteria, and companies
> and consumers don't want more credit.
> How is it that all these articles on SA miss this obvious fact?

Buffett's Import Certificates Plan Could Pilot the Economy to a Safe Landing

Sounds like a camoflaged Smoot-Hawley. I will also note that in the article Buffett cautions that his macroeconomic record has not been very good.

Why the Stimulus Plan Won't Work

Interesting to note the amount of positive thumbs up given to posters who are in support of government intervention in the economy. I would suggest excess involvement in the economy by the government was one of the major factors leading to this situation we find ourself in today. As far as Barack Obama being brilliant I do not see the evidence. Where is the record of success. He was President of the Harvard Law Review yet there is no published work? He was a state legislator yet from what I can find he was a back bencher. Because of a unique situation that occured in Illinois he was able to get elected as a US enator. His opponent was Alan Keyes remember. No he is more of a Elmer Gantry opprutunist that has been in the right place at the right time. Either that or the first affirmative action president. He is talking trillion dollar deficits for the next few years. Check his math as the deficit over the next year may be closer to $2.5 to $3 trillion. It will never get there though as the bond market or the currency will blow up before that. Obama is as they say on the southside of Chicago "pimping" the american people. It wil be delicous watching the disappointment set in as he and his sychophants try to solve our economic problems with FDR and LBJ solutions which cannot and will not work.