Paul Fekula

A Tale of Two Inflations

Here's another thing to ponder... electronics are the very goods that would be most effected by hedonic adjustments. I have to think, when most people buy a TV or a computer, they maked their purchase based on how much money they plan to spend and don't consider the differences in performance, which are marginal at best. Is there really such a massive difference in the quality of the viewing experience between flat screen and tube tvs? Does the average person consider the MHz, gigabytes and and ram, when they just need a computer for work and the internet?

The Seduction of America

Couldn't agree more

There Will Be No Inflationary Episode This Time, Unfortunately

I am not sure if I agree. While I agree that the fed's actions would probably not create inflation if the US economy existed in a vacuum, it doesn't. We are experiencing a massive treasury bubble, and by extension a dollar bubble. If and when the treasury bubble pops, it will force investors out of their safe haven and into other assets, where the risk is mispriced. Since most commodities are valued in dollars, their prices would if the dollar were to fall.

At the end of the day, I see that as the end game. This financial crisis is different from the S&L crisis or any other recessions we've had in the past 50 years, in that it was caused by the fact that debt levels in the economy reached unsustainable levels. As a result, all of that leverage is crashing down. As far as I can see, this unusustainable level of debt is the result of our current account defict, and the only way to solve that is by massively devaluing the dollar, resulting in inflation.

Buffett: Wrong on Treasuries?

You seem to miss one key aspect of the bond markets: the supply and demand of currency. The United States is not becoming any less leveraged, the leverage is merely moving from the private sector to the public sector. We are tremendously increasing the money supply and the supply of government bonds. It won't be long before we've flooded the market with dollars, making the dollar cheaper relative to all other asset classes i.e. inflation. While the dollar may be a refuge right now, the dollar's strength and low yields have nothing to do with the fundamentals of money supply. Additionally, we are still running a huge current account deficit, resulting in a continued increase in debt levels. The recent moves of the dollar and US government bonds seem to ignore the fundamentals of the economy and are purely based on emotion, and we all know how well of a guide emotion is when making investment decisions.

From Russia With Bitterness

I am not going to suggest that Russia is an utopia. It is very far from it. However, articles like this beg the question, "why did the Russian market tank?" Did it tank because of the lack of rule of law? Or did it tank because of the perception of the lack of rule of law? There is no question that Russia is still very far behind the western world in terms of development, however any Russian-speaking expat in Moscow will tell you that Russia is presented in a highly distorted light in the western media. Think about it: when was the last time you read a positive story about Russia in the Western press? Is this to say nothing positive has occurred in Russia since Putin came to power?

From Russia With Bitterness

Here's a question for you. Did the stock market in Russia plunge, because that is really the case, or because western investors believed that to be the case. Russian stocks are definitely undervalued, but how much of that is due to the western media picking on it as opposed to the realities in Russia. One glaring factual error I see in your piece is the assertion that Russia invaded Georgia. Last time I checked, Georgia invaded South Ossetia and started killing Russian peacekeepers, which sparked the war. Having lived in Russia for 2 years, I can tell you, there are a lot of problems, but Russia's problems are not so unique. They are the same problems many emerging economies face. Russia just gets a worse rap, because Russians are white and European, whereas the gross abuses that go on elsewhere are OK, because they are not white.

The Biggest Bubble of Them All

Thanks David,

This is one of the best articles I've read in a while describing the cultural origins of the crisis. The fact of the matter is our culture of consumption is to blame not derivatives, Wall St. or any other crazy scapegoat.

The Real Cause: Current Account Deficit

Our trade inbalance with China, while large, is about $250 billion in 2007. We still imported another $550 billion more than we exported. Even if the Chinese were willing to allow their currency float to more realistic levels, we would still have a large trade deficit regardless.

I am contending that the amount of debt that we needed to pump into the economy over the past 28 or so years to keep it growing us ultimately the problem. America is plain and simply over-leveraged. How did it get there? Current accound deficit.

Is Norilsk Really Selling Its SWC Stake?

I just spoke to my people at the Moscow Times. The reporter was there. The story is true. Down the line it just got a bit distorted in the west. Apparently he is open to bids but not seeking any. Two very different things. Nevertheless, no rumors here. It came out of Lobamov's mouth.

How to Break the Boom and Bust Cycle

I am not sure if regulation is the effective answer. After 1929, everyone said: "Never again," and sure enough there was a regulation overhaul that worked pretty well... until now. Nevertheless, I am not sure if that explicit, government regulation made so much of a difference. At the end of the day, we are seeing the deflation of a 20-odd year credit bubble. However, that had more to do with monetary policy than it did with bank regulation. Regardless of what kind of regulations we impose on banks, at the end of the day, lending standards are going to be tighter for decades to come, and banks will probably be less leveraged. We still have a lot of pain to come in this crisis, and the banks left standing at the end of it all are going to remember it for a long time. I figure that's at least as good as any regulation congress could try to impose.