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The U.S. economy is in a bubble inflated by “phony money” from the Fed and will...

The U.S. economy is in a bubble inflated by “phony money” from the Fed and will burst within a few years, David Stockman warns; when it bursts, the U.S. "will descend into an era of zero-sum austerity and virulent political conflict." Paul Krugman calls Stockman’s conclusions "pathetic and embarrassing... full of big numbers that are scary because they’re big numbers.”
Comments (29)
  • davidbdc
    , contributor
    Comments (3141) | Send Message
     
    Well, I have to admit - if anyone knows pathetic and embarrassing - its Krugman!
    1 Apr 2013, 06:40 PM Reply Like
  • ari5000
    , contributor
    Comments (365) | Send Message
     
    I guess someone missed the rally.
    1 Apr 2013, 06:42 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Punch kick and stab me,but, I actually agree with Prof. Krugman here.. Mr Stockman is clearly over the top.. Prof Siegel is probably right and Fed should hold half the 3 trillion permanently. Then unwinding will be a non event and Ben did say we can hold until maturity.

     

    Get the US GDP to 4% and somehow do lots more sequesters ~ then US would be fine.
    1 Apr 2013, 06:43 PM Reply Like
  • Pwdrskir
    , contributor
    Comments (135) | Send Message
     
    I understand your position, but what happens when rates go up (Get the US GDP to 4%...)? Fed will get killed on those bonds they're holding as the price drops.

     

    Can they really hold to maturity if rates rise to 6-7%?
    1 Apr 2013, 06:52 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    @Pwdrskir,If they hold sure !! They just hold until they mature an get full face value ! The 6~7% rate would only be on the new issued bonds the Treasury might sell. "IF" The ones the Fed hold now are fixed and the yield is determined by the price on issue date when they did the fancy two step with the US Treasury via a broker.

     

    Here is what Mr Stockman and most all don't get ! In order for the collapse in the magnitude David is claiming the US economy would go crazy. Why, because the value of the dollar would plunge.

     

    O/k,.... BUT.... if that happens the world gets slammed and especially China ! Their Yuan would double in value towards the USD and that destroys their economy..

     

    In the event that a situation like that started to develop China would buy US Treasuries in amounts that would make the Fed look like poor little N Korea ! They would have too to protect their economy and feed their citizens !!.
    1 Apr 2013, 07:06 PM Reply Like
  • HPBunker
    , contributor
    Comments (219) | Send Message
     
    I thought Stockman might have been overstating his case until I read Krugman's rebuttal. The problem is, Krugman is always wrong about everything. Always. About everything. So if I have to pick one of these guys, I'm all in for Stockman (just not going to invest on that basis).
    1 Apr 2013, 06:44 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Krugman aside ! If you think China would let an event happen while the USD is still the "reserve" than folks are as crazy as David Stockman. He seems to forget this is a global economy and the US has a mere 300 million ppl.

     

    If an event like Mr. Stockman touts would start to develop the Chinese would step in and buy US Treasuries in amounts that Fed Ben could only dream about. They would have to too save their economy and keep the Yuan from rocketing to par with the USD.

     

    Should time pass and the USD loose it's reserve status then it's possible.But, not until.. Will it be as Sec Geitner stated with meetings with the IMF as two decades ? I doubt it,but, at least one decade from now.
    1 Apr 2013, 07:15 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    Yes, I'd rather invest in stocks than krugs. Has Krugman ever run a real business?

     

    Having said that, I think Stockman has diagnosed the problem incorrectly. What we have is crony socialism, and capitalism is under assault. The state trying to fix prices and business cycles, and overload on punitive regulations: this is a major interference with real growth prospects.
    1 Apr 2013, 07:19 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Hi WhiteH.. I agree there. Equities are the best protection on any event like that ! Only land is a better thing to own,but,it's the currency that takes the hit ! Even if they call it inflation,but,stocks will just re~price according to the value of the fiats being used.!
    1 Apr 2013, 07:24 PM Reply Like
  • Pwdrskir
    , contributor
    Comments (135) | Send Message
     
    I agree, Capitalism is under assault. You call it Crony Socialism, I call it Statism (The practice or doctrine of giving a centralized government control over economic planning and policy), either way, the Govt is out of control.

     

    The bubble is forming & the debt is growing - the key is to keep the funds out of the way of the falling knife this time.
    1 Apr 2013, 11:20 PM Reply Like
  • Tack
    , contributor
    Comments (12704) | Send Message
     
    The illogic of Stockman's position is demonstrated by considering the history of the money supply, the value of the dollar and relative prices. If all monetary expansions were doomed to collapse, then, why would we not be back to 1900 dollar values and milk for three cents a quart?

     

    The reality is that relative pricing adjusts, and money infused into the economic system can remain there in perpetuity and is, or can be, contracted only if the Fed would so deem such a policy appropriate. In fact, that's virtually never done for any extended period, save for temporarily tamping down excessive inflation.
    1 Apr 2013, 07:22 PM Reply Like
  • HPBunker
    , contributor
    Comments (219) | Send Message
     
    All true. But what drives me crazy most about Krugman is his continued insistence that "record low borrowing rates" show that bondholders have no worries at all about $1 trillion deficits as far as the eye can see. As if the Fed wasn't buying nearly all our new debt issuance! The man is a true charlatan.
    1 Apr 2013, 07:23 PM Reply Like
  • HPBunker
    , contributor
    Comments (219) | Send Message
     
    P.S. On zerohedge.com, there's a guy who posts as "Dr. Paul Krugman". I assume it's not actually the esteemed nobel prize winner himself, but the responses by others are hysterical. :)
    1 Apr 2013, 07:24 PM Reply Like
  • bankingqueen
    , contributor
    Comments (135) | Send Message
     
    Blah, Blah, Blah. The biggest threat to the United States of America in the next 5, 10, 25 even 50 years from now is one thing. Liberalism / progressive movement, if they continue it gets much worse. If it subsides we will be fine. End of story, oh and Krugman lol what a Odumbo shill.
    1 Apr 2013, 07:25 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    @bank, your right,but, psssst.. They won the war & conservatives need to find a country with a parliamentary system to move to.

     

    You heard it here first in 2012 and Here it here first for 2016 !

     

    I pounded the SA threads with the" LATIN Vote would crush Romey !" I nailed it and here this now..

     

    What ever candidate the Republicans field in 2016 he/she can only dream about getting the 29% of Latins Romney got,but,they won't.Under 20% next time ! Nor will they make any gains with the largest group of immigrants ! The Asians.

     

    Enjoy the new world liberal order !
    As you know I MOVED ! I used my feet ala Reagan and paid to dump my Passport.

     

    Buena suerte amigo..
    1 Apr 2013, 07:33 PM Reply Like
  • BuildingBlocks
    , contributor
    Comments (47) | Send Message
     
    @BigThinker

     

    To me, the Republicans are failing to adapt to trends and will hurt them long term.
    1 Apr 2013, 08:51 PM Reply Like
  • Hendershott
    , contributor
    Comments (1497) | Send Message
     
    Big Don't let the door hit you in the @## on the way out.
    1 Apr 2013, 09:19 PM Reply Like
  • bankingqueen
    , contributor
    Comments (135) | Send Message
     
    It may hurt the Repulicans long term, but it will hurt the country more. The masses are all sheep that care more about their social issues than the economy or health of country. Ask not what your country can do for you, ask what your country can give you. ESP if it is free.
    1 Apr 2013, 11:50 PM Reply Like
  • BuildingBlocks
    , contributor
    Comments (47) | Send Message
     
    One must change with the times. If one does not, one perishes. People, companies and political parties.
    2 Apr 2013, 12:33 AM Reply Like
  • Pwdrskir
    , contributor
    Comments (135) | Send Message
     
    You're right, fiscal sanity has left the building and we're all headed the way of Stockton, CA. Good job CA, can't wait until GASB exposes the B.S. in CA:

     

    "Back in February the California Public Policy Center (CPPC) published a study entitled “How Lower Earnings Will Impact California’s Unfunded Pension Liability,” where, using various rates of annual investment earnings, the number ranged between $128 billion and $576 billion. This study and others highlighted the fact that starting in 2014, not only will Moody’s Investors Services begin using a much lower investment projection in their credit analysis, but GASB – the Government Accounting Standards Board – will require government entities to recognize this liability on their balance sheets."
    http://bit.ly/ZB6a90

     

    Another very good read to get more info:
    http://bit.ly/LlE3a2
    2 Apr 2013, 01:23 AM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Hi Hen, you know me well ! And, also should know ( remember) the 50 million per month we donate now doesn't go to any of the folks in the USA. And, better than that ; especially those who support your socialist friends..

     

    We don't see our kids in shelters with Iphone s and the poor here don't get $ 80,000 per year for there vote an then remain just sponges for four years.

     

    Even the big Dem folks on your side are wining about how there medical costs have soared in just 3 years ! Wait..
    2 Apr 2013, 04:23 AM Reply Like
  • Hendershott
    , contributor
    Comments (1497) | Send Message
     
    Bank, The masses are the economy and the health of the country.
    2 Apr 2013, 07:27 PM Reply Like
  • Hendershott
    , contributor
    Comments (1497) | Send Message
     
    Hi Big, Maybe you could have just gone to east LA or San Bernardino....nobody gets $80K a year...not a plethora of iPhones....pretty much just hard scrabble living. By the way, medical costs have been rising for a lot longer than three years. What kind of health care system do they have down south?
    3 Apr 2013, 08:49 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    ha ha ha my friend.. Ca cities are going to crumble one by one because of the politicos who spent a massive fortune buying those DEM votes via ridiculous pensions.Geees, they set themselves up for a lifetime of them ! Seriously sad and now it's biting them in the tushy !

     

    Anyway, remember my many health care warnings in our many thread chats..Well there coming http://wapo.st/10wVUhn

     

    You'll all get your single payer system. Me, I do hope your in the 1% ,so, you'll always afford great care..I enjoy your posts !

     

    Always your amigo..

     

    PS..Anyway, enjoy Pres. Hilary >)

     

    PS 2, Costa Rica is the prototype Obama wants. Cheap coverage nationwide.. I always paid my dues ,but, NEVER set foot in any public facilty.Panama is great and it's paygo ! I only use Panama doctors and the cost of everyday is 75 to 80% less than the US. But, when I needed my liver I wanted the best ! Flew to Israel ! However, if your seriously ill in Costa Rica the wait times are years ! Years and usually you die. Just like UK an Canada and soon the USA
    4 Apr 2013, 04:22 AM Reply Like
  • Hendershott
    , contributor
    Comments (1497) | Send Message
     
    Sounds like Costa Rica and Panama both work unless you're really sick......and part of the 99%. I notice you didn't come to the US for your liver where we have "the best healthcare in the world". Glad your liver worked out. My ex had half of hers removed a dozen years ago, supposedly benign tumor the size of a softball.
    4 Apr 2013, 03:51 PM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    Hen, I'd pick Israel over the US.There doing things the US isn't yet.First class liver guys ! And, I could afford the cost on Mars,but, I went there !

     

    I'm very glad to hear about you wife. Was a time when they didn't think liver would regenerate..

     

    Panama does have Johns Hopkins in Panama City and is as good as it gets too..US doctors and all the bells an whistles too. I've been there and seen the chiefs in two departments for diagnoses. Even though my Panama insurance doesn't cover that place.No biggie ..:>))

     

    Like I said I don't have insurance for J/H ,but,doctor charges were $ 30 & $ 35.Blood tests were $ 2.50 and $ 9.00...... You can't even get a cab for that in the States..

     

    Costa Rica has Great doctors for the thousands of foreigners who go for medical tourism,but, 95% of Costa Ricans couldn't even afford the initial visit !

     

    G-d Bless ! DAL :)
    4 Apr 2013, 04:39 PM Reply Like
  • bankingqueen
    , contributor
    Comments (135) | Send Message
     
    @Bigthinker

     

    Not only you but I have been preaching it for years, but you are right and affirm my worst fears that I already knew. Enjoy where u are my friend.
    1 Apr 2013, 07:49 PM Reply Like
  • DinNYC
    , contributor
    Comments (73) | Send Message
     
    Is this the same Paul Krugman that just filed for bankruptcy? You'd think a Nobel Laureate would know you can't borrow more than you can afford to pay back. Are we seriously still having to read the input of a guy who can't even balance his own checkbook? Let me help you Paul: when you reconcile your checkbook , its best that the "credits" column be a biggggggger number than the debits column. Mmkay pumpkin? Got it now?
    1 Apr 2013, 08:50 PM Reply Like
  • SoldHigh
    , contributor
    Comments (995) | Send Message
     
    Krugman is such a joke that he took the joke of minting a trillion dollar coin seriously.
    1 Apr 2013, 10:08 PM Reply Like
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