Lou Thomas

What If the Great Depression Analogy Is Wrong?

One conclusion that could be drawn from this article is that the expansion (or contraction) of liquidity is too general a solution. We need to recognize, and address, some specific aspects of the present crisis.

We need to recognize that:

* The export of heavy industry from the U.S. to other nations is a key factor in the present trade imbalance, and in the terminal dependency upon monetary manipulation and, more benignly, the service economy, which are dysfunctional and unsustainable, respectively.

* A large part of what remains of U.S. industry is dedicated to military production, which is a net negative for the real economy, and that dependence upon the external projection of power has destroyed the integrity of the U.S. economy, while building a fifth column in the form of a military-industrial complex that tends to lock the U.S. in to this destabilizing policy.

* Other centers of power have emerged as the internal decay of the U.S. through militarism and other corruption has undermined U.S. economic power and military alliances.


We need some truly creative ways of addressing these problems, such as:

* Making deals with nations with net surplus reserves that have grown tired of financing U.S. overspending, to obtain additional investment in exchange for the U.S. (and its clients) drawing back from present aggressive policies, and also by using these funds for a massive conversion of the military industry to civilian productive purposes (e.g., green technology) that the world needs and that can therefore ultimately correct the trade imbalance.

* Cutting the military budget and using the proceeds for part of the required stimulus.

* Including as part of the stimulus package Federal grants for worker-run cooperatives to take over idled manufacturing facilities, as happened during the recent Argentinian crisis.

* Putting zombie banks out of their misery and dealing with the chain reaction of failures by replacing these failed institutions with direct public investment, instead of pouring TARP funds down a bottomless pit of financial chicanery.

* Tight regulation of what remains of the financial sector.

Can we do it? It comes down to our will to survive.

What If the Great Depression Analogy Is Wrong?

One conclusion that could be drawn from this article is that the expansion (or contraction) of liquidity is too general a solution. We need to recognize, and address, some specific aspects of the present crisis.

We need to recognize that:

* The export of heavy industry from the U.S. to other nations is a key factor in the present trade imbalance, and in the terminal dependency upon monetary manipulation and, more benignly, the service economy, which are dysfunctional and unsustainable, respectively.

* A large part of what remains of U.S. industry is dedicated to military production, which is a net negative for the real economy, and that dependence upon the external projection of power has destroyed the integrity of the U.S. economy, while building a fifth column in the form of a military-industrial complex that tends to lock the U.S. in to this destabilizing policy.

* Other centers of power have emerged as the internal decay of the U.S. through militarism and other corruption has undermined U.S. economic power and military alliances.


We need some truly creative ways of addressing these problems, such as:

* Making deals with nations with net surplus reserves that have grown tired of financing U.S. overspending, to obtain additional investment in exchange for the U.S. (and its clients) drawing back from present aggressive policies, and also by using these funds for a massive conversion of the military industry to civilian productive purposes (e.g., green technology) that the world needs and that can therefore ultimately correct the trade imbalance.

* Cutting the military budget and using the proceeds for part of the required stimulus.

* Including as part of the stimulus package Federal grants for worker-run cooperatives to take over idled manufacturing facilities, as happened during the recent Argentinian crisis.

* Putting zombie banks out of their misery and dealing with the chain reaction of failures by replacing these failed institutions with direct public investment, instead of pouring TARP funds down a bottomless pit of financial chicanery.

* Tight regulation of what remains of the financial sector.

Can we do it? It comes down to our will to survive.

Trichet, ECB Missing the Point with Crude

The arrogance of assuming that the ECB is some kind of junior partner to the Fed, attempting, but oh, how badly, to lick its master's feet, is truly from yesterday's world. Columnists need to learn a new word that describes the present situation: multi-polar.

The dollar is still too high, which allows the US to continue to import more goods than it exports, which exports inflation to the Eurozone. Each time some indebted U.S. consumer takes out a home equity loan and buys a BMW, dollars from that sale are exchanged for Euros at a central bank, and those Euros in turn are used to pay workers who cannot buy that car they just made, because it is has been sent to the U.S. More money chasing too less stuff equals inflation. So the high dollar is part of the EU inflation picture and must be addressed. ECB interest rate hikes assist in that necessary correction; they are not mainly aimed at putting the brakes on Eurozone economic activity. The ECB's main concern with the dollar's decline is that it be orderly, not that it be stopped.

U.S. Dollar Signaling a Changing Tide?

Oh, and bearfund has a bad attitude. It's one thing to think you are right, but quite another to gloat over everyone else's imagined misfortune. The great mass of people did not create this crisis, even though they may be ignorant of its causes. It was created by an elite investing class that has a lot more in common with you than it does with them, and when they figure out what has happened, they will regard you accordingly.

When the hard times hit, you will need other people more than ever, and whether you know it or not, you need them even now.

U.S. Dollar Signaling a Changing Tide?

Other than precious metals, almost nobody holds actual commodities and waits for them to appreciate. Instead, they place bets on future prices using derivative contracts. And such bets involve counterparty risk.

The present environment is practically screaming with counterparty risk. For a conservative investor, non-dollar sovereign debt would seem to provide a better hedge against the dollar's decline. So, the 80 percent the author says in his comment should go to currency hedges and commodities combined I would say should go straight to the (non-derivative-based) dollar hedges themselves (sans commodities) if one is worried about such risks.