JCC

Perhaps There Are Unseen Green Shoots

On Jul 19 08:39 AM Quaker wrote:
""I believe that we're in a systemic change in currency and trade regimes worldwide, similar to that which happened in the late 20's in Germany and in 1870's in London and Amsterdam. The changes we're going through are more historical than economic. The reason we got into trouble was the China, Saudi trade caused an excess of dollars to enter the market and and excess of IOU's to be issued. This caused interest rates to get absurdly low and destroyed worldwide equity.""

Well Quaker - Those who read Kevin Phillips book "Bad Money" will at least partially agree with you. Look at the history of Europe and you will see a similarity as they progressed from a manufacturing based economy to a financial economy. This of course appears to be what the USA is going through.

Look at the charts of China, and you will see that they are the only ones that have been growing consistently since November 2008, and of course China is a manufacturing economy. I see green shoots in Asia.

By the way, Goldman Sachs has also been growing consistantly since November 2008, and now they appear ready to explode to the upside. I see fast growing trees in financial stocks.

Looking at history, the change in economic leadership should be gradual and painful. Asia needs us as a marketplace!

In the meantime, be careful with your investments. Specific financial stocks might be a great investment. Multinational companies are better suited to grow in the coming world economies. Resources will again be stretched, and provide for good investments. Technology leaders also will provide opportunity.

Hansen - This is a good article, and it's nice to see something factual and reasonable among all of the ridiculous opinions. Good work!!

The Economic Trifecta: Inflation, Devaluation, High Interest

Steve - I appreciate your intelligent argument. I agree that the danger of inflation is not eminent, but it is certainly possible upon recovery. You are correct that it could be avoided with an L shaped recovery. I submit that it is also possible with a U shaped recovery, depending upon the economic policies used at that time.

Currently monetary velocity has slown to a crawl, which if anything is a deflactionary factor. When velocity increases, then we must very carefully manage the monetary supply to avoid significant inflation. This might be difficult but it can be done.


On May 31 10:29 AM Steven Hansen wrote:

> "First the attribution of the quote was wrong. It was Laurel and
> Hardy, not the Three Stouges.' - Dave Wrixon
>
> Your are right. i was so concerned about getting the phrase correct
> that i did not realize the attribute was to the wrong people.
>
> Let me be clear on the point of inflation - i do not see this as
> an eminent problem. but if i would have written one year ago about
> fears of deflation, what would you have thought?
>
> you cannot keep taking different drugs and not expect a reaction
> between the drugs. the fed is conducting monetary policy on the foundation
> of computer models. if anyone has some statistical information relating
> to similar economic conditions from the past, please share it.<br/>
>
> i find it interesting that the punters believe
> - we are exiting the worst global economic situation since the great
> depression,
> - the government can spend money like there is no tomorrow,
> - the fed can massively expand the money supply,
> - that we can destroy massive amounts of wealth,
> - the boomers are exiting stage right,
> - we can dramatically increase our taxation,
> - the whole world can engage in QE
> and you can predict the outcome. not one swinging dick can say what
> will happen next.
>
> i remain convinced that when a recovery occurs - there will be inflation.
> however, if this is a L shaped recovery, i would agree inflation
> most likely is not a concern.

The Economic Trifecta: Inflation, Devaluation, High Interest

We exited World War 2 with debt being the quivalent of 120% of GDP. At that time, similar to today, many were crying about eminent out of control inflation. It did not happen!!

The Bank of Japan made huge debt purchases between 1997 and 2003. Many predicted run away inflation. What happened - Prices fell.

You reported a lot of interesting data, and it is generally a good article. But like many, the article fails to predict based upon factual analysis. Maybe we will have hyper-inflation, but it is by no means necessary, not is it a a foregone conclusion. Proper handling of the economy can avoid an inflationary conclusion.

Furthermore, in the short term a major worry is deflation.