Glen L.'s Comments

Richard Russell: Downturn Will Be 'Vicious'

Fri, 11 Dec 2009 13:47:29 -0500

I'm not going to name names, but there is an awful lot of ignorance of economic history being expressed by some of the commenters. Some truths to offset this:

1. The Fed DID try desparately to inflate after the Depression set in, and the FDR administration was run by pro-Keynesian academics who implemented some of Keynes' worst ideas, e.g. public works, which in those days were paid by higher taxes, not Chinese loans. This took money away from entrepreneurs who could have been funding a recovery. The Fed was stymied by those policies, and further constrained by the partial gold standard that still existed until FDR confiscated the people's gold in 1933.

2. Tens of thousands of banks collapsed in the Depression, and the same thing would be happening now if the FDIC did not insure deposit accounts. However, the FDIC is a BAD thing; the banks should collapse if they made stupid loans. Moral hazard reins supreme today.

3. The depression of 1921-22 was even more severe, in its initial collapse, than the Great Depression. But the Fed and the Government were wise enough in those early days to allow the markets to self-correct, including the failure of thousands of banks. Result: that depression was over within 18 months.

4. The entire world's economy was crippled after the Smoot-Hawley tariff was passed in 1930 (Hoover's watch). A round of protectionism that has never been surpassed set in, with former trading partners shutting each others' markets out. This destroyed much of the export sector for America, costing tens of thousands of jobs, while simultaneously raising the price of most imports beyond the reach of struggling American families.

5. The speculative boom known as the Roaring Twenties was caused by easy money policies of the fledgling Fed. All speculative bubbles must burst at some point, but they never should be inflated in the first place. The Fed system and its political accomplices are the villains.

Read "The Politically Incorred Guide to the Great Depression" by Robert Murphy for more information. If you're honest with yourself, it just might open your eyes.

Renting a Piece of the American Dream

Fri, 11 Dec 2009 13:01:28 -0500

Moral questions aside, the financial wisdom of renting will be called into question when the banks start lending again and mass inflation sets in. That's when they'll wish they had their decent credit scores back and could lock in a fixed rate loan.

Krugman: 'The Deficit Doesn't Matter'

Tue, 01 Dec 2009 22:58:53 -0500

Krugman may have won a Nobel prize but that doesn't mean he's a complete idiot. He knows full well that the US is in dire danger due to its deficits and he knows that unless jobs are created and the economy grows _exponentially_ faster we are doomed to dollar collapse with either hyperinflation or depression, depending on whether the Fed chooses the rock or the hard place option. He proves he's a partial idiot when he states that the government can create those jobs, the Keynesian brand of idiot that thinks massive stimulus programs that are blowing the incredible deficit bubble will have nothing but good effects, in the face of rising unemployment and the still-employed closing their wallets. In that respect, he's not only an idiot, he's crazy.

Krugman and his reputation will go down with the HMS J. Maynard Keynes. Too bad the rest of the country is going down with them.

Signs of Extreme Complacency in the Market

Fri, 27 Nov 2009 22:00:30 -0500

JHG: I would ask you to hang in here. Fact-checking so-called experts can turn them into ex-experts very quickly.

Dubai Debt Concerns Trigger Spike in Foreign Volatility Indices

Fri, 27 Nov 2009 21:23:49 -0500

Monday should be very interesting, indeed. Gold dropped over $50 today but recovered most of that in late trading. Hang on, gold investors, you have all the cards in your hand now.

Insider Selling Soars with Rally

Mon, 23 Nov 2009 18:53:54 -0500

"Here on the inside, outside's so far away..."

Jethro Tull, c. 1970

Weak Weekly Market Wrap-Up: Primed for a Correction

Mon, 23 Nov 2009 18:47:16 -0500

It was too much to comment on. Needs an editor. I need work. Call me.

Critical Moment for 'Audit the Fed' Effort

Fri, 20 Nov 2009 09:46:47 -0500

Tim, I see you wrote this article yesterday before the vote. Ron Paul's amendment that would restore ALL of his audit provisions PASSED in committee, and the bill is once again a powerful threat to the continued secrecy of the FED. We still have a long way to go, but the Revolution is still alive and well.

Why an Export-Led Recovery Won't Work

Thu, 19 Nov 2009 17:50:58 -0500

Here's a thought: stop voting for any politician except ones who promise to start dismantling the federal government, and then kick out any we elect who reneg on the promise. We need reverse Kelo actions that will take back land and assets seized from the private sector. We need to sell many other assets to the highest bidder, and use the money to start paying off our debts. We need to withdraw all troops from all foreign lands. We need to cut federal and state spending in 10% stages until we cut 90% of all government spending, at which point we'll be back to 1950 levels. We can cut taxes in 5% stages until we balance the budget and set up a repayment plan for foreign debt that has an actual pay-off date; after that taxes can be cut to match spending cuts. And we need a simultaneous rollback of all regulations that discourage entrepreneurship by ensuring that only the huge crony capitalists can survive alongside the state kleptocrats.

And we need to let the dollar collapse so a new, free market in money can emerge. We need to hear the clink of precious metal coins in our pockets once again. In order for this to happen we need to abolish the Federal Reserve and all fractional reserve banking except privately contracted arrangements with no public money on the line. In such an economic setting, America would once more be the beacon of hope for all humanity.

I know that just about everyone reading this will say it could never happen. I say that it can, and all you have to do is stop bitching and start working for it. The state, and the statist mindset of the common people responsible for all our troubles, grew incrementally and it can be shrunk incrementally. All we have to do is summon up the will, and devote ourselves to the task.

Hey, Ron Paul's amendment to salvage his own Audit the Fed bill just passed in the House! So take heart, the new American Revolution has just begun.

Prices Rise; 'Deflation' Narrowly Averted

Thu, 19 Nov 2009 16:55:55 -0500

Slow and steady price deflation, a la computers, would be cause for celebration. The only price deflation worth worrying about would be caused by a massive contraction of the money supply, and prices would tumble in all sectors, as they did in the 1930s. Since the Fed has more than doubled M1, that simply ain't gonna happen this time. Of course, the vast majority of that money, given to the banks, remains parked at the Fed, therefore no inflation to speak of -- yet. But it is like the proverbial Sword of Damocles.

Housing Starts Plunge

Thu, 19 Nov 2009 16:46:41 -0500

I like the ski jump analogy too, and would add that all the snow has melted, just like the value of the dollar, from the landing area, which is revealed to be a pile of rocks.

If This Is a Recovery...

Sun, 15 Nov 2009 12:03:03 -0500

John Mauldin: thanks for a great piece. It's easy to see that you (and Mish) have put a ton of work and thought into it.

But.... why so rosy an outlook? ;-)

I just finished reading Robert Murphy's excellent "Politically Incorrect Guide to the Great Depression". He makes a very strong case that the Fed was responsible for the 1929 crash, that the Depression did not end until 1946, and that both Hoover and FDR pursued avante-garde socialist and fascist economic policies in what was generally a well-meaning effort to alleviate the pain, policies which utterly failed because they were based on economic fallacies and ignorance. What are we seeing now if not exactly the same mistakes, only much larger in magnitude?

The only way out of this is for the average citizen who still has a job to start saving and prudently investing to rebuild the capital base, and for government to shrink dramatically and reduce the tax burden, allowing entrepreneurship to flourish again. Every other recovery scenario is based on inflating one bubble or another, with disastrous consequences. The stimulus packages are just the federal government bubble, which is the biggest fiasco of them all.

If This Is a Recovery...

Sun, 15 Nov 2009 11:47:33 -0500

@bbro: "As much as Mr. Mauldin's Texas Republican politics is a part of his economic opinion the stimulus has paid out 206 billion in tax cuts.grants.and loans. There is another 379 billion to go in Fiscal year October 2009 to October 2010."

As much as your Democrat politics is a part of your opinion, where do you think the stimulus funds came/will come from? From (a) taxing the productive non-government sector, the very people who are struggling to stay afloat in this economy and who would be hiring if you don't overtax them; (b) from China et al; and (c) from the government printing press. All of which is Keynes on steroids and horrible from an economic perspective. Furthermore, your rosy employment picture is false, because by far the biggest increase in hiring is being done by the Federal government, and we all know how productive THAT sector is in the economy.

So get down off your partisan horse and learn the lessons of history. The Great Depression was started by a Republican and made far worse by a Democrat who continued and exacerbated the former's failed stimulus, monetary and taxation policies. The exact same thing is happening this time, but the results are going to be far worse, due to the exponential increase in the size of the Federal government since 1930.

Cheers,
Glen L.

China Housing Market: It's 2005 All Over Again

Fri, 13 Nov 2009 12:01:18 -0500

@James Lewis and China Interest:

You both make good points. I think there is a minor bubble effect here, but I also think economic reality will pop it long before it can reach American RE speculation status. Official Chicom statistics aside, there are anecdotal reports of massive overproduction and construction that is far outstripping domestic demand, resulting in thousands of failed businesses, large and small. The Chinese Tiger may turn out to be made of paper -- fiat paper -- after all.

Fixing the Economy by Breaking It Yet Again

Mon, 09 Nov 2009 22:00:45 -0500

Thoughtful people just learning about the Austrian school will wonder why, if the great Austrian thinkers (many of whom are/were not Austrians, of course) have been proven right so many times, does the mainstream press and academia continue to ignore them? The answer to this question is simple: the Austrians correctly identified governments and central banks as the culprits responsible for the destructive booms and busts that have plagued the markets throughout history. All other economic schools worship the state to at least some degree, and so they produce court economists who will never bite the hand that feeds them.

Peter Schiff expresses it better than most. He says there is only one economics (Austrian), just as there is only one physics. We don't go around talking about Chinese physics, and one day, sooner than later, we may drop the Austrian and just know that there is one true economic school, which teaches free market capitalism, advocates a true gold standard, and treats money as just another good that governments should have no control over.

Why Won't Obama Just Create the Jobs?

Mon, 09 Nov 2009 20:59:25 -0500

The author, and some of the commenters, need to read a little Bastiat. Or listen. Go to mises.org and listen to his brilliant essay, "What is Seen and What is Not Seen". Bastiat saw through the socialist nonsense 160 years ago, and his words ring just as true and topical today.

U.S. Empire In Decline, Makes Way for China

Sun, 25 Oct 2009 12:27:29 -0400

Mad Hedge: " As for me, I think I’ll move to Tahiti and live off of coconuts and freshly speared fish, wearing only a loin cloth. "

That's a little too much information.

"Anything is better than becoming French."

Now, here we go again, insulting the whole race just because the Left has pretty much taken over there. They've been in power now for about 220 years. Stability!

How Will the U.S. Recover from the Debt Crisis?

Sun, 25 Oct 2009 12:07:00 -0400

I agree with the view that the US will "recover" from the debt crisis by defaulting on the entitlement programs, primarily Social Security and Medicare which will see gradual, piecemeal reductions in benefits. Congress will attempt to negate the "third rail" by targeting minority sectors within the geezer population for reduced benefits, never enough to seriously threaten their incumbency in the next election.

I also think the US will take extraordinary measures to save the dollar and continue to pay the interest on the foreign debt. This means rising interest rates, much higher taxes, and a true depression in the not distant future. The alternative -- printing money to pay -- is the road to Zimbabwe. I don't believe the Fed will allow that to happen.

The longer range forecast is for the collapse of the fiat dollar anyway, a return to the gold standard, the abolition of the Fed, and the end of the American empire. We can only hope.

Roubini Hates Gold: Is He Wrong Again?

Sun, 25 Oct 2009 11:46:50 -0400

Someone made a comment about GLD controlling more physical gold than all the central banks combined. More likely is that GLD is playing the fractional reserve game with gold. It would be very interesting if a large number of GLD players demanded physical gold. (I'm not sure if that's an option, however, someone could enlighten me). Perhaps the same thing is happening with the bullion banks. I've heard rumors that the level of trade in gold far exceeds known physical reserves.

Roubini Hates Gold: Is He Wrong Again?

Sun, 25 Oct 2009 11:41:08 -0400

@thotdoc: "If you want to use statistics to predict what people will do, use the statistics that mirror how the mind works. "

There are no such statistics. The human mind is much too unpredictable, otherwise there would be a lot of statisticians cleaning up in every conceivable market.

Mises, not Beyes or Fisher.

Cramer's Mad Money - When the Facts Change...(10/23/09)

Sun, 25 Oct 2009 11:13:19 -0400

Cramer? You mean that guy who lives across the hall from Jerry Seinfeld? His market sense is spot on! Love that coffee table book that converts into a mini coffee table.

Is Capitalism in Its Death Throes?

Thu, 22 Oct 2009 12:53:40 -0400

Capitalism is the natural economic order that arises from free enterprise. It has existed, at least in rudimentary form, since the first humans saved seeds from wild plants and planted their own crops. Without capitalism the human race itself can perhaps exist, but never thrive; we come into the world totally unequipped to survive without clothing and shelter, the most efficient production of which requires capitalism.

All forms of socialism employ at least a modicum of capitalism, or they couldn't exist either. The Soviet Union survived for 70 years because it had enough raw materials to sell to foreign capitalists, and because it had a two-tier system wherein the party aparatchiks secretly enjoyed the illicit fruits of the freest of all enterprise, i.e. the black market.

So, if capitalism really is in its death throes, so is the human race.

The author is completely correct in his points about crony capitalism, which is a hallmark of the fascist version of socialism. There is some confusion, however, about the banks controlling capital; the banks, via the Fed, control the money supply. This is a socialistic institution, and if not abolished it will eventually destroy every fiat currency and wreak havoc worldwide. There cannot be true, free market capitalism until money is treated as a free market good, with competing brands, private production, distribution, etc. Until then, capitalism will never be allowed to flourish and shower its benefits on all humanity, as it should be allowed to do.

Replace Ben Bernanke with Paul Volcker

Tue, 20 Oct 2009 12:40:15 -0400

@Dave Wrixon: "Wouldn't you just be replacing the Lies of the Present with the Lies of the Past that most intelligent thinkers can already see past?"

Which lies of the past?

Extending the author's baseball analogy....

So Obama (the manager) pulls Bernanke (pitcher) because, well, he sucks. Brings in Volcker, the old vet, who serves up the same pitch he used back in the 80's: the high hard one. High interest rates, hard times, that is. Back then he saved Manager Reagan's job, but in order to keep the winning streak going Reagan prevailed on the team owners to spend, spend, spend and eventually the major opposition, the Moscow Reds, went bankrupt trying to compete. But the Washington Pinks were slowly going bankrupt themselves, eventually spending more than all the other teams combined, far outstripping their revenue stream and borrowing from successful teams in the minor leagues. Everyone with a lick of sense knew this would lead to Washington suffering the same fate as Moscow.

Well, now the most successful minor league team, the Beijing Capitals, has been promoted to the big leagues and is challenging the Washington team for the championship. And they own Washington's stadium, the bats and balls, and most of the ushers and hot dog hawkers speak Chinese. When Obama brings in Volcker and his high hard one, throwing at their players' heads and threatening their investment, they'll turn the lights off and send Washington down to the minors.

Gimme the ball, Obama.

The Facts Indicate We're Not in a Depression or Bubble

Tue, 20 Oct 2009 11:34:39 -0400

<>

I hope you like downhill runs on the rollercoaster, too. Just remember they happen remarkably fast.

By the way, if the falling dollar is causing the stock market rise, should we not root for the dollar to fall to zero, which implies the S&P rises to infinity? If not, why not? Think things all the way through? Never!

Two More Indicators of a V-Shaped Recovery

Sat, 17 Oct 2009 14:26:00 -0400
I'd like to see a definition of recovery from that author. If recovery means the Fed and the government have managed to inflate 2 more bubbles, we're indeed recovering. It's like the recovery experienced by a dying cancer patient who shoots up with heroin. If recovery means more jobs created by productive private markets, and slow, sustainable growth of the economy without inflation, recovery is obviously a long, long way away, and a bone marrow transplant will have to be suffered through first.

Celente Flashback: Great Recession Will Maintain Grip for a Generation

Wed, 14 Oct 2009 10:31:37 -0400
Celente is familiar with Austrian school economics, so it was relatively easy for him to perceive that the US economy was being driven by Fed-blown bubbles which must deflate eventually. All the Austrian schoolers predicted much the same (Peter Schiff, for one), but almost all are dismissed and ignored by the mainstream. America will prosper once again when the Austrian school's business cycle theory, which is an improved version of classical economics and stands in total opposition to the Keynesian nonsense that drives economic policy today, is learned and promoted by a critical mass of economists.

We are still a long way from that great day, but it is coming.

California's New Budget Already $1B in the Hole

Tue, 13 Oct 2009 11:58:46 -0400
I agree with the thrust of this arcticle, but not the anti-rich class warfare rhetoric. They will pay a magitude or two more than their per-capita share of the national debt, and they weren't responsible for it in the first place, in most cases.

The phenomenon of wealth in this country is perfectly consistent with Pareto's law, wherein 20% of the people PRODUCE 80% of the wealth, by doing 80% of the savings, entrepreneurship, and capital investment. The Obamas of this world, who want the rich to pay for everything and subsidize the non-producers, are the villains in this story, and the author needs to re-examine his characterization of wealth belonging to the producers as "obscene".

Gold Not Faring Well Against Inflation

Thu, 08 Oct 2009 12:55:02 -0400
The 1980 spike was a massive speculative bubble fueled by the high inflation rates of the 70s. We are almost certainly going to have mass inflation again (the alternative being a protracted depression, much worse than the 30s), and when we do there will be another speculative bubble. Gold is therefore the ultimate protection against high inflation -- as long as the paper money isn't completely worthless. Gold is no protection against hyperinflation, which would destroy the dollar and put the economy into barter mode. Then the necessities of life would be all that anyone would care about owning, and gold would be almost as useless as paper money.

Almost - but not quite. At some point after a dollar collapse, sensible people will demand a return to the gold standard, and everyone still holding gold will be sitting pretty. Silver will be great to have, too.

How Can We Get the Economy Back on Track?

Mon, 05 Oct 2009 15:14:14 -0400
Prof. Krugman would be proud of you, Mr. Corson. He'd give you an A on your essay advocating Keynesianism of steroids. Of course, you're almost as big a blockhead as he is.

You guys just can't see the big picture because you're blinded by socialist pseudo-economics and policy wonk thinking. Aggregate demand, my pretty pink derriere! There will be no recovery until the free market is allowed to function and all the phony pooh-bahs who try to micro- and macro-manage the economy are driven from office, and their sycophants in the mainstream media and the academy finally are forced to resign in disgrace.

Dig it: savings and debt reduction are GOOD FOR THE ECONOMY! Individuals and governments spending beyond their means are BAD FOR THE ECONOMY! What you are advocating will destroy the US dollar... but maybe that's a good thing, after all.

On second thought, keep up the good work!

Welcome to the New Normal

Sun, 27 Sep 2009 12:58:24 -0400
I live close (too close) to Mordor, aka Washington, DC. The bars, restaurants, and shopping malls are all still pretty full. It's still hard to find a parking space at the grocery store. Housing prices have a dropped a mere 4%, on average.

Life is good in the realm of Obama, the Sun King. (sigh)