Glen L.

Marc Faber: 'It Will All End in Disaster'

kelm: Today's reality is much worse than the predictions made by 99% of economists and stock market touts. And the emerging national socialist reality will be much worse than you imagine, even if we don't suffer a total economic collapse. Ask the Germans or Russians who still remember what it was like if we're really going to get used to it when it happens. You get used to the idea of death, but you still fight it.

We don't need Pollyannish attitudes at a time like this. Americans must wake up and throw ALL incumbent politicians out of office unless they voted consistently against the bailouts. That leaves 2 or 3...

Global Markets Outlook: 3 Events that Could Shake the Markets During a Quiet Week

apppro says stop the insanity, but if he has his way only the insane would invest in any capital market. Capitalism is our friend, and capital gains should be encouraged, whether short or long term, not penalized.

People who advocate such aggressive tax schemes never seem to get around to the other side of the equation, i.e. capital losses. How about a 55% tax credit for people who lose a bunch of money in the first 6 months and decide to sell out? If you ever had a capital loss, you know that the IRS is only generous in giving your money to someone else, never in giving it back to you.

Recession Is Over: Long Live Depression

@studiophoto: you need to read some Hazlitt, at the very least. The problem with "cash for clunkers", in addition to the ones Peter and others here have pointed out, is that the money given to the recipients is money stolen from productive Americans, who would otherwise save it or use it for business and job creation. Dealers and others who see their bottom lines boosted by theft should be ashamed of themselves, and look for honest work.

@Chris Cook: you need to read some more Schiff, if you think he doesn't have ideas on a sustainable economy. First would be the abolition of the Federal Reserve and the breaking up of the banking cartel puppet masters that are ruining our nation; followed by a free market in money and a true gold standard, which would level the playing field and take away the ability of the government to wage incessant wars and create trillion dollar boondoggle programs that are idiotic in conception and disastrous to freedom.

Let's hear some real solutions other than the same old kindergarten class warfare from the Left.

Bernanke Desperate, Fed Out of Ammo

At last! A pundit on Seeking Alpha that is 100% correct re the cause of the crisis, and who has the courage to give Ron Paul the credit he deserves. As for the totally ignorant comments of Karl Marx Glazier, bleeeaaaahhhhh! When the actions of the Fed have totally trashed the US dollar, when the US loses its AAA credit rating, and when the unemployment rate in the US reaches depression-level heights, will you have the honesty to admit you were wrong? I seriously doubt it; anyone who thinks free markets and libertarianism are what caused this disaster is obviously a hopeless idealogue who will go to his grave denying the truth.

No One Saw This Economic Crisis Coming?

Once again the Austrian School of economics, which not only saw the crisis coming but saw the Great Depression coming, and foresaw every other bubble and downturn in the last 100 years, gets short shrift in a mainstream research paper and this article. The Austrians not only foresaw the bubbles and crashes, they developed and refined Austrian Business Cycle Theory (ABCT) over the last 8 decades to explain the cause, which in turn points us to the solution. That solution involves rejection of all "policymakers" - aka central plannners - which would also require the separation of economics and state, regardless of whether the state is represented by the Welfare Party or the Warfare Party or an indistinguishable blend of the two. And it would entail a true free market in money, i.e. gold/commodity based money produced by market entrepreneurs, not governments. The details make for great summertime reading, Lounsbury -- go to mises.org and indulge yourself.

And I say to everyone, there is no need to try to (or pretend to try to) digest and understand incomprehensible charts and mathematical formulae (econometrics, my arse!) that purport to explain economics. Come down to earth and educate yourselves in the science of human action - praxeology - which has already done that job for you.

Now, Peter Schiff would agree with everything I just wrote, but in the short list of visionaries above the names of Gary North, Walter Block, Jim Rogers, Robert Higgs, and dozens of other investors, scholars, and economists who understand ABCT are missing. That is a huge disservice not only to them but to the education of the public. I guess that's why I'm here.

If This Is a Recovery...

@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.

What Went Wrong with California, New York, and New Jersey?

VennDetta: "China has state-controlled "everything" and 40% tax rates, their growth rates are great."

Not true, there is far more economic freedom in China now than in the U.S. The Communists finally gave up after creating one of the poorest societies in the world over a period of 5 decades. It's far easier to start a business in Beijing than in New York or Los Angeles.

john s. gordon: Delaware also has drawn in thousands of corporations that DO have operations in the state due to low corporate taxes and other benefits. Furthermore, many other states have draconian penalties for businesses that get caught setting up corporate shells in Delaware.

It's incredible to me that anyone would still argue the point. Government is everywhere and always a parasite on the economy. Governments make nothing but trouble and are the only real impediment to worldwide prosperity. Many in the U.S. continue to believe that government is necessary to protect our freedoms, but what they do is the exact opposite: destruction of freedom, economic and otherwise.

Bernanke Desperate, Fed Out of Ammo

Oh, one more thing, Karl: Ron Paul was a relentless critic of Greenspan, as well as Bernanke, and Greenspan taught Bernanke everything he thinks he knows about how to destroy markets. Bernanke and Greenspan are both advocates of maximum INTERFERENCE in free markets, THAT'S WHY THEY BECAME FED CHAIRMEN!

Geesh...

Bernanke Has Lost Control

Excellent article. People are starting to see the light, and it is indeed a train bearing down from the opposite end of the tunnel. Call that train the City of New Orleans. Or Economic Reality.

Bernanke never had control. Neither did Greenspan, or Volcker, or any other man, woman, politician, king, or demigod on the planet. Go to the blackboard and write 100 times, "You can not centrally plan the markets, You can not centrally plan the markets...."

The great danger now is that Obama and his leftist henchmen think they can and will fall back on the failed socialist bromides -- well, look again, they already have. As each intervention makes the situation worse, will they resort to outright dictatorial powers? Yes, I know, they already have in some cases (the President has no constitutional power to fire private company CEO's), but it could get downright Orwellian in the next year.

The lesson is clear: government needs to be kicked out of the marketplace, the sooner ther better, and the Fed along with it.

What Went Wrong with California, New York, and New Jersey?

a palmer jr: How much illegal immigration would there be if those states did not have the most generous (and wasteful) welfare systems in the country? Once again, the real culprit is government. Furthermore, the voters of those states keep electing politicians who coddle illegal immigrants. So much for democracy as the answer to our problems.

If This Is a Recovery...

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.

Give Obama 40 More Years in Office!

My, my, what a bunch of partisan nonsense from both sides of the establishment duopoly in this comment stream! The fact is (here's a real factcheck for you, Mr. Lefty) that almost every president in American history has presided over the expansion of parasitic government, at the expense of free markets and freedom in general. This applies to St. Reagan of the Right as well as Ayotollah Obama of the Left, to Pretty Boy Clinton as well as Babyface Bush. Their actions belied their effusive rhetoric about capitalism, free markets, and liberty, as they either supported or failed to veto one government power grab after another. Only the favored special interests changed from one Administration to the next, and then only slightly.

So I just watched Obama's speech - aka dictatorial pronouncements - about how "we" are going to institute sweeping regulatory reform in the financial markets that will ensure that free market capitalism will once again function properly... reforms that will prevent firms that are too big to fail from engaging in activities that will put them at risk of failing in the first place. As he put it, "the guiding hand of government" will ensure that the "invisible hand of the marketplace" does not go astray. In other words, the markets will neither be allowed to take risks that the government deems foolish, nor will they be allowed to punish the risk-takers who make those foolish mistakes! THIS is public-private partnership, aka fascism, dressed up as responsible government policy.

America needs to shed some excess weight, also known as government, before any recovery will take place. I don't agree that voters will understand this in 2012; in fact Obama's reelection is likely to be by a landslide, just as FDR's was in 1936. But it won't make any difference if they vote the GOP back into majority status. The best we can hope for from the ballot box is gridlock, or a Ron Paul style president who will veto everything and use the bully pulpit to get Americans thinking straight about the inherent adversarial role government has to liberty and prosperity.

The Debt Conundrum, Part 2

To TonCinTx: your comment is filled with so many errors it compels me to reply, even if to educate the gullible who might believe any part of what you're saying.

For every entrepreneur that "borrowed his way to prosperity" there are 9, at least, that tried that and failed. Besides, you're missing the point; Quinn is talking about the consumer, not the good luck or timing of individual business owners. In their case, borrowing is of course often necessary, but it must be balanced by good business sense, meticulous planning, and a timely paydown of debt in order to have a healthy economy. All three of those qualities are sadly lacking in the sickly consumer debt-driven economy of today's America.

"If we had to borrow half a trillion from China to do it, wouldn't it be worth it to get us off oil and on to electric cars and trains fueled by geothermal, wind, solar and ocean energy?"

NO! You obviously don't understand how completely the debt load is crippling America's ability to compete. And "investing" (at the point of a gun) in inefficient so-called "green" technologies is malinvestment at its very worst. To the extent that government has forced us down that path already (oil drilling restricitions, ethanol, banning nuclear power plants, restricting oil refineries, ad nauseum) it has done massive damage. Only the apolitical market should decide which energy sources are best.

"If our government borrows at its low rate in order to reduce consumer interest rates that are running at 24%, (say through some legislative trick or another) wouldn't that cut consumer expense and improve their prosperity? Expenses do matter in economics."

Pathetic. Don't you understand that "our government" is us? And that when you force productive people who are NOT in debt now to go into debt to subsidize the fools who ran up huge personal debts, you are punishing the prudent to benefit the imprudent? Socialization of debt is the very definition of moral hazard, a lesson that your public school education did not impart to you.

Likewise, you learned nothing about economics from you experience working at the hospital. I work in the medical billing field, and I know what I'm talking about: for-profit hospitals are all in danger of going out of business because of government intrusion in the medical marketplace; Medicare and, especially, Medicaid, force them to accept payments that don't even come close to paying their costs, so it should come as no surprise that they boost the price of everything else that doesn't have a price control slapped on it. The problem with healthcare prices in the US is driven entirely by the Byzantine third-party payer system, a much too complicated issue to discuss here, but rest assured it has nothing to do with free markets in medicine.

"We have government do jobs that we do not WANT done at a profit. We don't want our police force to be a for-profit organization, we don't want our health inspectors to be either, nor our safety inspectors, or our garbage collectors, or any of our consumer protection agencies like the FDA, FAA or SEC."

Well, you're obviously speaking for yourself, but you couldn't be more wrongheaded. Where I live there is private, for-profit garbage collection, and it is far, far better than the noisy, destructive, union-addled non-service I got when I endured big-city public garbage collection. And I would LOVE to see for-profit police agencies (which already guard many communities in this country, by the way, the public police being useless for basic protection). And if you can't see how dismally your alphabet-soup federal agencies have failed you over the years you are obviously blind to reality. Did the SEC protect the millions of Americans from the FED-induced stock market bubble that recently deflated, taking trillions of 401k dollars down with it? You must be joking, man.

"For all that the US Postal service gets dissed, they deliver a letter cross country for 50 cents, while the same delivery by a for-profit carrier like FedEx costs at least $10, twenty times as much."

FedEx is forbidden to compete in the first class letter carrying business! Don't you know that?! If it wasn't, one thing for sure it wouldn't be doing is RAISING it's postage rates because it is LOSING money. The only reason USPS can handle mail as cheaply as it does is Federal government monopoly and subsidy. Some business model to emulate!

"Although I agree with the points made by Mr. Quinn, his arguments are weakened when he does not understand basic entrepreneurial economics (you CAN borrow your way to prosperity, just look at FedEx), or basic political philosophy. "

You don't agree with any of his points, and your own complete lack of understanding of basic entrepreneurial economics must be embarassing to everyone who knows you. As for basic political philosophy, yours is straight from your government high school education. Now, there's an industry that desperately needs a for-profit competition model, considering its pathetic products.

Gaping Hole in the Deflation Argument - Part II

Good article, and I think Mr. Kim's analysis is basically correct. There are two culprits that need to be named here if we are ever to have hope of breaking the increasingly disastrous business cycle: government intervention in the markets, and Keynesian economic policy. Unfortunately, Keynes is still the favorite economist of the ruling class after all these years (and all the failures) precisely because he advocated heavy government interference in the market. The central bank cartel is indispensable to Keynesian economic policy.

The solution should be obvious, and no, it's not a restoration of Volcker's policies. The Federal Reserve must be abolished, and the government forced to relinquish its control of the money supply. The way to do this is to let private entrepreneurs create competing forms of money, and let the markets decide which is best. Commodity-backed money would most certainly prevail. Whether or not bankers should be allowed to use fractional reserve lending (with full transparency) should also be left up to the markets.

All of these ideas are fully explicated by the Austrian school of economics - the only real economics. Read all about it at mises.org.

Obama Wants a 'Better Plan'? Here's One: Bite the Bullet

Lone Ranger to Tonto: "If we ride straight at those Apaches surrounding us with our guns blazing, maybe we can escape this trap!". Tonto to Lone Ranger: "What do you mean WE, white man?"

The point being, the author and many of the commenters keep saying WE should do this or that; you all want to second guess the central planners and institute your own version of central planning. If, instead, WE did nothing except mind our own business to the best of our abilities, and fired the central planners, we would not be in this mess in the first place, but since we are, starting to reject central planning now is the only way out. As you all seem to realize, we are in for either massive inflation or at least a decade of depression (maybe both as the feds try all available money manipulation options); so to my mind, biting the bullet means adopting the attitude of the much-maligned Warren G. Harding, and letting the FREE market sort out its own problems, leaving the taxpayers out of it. And no, Dave Wrixon, it is never too late to restore freedom to the marketplace.

Never forget that all political solutions favor one or more special interests over all others. The possibilities for corruption, cartel-forming, and other evils in the current bailout climate are endless. Asking politicians to act responsibly with trillions of dollars, deflated or not, at their disposal is asking for the worst economic disaster in human history. How many zeroes in the number before we, as individuals, just say no and throw the bastards out?