The Economy Is Sliding Into a Stagflationary Spiral [View article]
This country will survive and it will do what it has to. If our history shows us anything it’s that our system is the most resilient in the world. We can lay off millions of workers when we have to (try that in France), we can blow out our debt and still see generationally low interest rates (for now), we can endure wrenching shifts in the foundations of our economy. We adapt and overcome. We have vast assets, a superior incubator for innovation and an almost messianic belief in the rugged individualist. We can take it and this too shall pass.
We will, after all of the gnashing of teeth, brutal political showdowns, flirtations with isolationism and xenophobia and the eventual reshuffling of our currently misaligned priorities, show that the 21st century is not necessarily about the decline of the west and the ascendancy of the east. I have a great faith in our future and our ability to deal with our present.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
Mr. Kramer – you point out a certain inexactness in my statement – thank you for the correction. I reused the term “fiat money” as the author had been (mis)using it to refer to a policy of monetary inflation. This shorthand was, as you point out, an incorrect usage of the term. We were both actually agreeing that simply printing more money is not a strategy for real growth and I stick by that. I am not an advocate of a return to the gold standard (or even a bimetal standard).
Regarding Bryan’s Cross of Gold speech – that speech was made in an economic environment nearly opposite of where we are now and as such I don’t believe it informs the current discussion. In 1896 the US had suffered through 20 years of deflation which was devastating debtors because the real value of their debt was becoming onerous. Because the US was on a gold standard and the economy was growing strongly, the real value of the dollar was of course going through the roof. His proposal was meant to reverse that appreciation by expanding the backing of the dollar to include silver and thus, through this inflationary policy, to allow debtors to pay off their increasingly onerous real debt. Clearly we are in a very different situation now – the US economy is certainly in no danger of outpacing our ability to print dollars. If your point is that printing money makes it easier to pay off debt, I of course would agree. In fact that is likely a part of the approach the US will employ over the next decades to deal with our debt.
Regarding your question about my implied assumption that global productive capacity can keep up with global money-creation capacity. Global productive capacity is finite but global money-creation capacity is almost limitless. No math needed.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
“…more harm than any depression”? Perhaps you misspoke? I know neither of us have lived through one but I hear they're kinda bad. Really?
By definition we'll never be able to prove to you how bad it would have been because those in power did indeed act to avert a depression. Granted, it could have been better handled. The specific approach taken (TARP and other massive injections of liquidity) was hotly debated at the time (I advocated that the banks should take more of a haircut). But the vast majority of experts (especially those in positions to know) were adamant that it was necessary to avoid a total collapse of the global financial system. There was broad agreement (Paulson, Geithner, Bernanke, Volcker, Greenspan, Roubini, Buffett to name a few) that the result of letting Lehman (Dow off 50%) fail was a clear indicator that a catastrophe of unparalleled proportions would unfold should we let Citi, BAC, JPM, GS, Deutsche, etc also fail. This wisdom is called conventional for a reason.
You’re right about one thing – there is and will continue to be much suffering over a long period given the course we’re on. That was the entire point of both your and my pieces. I agreed with you then and I agree with you now. But it’s revisionist history to think that the situation wasn’t absolutely dire in the fall of 2009 or that the dramatic actions taken across the globe didn’t avert a catastrophe.
Don’t mean to pick on you, but to give our readers an idea of the depth of your…. conviction – whatcha say to raising that ol’ debt ceiling before we default? Maybe that’s being blown out of proportion too? Just based on junk science to justify more spending? Maybe it won’t be such a big deal and the markets will even appreciate it?
The Economy Is Sliding Into a Stagflationary Spiral [View article]
This is in response to several of the posts here and to this very well-written (and longggggg) article in general. As usual I agree with most of an Austerian's forecasts and disagree with most of his assessments. We come to very similar evaluations of what the future holds for us all but we have very different understandings of the alternatives.
Policies of the Bernanke, Geithner, Obama - these are not the causes of the dire situation we find ourselves in. As the author notes, malinvestment was the cause and the causes for the malinvestment can be debated. As the author beautifully details, the outlook is bad - we are in for years and years of pain. But it's a mistake to conflate our current pain with our current policy (fiat money).
Fiat money as a policy was not initiated as a growth strategy - clearly this would be silly. Instead, it was a reaction to a historic calamity and meant to simply stop the hemorrhaging. Without it we would all be in soup lines now. Great Depression II. Global meltdown. As the author clearly says - it was to paper over the problem and pray for rain. It was panic time back then and they did what they had to - they stopped our immediate plunge by gambling that something good would happen later. After that primary goal was achieved (yes - it was a success - we're not in soup lines), perhaps policy-makers are also hoping that it will drive growth without inflation but that's merely whistling past the graveyard (praying for rain).
We did what we had to. The current QE policies were rightfully put in place at a moment of crisis and we're stuck with them for now. We traded certain death for an uncertain and unhealthy future for an undetermined number of years. It was a gamble that will only be villified. Citizens who are alive but in pain are unhappy about the pain and unappreciative that the alternative was the apocalypse.
Those posts saying the Repubs are little different than the Dems are correct in this case. But that's not because we have a better alternative - the Tea Party is a childish reaction to pain (crying, kicking, screaming and blaming) and not a serious alternative. We are in trouble for the foreseeable future - grow up and accept it - there is no magic bullet.
When you look at the numbers you have to accept years and years of continued (and hopefully shrinking) annual deficits. Someday (as Boehner says, maybe 20 years from now) we will have a balanced annual budget. But between now and then, as the author says, we will see a growing national debt, stagflation, destruction of real capital, devaluation of the dollar, high unemployment and higher taxes.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
This is in response to several of the posts here and to this very well-written (and longggggg) article in general. As usual I agree with most of an Austerian's forecasts and disagree with most of his assessments. We come to very similar evaluations of what the future holds for us all but we have very different understandings of the alternatives.
Policies of the Bernanke, Geithner, Obama - these are not the causes of the dire situation we find ourselves in. As the author notes, malinvestment was the cause and the causes for the malinvestment can be debated. As the author beautifully details, the outlook is "bad" - we are in for years and years of pain. But it's a mistake to conflate our current pain with our current policy (fiat money).
Fiat money as a policy was not initiated as a growth strategy - clearly this would be silly. Instead, it was a reaction to a historic calamity and meant to simply stop the hemorrhaging. Without it we would all be in soup lines now. Great Depression II. Global meltdown. As the author clearly says - it was to paper over the problem and pray for rain. It was panic time back then and they did what they had to - they stopped our immediate plunge by gambling that something good would happen later. After that primary goal was achieved (yes - it was a success - we're not in soup lines), perhaps policy-makers are also hoping that it will drive growth without inflation but that's merely whistling past the graveyard (praying for rain).
We did what we had to. The current QE policies were rightfully put in place at a moment of crisis and we're stuck with them for now. We traded certain death for an uncertain and unhealthy future for an undetermined number of years. It was a gamble that will only be villified. Citizens who are alive but in pain are unhappy about the pain and unappreciative that the alternative was the apocalypse.
Those posts saying the Repubs are little better than the Dems are correct. But that's not because we have a better alternative - the Tea Party is a childish reaction to pain (crying, kicking, screaming and blaming) and not a serious alternative. We are in trouble for the foreseeable future - grow up and accept it - there is no magic bullet.
When you look at the numbers you have to accept years and years of continued (and hopefully shrinking) annual deficits. Someday (as Boehner says, maybe 20 years from now) we will have a balanced annual budget. But between now and then, as the author says, we will see a growing national debt, stagflation, destruction of real capital, devaluation of the dollar, high unemployment and higher taxes.
Bleak times for sure and potentially devasting political upheaval as misdirected anger is used by the unscrupulous. No one likes the bearer of bad news but whose fault is that?
Trading Costs and ETFs: FAZ and FAS [View article]
What is the impact of a reverse split on short-sold shares? I'm asssuming no net impact, right? That is, the short-seller would be on the hook for half as many shares at twice the original short-sell price.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
We will, after all of the gnashing of teeth, brutal political showdowns, flirtations with isolationism and xenophobia and the eventual reshuffling of our currently misaligned priorities, show that the 21st century is not necessarily about the decline of the west and the ascendancy of the east. I have a great faith in our future and our ability to deal with our present.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
The Economy Is Sliding Into a Stagflationary Spiral [View article]
Regarding Bryan’s Cross of Gold speech – that speech was made in an economic environment nearly opposite of where we are now and as such I don’t believe it informs the current discussion. In 1896 the US had suffered through 20 years of deflation which was devastating debtors because the real value of their debt was becoming onerous. Because the US was on a gold standard and the economy was growing strongly, the real value of the dollar was of course going through the roof. His proposal was meant to reverse that appreciation by expanding the backing of the dollar to include silver and thus, through this inflationary policy, to allow debtors to pay off their increasingly onerous real debt. Clearly we are in a very different situation now – the US economy is certainly in no danger of outpacing our ability to print dollars. If your point is that printing money makes it easier to pay off debt, I of course would agree. In fact that is likely a part of the approach the US will employ over the next decades to deal with our debt.
Regarding your question about my implied assumption that global productive capacity can keep up with global money-creation capacity. Global productive capacity is finite but global money-creation capacity is almost limitless. No math needed.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
By definition we'll never be able to prove to you how bad it would have been because those in power did indeed act to avert a depression. Granted, it could have been better handled. The specific approach taken (TARP and other massive injections of liquidity) was hotly debated at the time (I advocated that the banks should take more of a haircut). But the vast majority of experts (especially those in positions to know) were adamant that it was necessary to avoid a total collapse of the global financial system. There was broad agreement (Paulson, Geithner, Bernanke, Volcker, Greenspan, Roubini, Buffett to name a few) that the result of letting Lehman (Dow off 50%) fail was a clear indicator that a catastrophe of unparalleled proportions would unfold should we let Citi, BAC, JPM, GS, Deutsche, etc also fail. This wisdom is called conventional for a reason.
You’re right about one thing – there is and will continue to be much suffering over a long period given the course we’re on. That was the entire point of both your and my pieces. I agreed with you then and I agree with you now. But it’s revisionist history to think that the situation wasn’t absolutely dire in the fall of 2009 or that the dramatic actions taken across the globe didn’t avert a catastrophe.
Don’t mean to pick on you, but to give our readers an idea of the depth of your…. conviction – whatcha say to raising that ol’ debt ceiling before we default? Maybe that’s being blown out of proportion too? Just based on junk science to justify more spending? Maybe it won’t be such a big deal and the markets will even appreciate it?
The Economy Is Sliding Into a Stagflationary Spiral [View article]
Policies of the Bernanke, Geithner, Obama - these are not the causes of the dire situation we find ourselves in. As the author notes, malinvestment was the cause and the causes for the malinvestment can be debated. As the author beautifully details, the outlook is bad - we are in for years and years of pain. But it's a mistake to conflate our current pain with our current policy (fiat money).
Fiat money as a policy was not initiated as a growth strategy - clearly this would be silly. Instead, it was a reaction to a historic calamity and meant to simply stop the hemorrhaging. Without it we would all be in soup lines now. Great Depression II. Global meltdown. As the author clearly says - it was to paper over the problem and pray for rain. It was panic time back then and they did what they had to - they stopped our immediate plunge by gambling that something good would happen later. After that primary goal was achieved (yes - it was a success - we're not in soup lines), perhaps policy-makers are also hoping that it will drive growth without inflation but that's merely whistling past the graveyard (praying for rain).
We did what we had to. The current QE policies were rightfully put in place at a moment of crisis and we're stuck with them for now. We traded certain death for an uncertain and unhealthy future for an undetermined number of years. It was a gamble that will only be villified. Citizens who are alive but in pain are unhappy about the pain and unappreciative that the alternative was the apocalypse.
Those posts saying the Repubs are little different than the Dems are correct in this case. But that's not because we have a better alternative - the Tea Party is a childish reaction to pain (crying, kicking, screaming and blaming) and not a serious alternative. We are in trouble for the foreseeable future - grow up and accept it - there is no magic bullet.
When you look at the numbers you have to accept years and years of continued (and hopefully shrinking) annual deficits. Someday (as Boehner says, maybe 20 years from now) we will have a balanced annual budget. But between now and then, as the author says, we will see a growing national debt, stagflation, destruction of real capital, devaluation of the dollar, high unemployment and higher taxes.
The Economy Is Sliding Into a Stagflationary Spiral [View article]
Policies of the Bernanke, Geithner, Obama - these are not the causes of the dire situation we find ourselves in. As the author notes, malinvestment was the cause and the causes for the malinvestment can be debated. As the author beautifully details, the outlook is "bad" - we are in for years and years of pain. But it's a mistake to conflate our current pain with our current policy (fiat money).
Fiat money as a policy was not initiated as a growth strategy - clearly this would be silly. Instead, it was a reaction to a historic calamity and meant to simply stop the hemorrhaging. Without it we would all be in soup lines now. Great Depression II. Global meltdown. As the author clearly says - it was to paper over the problem and pray for rain. It was panic time back then and they did what they had to - they stopped our immediate plunge by gambling that something good would happen later. After that primary goal was achieved (yes - it was a success - we're not in soup lines), perhaps policy-makers are also hoping that it will drive growth without inflation but that's merely whistling past the graveyard (praying for rain).
We did what we had to. The current QE policies were rightfully put in place at a moment of crisis and we're stuck with them for now. We traded certain death for an uncertain and unhealthy future for an undetermined number of years. It was a gamble that will only be villified. Citizens who are alive but in pain are unhappy about the pain and unappreciative that the alternative was the apocalypse.
Those posts saying the Repubs are little better than the Dems are correct. But that's not because we have a better alternative - the Tea Party is a childish reaction to pain (crying, kicking, screaming and blaming) and not a serious alternative. We are in trouble for the foreseeable future - grow up and accept it - there is no magic bullet.
When you look at the numbers you have to accept years and years of continued (and hopefully shrinking) annual deficits. Someday (as Boehner says, maybe 20 years from now) we will have a balanced annual budget. But between now and then, as the author says, we will see a growing national debt, stagflation, destruction of real capital, devaluation of the dollar, high unemployment and higher taxes.
Bleak times for sure and potentially devasting political upheaval as misdirected anger is used by the unscrupulous. No one likes the bearer of bad news but whose fault is that?
Trading Costs and ETFs: FAZ and FAS [View article]
Also - any tax implications?