user8240

The Inflation / Deflation Forces Battles On

Untrusting says, in response to my comment that inflation or deflation is not as important as our trade deficit with China: "one has to assume that over time the standard of living in the US will decline relative to the rest of the world" and asks "Exactly what is it that you think the US government or for that matter even US business can realistically do about it?" but feels "America certainly could be much better run for the benefit of the average American and the country as a whole... but it is highly unlikely to ever be done. The reason being that the US is essentially run and has been for a long time for the benefit of the wealthy elite and the political process is part of that."
Well, I haven't given up and am not willing to go like sheep toward a third world future for the United States.
Untrusting asked me if I favored his five politically incorrect means to solve the trade crisis. The first is noteworthy: "Do you suggest we reduce US average wages to about the $500/month that they are in China in order to compete?". Hello, this is already happening...its the problem not the solution.
Since Untrustworthy asked me what solutions I would favor to deal with the China trade deficit, I advocate:...eliminate the income tax and replace it with the Fair Tax (yeah, I know special interests love tax loopholes) since the overall trade consequences of this measure would be huge....resurrect Senator Schumer's legislation to impose tariffs to offset Chinese currency manipulation, or even better impose Import Certificate requirements on China (which are permitted under WTO rules).
BTW, why not solve our health care issues by putting all ciitzens at birth onto Medicare paid for by a tax on foreign oil. But I digress from the point that deflation vs. inflation is a nice topic to debate but we have more pressing immediate issues (including the national debt) to deal with that are causal to this debate.

The Inflation / Deflation Forces Battles On

As the author indicates there are both inflationary and deflationary forces at work but takes no position on the ultimate resolution or outcome. So while somewhat informative, what do we make of this article? While many economists concerned with the consequences of fiscal and monetary policies that amount to "borrowing our way out of debt", see deflation for up to two more years then massive if not hyper-inflation, the more likely prospect is another asset bubble in a jobless recovery. The policy choices that fit government objectives are gradual depreciation of our currency while keeping long term interest rates down to avoid more unemployment. The argument that interest rates will rise as the Chinese e al stop buying our bonds is not realistic....oh, they may decrease purchases but the Federal Reserve has both an infinite balance sheet and the Congressional mandate to work toward full employment and stable prices (despite the inherent contradiction).
So, with a declining dollar putting pressure on prices to rise and interest rates held steady why would inflation not explode? Because, prices are the result of the demand supply equation not just the cost to import/produce goods. In a jobless recovery, household income won't increase and housing prices will decline in real terms...the money won't be there to pay higher prices. Demand for foreign goods will fall to offset the exchange rate changes. Until we get a government that wakes up to loss of our manufacturing base to China (83% of our non oil trade deficit is with China) and stops talking up free trade instead of fair trade, inflation or deflation will be the least of our problems.

The True Cost of the Home Buyer Tax Credit

Someone wrote an article saying the additional cost of cash for clunkers was $50,000 per car; he subtracted the number of cars that presumably would have been sold anyway in determining the incremental cost per car. However, has no one noticed that the so-called math in this piece is nonsense. Multiplying the number of homes that could be sold by $8000 then dividing by the number actually sold does not make the cost per additional home buyer $50,000. If only one were sold would it have cost us $15.2 billion? Unless you know the number of homes that would have been sold without the program, you can't get to the "additional cost per buyer".
Anyway on a scale of 1 to TARP, the cash for clunkers and first time home buyer programs are only a 2. A few billion in stimulous going to people vs tens of billions so AIG can repay Goldman Sachs....whats the problem?

Forget 'Cash for Clunkers': Try 'Dough for Dumps'

Actually on a scale of 1 to defense spending, Cash for Clunkers is only a 1. BTW, the program wasn't our idea...its an import from Germany.

Almost half of us don't any taxes. More than half don't bother to vote. Many complain about the few who pay most of the taxes but not about the Congress that spends more than its revenue every year.

Maybe we are just getting the government and the results we deserve.

Trade Deficit Improves, but for All the Wrong Reasons

While the view that Americans are cutting consumption on imports because of the economy is considered by Trader Mark as a "wrong reason", its actually a very good result. After years of no savings spurred by Greenspans wealth effect, we are finally forced to confront the reality of wealth destruction by cutting spending. The consequence will, in the long run, promote lower interest rates, capital investment, and self-financing of economic recovery.
BTW, what happened to the picture of the Chinese guy in the cowboy hat?

The Obama Fast Track for Hybrid Electric Vehicles (HEVs)

"Cars with plugs simply do not work for anyone other than the emotionally committed or the mathematically challenged." Only if the 60% fuel savings number is correct. Where did it come from? For a second car used for short trips only, the number would be much higher...closer to 100%.

" The logical flaw is the suggestion that 20 Asians will happily give up their hybrid scooter so that one American can have a PHEV."
Why would they have to give up their scooters? Demand for resources to make the batteries would raise the price of those resources to everyone but Asian buying power is lot more powerful these days. Seems to me the converse is more likely, Americans giving up PHEVs so Asian can have their cars ("scooters", may be both demeaning and archaic).

Making Target-Date Funds More Accessible to Retail Investors

When are people writing this stuff going to include the liquidity of these funds? Do you want to buy funds that trade only a few hundred shares a day?

Not Your Grandfather's Great Depression

The GD was caused by Hoover raising taxes, Protectionism that killed world trade, and the Federal Reserve shrinking the money supply. The New Deal didn't cure the GD because it was too small to be effective in reviving the economy. But, don't let the facts interfere with the truth.

The Hedge Fund of America, LP

Bernanke said banks want to abandon fair value accounting standards and instead use their own estimates of hold-to-maturity prices for these assets, but "warned such estimates would be unreliable.”

But Hold-to-maturity is the price Bernanke said we should pay to takeover these assets. So, the plan is to deliberately over pay for the Banks mistakes.

Worse, the Bailout won't work. The Banks are not lending the cash they already have, why would they lend (even if they have more cash) if they are afraid they won't get re-paid? The Bailout plan is attacking the wrong end of the problem. Effective demand should be stimulated not the supply of cash. Money supply is the quantity of money times the velocity of money. Without effective demand, velocity will continue to fall.

Curing the Credit Crisis: A Better Alternative Plan

The constitution says:
"To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures". Nothing about Gold.

The problem is the Paulson plan gives more cash to banks that aren't lending what they have because they are afraid they won't get paid back. We should be creating effective demand for loans instead of transferring paper around.

The 'Sage of the Dow' is Also Confused

"not only would the worst of the bear market already have been over, within a very short time a new bull market would be born."

Based on what?

Stagflation or Deflation?

Philman, is your proof that Paulson "is intentionally lying" and Bernanke an "academic fool" your investment losses?

The GSE losses were already socialized through implicit guarantees. So far, no gains to privatize (unfortunately).

BTW, I wonder how many folks complaining about the GSE takeover enjoyed lower cost/down payment mortgages to buy homes through the GSEs? Then, no complaints!

Stagflation or Deflation?

"in the hope that the complexity of the economy will confuse the majority of people."
Mr. Conrad demeans his own writings by confusing intentions with consequences. Does any rational person believe that Paulson et al are deliberately confusing the public? They are dealing with a tough economic situation created through fiscal incompetence starting with the Clinton administration that accelerated under Bush. Given the fact that we were virtually already on the hook for 6 trillion dollars of GSE bonds, their takeover 1) reassured current and future bondholders that the U.S. implied guarantee would be honored and 2) punished the stockholders and executives who were culprits or complicit in the GSE "keep the party going" crowd.

"And, the process is continuing."
Why do critics complain about the consequences of GSE and Bear Stearns takeovers but never offer a viable alternative that should have been taken?

"Gold, agricultural land and food products are good bets"
Great, another lets hide in the cellar with gold coins or become farmers as the answer.

Democracies respond to crises. When things get bad enough we will figure out the solutions or learn Chinese.

25 ETFs That Actually Are Making Money

I think baller miss understood Jim Wiandt's point re ETF fees. By comparison with mutual fund fees, all the leading ETFs are cheaper. His point is that the fees of leading ETFs were higher than under performing ETFs. Well, you get what you pay for (sometimes).

Another Depression?

How did politics get into this discussion? There's lots of blame to go around for the state of our economy. Whether or not the market crashes, the economy is being pushed along by easy money polices that weren't employed by Hoover and the Fed to avoid the depression. Of course, we may get hyper inflation instead but at least Ron Paul will be able to say "I told you so". I prefer to think about the short term what to do....for example, if McCain wins, the likelihood of a renewed Cold War with Russia would be wonderful for defense stocks.