Scott,Do you think we are in a secular bear market that started in 2000 and is likely to continue until the middle part of this decade due to poor fiscal/monetary policy?
Boy, how to bring down federal spending.David Stockman, the old Reaganite OMB top gun, has authored a truly insightful commentary on today's GOP and it's marriage to red ink. I take a lot of heat as I say the R-Party is not worth voting for anymore. Read this, and then tell me if I am too cynical. http://www.marketwatch.com/story/reagan-insider-gop-destroyed-us-economy-2010-08-10So, get used to deficit spending. And an overly tight Fed. Not a recipe for growth--though so creative and hard-working is the private-sector, we will probably see modest growth anyway.
Bill: I think it's hard to escape that conclusion. What we really need is an improvement in fiscal policy. I think it's coming. I don't think we will hve to wait 5 more years--what is happening today is unsustainable and that is forcing positive changes on the margin.
I missed posting on the Fed move yesterday, but thought I would share my 2 cents today.I think the all the Fed did yesterday was to acknowledge we're at risk of rolling into a double dip. Instead of QE2, they merely cancelled their very slow motion exit strategy for QE1.The problem for me is that we all know, and they repeatedly tell us, they are prepared for QE2 when it's needed. It seems to me the longer they wait for QE2, the bigger it will be, and the bigger the risk of pushing us over the tipping point towards hyper-inflation. So they are just adding fuel to the instability/uncertainty fire, and it looks like the risk markets are reflecting that today.What amazing to me is given this uncertainty, and the most likley outcome that the fed will succeed in generating inflation one way or another, what are people thinking who are buying those bonds? This looks like the formation of the biggest financial bubble the planet earth has ever seen!
Mark Gerber:Hyper-inflation? Can we even get to 4 percent inflation? Most economists say the big threat is now deflation, although as Grannis points out, the phrase "most economists say" is not a confidence builder.Still, unless we get an more-aggressive Fed...what is interesting is that Japan reached long-term deflation even while running big trade surpluses...jeez, what will happen to the US?
Scott, I usally agree with your posts and always enjoy them. I disagree with your finding good news in the June trade deficit.The top U.S. Exports should be high-value goods and services due to the evolution of the economy. The top three Exports to China are: 1] Scrap and Trash; 2] Oilseeds and Grains and 3) Grains.This looks like a Second to Third World line-up. Why? Because Intellectual Property is acquired with-out payment and trade secrets are the entry into the Chinese market through forced joint-ventures.Those of us the promoted trade with China have to question the control of the markets by the Chinses government now. Agree totally about U.S. fiscal restraint now.
Mark,Banks and consumers around the globe will unwind the massive amounts of excess fractional reserve credit sloshing around for the past 3 decades and this trumps any credible amount the Fed can pump out on its own.Inflating away will prove more disastrous especially considering that is how we got from point A to current point B.
Buddy,If those highlights are true, nice digging. The composition of the global markets is what matters, not the levels.Just like the composition of the Fed's balance matters. Holding piles of cr*p marked at par when there is likely a 30-60% haircut, implies if the Fed sold off its positions, hundreds of billions would remain sloshing around in the system.The Fed is becoming more and more of a joke in my opinion. They could quickly lose complete control of this already rudderless ship.
A bearish view by a money manager:America is a "Mickey Mouse economy" that is technically bankrupt, according to Jochen Wermuth, the Chief Investment Officer (CIO) and managing partner at Wermuth Asset Management. "America today looks like Russia in 1998. Consumers, companies and the government are all highly indebted. America as a result is a bankrupt Mickey Mouse economy," Wermuth told CNBC.
Benj,The law of physics applies to Americans just like everyone else. Granted, we've done our darnedest to inflate physics away with our beautiful fractional reserve system, but the Madoff's are now fully exposed.
Benj,So now we're Russia. Lets see...we've been Rhodesia, Argentina, Japan, and probably several other countries with negative connotations. People have been crying about consumption. If consumption is so bad, why are imports going up? Macy's just reported excellent same store sales. According to management the best performing catagories were:men's apparalluggagefurnituremattressesOnly one company but the picture is not consistent with the one painted on TV by people comparing America to third world countries. Disney reported earnings far ahead of expectations. People are still flocking to Disney World. Media was strong. Boeing's 787 Dreamliner will begin deliveries soon. Hundreds are on order from airlines all over the world. To see one, go to Boeing.com.Pessimists love say we are nothing more than some third world banana republic and all we have to offer the world in trade is oilseed and maybe a little corn. It is SO a hoot.
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