By Monty Pelerin, on December 21st, 2009 Despite what you hear and read, there can be no recovery until the private sector starts growing, and it has not.
The public sector produces no products, gets in the way and generally hinders the private sector from accomplishment. Here is what has happened in the third quarter as reported by Doug Noland: “No encouraging news on the fiscal front. Third quarter Federal government Receipts were down 11.2% from a year ago to $2.212 TN SAAR. Federal Expenditures jumped 12.7% to $3.555 TN SAAR. Compared to three years ago, Receipts were down 12% while spending was up 29%.”
Federal Government receipts, down 11.2% over the prior year, indicate a private sector still in steep decline. Federal spending soaring indicates a government out of control or desperate to “solve” or at least “hide” the problem via Keynesian economics. While government spending can pump the GDP statistics (for a while) and create “make-work” projects, this spending does not reflect real value to the economy as it would if it occured voluntarily (i.e., in the private sector).
A better way to understand this matter would be to drop the terms private and public sectors and replace them with productive and unproductive sectors. That would have the advantage of educating the public as to economic reality, which is why politicians will never deal in realistic terminology.
Share/Save
By Monty Pelerin, on November 22nd, 2009 Doug Noland at Prudentbear.com has another excellent article in which he argues persuasively that the focus of the government’s effort is wrong and will do additional damage:
“The focus remains on financing the old structure. Indeed, I would argue that the current course of policymaking and market interventions only work to delay the unavoidable economic adjustment process.”
It is difficult to disagree with his perspective which follows.
Reflation Issues Heat Up:
The Bernanke Fed held tightly to its “extended period” language in their November 4th communication. Global markets took this as a signal that the Fed would not be shifting away from its ultra-loose stance until sometime later in 2010 – at the earliest. Then there were captivating comments this week from St. Louis Federal Reserve Bank President James Bullard: “Policy rates are near zero in the U.S. and the rest of G-7 countries, something not seen in postwar economic history. The FOMC did not begin policy rate increases until 2-1/2-3 years after the end of each of the past two recessions.” Markets were quick to ponder the possibility that rates might be on hold all the way into 2012. The Fed should discourage such thinking.
Share/Save
By Monty Pelerin, on November 1st, 2009
Image by wallyg via Flickr
Doug Noland’s latest post regarding “The Newest Abnormal” tracks many of the past buzzwords applied to the economy. Past terminology applied to economics and markets shows up in hindsight to be little more than post-crises rationalization at best. At worst, it was a form of Madison Avenue spin to entice unwary investors back into markets.
He details some of the history of this “marketing” and concludes that, despite clever phrases, we are still trying to blow bubbles. Here are a couple of excerpts from his piece:
The “miracles” were – without exception – belatedly recognized as Bubbles.
I’m thinking more “The Newest Abnormal”. To be sure, there have been some popped Bubbles. But we remain trapped in the same old Bubble-inciting paradigm of activist central banking and government intervention. I have expounded the view that a “government finance Bubble” emerged with the bursting of the Wall Street/mortgage finance Bubble. I would argue that Bubble dynamics have taken firm hold in China, throughout Asia, and in the “developing” economies more generally.
The New Normal implies more monetary order, while the Newest Abnormal suggests unrelenting Monetary Disorder. The proponents of the New Normal would tend to view extreme government intervention as a stabilizing force appropriate for a (deflationary) post-Bubble landscape. From the Newest Abnormal perspective, massive government deficits and market interventions inaugurate a dangerous new stage of global inflationism. Newest Abnormal analysis posits that a more stable New Normal backdrop would, at this point, likely arise only after
Continue reading How Abnormal Will Economic Policy Get?
By Monty Pelerin, on October 18th, 2009 Another good column by Doug Noland. This one deals with the inflationists and their one-solution solution for all economic problems. Here is part of the commentary:
Inflationism doctrine is riddled with failings: Easy Credit distorts system pricing mechanisms; foments destabilizing speculation; spurs societal wealth transfer; distorts the underlying economic structure; fosters financial fragility; and debases the currency – to name just a few. History – including recent history – validates this analysis.
To read the full-piece, go here.
Share/Save
By Monty Pelerin, on October 4th, 2009 Doug Noland of Prudent Bear tackles the flaws in credit and interventionism practiced by our government and concludes: “… it is my view that a flawed Credit apparatus, ill-advised government intervention, and dysfunctional market dynamics ensure economic maladjustment gets worse before it gets better.” His commentary on the current state of economic thinking and what it will produce appears below.
The Governator and the Market Operator
I’ll begin with an excerpt from Bill Gross’s latest Investment Outlook:
“But California’s problems, while somewhat unique and self-inflicted, are really America’s problems, and not just because the California economy is 15% of national GDP. While California’s $26 billion deficit is not directly comparable to the federal gap of $1 trillion-plus, they both reflect a lack of discipline and indeed vision to perceive that the strong growth in revenues was driven by the same excess leverage and same delusionary asset appreciation that was bound to approach cliff’s edge.”
It’s contagious. Both at the state and local level and in Washington, policymakers “lack discipline and indeed vision…” It is said that “bull markets create genius.” I’ll suggest that the downside of the Credit cycle fashions lousy policymaking. I feel for the “Governator” and the California legislature, and I feel for our new President and members of Congress. They confront the harsh post-Bubble reality of no win circumstances – wearing
Continue reading “Inflationism” and Intervention
|
Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
|
