David Stockman wrote an intriguing article which appeared in the NY Times. That it appeared in the Times is noteworthy itself, for it contradicts so many liberal shibboleths the paper has supported (promoted) for many years. Its appearance is less likely to reflect the first steps to Damascus and may be a sign of financial desperation where the need for [...]
Great Depression
The Keynesian Legacy Unravels
“Those who cannot remember the past, are condemned to repeat it.” George Santayana Ideology is powerful, capable of masking unpleasant facts. Whether we recognize it or not, we are all slaves to ideology. Economists are no different in that regard than other people. They hold preconceived ideas which affect the interpretation of data and facts. In the extreme, ideology is [...]
Polite Pessimism Is Not Warranted
The condition of the US (and world) economy is precarious. Alasdair Sinclair says that money printing is the only thing holding the economy up: We are in the eye of a financial storm, for which the only solution – other than mass default – is an accelerating supply of money. Deteriorating financial conditions ineither government, banks, private sector or securities markets are almost certain to trigger a run on the others. And that is why a far larger figure than QE3’s $85bn permonth may be required to keep the system afloat. Mr. Sinclair is correct. I recommend you read his piece in full. While Mr. Sinclair points out [...]
Why Are Interest Rates So Low?
For those who think bonds are a safe place to be, you might want to reconsider. In addition to rising sovereign risk (yes, for the US as well as other countries), there is interest rate risk. Interest rate risk is what you assume when you buy a bond and do not intend to hold it to maturity. If interest rates [...]
Why High Inflation Is Inevitable
How this economic disaster ends is something about which many of us speculate. Two extreme endings are likely — a sudden deflationary collapse or a period of very high inflation/hyperinflation which ultimately cripples commerce and resolves itself in a deflationary collapse. In either case, the deflationary collapse is another Great Depression. It is important to know which route will occur because [...]
The Future Is Determined By the Past
Even if the economy improves (it won’t in any real sense), the changes coming to this country border on the unimaginable for both the enlightened and unenlightened. Economic events similar to what occurred during the Great Depression are not far from happening. Some outcomes will be worse than what occurred 80 years ago. No bell will sound to alert you [...]
The Stock Market in Perspective
On the roller coaster that we call the stock market, it is easy to miss the forest for the trees. Volatile short-term moves are especially pronounced in today’s economic environment. But do they have any meaning in the larger scheme of things? The following chart provides a big picture of the stock market. More important, it provides the picture in [...]
Richard Russell on the Financial Mess
Richard Russell, respected investment adviser for over half a century, has been operating at half-speed for him which is full speed for most of us. In this short note he explains why. More importantly, he comments on what he believes is coming. This is from a man who lived through the Great Depression. Please read his words carefully: Here I [...]
How Far to Go?
There is no way to reasonably estimate how long the depression will last. Michael Panzner discusses one way to estimate timeframes. Are We There Yet? by Michael Panzner (Image: source.) Like children sitting anxiously in the back of the car on a long journey, many people — especially those “experts” who failed to see financial Armageddon coming or how bad it would [...]
Economic Armageddon Seen As Imminent
Suddenly it is getting crowded in the world of those predicting economic armageddon. In a sense, that is comforting for those of us who were early and few. Once relegated to the lunatic fringe, it appears as though this view is expanding, possibly even going mainstream. .That more are calling for a terrible ending to the crisis does not ensure [...]
A Lost Decade (or More)
The US has now joined Japan in terms of having a “lost decade.” Japan is still far ahead, however, as they are in their third lost decade. Their stock market, 40,000 over twenty years ago, closed today at under 9,000. The lost decade in the US has not yet been as bad as Japan’s. As Bill Bonner described conditions in the US: [...]
The Inevitability of Another Great Depression
I have argued that we are in or inevitably headed for another Great Depression and there is no way to avoid it. Mathematically, we passed the tipping point several years ago. As Charles Hugh Smith put it in a must-read article: … the Status Quo is now addicted to unlimited flows of free credit issued by central banks. If the [...]