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Senior Contributor

Re: dream trade busted

Totally agree Jim.  And unlike what Palouser said, history is on the side of no austerity and inflating to solve the problem.  Palouser linked to a Krugman article.  Krugman has been right on only one thing at that is he predicted along with scores of others the financial crises of 2008.  Keeping company with Krugman will cost a person dearly.

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Senior Advisor

Re: dream trade busted

From what you said I'm not sure we disagree a great deal. Unless you typoed somehow. 

 

I will say Krugman is right at least about one other thing. He predicted Britain would go back into recession with austerity. It did, right on schedule. 

 

I think another issue that is worth understanding is that the Fed definitely has tools to work on inflation should it occur. Volcker proved that beyond a shadow of a doubt when he guided the economy into a brick wall after years of inflation that had been poorly dealt with. But inflation needs a market that is speeding up, and w/o that there is no inclination towards inflation (and ours is not 'heating'). And since our currency relative to other currencies is very stable it's not likely to happen from 'flight' to other sanctuaries.

 

And Volcker did his 'magic' at a time when budget deficits were rising and debt piled on.   Being simplistic sacrifices understanding.

 

 

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Honored Advisor

Re: dream trade busted

Trying to find one example where a country borrowed

itself into prosperity, none come to mind. Well, one does,

the US during WW2. Most don't think we should do that

again regardless of the economic benefits. Physically

destroying the competitions physical plant and moving

all their great minds to our soil does work.

 

OBVIOUSLY, if the gov which makes up 40% of the economy

decides to reduce spending it will slow the economy. OF course,

some day when it is forced to stop unrestrained borrowing

the economy doesn't slow, it stops, Greece is a great example.

Capital flight follows. You can choose which course of action

you want to follow but the net result has always been the same.

 

The question is do we want to remain in control of our own

destiny, or do we want to cede that to someone else. Greece

has ceded itself to German control, or they can just write it

off and start over. The case for starting over is pretty compelling.

 

Like Palouser, I think this is a long-term issue and has little

to do with today's price of commodities.

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Honored Advisor

Re: dream trade busted

I did forget to mention that the correlation between all commodities is

not something that is a good thing. As is the astounding correlation

of movement of all stocks. IT is a very clear manifestation of the

extremely weak fundamentals underneath how the market is valueing

everything. Unintended consequence of the Fed's  vast over-supply

and low-earnings of  currency I suppose.

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Senior Contributor

Re: dream trade busted

You say no inflation. I say inflating to infinity!  We are on opposite sides.  Raising rates like volcker did will put us into a gigantic depression.  Politicians will choose inflation.

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Senior Contributor

Re: dream trade busted

Longterm the dollar is headed way lower.  What will that do to things we buy with it?  The fed has no choice with a congress unwilling to rein in spending. Beyond the point of n return.  This isn't going to end well!

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Re: dream trade busted

Krugman has been totally correct on the one big thing- that you wouldn't see inflation despite large deficits because inflation is well nigh impossible to produce once you've fallen into a liquidity trap.

 

Wish I had a buck for every polemic on the coming hyperinflation I've seen posted over at Forum the last 5 years. Like I told a friend who has a PhD in economics, too bad he spent all that time and money getting his sheepskins when they're now apparently giving them out in Cheerio boxes.

 

I suppose the interesting thing we may see play out in real time is some Republican Keynesianism (ala' Reagan and Bush II) as a Romney platform seems certain to deliver bigger deficits-  no way they're going to cut discretionary spending (see Senate Farm Bill proposal) enough to compensate for tax cuts and increased defense spending.

 

While the people who get the money will be those who deserve it, doubt if more trickle up is going to solve the basic problem of punky aggregate demand. Just too many lazy and feckless folks out there, I guess.

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Veteran Contributor

Re: dream trade busted

Ultimately, I think Keynes applies more aptly today than many wannabe economists believe.

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Re: dream trade busted

He was always good for a quote, at any rate.

 

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

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Senior Advisor

Re: dream trade busted

in reality it is not a choice of one over the other. It's how much - and when. If it was purely how much debt is accumulated during an administration (and they don't always have their way) then one better not vote Republican because they are the winners at that game and Reagan one of the best practitioners. The old 'do what I say, not what I do' kinds of things. We need more realism.

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