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Promo For Mish’s Economic Analysis

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  • Fri, Nov 21, 2008 - 07:13pm

    #1

    Nichoman

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    Promo For Mish’s Economic Analysis

Folks…

 

A quick plug for a link Chris has about  Mish’s Economic Analysis at…

http://globaleconomicanalysis.blogspot.com/

 

This site has several excellent financial oriented articles explaining much of what is happening and why.  For those who haven’t visited and want to understand more.  Reviewing at least the last 2 weeks articles found at least 2/3 very helpful if not more from my olde MBA days.

 

Encourage others, including Chris or Erik to provide their inputs on their articles.  Those who have read my posts, know am a "facts and data" person…which most of these articles do a very good job of highlighting and explaining relevant topics and issues….toward greater understanding.

 

Nichoman

 

 

  • Fri, Nov 21, 2008 - 09:20pm

    #2
    switters

    switters

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    Re: Promo For Mish’s Economic Analysis

I’ve been following Mish’s blog for about six months now and I agree that he is a very astute analyst.  He got deflation right where many were wrong, and he really understands the root of the current crisis.

  • Fri, Nov 21, 2008 - 09:43pm

    #3
    gregroberts

    gregroberts

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    Re: Promo For Mish’s Economic Analysis

November 21, 2008

The Truth About Bailouts
Peter Schiff


As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit’s depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn’t have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy.

The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What’s worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.

When it comes to bailouts, the real discussions are not centered in Washington but rather in Beijing, Tokyo, and Riyadh. With no money of our own, our ability to bailout our own citizens is completely dependent on the world’s willingness to foot the bill. While I am sure that Bush and Paulson are doing their best to convince the world that open ended financing of the United States is in the global interest, my guess is that, unlike Congress, our foreign creditors will see through the self-serving nature of our plea.

Like any bailout, our foreign creditors should consider the moral hazard of rewarding bad behavior, and the old investment adage of not throwing good money after bad. By continuing to "lend" us money, the world is merely delaying the necessary rebalancing of our upside down economy. By continuing to subsidize our reckless and outsized consumption, the world merely delays the inevitable re-balancing and exacerbates the underlying problem at the root of the current global financial crisis.

If Washington bails out General Motors, the funds will never be recovered. GM will simply burn through the bailout money and then be back for more. Talk of designing a new fleet of "green" cars that will pave the way to profitability by spurring a new buying spree is simply delusional. Given the staggering "legacy" costs of health care and pensions for millions of current and former workers, Detroit cannot produce cars profitably. Unless these costs are seriously brought down, and there is very little chance that they will be, Detroit will remain a bottomless money pit.

Similarly any money that the world lends to America to finance more consumption will never be repaid. We will simply blow through it, and be back, hat in hand, begging for more. As we painfully learned in the housing bust, lending people money that they cannot pay back makes no sense. This applies equally to foreign central banks lending to America as it does to commercial banks lending to homeowners.

So for the same reasons that Washington should not bail out General Motors, the world should not bailout America. Like GM, our economy is in desperate need of a restructuring. Spending must be replaced with savings, and consumption with production. The service sector must shrink and manufacturing must expand to fill the void. The dollar must fall, wages in America must be brought down to a competitive level, and hopefully government spending and burdensome regulation can be reduced.

This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

Many people have had to eat their words when they disagreed with Peter Schiff, (Mish will eat his too) he tells people what caused the problem and then he tells them what will happen in the future not what is happening now. Of course when you blow up a bubble and then you pop it it will deflate, soon you will see a reversal and monetary inflation will take over. As The Mogambo Guru says, we’re all freakin doomed (wafd).

  • Fri, Nov 21, 2008 - 10:27pm

    #4

    Ray Hewitt

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    Re: Promo For Mish’s Economic Analysis

For the record, Mish openly applies Austrian Theory in his analyses. The skeptics who believe it’s another ideology don’t know economics. It’s no more an ideology than Newtonian Mechanics is an ideology. Peter Schiff hasn’t mentioned where his understanding of markets come from, but from what I can see, it’s right out of Austrian Theory. He has no need to quote any of the Austrian thinkers anymore than one has to quote Newton. There is no better system of logic for understanding the real world of economics than Austrian Theory.

  • Fri, Nov 21, 2008 - 10:30pm

    #5

    Chris Martenson

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    Re: Promo For Mish’s Economic Analysis

I’ve been following Mish’s blog for about six months now and I agree
that he is a very astute analyst.  He got deflation right where many
were wrong, and he really understands the root of the current crisis.

I agree that Mish is a great analyst and I’ve learned a lot from him over time.

My one caveat is that I think he holds a belief about deflation.

I am trying to remain agnostic on the issue because I am not yet sure which way it will all turn out.  In this environment, held  beliefs can be a real killer. So I am careful when reading his posts on deflation to not accept them as gospel but instead as just another point of view.

For now I prefer to remain open to the possibility that massive inflation could still lie in our (not-too-distant) future.  

Best,
Chris

  • Fri, Nov 21, 2008 - 10:52pm

    #6

    Nichoman

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    Re: Promo For Mish’s Economic Analysis

[quote=cmartenson]

I agree that Mish is a great analyst and I’ve learned a lot from him over time. 

My one caveat is that I think he holds a belief about deflation.

I am trying to remain agnostic on the issue because I am not yet sure which way it will all turn out.  In this environment, held  beliefs can be a real killer. So I am careful when reading his posts on deflation to not accept them as gospel but instead as just another point of view.

For now I prefer to remain open to the possibility that massive inflation could still lie in our (not-too-distant) future.  

Best,
Chris

[/quote]

Well stated. 

Add…Any view is based on assumptions, which may or may not be properly weighted or valid under changing conditions.    Thus…need for systematic analysis…correlation studies…scale analysis, etc.   In my profession, there are over 100 Rules and Principles that can be applied in forecasting…which is essentially what were doing here.   The truth is we never have enough data and can only estimate through careful analysis. 

Agnostic is an accurate and useful word.  Since were striving for objectivity and open mindedness.

 

–Nichoman     

 

  • Fri, Nov 21, 2008 - 10:59pm

    #7
    switters

    switters

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    Re: Promo For Mish’s Economic Analysis

Chris,

I agree that it’s wise to keep an open mind about the deflation/inflation question, as nobody really knows what’s going to happen.  But I don’t think that Mish is predicting that we won’t end up with hyperinflation at some point, is he?  This is a question I’ve wanted to ask him, because I don’t have a clear sense of what his timelines are even after following his blog for six months.  Does he think we’re headed for a decade of deflation a la Japan?  Or has he simply been arguing that the initial collapse would be deflationary?  I really don’t know.

Anyone else?

  • Fri, Nov 21, 2008 - 11:34pm

    #8
    gregroberts

    gregroberts

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    Re: Promo For Mish’s Economic Analysis

by The Mogambo Guru

Jim Sinclair of jsmineset.com had a link to the essay "Before Saving the US" at ChinaStakes.com, written by a guy named Xiang Songzuo, which starts out, "The nature of the current global financial crisis is the biggest debt crisis in America’s history", which is certainly not news.

Then the article gets right in our American faces and keeps hammering at us: "Statistics show that America’s internal and external debt exceeds $60 trillion, over 400% of the country’s annual GDP of a bit over $14 trillion. Of that total, family debt (including mortgages), financial and non-financial firms’ debt, and municipal and national debt come to about $15 trillion, $17 trillion, $22 trillion, $3.5 trillion, and $11 trillion, respectively, though it is hard to tell how these debts have been split up among foreign governments, financial firms, companies, and individuals."

Naturally, as a proud American, I take the aggressive approach and sneer, saying, "So? Tell us something that we don’t know! Hahaha!"

In an apparent response, he goes on, "To relieve the crisis, the US must repay its debts, and to do that it needs to live a more frugal life instead of asking others to continue lending it the money to maintain its over-consumption."

So, still being a smug American, I say, "Says who? You? Hahaha! We’re Americans, and we have a fiat currency, and we can just print up all the money to pay you off! And everybody else, too, suckers! How do you like them apples? Hahaha!"

Apparently, Xiang is unimpressed with my typically American solution to the debt problem, as with all problems, and continues, "The first thing the government needs to do is reduce spending and the deficit. Correspondingly, the US needs to cut military disbursement, stop its global expansion and the robbing of oil resources from other countries."

Again, I am instantly indignant, and my anger shows through when I say, "Hey! Deficit spending like profligate morons while running around the world taking what we want and killing anybody that gets in our way characterizes The American Way! You are proposing to destroy our native culture, you insensitive, genocidal, racist bastards! I’ll sue you all!"

Apparently, even Chinese people know that I am just a big blowhard, and instead of insulting me and calling my bluff, we are given some sinisterly interesting advice – namely, "Families and individuals should stop anticipating their income to buy houses and travel globally. Instead, they should warmly welcome foreigners to travel to and spend money in the US. "

Boinggggg! Proving once again that being a paranoid lunatic has its upside, I am able to instantly decipher this to mean that the "Secret Chinese Plan" is for us to sell them everything we have to pay our debts, and then act as courteous hosts and hostesses as they travel the country, inspecting their vast holdings and indulging in various, ummm, indulgences involving our women-folk and enslaving us all on vast rice and pig farms where we will be given pork-fried rice to eat, as much as we want, which is the only upside to this whole mess, as far as I can see.

And these Chinese may be onto something with this commodities thing, because I am betting that commodities will be soaring from here on out, as Dailytech.com reports that "All four major global temperature tracking outlets (Hadley, NASA’s GISS, UAH, RSS) have released updated data. All show that over the past year, global temperatures have dropped precipitously."

The article goes on with the specifics, namely that "The total amount of cooling ranges from 0.65C up to 0.75C – a value large enough to wipe out most of the warming recorded over the past 100 years. All in one year’s time. For all four sources, it’s the single fastest temperature change ever recorded, either up or down."

This explains the subhead: "Twelve-month long drop in world temperatures wipes out a century of warming", although it does not explain why such a momentous piece of news does not have at least one exclamation point! Hell, I’d give it two, and I don’t know anything about it!

The Bad, Bad News (BBN) is not just that this kind of poor punctuation is rampant, but that this abrupt dropping of global temperature has a nasty habit of portending "little ice ages", and this, along with the mysterious and ominous disappearance of sunspots, has me running outside, yelling at some kids playing down the block, "Hey! You stupid kids! Run home and tell your parents that they should be buying gold, silver, oil and commodities of all kinds because crop yields in the future will be catastrophically low, and if they don’t, then they are stupid! And when they don’t follow your advice, you can remind them a few years from now about how you warned them, but they were too stupid to listen to you, which is what all parents like to hear from their teenage children! Hahahaha!"

Well, I hope they do, not that it will do any good, but at least I made their children a little more obnoxious, which makes me smile in smug satisfaction.

And I bought some more commodity plays, which made me smile ditto! Whee! This investing stuff is easy!

  • Sat, Nov 22, 2008 - 01:30am

    #9
    gregroberts

    gregroberts

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    Re: Promo For Mish’s Economic Analysis

Great Video of Peter schooling the children at CNBC, the faces they make are hilarious…

http://www.youtube.com/watch?v=pGHODRNJqRo

  • Sat, Nov 22, 2008 - 02:17am

    #10

    Ray Hewitt

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    Re: Promo For Mish’s Economic Analysis

My one caveat is that I think he holds a belief about deflation.

I don’t read him that way. I haven’t seen him argue that it won’t return. He argues that the money supply is contracting because defaults in financial assetst outweigh the money the feds are creating. On that, he’s been correct. Mish is not predicting or arguing for inflation because there is no evidence of it yet. The difference between him and the inflationists is time horizons. I’ve come to lean Mish’s way, but I watch for the signs that the inflationists are looking for. This deflation could last several years before it’s run its course. If Mish is as good as I think he is, he’ll be sounding the alarms when the evidence is recognizable. It’s impossible to predict market behavior far in advance; it’s like predicting the weather.

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