The Supersize Me Era

Team Blue and Team Red continue to point the finger at one another in the blame game.  Twenty eight years of debt accumulation and we want to blame those in power today.  It all kicked off with the "morning in America".  How steep can the curve get before it rolls over?  As a wise man once said "don't try to catch the falling arrow".



"The Keynesian school argues that 'money supply' is the driver of the economy and, in times of cooling economic activity, deficit spending will kick start it again. This behaviour has been in place since the Reagan years and the net result has been the emergence of a debt mountain.  The Austrian school argues that “the market” should be allowed to breathe in and out without interference and that mindlessly throwing money at the economy will result in nothing other than malinvestment. A corollary to this school of thought is that there needs to be an external discipline exerted on banker behaviour in the form of formal constraints regarding the quantum of money in circulation. Logically (it is argued by growing number of people) the most sensible constraint will be a gold standard in some form."

Brian Bloom

The Four Headed Debt Monster

I often get asked the question "why are you so pessimistic on the stock market?".  The graph below sums it up very well.  It's the across the board debt.  Debt at all levels.  It will take time to cleanse the system.  Time on the scale of 10-15 years.

Bunny Rabbits

"In time, however, the government is going to run out of bunnies… be careful."
Casey Research

The End of The Keynesian Era

"In terms of the world, Greece has no economic meaning. Greece is way out in the decimals. Economic problems of California are certainly larger. Yet, no one is buying Gold because of the end of the California dream. No one is talking about the dissolution of the U.S. because of the economic collapse of California, Illinois, and New Jersey.  Where Greece is important is in ending the decades of economic damage done by Keynesian dogma. Greece had become one of the great success stories for Keynesianism. The nation lived off of debt, and illusions of wealth. Borrowed money was used to pay government workers and reward pensioners after a few short years of work. Bond markets suddenly discovered that Greece may never be able on its own to repay that debt. Hyman Minsky would have referred to today’s governments as Ponzi borrowers. Bond market did as it should with near bankrupt Keynesian economies. It turned off the money.  The panic, or crisis if there is one, is that governments across Europe, and the Obama Regime, can not accept the idea of markets disciplining governments. Imagine the panic in halls of government all around the world as politicians ponder governing without borrowed money with which to buy votes. Government debt is nothing more than legitimized vote buying by politicians. That, in fact, is the essence of Keynesian dogma, and it is the real crisis about which politicians are so concerned.  Like all great economic crises, this one too will probably be a disappointment. Economic world will not end, though the economic fantasy land of Keynesianism may indeed wilt. That, however, will be on the back side of the crisis. Today we seem to still be on the front side of the crisis. Crises, like all hills, mole or real, have a front side and a back side. Front side is all emotional and panic filled. On the front side are created outrageous forecasts in order to spur web site traffic."
Source: Ned Schmidt, May 19, 2010

Corporatism vs Socialism

More from the interview with Long Wave master, David Knox Barker:

"It’s easy to look around at what has happened since the credit crisis and say, “This looks like a Redistributive World Empire.” But it’s also interesting to look at a recent quote from Ron Paul, who was responding to the accusation that Obama is a socialist. Ron Paul said, “Obama isn’t a socialist, he’s a corporatist.” The corporatist world view is the same view as the Redistributive World Empire, namely that there’s an elite class of business and government taken care of no matter what happens while the middle class is taxed to make sure that the elite class survives."

Read the entire interview:
http://financialsense.com/editorials/droke/2010/0415.html

The Spicy Game of Chicken in Thailand

Things are heating up in Thailand. The New York Times reports:
BANGKOK — "Antigovernment protesters shut down parts of the Thai capital on Monday but appeared a long way from achieving their goal of forcing the government to step down. Shops and offices in the northern outskirts of the city closed for the day as convoys of red-shirted protesters converged on a military base that had become a sort of field headquarters for government leaders, including Prime Minister Abhisit Vejjajiva. The relatively high turnout by protesters, who call themselves the red shirts, has underlined divisions in Thailand between the rural poor and the Bangkok establishment as well as the enduring popularity of the billionaire tycoon, Thaksin Shinawatra, who was ousted as prime minister in a 2006 military coup. The strategy of the red shirts appears to be to disrupt the functioning of government for as long as possible in the hope that the prime minister blinks. “It’s a game of chicken,” said Gothom Arya, director of research at Mahidol University in Bangkok. “They are saying, ‘We will bring you to the edge and see who falls first.’ ” "

As I posted a year ago, we're Talkin' Bout A Revolution.

Quinn's Woulda Coulda Shoulda

James Quinn's list of "woulda, coulda, shoulda":

"The country had a chance to prepare for this Winter by:

• Forging consensus regarding the problems we face.
• Preparing our governmental institutions for the challenges ahead.
• Political leaders bluntly describing the issues before us, stressing duties over rights.
• Developing community teamwork to solve local problems.
  Treating our youth as a national priority.
• Preparing elders for the sacrifices and unfulfilled promises in their future.
• Reducing government and personal debt.
• Conserve military resources for the long road ahead."

The entire article:

http://theburningplatform.com/economy/21st-century-breakdown

Selfish Manipulation

"The album is a snapshot of the era in which we live as we question and try to make sense of the selfish manipulation going on around us, whether it be the government, religion, media or frankly any form of authority.”
Billie Joe Armstrong - Green Day

The Unobserved Secret

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose." John Maynard Keynes - 1920

The Age of Reagan

“In doing so he effectively marked the end of the Age of Reagan, the 30 years beginning with the rise of former President Ronald Reagan in which business was given free rein to create wealth wherever and however it wanted, with the bare minimum of government intrusion.”
Wall Street Journal 10-23-08

Buffet on CNBC

Warren Buffet made some interesting comments this week:

"The government is going to play an enormous factor in our confidence."

On unemployment:
"Its going to go higher. Going to go a fair amount higher. Five years from now it should be running fine but I wish it would happen faster."

On inflation:
"Its hard to tell how severe it could be. We are certainly doing things that could lead to a lot of inflation. The best asset during inflation is your earning power - your own talent. Make yourself more valuable. The second best asset is a good business that you may own yourself or through equities."

On leverage:
“Leverage is the only way a smart guy can go broke … You do smart things, you eventually get very rich. If you do smart things and use leverage and you do one wrong thing along the way, it could wipe you out, because anything times zero is zero. But it’s reinforcing when the people around you are doing it successfully, you’re doing it successfully, and it’s a lot like Cinderella at the ball. The guys look better all the time, the music sounds better, it’s more and more fun, you think, ‘Why the hell should I leave at a quarter to 12? I’ll leave at two minutes to 12.’ But the trouble is, there are no clocks on the wall. And everybody thinks they’re going to leave at two minutes to 12.”