I just think that "traditional" economic thinking isn't capturing what's really going on, and again, I've talked to some pretty smart people who haven't given me satisfactory answers---Right or Left.
You’re absolutely correct - because conventional economists simply refuse to:
1. Use the word “deflation.” I’ve consistently been telling people here on FR that we’re in a debt deflation. We’ve built up a huge bubble of debt in the US (everywhere in the world, practically) and now a large and economically significant sector of this debt can no longer be serviced. The debt will be defaulted upon, the amount of “effective money” in the economy will contract until such time as the amount of debt comes down to a level that can be serviced by the creation of real income and wealth in the country.
The trouble is, Keynesian economists are all for prolonging this pain - they’re trading a sharp, short, severe contraction for a prolonged, dawn-out discomfort, with huge transfers of private sector defaults onto the government’s balance sheet. This means we’re following Japan’s model from their RE collapse in 1990.
2. Accept that the work of Hyman Minsky and Irving Fisher (post-1933) has something to tell us today. Today’s economists are largely disconnected from reality; they don’t look at the real couplings in the economy by talking to businesses and people, they’re relying on reams of various statistical abstracts churned out by the government and private sector data collectors, then applying their goofy statistical models to these. And they’re failing.
When one goes back and reads Hyman Minsky’s papers about “unsustainable towers of debt,” - he’s not using partial differential equations or other highbrow mathematics that are in vogue in economics today. Minsky lays out his case in practical observations of how the credit markets work, how banks work, how there is a circular pattern of reliance upon everyone paying their debts in the larger economic world - and when enough people default on their debt, the circle is broken and the pyramids of debt in the banking sector come crumbling down. No math, just a dogged pursuit of how things really hang together.
Today’s economic landscape would not tolerate a Minsky or Fisher.
I didn’t get my call on the housing market from being an economist. I got it by being a skeptical investor and visiting some housing developments north of Reno, NV, getting out of my pickup and talking to people. When I learned that the people I was talking to were self-styled “real estate investors” - getting IO loans to buy two or three houses on either side of them, and that the development of hundreds of houses was largely sold out to a scant number of people who were actually *living* in the development.... that’s when I had my Bernard Baruch “shoeshine boy” moment.
Amateurs playing at being RE investors with IO mortgages that required a bit of fraud (ie, that they were going to occupy the property when it was nothing but a price appreciation flip) .... that’s a case of shoeshine boys and stocks writ most large.
[or several new appliances.]
It’s part of the EPA “green shoots” smoke and mirrors act.
http://www.energystar.gov/index.cfm?fuseaction=rebate.appliance_rebate