A Long Economic Winter

PrudentBear.com ^ | 05-Feb-2003 | Richard Benson

[arete]

is a classic - as you noted, he's outdone himself.

Billy_bob is an as yet undiscovered talent.

Richard W.

[The Duke]

You have to admit; the Roman Empire lasted a hell of a long time!

Had they had faxes, phones and interstate highways I have no doubt their tenure would more closely resemble our own.

[marbren]

China wins

[GWfan]

Your prediction is good, but you forgot the tidal wave and earthquakes that will hit California and make Phoenix a new coastal city. (someone actually told me that).

[the gillman@blacklagoon.com]

Well, that's because I draw the line at believing in the feasting on the dead!

Only crackpots think the California coast is going to fall off. It's actually going to be the Rhode Island coast that will fall off, all the way to Arizona.

[Southack]

"We are going to have inflation ( a monetary phenomenon) and deflation ( a credit collapse) simultaneously."

No, those two circumstances are mutually exclusive.

INFLATION is the devaluation of your currency (ie. it takes more of your currency to buy the same thing).

DEFLATION is the enhancement of your currency (ie., things cost less).

You can have one or none, but not both at the same time.

[farmguy]

For 50 years our tax system has encouraged borrowing and spending and penalized saving and investment. The Washington bureaucrats are beginning to realize that.

You must have a different set of bureaucrats than I do. Mine still think that if you bust your butt and try to get ahead, you've won life's lottery.

[AdamSelene235]

No, those two circumstances are mutually exclusive.

I'm afraid not. You're ignoring how credit originates and is distributed in our financial system.

The scope of the terms "inflation" and "deflation" is too narrow to capture our current situation. The credit bubble collapse is deflationary, the Central bank's response is inflationary. Unfortunately, the two will not neatly cancel out.

[Southack]

"The credit bubble collapse is deflationary, the Central bank's response is inflationary. Unfortunately, the two will not neatly cancel out."

A credit bubble collapse may throw a deflationary tendency into an economy, but it by no means insures that one gets deflation per se.

Likewise, pumping money into an economy may throw inflationary trends into an economy, but it alone by no means insures that one gets inflation.

Moreover, one can not have both inflation and deflation (on any broad scale) simultaneously.

Inflation means that things cost more.

Deflation means that things cost less.

Inflation means that your currency is worth less.

Deflation means that your currency is worth more.

You can have one of those two things (or neither), but it would be quite a feat to have your currency worth both MORE and LESS at the same time!

[AdamSelene235]

Inflation means that things cost more. Deflation means that things cost less. Inflation means that your currency is worth less. Deflation means that your currency is worth more. You can have one of those two things (or neither), but it would be quite a feat to have your currency worth both MORE and LESS at the same time!

It all depends on what "things" you are talking about. If a dollar buys more housing,less gold,more equities,less energy,more automobiles but less skilled labor, then what are you going to call it?

[Southack]

An average day on the market.

[AdamSelene235]

An average day on the market.

Minor peturbations, yes, not the major dislocations that result from the moronic misallocation of resources that is the halmark of Democratic Socialism.

On a side note, I learned the middle name of the President of Fannie Mae today. Delano. Fannie is run by Franklin Delano Raines i.e. FDR

The irony is killing me.

[Southack]

Yes, and John F Kerry (i.e., JFK) is running for President...

[razorback-bert]

You forgot the biggie:


Dogs and cats living together!

[Southack]

"not the major dislocations that result from the moronic misallocation of resources"

You'll know when resources are grossly mismanaged because you'll see Productivity decline.

Look at Zimbabwe today, for instance, a nation that once was so productive that it exported food now must import emergency rations just to survive yet another day of its self-imposed famine. Now look at Zimbabwe's resources; they've been confiscated from the most productive group and given to the least productive (i.e. the "war veterans" who don't want to do any work, they just want free land and fancy titles).

Now there's a gross misallocation of resources as well as the loss of Productivity to show for it.

Look for Productivity declines to find areas where resources have been misallocated.

[wideawake]

I know how you feel. Last year, after a decade of busting my hump, I finally made it to the "wealthiest one percent" only to find that I am apparently the embodiment of evil and greedy entitlement.

My point is that there is now some traction on dividend, estate and capital gains taxes - cuts in any of these diminish the relative tax advantages of borrowing.

[Jim Noble]

We have nothing to fear but fear itself.

America is not the economy, however misconceived.

I do share many of the notions of "prudent bears"-I think the "information economy" was a (mostly) Clintonian shell game, I think outsourcing production is a disaster, and I think the credit bubble is going to pop.

Where I part company with these folks, is to say, "So what?"

This is America. We'll fix it. And it will be better, afterwards.

[MurryMom]

Clinton had the GREAT FORTUNE to be contemporary to Gates, Grove and Greenspan.....Nothing more than that!

And Bush has the great fortune of being a contemporary of Gates, Grove, and Greenspan, too!

One big difference between Clinton and Bush is that Bush seeks his inspiration from Kenny Boy of Enron fame, Tyco, and Worldcom. Bush made his fortune from inside trading in Harken Energy stock, didn't he?

[litehaus]

Don't think Dubya was found guilty of that..just as Hitlery was just a GOOD TRADER of futures and turned her thou into 100 thou I guess. Re contemporaries, Klintoon reaped the benefits, not Bush 1.

[FreedomPoster]

>>We are at the end of the republic. Whether or not we become a great empire or crumble to dust, is the big question to be answered in the next decade.

Jerry Pournelle discusses the issue of Republic and Empire regularly on his site. As he is a true Modern Renaissance Man, his commentary is interesting and worthy of review and consideration. My summary of his take - we are long past returning to Republic, and seem to be sliding into incompetent empire, where we have the worst of both worlds. If we're going have empire, it should at least be run for the benefit of the citizens of the empire.