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The Market Ticker: Crack Smoking Is Getting More Popular
We spent the last ten years producing the illusion of prosperity through credit, which simply pulled forward final demand from tomorrow. But then tomorrow came and we did it again - and again...
I find it very disturbing that anyone could think we've spent the last ten years producing the illusion of prosperity. That's the craziest thing I've ever heard. It is simply preposterous.
It makes me wonder why I even have him on my preferred blog list as seen over on the left side of my blog.
First, "the" illusion? That implies there is only one. That's just crazy talk. Just one smoke? Just one mirror? Seems very unlikely. We've had a plethora of smoke and mirrors lately. There's more illusions than a funhouse! Why not Illusions of Prosperity? It is silly to limit to just one.
Second, 10 years? Who is buying that theory? It took the Roman Empire an estimated 320 years. What are the odds we're just 10 years into it?
I could go with 40 years though. That's when we fell off the gold standard. That was quite a shock.
I could also go with 20-30 years. That's when we started embracing the concept of an ever increasing trade deficit on a biblical scale.
10 years though? What's he smoking? Crack?
Perhaps I'm being too harsh though. I do find some merit in his illusion of prosperity theory in general. From a completely unbiased perspective I assure you, something just feels right about it. I can't quite put my finger on it though.
Friday: No Major Economic Releases
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[image: Mortgage Rates] Note: Mortgage rates are from MortgageNewsDaily.com
and are for top tier scenarios.
Friday:
• At 10:00 AM ET, *University of Michig...
9 hours ago
5 comments:
Ha! I saw that KD item today and was laughing and all my coworkers were like "Whats so funny?".
I sent the link home, but I was drwn in to the Prag Cap comment section. Wish I had time too discuss this clip:
"The US government is never revenue constrained. They are not like a household or state government. We don’t need China to buy our bonds in order to spend. China gets pieces of paper with old dead white men on them in exchange for real goods and services. They can either hold that money in a checking account at the Fed OR they can do what they wisely do and invest those pieces of paper in what is actually a savings account at the Fed. We also don’t need taxes to spend. The budget deficit is in direct inverse correlation to private sector savings. TO THE PENNY."
Now I think TPC is great but that paragraph had me a tad lost.
GYSC,
Here's the link you refer to.
THE MESSAGE IS GETTING OUT – UNCLE SAM ISN’T GOING BROKE…
The US government is never revenue constrained.
Someone needs to inform David Walker, our former Comptroller General.
March 5, 2007
Health Care Can Bankrupt America: Walker
Walker, the nation's chief accountability officer and head of the Government Accountability Office (GAO), reportedly said that the United States is overwhelmed simply in meeting the requirements of entitlement programs such as Social Security and Medicare.
He also warned that economic growth alone won't solve the problem, reported the Associated Press. "Anybody who tells you we are going to grow our way out of this, number one, hasn't studied economic history, and number two, probably isn't very proficient at math," Walker reportedly told the audience, which represents for-profit hospital chains.
Of course, that was said before the big financial crisis. The DJIA closed that day at 12,050.41. I'm sure things have gotten much better since then. You know, since the US government is never revenue constrained.
Walker is/was a partisan hacl for including OASDI with the Medicare crisis. OASDI is "fine" for most meanings of the word, it's got $1.5T of its money and another $1T of credited interest on the books.
The $2.5T OASDI needs paid back over the next 25 years isn't going to be the final straw here.
Medicare is going to make things weird, but all the infinite-horizon scare stories I've seen simply fail to translate these trillions of future costs into the actual economy. We simply can't spend that much money as we're projecting, every health provider will become a millionaire or billionaire.
As for stimulus over the past decade, I made this chart to compare the credit bubble to the tax cut.
http://imgur.com/DSeHM.png
it's not scientific but I think it's close enough
They can either hold that money in a checking account at the Fed OR they can do what they wisely do and invest those pieces of paper in what is actually a savings account at the Fed
The third and more interesting option is deploying that money to buy global assets outright. Gold mines, oil companies, plus consumption of what they can't buy indirectly.
It was Japan in the 80s and 90s buying stuff up, China is going to be not so nice a mistress.
Troy,
Or alternatively, we can avoid buying and just wait for China's unsustainable system to implode.
I guess it all comes down to how strong you think China is right now and we clearly have very different opinions on that.
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