This post is for those who know a little economic theory history, it won't make sense to anyone else. A great article on why Keynesian economic theory is so incredibly stupid, and yet almost everyone is returning to it.
Simple logic would dictate that excessive spending and loose lending standards caused this crash so excessive spending and loose lending standards cannot possibly cure it. Indeed it is axiomatic that the problem cannot be the solution. The concept is so simple that Keynesian demagogues cannot see it.
Just so. I can't believe the idiots who keep throwing money at this crisis and when it doesn't work (and indeed, makes the situation worse), they decide that they must not have thrown enough money at it. Laughable.
4 comments:
Very good article. I do disagree with him on one thing though, particularly saving dollars. Once this mess hits bottom, inflation is going to skyrocket thus rendering saved dollars less and less valuable. Inflation will impact every asset but I would look for ways to save that convert today's dollars into something else (namely something that the US Treasury can't print more of), because I think the dollar is about to take a beating like never before.
You know, I can't figure this one out. I've read guys who SWEAR we are going into inflation and other ones (Robert Prechter) who SWEAR we are going into a deflationary collapse. Right now I cannot tell. Austrian economics teaches that the end result of a financial bubble is a deflationary collapse. One would think that inflation will go nuts with all the money they are printing, but is asset deflation a giant wave that will sweep all efforts out of it's way? I don't know, although the price of gold seems to be signaling either a retrenchment to shoot higher, or outright deflation. Wish I knew...
Hmmm, I need to read some people on the deflationary collapse side. Anyone besides Prechter you'd recommend? Oh and if you're looking for a house in Tampa, the people selling them apparently haven't heard that prices are supposed to be coming down. We saw two townhomes today - TOWN HOMES! - one for $500k and the other for $630k. Delusional insanity.
Just goes to show you how reluctant people are to take the big loss. Hope springs eternal...until they have to walk away while the house is foreclosed.
Mike Shedlock is pretty good...read one post at:
http://www.marketoracle.co.uk/Article5831.html
http://globaleconomicanalysis.blogspot.com/2008/04/deflation-in-fiat-regime.html
Someone else weighs in here:
http://www.dailypaul.com/node/28089
I read Richard Russell on this a few years back and he described exactly what is happening now. Said basically that in deflation everyone is in search of dollars to pay off debt, so dollars become scarce and drive the relative value up (which we are seeing).
Of course it beggars the imagination trying to figure out how we could have deflation the way the Fed is almost literally dumping money from helicopters, so like I said, I simply can't figure this one out.
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