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04/03/2013

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Alexander Ač

Dave,

great, well balanced unemotional analysis, as usual, thanks!!

Diogenes

I've always loved his "blackberry panic" description of the crash and was amused by his appearance on Hardball last night - dealing with Matthews' incessant interruptions...
http://www.nbcnews.com/id/49263362#51409062

For me, the Bubble metaphor continues its recent deformation...really hope it's temporary...
http://digitaljournal.com/img/8/7/3/i/5/3/0/o/MichaelJackson-by-JeffKoons.jpg

Thanks

Don Levit

I read an article recently which professed that higher interest rates will affect the macro economy badly, for more people are dependent on debt than are dependent on savings (particularly savings in fixed or variable interest accounts).

MY INITIAL REACTION WAS that he was making sense.
Then, I thought, if debt was more important to sustaining our economy than savings, then maybe we are on the downward swing.

It seems that saving associated with debt is the way to go, but whatever happened to simple savings?

Don Levit

Dave Cohen

@Don Levit

The Fed has declared war on savers. Keynesian economists have decided that saving is not in the general interest. This is called the Paradox of Thrift, and I have written about it.

https://www.google.com/search?q=paradox+of+thrift+site%3Awww.declineoftheempire.com&ie=utf-8&oe=utf-8&aq=t

And regarding the war on savers

http://business.time.com/2012/10/23/is-the-u-s-waging-a-war-on-savers/

And see this post

http://www.declineoftheempire.com/2013/01/the-fed-engineers-a-phony-recovery.html

-- Dave

Ken Barrows

FYI, Stockman was a Congressman BEFORE joining the Reagan Administration.

Fixed -- Dave

GDP/total credit market debt has fallen almost continuously for 40+ years. Neither Krugman nor Stockman have any idea how to reverse that trend.

Mike Roberts

Yeah, I see collapse taking a long time (as in decades or centuries), as it usually does, but for increasing numbers of people, that collapse will have already played out. I can't really see a new stock market collapse, altering things, as you say, except that it would elicit a new round of stimulus measures from a country that has no money for stimulus measures.

Oliver

You've nailed it Dave - this is the most cogent piece I have read recently about the disconnect between real people trying to get by lawfully and the sociopathic marauders raking in billions of fake dollars from manufactured insider-deal margins. That Stockman went over the top in book-selling mode is less important in my opinion than his rattling the cage from "within".

We can expect more of such venomous reactions, as these unstoppable humility-free larcenists and their media drum-beaters continue to turn on anyone with an audience who has the audacity to approach the truth.

By the way, how was that dinner chat with Paul Krugman? ;-)

gus

A lot of what you say is probably right, but one thing jumped out at me: "Most Americans don't care about bond yields and prices—traders care. Certainly the stock market will undergo a large "correction" at some point in the next few years—this is a new bubble, after all—but why would that drop in stock values affect the Main Street economy?"

The answer to that is the fact that, while most everyday folks don't care about the bond market OUR MUNICIPALITIES DO. Those bonds make it possible for cities and towns to do almost everything; if they fall through the floor, the money towns use to fix roads and water pipes and maybe even to pay teachers and cops goes with them. Most towns these days don't run just on locally-collected taxes; they depend on huge sums of state and federal aid and, quite frankly, would have no idea what to do without it. (On one level, though, a bond collapse might benefit towns that recently completed major building projects, b/c Wall Street's demise would mean their debt vanishes, but they still have the building.)

Dave Cohen

@Gus,

Stockman was not talking about Muni bonds and neither was I.

I should have said treasury bonds, i.e. federal government debt.

-- Dave

LCarey

Good post, Dave. However, I have a mild note of dissention with "Mark Thoma, Paul Krugman, Jared Bernstein, Joe Weisenthal, and other representatives of the status quo". All of those guys are essentially academics and writers on the outside looking in, and arguing for significant changes to the way things are currently arranged (e.g., tougher regulation of financial institutions, stopping the Euro-style austerity mania, etc.). The REAL "reprentatives of the status quo" are STILL the oligarchic thugs who run the financial system, and by virtue of unlimited campaign contributions, the government...

Mike

I'd also keep an eye on the money market "buck" rule - that is, there has been chatter about breaking the buck on money market accounts (1 share = $1 historically) and having it simply as a fixed number of shares (1.5 might = $1, the next day 1.523 might = $1). To me, that is a huge sign that there is massive problems behind the curtain.

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