Archive - 2009 - Blog entry

Since we are already in a deflation, the argument over inflation or deflation is moot. The real question is: how long will we remain in a deflation? And, if deflation ends, will we then see inflation, hyperinflation, or real growth?

Many deflationists assume that since we are following the Japanese path that we will have the same economic results as Japan. That is, a stagnant economy with generally falling prices as has been seen for the last 19 years in Japan.

While it depends mostly on what the government's responses will be, our experience will more likely be stagnation with long-term inflation rather than long-term deflation. The economic differences are significant.

Think you know what aspects of America's banking system need to be changed?

Are you sure you're not missing anything?

A California Court case is headed for a resolution. It looks like AIG is the loser. But that means the taxpayers will suffer. If the case is overturned then the taxpayers will suffer. Another no win situation for the folks writing the checks.

On Sept. 4, the NYMEX October futures contract for natural gas closed at $2.73/mmbtu, a 7-year low, as the ratio of oil to natural gas prices ballooned to 25-to-1, compared to its energy conversion ratio of 6-to-1.

Now, just one month later, natural gas has rebounded 75% to close at $4.77/mmbtu for NYMEX November delivery last Friday on record high levels of natural gas in storage, leaving investors to wonder if prices have bottomed out and it's time to jump back into the market, or if the sector is dead.

There's been a coup.

The global pension crisis is a major concern. The uptrend in equities in Q3 boosted pension returns in Canada and elsewhere, but this will do little to address long-term concerns on the sustainability of pensions. After losing 31% in their last fiscal year, Ohio fund's annual report detailed how long it would now take for its investments to put the fund back on track. Officials simply said: "Infinity."

I want to state that equities are for renting not owning at this juncture.

Break 'em up.

Who's bought and paid for?

Russia: "primitive resource-based economy, systemic corruption, lack of pluralistic democracy"
Russia's President Medvedev

Beneath all of the rhetoric, here is the REAL reason by big boys are fighting to keep CDS from being regulated.

Will the next asset bubble come sooner than we think? Will it be in cleantech? Biotech? Nanotech? Infrastructure? Oil? Gold? Bonds? BRIC economies? Or will the next bubble be Canada? Yes, Canada! Nobody really knows, but big bets are being placed by some very big funds. The only thing I know is the world is awash with liquidity, a bubble is forming and we won't know about it until it's too late.

FHFA's new top cop spoke before the Senate Banking Committee. Strong words. None of them sounded so good to me. Those that think that America's RE and mortgage crisis are behind us should read this. It will get worse before it gets better according to DeMarco. The good news is that he promised the problems at his Agency will come up for discussion before the end of the year. This is going to get interesting.

Did Greenspan know exactly what he was doing?

I do not profess that the main structural arguments of the following essay are mine. Rather they belong to a rather famous former Chairman of the US Federal Reserve named Alan Greenspan as noted in his rather seminal 1966 essay titled “Gold and Economic Freedom”. However, I have taken the specific arguments of that very prescient essay and modified and reinterpreted them to fit into the contemporary situation of our current global and financial crisis (that it its core, is a monetary crisis).