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Michael Pento Explains How Dr. Keynes Killed The Patient

Tyler Durden's picture




 

Another brilliant allegory by the man who makes CNBC watchable (even in dodecabox format), Michael Pento, as of recently working at Peter Schiff's Euro Pacific Capital.

Dr. Keynes Killed the Patient, by Michael Pento, first appearing on Real Clear Markets

A morbidly obese gentleman labored into Dr. Hayek's office suffering
from severe chest pain. The patient also complained that he was unable
to consume his usual 10,000 calorie-per-day diet; in fact, he was
feeling so sick that he could barely scarf down 9,000 calories. He
noted that his love for food remained as strong as ever, but his body
just wasn't keeping up with his demands.

After having a thorough look at the patient, the good doctor
could not find anything wrong outside of the patient's extreme
portliness. After a moment of reflection, he delivered to his patient a
troubling diagnosis. He explained that the chest pain stemmed from the
strain the patient's 500lb body was putting on his heart, and that the
lack of appetite was his body's attempt to protect itself from this
imbalance. Dr. Hayek's prescription was simple: the patient had to
dramatically reduce his consumption while undertaking a moderate
exercise program, with the goal of losing 250lbs as quickly and safely
as possible. Dr. Hayek was aware that it would be a physically painful
and emotionally difficult process for the man, but it was the only way
to avert a life of suffering - or even a heart attack.

Unfortunately, our patient rebelled against such an austere program.
He had grown very fond of his high-calorie and high-fat diet and didn't
think that now, when he was already depressed from dealing with all
these ailments, was a good time to deny himself the few pleasures he had
left. In his opinion, the doc's prescription was just too simplistic.
He thought there just had to be a way to have his cake and eat it -
frequently. So, he waddled out of Dr. Hayek's office as fast as he
could, shouting over his shoulder: "I'm getting a second opinion!"

The overweight gentleman sauntered across the street, where he found
the office of Dr. Keynes. He told the new doctor about his acute chest
pain and lack of appetite, and complained about the previous doctor's
"heartless" prescription. After a cursory examination, Dr. Keynes
rendered his diagnosis: the patient's condition did not stem from the
fact that his gigantic frame was causing undo strain on his heart;
instead, the doctor concluded, the patient's chest pain was merely
causing a temporary lack of hunger.

Furthermore, Dr. Keynes argued, the stress of cutting weight at the
present time would certainly prove detrimental to the man's already weak
heart. Therefore, his prescription was for the 500lb man to each as
much as possible, as quickly as possible. Anything less might cause the
man to suffer a heart attack, he noted. Now the doctor did concede that,
at some point in the distant future, it might be a good idea for the
man to shed a few pounds. But for the present, the most import thing to
do would be to consume as much as he could stomach.

The patient left Dr. Keynes' office with a broad smile. After gorging
at an all-you-can-eat buffet, he momentarily forgot about his chest
pain. It looked like he had found his solution; except, a week later, he
died.

The Hubris of Government

The allegory above discusses the dangers of quackery, whether medical
or economic. Right now, economic quackery - in the form of Keynesianism
- has overtaken Washington.

American consumers are trying their best to deleverage. In terms of
the story, the patient is actually trying to lose weight. But the
government is blocking deleveraging and trying to boost consumption.
They are forcing food down the patient's throat. According to the Flow
of Funds Report, households reduced debt at a 2.4% annualized rate ($330
billion) during Q1 of 2010. Meanwhile, the federal government was
piling on debt at an 18.5% annual rate ($1.44 trillion). Since every
dollar of government debt is a promise to tax the private sector in the
future with interest, this public spending spree effectively negated the
Herculean efforts of the private sector to return to a sustainable
path.

That's where the arrogance of Washington is really apparent. Scores
of millions of American consumers have made the decision that reducing
their debt burden is in their best interests right now. But a few
hundred individuals in government believe they know better than the
collective wisdom of the entire free market. By leveraging up the public
sector, they have used their power to confiscate our savings. In short,
they are forbidding us from following the common sense path to fiscal
health.

Unlike their forbears, modern-day Keynesians do not argue just for
mollification in the rate of deleveraging. They seek to significantly
increase debt levels in an effort to boost the aggregate demand in the
economy. Apparently, only once the mythical recovery takes hold due to
government spending, printing, and borrowing does a discussion of
deficits become appropriate.

The US has persisted under this theory for close to a century, though
with a declining quality of life. Unfortunately, the patient has now
gone critical. Curiously, the world has yet to fully recognize our
precarious condition, even as they provide us with life support.
Washington is now entirely dependent on the reserve currency status of
the dollar and the continued hibernation of bond vigilantes. Without
these supports, the United States would face complete economic arrest.

Rather than allowing the American people to get back on our feet,
Washington is stuffing us with even more debt. It's almost as if the
feds are daring our foreign creditors to pull the plug. As a
consequence, I predict that just as Dr. Keynes killed his patient,
Keynesian economics will kill our economy.

 

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Fri, 08/20/2010 - 09:41 | 532572 NoBull1994
NoBull1994's picture

Spot on.

Fri, 08/20/2010 - 09:41 | 532576 NoBull1994
NoBull1994's picture

Michael Pento is my favorite make-up wearing, eyebrow waxing market and economic commentator.

Fri, 08/20/2010 - 12:50 | 533106 akak
akak's picture

Has anyone else ever noticed the eerie resemblance between Michael Pento and Wayne Newton ca. 1975?  Every time I see Mr. Pento in an interview, I keep expecting him to suddenly break into song and start crooning "Danke Schoen".

Fri, 08/20/2010 - 13:38 | 533227 NotApplicable
NotApplicable's picture

Well, I'm never going to see him again without hearing that song.

Fri, 08/20/2010 - 10:31 | 532757 Pladizow
Pladizow's picture

Seems like anybody with sense is joining Peter over at EuroPac.

Fri, 08/20/2010 - 09:41 | 532574 Fred Hayek
Fred Hayek's picture

I tried to save the guy! 

Sometimes they just don't listen.

Fri, 08/20/2010 - 11:20 | 532884 Steak
Steak's picture

you did the best you could fred :)

one good turn (a playlist): http://www.youtube.com/view_play_list?p=DBB6891B8CA31A85

Fri, 08/20/2010 - 09:42 | 532577 Young
Young's picture

Obesity kills bitchez!

Sat, 08/21/2010 - 09:38 | 534591 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

...and men TOO!

Fri, 08/20/2010 - 09:43 | 532580 yabs
yabs's picture

michae;l pento is spot on as usual

Fri, 08/20/2010 - 09:46 | 532589 mark mchugh
mark mchugh's picture

I'll say it again, Pento rocks!

The National debt pace has been running at $500 per person per month for almost two years now.  It doesn't matter how hard American households try to deleverage, because the government's running around with a credit card and it's got your name on it!

Fri, 08/20/2010 - 09:55 | 532619 mark mchugh
mark mchugh's picture

I'm not really sure why this isn't considered identity theft, but I'm assured it's not.

Fri, 08/20/2010 - 09:48 | 532590 LoneStarHog
LoneStarHog's picture

Who gives a damn shit about all of this.  Try talking to any of the Sheeple Herd and you become a social outcast, with the typical response being, "I Don't Want To Hear Anything Negative!"

What a waste of paper/CPU cycles.  The non-Sheeple (aka Mavericks) already know all of this.

It is time to stop handing choir books to the damn Choir!

Fri, 08/20/2010 - 13:56 | 533263 packman
packman's picture

Some times it's good to hand out ammunitition to the troops before it can be properly "distributed" to the enemy.

 

Fri, 08/20/2010 - 09:48 | 532591 LibertyIn2010
LibertyIn2010's picture

....and we'll have a Diet Coke to go along with our 9000 calorie economy.

Fri, 08/20/2010 - 10:38 | 532781 Jerome Lester H...
Jerome Lester Horwitz's picture

Ha!...And just try and tell someone who drinks diet soft drinks how damaging Aspartame is and they will look at you with a skeptical glance while declaring "But it has no calories!" As if that is the standard to judge whether something is healthy or not!

Fri, 08/20/2010 - 13:30 | 533209 glenlloyd
glenlloyd's picture

that's Larry Summers...

Fri, 08/20/2010 - 09:48 | 532593 JohnnyR2121
JohnnyR2121's picture

He should run the Fed. 

 

Can anyone post the weekly ECRI number? I don't have access to the information. 

Fri, 08/20/2010 - 10:11 | 532669 hellboy
hellboy's picture

ill post it once its ou, 10:30am nyc time I think... or 15:30 london time.

Fri, 08/20/2010 - 10:41 | 532791 hellboy
hellboy's picture

-10.0%

Fri, 08/20/2010 - 09:48 | 532594 Silversinner
Silversinner's picture

every 1% increase in taxes=-1% in economic freedom=-1%less real production.

 

Fri, 08/20/2010 - 09:56 | 532617 flacon
flacon's picture

The is correct.

 

It's funny how reality bites. Keynes equation is: Every 1% increase in taxes = 1% more government spending = 1% higher GDP - which explains why Joe Biden said "We have to go spend more so we don't go bankrupt".

Fri, 08/20/2010 - 13:15 | 533175 IBelieveInMagic
IBelieveInMagic's picture

Except because of Reserve currency status, there is no tax increase. It is all just print and go! All good until our trade partners say enough.

Fri, 08/20/2010 - 19:40 | 534035 KevinB
KevinB's picture

Keynes equation is: Every 1% increase in taxes = 1% more government spending = 1% higher GDP

Man, you need to go back to Eco 101. The equation for GDP is GDP = G + C + I + EX - IM. If you increase taxes to increase G, then you necessarily reduce C + I by the same amount, and you have no change in GDP.

And, of course, Keynes never put forth any formulation remotely resembling your drivel. Keynes said that to avoid prolonged slumps, governments should borrow to increase G, and thus GDP, but he also said that such borrowings should be taken back out of the economy during booms. Politicians of all stripes routinely forget the second half of the prescription, and then wonder why the patient gets sick.

Geez, the level of economic knowledge around here has dropped dramatically in recent months; it's getting as bad as Dealbreaker.

Fri, 08/20/2010 - 10:09 | 532661 Mitchman
Mitchman's picture

economic freedom=personal freedom

Fri, 08/20/2010 - 09:50 | 532600 Bearster
Bearster's picture

Pento forgot one important fact:

Scores of millions of Americans believe that if the government does it, it's all different somehow.  And of course they also want something for nothing.

Sat, 08/21/2010 - 11:36 | 534783 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

I don't want something for nothing, I just want what I am entitled to...And I gave the man $1.50 for that bridge over there -- thus I believe that I am entitled to it.

Fri, 08/20/2010 - 09:52 | 532608 Silversinner
Silversinner's picture

every dollar prited=-1 dollar for you(and me)=economic slavery

Fri, 08/20/2010 - 09:57 | 532622 flacon
flacon's picture

I'm getting to the point where I want my employer to pay me in silver dollars. We both benefit because I'd make twenty times less dollars per year (lower tax bracket). 

Fri, 08/20/2010 - 10:07 | 532655 Silversinner
Silversinner's picture

He would have to pay the minimum wage but ten in silver $ not that bad??

Fri, 08/20/2010 - 10:06 | 532656 Silversinner
Silversinner's picture

He would have to pay the minimum wage but ten in silver $ not that bad??

Fri, 08/20/2010 - 10:32 | 532755 nevadan
nevadan's picture

But, when you realize a gain on the silver the IRS expects a capital gains tax payment..........

Fri, 08/20/2010 - 13:41 | 533231 NotApplicable
NotApplicable's picture

Not if they're eagles!

Besides, you use them to buy a used car from someone for a few hundred dollars.

Sat, 08/21/2010 - 11:40 | 534790 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

And I thought the frontyard full of used cars at the neighbor's house down the street was an amateur parts operation.  Now I see the light -- it's a capital gains avoidance scheme!

</sarcasm>

Fri, 08/20/2010 - 09:55 | 532620 doggings
doggings's picture

and of course being as they're mostly all actually mordidly obese themselves they doubly dont want to hear this story.

fat indebted bastads.

Fri, 08/20/2010 - 10:14 | 532621 Shiznit Diggity
Shiznit Diggity's picture

That's where the arrogance of Washington is really apparent. Scores of millions of American consumers have made the decision that reducing their debt burden is in their best interests right now. But a few hundred individuals in government believe they know better than the collective wisdom of the entire free market. By leveraging up the public sector, they have used their power to confiscate our savings.

The private sector can't increase its saving rate unless the public sector runs bigger deficits or unless the C/A deficit shrinks (or swings to surplus). It's an inviolable accounting identity.


Fri, 08/20/2010 - 09:58 | 532626 bullandbearwise
bullandbearwise's picture

You can lead a horse to water, but you can't make him drink. Lord Keynes obviously never rode a horse.

Sat, 08/21/2010 - 11:43 | 534793 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

You can lead a horse to water, but you better be DAMN STRONG if you're going to try to drown the sucker.

Fri, 08/20/2010 - 09:59 | 532627 John McCloy
John McCloy's picture

And what Dr. Keynes also will not reveal to the patient is that he is a part owner of "Chub Rocks All You Can Eat Buffet" so he like our politicians have a conflicting interest in his diagnosis.
The answer to our problems is so simple as is the reason they ignore it and that is they profit from our debts.

Fri, 08/20/2010 - 09:59 | 532628 tony bonn
tony bonn's picture

aggregate demand must be maintained in order to continue and expand consumer / debt slavery. that is your purpose stupid american - to spend and consume and pay taxes to the masters of the universe elite.

"tax the private sector in the future with interest" i imagine very few get the point but pento did not say future taxes but future interest. the usa has been sold to the banksters and we are living on their fiefdom. and most people, being good little fucktards, don't see it.

Fri, 08/20/2010 - 10:14 | 532687 1100-TACTICAL-12
1100-TACTICAL-12's picture

I see it plain as day. I think alot of other Fucktards are starting to figure it out also. And when the unemployment benifits  finally run out the racket will come to light , because everybody will be standing with their mouths open, thinking how in the hell did this all happen?

Fri, 08/20/2010 - 12:23 | 533047 Max Hunter
Max Hunter's picture

The UE benifits won't run out. For the reason you expressed.. Watch..

Fri, 08/20/2010 - 13:40 | 533230 RichardENixon
RichardENixon's picture

The US will go to a permanent dole ala the UK.

Fri, 08/20/2010 - 13:44 | 533236 NotApplicable
NotApplicable's picture

The flying roast pigeons are going to show up any minute now, comrade!

No, really!

Fri, 08/20/2010 - 10:44 | 532813 Spitzer
Spitzer's picture

Aggregate demand is a flawed keynes term.

Drop that  gold avatar you keynes believer.

Fri, 08/20/2010 - 10:01 | 532633 PeterSchump
PeterSchump's picture

Solve the problems with America?  Replace the Americans.  Surely there must be a group of people that wish to live upright and free without the teat or interference of the nanny state.  Where are they?

Fri, 08/20/2010 - 10:14 | 532686 Jesse
Jesse's picture

 

Not on Wall Street

Fri, 08/20/2010 - 10:19 | 532711 Mitchman
Mitchman's picture

Jesse, the folks on Wall Street want the State to aid and abet their activities and keep the sheeple passive while they fleece them.  The Wall Street thieves see the State as an integral instrument in their con and don't want the state to interfere with their activities.

Fri, 08/20/2010 - 10:42 | 532804 grunion
grunion's picture

And that criteria precludes all Americans.

We are right here.

You have not been made aware of our presence probably because we choose to exclude you from the upright and free, mainly because those attributes accompany justice, reason, dignity and compassion. Qualities I fear you may be lacking sir.

Fri, 08/20/2010 - 10:01 | 532636 stpioc
stpioc's picture

So, you rather do nothing? If household demand falls, companies not invest because households are not spending and they have huge excess capacity already, add to that public austerity, and what do you've got? A deflationary cycle that we had in the 1930s or you described so vividly here what's happening in Greece. Congrats for these sharp insights.
http://shareholdersunite.com/2010/07/04/keynesianism-zerohedge/

Fri, 08/20/2010 - 10:41 | 532798 ElvisDog
ElvisDog's picture

To constantly avoid necessary pain is adolescent behavior. The problem with the U.S. of A is that we are a country that is filled with adult adolescents of all ages. Living within our means is no fun. We don't want to do it. Mommy, don't make us do it.

Fri, 08/20/2010 - 10:48 | 532817 grunion
grunion's picture

Enough with the sweeping generalities already.....

Speak for yourself sir and I sincerely hope you find relief from your condition.

Fri, 08/20/2010 - 11:08 | 532839 ElvisDog
ElvisDog's picture

Unfortunately, your condition, that of being a full retard, has no cure. Let me guess - you're either a member of a public union or one of those pathetic few who still drink from the Obama/Big Government Kool-Aid. If you feel we can continue to deficit spend in excess of $1T forever, I suggest you go back and study 5th grade mathematics.

The original poster brought up the example of Greece and implied how they should go away from austerity and back to deficit spending. How exactly are they to do that? They are in the unhappy position that no one will lend them money without additional austerity measures.

Fri, 08/20/2010 - 11:09 | 532849 ATTILA THE WIMP
ATTILA THE WIMP's picture

Cat and dog fight. Another reason to love ZH.

Fri, 08/20/2010 - 11:04 | 532837 Trichy
Trichy's picture

not you again stpid,

what would you do if you realised you were driving head on into a brick wall...you are advocating pedal to the metal.

Good luck to you

Fri, 08/20/2010 - 13:15 | 533173 Idiot Savant
Idiot Savant's picture

It seems to me that we're past the tipping point. Austerity at this point is like telling someone with terminal lung cancer to stop smoking. Our economy is so fundamentally imbalanced, it'll virtually collapse if we enter a deflationary spiral (see Greece). Default via printing press is fine with me, we're screwed either way.

http://www.zerohedge.com/article/greek-bonds-slump-austerity-backfires-country-enters-death-spiral-and-violent-end-game-appro

Fri, 08/20/2010 - 14:19 | 533312 Trichy
Trichy's picture

Please don't compare with Greece. It is stuck, thanks to dis(or NWO)connected politicians, with a currency 5x stronger than their economy can withstand. The US still has or at least can take back the power over its own.

Fri, 08/20/2010 - 10:03 | 532638 Turd Ferguson
Turd Ferguson's picture

+++++

The end of The Great Keynesian Experiment is upon us.

Prepare accordingly.

Fri, 08/20/2010 - 13:44 | 533237 RichardENixon
RichardENixon's picture

Turd, if the shit hits the fan and you lose your house, you could live very comfortably in that hat of yours.

Sat, 08/21/2010 - 11:58 | 534809 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

There's already a Burger King restaurant and a Kinko's inside that hat...

Fri, 08/20/2010 - 10:09 | 532663 Young
Young's picture

Take a good hard look at the share price of Visa (V). PPT in action, either that bastard will explode or implode. Straddle time!

Fri, 08/20/2010 - 10:13 | 532682 hellboy
hellboy's picture

whats ppt?

Fri, 08/20/2010 - 10:25 | 532733 mark mchugh
mark mchugh's picture

http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets

affectionately known as the Plunge Protection Team (PPT).

(newbies...)

(just kidding)

Fri, 08/20/2010 - 10:38 | 532778 hellboy
hellboy's picture

thanks.

Fri, 08/20/2010 - 11:39 | 532927 mikestephan520
mikestephan520's picture

someone is definitely toying with that. there was a 1000 increase in volume on the 70 put in the past 7-10 minutes alone...

Fri, 08/20/2010 - 10:11 | 532668 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Stpioc: Yes, because we are all so heartless here. bwahahah.

 

Um, actually the result is going to be inevitable. Everything is starting to line up for major retracement and perhaps more in this last quarter of the year into 2011. I've seen thiss from both camps (deflationist/inflationists) Williams now gives us 6 months to a year.

 

In any event, you can only stall, you can't save it.

Fri, 08/20/2010 - 10:11 | 532670 Chemba
Chemba's picture

Keynes was a socialist, which seriously taints any of his "theories"

But even Keynes did not prescribe this bastardization of Keynesian "fiscal policy" taking place in Washington D.C., led by the Socialist Troika Osama/Pelosi/Reid

Keynes' point was that government needed to use cyclical deficit spending in order to fill the output gap in periods when the private sector was in a cyclical contraction mode.

Keynes never espoused a secular deficit spending policy to cover for the erosion of an economy's competitiveness, which is what is happening in the US today, an erosion which b.t.w. has been largely caused by government interference, fiscal, regulatory and otherwise.

America has one chance to gridlock D.C. (by shifting one or both houses out of Socialist control) in Nov-10, and then one chance to toss out the Socialist Osama in Nov-12.  If it fails on either of those missions, it is game over.

Fri, 08/20/2010 - 10:13 | 532683 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Never trust your fate to a guy who lost everything during the Great Depression I.

 

Seems rather obvious to me.

Fri, 08/20/2010 - 11:58 | 532986 Ripped Chunk
Ripped Chunk's picture

Yup!

New avatar. Nice!

Sat, 08/21/2010 - 03:35 | 534488 Temporalist
Temporalist's picture

Looks like Cindy is getting prepared to kill Zombies early.

Fri, 08/20/2010 - 11:05 | 532838 Spastica Rex
Spastica Rex's picture

So, who you want for the Superbowl?

Fri, 08/20/2010 - 13:45 | 533240 RichardENixon
RichardENixon's picture

The smart money is on Lions-Raiders.

Fri, 08/20/2010 - 11:18 | 532875 Caviar Emptor
Caviar Emptor's picture

Right you are about the secular shift. But nobody wants to even discuss this let alone face up or do anything. I disagree, however that government interference had anything much to do with it. I know it's been fashionable to say that for the last 30 years, but Reagan himself proved that aggressive government policies and intervention into every aspect of foreign and domestic policy can marshall a growth explosion, a new direction and vigorous national agenda. The truth about human nature is nobody actually really wants passive leaders. 

Fri, 08/20/2010 - 13:02 | 533148 JLee2027
JLee2027's picture

The truth about human nature is nobody actually really wants passive leaders. 

That's not true. Human nature desires FREEDOM, not living in shackles.

Fri, 08/20/2010 - 13:50 | 533246 NotApplicable
NotApplicable's picture

Nor constantly being stolen from.

And to all those spouting political solutions, that's what creates the problems!

Voting is evil, as you have no right to choose my leader. Nor do they have any "rights" over my life. They have nothing but the force of violence and a captive, passive society.

www.regenerationx.org

Fri, 08/20/2010 - 13:14 | 533170 A Nanny Moose
A Nanny Moose's picture

<raises hand> I do.

"A leader is best when people barely know he exists, when his work is done, his aim fulfilled, they will say: we did it ourselves" - Lao Tze

Then again "people are sheep, and must be led" - Me

If they only realized the slippery slope that results from discarding personal choice, in favor of the uber-collective making decisions on one's behalf.

Sat, 08/21/2010 - 12:07 | 534816 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

 The truth about human nature is

LMAO...Oh God, stop!  You're killing me. 

You've gone beyond 'sweeping-generalities' -- now you're using a leaf-blower.

Fri, 08/20/2010 - 10:20 | 532684 G-R-U-N-T
G-R-U-N-T's picture

Another reason why these evil bastards have to go.

Fri, 08/20/2010 - 10:15 | 532690 Silversinner
Silversinner's picture

Middle class getting sqeezed from higher taxes and devaluation of their savings.

 

Fri, 08/20/2010 - 10:32 | 532756 grunion
grunion's picture

“I am an unabashed believer in gold,” he says.  “Gold can go to $2,000 in the next few years, and I’m not talking about 2020.”  The “most bullish factor” for gold is that “we’re running out,” says Cramer.  “There are no more big discoveries in the world,” says Cramer, adding that the next two months are traditionally bullish for gold because of jewelry demand in India and China.

Fri, 08/20/2010 - 10:38 | 532783 nontaxpayer
nontaxpayer's picture

unabashed believer in gold and a mere $2k - I am way greedier than that, give me $10k.

Fri, 08/20/2010 - 12:15 | 533029 tmosley
tmosley's picture

I'm not greedy.  I don't trade gold for dollars at any price, unless I think I can get more gold with it somehow.  I certainly don't plan to end up with a bunch of dollars at any time.

Fri, 08/20/2010 - 13:11 | 533164 spekulatn
spekulatn's picture

Kramer is the kiss of death, imo. 

 

disclosure: No position in paper gold.

Sat, 08/21/2010 - 03:38 | 534491 Temporalist
Temporalist's picture

Cramer loves those ETFs.  He should be banned from all forms of media and locked in a room with only his noise making machines and rubber bulls and bears so he can have friends.

Fri, 08/20/2010 - 10:38 | 532779 Dr Emilio Lizardo
Dr Emilio Lizardo's picture

Hey monkey boys, don't knock Keynesian economics.  I've found that it works in three cases.

1. In academia (even pigs can fly on paper)
2. In a "redistributive" government system (who cares if you've killed the patient)
3. When a resilient economy recovers in spite of the Keynesian poison ingested ("just think how bad the economy would have been without it")

Fri, 08/20/2010 - 13:12 | 533168 spekulatn
spekulatn's picture

Well done, doc.

Fri, 08/20/2010 - 10:41 | 532794 NumberNone
NumberNone's picture

The fallacy of the stimulus is that if you are a business owner and you get $1 of government stimulus money...you got $1 of government stimulus money.  You make your sale, you deliver your product and you are done.  You don't ramp up your factory, you don't hire more workers, you don't buy tons of materials in anticipation of future sales...

Keynes is basically just a process of trying to trick the system into kicking back into gear...unfortunately for its proponents most business owners are not the ass-clowns they think them to be and know that the money is just a one-time sugar high and don't invest into it.

 

 

Fri, 08/20/2010 - 10:44 | 532814 billwilson
billwilson's picture

Does anyone really think Americans would be paying down debt (on a net basis) if the US government cut its deficit? The only reason Americans have the money to pay down debt is because the government is flooding the economy with money. The bigger problem is that even with massive new government debt, net debt in the eocnomy is increasing....because there is a whole whack of leakage ... China says thank you.

Sat, 08/21/2010 - 12:15 | 534822 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Bill W -- are you drinking again?  ;)

Fri, 08/20/2010 - 10:48 | 532816 billwilson
billwilson's picture

Does anyone really think Americans would be paying down debt (on a net basis) if the US government cut its deficit? The only reason Americans have the money to pay down debt is because the government is flooding the economy with money. The bigger problem is that even with massive new government debt, net debt in the eocnomy is increasing....because there is a whole whack of leakage ... China says thank you.

Fri, 08/20/2010 - 10:53 | 532821 billwilson
billwilson's picture

Does anyone really think Americans would be paying down debt (on a net basis) if the US government cut its deficit? The only reason Americans have the money to pay down debt is because the government is flooding the economy with money. The bigger problem is that even with massive new government debt, net debt in the eocnomy is increasing....because there is a whole whack of leakage ... China says thank you.

Fri, 08/20/2010 - 11:07 | 532843 Spastica Rex
Spastica Rex's picture

I didn't think so the first time, but now I begin to wonder...

Fri, 08/20/2010 - 11:38 | 532926 -Michelle-
-Michelle-'s picture

ROTFL!

Fri, 08/20/2010 - 11:08 | 532848 Waterfallsparkles
Waterfallsparkles's picture

"They seek to significantly increase debt levels in an effort to boost the aggregate demand in the economy."

I found this quote interesting.  The reason is because it appears that the Government wants us to be deeper in Debt so that we work harder to pay that Debt and they get to collect Taxes on the Labor needed to pay the Debt.

In essesence the more in Debt we are the more we work and pay taxes into the Government.

Yet, I think the reverse is happening with the Consumer (Americans).  They are paying down their Debt so they do not have to work harder just to pay Debt and Interest to the Banks.

Plus, I think that the Consumer has figured out that instead of putting Savings in the Banks at .05% interest they actually receive the interest save on their Debt.  So, if you pay down or off a Credit Card with 18% interest you are actually making 18% on that Money.

Fri, 08/20/2010 - 11:10 | 532851 bobola
bobola's picture

Endless effective advertising keeps reminding us to buy junk food, and we've become the fattest and most unhealthy group on the planet, with the most expensive health care.  No surprise there.  The smart few eat right and stay fit.  They live longer, healthier and most certainly happier lives.  No surprise there.  It all comes down to personal choices.   

With finance, the smart few stay out of debt and use credit wisely.  The trick going forward will be how to make wealth portable enough to hide it from the IRS….

Fri, 08/20/2010 - 11:19 | 532877 suteibu
suteibu's picture

I enjoy watching creative advertising.  I like the Geico commercials, but I don't buy their insurance.  It doesn't sway me at all. 

But that makes me realize that I am, in some respects, a slave to the masses who are swayed by advertising, political propaganda, and economic bullshit.  This fact makes your "trick" going forward critical.  Any ideas?

Fri, 08/20/2010 - 12:02 | 533002 Things that go bump
Things that go bump's picture

Gold works for that.  Buy it anonymously with cash and hide it well or bury it, which is a time-honored method of hiding your hoard from vandals.  Under no circumstance should you keep it in a safety deposit box, unless the box is out of the country and out of the reach of those grasping harpies.  Of course, that might put it out of your reach if the S really does HTF  

Fri, 08/20/2010 - 11:27 | 532901 ZackLo
ZackLo's picture

Super size me! economic edition bitchez! coming 2011

Fri, 08/20/2010 - 11:34 | 532906 tom
tom's picture

There's a twist to this story: the "Dr Keynes" was an impostor. His real name was Krugman. The real Dr Keynes, back when he was alive, wrote his prescriptions for a couple chicken-legged dudes named Mr Decline of the British Empire and Mr Great Depression.

http://keynesianfailure.wordpress.com/2010/08/05/dont-always-blame-keynes/

Fri, 08/20/2010 - 11:33 | 532914 Don Levit
Don Levit's picture

I can empathize with those who feel alone, in their concerns for our long-term future.

It is uncomfortable being a party pooper.

But, really, I have never been so happy since I realized how miserable I am.

Don Levit

Fri, 08/20/2010 - 11:53 | 532967 Raymond K Hessel
Raymond K Hessel's picture

I don't know why we gotta pick on the overweight...not cool.

Fri, 08/20/2010 - 11:56 | 532981 Ripped Chunk
Ripped Chunk's picture

Overdose.  Tag em' and move on to the next patient.

Fri, 08/20/2010 - 12:11 | 533017 williambanzai7
williambanzai7's picture

STAR SPANGLED DEBTORS Oh, say, can you see, how our debts are sky high,  Oh so proudly we failed as DC's Keynesians kept dreaming,  Whose crony capitalist stars and politically hacked farce,  O the deficit we watched, was so gallantly increasing!  And the markets red glare, derivative bombs bursting in air,  Gave proof through the night that foreclosure is near,  O say, do those star-spangled debtors ever save?  O'er the land of the deadbeats.... and the home of the debt slaves

Fri, 08/20/2010 - 12:16 | 533032 RockyRacoon
RockyRacoon's picture

To extend the allegory just a bit:  Dr. Keynes boat payments are being made by McDonalds Corp.   (For the allegory impaired: Big banks are buying off those who would force the patient to go on a diet.)

Fri, 08/20/2010 - 12:46 | 533097 Tao Jonesing
Tao Jonesing's picture

Over 75% of the new government debt was incurred by Bernanke to implement Milton Friedman's monetarism.

Milton Fiedman was not a Keynesian.  Indeed, monetarism was Friedman's rebuttal to Keynesianism, and Ben Bernanke is a monetarist, not a Keynesian.

While one can reasonably argue that aggressive Bernanke/Friedman monetary policy constitutes improper government intervention into the market, one cannot reasonably argue that it is Keynesianism in any form. 

Fri, 08/20/2010 - 14:13 | 533304 packman
packman's picture

Ben Bernanke is a monetarist, not a Keynesian.

It's not an either/or thing.  Using created money to buy government debt is implementing both policies simultanously.

In other words - Ben is both.

 

Sat, 08/21/2010 - 03:52 | 534496 Temporalist
Temporalist's picture

I agree and additionally when the problems with price stability are both inflation and deflation the monetarists are screwed with no recourse which is what appears to be happening now.

Stagflation, inflation, deflation, hyperinflation...I wonder if there will ever be a hyperdeflation (just a thought).

Fri, 08/20/2010 - 13:52 | 533253 brent1023
brent1023's picture

This article, and many comments here, are over the top reactions.

Go back and listen to the Kyle Bass interview again. Bass understands that there is a problem and understands that the solution involves restructuring. He does however admit that the restructuring process is a bit farther down the road and will take time.

The government is walking a fine line between stoking another bubble and having the current bubble burst completely. Contrary to some here, I do not feel a cataclysmic bursting of the bubble is in the best interests of the country.

The finance/housing bubble was the product of free market/monetarist economic distortions. The winding down of that bubble is the hundred year economic challenge that is being worked at by sovereign governments all over the world. With very small steps forward, with some larger steps backward. Very little of the money applied to the problem over the last two years could be called Keynsian stimulus. Most went to patch up the failed self-regulating financial sector.

As long as people let political views define their understanding of what is happening in the financial markets, their investing is doomed to failure.

Fri, 08/20/2010 - 14:18 | 533319 packman
packman's picture

The finance/housing bubble was the product of free market/monetarist economic distortions.

Free market and monetarism are mutually exclusive. A free market is by definition free of artificial government interference, and that includes changes in the money supply.

The housing bubble was partly the product of monetarist distortions.  It was also the product of various other government legislation - e.g. tax credits, affordable housing mandates, bank reserve rule changes, etc.

It was very much not a product of "free markets".

Fri, 08/20/2010 - 14:32 | 533341 malek
malek's picture

Even if you truly believe that claptrap you wrote:

1.) How likely is it that gov't/Fed/central planners of our economy will be able staying on that fine line for the decade or longer needed to wind down that bubble? Even if they do everything right, a surprise external shock could throw them off.

2.) Has it ever come to your mind that Mr. Bubbles (Greenspan) after the dot-com bust might have been following the same approach - didn't work out so well, did it?

Sat, 08/21/2010 - 12:19 | 534827 GoingLoonie
GoingLoonie's picture

Yes, the cartel of big banks / business and politicians used a lot of the initial bush dollars to bail the banks and financial institutions.  However, the second "stimulus" was a government job preservation program.  Keep the the firemen and police that get paid while they sleep on the dole with exorbitant benefits, pay and defined benefit plans.  The taxpayer be damned.  My guess brent1023 is that ye be a government worker, most of those that endorse these actions are government workers.  And the homeland security and two-war staffing are all more Government job programs.  Note how most of these jobs now involve saving us from the bogey man?  Speak up too much, like the Wikileaks site, and they will make you the bogey man too.

Fri, 08/20/2010 - 15:14 | 533453 proLiberty
proLiberty's picture

The economy originates with individual transactions.  Aggregates only exist as a consequence of those actions,  not the other way around.  Proposing that we can increase individual activity by manipulating the aggregates is like proposing that a doctor cure an infection by dunking the fevered patient in ice water.

 

 

Sat, 10/02/2010 - 06:46 | 620607 Herry12
Herry12's picture

There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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