"...much like when the Germans bombed Pearl Harbor, nothing is over yet. The Fed has not undone its extraordinary loose monetary policy and is just now stopping its direct QE purchases... Paul [Krugman] will continue to be mostly wrong, mostly dishonest about it, incredibly rude, and in a crass class by himself."
One would think: i) French + ii) economist + iii) Nobel prize winner = the French version of Paul Krugman, which immediately means someone who exists in a permament state of eternal hubris and confused shock at the endless stupidity of all those others who (have a functioning frontal cortext and thus) fail to recognize his brilliance (hence, are capable of rational thought), whose only explanation for the failure of all his promoted policies is that not enough, never enough of them was attempted, and that, like a good socialist, the only thing better than a massive government apparatus is an infinite government apparatus, coupled with 10 Princeton economists sitting in a circle, chanting and micromanaging the world, the economy and the capital markets.
One would be wrong.
The Council on Foreign Relations may be concerned about the ramifications of China accumulating larger gold reserves than those that the U.S. has and the People’s Bank of China (PBOC) giving the yuan some form of gold backing. This would pose serious challenges to the dollar as global reserve currency and thus to U.S. hegemony.
No, it's not a joke or sarcasm. The Fed-whispering Jon Hilsenrath has penned the first strawman sponsoring Ben Bernanke for the Nobel Prize...
Back in 1930, Keynes looked out into the future and saw that with the proper management of the economy, monetary policy and the like, the world could attain a type of utopian stasis: Keynes expected growth to come to an end within two to three generations, and the economy to plateau. He referred to this imaginary state of equilibrium as "bliss," noting “thus for the first time since his creation man will be faced with his real, his permanent problem - how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well." However, Keynes did say this would happen if mankind avoided any calamitous wars and if there was no appreciable increase in population. Two more flawed base assumptions there could not have been.
Presented with no comment...
While hardly able to match the wit, sophistry or, allegedly, satire of yesterday's MarketWatch grandslam in market insight "Why This Stock Market Will Never Go Down", we are confident readers will enjoy the following interview from none other than the Nobel prize winner in Keynesianomics, Paul Krugman, who in this interview with Princeton Magazine, had some comments on bubbles, inflation, student loans, minimum wages, artificially low rates, the Fed's dual mandate, and, of all things, Bitcoin.
The term “jobless recovery” is itself an oxymoron since the main function of any economic advance is to broaden participation. Thus a “jobless recovery” is nothing of the sort, indicating more so the re-arranging of numbers rather than full achievement – the hallmarks of redistribution.
As financialism spreads, so does disharmony, not just in function but in breaking correlations among economic accounts and statistics that were once seemingly so unconquerable.
Google "grocery prices last 12 months" and it's post after post beginning with "Consumer prices rise" or "Rising food prices bite." One person who is happy about this is the New York Times’ Paul Krugman, for instead of being like Europe, that is “clearly in the grip of a deflationary vortex,” America only teeters on the edge of a general price plunge. “And there but for the grace of Bernanke go we,” writes the voice of Grey Lady economics wisdom. However, Mr. Krugman shouldn’t declare defeat to the deflationists just yet. Bankers are learning to say ‘yes’ again, and that means velocity and price increases.
One of the great economic myths of our time is Japan’s “lost decades.” As Japan doubles-down on inflationary stimulus, it’s worth reviewing the facts. The truth is that the Japanese and US economies have performed in lock-step since 2000, and their performances have matched each other going as far back as 1980. Either Japan’s not in crisis, or the US has been in crisis for a good thirty-five years. You can’t have it both ways... So, Who Benefits from the “Lost Decades” Myth?
What is hard to measure is often hard to manage. Employers using new technologies need to base hiring decisions not just on education, but also on the non-cognitive skills that allow some people to excel at learning on the job; they need to design pay structures to retain workers who do learn, yet not to encumber employee mobility and knowledge sharing, which are often key to informal learning; and they need to design business models that enable workers to learn effectively on the job (see this example). Policy makers also need to think differently about skills, encouraging, for example, industry certification programs for new skills and partnerships between community colleges and local employers. Although it is difficult for workers and employers to develop these new skills, this difficulty creates opportunity. Those workers who acquire the latest skills earn good pay; those employers who hire the right workers and train them well can realize the competitive advantages that come with new technologies.
"Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly.... Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy... The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them"...
Janet Yellen has essentially confirmed QE’s demise; good riddance. Unfortunately, I don’t think that is the final end of QE in America, just as it hasn’t been the end time after time in Japan (and perhaps now Europe treading down the same ill-received road). The secular stagnation theory, that we think has been fully absorbed in certainly Yellen’s FOMC, sees little gain from it because, as they assume, the lackluster economy is due to this mysterious decline in the “natural rate of interest.” Therefore QE in the fourth iteration accomplishes far less toward that goal, especially with diminishing impacts on expectations in the real economy, other than create bubbles of activity (“reach for yield”) that always end badly. What Krugman and Summers call for is a massive bubble of biblical proportions that “shocks” the economy out of this mysterious rut, to “push inflation substantially higher, and keep it there.” In other words, Abenomics in America. Japanification is becoming universal, and the more these appeals to generic activity and waste continue, the tighter its “mysterious” grip.
An earthquake of 6.0 magnitude, the largest in the region for 25 years, shook the San Francisco Bay Area early on Sunday, waking residents and causing some power outages and minor damage, according to initial reports.