The problem, though, is that once you embrace the Narrative of Central Bank Omnipotence to "explain" recent events, you can't compartmentalize it there. If the pattern of post-crisis Emerging Market growth rates is largely explained by US monetary accommodation or lack thereof ... well, the same must be true for pre-crisis Emerging Market growth rates. The inexorable conclusion is that Emerging Market growth rates are a function of Developed Market central bank liquidity measures and monetary policy, and that all Emerging Markets are, to one degree or another, Greece-like in their creation of unsustainable growth rates on the back of 20 years of The Great Moderation (as Bernanke referred to the decline in macroeconomic volatility from accommodative monetary policy) and the last 4 years of ZIRP. It was Barzini all along!
I go at Krugman again for speaking about something of which he seems to understand relatively little about. I actually have some help this time around, though.
Following his WSJ letter comparing the "progressive war on the 1% in America" to fascist Nazi Germany persecution of the Jews and "just as Kristallnacht was unthinkable in 1930, the descendant 'progressive' radicalism in American thinking is unthinkable now", Tom Perkins appeared on Bloomberg TV to explain himself. His first step was to apologize for the analogy but not the message that "the creative 1% is being threatened." The interview with Emily Chang is fascinating and wends it way from Rolexs, yachts, and underwater airplanes to trailer parks, and from being disconnected with reality to implying Krugman's craziness. However, Perkins sums his message up thus:"the solution is less interference, lower taxes and let the rich do what the rich do - that is get richer... and they will bring everyone else along with them when the system is working." It appears the 'system' needs a different final solution.
The forest (the economy) can only remain vibrant and healthy if the dead wood is burned off in bankruptcy and insolvency. Retail commercial real estate is over-built and over-leveraged. If it is allowed to burn off as Nature intended, we can finally move forward.
As the saying goes, ‘desperate times call for desperate measures.’ The phrase is bandied about so frequently, it’s generally accepted truth. But I have to tell you that I fundamentally disagree with the premise. Desperate times, in fact, call for a complete reset in the way people think. Desperate times call for the most intelligent, effective, least destructive measures. But these sayings aren’t as catchy. This old adage has become a crutch – a way for policymakers to rationalize the idiotic measures they’ve put in place...
The decay of the "build it and they will come" model of commercial real estate is gathering speed for a simple systemic reason: the decline is self-reinforcing in several critical ways. Before we start the analysis, let's ask a basic question: How much of the stuff and services purchased at retail outlets, malls, strip malls, etc. is absolutely necessary and how much is excess consumption? Conventional "Growth by any means" Cargo Cultists such as Paul Krugman never ask this basic question, because the answer (very little is essential, most is excess consumption) undermines the entire narrative that all growth is good, even the most marginal, unsustainable, wasteful and fiscally imprudent. I've captured the essence of retail in America with this photo:
"A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers. Political idealists project visions of liberation and revolution onto it; establishment elites heap contempt and scorn on it. On the other hand, technologists — nerds — are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it. Eventually mainstream products, companies, and industries emerge to commercialize it; its effects become profound; and later, many people wonder why its powerful promise wasn’t more obvious from the start. What technology am I talking about? Personal computers in 1975, the Internet in 1993, and — I believe — Bitcoin in 2014."
Krugman frequently accuses his opponents of being stupid and/or evil, when they present a view that he himself advanced in other circumstances. His typical readers would have no idea that Krugman once worried about bond vigilantes, or that his books lay out the standard case for why generous government unemployment benefits might contribute to structural unemployment. No, Krugman has led such typical readers to believe that anyone espousing such views is either a complete idiot - immune to theory and evidence that we’ve had since the 1930s - or is a paid shill who hates poor people.
If we don't understand the problem or the dynamics that are generating the problem, it is impossible to reach a solution or practical plan of action. The four points of ignorance below doom us just as surely as the actual underlying dynamics of insolvency, corruption, debt servitude, and Tyranny of the Majority.
Overstock CEO Patrick Byrne goes to town on Keynesian Crony Paul Krugman in this brief interview. Byrne blasts Krugman for everything from his "unethical" involvement in the Enron debacle to his present day view that "the market failed so we need more government; or freedom failed so we need more government." Noting that Krugman may have done "some great work before he went crazy," he rants against the Fed apologist for his "bitcoin is evil" comments adding that he hopes "Bitcoin can destroy central banking." Byrne pulls no punches in his attack on Krugman and his "Keynesian magic money tree theories," as he explains why the so-called 'economist' would be against a 'bounded currency'.
- House Unveils $1.01 Trillion Measure to Fund Government (BBG)
- Credit Suisse Tells Junior Bankers to Take Saturdays Off (BBG)
- Spot the odd word out: ECB Sees Bad-Debt Rules as Threat to Credible Bank Review (BBG)
- Insert laugh track here: Spain GDP grows at fastest pace in almost six years (FT)
- Scandinavian Debt Crisis Waiting to Happen Puzzles Krugman (BBG)
- Fed Said to Release Plan to Limit Banks’ Commodities Activities (BBG)
- Thai Protesters Extend Blockade After Rejecting Poll Talks (BBG)
- China provinces set lower growth goals for 2014 (BBG)
The “Ig Nobel Prize” is parody of the Noble Prize that is awarded every year for the most trivial scientific achievement. For example, the 2007 recipient for the ‘Ig Nobel Peace Prize’ went to the United States Air Force Wright Lab in Ohio, for proposing the development of a ‘gay bomb’ that could be dropped in hostile territory and make enemy troops sexually attracted to each other. Make love, not war? So when we opened my email yesterday and saw the subject line: “Central Bank Governor of the Year”, we immediately presumed it was a similar satire. It wasn’t...
If Americans in particular want to pursue any solution to the threat of globalism or dollar collapse, they are going to have to start with themselves, and the community around them. Online trade is the last thing they should be worried about. Only when neighborhoods, towns, and counties become producers and self suppliers will they be safe from financial instability. Only when those same communities band together for mutual aid and self defense will they be safe from tyrannical political entities. Bitcoin accomplishes nothing in either of these categories, making it possibly the most popular non-solution for liberty to date. Bitcoin is consistently touted as a superior option to precious metals as a way to decouple from central bank fiat. Under examination, though, it appears to me that bitcoin is instead a deliberate distraction away from gold and silver, and other tangible solutions; in other words, we believe it to be a form of controlled opposition.
Bottom line for financials is that 2014 is looking to be a tough year, even if the Sell Side wants to believe that growing earnings is still possible on flat revenue
The Future of Money: The Dumb Dollar vs Smart, Programmable Currencies!