We're not criticizing Krugman for the number of battles he gets himself into. If he argued his case truthfully and respectfully, there would be little reason for this post. But Krugman accumulates enemies by inventing his own facts, denying obvious mistakes, displaying über-arrogance and insulting those with opposing views. Fortunately, folks such as Ferguson occasionally bring these points to light.
Mass Surveillance Destroys Innovation, Trust, the U.S. Internet Market and Other Foundations of Prosperity
The twenty-first-century economy has thus far been shaped by capital flows from China to the United States – a pattern that has suppressed global interest rates, helped to reflate the developed world’s leverage bubble, and, through its impact on the currency market, fueled China’s meteoric rise. But these were no ordinary capital flows. Over the last decade, the vast quantities of short-term capital that were being pumped into China’s banking system drove commercial banks and other financial institutions to expand credit substantially, especially through the shadow-banking system, leading to a massive credit bubble and severe over-investment. Given this, in the event of a crisis, China would most likely have to begin selling off its massive store of US debt - and indeed it is. After spending years attempting to insulate the US economy from the upshot of its own banking crisis, the Fed may ultimately be forced to bail out China’s banks, too.
EB heads to TV...and reflects on predictions from 2009's "A Grand Unified Theory of Market Manipulation"
Niall Ferguson recently remarked, "[Europe] is a politicial experiment gone wrong. The experiment was to see if Europeans could be forced into an even closer union - despite their wishes - by economic means, because the political means failed." In this brief clip, Lars Seier Christensen, co-CEO and co-founder of Saxo Bank, tells an audience at the Saxo #FXDebates in London that the eurozone will eventually break up as Brussels claims even more power from nation states. He warns investors that Cyprus was indeed a template for bail ins and that outright confiscatory wealth taxes, disguised as solidarity payments, could be used to raise funds. "The governments of Europe need money, and the private sector has it. It is as simple as that. Be very paranoid," he said, warning investors that the mattress may be a safer place to deposit money over the weekend than their bank accounts. "Frankly, it is a complete mess. And it is a mess that gets worse and worse every day," is how the outspoken truthiness begins, adding, "anyone with a rational view of the world now sees the currency collaboration as a historic failure that can lead to even further fatal consequences for Europe and the continent’s competitiveness vis-à-vis the rest of the world."
The financial and other markets do not seem to reflect the reality of subdued growth is how Hoisington Investment's Lacy Hunt describes the current environment. Stock prices are high, or at least back to levels reached more than a decade ago, and bond yields contain a significant inflationary expectations premium. Stock and commodity prices have risen in concert with the announcement of QE1, QE2 and QE3. Theoretically, as well as from a long-term historical perspective, a mechanical link between an expansion of the Fed's balance sheet and these markets is lacking. It is possible to conclude, therefore, that psychology typical of irrational market behavior is at play. As Lance Roberts notes, Hunt suggests that when expectations shift from inflation to deflation, irrational behavior might adjust risk asset prices significantly. Such signs that a shift is beginning can be viewed in the commodity markets. "Debt is future consumption denied," and regardless of the current debate - Reinhart and Rogoff were right. Simply put, "the problems have not been solved, they have merely been contained."
Gluskin Sheff's David Rosenberg exclaims we are currently are witnessing the Potemkin rally (the phrase Potemkin villages was originally used to describe a fake village, built only to impress). The term, however, is now used, typically in politics and economics, to describe any construction (literal or figurative) built solely to deceive others into thinking that some situation is better than it really is. Ben Bernanke, recently proclaimed “The Hero” by Atlantic Magazine, is the “Wizard of Potemkin.” Since 2009 Bernanke has engage in massive monetary experiments. These experiments lead to future dislocations. There is no doubt that the Fed wants inflation. The problem is they may get more than they ask for. We are currently witnessing the slowest economic recovery of any post-WWII period. However, It is important to challenge your thought process. Read material that challenges your views. Here are David's rules...
The world is awash in contradiction with stocks rising to new highs as interest rates reflect a slowing economy. It is an upside down world according to PIMCO's Mohamed El-Erian. As Lance Roberts annotates, the moustaced maestro explains individuals are both excited and anxious. They are excited by the rally in the markets as they see their portfolios increase in values but at the same timed overwhelmingly concerned about the economic future. It is a world with an enormous contrast between the markets and the real economy. That is the world we are navigating and it is incredibly unusual. This is why it is an unloved rally. His discussion at the recent Strategic Investment Conference is about a simple framework to reconcile these issues. The long term view matters greatly - but the short term matters also.
While Harvard historian Niall Ferguson's off-the-cuff remarks during the Q&A were in his words "as stupid as they were insensitive", the core message of his presentation was clear: the party of the last 20 years is now over and the longer we fail to address the real issues the bigger the hangover will be in the future. The central question Ferguson asks is whether our institutions, corporations and governments, are degenerating. As Lance Roberts of Street Talk Live notes Ferguson believes that without addressing the structural problems that plague the economy from production to employment – stimulus will fail. The reality is that the 'punch bowl' won't fix employment growth, economic growth or the rule of law.
The "Excel Spreadsheet Error" In Context
Niall Ferguson "In my view Paul Krugman has done fundamental damage to the quality of public discourse on economics. He can be forgiven for being wrong, as he frequently is--though he never admits it. He can be forgiven for relentlessly and monotonously politicizing every issue. What is unforgivable is the total absence of civility that characterizes his writing. His inability to debate a question without insulting his opponent suggests some kind of deep insecurity perhaps the result of a childhood trauma. It is a pity that a once talented scholar should demean himself in this way."
It’s Not a Tax or Spending Problem … It’s a Devolution Into Lawlessness
Americans Have Less Access to Justice than Botswanans … And Are More Abused By Police than KazakhstanisSubmitted by George Washington on 11/28/2012 14:57 -0500
U.S. Scores Towards the Bottom of All North American and Western European Nations
"This is a time of tremendous flux in the international order" is how Harvard's Niall Ferguson describes the world in which we live as he opines expertly on the change in China, Europe's pending 'lost decade', and the Middle East's post-Arab Spring disestablishment of the 1970s 'order' with GoldMoney's Alasdair Macleod. From China's need to begin privatizing SOEs and globalizing the RMB (with an interesting focus on the introduction of reliable property rights to 'enable' the middle class) to concerns about its large dollar holdings (and the top-down and bottom-up diversification into gold that continues); Ferguson notes that the ongoing attempt to diversify its wealth and revenues (stock and flow) is relatively limited by the ability to secure hard assets but adds that as the world's 'trade' center of gravity shifts east at a very fast pace so gold will flow from "the West to the rest" as Western power declines and the Asia bloc rises. A fascinating macro-economic and geo-political discussion that concludes with a shift through Russia's energy quagmire, Japan's debt problems, and the faulty design of the European Union.
On a regular basis we are placated by commercials to satisfy our craving to know which bathroom tissue is the most absorbent; debates 'infomercials' assuaging our fears over which vice-presidential candidate has the best dentist; and reality-shows that comfort our 'at least I am not as bad as...' need; there is an inescapable reality occurring right under our propagandized nose (as we noted here). Economic Reason has gathered together the Top 15 'reality' economic documentaries - so turn-on, tune-in, and drop-out of the mainstream for a few hours...