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The First Rule Of Holes
Submitted by Michael Lebowitz via 720Global.com,
“Promoted by the intellectual glitterati of the central banks, our economic system has become addicted to all forms of debt, much of which has been unproductive”
- The Humility of Rates and the Arrogance of Equities – 720 Global 4/20/2015
The quote above from our recent article failed to acknowledge that it is not just central banks promoting misguided policies of exorbitant debt accumulation but also renowned economists from Wall Street and the world’s distinguished universities. Brad DeLong, a P.H.D. economist from Harvard, former Deputy Assistant Secretary for Economic Policy at the U.S. Department of Treasury, visiting scholar at the Federal Reserve Bank of San Francisco and University of California- Berkeley professor of economics casts a wide sphere of influence that includes the Federal Reserve and other central banks.
At the IMF’s “Rethinking Macro” conference on April 15th and 16th 2015, DeLong made the following comments;
“But how do we fix this risk-bearing capacity mobilization market failure? And isn’t the point of the market economy to make things that are valuable? And isn’t the debt of reserve-currency issuing sovereigns an extraordinarily valuable thing that is very cheap to make? So shouldn’t we be making more of it?"
Click for link to Delong’s speech.
What Mr. DeLong is arguing for is a marked increase of sovereign debt. In fairness, Delong prefaced his comment saying “I resist this logic.” However, in a startling contradiction, he goes on to promote that very logic, arguing such policy carries “relatively small danger”.
In his book Economics in One Lesson, the late New York Times and Wall Street Journal columnist Henry Hazlitt writes,
“Now all loans in the eyes of honest borrowers, must eventually be repaid. All credit is debt. Proposals for an increased volume of credit, therefore, are merely another name for proposals for an increased burden of debt. They would seem considerably less inviting if they were habitually referred to by the second name instead of by the first.”
Intellectual rationalizations like Delong’s, which support ever expanding debt loads, highlight an uncomfortable paradox for our economy. On one hand, the lack of discipline accompanying calls for the expansion of debt is partially based upon experiential evidence from the recent financial crisis. As the economy witnessed in 2008, unless the parabolic expansion of debt continues, our economy will suffer mightily. At the same time, the on-going expansion of debt will eventually involuntarily stop precisely because the debt load will become unserviceable. Our economy will be faced with the inevitable Minsky Moment of a Ponzi finance system.
720 Global disagrees with Delong.
The seemingly universal agreement that the prerequisite for a healthy economy is the growth of debt at all costs highlights both a lack of discipline and an aversion to consider different ideas on the part of economic policy-makers.
Leadership fails to grasp what truly constitutes a healthy economy and the longer-term consequences of their short term actions. A change in mindset does not demand a unique level of creative ingenuity, but it does require rejection of the destructive approach currently being employed.
A much different approach to economic policy is ultimately required.
The first rule of holes - when you are in one, stop digging.
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My favorite characterization of DeLong was when Gonzalo Lira referred to him as a "professional Keynesian fluffer".
I miss his ZH commentary. He moved on with his own gig. London Banker was another gem.
Very interesting central bankster gold article that I think all ZH'ers will like:
Dr. Zijlstra’s Final Settlement: Gold as the Monetary Cosmos’ Sun
http://marketupdate.nl/en/dr-zijlstras-final-settlement-gold-as-the-monetary-cosmos-sun/
Or.. after you have departed an aircraft at altitude,
don’t keep your head pointed down, your arms tucked in forever and maybe consider pulling the ripcord.
Central bankers do not consider themselves Keynesians...they view themselves as Technocrats.
read Chapter Three: Analysis of the Price System http://beta.technocracy.org/wp-content/uploads/2014/04/Study-Course-1-1....
You say tomato, I say worthless cargo-cult magical thinking imbecile . . . let's meet somewhere in the middle
If you drop the second C in the word "technocrats" it will now read correctly, which is the equivalent of Keynesian.
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Dig this hole somewhere else! Try Huffpo.
THE FIRST RULE OF HOLES is to be well lubricated when Uncle Sam comes knockin' on your door, ie. tax time............
"With absolute with regard to holes, and notwithstanding the humor that was poked at me earlier, and I'm certainly a fan of humor can't get by without it but I think the point about holes is well taken and sort of circles back to my point about plug holes earlier. Well, not not not quite. But we wanna find those holes or the loopholes. But we wanna stay above the hole. We don't wanna go down the hole. If I get your vote, you won't go down that hole. I wanna bring everybody above the hole. We all want to live above the hole."
- That sounds like a slogan, folks.
- VEEP
I keep having these perplexing dreams... Dimon & Blankfein are waving flaming 666 flags in the lobby of http://www.ny.frb.org/
lol
I was under the impression that the first rule of hole digging was keep digging.
That has been my own personal observation in life watching friends and family, and sadly myself at times.........
No, you hire six people to dig hole and hire 7 to fill the hole. White House administration math to artificially create GDP targets.
Don't forget 1 to wear the white hard hat.
No no no! It's a government project. Seven guys wearing white hard hats and one guy digging occasionally.
Yes, hole digging, the Cool Hand Luke way.......
It's like the old Polish light bulb joke Atomizer....
Q: How many banksters does it take to ass rape your 401-k.
A: It takes one to hold the contract and six to hold the Quill.
guess how funny that joke isn't?
Who knew polish people weren't funny?
Q: How many jews does it take to screw in a lightbulb?
A: 6 billion.
A healthy economy? What, where proles get to enjoy the fruits of their labour? Forget that for a game of soldiers.
Our masters know exactly what they're about---expropriation, then extermination, of all strains of humanity deemed a potential threat to their rule. When robotics reaches the point that a robot can do anything a human drudge can do and do it better, even the human drudges will be exterminated, save those still deemed expedient to keep around as sex slaves. Robots don't insist on enjoying the fruits of their labour. They don't have wants at all, just fuel and maintenance requirements. They'll make much better socialists than we ever did.
This is a class war. The enemy are winning. When victory is theirs, expect no quarter.
So nearly 100% of what are objectively smartest people in the room on the subject who are by the way the same people in charge of everything say moar debt is good and the way of the future yet somehow they are wrong.... Got it.
now granted ever increasing debts have been nearly inconsequential in the previous period of all of recorded human history surely next week there will be a world changing crash caused by the aforementioned debt loads.
The clear solution is to short anything you can get your hands on.
Disregard the 45 degree angled logrithmic and multi generation history of ever increasing prices or the clear statements from every authority with any semblance of influence over the price of anything telling you that they want prices to go higher, throw aside all the overwhelmingly bullish technicals. The market will go down soon because reasons.
What reasons you ask? Stuff and things, don't worry about it right now. Subscribe to my newsletter to see why tomorrow the crash is coming and how you can prepare for it.
B.S. Once they stop digging, you get the Minsky Moment after 5 milliseconds. Another question is: What happens once the realization dawns that the hole that everybody is in is way - and I mean WAAAAAYYYYY - too deep to ever crawl back out?
A possible answer: Flood the tunnels (with many casualties) and a few survivors that happen to have (golden) life jackets ?