Paul Krugman has officially lost all credibility

[Arraya]

http://theautomaticearth.blogspot.com/
The Fed is not omnipotent, especially in comparison to the weight of the collective that will be ranged against it once the market turns. If it were possible to print one’s way out of trouble then we would never have seen periods of deflation historically. No one can print confidence. All they can do is to play confidence games temporarily – promising to stand behind everything, knowing perfectly well that it’s a promise they could not keep. They hope that by making it, they will not have to keep it, but the market is very good at calling desperate bluffs like that.

The market will turn when confidence does, and I believe that will be soon. As I have said before, this will not lead to an imminent bond market dislocation. First I would expect a flight to safety and record low nominal interest rates. IMO a bond market dislocation, where rates shoot up into the double digits, is perhaps a year away, at an initial guess. When it happens it will be because everyone will be trying to borrow (this being a global crisis) and few of the very small number of parties still able to lend will wish to do so, due to tremendous (and entirely understandable) risk aversion.

The global economy is not a machine that can be directed with appropriate levers. It is a messy, subjective and thoroughly irrational human construct. Crowd psychology is the most important element to understand in predicting what it will do next.

IMO we will see the Fed revealed as essentially powerless (as the little man behind the curtain) as the next leg of this crisis unfolds. It was never a public service duty bound to trash its own balance sheet for the supposed wider benefit, although it has done so to some extent. IT has limits, and we are going to see them soon enough.

The anger and recrimination that are coming this time will be something almost none of us have any experience with, and it will be terribly easy to be caught up in it. Don’t do it, as that kind of vengeful and punitive mindset will drain energy and resources from what you need to do to help yourself and your loved ones. Ultimately it fractures the trust that holds society together at a time when cohesiveness matters most. While this is inevitable at a national scale, it need not be at a very local level where a few individuals can make a difference.

We will eventually see a default. It is simply inevitable. You just can’t keep kicking the can down the road indefinitely. However, just because a default is inevitable does not mean it is imminent. A flight to safety is a knee-jerk reaction to threat. It is not a rational response and does not look at the reality of the dollar’s position. A rush to the dollar is something people will do on an emotional imperative, and it will push up the value of the dollar substantially. Betting on a dollar carry trade is therefore a sucker play – evidence of an imminent dollar bottom in fact.

The dollar should first rise and then collapse in value. I would expect the rising phase to last perhaps a year. When the collapse happens it will probably coincide with the coming bond market dislocation. However, the value of the dollar relative to other currencies will be much less important in practice than the value of cash in relation to available goods and services domestically.

[briansd1]

Yes, Rich, I agree.

I’m glad you clarified that eventually, we’ll pay for the Krugman-esque policies, which in the immediate term are working.

I hope that I’m prescient enough to at least feel the coming distortions, whether they occur a couple years from now, or decades from now.

I wouldn’t mind some pain, but for right now, most everyone (on the left and on the right) is thankful for the Krugman-esque policies.

It is interesting that Republican leaders are pontificating about the harm that bailouts are causing while their voters (other than the ideological social conservatives) keep wishing for more Krugman-esque government support to prop up their value of their houses.

So, Krugman is indeed riding high. His policies are working.

[briansd1]

Yes, Rich, I agree.

I’m glad you clarified that eventually, we’ll pay for the Krugman-esque policies, which in the immediate term are working.

I hope that I’m prescient enough to at least feel the coming distortions, whether they occur a couple years from now, or decades from now.

I wouldn’t mind some pain, but for right now, most everyone (on the left and on the right) is thankful for the Krugman-esque policies.

It is interesting that Republican leaders are pontificating about the harm that bailouts are causing while their voters (other than the ideological social conservatives) keep wishing for more Krugman-esque government support to prop up their value of their houses.

So, Krugman is indeed riding high. His policies are working.

[briansd1]

Yes, Rich, I agree.

I’m glad you clarified that eventually, we’ll pay for the Krugman-esque policies, which in the immediate term are working.

I hope that I’m prescient enough to at least feel the coming distortions, whether they occur a couple years from now, or decades from now.

I wouldn’t mind some pain, but for right now, most everyone (on the left and on the right) is thankful for the Krugman-esque policies.

It is interesting that Republican leaders are pontificating about the harm that bailouts are causing while their voters (other than the ideological social conservatives) keep wishing for more Krugman-esque government support to prop up their value of their houses.

So, Krugman is indeed riding high. His policies are working.

[briansd1]

Yes, Rich, I agree.

I’m glad you clarified that eventually, we’ll pay for the Krugman-esque policies, which in the immediate term are working.

I hope that I’m prescient enough to at least feel the coming distortions, whether they occur a couple years from now, or decades from now.

I wouldn’t mind some pain, but for right now, most everyone (on the left and on the right) is thankful for the Krugman-esque policies.

It is interesting that Republican leaders are pontificating about the harm that bailouts are causing while their voters (other than the ideological social conservatives) keep wishing for more Krugman-esque government support to prop up their value of their houses.

So, Krugman is indeed riding high. His policies are working.

[briansd1]

Yes, Rich, I agree.

I’m glad you clarified that eventually, we’ll pay for the Krugman-esque policies, which in the immediate term are working.

I hope that I’m prescient enough to at least feel the coming distortions, whether they occur a couple years from now, or decades from now.

I wouldn’t mind some pain, but for right now, most everyone (on the left and on the right) is thankful for the Krugman-esque policies.

It is interesting that Republican leaders are pontificating about the harm that bailouts are causing while their voters (other than the ideological social conservatives) keep wishing for more Krugman-esque government support to prop up their value of their houses.

So, Krugman is indeed riding high. His policies are working.

[Arraya]

If you call working, a temporary delay before an inevitable collapse of mass bankruptcies dovetailing into a currency collapse, caused by the debts taken to allow the temporary delay. Then yes, they are working to temporarily allow the population to feel good.

To be followed by:

The anger and recrimination that are coming this time will be something almost none of us have any experience with, and it will be terribly easy to be caught up in it. Don’t do it, as that kind of vengeful and punitive mindset will drain energy and resources from what you need to do to help yourself and your loved ones. Ultimately it fractures the trust that holds society together at a time when cohesiveness matters most. While this is inevitable at a national scale, it need not be at a very local level where a few individuals can make a difference.

Soon to a theater near you.

[Arraya]

If you call working, a temporary delay before an inevitable collapse of mass bankruptcies dovetailing into a currency collapse, caused by the debts taken to allow the temporary delay. Then yes, they are working to temporarily allow the population to feel good.

To be followed by:

The anger and recrimination that are coming this time will be something almost none of us have any experience with, and it will be terribly easy to be caught up in it. Don’t do it, as that kind of vengeful and punitive mindset will drain energy and resources from what you need to do to help yourself and your loved ones. Ultimately it fractures the trust that holds society together at a time when cohesiveness matters most. While this is inevitable at a national scale, it need not be at a very local level where a few individuals can make a difference.

Soon to a theater near you.

[Arraya]

If you call working, a temporary delay before an inevitable collapse of mass bankruptcies dovetailing into a currency collapse, caused by the debts taken to allow the temporary delay. Then yes, they are working to temporarily allow the population to feel good.

To be followed by:

The anger and recrimination that are coming this time will be something almost none of us have any experience with, and it will be terribly easy to be caught up in it. Don’t do it, as that kind of vengeful and punitive mindset will drain energy and resources from what you need to do to help yourself and your loved ones. Ultimately it fractures the trust that holds society together at a time when cohesiveness matters most. While this is inevitable at a national scale, it need not be at a very local level where a few individuals can make a difference.

Soon to a theater near you.

[Arraya]

If you call working, a temporary delay before an inevitable collapse of mass bankruptcies dovetailing into a currency collapse, caused by the debts taken to allow the temporary delay. Then yes, they are working to temporarily allow the population to feel good.

To be followed by:

The anger and recrimination that are coming this time will be something almost none of us have any experience with, and it will be terribly easy to be caught up in it. Don’t do it, as that kind of vengeful and punitive mindset will drain energy and resources from what you need to do to help yourself and your loved ones. Ultimately it fractures the trust that holds society together at a time when cohesiveness matters most. While this is inevitable at a national scale, it need not be at a very local level where a few individuals can make a difference.

Soon to a theater near you.

[Arraya]

If you call working, a temporary delay before an inevitable collapse of mass bankruptcies dovetailing into a currency collapse, caused by the debts taken to allow the temporary delay. Then yes, they are working to temporarily allow the population to feel good.

To be followed by:

The anger and recrimination that are coming this time will be something almost none of us have any experience with, and it will be terribly easy to be caught up in it. Don’t do it, as that kind of vengeful and punitive mindset will drain energy and resources from what you need to do to help yourself and your loved ones. Ultimately it fractures the trust that holds society together at a time when cohesiveness matters most. While this is inevitable at a national scale, it need not be at a very local level where a few individuals can make a difference.

Soon to a theater near you.

[briansd1]

[quote=Arraya]

Soon to a theater near you.[/quote]

How soon? That’s the question.

If you make me expect it too much I’ll be very let down when it doesn’t come.

I can only see 6 months to 1 year ahead, at the most.

If you keep on telling a girl that you’ll marry her but can never save enough to buy her a ring, what do you think will happen?

[briansd1]

[quote=Arraya]

Soon to a theater near you.[/quote]

How soon? That’s the question.

If you make me expect it too much I’ll be very let down when it doesn’t come.

I can only see 6 months to 1 year ahead, at the most.

If you keep on telling a girl that you’ll marry her but can never save enough to buy her a ring, what do you think will happen?

[briansd1]

[quote=Arraya]

Soon to a theater near you.[/quote]

How soon? That’s the question.

If you make me expect it too much I’ll be very let down when it doesn’t come.

I can only see 6 months to 1 year ahead, at the most.

If you keep on telling a girl that you’ll marry her but can never save enough to buy her a ring, what do you think will happen?

[briansd1]

[quote=Arraya]

Soon to a theater near you.[/quote]

How soon? That’s the question.

If you make me expect it too much I’ll be very let down when it doesn’t come.

I can only see 6 months to 1 year ahead, at the most.

If you keep on telling a girl that you’ll marry her but can never save enough to buy her a ring, what do you think will happen?

[Author]

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