Paul Krugman has officially lost all credibility

[Rich Toscano]

Dan (I called you UR so people would know which post I was responding to) —

Basically, I think the Krugmans of the world are looking at things like low capacity utilization, low velocity, etc, and assuming that purchasing power cannot decline. This conclusion rests on the assumption that foreigners will continue to lend us simply vast amounts of money, despite the fact that we are so deeply in debt that there really isn’t a credible and politically feasible way to pay it off in real terms. I just disagree with this conclusion because the math doesn’t add up. Neither the USD nor Treasuries are a viable store of value; I just think it’s a matter of time before the world realizes that.

I think there is a US funding crisis in the offing (not necessarily imminent, just to be clear about that). The results of a funding crisis would be a weaker dollar (higher import and commodity prices in US$ terms) and higher rates. There is already precedent for the Fed monetizing debt to bring down rates and fill the gap where foreign inflows have not been sufficient to finance our deficit; I think this will increase into any funding crisis, especially if it happens against the backdrop of weak employment. If that were the case, rates might not rise as much, but it would result in an even weaker dollar.

I apologize, I don’t have much time today so I can’t give the response it deserves… hopefully the above at least gives an inkling of where I am coming from.

Rich

[briansd1]

[quote=urbanrealtor]
How exactly do we crash the plane into the mountain??
[/quote]

I would love to know that too.

From the people around me, I’m feeling that people are afraid of the consequences of all the bailout packages. But they are also happy about the bailouts and want even more to protect and reflate the value of their assets.

I’m also getting mixed signals from Rich’s writing.

I get it that the “Krugman-esque policy will eventually be looked at as a giant, tragic mistake.”

But then again, all the Krugman-esque policy is so far successful in improving real estate prices.

Will the efforts of reflate which so far have stabilized some markets collapse in a spectacular show?

[briansd1]

[quote=urbanrealtor]
How exactly do we crash the plane into the mountain??
[/quote]

I would love to know that too.

From the people around me, I’m feeling that people are afraid of the consequences of all the bailout packages. But they are also happy about the bailouts and want even more to protect and reflate the value of their assets.

I’m also getting mixed signals from Rich’s writing.

I get it that the “Krugman-esque policy will eventually be looked at as a giant, tragic mistake.”

But then again, all the Krugman-esque policy is so far successful in improving real estate prices.

Will the efforts of reflate which so far have stabilized some markets collapse in a spectacular show?

[briansd1]

[quote=urbanrealtor]
How exactly do we crash the plane into the mountain??
[/quote]

I would love to know that too.

From the people around me, I’m feeling that people are afraid of the consequences of all the bailout packages. But they are also happy about the bailouts and want even more to protect and reflate the value of their assets.

I’m also getting mixed signals from Rich’s writing.

I get it that the “Krugman-esque policy will eventually be looked at as a giant, tragic mistake.”

But then again, all the Krugman-esque policy is so far successful in improving real estate prices.

Will the efforts of reflate which so far have stabilized some markets collapse in a spectacular show?

[briansd1]

[quote=urbanrealtor]
How exactly do we crash the plane into the mountain??
[/quote]

I would love to know that too.

From the people around me, I’m feeling that people are afraid of the consequences of all the bailout packages. But they are also happy about the bailouts and want even more to protect and reflate the value of their assets.

I’m also getting mixed signals from Rich’s writing.

I get it that the “Krugman-esque policy will eventually be looked at as a giant, tragic mistake.”

But then again, all the Krugman-esque policy is so far successful in improving real estate prices.

Will the efforts of reflate which so far have stabilized some markets collapse in a spectacular show?

[briansd1]

[quote=urbanrealtor]
How exactly do we crash the plane into the mountain??
[/quote]

I would love to know that too.

From the people around me, I’m feeling that people are afraid of the consequences of all the bailout packages. But they are also happy about the bailouts and want even more to protect and reflate the value of their assets.

I’m also getting mixed signals from Rich’s writing.

I get it that the “Krugman-esque policy will eventually be looked at as a giant, tragic mistake.”

But then again, all the Krugman-esque policy is so far successful in improving real estate prices.

Will the efforts of reflate which so far have stabilized some markets collapse in a spectacular show?

[briansd1]

[quote=Rich Toscano]the math doesn’t add up. Neither the USD nor Treasuries are a viable store of value; I just think it’s a matter of time before the world realizes that.[/quote]

I didn’t see the response before posting my question.

That’s the fear.

But so far a lot of people are cheering the little bit of good news that resulted from the Krugmanesque policies.

If inflation sets it, the stock market might do very well as US corporations would have more pricing power; and their overseas profits converted back to USD would also be inflated.

The real estate market? Not so good because of the need to borrow at high interest rates.

Stagflation might make a comeback… Interesting.

[briansd1]

[quote=Rich Toscano]the math doesn’t add up. Neither the USD nor Treasuries are a viable store of value; I just think it’s a matter of time before the world realizes that.[/quote]

I didn’t see the response before posting my question.

That’s the fear.

But so far a lot of people are cheering the little bit of good news that resulted from the Krugmanesque policies.

If inflation sets it, the stock market might do very well as US corporations would have more pricing power; and their overseas profits converted back to USD would also be inflated.

The real estate market? Not so good because of the need to borrow at high interest rates.

Stagflation might make a comeback… Interesting.

[briansd1]

[quote=Rich Toscano]the math doesn’t add up. Neither the USD nor Treasuries are a viable store of value; I just think it’s a matter of time before the world realizes that.[/quote]

I didn’t see the response before posting my question.

That’s the fear.

But so far a lot of people are cheering the little bit of good news that resulted from the Krugmanesque policies.

If inflation sets it, the stock market might do very well as US corporations would have more pricing power; and their overseas profits converted back to USD would also be inflated.

The real estate market? Not so good because of the need to borrow at high interest rates.

Stagflation might make a comeback… Interesting.

[briansd1]

[quote=Rich Toscano]the math doesn’t add up. Neither the USD nor Treasuries are a viable store of value; I just think it’s a matter of time before the world realizes that.[/quote]

I didn’t see the response before posting my question.

That’s the fear.

But so far a lot of people are cheering the little bit of good news that resulted from the Krugmanesque policies.

If inflation sets it, the stock market might do very well as US corporations would have more pricing power; and their overseas profits converted back to USD would also be inflated.

The real estate market? Not so good because of the need to borrow at high interest rates.

Stagflation might make a comeback… Interesting.

[briansd1]

[quote=Rich Toscano]the math doesn’t add up. Neither the USD nor Treasuries are a viable store of value; I just think it’s a matter of time before the world realizes that.[/quote]

I didn’t see the response before posting my question.

That’s the fear.

But so far a lot of people are cheering the little bit of good news that resulted from the Krugmanesque policies.

If inflation sets it, the stock market might do very well as US corporations would have more pricing power; and their overseas profits converted back to USD would also be inflated.

The real estate market? Not so good because of the need to borrow at high interest rates.

Stagflation might make a comeback… Interesting.

[DWCAP]

“Yet some Fed officials want to pull the trigger on rates much sooner. To avoid a “Great Inflation,” says Charles Plosser of the Philadelphia Fed, “we will need to act well before unemployment rates and other measures of resource utilization have returned to acceptable levels.” Jeffrey Lacker of the Richmond Fed says that rates may need to rise even if “the unemployment rate hasn’t started falling yet.”

I don’t know what analysis lies behind these itchy trigger fingers. But it probably isn’t about analysis, anyway — it’s about mentality, the sense that central banks are supposed to act tough, not provide easy credit.” -Paul Krugman

-Bull. Right there is proof that this guy hasnt learned crap since 1940. The massive downturn was a credit collapse, one set off by residental morgages (other forms of credit are hurting too, CRE anyone), better known as a housing bubble. The housing bubble was instigated by two governement forces, deliberatly.

1)Ultra low interest rates set by the Fed, and keeping them there for too long.

2)Favorable tax and investment policies set by governement agencies. (250k cap gains deduction, morgage interest deducation, low to no down morgages, (up until very reciently) seller financed DP’s, Multiple ‘primary’ homes (10 primary home loans????)

This created a massive bubble, which we are suffereing the after effects of now. The entire reason rates were left so low for so long was because of the ‘jobless recovery’ after the stock bubble of the late 1990’s bust in 2000. Now the solution is to do it again, only stronger, thinking we can’t get another bubble? Says who? In the past decade we have had three bubbles pop. Stocks, oil, and Housing. None of them has been plesant or easy on the USA.

Last time the Fed did what Krugman wants it waited until 2004 to raise rates, well into the housing bubble. It moved slowly, and was hesitant to put regulation on banks that may have helped slow the bubble, until it was way way way to late.

If the Federal reserve waits until unemployment is 7% or less they will already have another raging bubble on their hands somewhere else. As so many bulls are fond of saying about our GDP recovery, unemployment is a lagging indicator. So the FED would be waiting until AFTER the recovery was well inplace to begin to withdrawl this aid. By that time the damage will have already been done and we will have to suffer through another recession/bubble bursting. They didn’t even see the housing bubble coming in 2006 and thought it was contained up until it blew up in their faces. Now they are gonna be better about it and avoid a new bubble, cause ‘this time it is different’?
BULL.

[DWCAP]

“Yet some Fed officials want to pull the trigger on rates much sooner. To avoid a “Great Inflation,” says Charles Plosser of the Philadelphia Fed, “we will need to act well before unemployment rates and other measures of resource utilization have returned to acceptable levels.” Jeffrey Lacker of the Richmond Fed says that rates may need to rise even if “the unemployment rate hasn’t started falling yet.”

I don’t know what analysis lies behind these itchy trigger fingers. But it probably isn’t about analysis, anyway — it’s about mentality, the sense that central banks are supposed to act tough, not provide easy credit.” -Paul Krugman

-Bull. Right there is proof that this guy hasnt learned crap since 1940. The massive downturn was a credit collapse, one set off by residental morgages (other forms of credit are hurting too, CRE anyone), better known as a housing bubble. The housing bubble was instigated by two governement forces, deliberatly.

1)Ultra low interest rates set by the Fed, and keeping them there for too long.

2)Favorable tax and investment policies set by governement agencies. (250k cap gains deduction, morgage interest deducation, low to no down morgages, (up until very reciently) seller financed DP’s, Multiple ‘primary’ homes (10 primary home loans????)

This created a massive bubble, which we are suffereing the after effects of now. The entire reason rates were left so low for so long was because of the ‘jobless recovery’ after the stock bubble of the late 1990’s bust in 2000. Now the solution is to do it again, only stronger, thinking we can’t get another bubble? Says who? In the past decade we have had three bubbles pop. Stocks, oil, and Housing. None of them has been plesant or easy on the USA.

Last time the Fed did what Krugman wants it waited until 2004 to raise rates, well into the housing bubble. It moved slowly, and was hesitant to put regulation on banks that may have helped slow the bubble, until it was way way way to late.

If the Federal reserve waits until unemployment is 7% or less they will already have another raging bubble on their hands somewhere else. As so many bulls are fond of saying about our GDP recovery, unemployment is a lagging indicator. So the FED would be waiting until AFTER the recovery was well inplace to begin to withdrawl this aid. By that time the damage will have already been done and we will have to suffer through another recession/bubble bursting. They didn’t even see the housing bubble coming in 2006 and thought it was contained up until it blew up in their faces. Now they are gonna be better about it and avoid a new bubble, cause ‘this time it is different’?
BULL.

[DWCAP]

“Yet some Fed officials want to pull the trigger on rates much sooner. To avoid a “Great Inflation,” says Charles Plosser of the Philadelphia Fed, “we will need to act well before unemployment rates and other measures of resource utilization have returned to acceptable levels.” Jeffrey Lacker of the Richmond Fed says that rates may need to rise even if “the unemployment rate hasn’t started falling yet.”

I don’t know what analysis lies behind these itchy trigger fingers. But it probably isn’t about analysis, anyway — it’s about mentality, the sense that central banks are supposed to act tough, not provide easy credit.” -Paul Krugman

-Bull. Right there is proof that this guy hasnt learned crap since 1940. The massive downturn was a credit collapse, one set off by residental morgages (other forms of credit are hurting too, CRE anyone), better known as a housing bubble. The housing bubble was instigated by two governement forces, deliberatly.

1)Ultra low interest rates set by the Fed, and keeping them there for too long.

2)Favorable tax and investment policies set by governement agencies. (250k cap gains deduction, morgage interest deducation, low to no down morgages, (up until very reciently) seller financed DP’s, Multiple ‘primary’ homes (10 primary home loans????)

This created a massive bubble, which we are suffereing the after effects of now. The entire reason rates were left so low for so long was because of the ‘jobless recovery’ after the stock bubble of the late 1990’s bust in 2000. Now the solution is to do it again, only stronger, thinking we can’t get another bubble? Says who? In the past decade we have had three bubbles pop. Stocks, oil, and Housing. None of them has been plesant or easy on the USA.

Last time the Fed did what Krugman wants it waited until 2004 to raise rates, well into the housing bubble. It moved slowly, and was hesitant to put regulation on banks that may have helped slow the bubble, until it was way way way to late.

If the Federal reserve waits until unemployment is 7% or less they will already have another raging bubble on their hands somewhere else. As so many bulls are fond of saying about our GDP recovery, unemployment is a lagging indicator. So the FED would be waiting until AFTER the recovery was well inplace to begin to withdrawl this aid. By that time the damage will have already been done and we will have to suffer through another recession/bubble bursting. They didn’t even see the housing bubble coming in 2006 and thought it was contained up until it blew up in their faces. Now they are gonna be better about it and avoid a new bubble, cause ‘this time it is different’?
BULL.

[DWCAP]

“Yet some Fed officials want to pull the trigger on rates much sooner. To avoid a “Great Inflation,” says Charles Plosser of the Philadelphia Fed, “we will need to act well before unemployment rates and other measures of resource utilization have returned to acceptable levels.” Jeffrey Lacker of the Richmond Fed says that rates may need to rise even if “the unemployment rate hasn’t started falling yet.”

I don’t know what analysis lies behind these itchy trigger fingers. But it probably isn’t about analysis, anyway — it’s about mentality, the sense that central banks are supposed to act tough, not provide easy credit.” -Paul Krugman

-Bull. Right there is proof that this guy hasnt learned crap since 1940. The massive downturn was a credit collapse, one set off by residental morgages (other forms of credit are hurting too, CRE anyone), better known as a housing bubble. The housing bubble was instigated by two governement forces, deliberatly.

1)Ultra low interest rates set by the Fed, and keeping them there for too long.

2)Favorable tax and investment policies set by governement agencies. (250k cap gains deduction, morgage interest deducation, low to no down morgages, (up until very reciently) seller financed DP’s, Multiple ‘primary’ homes (10 primary home loans????)

This created a massive bubble, which we are suffereing the after effects of now. The entire reason rates were left so low for so long was because of the ‘jobless recovery’ after the stock bubble of the late 1990’s bust in 2000. Now the solution is to do it again, only stronger, thinking we can’t get another bubble? Says who? In the past decade we have had three bubbles pop. Stocks, oil, and Housing. None of them has been plesant or easy on the USA.

Last time the Fed did what Krugman wants it waited until 2004 to raise rates, well into the housing bubble. It moved slowly, and was hesitant to put regulation on banks that may have helped slow the bubble, until it was way way way to late.

If the Federal reserve waits until unemployment is 7% or less they will already have another raging bubble on their hands somewhere else. As so many bulls are fond of saying about our GDP recovery, unemployment is a lagging indicator. So the FED would be waiting until AFTER the recovery was well inplace to begin to withdrawl this aid. By that time the damage will have already been done and we will have to suffer through another recession/bubble bursting. They didn’t even see the housing bubble coming in 2006 and thought it was contained up until it blew up in their faces. Now they are gonna be better about it and avoid a new bubble, cause ‘this time it is different’?
BULL.

[Author]

Posts