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patientrenter
ParticipantChris, you have a lot more expertise in equity markets than I do, and you’ve made a couple of smart calls, so I listen carefully when you give advice to the fellow Piggs.
I have to admit I am dumbfounded by the rise in equity markets since March. They appear to be levitating well above the underlying economics.
But I am curious. What do you think of the argument, made by Paul Krugman and others, that the world is still awash in excess savings? If that were true, couldn’t that lead to equity values well above what they “should” be based on traditional measures of fundamental value, together with very low interest rates? I am not trying to start a tired endless debate here. I am just curious what you think.
ParticipantChris, you have a lot more expertise in equity markets than I do, and you’ve made a couple of smart calls, so I listen carefully when you give advice to the fellow Piggs.
I have to admit I am dumbfounded by the rise in equity markets since March. They appear to be levitating well above the underlying economics.
But I am curious. What do you think of the argument, made by Paul Krugman and others, that the world is still awash in excess savings? If that were true, couldn’t that lead to equity values well above what they “should” be based on traditional measures of fundamental value, together with very low interest rates? I am not trying to start a tired endless debate here. I am just curious what you think.
ParticipantChris, you have a lot more expertise in equity markets than I do, and you’ve made a couple of smart calls, so I listen carefully when you give advice to the fellow Piggs.
I have to admit I am dumbfounded by the rise in equity markets since March. They appear to be levitating well above the underlying economics.
But I am curious. What do you think of the argument, made by Paul Krugman and others, that the world is still awash in excess savings? If that were true, couldn’t that lead to equity values well above what they “should” be based on traditional measures of fundamental value, together with very low interest rates? I am not trying to start a tired endless debate here. I am just curious what you think.
Participantpartypup, you make it sound like some little cabal of upper-echelon US bankers and policy administrators are selling out the US. In a way, that is happening. But they are simply trying to find ways for the American people – you know, that huge mass of innocence and goodness and light – to continue to do what they insist on doing. What do they insist on? Investing without saving, spending without earning. House prices and stock prices going up forever, and borrowing without end.
If we lived in an old-fashioned kingdom under an absolute monarch, or some other top-down political system, then the right people to blame would be the few people at the very top. But we live in a democracy, imperfect as it is. Our politicians’ actions reflect, mostly, what we the voters demand. What’s going on between Geithner and Hu and all the other leaders is not THEM, it’s US. Blaming THEM is just compounding our failure to act responsibly by not even taking responsibility in the first place.
I realize conspiracy theories are a lot sexier, but they end up letting the people who are really irresponsible off the hook.
Oh, and why do you think the Democratic party is more committed to financial irresponsibility than Republicans? Arthur Burns was put in by Republicans, Paul Volcker by Dems. As far as I can tell, they both get near-perfect scores in the current bout of financial irresponsibility.
Participantpartypup, you make it sound like some little cabal of upper-echelon US bankers and policy administrators are selling out the US. In a way, that is happening. But they are simply trying to find ways for the American people – you know, that huge mass of innocence and goodness and light – to continue to do what they insist on doing. What do they insist on? Investing without saving, spending without earning. House prices and stock prices going up forever, and borrowing without end.
If we lived in an old-fashioned kingdom under an absolute monarch, or some other top-down political system, then the right people to blame would be the few people at the very top. But we live in a democracy, imperfect as it is. Our politicians’ actions reflect, mostly, what we the voters demand. What’s going on between Geithner and Hu and all the other leaders is not THEM, it’s US. Blaming THEM is just compounding our failure to act responsibly by not even taking responsibility in the first place.
I realize conspiracy theories are a lot sexier, but they end up letting the people who are really irresponsible off the hook.
Oh, and why do you think the Democratic party is more committed to financial irresponsibility than Republicans? Arthur Burns was put in by Republicans, Paul Volcker by Dems. As far as I can tell, they both get near-perfect scores in the current bout of financial irresponsibility.
Participantpartypup, you make it sound like some little cabal of upper-echelon US bankers and policy administrators are selling out the US. In a way, that is happening. But they are simply trying to find ways for the American people – you know, that huge mass of innocence and goodness and light – to continue to do what they insist on doing. What do they insist on? Investing without saving, spending without earning. House prices and stock prices going up forever, and borrowing without end.
If we lived in an old-fashioned kingdom under an absolute monarch, or some other top-down political system, then the right people to blame would be the few people at the very top. But we live in a democracy, imperfect as it is. Our politicians’ actions reflect, mostly, what we the voters demand. What’s going on between Geithner and Hu and all the other leaders is not THEM, it’s US. Blaming THEM is just compounding our failure to act responsibly by not even taking responsibility in the first place.
I realize conspiracy theories are a lot sexier, but they end up letting the people who are really irresponsible off the hook.
Oh, and why do you think the Democratic party is more committed to financial irresponsibility than Republicans? Arthur Burns was put in by Republicans, Paul Volcker by Dems. As far as I can tell, they both get near-perfect scores in the current bout of financial irresponsibility.
Participantpartypup, you make it sound like some little cabal of upper-echelon US bankers and policy administrators are selling out the US. In a way, that is happening. But they are simply trying to find ways for the American people – you know, that huge mass of innocence and goodness and light – to continue to do what they insist on doing. What do they insist on? Investing without saving, spending without earning. House prices and stock prices going up forever, and borrowing without end.
If we lived in an old-fashioned kingdom under an absolute monarch, or some other top-down political system, then the right people to blame would be the few people at the very top. But we live in a democracy, imperfect as it is. Our politicians’ actions reflect, mostly, what we the voters demand. What’s going on between Geithner and Hu and all the other leaders is not THEM, it’s US. Blaming THEM is just compounding our failure to act responsibly by not even taking responsibility in the first place.
I realize conspiracy theories are a lot sexier, but they end up letting the people who are really irresponsible off the hook.
Oh, and why do you think the Democratic party is more committed to financial irresponsibility than Republicans? Arthur Burns was put in by Republicans, Paul Volcker by Dems. As far as I can tell, they both get near-perfect scores in the current bout of financial irresponsibility.
Participantpartypup, you make it sound like some little cabal of upper-echelon US bankers and policy administrators are selling out the US. In a way, that is happening. But they are simply trying to find ways for the American people – you know, that huge mass of innocence and goodness and light – to continue to do what they insist on doing. What do they insist on? Investing without saving, spending without earning. House prices and stock prices going up forever, and borrowing without end.
If we lived in an old-fashioned kingdom under an absolute monarch, or some other top-down political system, then the right people to blame would be the few people at the very top. But we live in a democracy, imperfect as it is. Our politicians’ actions reflect, mostly, what we the voters demand. What’s going on between Geithner and Hu and all the other leaders is not THEM, it’s US. Blaming THEM is just compounding our failure to act responsibly by not even taking responsibility in the first place.
I realize conspiracy theories are a lot sexier, but they end up letting the people who are really irresponsible off the hook.
Oh, and why do you think the Democratic party is more committed to financial irresponsibility than Republicans? Arthur Burns was put in by Republicans, Paul Volcker by Dems. As far as I can tell, they both get near-perfect scores in the current bout of financial irresponsibility.
Participant[quote=Bob]I know this might sound shocking to some of the readers, but at this point, I’m almost hoping for a massive increase in interest rates, and perhaps even hyper-inflation. Unfortunately, that might be the only way to stop the jokers in Washington from continuing their spending spree. And it also might cause voters to boot the socialists out of congress in 2010. Short term pain might result in long term gain.[/quote]
How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters. Why? Because a lot of them borrowed and spent like drunken sailors, and high inflation lets a lot of them off the hook for the debt repayment (in real terms).
If you wanted to teach the lesson that overspending is bad, you’d deflate. The pain of debt repayment is proportionate to (Interest rate – inflation rate). So increase interest rates and/or deflate, not inflate.
All theoretical, of course. We will inflate and hold interest rates relatively low, so the real interest rate will be forced to be low, probably quite negative. That will tank the dollar. And that’s the end game:
1. Inflation
2. Negative real interest rates
3. Lower dollar value
By the way, you can get negative real rates without ever showing Treasury rates less than CPI inflation rates. How? A lot of debt (like mortgages) is at fixed rates of interest, so just arrange for massive amounts of financing of debts at low fixed rates,and then inflate. Treasury rates rise some, even with the Fed pushing down, but there’s a huge windfall for all the people who borrowed at the earlier fixed rates. So effective real rates become negative for large chunks of the economy, without ever showing up in the stats as negative real rates.
Participant[quote=Bob]I know this might sound shocking to some of the readers, but at this point, I’m almost hoping for a massive increase in interest rates, and perhaps even hyper-inflation. Unfortunately, that might be the only way to stop the jokers in Washington from continuing their spending spree. And it also might cause voters to boot the socialists out of congress in 2010. Short term pain might result in long term gain.[/quote]
How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters. Why? Because a lot of them borrowed and spent like drunken sailors, and high inflation lets a lot of them off the hook for the debt repayment (in real terms).
If you wanted to teach the lesson that overspending is bad, you’d deflate. The pain of debt repayment is proportionate to (Interest rate – inflation rate). So increase interest rates and/or deflate, not inflate.
All theoretical, of course. We will inflate and hold interest rates relatively low, so the real interest rate will be forced to be low, probably quite negative. That will tank the dollar. And that’s the end game:
1. Inflation
2. Negative real interest rates
3. Lower dollar value
By the way, you can get negative real rates without ever showing Treasury rates less than CPI inflation rates. How? A lot of debt (like mortgages) is at fixed rates of interest, so just arrange for massive amounts of financing of debts at low fixed rates,and then inflate. Treasury rates rise some, even with the Fed pushing down, but there’s a huge windfall for all the people who borrowed at the earlier fixed rates. So effective real rates become negative for large chunks of the economy, without ever showing up in the stats as negative real rates.
Participant[quote=Bob]I know this might sound shocking to some of the readers, but at this point, I’m almost hoping for a massive increase in interest rates, and perhaps even hyper-inflation. Unfortunately, that might be the only way to stop the jokers in Washington from continuing their spending spree. And it also might cause voters to boot the socialists out of congress in 2010. Short term pain might result in long term gain.[/quote]
How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters. Why? Because a lot of them borrowed and spent like drunken sailors, and high inflation lets a lot of them off the hook for the debt repayment (in real terms).
If you wanted to teach the lesson that overspending is bad, you’d deflate. The pain of debt repayment is proportionate to (Interest rate – inflation rate). So increase interest rates and/or deflate, not inflate.
All theoretical, of course. We will inflate and hold interest rates relatively low, so the real interest rate will be forced to be low, probably quite negative. That will tank the dollar. And that’s the end game:
1. Inflation
2. Negative real interest rates
3. Lower dollar value
By the way, you can get negative real rates without ever showing Treasury rates less than CPI inflation rates. How? A lot of debt (like mortgages) is at fixed rates of interest, so just arrange for massive amounts of financing of debts at low fixed rates,and then inflate. Treasury rates rise some, even with the Fed pushing down, but there’s a huge windfall for all the people who borrowed at the earlier fixed rates. So effective real rates become negative for large chunks of the economy, without ever showing up in the stats as negative real rates.
Participant[quote=Bob]I know this might sound shocking to some of the readers, but at this point, I’m almost hoping for a massive increase in interest rates, and perhaps even hyper-inflation. Unfortunately, that might be the only way to stop the jokers in Washington from continuing their spending spree. And it also might cause voters to boot the socialists out of congress in 2010. Short term pain might result in long term gain.[/quote]
How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters. Why? Because a lot of them borrowed and spent like drunken sailors, and high inflation lets a lot of them off the hook for the debt repayment (in real terms).
If you wanted to teach the lesson that overspending is bad, you’d deflate. The pain of debt repayment is proportionate to (Interest rate – inflation rate). So increase interest rates and/or deflate, not inflate.
All theoretical, of course. We will inflate and hold interest rates relatively low, so the real interest rate will be forced to be low, probably quite negative. That will tank the dollar. And that’s the end game:
1. Inflation
2. Negative real interest rates
3. Lower dollar value
By the way, you can get negative real rates without ever showing Treasury rates less than CPI inflation rates. How? A lot of debt (like mortgages) is at fixed rates of interest, so just arrange for massive amounts of financing of debts at low fixed rates,and then inflate. Treasury rates rise some, even with the Fed pushing down, but there’s a huge windfall for all the people who borrowed at the earlier fixed rates. So effective real rates become negative for large chunks of the economy, without ever showing up in the stats as negative real rates.
Participant[quote=Bob]I know this might sound shocking to some of the readers, but at this point, I’m almost hoping for a massive increase in interest rates, and perhaps even hyper-inflation. Unfortunately, that might be the only way to stop the jokers in Washington from continuing their spending spree. And it also might cause voters to boot the socialists out of congress in 2010. Short term pain might result in long term gain.[/quote]
How would high inflation punish the most irresponsible or contain govt spending? High inflation is the primary financial goal of govt now, and is favored by maybe half the business community, and probably 2/3 or more of all voters. Why? Because a lot of them borrowed and spent like drunken sailors, and high inflation lets a lot of them off the hook for the debt repayment (in real terms).
If you wanted to teach the lesson that overspending is bad, you’d deflate. The pain of debt repayment is proportionate to (Interest rate – inflation rate). So increase interest rates and/or deflate, not inflate.
All theoretical, of course. We will inflate and hold interest rates relatively low, so the real interest rate will be forced to be low, probably quite negative. That will tank the dollar. And that’s the end game:
1. Inflation
2. Negative real interest rates
3. Lower dollar value
By the way, you can get negative real rates without ever showing Treasury rates less than CPI inflation rates. How? A lot of debt (like mortgages) is at fixed rates of interest, so just arrange for massive amounts of financing of debts at low fixed rates,and then inflate. Treasury rates rise some, even with the Fed pushing down, but there’s a huge windfall for all the people who borrowed at the earlier fixed rates. So effective real rates become negative for large chunks of the economy, without ever showing up in the stats as negative real rates.
ParticipantWell, I think most of the good arguments on both sides are laid out well here.
I’ll only add, as one of those in the pro-globalization camp, that I am very focused on the quality of what I buy, and the total value it provides me. I do favor local products in some cases. For example, wherever I have lived, I seek out the highest quality bakery, and then go to some trouble to buy from them. I deliberately pay more to help them stay in business. Why? Because I love very high quality and very fresh bread, and I will only have that if I and others pay enough for it.
Same with reliability and toxicity of products. I am happy to pay some more for known better quality for me. But I am not happy to pay more, regardless of the quality I am getting, simply because the people making the good happen to live close to me. If some Japanese people can make a better car for the price than Americans, I will buy Japanese (or vice versa). I won’t lose out if that means all cars come from Japan, so I don’t worry about making the right decision. If everyone stops buying from my favorite local baker, I won’t have any local fresh bread. Then I will lose out. So the right decision for me is to support one and not the other. Our personal preferences and circumstances dictate what local support is right for each of us.
But although I support each person exercising their own personal preferences, I remain very leery when that results in simplistic “Buy American” campaigns. Blanket statements tend to follow, like the other people make lower quality goods, or they have barbaric politics or practices. Unless justified by specifics, I think a lot of these blanket statements are misguided, show a lack of respect for others, and are the beginnings of a slippery slope to a very nasty end.
There is that famous Golden Rule: “Do unto others as you would have them do unto you”. I would not want New Yorkers to boycott San Diego in favor of the Finger Lakes for their vacations. I would not want Europeans or Chinese to boycott American goods just because they were American. Yes, we can argue about the pluses and minuses of specific goods, and complain about the other guy’s unfair practices, but we are simply making our world a poorer place for us all, and for ourselves, if we allow all that bickering to send us all in the wrong direction.
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