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View Diary: Wherein "Bernanke Cuts Geithner Off at the Knees" (161 comments)

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  •  Shepherdson (3+ / 0-)
    Recommended by:
    Mnemosyne, Pluto, bobswern

    I too see a slight turn for the better in the indicators that I watch on a regular basis (things like restaurant indicators, hotel indicators etc).

    HOWEVER we must remember 2 things:

    1. The rise so far has been extremely limited.
    1. The amount of fuel being provided (through deficit spending and low interest rates) is unprecedented.

    So I would actually be shocked given all this fuel if we did not see a turn for the better in the economy. The more important question is how sustainable is it.

    My guess - it is NOT sustainable. Why? Because nothing has been fixed. All the problems that led to the recession are still in place, no new platform for growth has been built. All that has been done is to build an artificial support under the economy.

    Let's look at what has happened:

    1. China still has its currency pegged to the US dollar and its trade surpluses continue to be huge. This is the prime source of global imbalances/instability.
    1. The US continues to run huge trade deficits (primarily because it refuses to cut oil consumption).
    1. Housing remains on life support, with all mortgages basically being government funded. this has stopped any ability to find a true value for housing.
    1. Jobs lost in the recession (primarily construction and manufacturing) are not coming back. The only growth area is health care (and the US already spends more than any nation per capita on health care.
    1. In a global economy much of the US stimulus (deficit spending) has leaked out into the rest of the world. So the US has racked up huge debts to stimulate the rest of the world.
    1. Any move to raise rates will immediately strangle the economy (basically Bernanke has no way out.)

    Finally for today's "stupid moment" the award goes to Paul Krugman, a so called economist. From his blog where he trashes Jim Rogers (a guy who has been right far more often than Krugman)

    this means that monetary policy, our only real hope at this point, must climb a wall of stupidity

    Note to Mr Krugman. When you are at the zero bound on interest rates and you have cranked up the printing press to monetize the debt, you had better hope that monetary policy is not your best hope. Other wise all I can say is "you are F***ED)

    "If they can't deal with the Internet, they should shut it off." Mike Lazaridis of RIM

    by taonow on Sun Nov 07, 2010 at 08:28:36 AM PST

    •  An outstanding comment. Thank you! n/t (0+ / 0-)

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Sun Nov 07, 2010 at 08:39:18 AM PST

      [ Parent ]

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