“The Great Depression of Debt” is a hardcover updated edition of “The Second Great Depression, Starting 2007, Ending 2020.” “The Great Depression of Debt” can be purchased at most bookstores or at Amazon.com: http://www.amazon.com/Great-Depression-Debt-Survival-Techniques/dp/0470423714
TWO OPPOSING VIEWS: Austrian versus Keynesian Economics
There are two diametrically opposite views on the economy that are driving many of the votes in Congress. I have neither the knowledge nor time to explain both of these views in detail, but with two short paragraphs I can probably cover more than most of our politicians really understand.
AustrianSchool. Central banks are evil and cause all recessions/depressions by periodically creating too much paper/electronic money which then causes boom/busts. Central banks should be disbanded and we should go back to a gold standard. Austrian economists reject empirical statistical methods, natural experiments and constructed experiments because people and their actions are too complex to fit into formulas. Austrian theories are not presented mathematically. They rely mainly on verbal arguments based on self-evident axioms. Laissez-faire is the best way to run an economy.
Keynesian Economics. Well-meaning actions by multiple firms can sometimes cause the economy to operate below its potential, with high unemployment, etc. This requires policy responses by the public sector, including monetary actions by the central bank and fiscal policy actions by the government to minimize the economic swings. Keynesians believe that the solution to the Great Depression was to stimulate the economy through a reduction in interest rates and government investment in infrastructure. Mathematical models and statistics are used extensively in Keynesian economics.
Reading these two obviously simplified explanations, a couple of things stand out. First, the general mistrust of scientific methods by Austrian followers explains why there seems to be a lot of disbelief in science in general by these people, which include many of the Republican presidential candidates. This includes their doubts on man-caused global warming and evolution. It also explains why there is little room for discussion between the two opposing views and why there is such vehemence by the Austrians against the Fed, especially Bernanke because he is a strong Keynesian.
SPEAKING OF BERNANKE!
If Ben were following a list of things he could do to irritate the Austrians, especially people like Ron Paul, he would not be doing much different than he is already doing. To further drive down interest rates from their already historic lows, the Fed is doing the Twist where the Fed sells short term securities and buys long term Treasuries. He is also buying up mortgages from banks to give the banks more cash for lending. And, he is going crazy on money creation! Per the Federal Reserve, for the last 13 weeks ending Oct 31, 2011, the M2 money supply has been increasing at an 18.8% seasonably-adjusted annualized rate. Now THAT is money creation! Per Austrians, that excessive money creation is guaranteeing future inflation. And indeed, our current annual inflation rate is already 3.9% through September. That is the highest it has been since the middle of 2008!
MY FEELINGS!
Congress, no matter what the Deficit committee comes up with, seems determined to make large cost cuts to get our deficit under control. They seem to want to follow an Austrian view of no more stimuli; let the economy work things out on its own.
Since most of the likely cost cutting measures involve job reductions, this will certainly exacerbate the unemployment problem. Also, it is unlikely that extended unemployment benefits will be continued. Nor is the Social Security Withholding Tax Holiday likely to be extended. And earlier stimulus is winding down. Savings rate reductions, which have been giving the consumers more spending money, are likely to bottom out in February. States are cutting people to get their budgets under control. And the European Euro crisis is not going away and is likely to explode within months. All of these events are very likely – sort of a perfect storm! And the Fed’s actions are not going to be enough to counter Congress’ direction.
An alternative approach to our economy is to realize that we have the wealth in this country to fight this slowdown. If we take taxes back to where they were perhaps 30 years ago, recover some of the $6 trillion excess wealth that flowed to the top 5% over the last 40 years, and bring our troops home and put them on our borders, we would have enough additional income and saved costs to enable us to heavily invest in self sustaining jobs, like clean renewable energy. We could then grow our way out of our problems with lower unemployment and a higher GDP. But alas, the chances of any of this happening are about zilch! We are choosing to let our economy slide into a depression without a fight! The Austrians are going to win!
HOW DUMB DO THEY THINK WE ARE?
Per CNN Money, the top five executives at Fannie Mae received $33.3 million in 2009 and 2010, while the top five at Freddie Mac received $28.1 million. And each company has set pay targets of as much as $17 million for its top managers for 2011. That’s a total of $95.4 million which will be coming from taxpayers who have been keeping the mortgage finance giants alive with regular quarterly cash infusions.
But Fannie Mae and Freddie Mac executives may have finally reached the tipping point. Congress is considering legislation to put strict limits on pay at the two firms. But I am SURE that there will be some legislators claiming that we should not be setting salary limitations. They will claim that we need to pay those wages to get the required talent!
THE STOCK MARKET NUMBERS
The Price/Dividend (P/D) ratio for the S&P 500 is now 49. The current P/D of 49 can be compared to the historical median P/D of 26 and the 17.2 target I use to get back into the market. At current dividends, the market will have to drop 47% to get down to its median P/D and drop 65% to get to my own entry target P/D.
Do not interpret the P/D ratio as a predictor of the direction of the economy. It is a historical unemotional measure that I believe reflects whether the market is overpriced. The P/D ratio can stay very high for many years with little rationale, as it did in the nineties.
Here is where I get my P/D ratios. http://www.indexarb.com/dividendYieldSortedsp.html. Go to the bottom of the table and read the value opposite “Average Dividend Yield (%) of All S&P 500 Stocks.” Take the inverse of this number X 100 to get the price/dividend.
As always, people should use their own judgment/data to affect their own investment strategies; and they should not blindly use the above information. Intelligent people can, and do, disagree.
November 16, 2011 at 1:55 pm |
I moved this comment into the recent blog update because my reply may hold some interest to others.
Will Says:
November 16, 2011 at 1:57 am | Reply edit
Warren, didn’t you work for Jack Welch? Apparently your conscience didn’t bother you enough to quit!
November 16, 2011 at 1:56 pm |
Will Says: “Warren, didn’t you work for Jack Welch? Apparently your conscience didn’t bother you enough to quit!”
I certainly DID work for Jack; and I did quite well, including getting quite a few stock options. But I refused to do the bleeding of the production plants that Jack instructed. I and my team were good enough and generated enough profits that we fell under Jack’s radar because of our great results. But, I certainly risked my job because if I had done what Jack wanted, I could have generated even more short-term profits at the long term risk of the plants and their people. So, I did not have a conscience problem because I refused to follow Jack’s orders.
In fact you can read about one example in my most recent book, “A Step Beyond Six Sigma, Manufacturing Innovation.” It is Case Study 4-3. I used third person at my publisher’s suggestion, but it is me in the case study.
An aside: When I was taking classes for my MBA, I facetiously commented to the professor that I could take any company, fire most of their engineers, shut down R&D, quit buying spare parts, reduce routine maintenance, etc. and generate huge profits for several years. The professor commented that companies don’t do that because, in the long run, it would hurt the company. Well, guess what Jack did? And it DID hurt GE! Incidentally, I sold all my GE stock options at close to the high in 2000. Even including dividends, GE has never recovered to that price level. I sold because I saw how Jack was raping GE and I knew that it was only a matter of time before reality caught up. So, I did very well by not blindly believing Jack or that he was doing best for the company or its employees. You would be wise to also give up your blind hero worship of the rich and powerful, because many (not all) of them are only selfishly worried about themselves. Jack was certainly only worried about himself!
November 16, 2011 at 2:15 pm |
Warren,
Your solution to the economic problems is basically to tax the rich.
How would you protect the funds since the lock box for social security did not work. Any money given to the federal government is spent. How would the debt be reduced given that the politicians
are addicted to “food and circus” for the populus?
On your taxing the rich it seems there are two groups, the ones who already have riches usually due to inheritance, and those who are currently working to earn their riches. Would you treat the groups the same way?
The tax code seems to be a good part of the problem. First, it is way too complex and secondly, it favors the rich. But everyone has an axe to grind. The other guys tax exemption should go but not mine. A good example, we own our house outright so we no longer benefit from the interest tax deduction so out it goes. Oil depletion,
also with us having no wells so out it goes. But if I had high medical bills I would want the medical exemption.
Your general philosophy of tax the rich doesn’t explain why we should have that policy. I agree that the distribution of wealth has gotten somewhat lopsided but the problem is how to correct it. Returning to 1960 or 1970 tax policies does increase the revenue
but does not address the philosophy of why.
The new ones appointed by Obama dealing with health issues are indicating that they expect that health benefits will be rationed somewhat like in England. Why should I having “worked & earned” my position in this world give up my health benefits for someone who has a drug problem or is lazy or stupid.(I’m using the worst case to illustrate)
Please stay on point and don’t nitpick. Why should we trust the government to not misuse additional tax revenues even if only from the rich? We agree that taxes are are necessary evil to support a government but what right does our government have to take from me and give to another? I believe that you support many or most of the giveaway programs but is there any limit and if so why is there that limit?
If Obamacare is found to be constitutional then there will be no limits on what the government can and will take and I believe that it will be the end of our country and we will be like Europe.
Note: I can see where the balance of the wealth is skew. I’m questioning how this can be corrected. Your choice is a return to the past. I’m indicating that the same reasons we got to where we are now would have not changed and we would again go down the same path except maybe slower. You trust bigger government and I don’t. That doesn’t mean that I can’t recognize that the tax code has been tipped to favor the rich.
As always thanks for the update!
Bob
November 16, 2011 at 3:10 pm |
Bob Arkell Says: “Your solution to the economic problems is basically to tax the rich. How would you protect the funds since the lock box for social security did not work…Your general philosophy of tax the rich doesn’t explain why we should have that policy. I agree that the distribution of wealth has gotten somewhat lopsided but the problem is how to correct it. Returning to 1960 or 1970 tax policies does increase the revenue but does not address the philosophy of why.”
First, returning to the tax policies of perhaps thirty years ago DOES address the “why.” The tax changes, especially related to lower taxes on dividends and capital gains, are what have caused the increased wealth flow to the wealthy. Reversing those tax changes will largely resolve the problem. As for the excessive wealth already accumulated (by excessive, I mean compared to the wealth distribution of perhaps thirty years ago), I would put in place a five-year excessive asset tax, like perhaps on homes worth over $2 million and other assets worth over $100,000. But I certainly have not worked out the details. The intent is not to get back the whole excessive $6 trillion, but perhaps $2 trillion to help fund new jobs. Comparing to the social security lock box doesn’t apply since I expect the money to be quickly spent on job creation, not put into some lock-box. But, I don’t disagree that the extra money will have to be watched for misuse. Certainly some misuse will happen (when hasn’t it). But I think that with care we can get the majority of extra tax money doing what we want. Also, I would put certain limitations on use of these funds, like no project can be more than 30% public funded, all projects must create the majority of the jobs in the U.S., projects must lead to self-funded jobs within five years (not road paving), etc. And I would treat all wealth the same way as far as taxes.
You also say that the tax code is too complex. I agree, but we don’t have time to sort that out right now. Our economy is an emergency, and going back to earlier tax policies are the easiest quick-move. And likely those earlier tax codes were somewhat simpler. But more work will have to be done. But let’s not delay on that right now.
You also say, “Please stay on point and don’t nitpick. Why should we trust the government to not misuse additional tax revenues even if only from the rich? We agree that taxes are a necessary evil to support a government but what right does our government have to take from me and give to another?”
Well, hopefully I am not nitpicking. First, we should not trust the government. Nor should we trust the wealthy, the powerful CEOs of banks and corporations, or the poor. All groups have shown a propensity for self-interest, even at the expense of others. The only reason I am looking at the government to solve this issue is there seems to be no other alternative. Certainly, Congress’s approach of just cost cutting seems to be destined to drive us into a depression. I just don’t see any other outcome. Companies are certainly not going to change their ways for the betterment of society on their own. As for taking money from one part of society (the wealthy) to help society in general, I guess I have to quote Willie Sutton: “I rob banks because that’s where the money is.” To rebuild our economy without a severe depression will cost money. And the wealthy is where the money is! Given the excessive wealth flow of recent years, I don’t think any of us should feel very guilty about taking a little of it back. After all, the wealthy live in this country too, and with the relatively small effect my tax plan would have on their life style, I certainly would not feel very guilty.
You tell me: “Please stay on point.” Well, I think that you confuse the issue by bringing in things like Obamacare. With or without Obamacare our economy was going to be in trouble. Also, speculating that Obamacare “will be the end of our country and we will be like Europe” is a stretch. It also assumes that there is nothing about Europe that we can not learn from, which I think is somewhat narrow thinking. For example, before we went into Iraq, many European countries warned us that the case for Iraq having nuclear weapons had not been made. They certainly turned out to be right, didn’t they? And in many European countries their healthcare is the same quality as in the U.S. but it covers more people and cost less per person than healthcare in this country. “America Always Knows Best” is a very questionable and foolish assumption!
November 16, 2011 at 4:17 pm |
Warren,
We get closer and closer. Of course, other countries have good ideas! The rational of the tea party and Republicans is that the private market does better at investing money than the government. So far Obama has not picked winners on sustainable energy. So I would prefer the following.
1. Tax policy that encourages new companies (US only) to expand
and hire. This means reducing the federal tax on corporations to match the average tax compared to other countries. If you want have no taxes on companies providing sustainable energy products.
2. Any new taxes would go to pay down the debt ONLY!
Here is where you can tax the rich by eliminating tax breaks.
3. A smaller federal government. Yes, I know that it will increase unemployment.
4. Increase the age required for one to draw social security.
Also restrict other ways to draw SS. No more drawing since you are a drug or alcohol addict. Require those who are drawing disability SS be tested for drugs and prove yearly the disability.
5. Make all elected federal positions match the 8 years and out like the president. No one would become a professional politician.
6. Eliminate Obamacare. Change the laws so that insurance companies can compete anywhere in the US.
7. Require Congress to be under the same rules and regulations as the general public.
I reread this and realize there is a better chance for me to sprout wings and fly. Too much self interest for anything to change. Reasonable people can disagree but who believes that the Congress and Presidant are reasonable? Depression here we come. Too much money for those who have it to give it up.
Bob
November 16, 2011 at 7:02 pm |
Doug Fritz Says: “As far as the global warming goes, I am very skeptical about it, than in the past.”
I don’t know for sure if man is causing or speeding up global warming or not. The data seems to be leaning in support of man contributing. I only know that the proposed solutions to global warming should be being done in any case. Certainly there are all kinds of data showing how contaminants in air and sea caused by the burning of fossil fuel and oil leaks are causing world wide health problems, smog, pollution, etc. Couple that with the possibility of Peak Oil and that much of our oil comes from nasty people and we have reasons enough to be pushing for renewable clean energy.
November 17, 2011 at 1:28 am |
Warren,
Canada has a program where you put in solar panels and get reimbursed for the next 20 years by the electric company. Which is how long the panels are expected to last. What I found interesting is that the panels work better in the colder parts of Canada than in the warmer parts. The program currently loses money for everyone but the solar panel owner. But it is renewable energy.
Bob
November 17, 2011 at 6:30 am |
Warren, you allege that we can grow ourselves out of this mess. What growth rate would it require and how are we going to achieve it?
November 17, 2011 at 2:35 pm |
Bob Says: “Warren, you allege that we can grow ourselves out of this mess. What growth rate would it require and how are we going to achieve it?”
The answer all centers on self-sustaining job growth. Depending on what numbers you use, we have somewhere between 15% and 20% of unused manpower either looking for jobs or having given up. If we freeze government size to where it is now, but aggressively grow jobs to put those people back to work, we would expect GDP growth, tax income, etc. to grow 15% to 20% while reducing unemployment benefit costs, food stamp use, welfare, etc. Out current tax receipts are $2.2 trillion. If we get a 20% benefits in receipts and savings from putting these people back to work, that will be $440 billion per year. This would take a big bite out of our $1.4 trillion deficit. This savings, combined with taking the tax code back to where it was 30 years ago, will get our deficit down to a manageable level. And further benefits will come from the program outlined below in reducing military costs, health costs, and costs related to our balance of payments.
We have to identify a huge program that will employ large numbers of people. Green and renewable energy and related projects are the only programs big enough to do this. To justify investment in these areas requires looking at a far bigger picture than just whether solar panels can currently make energy cheaper than coal plants. You have to include the assumption that efficiencies of wind and solar products will continue to improve as they have in recent years, and that higher volumes will help. You have to look at the TOTAL costs of fossil fuels to society, including health costs, environmental damage, cost of our military in people and dollars in protecting our oil sources in the Middle East, risk of oil supply interruption due to political or Peak Oil events, balance of payment issues, terrorists being financed through oil money, and so on. There are books and articles that have attempted to put dollar values on these things, and the costs are HUGE.
You also have to accept that the world is going to renewables whether we lead the way or not. Other countries, especially China, are investing far more money and effort in this area than we are. So the question is whether we will be buying these energy devices from China or getting the jobs and profits of renewables by being a leader in their development and manufacture.
Related products include the conversion to electrified transportation (yes, I am aware of the fire in one Chevy Volt). And this conversion involves more than just putting batteries and motors in existing car designs. In “Reinventing Fire,” the author emphasizes that the conversion of automobiles to carbon fiber bodies will make the cars substantially lighter and safer, enabling perhaps double the equivalent MPG versus current cars when everything else in the car (like the size of the motor) is made comparable. In fact, with that kind of engineering being applied to a Prius, it may very well get 100 MPG without even converting it to full electric. And the Chevy Volt could go 80 miles on a charge rather than its current 40 miles! And conversion to carbon fiber bodies is not just a pipe dream! BMW is supposedly coming out with a fiber bodied car in two years. And although the body is more expensive, BMW says that the added cost is made up by savings on engine size, etc.
Progress in this renewables area is already happening. For example, GE recently announced that they are building a new thin-film photovoltaic (PV) solar panel manufacturing facility in Aurora, Colorado. GE expects that the plant will produce enough solar panels annually to provide electricity to 80,000 homes and to create 355 jobs in Colorado over the next three to five years. The company expects that the factory’s manufacturing lines will be producing panels beginning next year and that the panels will be available for sale starting in 2013. GE plans to invest $600 million around the company’s technology.
But with more active government involvement, including guarantees that the energy produced from renewable energy devices will be purchased even if their initial energy costs are somewhat higher than using current sources, progress and jobs creation would skyrocket. For example, the basic layout for wind farms along the East Coast has already been established. We could move on starting on that project in a matter of months. The job creation would be in stages: first engineering, than construction, than permanent production and maintenance jobs. This kind of staged job creation would also happen for a new electric grid, electric cars and buses, and so on. These projects, if aggressively pursued, could be completed within 10 years; but initial job creation benefits would start within months with enough aggressive decision making.
If President Obama were willing to take the risk of being impeached, he could declare an emergency and start doing this right now. I don’t thank that he will do this, but if he gets frightened enough about his chances of reelection, he may.
Obviously, I just glanced over the details. The new book “Reinventing Fire: Bold Business Solutions for the New Energy Era” by Amory Lovins, Marvin Odum and John W. Rowe covers a lot of this in much, much more detail.
November 17, 2011 at 5:28 pm |
Hello Warren:
Thanks for changing your “AustrianSchool” summary.
November 17, 2011 at 11:11 pm |
Warren, given that we are nominally $15T in debt, where is the money going to come from to massively invest in green energy technology and build out the grid?
November 18, 2011 at 12:43 am |
Bob asks: “Warren, given that we are nominally $15T in debt, where is the money going to come from to massively invest in green energy technology and build out the grid?”
From the $2 trillion we take back through excess asset taxes on the excess $6 trillion the top 5% got over the recent years. And, since the government should not fund more than 30% of any project, this would trigger over $6 trillion in green renewable energy projects.
The U.S. is tremendously wealthy. We just have to put the excess money to work. And asset taxes are nothing unique. For me to get license plates in SC, I pay based on the value of my car. Those with a new Mercedes pay far more for license plates than those with old Fords. I guess class warfare started in Republican South Carolina, of all places!
November 18, 2011 at 5:14 am |
Hi Warren.
Thanks for the update.
Are you planning/thinking something regarding the SDR based currency situation?
Regards Peter.
November 18, 2011 at 2:12 pm |
Peter Says: “Are you planning/thinking something regarding the SDR based currency situation?”
From my limited knowledge of SDR based currency, I don’t see how it would ever prevent issues like what is currently going on in Greece and Italy. Also, the U.S. is unlikely to give up its having the dollar as the world’s premium currency, which the SDR, if aggressively accepted and used, would do. More than any other country, if we have to, we can use controlled-dollar-inflation to systematically back out of excessive debt obligations. Assuming, that is, that we can control inflation without slipping into hyper-inflation!
November 19, 2011 at 12:12 am |
Warren–Have you written anything to supplement the analysis in the Debt Depression book with regard to the implications of the collapse of TIPS real rates?
On one point of special interest to me, the necessary funding for retirement at age 65 (for 28 years to age 93) goes up by almost 50% from T/18 (at a 3% TIPS real rate) to T/28 (at a 0% TIPS real rate and the necessary funding for retirement at age 65 (for 55 years to age 120) more than doubles from T/26 (at a 3% TIPS real rate) to T/55 (at a 0% TIPS real rate).
More generally, it seems as though the collapse of TIPS real rates should have a significant effect on the TIPS v. Stock analysis in the book.
Also, do you think that the collapse of TIPS real rates is a temporary or a long-term condition?
Thanks
WKJ
November 19, 2011 at 2:08 pm |
WKJ says: “…it seems as though the collapse of TIPS real rates should have a significant effect on the TIPS v. Stock analysis in the book.”
On page 147 in “The Second Great Depression of Debt,” I show the results differences between 3% TIPS and 1.5% TIPS. I then note :
“Although the lower base interest on TIPS did reduce the gains over the various savings periods, its effect was quite small. This is because the gains from using the formula largely come from being out of the stock market when it is historically high. Also, the interest that TIPS contribute are generally mostly due to their inflation adjustment rather than their base interest rate.”
As for your “point of special interest,” please tell me the page number(s) in which book you are referring to related to the data you are using. I am confused.
November 19, 2011 at 2:26 pm |
WKJ asks: “…do you think that the collapse of TIPS real rates is a temporary or a long-term condition?”
Temporary, perhaps a year or two! The Fed is trying to stimulate the economy by both keeping interest rates low and creating excess money. At some point this will explode into inflation and the Fed will have to raise interest rates to slow down inflation so we don’t get hyperinflation. This may also answer your question on savings requirements for retirement.
November 20, 2011 at 11:25 pm |
Thanks for your response. I agree, at least in general. What I don’t know is if I am confident (brave) enough to trade out of some or all of my TIPS with a view to buying back in when real rates have risen again.
November 19, 2011 at 11:13 pm |
wbrussee Says:
This should make you feel very, very bad! But, it probably won’t. We are so used to politicians, Fox News, and others misrepresenting data and information that it has become a norm. Sad!
Fox news must be doing something right since they are blowing the competition away. http://www.mediabistro.com/tvnewser/category/ratings
November 19, 2011 at 11:35 pm |
Doug Fritz Says: “Fox news must be doing something right since they are blowing the competition away.”
How about pandering to the semi-illiterate masses that like simple but inane non-documentable explanations for complex issues.
November 20, 2011 at 3:02 pm |
Warren,
What news program doesn’t do identical to what you accuse Fox of doing? It’s not like you need to be a rocket scientist to report the news. Or is it because the Fox network doesn’t have your slant on the news? It’s easy to like those who agree with us and dislike the others.
Bob
November 21, 2011 at 12:56 am |
What Will Happen
What will happen, must happen, and …. has already happened. The US central bank in early 2009 become the sovereign agent for the use of United States currency. This was necessary because there wasn’t enough money in global system to maintain the US economy.
The bank now creates money as electronic ledger entries, having exactly the same value as the money that was earlier borrowed theoretically from the savings of those with past real (private) economic activity. This state fabricated money maintains the salaries of the US military, contractors, governmental agencies, and beneficiaries. Without the money and that is the question for sequestration, what would be the demultiplier effect on the economy?
The Sovereign’s Use of Money; Sovereign Keynesianism
Doesn’t all money have its worth ultimately grounded in the labor, service, and products of its citizens? Why shouldn’t a sovereign nation be allowed to use its currency to pay people a living wage to maintain the essential functions of the system. Private or public … what does it matter? In the private sector a lender is needed to front the money with a borrowing cost. Cut out the middle man. This Sovereign debt never has to be repaid nor will it be repaid. The country and the country’s society benefit from the employment, labor, products, and services produced. Can this money be used to create new energy systems, revitalize infrastructure, and do whatever the sovereign finds useful? Of course it can. This is Sovereign Keynesianism without need to repay.
It does diminish the value of the debt assets owed by US debt holders. But who cares? They still can use their accumulated electronic wealth in dollars to buy assets and services that the system produces. Without Sovereign Keynesianism, a debt jubilee, which will occur in Europe shortly, would wipe out US debt obligations to the entitled US debt owners.
The Austrians and Inflation
The Austrians are right that central banks can cause greater dysequilibrium in the system. But, for clarity in the current global case, more so than in the 1920′s, it is the mid to late 1980′s, 1990′s, 2000′s incestuous linkage of the central bank and politicians to and for the benefit of the private mega banking financial industry that has caused the Great Dysequilibrium.
In this personal, county, state debt saturated environment of November 2011, in the current asset over produced environment, in the current asset overvalued environment – all dysequilibrium elements produced by the bond holding mega-bank London Wall Street financial industry and their leveraged predatory debt spider webs … in this Great Dysequibrium state – inflation – even with the central bank creating money ex nihilo just to maintain the system and its debt obligations – inflation, is not an issue.( Watch what happens to gold’s valuation in the next two trading weeks).
Macroeconomics as a Science
As far a mathematical models: the debt-money-asset system will prove to be exquisitely cyclical, asset valuation bounded, self regulating, self organizing, and nonlinear. This self assembly process conforms to very precise elegantly simple time denominated mathematical equations: x/2.5x/2x/1.5-1.6x and y/2.5y/2.5y.
Macroeconomic Collapse
Will the debt-money-asset system collapse by 30 November 2011 and within a one percent time error of its Wilshire 8 July 2009 second fractal expected ideal nonlinear crash?
November 22, 2011 at 1:27 pm |
Bob Arkell Says: “What news program doesn’t do identical to what you accuse Fox of doing? Or is it because the Fox network doesn’t have your slant on the news? It’s easy to like those who agree with us and dislike the others.”
I could be guilty of that. Actually, I don’t watch TV news at all, but I get summaries on the net. So, most of the conclusions I reach are based on multiple news sources. Since I try to look for sources that have data and logic backing them up, I am going to most notice sources that do not do that well, or those that seem to distort their summaries or headlines. It seems to me that Fox slants the news more than other news sources; but, as I say, it could be that I notice Fox because they just don’t emphasize the data to support their stories.
I tend to believe BBC sources more than most, but again, maybe because in my mind they have less of a set agenda.
I have no data proving that Fox slants news more than other news sources. So I will try to be more careful of my criticism of Fox News in the future!
November 22, 2011 at 1:45 pm |
theeconomicfractalist asks: “Will the debt-money-asset system collapse by 30 November 2011 and within a one percent time error of its Wilshire 8 July 2009 second fractal expected ideal nonlinear crash?
Help me out here. You use a lot of words to make your point! Is the “one percent time error” based on one percent of time since time began, one percent of time in the last 100 years, one percent since July 8, 2009, or what? One percent of time since July 8, 2009, will be roughly 8 days. Wouldn’t it be easier to just give us the dates? So are you saying that the collapse will happen between November 22 and December 7 of this year?
And what do you mean by collapse. Are the world’s financial systems going to collapse such that trade will happen in goats and sheep or slivers of gold?
You are posing your prediction as a question. What does that mean? You aren’t going to do one of these “end-of-the-world” predictions on us, are you? Because if I am going to sell all my belongings and put their value into gold bullion, I don’t want you on December 8 telling me that you made a slight error in your calculations and then you just give me a new date!
Also, on December 8, please give an update on this blog!
November 22, 2011 at 2:40 pm |
Warren, your solution to the financial crisis is more tax and spending, and higher debt. Do you you think that we need to cut the budget too, and if so, where would you make cuts?
November 22, 2011 at 3:59 pm |
MPyhthon asks: “Warren, your solution to the financial crisis is more tax and spending, and higher debt. Do you think that we need to cut the budget too, and if so, where would you make cuts?”
Absolutely, we need cuts. But we should not take our eye off the immediate goal of lowering unemployment. The first cut I would do, and I would do it very quickly, is to bring our troops home and put them on our borders. Note that our President just announced the opposite by promising to rotate 2500 troops through Australia! That is crazy! Like 2500 U.S. troops in Australia will affect China’s decision what to do with their huge military!
I would not reduce troop levels at this time because it would hurt unemployment. Troops at home cost a lot less than overseas. They will be available if we need them, can protect against terrorism, can reduce drug trafficking, will reduce illegals coming into our country, and will buy homes and cars and other things that will spur our economy. This is a large cost savings that brings all sorts of quick benefits. I haven’t worked out the numbers, but I suspect that it would go a long way towards satisfying the proposed automatic additional $400 billion cut in the military.
We also have to cut Medicare. This should be done by allowing Medicare to negotiate drug cost (like the VA does), require the use of nurse practitioners rather than doctors, etc. Retirement age should be changed to age 70 for full benefits, still keeping a much reduced early retirement. But this delayed retirement should not take effect for about 10 years so our economy can recover first.
And government size should be frozen as our economy recovers.
November 23, 2011 at 1:59 am |
re; End of the World..
Not the end of the world, just the greatest global asset nonlinear devolution of all time.
Could the debt-money-asset macroeconomic bounded system, summated in its daily weekly monthly quarterly asset valuations, have a time based quantum self assembly patterned evolution?
The one percent error refers to the low to low 247-249 trading day second fractal base (2.5x) starting 8 July 2009 and the expected daily low 3.62x later at the end of the composite third and fourth fractals.
This historical collapse now predicted as transpiring over the next five trading days and ending 30 November 2011 will be observable on daily, weekly, and monthly charts.
The Wilshire’s ideal decay fractal is 2/4 of 5/5 days :: y/2.5y/2.5y at the end of the 22 November 2011 trading day.
(And yes, this collapse will be attributed by the dullards to the two polarized parties failing to meet an agreement and to Euro bond default with the Euro dissolution).
11 October 2007 was prospectively predicted as the nominal high for the Wilshire (the macroeconomy’s valuation proxy) by the patterned science of saturation debt money asset macroeconomics.
November 23, 2011 at 2:54 am |
Warren,
I agree with most of what you would do to help the current economic conditions. Certainly we no longer need troops in Germany. My question is what would you do if a country (or some of it’s citizens) decided to attack us? The rational on the current wars was to defeat terrorism. Please do not argue on whether the current wars are good or bad since I am curious on what circumstances need to exist before you are in favor of sending troops out of our country.
The only other part I dislike is to only freeze the budget as it currently stands. Surely some part of the federal budget needs to be eliminated. Granted maybe the only political way is to freeze everything.
Bob
November 23, 2011 at 6:00 pm |
Warren:
Have a happy Thanksgiving tomorrow.
November 27, 2011 at 11:05 pm |
Warren,
After rereading your comments you seem to merge a scientific theory and a scientific fact. Evolution is “one” scientific theory which has never been proven and which I believe never can be proven. But I have no problem utilizing it as one theory in the attempt to understand the world. Global warming is another theory. The problem comes when one confuses a theory and a fact.
It is easier to decide something is fact than to accept you just don’t know. Fesinger’s Cognitive Disonance Theory states once a person makes a decision it is almost impossible to budge them from that decision since no one likes fence sitting.
Then the decision becomes writ and all who disagree must be shouted down. It is like a religion/faith. The believer knows he/she is correct and everyone else is nuts or stupid.
The economic theories are theories and not fact! As are evolution and global warming. I am a Christian and believe differently than those who are not Christian. But I recognize this is based on faith. Granted I believe it as fact whereas you see it as religion.
So when you judge keep in mind what is a theory and what is a fact.
My difficulty is that you sometimes mix the two equally giving them weight. It is easier to have facts since all of us can agree but the problems are so complex that we are currently unable to have enough facts on what to do.
I attempt to keep an open mind, since sometimes theories can do a good job of organizing the world (data). But sometimes it becomes faith, no longer scientific except being presented as scientific by the faithful (ex. evolutionists & man made global warming advocates).
Really listening to another who radically differs from your beliefs is difficult and for some impossible. I don’t disbelieve science but recognize some is theory and only part are facts. Telling the difference is the hard part.
Keep giving us the facts (data) and then your (theory) interpretation of those facts. Don’t assume that because we may differ in the interpretation that we necessarily must be wrong. And we who have a different bent will not assume that your interpretation must be wrong since obviouly you have been correct in many cases.
Bob
December 1, 2011 at 12:46 am |
Bob,
Let me, if I may, try to explain why Warren uses the words fact and
theory interchangeably.
Warren was trained in the hard sciences (chemistry, physics, etc)
to become an engineer. In other words, you could consider him
a scientist. He was taught to think like a scientist in college.
Scientists think differently than the rest of us. They are careful with
numbers, try to think logically and rationally, and the words they
use have different meanings than the general public has for them.
To a scientist, an “educated guess” is also called a “hypothesis”.
It is something to be tested, not yet considered a fact.
A “law” e.g. law of thermodynamics, is considered an absolute truth.
It cannot be changed in any way, shape or form.
A “theory” is considered a FACT. Take Einstein’s “Theory of Relativity”. It is considered a fact. Ditto for the theories of evolution and global warming. Recently, headlines were made because a
neutrino supposedly went faster than the speed of light. Most scientists believe a mistake was made somewhere, because if
proven true ( which I personally think is highly unlikely) , it would
turn the theory of relativity on its head. Thoeries , in science, are
data, thoughts, experiments etc. that have consistently been proven
true, are rational, and most importantly can be confirmed by data.
Therefore they are facts.
I appreciate Warren’s blog simply because he is rational, backs his
statements with data, and demands that others do the same. In
short , he’s being a scientist. If you can think like a scientist, you will understand Warren and his train of thought better.
I hope this helps.