Our Solid Economy
That looks like it'll work just fine.
>
The silliest thing about all these reality deniers is that a recession -- a normal, cyclical event -- is actually healthy for the economy over the long run.
Consider how many of our current problems are due to ill-considered poorly thought attempts to avoid a cyclical recession. Not only is our mess man-made, but it was totally unnecessary.
Tuesday, February 05, 2008 | 01:00 PM | Permalink
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Has anyone ever asked "B-52" Ben why hes trying to repeal the business cycle? What does it say when the ECB and Australia are either leaving rates along or raising them right now?
Posted by: Joe Klein's conscience | Feb 5, 2008 1:04:45 PM
Could it be that they don't have the budget and trade deficits we do? Our economy is entirely based on debt creation, not production.
Posted by: tedzbear | Feb 5, 2008 1:08:45 PM
"Consider how many of our current problems are due to ill-considered poorly thought attempts to avoid a cyclical recession."
That's what a debt-laden nation/society does.
Posted by: Pat G. | Feb 5, 2008 1:09:43 PM
How would the market look today if the Fed wouldn't of cut by 75 on the freak out Tuesday?
I would be 75% in equities and going to sleep for 3 years.
Posted by: Steve | Feb 5, 2008 1:10:17 PM
You're thinking is archaic. There is no business cycle. Don't you know that the price of housing and stocks only go up?
Recession bad. Perception of strong economy good. Savers bad. Spenders good.
Posted by: Helicopter Ben | Feb 5, 2008 1:10:25 PM
There is no true, pure economy. How on Earth did you get the idea that there is a pure state of being for a world or national economy? An economy is a flow. It reacts to cause and effect. There is no such thing as an appropriate recession, just as there is no such thing as a perfect inflation.
All economies are artificial constructs, based on fiscal policies, monetary policy, interest rates, and consumer behavior. Entropy would kill the process if no actions were taken to enhance or deaden various effects.
So, this is why you are so pessimistic about so many things. You are looking for a purity that can never exist.
This is an amazing personal revelation. Quite naive.
Posted by: cinefoz | Feb 5, 2008 1:23:34 PM
It's "wouldn't have" not "wouldn't of", Steve. Illiteracy can ruin an otherwise intelligent-sounding statement.
Posted by: mappo | Feb 5, 2008 1:27:55 PM
cinefoz says, "You are looking for a purity that can never exist."
Not Barry...it's the politicians that are seeking the "purity."
Your statement kind of validates Barry's point!
Posted by: glenn_in_MA | Feb 5, 2008 1:37:48 PM
Someone in here reeks of fear.
Posted by: Marcus Aurelius | Feb 5, 2008 1:38:54 PM
I did not see Tiki Barber at the parade today..
Posted by: Bloomy | Feb 5, 2008 1:39:53 PM
Why are the metals tanking? Steve Barry, blog commenter, called this a few days ago, saying gold would collapse. Looks like it may have started. I don't get why.......
Posted by: Whammer | Feb 5, 2008 1:40:59 PM
Gold is a late-stage cyclical, not a religion. Look at that euro-dollar triple-top. I would be a seller of gold here, certainly not a buyer.
Posted by: ZackAttack | Feb 5, 2008 1:43:44 PM
Think of an economy as a balloon that has a bump disfiguring it. If you squeeze the balloon, the bump appears in one or more new places. If you squeeze those, the bumps just go somewhere else and take more energy to flatten.
Meanwhile, the balloon is always growing bigger and the original bump moves on it's own in relation to the growing size of the balloon. If you try to stop the balloon from growing, then it fails in it's purpose and is not large enough to accomplish its task. However, if it grows out of control, it can damage the space in which it exists or grow in a way that causes it to fail in purpose.
Try to create the perfect balloon and you will fail because it will always have aspects you can never control.. The best you can do is manage it so that is causes no harm and still fulfills its purpose.
This is why the stock market will always go up, unless entropy takes over or unless well meaning meddlers try to create a static perfection.
Posted by: cinefoz | Feb 5, 2008 1:48:34 PM
It's completely political, supply siders need to justify the tax cuts, so anything that suggests that the economy slumped like a Dali watch on their time is verboten. All of these deniers will turn on a dime if a democrat is in office.
Posted by: Frank Mayo | Feb 5, 2008 1:51:11 PM
Whammer: I think there are a few reasons...if this actually is the beginning of a big fall
1) Despite what gold bugs say, at this point gold is still primarily a currency play and the $ is up big today. I think that the Euro is going to fall a lot and over time the correlation between gold and currencies will decrease but right now it's like 70% (to pull a number out of my ass).
2) It's unclear that gold will do well in deflation unless there is severe deflation...and it looks like deflation is coming on faster than inflation.
3) Most of the speculators in gold are highly "sophisticated" (i.e. leveraged) and will have to sell just to cover their other positions. Even a huge gold bug like Mish Shedlock says that he expects gold to have a huge correction at the beginning of the cycle before it skyrockets to massive records.
Posted by: mikkel | Feb 5, 2008 1:51:18 PM
marcus-
A little more color on Gold perhaps
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/05/cnspain105.xml
The money quote:
"Pedre Perez, head of the Spanish G-14 property trade group, said the reports of a state bail-out were untrue. "We do not reveal who we talk to but we are not asking the government for a rescue. No such thought would cross our minds. Commercial property is still doing magnificently. This can be resolved by market forces."
Reason why gold went lower......Spanish banks are dumping gold ala Big Ben.
helicopter Jose'!!
Ciao
MS
Posted by: michael schumacher | Feb 5, 2008 1:52:04 PM
So... the million dollar question.... do we close at the lows today?
Posted by: Vermont Trader.. | Feb 5, 2008 1:53:35 PM
Posted by: cinefoz | Feb 5, 2008 1:48:34 PM
________
Until the balloon bursts from all of the hot air.
Posted by: Marcus Aurelius | Feb 5, 2008 1:54:02 PM
product off pubic education
Posted by: Steve | Feb 5, 2008 2:03:02 PM
"Has anyone ever asked "B-52" Ben why hes trying to repeal the business cycle? "
Actually that's been part of the problem, Ben has NOT been B-52 contrary to expectations... the Fed has been draining off liquidity.
http://wallstreetexaminer.com/
Fed Flea Flicker Play - WSE Pro
by Lee Adler, Tuesday, February 5, 2008, in Money and The Fed, Professional Edition | Permalink |Comments (0)
The Fed pulled a net of $11.25 billion out of the market on Tuesday, a near double reverse of Monday’s add.
Posted by: Stuart | Feb 5, 2008 2:04:23 PM
I Think the positive today is oil is deflating. This is going to help going forward. Hopefully 60ish. Pie in the sky I know.
I still feel we would weather the credit problem better if energy would deflate.
CineFoz....WTF....Your head is like a balloon full of hot air! People around here keep trying to squash it and you keep popping up?
I don't mind your point of view, just back it up with facts, technical or fundamental would be just fine. Your always insulting everybody too? Again, WTF?
Posted by: ken h | Feb 5, 2008 2:05:07 PM
I don't ever want to turn the economy over to well meaning meddlers who think a good recession is needed just to take us back to a fantasy purity.
Economies grow by nature. To shrink them and impose artificial limits on all, just to fulfill a fantasy image of a state of economic perfection is a benign form of a command economy. Wage and price control are next, just to deal with unpleasant aspects of supply and demand?
Life is messy and so are free economies from time to time. But growth is built into the system. Attempts to remove it are unnatural.
The best you can do is keep growth from going out of control. And the second best thing you can do is fix the damage promptly when growth does go out of control, without stopping growth completely. Stopping growth completely is an unnatural act.
Posted by: cinefoz | Feb 5, 2008 2:10:37 PM
The economy as a balloon analogy fails. The economy is like lungs - overinflation is lethal.
Pop!
Posted by: Marcus Aurelius | Feb 5, 2008 2:18:48 PM
The other reason gold is going down is that it's a bad currency play, and an even worse inflation hedge (see investmenttools.com for neat charts on gold prices v. various other real assets). Last I checked, ain't no gov'ment willing to redeem my dollars, euros or pounds for gold. And it would serve as a poor currency substitute anyways. How could you keep from losing 1/900 of an oz if you wanted to carry around gold dollars for which to pay your bills? Or even 1/45 of an oz, for a twenty dollar gold bill? Will banks allow me to write checks off my gold deposits?
That said, whether the coming days yield inflation or deflation is truly the $64,000 question. By any metric, the years 2003-2005/6 were inflationary for the dollar. But after a few more rate cuts, emergency and otherwise this year, the fed will be literally flooding the world again w/ dollars. Will the reduced money market activity due to the bullshit alphabet soup of the financial alchemists decrease money market activity enough to prevent all those dollars from just depreciating, i.e., inflating the prices of real goods? Or will the fed call it just right, keeping enough currency out there such that currency grows or declines about as much as real output. Who knows? But I know which way the fed will tend to err--on the side of too much money, i.e., inflation, instead of too little.
Which is why cinefoz's optimism is not unfounded. Inflation, even if only creating the illusion of demand and growth, is a powerful psychotic, and markets are basically manic-depressives these days (or perhaps have always been so?). The only problem is that the dosage has to keep going up to get the same results, and at some point (e.g., Japan) you run out of medicine.
Posted by: Don | Feb 5, 2008 2:19:50 PM
Growth vs. inflation. The Fed is mandated to maintain full employment and low inflation. From 1981 to 2000, inflation was not a problem no matter what the fed did. That has changed, and now they have become opposing forces (which is actually the more natural state). The Fed can't equally satisfy both mandates at the same time. So they must alternate, to prevent a major dislocation.
Posted by: SteveC | Feb 5, 2008 2:21:32 PM
