Yesterday’s preferred wave count outlined a small fourth wave correction as the most likely outcome for the session, and the market performed very much in line with that expectation. Odds are reasonably good that there’s still a small degree fif…
On Tuesday, Fitch Ratings affirmed all the debt and credit ratings of MetLife Inc. (MET) and its operating subsidiaries, reflecting its dominant market position and financial flexibility amid the low rate interest environment. Accordingly, Fitch asserted the issuer default rating (IDR) of “A” for MetLife, while the financial strength ratings (FSR) were maintained at “AA-” […]
Nobel Prize-winning economist and New York Times columnist Dr. Paul Krugman is at it again.
A favorite of the Keynesian crowd, he claimed earlier this week that fixing the deficit is important but added that “doing it now would be disastrous.” He also observed that the 10-year U.S. debt situation isn’t really all that bad.
At least he’s consistent. I’ll give him that.
For five years now Dr. Krugman has argued that increasing U.S. government spending is vital to our nation’s recovery. And for five years he’s been dead wrong.
Since this crisis began, the United States has spent trillions…more money than any nation in history. In the process, it’s gone from being the world’s biggest creditor to the biggest debtor of all time.
In fact, our national debt is now so high that people literally can’t count the zeros. So most have thrown up their hands in exasperation and given up trying.
Now, to be perfectly clear, I don’t believe Dr. Krugman is stupid. Far from it – you don’t win Nobel Prizes for being an idiot. However, I do believe that he’s trapped in the past–an acolyte of sorts to failed economic policies and doctrine that dates to the 1930s.
Some people, like University of Chicago Finance Professor John H. Cochrane, are more pointed, noting that if Krugman were a scientist, he’d be akin to a “flat-earther,” an “AIDS-HIV disbeliever” or somebody who believes the continents don’t actually move.
This makes him very dangerous in the scheme of things because Dr. Krugman’s solution is that “we” just haven’t spent enough money…yet.
I don’t know how he can make that argument with a straight face.
During the current commodity supercycle, there have been occasions-too many to count-when investor psyche has been damaged by reports about slowing U.S. growth, a hard landing in China or a debt crisis in Europe.
Yet just behind the gloom, significant and positive trends are taking hold, causing the storms to start dissipating.
I often say that government policies are precursors to change, which is why we follow the monetary and fiscal actions closely as they can have a significant impact on asset prices.
You have to go back about 16 months when Brazil kicked off the latest global easing cycle by cutting interest rates by 50 basis points. Since then many developing countries such as the Philippines, China and Colombia, as well as developed nations of Japan, the European Central Bank, the U.S. and the U.K. have joined forces in a world-wide synchronized stimulation of the economy.
Last summer, Mario Draghi indicated that the ECB would do “whatever it takes” to save the euro. In the fall, the Federal Reserve agreed to buy $85 billion a month in Treasuries and mortgages, amounting to $1 trillion a year.
And just recently, Japan announced that, in addition to pumping $1.1 trillion into the markets through 2013, the central bank will keep an open-ended approach to buying assets through 2014.
Historically, central banks’ policy actions occur after there’s been some economic deterioration. Several months later, the stimulative measures work their way through the global economy.
This has been the case with China, which has been showing remarkable improvement in its export-oriented HSBC Purchasing Managers Index. The PMI is a measure of health of companies in China, as it includes output, new orders, employment and prices across numerous sectors.
This month, the Flash PMI came in at 51.9, beating market consensus, which was at 51.7. The PMI stands at a two-year high, as you can see in the chart below.
This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. Ballooning government deficit spending and debt has a negative effect on private GDP, money supply, money velocity and wages. I have often explained why the Keynesian belief that the government can print/ borrow and spend enough money…
This is a syndicated repost courtesy of Sober Look. To view original, click here. Reposted with permission. US crude oil prices have been moving up for nearly two months now. There are a number of reasons behind this strength in crude, including ongoing Mideast unrest, expectations of higher demand from China, and of course the…
Ugly unemployment numbers are politically inconvenient in democracies. Red-faced politicians have to come up with excuses. Elections are lost over them. So, countries use inscrutable statistical systems to make unemployment look better. But France also…
This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission. The Fed delivered a clear message Wednesday after its two-day meeting: Don’t expect the easy monetary policies to end anytime soon. The Central Bank’s official policy statement, the first of 2013, said interest rates would remain near zero,…
In my time I’ve watched a bunch of countries go south. In the 80’s it was all of South America. Poland, Yugoslavia and South Africa also hit the skids during those years. There was an observable pattern as events unfolded. The early stages of a crisis were always marked with capital outflow by the…