Comments on: Let Them Inflate http://dailyreckoning.com/let-them-inflate/ Entertaining Ideas on the Economy, Markets, Gold, Oil and Investing Strategies. Fri, 10 Feb 2012 17:22:41 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Patrick Connolly http://dailyreckoning.com/let-them-inflate/#comment-20444 Patrick Connolly Mon, 24 Aug 2009 12:07:57 +0000 http://dailyreckoning.com/?p=17851#comment-20444 The Editor The Economist letters@economist.com Buenos Aires, October 3, 2008-10-07 THE SNAKE BITES ITS OWN TAIL SIR – The financial crisis, is now becoming an economic one. It is to a large extent accepted that a fall in the real rate of interest stimulates economic activity and will not be inflationary if plant and labour are available, until the liquidity trap is reached. However few comment in the face of today´s crisis that low rates of real interest also signal a low marginal product of capital, since entrepreneurs will willingly pay more for capital if its marginal product allows this. Low wages in terms of, say, housing, signal low marginal product of labour. Today we have evidence of both low marginal products. In the rich countries the same economic agent is a trinity which supplies labour, professional or other, supplies capital , either as investor or through pension funds and is, above all, the ultimate consumer. But each member of this trinity militates against the other two. To compete globally robotization and outsourcing to east Europe and Asia are essential tools but cap real domestic purchasing power which is maintained through very cheap (and good) “made in China, etc”. For social peace the state must swell its ranks, pick up the shell-shocked – violent, drugged, unemployable youth or redundant though experienced, middle aged. To pay for this humanitarianism, business must be taxed, thus increasing costs, and making “head cuts” and outsourcing the only viable solution to maintain falling dividends and avoid failure. To sell its expensive goods and housing to domestic consumers with sagging purchasing power, credit must be expanded so graduates start their lives with huge debts and loans are made to obviously risky borrowers. Since the onset of deindustrialisation from Birmingham to Detroit the marginal product of capital has been falling, real interest had to fall as a result ( not only through the policies of Mr Greenspan) and the only field of investment left was the booming construction industry, sowing the seeds of “toxic mortgages” which is where we came in. Eur Ing Patrick Connolly.M.I.Mech.E. B.Sc.(Econ), LU, Member of the Argentine Institution of Financial Executives (IAEF) LATIN AMERICAN FINANCIAL SERVICE , Buenos Aires. (Subscriber02605759) PS Correction in second paragraph, should read “through”, sorry. The Editor
The Economist
letters@economist.com

Buenos Aires, October 3, 2008-10-07

THE SNAKE BITES ITS OWN TAIL

SIR – The financial crisis, is now becoming an economic one. It is to a large extent accepted that a fall in the real rate of interest stimulates economic activity and will not be inflationary if plant and labour are available, until the liquidity trap is reached. However few comment in the face of today´s crisis that low rates of real interest also signal a low marginal product of capital, since entrepreneurs will willingly pay more for capital if its marginal product allows this. Low wages in terms of, say, housing, signal low marginal product of labour. Today we have evidence of both low marginal products. In the rich countries the same economic agent is a trinity which supplies labour, professional or other, supplies capital , either as investor or through pension funds and is, above all, the ultimate consumer.

But each member of this trinity militates against the other two. To compete globally robotization and outsourcing to east Europe and Asia are essential tools but cap real domestic purchasing power which is maintained through very cheap (and good) “made in China, etc”.

For social peace the state must swell its ranks, pick up the shell-shocked – violent, drugged, unemployable youth or redundant though experienced, middle aged. To pay for this humanitarianism, business must be taxed, thus increasing costs, and making “head cuts” and outsourcing the only viable solution to maintain falling dividends and avoid failure.

To sell its expensive goods and housing to domestic consumers with sagging purchasing power, credit must be expanded so graduates start their lives with huge debts and loans are made to obviously risky borrowers.

Since the onset of deindustrialisation from Birmingham to Detroit the marginal product of capital has been falling, real interest had to fall as a result ( not only through the policies of Mr Greenspan) and the only field of investment left was the booming construction industry, sowing the seeds of “toxic mortgages” which is where we came in.

Eur Ing Patrick Connolly.M.I.Mech.E. B.Sc.(Econ), LU, Member of the Argentine Institution of Financial Executives (IAEF)
LATIN AMERICAN FINANCIAL SERVICE , Buenos Aires.
(Subscriber02605759)

PS Correction in second paragraph, should read “through”, sorry.

]]> By: Howard Denny http://dailyreckoning.com/let-them-inflate/#comment-20226 Howard Denny Sat, 22 Aug 2009 21:02:09 +0000 http://dailyreckoning.com/?p=17851#comment-20226 The Magombo Guru caused me -(calling me stupid and dumb!) to buy a safe and fill it with gold and silver! I don't understand why everyone around me is sweating bullets?(This investing stuff is fun! Mr. Denny The Magombo Guru caused me -(calling me stupid and dumb!) to buy a safe and fill it with gold and silver! I don’t understand why everyone around me is sweating bullets?(This investing stuff is fun! Mr. Denny

]]> By: JMR bayou bobby http://dailyreckoning.com/let-them-inflate/#comment-19184 JMR bayou bobby Tue, 18 Aug 2009 09:05:33 +0000 http://dailyreckoning.com/?p=17851#comment-19184 Alonso Quijano el bueno must be from Argentina. Alonso Quijano el bueno must be from Argentina.

]]> By: Toru http://dailyreckoning.com/let-them-inflate/#comment-19183 Toru Tue, 18 Aug 2009 09:05:04 +0000 http://dailyreckoning.com/?p=17851#comment-19183 World stimulus money is running out. We need faster printing machine now. See the chart carefully. World stimulus money is running out.
We need faster printing machine now.
See the chart carefully.

]]> By: Alonso Quijano el bueno http://dailyreckoning.com/let-them-inflate/#comment-19138 Alonso Quijano el bueno Mon, 17 Aug 2009 23:18:34 +0000 http://dailyreckoning.com/?p=17851#comment-19138 Well, I'd have to say that negative interest rates and planned inflation make sense in a modern economy. Our entire system requires "Growth". It must occur in an economy based on debt. Therefore, the money supply must grow accordingly or growth ceases. Look at the depression of 1907. That one was not caused by inflation, but rather the lack of money (i.e. William Jennings Bryan "Cross of Gold"). In fact, this event gave motive to the creation of the Federal Reserve (I know! the Federal Reserve is neither federal nor does it have reserves). Only those who are in possession of large quantities of cash would benefit from a restricted money supply. I do agree, however, that in an effort to protect your lifelong savings from the evaporative effects of inflation, a better store of value must be found. Yep! Gold, Silver, Oil, any commodity port in an inflation storm. Well, I’d have to say that negative interest rates and planned inflation make sense in a modern economy. Our entire system requires “Growth”. It must occur in an economy based on debt. Therefore, the money supply must grow accordingly or growth ceases. Look at the depression of 1907. That one was not caused by inflation, but rather the lack of money (i.e. William Jennings
Bryan “Cross of Gold”). In fact, this event gave motive to the creation of the Federal Reserve (I know! the Federal Reserve is neither federal nor does it have reserves). Only those who are in possession of large quantities of cash would benefit from a restricted money supply. I do agree, however, that in an effort to protect your lifelong savings from the evaporative effects of inflation, a better store of value must be found. Yep! Gold, Silver, Oil, any commodity port in an inflation storm.

]]> By: Paul Gelman http://dailyreckoning.com/let-them-inflate/#comment-19133 Paul Gelman Mon, 17 Aug 2009 22:51:02 +0000 http://dailyreckoning.com/?p=17851#comment-19133 (VVL) and (VVU) ? Looks like Mogambo has discovered the true letter representations of what type of recovery we'll have. I'm betting on VVL myself. If there was a letter that fell below the L, I'd bet on that too. (VVL) and (VVU) ? Looks like Mogambo has discovered the true letter representations of what type of recovery we’ll have. I’m betting on VVL myself. If there was a letter that fell below the L, I’d bet on that too.

]]> By: JMR Coy Lewis http://dailyreckoning.com/let-them-inflate/#comment-19130 JMR Coy Lewis Mon, 17 Aug 2009 22:32:40 +0000 http://dailyreckoning.com/?p=17851#comment-19130 MM Krugman is a freaking GENIUS! Just ask him. MM

Krugman is a freaking GENIUS! Just ask him.

]]> By: Lost & Found http://dailyreckoning.com/let-them-inflate/#comment-19096 Lost & Found Mon, 17 Aug 2009 18:09:21 +0000 http://dailyreckoning.com/?p=17851#comment-19096 "the Labor Department figures that the Consumer Price Index rose 0.7% in June, and although 0.7% does not seem like that much in one month, it adds up to a lot over the course of time; like for instance, in a year, when this 0.7% per month inflation compounds to 8.7% per year inflation! Yow!" July CPI was zero. Yow! “the Labor Department figures that the Consumer Price Index rose 0.7% in June, and although 0.7% does not seem like that much in one month, it adds up to a lot over the course of time; like for instance, in a year, when this 0.7% per month inflation compounds to 8.7% per year inflation! Yow!”

July CPI was zero. Yow!

]]> By: Matt Smyth http://dailyreckoning.com/let-them-inflate/#comment-19094 Matt Smyth Mon, 17 Aug 2009 17:57:26 +0000 http://dailyreckoning.com/?p=17851#comment-19094 People say that 3% bulls on the dollar means that the dollar will go up. Maybe that is true in the short term but the only reason it is true is because 98% of people use the dollar for a safety play. When are the 98% of fools (dollar bulls) that use the dollar as a safety play going to be wrong ? Where the hell are these 98% dollar bears when the market crashes ? Are these numbers real ? 3% dollar bulls but get what happens when the stock market goes down... WTF? People say that 3% bulls on the dollar means that the dollar will go up. Maybe that is true in the short term but the only reason it is true is because 98% of people use the dollar for a safety play.

When are the 98% of fools (dollar bulls) that use the dollar as a safety play going to be wrong ?

Where the hell are these 98% dollar bears when the market crashes ?

Are these numbers real ? 3% dollar bulls but get what happens when the stock market goes down… WTF?

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