I'm sort of agnostic on the Noland view also. Suffice to say though, a 6% annualized drop in various monetary aggregates over two months (3% over three months) is a lot closer to a sell signal than a buy.
Barron's had this over the weekend and it's closer to my thinking,
"The monetary contraction has been partly the result of the Fed's relentless campaign to punish savings (and encourage risk taking) by holding real short rates underwater".
My comment: That's the Noland view, I'd just add that "risk taking" is running amok, and has gone dangerously parabolic (blowing off?) and is now completely distorting the world economy (see my various prior posts this week on commodities, shipping rates, China, etc).
Barron's goes on:
"Some economists note that this merely is a reflection of the slowdown in mortgage refinancing activity. Refis boost bank deposits after the happy homeowners take down their new loan and before they spend the proceeds on new cars, big-screen TVs, college tuition and vacations"
My comment: and crap and junk from China, see WMT news on Wed.
Message 19498707
Barrons:
"To ignore the effects of the 80% decline in mortgage refis since summer is to overlook the elephant in the room, says HSBC economist Ian Morris. This drop is reflected in the falloff in the money stock and will likely hamper consumer spending in 2004."
My comment: In otherwords the system (except apparently the govt) is tapped out, can't borrow more, can speculate more, and has completely satiated it's appetite for consumption (see Contrary Investor's excellent charts on housing, auto purchases, consumption: there's NEVER been a consumer recession, it's been katie bar the door for years).
It's like all the 300 pounders (and not all men) I saw last time I went into Sizzlers (yeah, I'll admit I like a steak once in awhile, but jeez). They just kept going up to the "salad bar" (there's a term!)for cookies, chocolate cake with sort of this funny ice cream piled on, cheesy things, and apparently just for good measure, two garbonzo beans (after all it was a "salad bar"). And Uncle Sam plans on bringing out some really tasty pizza, and french fries (2004 tax cuts and a $700 billion deficit) to keep "stimulating" all these wide bodies (and by extension the runaway Asian economies, certainly not the US). |
