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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Crimson Ghost who wrote (60368)2/15/2005 6:13:56 PM
From: Gemlaoshi  Read Replies (2) of 74559
 
<<“The truth is that the dangerously destabilising idea has rooted in Washington that, in the words of Vice President Cheney, ‘deficits don’t matter (we proved that in the 90s).’ He is right of course in pure power terms; a fuller expression of Cheney’s dictum might well add, ‘as long as we are able to force everyone else to accept them (deficits).’”>>

Auerback's article further illustrates that the supply-side idealogues in the White House are fighting the wrong war with the wrong weapons. While supply-side economics had some appeal during the early eighties, that appeal was due to the high inflation/low investment environment of the 1970s and early 80s.

Those conditions simply don't exist today, with record low interest rates, and record high housing and auto consumption. If there is an unmet demand somewhere in the economy, it is certainly hard to find. We are not going to grow our way out of this one.

In the wrong environment, the Laffer Curve has an ugly downside: increased malinvestment in the desperate search for yield, and tax revenues decreasing at an increasing rate...what Auerback and many on this board have so eloquently described as Debt Trap Dynamics.

The issue remains...is the train wreck inevitable? Have we passed the point of no return? Is it possible that some brave souls will speak the truth, political consequences be damned?

I still find it difficult to believe that we have allowed these half-wits to hijack the largest economy in the world without so much as a wimper from our elected representatives in Congress. Truly amazing.

Dave
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