Lammert's Latest
From Ure
11-25-08
The Economic Fractalist was kind enough to send me an update on his thinking - and seems that despite the rabid paper-printing, there are larger forces at work. I'll let his email explain the details...
"George, as the world sits on the crest of a further deflationary valuation implosion of equities, commodities, gold, and real estate - and as US Treasuries earn a nickel to a dime a year on a hundred dollar investment - the recent mega bailout of Citi is being often compared with the miserly refusal for a relatively minor bailout for GM. GM represents the microcosm business model, health benefit entitlement model, and pension model for the entire United States. Because of its great importance to the real economy, GM's long term viability likely parallels that of the republic. GM's corporate owners have been dependent upon the workers for a symbiotic but unsustainable long term business model. The money made and forwardly borrowed by GM to maintain wages and benefits was well plowed back into the real economy. GM's product was generally useful and essential to the economic growth of the United States over the last 60 years. Compared with the massive governmental hand outs in either the health care and or the pharmaceutical industries which produce little real value added in the global macroeconomy, GM arguably represents a lessor of the three poor business models. Compared with the larger picture of a debt driven forward economy the United States corporate and political 'owners and decision makers' are dependent upon the banks and financial industries as intermediaries to provide forward credit to continue and sustain the much larger scale and unsustainable bad business model. The implosion of the the financial industries' and Central Bank's created housing bubble has resulted in waning demand for GM worker dependent products paralleling waning larger scale demand for bank-abled credit. Workers can enable the production of vehicles but those products will sit on full lots without demand. Banks given massive injections of low interest credit by monetary potentates to enable debtors will have that credit sitting on their books if there is no credit demand based on declining jobs in the real economy from preexisting low interest rate induced and financial industry facilitated oversupply. With the loss of jobs, more foreclosures. and credit default - existing debt is becoming relatively greater each day. And the greater debt dependent US macroeconomic system - just like its proxy GM - will inevitably implode. This is the qualitative nature of the nonlinear ending of the United States' 150 year quantitative second fractal. While alternatives of doing nothing may be more immediately worse, all of these massive trillion dollar interventions - all theoretically based on the taxes of future wages of world citizens, represent a basic gross misunderstanding of how the self-balancing macroeconomy system works and the greatest historical[ly] futile act ever - of pushing on a string.
The present moment is indeed an interesting 'science project' -which most economists won't admit, but it really all comes down to this easy-to-understand concept: Can a government print enough money and force it into circulation fast enough to prevent massive deflation?
Like I said, it's nothing more than a junior high school 'economic science project' -- Yet those perpetrating it would have you believe otherwise. Pardon me if I'm skeptical and can still see how it could blow up either way, so we'll just keep on our self-sufficiency path here until the science project is finished...which could be in 2009 by the look of it. Hyperinflation or hyperdeflation, and soup lines either way.
Oh, and note Gary's use of 'second fractal' - ties in to the lack of new/innovation/gotta have it products for people to power 'growth'. Once everyone has everything corporate capitalism has a little problem that no one is talking about: Where's the plan for sustainable economics? The present economic system handles growth just fine. But when it comes to contractions, it fails...or more correctly, implodes as we are not witnessing.
Key thing about the second fractal - and the rush to fund the automakers - is that autos were one and are one of the biggest segments of the economy. As goes GM, so goes the world, claims one viewpoint. "No new consumption = no economy" says my sticky note on the wall.
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