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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (87084)	9/29/2007 7:58:03 PM
From: arun gera	Read Replies (1) \| Respond to of 110194

>the "worldwide savings glut" are so divorced from the underlying facts.> Another view imf.org >Some call this a new world order. I see the situation as a temporary but effective response to crisis. It is somewhat misleading to term this situation a "savings glut" for that would imply that countries running current account surpluses should reduce domestic incentives to save. But if the true problem is investment restraint, then a reduction in world savings incentives will engender excessively high real interest rates when the factors holding back investment dissipate. Put differently, I think it is best to see the underlying cause of current account surpluses as inadequate investment rather than excess savings, because the desirable policy response is to improve the investment environment rather than cut back on savings. The world now needs two kinds of transitions. First, consumption has to give way smoothly to investment, as past excess capacity is worked off and as expansionary policies in industrial countries return to normal. Second, to reduce the current account imbalances that have built up, demand has to shift from countries running deficits to countries running surpluses.>

To: Elroy Jetson who wrote (87084)	9/30/2007 3:39:57 AM
From: westpacific	Read Replies (1) \| Respond to of 110194

Elroy - ""Credit has greatly increased while money has not."" Nice follow up on that article, thank you. That really sums it up, we do not have more money, only credit. Credit is debt. So many do not understand crap about how the banking system works. That, in of itself, is the problem. West

To: Elroy Jetson who wrote (87084)	9/30/2007 9:04:06 AM
From: el_gaviero	Read Replies (5) \| Respond to of 110194

Elroy, This is an interesting piece. Rist is trying to be accurate in a way that is admirable but I am skeptical about money policy. In general, so it seems to me, too much emphasis is put upon money policy as a driver of events, and too little emphasis is put upon money policy as a symptom of events. Said another way, money policy is the tail not the dog. Take the current situation in the USA. It is unhelpful to say that our various problems are caused by bad money policy (too much credit creation, too little M1, too much M3, or whatever). This is like saying that a cold is caused by fever. My analysis is roughly that by the decade of the 1970s, and certainly by the 1980s, American workers were vulnerable to competition from third world countries. (If a decent, disciplined worker is more than willing to work for a dollar an hour, sooner or later this worker is going to displace an American worker who costs his employer 50 dollars an hour.) Since the 1980s, the vulnerability of American workers has only increased, and is now being caused by two deeply rooted tendencies -- ever more expensive oil, and the discrediting of socialism. What this means is that economic power has shifted away from the American worker. He can’t make a decent living, and support with his taxes the vast superstructure of government erected upon his shoulders. The trouble is that our American system does not know how to deal with large classes of people becoming worse off. Either the worker is going to have to get less or government is going to have to shrink (or both). But how? Collectively, we don’t do shrinkage well. How does LESS get sorted out? The real problem is not policy but power. Behind our money policy is a looming clash of power, which, however, we avoid. Rather than dealing with it, we take the path open to any wealthy family in decline -- we go into hock and we sell off assets. The absurdities and dangers of our current financial situation are just the particular way that we have found to do this, i.e., go into hock and sell off assets. To make the same point in a slightly different way: I think people who suggest monetary reform are naive. Take for example an idea with which I am sympathetic -- a return to the gold standard. Sure, a gold standard, even with its problems, would be an improvement. But don’t kid yourself. A true gold standard would dis-empower a lot of people who now have power -- and lots of it. Which means: if you want a gold standard, do you also want the civil strife, and possibly the civil war, required to impose it? My basic assumption is that we are going to do nothing until our collective ship plows into a granite reef somewhere, and then in the chaos that follows, we will make new arrangements.