THE UNFORTUNATE MATH BEHIND OUR ECONOMIC PLIGHT

Few will argue against the fact that the U.S. economy is sputtering.  For several years now I have been arguing that the government misdiagnosed our problems and subsequently applied the incorrect cure.   If we take a look under the hood at the growth drivers of our economy we can reveal convincing evidence showing that this was in fact the case.

The following chart shows 30 years of US GDP along with potential output.  The blue line represents actual GDP while the red line shows potential GDP.  This represents what economists call the output gap.

(Figure 1)

At the current levels we are running an output gap of just over $1.2T.  This merely means that the U.S. economy would be producing $1.2T more in total GDP if we did not have so much idle capacity.

The math behind the U.S. economic growth of the last 100 years is fairly straight forward.  Economists describe GDP in mathematical format as follows:

Y=C+I+E+G

Y = GDP

C = Personal Consumption Expenditures

I = Fixed Private Investment

E = Net Exports/Imports

G = Government Consumption Expenditures

While all four components matter to the economy the C component (at roughly 71%) is the coaching staff, offense and defense of this football team.   Let’s just call the other three components “special teams” – important, but far less so in the grand scheme of things.   What’s happened to this crucial component of the U.S. economy in the last three years has been remarkable to say the least.  There has been a dramatic stagnation in personal consumption expenditures (PCE).  If we take a look at the historical data it’s truly incredible.  PCE grew at an average rate of 7.5% for almost 50 straight years.  Even more incredible is that this growth has been almost entirely uninterrupted.

(Figure 2)

(Figure 3)

When the Nasdaq bubble imploded, American balance sheets were cracked, but not shattered.  Slowly, they began to come back.  But as we all know now a far more nefarious bubble was brewing.  One based on pure debt and speculation.   When the housing bubble imploded in 2008, it shattered consumer balance sheets.  Make no mistake – this is not a government debt crisis in the United States (as the hyperinflationists and defaultistas have tried to convince us).  It is not a banking crisis (as Ben Bernanke has told us).  It is a private sector debt crisis – primarily a household debt crisis.

If we look at the recent PCE data we see some signs of stability, but even this is nowhere near enough to sustain economic growth.  By my estimates we would need to see 5.5%+ annual growth in PCE to fill the output gap in the coming 3 years.  In the last 3 years we have seen a grand total of 5% growth in PCE.  That is an astonishingly low rate compared to the average annual rate.  Even if we cherry pick the absolute bottom in December of 2009 the annualized growth rate is just 2.9% – still well below trend growth and that includes an incredible equity market wealth effect and stable housing.   This is the primary reason why we are seeing such an anemic recovery and tepid hiring.  The balance sheet recession is strangling the household sector.

(Figure 4)

As I’ve previously mentioned, this current environment is easier to comprehend than most would like to admit.  What is basically occurring here is a massive decline in consumer spending power which subsequently weakened corporate revenues.   The lack of revenue  strength leads to tepid hiring because visibility is poor.  Margin expansion has helped companies maintain their balance sheets in recent years, but margin expansion alone can only sustain bottom line growth for so long before the market realizes that there is no organic growth.  At some point, the household must heal to the extent that they contribute to corporate revenues and sustain recovery.  So what we’re seeing now is this frustrating positive feedback loop where corporations are waiting for revenues to rebound so they can expand their operations and hire, but the problem is that consumers are more focused on paying down debt as opposed to spending and accumulating debt.  The problems are now being compounded by the fact that the government is no longer aiding growth.

Although I’ve believed this issue has been clear for the past two years, it has not been so obvious to those making decisions.  Ben Bernanke misdiagnosed this as a banking crisis.  Timothy Geithner agreed with him.  Hank Paulson certainly agreed with him.  So they went on their bank rescue mission while almost entirely ignoring the root cause of the problem.  Meanwhile, the defaultistas and inflationistas have been on an austerity campaign attempting to convince everyone that the USA is bankrupt and on the cusp of becoming the next Greece – they have been and will continue to be wrong, yet their fear mongering campaigns continue to this day.  This has not only exacerbated the level of fear and uncertainly and has largely contributed to the political gridlock we are beginning to see.  So now we find ourselves in quite a bind.

As I expected, the initial stimulus plan helped give the appearance of recovery, but it did not solve the actual problem.  It merely papered over the problems and injected some short-term relief.  The problem of debt was still (and still is) brewing under the surface.  Now as the stimulus effect wears off we are realizing that the household sector remains incredibly weak, but there is no political will to attempt to solve the problems at hand.  Ultimately, these problems will persist until the problem of debt has been reduced to a point that can sustain higher levels of expenditures.  By my estimates, the current trajectory of debt repayment and economic growth leads me to believe this cannot occur until 2012 at the earliest.

What this all likely means is that growth will remain well below trend as the consumer continues to de-leverage.  This creates a particularly uncertain environment for corporations and leaves the economy highly susceptible to exogenous risks (China, European debt crisis, housing double dip, etc).  Political gridlock and continued misdiagnosis in government will certainly not help.  Welcome to the balance sheet recession boys and girls.  Enjoy your stay.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. TPC/Cullen

    G’day mate
    You mention that “I’ve explained MMT in great detail” in your commment above – where can I find a detailed exposition of MMT?
    cheers

      • TPC

        Many thanks for your detailed responce to my query on what MMT is.
        Certainly a very interesting theory and will be studying it in detail

        kind regards

  2. If you ask why the public has taken on so much debt, the answer has to be that the 20 year decline in interest rates allowed the carrying costs to go down even as debt went up, until the crazy house bubble started in 1999-2000. Then interest only loans and other structured finance products allowed speculators to defer interest payments for several years, with the intention of selling the property before the full cost kicked in. People literally went nuts, and took on insane levels of debt. The very definition of mass insanity.

    Also, wages stagnated, so the public has to take on more debt to spend more. With cheaper labor in China and elsewhere, and virtually all manufacturing outsourced, wages have no choice but to stagnate. Another reason why it will take so long to grow out of this mess.

  3. Citizens owe so much because the bank confiscated the goods they produced, and loaned the goods back to them. If they didn’t borrow the confiscated goods back, their standard of living would have gone down.

    Better to just stop the bank from confiscating goods by printing, then citizens will be able to buy what they produce without a net debt increase.

  4. TPC – “Its a private sector debt crisis – predominantly a household debt crisis”

    The non-economist in me assumes that the private sector here includes the corporate sector. Can you comment a bit on the magnitude of their debt vis a vis the household debt.

    Thanks – MG

    • Duc,

      Thanks for taking the time to respond. It’s great that people challenge my ideas. I don’t pretend to have all the answers and I assume you don’t do so either. We are so far apart on these issues that there is no agreeing with one another. You think it all comes down to personal liberties and this government conspiracy to take over our lives. You believe in some form of anarcho capitalism. I do not. I fully respect your beliefs and your ideas that the govt should stop meddling in our lives and just step to the side. I even agree with many of your ideals. But I do not believe in a world where the private sector can run everything on its own. If it were possible I am quite certain that someone would have done it by now….I simply don’t agree with your ideas or believe that they are realistic.

      We can have this back and forth until we both die and neither of us will ever agree on this stuff. Until then, I wish you a highly profitable future. Thanks.

      -Cullen

  5. TPC,

    Yes we are polar opposites on many issues, possibly all. However, fundamentally, the issue of the money system, and who controls it is central. When government control it, which they do, they always inflate it, history stands as mute testament to the fact, and inflation is theft.

    All the current economic problems that we are embroiled in today take their causation from government inflating the money supply. What is their answer? Why, inflate the money supply some more.

    You argue that the US cannot go bust due to the ability to create increased quantities of fiat currency.

    I say nonsense. Fiat currency only has value due to the exchange potential it holds for goods/services. If the willingness to exchange real goods/services for fiat is lost, then fiat is worthless.

    You lose the willingness to exchange when you constantly default on your promises, which is the very definition of inflation. Only through coercion can you continue to foist increasingly worthless paper onto people.

    If the US continues to inflate at the current rate, someone will call your bluff. China is already agitating in this direction.

    jog on
    duc

    • See, we could go back and forth all day. You view the world from the perspective of someone who believes in the gold standard. I just don’t fundamentally agree with anything you say.

      So what’s the answer Duc? What should we do? Go back to the gold standard and dissolve the government?

  6. TPC,

    In a word, yes.

    Not that gold has any special significance other than it cannot be inflated by government.

    The function of money is to facilitate the exchange of goods and services. Money does not need government to micro-manage its availability, quantity, or any other variable.

    Money can self-regulate on a free unhampered market. The quantity of money is NEVER a factor, money is scarce, prices adjust downwards, money is plentiful, prices adjust upwards. Thus there is no requirement for government to micro-manage the money supply based on the argument of quantity.

    Government need to control the money supply as it affords them the most powerful tool in retaining POWER. Power is ultimately what government seeks, as it allows government [and the individuals who compose it] the legal right to expropriate the masses, maintained via coercion [Police, Army]

    All government functions can be performed and supplied on the free unhampered market: Police, Army, etc.

    The Judicial system [what a joke] is supposed to provide a check on the government. How realistic is that when government pays your wage and selects who sits in judgement on the government?

    You should hand me the keys to your blog for 1 week, and I will post a series of posts that are the other side of the coin to your arguments, you did state that you believed in debate.

    jog on
    duc

    • It’s a libertarian utopia. We’ve seen what happens when govt steps aside. Just look at the wild west or the mobs in the 1920′s. You have too much faith in the intelligence, organization, honesty and good in human beings.

      Personally, I think human beings are more primitive than most would like to admit. We will scratch, claw and kill our way to the top. Even if it means climbing over our own. We’ve seen your utopian dream in parts of our society throughout history. It doesn’t work.

      Now, I am not saying that govt should rule all things, but there must be an authority figure. Your world is a lot like saying that kids should be allowed to raise themselves. Good luck with that. It’s just not a realistic way to approach the world. Your world would experience mass corruption, crime and general mayhem. History has already proven as much.

      Is there a healthier medium than the current world and this libertarian utopia? Probably, but call the human race a work in progress.

  7. TPC,

    Well first off there are two forms of Utopia: http://en.wikipedia.org/wiki/Utopia

    Economic utopias are based on economics. Most intentional communities attempting to create an economic utopia were formed in response to the harsh economic conditions of the 19th century.

    Particularly in the early nineteenth century, several utopian ideas arose, often in response to their belief that social disruption was created and caused by the development of commercialism and capitalism. These are often grouped in a greater “utopian socialist” movement, due to their shared characteristics: an egalitarian distribution of goods, frequently with the total abolition of money, and citizens only doing work which they enjoy and which is for the common good, leaving them with ample time for the cultivation of the arts and sciences.

    Which is about as far from what I advocate as is possible to get. The second type of Utopia is a Capitalistic one:

    Utopias have also been imagined by the opposite side of the political spectrum. For example, Robert A. Heinlein’s The Moon Is a Harsh Mistress portrays an individualistic and libertarian utopia. Capitalist utopias of this sort are generally based on free market economies, in which the presupposition is that private enterprise and personal initiative without an institution of coercion, government, provides the greatest opportunity for achievement and progress of both the individual and society as a whole.

    Another view that capitalist utopias do not address is the issue of market failure, any more than socialist utopias address the issue of planning failure. Thus a blend of socialism and capitalism is seen by some as the type of economy in a utopia.

    Market failure. The primary problem in any potential market failure, is the failure of the money system. Government, invariably, debases the money, driving the boom/bust cycle.

    I do not advocate an absence of laws. I advocate laws based on the Common Law, not Statutory Law, which is government created law that benefits who exactly? The parties that have lobbied for it.

    Statutory Law is very largely Rent Seeking, which again allows expropriation of the masses by the few.

    The Common Law, however allows for justice, or fairness, to be reintroduced to society. Police, Courts, all enforcement, can be provided on the free market. Insurance companies already are in this business, and could quickly and easily adapt to provide these services.

    jog on
    duc

    • We probably agree on this more than you might think. If we lived in a world where we were all citizens of the same country then many of these problems would be non-issues. If the world was one huge United States your utopia might work. The single currency system would work, much of the civil disagreements would be alleviated, there would be generally no need for military, etc.

      But that is not the world we live in. We live in a primitive world where people fly planes into buildings because they read some 2,000 year old manuscript that told them they are supposed to hate someone else for what they believe in. We live in a dangerous world where the military is almost always the largest bureaucracy in a country (by necessity). We live in a world where resources are running out and people believe that power and prestige are all that matters. Morgan Freeman quoted Ernest Heminway in the movie se7en: he said “the world is a fine place and worth fighting for. the second part is true.” It’s sad and true. This is not a good world, but we will continue to fight for it.

      I wish we lived in your world. But we don’t. We live in this primitive place. We can fight for your world, but the reality is that we will likely all kill one another before we ever get there.

  8. TPC,

    You subscribe to a few myths I see.

    Why is America unpopular [understatement] in the Middle East? Could it be that America has practiced Imperialism under the sobriquet “Open Door” since the 1900′s? In fact taking over from the British Empire after we pretty much collpased after WWI. That America has sought to expropriate all and sundry via the “Reserve Currency” instigated at Bretton Woods, and abrogated by Nixon in 1971

    Turning to your Hobbsian philosophy and the requirement for a military. There are of course two forms of military: the first is an offensive military, the second a defensive military.

    They have very different costs associated with the different models, as are their aims. A defensive model will cost less than the offensive model, even allowing for costs to be defrayed via expropriation of foreign resources through Imperialism.

    The supply of defensive military can be provided on the free market, the cost paid for by the massive savings made by the abolition of all taxes, currently required to support government.

    jog on
    duc

    • Your utopia breaks down the second we require large scale offensive military operations. And no, it is a total pipe dream to believe that a military as large as the US military could be run by the private sector without corruption and potentially disruptive power shifts. There is a great irony in the libertarian perspective in that they are staunch supporters of the military yet it is really the primary reason why government even exists at all.

      There are no true libertarians in foxholes.

  9. An excellent argument!

    TPC, I’m solidly in your corner on this. Keep writing (is there a book in the making?).

  10. TPC,

    Several points: if the private sector could not run a military machine as large as it is currently, free of corruption, what makes you think the government can?

    The size of the military and hence its cost, is the issue. America is an aggressor, and hence needs a very large military. If America was not an aggressor, and instead traded for goods and services, then the military could be far smaller, and cost proportinally less.

    The smaller [significantly] military would reduce the amount of corruption within the system.

    I’m surprised that you did not voice the legitimate question: what about the potential for freeloaders, enjoying the benefit of the “commons”.

    jog on
    duc

    • See, this is the problem with your thinking. You seem to think we live in this nice big pretty sandbox where no one ever gets sand kicked in their face. But the truth is, when Johnny wants to play with the Tonka Truck and Sam won’t trade it to him, Johnny gets upset because his personal needs aren’t being fulfilled. All hell breaks loose when Johnny kicks sand in Sam’s face and takes his truck.

      The global economy is the same thing on a much larger scale. We are divided whether you want to believe it or not. When the USA runs out of oil we’re not going to ask the Saudi’s if they’ll be a doll and send some our way. That’s just not in our DNA. If I have bigger guns than you and I need something from you then I am going to wield those weapons in a way that convinces you to meet my demands. I know you don’t like this reality, but that’s what it is – reality. The size of our military largely represents the growing needs of our citizenry and our attempt to prepare for and dominate this game of global chess.

      We aren’t going to sit by idly as people fly planes into our buildings, fly planes into Pearl Harbor, manipulate their currency or hoard all the world’s oil reserves. This is basic human survival. The global economy is the ultimate game of human survival and we are not all on the same team. And we will try to survive at any cost.

      You want this small, low cost, friendly army. But when we run out of oil or China drops a nuke on NYC you’re going to wish we had a large organized military that can keep your children from being murdered by a “foreigner”.

      Your world works great in theory. We all get along, we play nice and share our goods, etc. But that’s not the world we live in. There will be more wars and there will be need for men with guns because we are a primitive “survival first” group of animals. I wish it was different, but it is not.

    • PS – What’s up with calling me a socialist and all that other garbage on your site? You’ve gone out of your way to try to demean and denigrate me personally. We both know that I am not an idiot or a socialist. I don’t care that we disagree, but where does the name calling get us? Are we on a playground?

      You don’t see me calling you a barbarian do you? You can’t honestly come here and request to write articles on my site while at the same time insulting me consistently on your site. I’m all for debate, I am open to the idea of you writing articles here and I am about as open minded a person as you’ll find, but I have zero tolerance for those kinds of playground tactics. What is the point?

  11. TPC,

    Now the longer post.

    America’s large military, I agree, has been used since WWI, for exactly that purpose. America has moved from a country of non-aggression, to the aggressor, in much the same way Fascist & Communist Europe did prior to WWII.

    So no, when terrorists [if in fact that's what they where] flew into two buildings, President Bush [aided and abetted by Tony Blair] invade Iraq under the weapons of mass destruction nonsense.

    As to China, or anyone else, how dare they manipulate their currency, viz. inflate it, don’t they realise only America can inflate their currency, so as to steal from suppliers of goods/services, paid in worthless paper.

    As to the first strike rhetoric, isn’t this the same tripe that was sold to Americans to promote the Cold War and thus enable the State-Military-Industrial complex that dominated from 1950-1990 when the Soviet empire collapsed?

    There will be more wars etc agreed, but not for the reason you posit. There will be more because that’s what governments do. To keep a populace subdued, keep them stupid, keep them scared, and keep them under control. To do so, costs money, lots of money, hence, control the money supply so that you can continue to fund the paranoia through theft.

    jog on
    duc

    • Duc,

      you can’t be serious when you say that wars are fought to suppress the populace and not for strategic economic or survival reasons. That’s just not a rational perspective. You keep making these dramatic arguments backed by little to no historical fact and when you run out of things to say you demean me or call me a socialist.

      You want to guest post on my site yet you feel that it’s okay to insult me and make unsubstantiated claims. Do you really expect me to trust a person who consistently resorts to these kinds of tactics?

  12. TPC,

    I am entirely serious when I say that wars are fought in large part to suppress the populace. Government, formerly Kings & Queens, and before them the Church, maintained power in exactly this manner.

    Government: the Soviets/Islamic terrorists/ threaten us [Americans] thus we need to implement the Patriot Act and invade Iraq, as all the terrorists are being sheltered there, plus Saddam is a nasty brute.

    And so it has been throughout history. Power posits the enemy that threatens, the populace rally’s around Power, and increased control by Power is gained.

    Defensive wars, where an enemy invades you are somewhat different. I agree fully, someone comes to your house to steal, you resist with all the force you can muster.

    As to historical fact. Unlike financial data, of which I supply to back every financial statement that I make, historical data of human action is harder to present, thus I accept to a degree the argument.

    You seem to have a real issue with being called a Socialist. The policies that you support, viz. MMT, are unequivocably, socialist. That you support and advocate them, makes you what, a capitalist?

    Your financial posts are incredibly data lite. Unfounded assertions abound, which is why I love to use your posts as examples of economic fallacies.

    jog on
    duc

    • You seem to have a real issue with being called a Socialist.

      Being that TPC isn’t a socialist, it’s understandable that he would object.

      You frankly don’t know what you’re talking about. You type a lot, while saying very little.

      Let’s try to be a bit rational. We can begin by not abusing terminology, as you obviously do.

      Socialists believe that the state should operate and control major industries. It isn’t a monetary theory, it’s a political theory.

      MMT (a theory with which I happen to disagree with myself) is a monetary theory. It has nothing to do with the ownership of production. It isn’t even remotely socialist, as it doesn’t address the issues that socialism addresses, i.e. who should own the means of production.

      If you want to disagree with MMT, then that’s fine. I certainly don’t agree with it myself, and I haven’t been shy about saying it.

      But referring to TPC as a socialist says a lot more about your ignorance than it does about TPC’s positions on economic matters. You need to grow up, and realize that is quite possible for one to disagree with your (half-assed) analysis without being a pinko commie.

  13. TPC,

    You raise so many points that I shall require both time and space to refute them with the data to evidence my arguments and refutations. I shall post the link here as I progress.

    jog on
    duc

    • Here you go again. You’ll change the topic no doubt and make some ridiculous circuitous argument that ignores how incredibly wrong you have been and instead focuses on name calling and misinformation.

      Just answer the question. You’ve maintained for many years that inflation, USA insolvency and a dollar crash would be the major themes of the last few years. Why have you been wrong? This childish back and forth has grown tiresome and I will not be roped into your trolling and persistent attacks just so you can fulfill some weird insecurity of yours. Answer the question or I will simply ignore all of your future work and comments.

      It does not require a new post on your site. It’s time for you to explain why you know so much more than the rest of the world yet the markets disagree. A single paragraph here should suffice. If you can’t do this, I will not be responding to any further trolling of yours. You claim to know to know so much more than everyone else. How come the markets disagree with you so vehemently?

  14. Mr Angry,

    Our posts crossed, therefore I shall address briefly some of your points:

    I agree with your definition of Socialism, viz. the State, or government controls or owns the productive assets. I also agree that MMT is monetary theory. However, extend your analysis from one of simply definitions, to an analysis that includes an understanding that the definitions clarify for analysis separate variables, but that they operate in the economy together.

    Thus, the control of the money supply allows the State if it chooses, control of the productive assets. As it happens, it is actually Corporate America via the Morgan and Rockerfeller power groups that control government, and have done so since circa the 1896 Presidential election where William Jennings Bryan and the Silverites bid for power.

    Thus, the control of the money supply has directly provided the control of the productive assets, thus fulfills the definition of socialism.

    jog on
    duc

    • Lots of words, no conclusion. Let’s just go ahead and agree with everything you’ve said. I am a socialist, I know nothing, etc. Fine. But if you know so much then why have you been so fantastically wrong about the collapse of the dollar, hyperinflation and USA default? How come the markets disagree with your entire macro thesis of the last few years? Spare us with the wordy circuitous nonsense. A paragraph should suffice.

    • Thus, the control of the money supply allows the State if it chooses, control of the productive assets.

      Look, I already knew that you were a goldbug. The internet is a magnet for your folks, particularly during economic downturns.

      My apologies, I just can’t take people with your views seriously. Attempting to discuss economic matters with folks in your camp is frankly a waste of time.

      • Hey guys, sorry to butt in on your convo, but a little background might help you avoid wasting some time:

        Duc is a troll from the Ibankcoin website. He was booted from the site after losing a series of market bets with the website author.

        He has since gone on a campaign trying to discredit the author.

        He is a hardcore anarchist. He thinks the govt is destroying the world.

        But he is not a gold bug. That is just a recent trend that he uses as evidence to prove a point that has been wrong. See here for his bearish comments on gold at $800: http://leduc998.wordpress.com/2008/03/24/gold/ He thought the cycle was over and that interest rates would rise and cause gold prices to drop.

        “Thus, in the longer timeframe, Gold has probably pretty much topped out in this cycle. However, there will be Gold bulls who refuse to buy this argument, thus there will be increased volatility, as there may well be at the bottom of the US$

        For my money, Gold as a LONG trade is finished, you missed the boat at $300oz. As a SHORT trade, you are looking at high volatility and the difficulty of staying in the trade.”

        In August of 2008 at the exact end of the inflation cycle he said we were on the verge of the beginning of a great inflation cycle: http://leduc998.wordpress.com/2008/08/18/internal-inflation-contrasted-with-external-inflation/

        “In summary, it’s early days in the inflationary environment.”

        This guy is just a common website troll and a bad one at that. He has had the entire story wrong from the beginning. I would recommend you just steer clear and ignore him.

        • Mark,

          Thanks for the background. This confirms much of my thinking though I assumed (like MBA) that Duc was a gold bug. It’s interesting to see him use gold as evidence of inflation now (convenient revisionist history). He also frequently cites stock price performance in 2009 without noting that he was an inflationist at S&P 1500. Another convenient bit of revisionist history.

          It’s the end it’s all standard neoliberal nonsense. Milton Friedman to the end. Duc thought easy money and low rates would cause interest rates to rise and he thought the inflation cycle was going to get worse. He couldn’t have possibly been more wrong.

          I am all for debate. If he can explain why he has been so wrong I am perfectly willing to entertain his ideas and writings. Otherwise, he just confirms that he is a troll, a very poor forecaster of macro trends, and generally unworthy of attention.

  15. TPC,

    I have already indicated that I will address all your points. I will again include all the data that you simply ignored last time. Unfortunately I cannot do this in a single paragraph.

    jog on
    duc

  16. MarkS

    Let’s examine a random series of your comments from my blog:

    Oh dear.

    jog on
    duc

  17. TPC,

    Which is exactly why I offered to post on your blog as a temporary guest, then any traffic generated would stay at home so to speak. I sell nothing on my blog, therefore I could careless whether 50K show up or 50.

    MarkS being put forward as an authority on anything is the best yet, we have truly entered the twilight zone. You should have left the link, his abusive comments on my blog reveal the true nature of the chap.

    I’ll rebut your MMT on my blog over the next few days, obviously I’ll provide no link or further comments, it is clear you do not want a debate, therefore I shall respect your wishes.

    jog on
    duc

  18. TPC,

    Just one last quick comment. Have you actually looked at the links provided by MarkS? When you have a moment, have a look, 2 lead nowhere, the third to flippe-floppe-flye, real highbrow stuff!

    Last comment – promise!

    jog on
    duc

  19. TPC,

    You must have restored the links. Did you actually read them? They are pretty spot on. Remember these were written in March 2008. You mention that I said the gold bull was over. Look at a chart of gold and see what happened.

    Of course then after the banking crisis, Bernanke stepped up to inflate. This then in later posts modified my position.

    You have been duped by a cretin. MarkS.

    You state that I am an inflationist. That is correct. You asked for evidence. I provided from memory, about 8 charts, all generated by the government. You ignored, without comment every single one. Why was that?

    CPI data indicates, as do symptoms of medical issues, the inflationary pressures being generated by the expansion of the total money supply [currency + credit]

    http://research.stlouisfed.org/fred2/series/CPIAUCNS?cid=9

    This is the governments own data.

    jog on
    duc

    • This has grown so incredibly tiresome. You thought Bernanke’s actions would cause hyperinflation. You thought it would create a solvency problem in the USA. You thought bonds would collapse and that the gold bull was over. These weren’t short-term calls. They were long-term calls and they have proven disastrously wrong in the last two years.

      I am tired of you ducking these FACTS. I have reviewed your charts. They prove nothing. They show an expansion of the money supply. Nothing more. The markets have already proven you wrong. I suggest you move on. I am not going to entertain your comments or rebuttals any longer. If you choose to continue making your life’s work a persistent rebuttal of my work then I am sad to inform you that I will not even read them.

  20. Interesting exchange.
    Everybody is right about one thing and everyone is wrong about something else. (As far as Duc and a couple of other things go, anyway)

    Right: his calls are not 100%
    Wrong: his calls are wrong 100%
    Wrong: He is a troll
    Right: His blog provides useful information, verifiable information, and some entertaining, even interesting commentary by Duc himself.
    Right: He has an itchy trading trigger finger that gets him into trouble. Like with any other anonymous blogger: dispatch any/all posted plays at your peril.
    Wrong: world reserve currency status is granted in perpetuity even in the face of decades of the most egregious ongoing abuse, just because it’s American and you say so.

    Regards

  21. Er just one more thing.

    RE: “…They prove nothing. They show an expansion of the money supply. Nothing more.”

    That does illustrate something. And it begins with the letter ‘I’. Which has been followed by price ‘I’.

    Question: DXY 6 month chart. What does that look like to you? (Assuming TA means anything in such a marketplace, of course)

    Regards