The Bigger the Bubble the Greater the Bust

Fantastic piece. Wish I understood it all. Hope you are WRONG. But maybe that is my problem and Obama's. Wanting and wishing everything will turn out alright as the lights go out. LOL

Well done PIM

Thanks for the comments and the compliment. I too hope to be wrong, but the chance that I'm, is very remote. Ten years Earlier Greenspan could have given a U-Turn to the economy and avoiding the mess we are in.

The only latin needed:  Ubi est cena?

Answer in english, so i'm not late!

Yes, good article, and "Ubi est cena?".  Non est a casa mia.

Pim, you are the "Economic Anti-Illusionist". ! You now have a title.

"...Fillmore said he didn't want a degree he couldn't understand.”

Thanks for these essays, a lot of people including myself are getting an idea where we are heading .

.Agent.

Yes to all of you, it is someone's task to knock on doors to make a 'Final Wake Up Call' and that's this time the "Economic Anti-Illusionist"! Thanks Roy for the title I do understand, and won't refuse it, as Fillmore was obliged to do.

Lets spread the true message, the more people become aware 'that they are tricked into an unhealthy economy' the better it will be for all of us.

I had a great conversation with my Latvian hairdresser. I was, like, the economic downturn has not affected me, and to be honest, I have not seen any bad effects where I live (a bit of a ghetto of a place, so things stay the same as ever). She said I lived in a bubble: that when she goes home to Latvia, she feels it hard: her family is much poorer. She said we were lucky to be protected in our bubble because food prices are being kept low compared to other countries. As long as you stay in the bubble, you will be comfortable.

Could not help mentioning the movie Matrix here, that says  every human being is just a power cell with wires and cables connected from the body to the huge machine - that drains the cell in due course of time.

.Agent.

"Four-fifths of them said the recession was over..."

The economics fraternity has become a priesthood dedicated to reciting the same cant whether true or false like some ivory tower Inquisition. I remember clearly Joseph Stiglitz in 2005 stating that by 2009 the world economy would be in depression. I even made a note of it at the time, so true it struck me. The only place Stiglitz could get the airplay? Alex Jones' Prison Planet! Love it or hate it, it's fringe radio and an example of how ignored any voice of reason has become.

Well, O is/has tried to pull us out of a nose dive, & in doing so, has stretched/stressed our "wings"

Now when the world buffets us hard enough, the wings will just fall off the economy..

One of my bigger worries in the next 2 years is Oil going off the dollar.. It would be like dumping the fuel out of the wings of this plane before the wings fall off....

You might say we are between a rock & a hard place :(

Pim,

maybe you have a better grasp of the economist who are aware of the current state of the world economy? For me those people are Congressman Ron Paul and Peter Schiff. The sad thing is that there is no money to be made in predicting a bad future, while keeping up appearances might buy the banksters some time to save their own assets.

All above comments more or less confirm that the economic predictions in the media are not sound at least. Of course no money is to be made in predicting a bad future unless you are in the environmental business predicting global warming that not is going to happen.

There we go... just keep pushing and the truth will come through!

PIM,

Hoisted from the comments on your previous story. I posted it late this morning and think it is relevant here.

Look. At the end of the day this is an ideological issue. And I don't say this with malice.The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama’s economists lean left. This is a quote from James K. Gailbraith in this article from Washington Monthly:James K. Galbraith If you or anyone else are interested it will give you a good argument for why government intervention can and should be utilized it times of crisis.

Contrary to what some have said here, policies instituted by the Roosevelt administration did not in fact prolong the recovery from the Great Depression. There has been a bit of revisionist "history" going on in this debate, but if you look at the hard data, unemployment numbers in particular, you will see that the stimulus type programs from the New Deal were positive in nature. In fact there was a period during the mid thirties, when owing to political pressure, and fears of inflation, monetary policy was tightened, and unemployment spiked. In 1933 the unemployment rate was approximately 25%. By 1937 unemployment was down to around 14%. (Some argue the number was lower because people working through WPA programs were not counted as employed.) Concerns of inflation as a result of increasing the money supply, led the administration to pull back on programs and money supply. By the end of 38' as a result of tightening, unemployment jumped back up to around 19.5%. Once we started preparing for War in 39' unemployment was no longer an issue. Interestingly, now as then, no one was expressing concern of the inflationary effects of borrowing large amounts of money to fund the war effort. 

We can have an honest debate about policy and the role of government, but I think history shows that overall ,the intervention by the government during the Depression was a positive force towards a gradual economic recovery.

Update: The war helped too.

great piece of article, and nice insight to current financial crisis. I guess there's no way out and answer will be found as usual on overspending and loans. kudos

http://www.tradeviewforex.com/blog/post/2009/09/17/Expected-economic-Recovery-is-weakening-US-Dollar.aspx

There has to be a way out. Rather than looking at the problem, we must learn to "see"  what it is.

Articles like this would enable a lot many people to "see" it.

.Agent.

Nice angle of argument PIMs but I have a feeling that depression is when all parts of the market place are effected by a total stock market crash. Massive unemployment on a level of 10 times we have seen so far.

No what we have seen in September was a slump in consumer spending caused by less sales in the US auto industry. The so called bailout prop for the auto industry is not working. This was a slump within a recession which is on the an upward curve to recovery and has been for some time. The New york stock exchange today issued figures that show that's really the case. China exporters and manufacturers are reporting today they are having problems to fulfill orders at the factory level a panic recruitment for factor workers is in process as I write.   

There is always a slump this time of year and next month its starts to be rosy.

But yes USA needs to start looking at creating jobs and shifting reliance abroad on manufactured goods its not complicated to get to that obvious logic answer. Yes we could say USA has to reinvent the way it makes money but really its reverting back to USA's manufacturing history before the greedy started looking for cheap labor in Asia for better profit margins.

USA has also got to learn not to live on credit, more people need to destroy those damn credit cards. 

nanute thanks for yr contribution by viewing from another angle on this issue. As in the past and still today opinions about intervention and large stimuli by government during the great depression 1.0 vary widely. I'm more dedicated to the Austrian school of economics than sharing the view of Galbraith. Many articles and books have been published pro and contra. As always the world opinions remain divided. Only this time the outcome of the current crisis can tell us by experience exactly what was O.K. and what was wrong. You wrote about the aspect of inflation not dealt with:

"Interestingly, now as then, no one was expressing concern of the inflationary effects of borrowing large amounts of money to fund the war effort. "

I may refer you to one of a view other essays that dealt with this.

We'll I'll be! Seems someone was talking about the cost of the war(s). And it wasn't a follower of the Austrian school of economics. In the comments up thread hidflect brings up the name of Joseph Stizlitz. And here is a link to a piece in the Times Online that discusses the cost of the war in both monetary and domestic US economic terms. It is a great read.http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article3419840.ece As always PIM, I enjoy reading your take on the economy, even if I don't share the "school of thought." As some one lamented recently: "We're all Keynesian's Now."

Update: I couldn't seem to activate the link. Can anyone help?