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ThePythonicCow
01-23-10, 04:41 PM
Mr. Muddle Through Himself, John Mauldin, has turned pessimistic. Ouch!. In his latest post, at Thoughts on the End Game (http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2010/01/22/thoughts-on-the-end-game.aspx), Mauldin writes:

But make no mistake, we are coming close to the end game. Some countries and economies are closer to that point than others, but the entire developed world is lurching, in almost drunken fashion, towards our economic denouement.In this post, John also has a brief, favorable review of Carmen M. Reinhart and Kenneth Rogoff's new book, This Time is Different. The bulk of Mauldin's post this week is a report from Van Hoisington and Dr. Lacy Hunt which further summarizes Reinhard and Rogoff's book, and then presents the deflationary case (declining debt will dominate, stay invested in Treasuries.)

grapejelly
01-23-10, 05:21 PM
I read the book they reference and I don't like it.

From the above letter, an important example of why the whole thing is wrong:


The very first step toward an inflationary cycle has to be to get the monetary aggregates expanding vigorously. That cannot be accomplished with the Fed "printing money", i.e., adding more reserves into banks that cannot or will not make loans. The reason this process has not begun (and will not for a time) is the overhang of excessive indebtedness and asset price depreciations. No one needs to borrow, or has the resources or balance sheet to borrow, and banks are busily writing off bad debt. Irving Fisher warned of that process (note our Third Quarter 2009 quarterly letter).

This is patently wrong. There is infinite ability to depreciate currency and therefore initiate inflation.

The US government stands ready to borrow as much money as the banks can print, and the banks can print as much money as the government can borrow.

The government spends this money and that brings about inflation.

Commodities will be increasing in price. Labor may or may not, but in some sectors of labor, there will be mighty inflation, especially government employee compensation and people whose work cannot be done offshore.

Investments will continue depreciating through debt writeoffs and writedowns.

This nonsense about deflation is just so tiresome.

metalman
01-23-10, 07:06 PM
I read the book they reference and I don't like it.

From the above letter, an important example of why the whole thing is wrong:



This is patently wrong. There is infinite ability to depreciate currency and therefore initiate inflation.

The US government stands ready to borrow as much money as the banks can print, and the banks can print as much money as the government can borrow.

The government spends this money and that brings about inflation.

Commodities will be increasing in price. Labor may or may not, but in some sectors of labor, there will be mighty inflation, especially government employee compensation and people whose work cannot be done offshore.

Investments will continue depreciating through debt writeoffs and writedowns.

This nonsense about deflation is just so tiresome.

huh... didn't know anyone still read 'muddle-thru' right half the time, hedge fund middle man mauldin.