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"who saw it coming": ej gets a mention at ft.com/alphaville

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  • #16
    Re: "who saw it coming": ej gets a mention at ftalphaville

    Originally posted by medved View Post
    What about Doug Noland? http://www.safehaven.com/archive-2.htm
    Very much online and searchable. BTW, it would be nice to interview this guy.

    However, the main question is not, who gets the credit and who does not. The question is, why the mainstream analysis is so delusional. Having 10-20 very smart analysts shouting FIRE did not help most people.
    but isn't the answer obvious? these 12 are not collecting a paycheck from the fire econ.

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    • #17
      Re: "who saw it coming": ej gets a mention at ftalphaville

      Originally posted by medved View Post

      However, the main question is not, who gets the credit and who does not. The question is, why the mainstream analysis is so delusional. Having 10-20 very smart analysts shouting FIRE did not help most people.
      We differ on the importance of well deserved credit.

      If one wants to know why it didn't help most people and why mainstream analysis is so delusional, then listen more to those 10-20 or more analysts that got it right... and get it generally right, year after year. Answers are there.
      I hope this doesn't come across as accusatory.



      And to follow up on metalman:
      "The few who understand the system, will either be so interested from it's profits or so dependent on it's favors, that there will be no opposition from that class."
      -- Rothschild Brothers of London, 1853

      Tinfoil hate enabled and/or cynical?... perhaps, but also true as so much of human history shows.



      And one last item:
      According to Aristotle one Greek city state had a fundamental law: anyone proposing revisions to the constitution did so with a noose around his neck. If his proposal lost he was instantly hanged. (from Jerry Pournelle )
      Last edited by bart; 07-16-09, 05:13 PM.
      http://www.NowAndTheFuture.com

      Comment


      • #18
        Re: "who saw it coming": ej gets a mention at ft.com/alphaville

        This is an excellent article, great find jk. Definitely worth reading in its entirety. I find the paragraph that starts on page 16 especially illuminating.

        By accounting identity, any credit flows to firms and households (through banks’ credit
        creation as they lend) exceeding the growth of investment, production and consumption in the real
        economy will be held as wealth, and so invested in FIRE sector assets. This extra liquidity inflates
        the money value of financial assets and instruments (housing, stocks, bonds, currency, derivative
        instruments etc.), so increasing returns on financial investments. Through their rising net worth,
        firms and households can - if lending regulations allow - borrow more against their collateral; and
        if they believe this to be sustainable, they will. This means that banks create yet additional credit
        which is again invested in the FIRE sector, further pushing up asset prices. Each flow of credit has
        its balance sheet counterpart in increased debt levels for firms and households. The new situation is
        characterized by (a) higher returns on financial assets relative to real-economy investment, and (b) a
        larger part of the (say, annual) credit flow going towards debt servicing and financial fees, and a
        smaller part to investment in the real sector
        (see Stockhammer, 2004 for evidence on this). In early
        stages of a financial asset boom, the benefits from (1) will more than balance the costs of (2),
        especially if future debt servicing costs are discounted or neglected. This encourages a next cycle of
        credit flows, debt growth and asset price rises. With psychological mechanisms such as herding
        behaviour leading to housing or stock market euphoria - and in the absence of regulation to stop it -
        there can be a self-sustained dynamic of credit flows shifting away from the real economy and into
        financial asset market, with ever growing financial asset returns and individual net worth figures,
        and a growing debt service burden on the real economy. Along the course of this financial boom,
        Friedman’s (2009) all-important ‘fraction of the economy's total returns absorbed up front by the
        financial industry rises and the function of the financial system in the economy’ changes from
        supportive to extractive. Consumption – and the production that depends on it - may become
        financed more by fresh credit and debt flows from the FIRE sector based on capital gains than by
        real-sector wages and profit. Thus net saving by firms and households may fall and even turn
        negative.
        An accounting (or balance sheet) view of the economy makes clear that this dynamic – a
        bubble – is unsustainable in the sense that it is constrained by the real economy’s ability to service
        debt.
        Yet without policy intervention, it can last for many years or even decades, if starting from
        low levels of indebtedness. A burst occurs as investors realize this constraint is approaching or has
        been reached. The severity of the impact of a burst will be the larger as real-economy consumption
        (and thereby production) have grown more dependent on capital gains rather than on wages and
        profit.
        I know that iTulip discussed these issues many times over. It's just that for me, personally, it really clicked when I read the above.

        Comment


        • #19
          Re: "who saw it coming": ej gets a mention at ft.com/alphaville

          In retrospect, I think a lot of average homeowners saw it coming. My wife and I own a house along the Potomac River in Virginia. We spend a month or two there. It’s always been interesting over the last fifteen years to return, drive along the road, and see if anyone is selling a house. There are about 60 houses along the road. About five years ago, our friend John had put his house up for sale. He and about eight of his neighbors were sitting around on his dock. “So what are you asking?” someone asked. “$ 810,000” Everyone laughed. Beer came out of the nose of the guy sitting next to me.
          Last edited by Thailandnotes; 01-25-11, 04:29 AM.

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          • #20
            Re: "who saw it coming": ej gets a mention at ftalphaville

            some later-on comments on this one, which just popped up on 'the news'

            Re: "who saw it coming": ej gets a mention at ftalphaville

            Originally Posted by hayekvindicated
            They didn't mention Marc Faber, George Soros and Jim Rogers - all of whom warned about this well in advance. Soros has a video interview about the housing market back in 2006 which unequivocally pointed to the housing bust.

            Rogers put his money where his mouth is and shorted Fannie Mae and Freddie Mac back in March 06. And Faber pointed out the bubbles way back in late 05.

            and then....

            Originally posted by metalman View Post
            i bet they didn't get mentioned because soros, faber & rogers are traders? not economists? besides an interview or two they have no analysis to the authors of the paper to review... ej's is all online and google searchable... for anyone who's interested to know the facts from the bs.
            phreakin amazing all this stuff is...


            Originally posted by Thailandnotes View Post
            In retrospect, I think a lot of average homeowner saw it coming. My wife and I own a house along the Potomac River in Virginia. We spend a month or two there. It’s always been interesting over the last fifteen years to return, drive along the road, and see if anyone is selling a house. There are about 60 houses along the road. About five years ago, our friend John had put his house up for sale. He and about eight of his neighbors were sitting around on his dock. “So what are you asking?” someone asked. “$ 810,000” Everyone laughed. Beer came out of the nose of the guy sitting next to me.



            Originally posted by FRED View Post
            you guys are UNBELIEVABLE (or at least undeniable... ;)

            like i said a few daze ago - i havent been this 'spellbound' since i read dr hunter s thompsons fear-and-loathing-in-las-vegas !
            (all in one night, whilst 'living the moment' virtually-speaking and enjoying several of the vices so mentioned... ;)

            Comment


            • #21
              Re: "who saw it coming": ej gets a mention at ft.com/alphaville

              A bit off topic...

              I was at my community college library last night and saw EJ's book prominently displayed on the recommended reading table at the entrance. I also gave a copy to our mayor.

              Be kinder than necessary because everyone you meet is fighting some kind of battle.

              Comment


              • #22
                Re: "who saw it coming": ej gets a mention at ft.com/alphaville

                Originally posted by shiny! View Post
                A bit off topic...

                I was at my community college library last night and saw EJ's book prominently displayed on the recommended reading table at the entrance. I also gave a copy to our mayor.
                local borders books... check out the competition... free money... derp...

                Comment


                • #23
                  Re: "who saw it coming": ej gets a mention at ft.com/alphaville

                  Originally posted by metalman View Post
                  local borders books... check out the competition... free money... derp...
                  I enjoyed Good to Great, found it a solid case study with thoughtful conclusions.

                  Comment


                  • #24
                    Re: "who saw it coming": ej gets a mention at ft.com/alphaville

                    Originally posted by thriftyandboringinohio View Post
                    I enjoyed Good to Great, found it a solid case study with thoughtful conclusions.
                    Beat me to it ... if EJ's book is sitting with Good to Great - he's certainly in good company

                    Comment


                    • #25
                      Re: "who saw it coming": ej gets a mention at ft.com/alphaville

                      I think it could be a combination of many influences. The devaluing of the American economy is based upon our dependency on China and other emerging Asian economies. Brad Hames of Far East Investments was reported in Investment Options Asia as seeing the economic collapse as having to do with more: "the population growth expectation trend." Clearly America has an issue cheap production and this causes jobs to be shifted overseas ultimately to countries that have a cheaper labor force.This trend has created a hollow worth to not only the housing market, but the entire banking and financial structure.

                      The issue is can we reverse the trend. I am skeptical based up research done in the diverging economic approaches between countries like China and the US. Only by expanding the creative forces withing the America populace can the USA rebound and lead the West against the Asian powers. The answer is certainly not a more rigid and centralized economic approach like the POTUS wants to implement.

                      We need to diversify our ability to generate and produce meaningful economic growth in order concretize a long term economic growth plan that involves expanding and a cost effective labor force.

                      Comment


                      • #26
                        Re: "who saw it coming": ej gets a mention at ft.com/alphaville

                        Originally posted by metalman View Post
                        local borders books... check out the competition... free money... derp...

                        Here in Portland the local heavyweight bookstore is Powell's, self-determined to be the largest independent bookseller in the world. The main store is 68,000 square feet, divided into nine areas on multiple levels.

                        Last fall when I went to buy the book there, I first looked in the Business section and nearby categories, where I saw books similar to the competition shown in the photo above. This section is in a fairly prominent location near the secondary entrance (which is now larger than the older front entrance). Alas, no EJ. I went to one of the help desks, and she pointed me to the Economics section... upstairs, tucked away in the middle of a long row of floor-to-ceiling shelves. No one there but me. There were two copies.

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