Roubini: No Poom

[phirang]

Re: Roubini: No Poom

They are opposing forces: disinflation driven by dollar demand from de-leveraging and inflation driven by reversing capital flows.

The former is short term but latter long term. Long term, you can't stop this:

Econ 101: depreciate a currency and you get inflation in the local economy. No way around it.

In the real world, versus the textbooks:

In the undertow of the disinflationary "Ka" rush to liquidity, before the surge of inflation that arises from currency depreciation, that arises from negative net capital flows, the men and the boys are separated.

Really? Where will the money go? Yen? The BoJ will start murdering the Yen in a matter of weeks at this rate.

BRICOPEC? Are you kidding me? The kleptocrats there put their money HERE to get stable returns! Do they really believe what they say?

Commodities? Who the HELL will buy commodities as a hedge when AD is down?

Seems like you're confusing the carry-trade with fundamentals.

I know some guys who have been buying real estate in Baghdad, but you better not mind the blood on the street.

[Supercilious]

Re: Roubini: No Poom

[/b]

Import deflation - export inflation: keeping US citizens tractable since 1980.

Well put!

[phirang]

Re: Roubini: No Poom

Well put!

In that vein, we could use these guys instead of Blackwater to keep us in line:

http://www.youtube.com/watch?v=tsUXG...eature=related



god, these videos are a riot... can't resist.

[Master Shake]

Re: Roubini: No Poom

No Master Shake - he was not right. He has cobbled together two separate events to form a false conclusion. The demographic and geological trends describe a train wreck aseversal factors larger even than this financial one, and it arrives right on schedule in the global recovery from this financial collapse. 2015-2017 you will have it.

I have zero interest in convincing you of this point, as you'll have it squarely front and center in your life shortly enough anyway. I see that Jtabeb got tangled on this same distinction. "$#* wuz right, wasn't he??". The event you see unfolding puts global GDP growth on hold, but anyone who presumes that global GDP energy consumption will be stagnating 3 - 4 years from now is being notably ingenuous.

I have read $#* refer with vague expansiveness to this event occurring in "15 years" and I have heard him vaguely referencing "coal and nuclear fusion" solutions. His references to these things evidence he has not been very curious to delve into it's mountain of substantiated data - but he has surely done a copious amount of exposition on the "oil bubble". These are two very distinct and separate events which $#* has ably "comandeered" for his thesis.

He's talking through his hat actually, on the larger event. No bubble.
An intermission. Don't forget also it's horrific twin sister, fiat money inflation which is waiting and building up a nice cloud of "flammable fumes" to rocket propel the oil price up to $200 in the next three years. Four years at the outside, and then on north from there towards $500.

If I read another mention to $#* having been "right" on this broader point I think I will start to feel nauseous. It is pure mis-information, all gussdied up in a duly dramatic commodity cycle bust. People will get whipsawed by the underlying story by 2012 like nothing imaginable.

Well, I wish I had followed $#*'s advice last July rather than EJ's; it would have saved me a lot of $$$ while energy (and commodity) prices crashed. Yes, in the long run (2012-2017) that may not be the case, but that didn't help me out the past four months, did it, whether you term what happened a "bubble" collapse or mere "intermission."

[phirang]

Re: Roubini: No Poom

Well, I wish I had followed $#*'s advice last July rather than EJ's; it would have saved me a lot of $$$ while energy (and commodity) prices crashed. Yes, in the long run (2012-2017) that may not be the case, but that didn't help me out the past four months, did it, whether you term what happened a "bubble" collapse or mere "intermission."

At least you didn't follow Jim ROgers' advice and buy Australian dollars this July!

LMAO!!!

[Guest]

Re: Roubini: No Poom

Really? Where will the money go? Yen? The BoJ will start murdering the Yen in a matter of weeks at this rate. BRICOPEC? Are you kidding me? The kleptocrats there put their money HERE to get stable returns! Do they really believe what they say? Commodities? Who the HELL will buy commodities as a hedge when AD is down? Seems like you're confusing the carry-trade with fundamentals. I know some guys who have been buying real estate in Baghdad, but you better not mind the blood on the street.

Phirang - you are floundering ... on the net US capital flows chart data that Fred just posted. You make copious comment on where it may sound implasusible for funds to go, but you make no comment on what he's showing you - that the reliable funding of the US account is in a state of advanced fibrillation, a.k.a. "heart attack". This is what IS ALREADY HAPPENING, not any conjecture about the future. Your lack of direct comment on it is more telling than everything else you did comment on.

Sure looks like credit inflows to fund the US current account have caught a little sand in the gearing, eh? Your float theories of orderly captive pools of international money, described as docile and pliable underwriters of the US current account deficit, such as the OPEC Gulf states. You paint pictures of these vast pools of wealth, confined increasingly fearfully in their national SIV's, who like docile and decorous gentlemen (a.k.a. domesticated financing chattel of a truly bovine stupidity fit only for the US funding maw) like to buy "English football teams" and "Madame Tussaud's Waxworks Museum", while they yawn at hoary hard money myths like gold, because buying gold bullion "is just so yesterday"

These are witty but essentially gadfly observations in the face of the US net flow of funds charts Fred showed you. You have this wondrous research apparatus of your own? Why is it not supplying you with this particular morsel of up to the minute critical data? Or did you already look through it on your own and consider it utterly inconsequential? You are maybe worried stiff about massive inflation hedge positions you hold which have gone south. And the Roubinis of this world who talk of all the manifest current deflationary symptoms painfully on display today, reassure you they must have the full, and complete story, because what they refer to is easy to observe immediately.

While iTulip instead talks about where the ball is going to wind up on it's trajectory, Roubini talks compellingly about where the ball IS TODAY so the doubting Thomas's are all reassured that he must have peeled back the essential layers of the onion, because they can see what he's talking about unfold before their very eyes. iTulip is giving you the conclusions which Roubini never even mentions on his website. The quite rational conclusion as to where it must wind up - in a funding train wreck for the USA. Why does Roubini not mention that? Has he not even bothered to glance at this even if only to discard it?

I find your flippant and dismissive response to those charts to be interesting. The assumptions about orderly and cow-like foreign creditors, strung together like chattel to feed the US debt maw, sound all ironed out - then they fall curiously silent when it comes to addressing or commenting directly on data Fred shows you evidencing a heart attack which is actually in progress for incoming funding to the US. You sound so self assured elsewhere that this is all nonsense. Then when someone shows you a chart showing your assessment at least to date is flatly incorrect you ignore it and chatter on about what will be likely to occur in the near future? What about the present data, contradicting your assertions of captive funding?

What kind of agnostic inquiry is that?

In that vein, we could use these guys instead of Blackwater to keep us in line:

http://www.youtube.com/watch?v=tsUXG...eature=related



god, these videos are a riot... can't resist.

[skidder]

Re: Roubini: No Poom

"As long – as likely – as these fiscal costs are financed with public debt rather than with a monetization of these deficits inflation will not be a problem either in the short run or over the medium run. "

Sorry, but with my limited knowledge of the deficits being run prior to the world entering this recession, I just don't see how these fiscal costs get financed with "public debt"?
I'm assuming here that "public debt" means borrowed foreign money?

Weren't we borrowing 700 Billion from foreigners in the most recent accounting and didn't this equate to about 80% or so of total world savings?

Didn't Oil just drop 60% or so? Wasn't this the source of income for much of that Saudi money making it's way back into the US as part of that 700 Billion?

Didn't I just read where our imports/Baltic shipping index has fallen like 70% or something like that, again the source of funds the Chinese/Japanese were re-investing in the US, another major source for that 700 Billion?

I'm just having a hard time imagining why Roubini would not have run these numbers (or whatever they are) and come to the conclusion that foreigners couldn't fund that level of deficit even if they wanted to? In light of the recent Chinese comment that accuses the US of basically using our dollar hegemony to steal from the rest of the world, I believe a case could be made that "they" in fact do not want to fund the US for much longer. That really didn't sound like the sort of comment one would want to hear from one of our biggest creditors, in anticipation of continued funding flows.
Assuming any of what I just wrote is remotely accurate, there isn't a chance in hell that we continue our past level of borrowing from foreigners, to say nothing of increasing this amount (IMO).
The US either prints or cuts spending.

[labasta]

Re: Roubini: No Poom

Someone stop me if I have got any of this wrong.


Debts go bad as people can't pay them back as the debts get too big. Banks go insolvent as their compounded bets (derivatives) on these debts are called in. The derivatives were previously not in the real economy, just the continuing fractionally lent out Asian money. Asian money is stopped being lent out, as banks try to cover their derivative losses. They can't, as the derivatives dwarf Asian money and any capital they may have had. Government steps in and swaps derivative losses for core debt money nearly equivalent to the amount Asia would have bought as treasuries. Asian money still not lent out but derivative swapped treasuries are. Banks still insolvent as the government helped merely keep them lending (remain in business). It did not sort out their losses on their gigantic pile of derivatives going wrong. Banks are nationalised. Derivatives aren't paid back as the money isn't there.

Now I come to a problem. At the moment inflation doesn't occur as less derivative swapped debt is lent out due to the American people being unable to accept the same amount of debt as before. The demand side fails. So far so good. But the govenrnment has a high expenditure (such as its military). Its demand remains constant. Asia is in recession as people are borrowing less to spend on their goods. The government needs Asian money to keep up with its expenditure which is mushrooming due to poor Americans. Asians have less of it to give as it is in recession thanks to poor American people not buying stuff. Government needs to top up somewhere.
Government creates treasuries to give to itself which adds to the money supply creating inflation.

Treasuries become downgraded as they are being created from nothing. Nobody want treasuries as their yield is much lower than their continually depreciating value unless government raise the yield to match it. This might be 20% 30% 50% or 100% yield.

So it is the government needs which will essentially create inflation, not the swapping of treasuried for toxic paper in itself.

Have I got this right?

This is the US story. What about Europe?

[phirang]

Re: Roubini: No Poom

"As long – as likely – as these fiscal costs are financed with public debt rather than with a monetization of these deficits inflation will not be a problem either in the short run or over the medium run. "

Sorry, but with my limited knowledge of the deficits being run prior to the world entering this recession, I just don't see how these fiscal costs get financed with "public debt"?
I'm assuming here that "public debt" means borrowed foreign money?

Weren't we borrowing 700 Billion from foreigners in the most recent accounting and didn't this equate to about 80% or so of total world savings?

Didn't Oil just drop 60% or so? Wasn't this the source of income for much of that Saudi money making it's way back into the US as part of that 700 Billion?

Didn't I just read where our imports/Baltic shipping index has fallen like 70% or something like that, again the source of funds the Chinese/Japanese were re-investing in the US, another major source for that 700 Billion?

I'm just having a hard time imagining why Roubini would not have run these numbers (or whatever they are) and come to the conclusion that foreigners couldn't fund that level of deficit even if they wanted to? In light of the recent Chinese comment that accuses the US of basically using our dollar hegemony to steal from the rest of the world, I believe a case could be made that "they" in fact do not want to fund the US for much longer. That really didn't sound like the sort of comment one would want to hear from one of our biggest creditors, in anticipation of continued funding flows.
Assuming any of what I just wrote is remotely accurate, there isn't a chance in hell that we continue our past level of borrowing from foreigners, to say nothing of increasing this amount (IMO).
The US either prints or cuts spending.

There is a third option. It's been mentioned a BUNCH of times.

But let's wait for EJ to elucidate... shall we?:cool:

[blazespinnaker]

Re: Roubini: No Poom

In that vein, we could use these guys instead of Blackwater to keep us in line:

http://www.youtube.com/watch?v=tsUXG...eature=related



god, these videos are a riot... can't resist.

Great, we all just ended up some watch list. Thanks Phirang

[blazespinnaker]

Re: Roubini: No Poom

The key thing is VELOCITY: who cares about aggregates when there is no VELOCITY!

This is what morons like Rogers and Schiff completely forget about! THERE IS NO CREDIT TO BUY GOLD WITH.

GOLD IS MONEY, but you have to get CREDIT to get MONEY!

As for inlfation, if the US reduces her imports meaningfully as a result of declining AD, then other nations will have to import MORE inflation to have a hope in hell of exporting to the US.

Sing it!

This is something a lot of people here don't realise. The government is just replacing the shadow banking system, but not fast enough, so we have deflation.

The whole shadow banking system(SBS) experiment obviously went majorly sideways, and we can all agree that Ayn Rand probably should have spent less time hanging out with Alan.

Fair enough. Clearly the invisible hand has a tendency to panic in a very painful way at times, and government can probably provide a useful role in keeping the hand on a steady path.

Which I believe is what's going to happen here. The government is just leveraging up as the SBS is leveraging down and isn't going to over leverage because the head of the CB has inflation numbers to target.

However - we still have fundamental problems after they've done that:

- Peak Oil,
- Global Warming,
- a total lack of Savings in the US,
- an aging demographic,
- an end to Bretton Woods II

The first two I think Obama has some good ideas on how to solve and could go some ways to helping us out with the current problem.

The third, however, is pretty scary and could lead to a very painful recession here as people start saving again. But who knows, people like to spent money and countries like China and Japan, let's face it, rely on selling goods to Americans.

The fourth is some ways away. I suspect it will just end up in some balance of higher taxes, slower productivity, and decreased benefits.

The final problem is the biggest of all for the US. Again though, I don't imagine any quick disruptions, but clearly, the hegemony is over.

[Starving Steve]

Re: Roubini: No Poom

There will be a federal value-added tax or a federal sales tax coming, in the not too distant future, whether in a recession or coming out of one. This is how this economic mess can be worked-out.

I blame the neo-cons for spending on endless wars, deficits, drug war, prisons, tax-cuts for the rich, military toys, and bail-outs for Wall Street. So let's be very clear about who is to blame before the new tax scheme is even introduced.

Just this past week, the U.S. military launched a new atomic-powered, attack submarine. With all this economic turmoil going on, the U.S. military got another expensive toy to play with...... Does Al Qaide have a navy?

[blazespinnaker]

Re: Roubini: No Poom

In the latest post to his blog, Nouriel Roubini seems to pooh-pooh the possibility of poom.

http://www.rgemonitor.com/roubini-mo...plus_deflation

In conclusion, a sharp slack in goods, labor and commodity markets will lead to global deflationary trends over the next year. And the fiscal costs of bailing out borrowers and/or lenders/investors will not be inflationary as central banks will not be willing to incur the high costs of very high inflation as a way to reduce the real value of debt burdens of governments and distressed borrowers. The costs of rising expected and actual inflation will be much higher than the benefits of using the inflation/seignorage tax to pay for the fiscal costs of cleaning up the mess that this most severe financial crisis has created. As long – as likely – as these fiscal costs are financed with public debt rather than with a monetization of these deficits inflation will not be a problem either in the short run or over the medium run.

I'm not sure I agree with the conclusion. I do see some inflation happening. I'm sure Bernanke and Obama will be doing everything they can to make that happen.

[blazespinnaker]

Re: Roubini: No Poom

I blame the neo-cons for spending on endless wars, deficits, drug war, prisons, tax-cuts for the rich, military toys, and bail-outs for Wall Street. So let's be very clear about who is to blame before the new tax scheme is even introduced.

They did that on purpose. Their approach has always been - do the spending and the tax cutting, and then blame the democrats whenever they try to raise taxes to try to deal with the massive deficit that the republicans forced them to have to deal with.

Basically, make the government structurally out of money so they can't spend it on more programs. Bankrupt it so it can't get any bigger.

Regan did that, Bush did that, and then Bill had to balance the budget. Then Bush II did that, and now Obama has to balance the budget.

The republicans knew very well what they were doing.

[phirang]

Re: Roubini: No Poom

They did that on purpose. Their approach has always been - do the spending and the tax cutting, and then blame the democrats whenever they try to raise taxes to try to deal with the massive deficit that the republicans forced them to have to deal with.

Basically, make the government structurally out of money so they can't spend it on more programs. Bankrupt it so it can't get any bigger.

Regan did that, Bush did that, and then Bill had to balance the budget. Then Bush II did that, and now Obama has to balance the budget.

The republicans knew very well what they were doing.

This is bigger than stupid political parties... but yes, the key players knew what was what.