tag:blogger.com,1999:blog-2992740250270600844.post7521221713079946388..comments2024-03-24T05:26:32.964-07:00Comments on Advancing Time: Crosscurrents Cloud Future Economic PictureBruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2992740250270600844.post-91945230402290565312015-01-10T16:44:05.596-08:002015-01-10T16:44:05.596-08:00Hard to believe that if debt continues to rise. th...Hard to believe that if debt continues to rise. that growth could expand.badger10https://www.blogger.com/profile/02328760269429346895noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-38007705770597336092015-01-05T10:09:09.770-08:002015-01-05T10:09:09.770-08:00Bruce, this is a well thought out analysis on your...Bruce, this is a well thought out analysis on your part. There seems to be a hidden agenda by the global finance world (including all Central Banks) to just extend household debts to even more EM (Emerging Market) countries, now that the developed economies in U.S. Europe and Canada are drowning in debts, and spur more accumulation of "stuff" by consumers and prolong this debt-fuelled economic expansion, which has been going on 30+ years, without having to worry about paying it, for now anyways. These finance gurus, looking at their world maps, estimate there are at least 2 Billion more potential consumers and credit card holders around the world they can corral, and hopefully 20 more years of debt binging, before we face the Day of Reckoning. We'll see who is right soon enough.Anonymoushttps://www.blogger.com/profile/03032957484519882216noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-13274797673931822062014-12-13T04:58:45.041-08:002014-12-13T04:58:45.041-08:00Thanks for the comment which you end with "We...Thanks for the comment which you end with "Welcome to the New Normal where debt doesn't matter." Many people believe this and I see this as the glaring flaw in Modern Monetary Theory, referred to as MMT to its many believers this theory removes much of the risk ahead and guarantees that we will always be able to muddle forward by using government-issued tokens and our current units of fiat money. Newly acquired tools like derivatives and currency swaps allow us to print and manipulate away problems. What you pay in interest on debt does matter except in the manipulated land of MMT. An "almost surreal" feeling of indifference towards reality has started to develop.<br /> <br />Companies have already ushered saving from interest paid on debt into the earning column and a major reason inflation remains low is they are sitting on a hoard of cash this has lowered the velocity of money. We must remember the artificially low FED controlled interest rates are a massive one-off or onetime tailwind that is mainly behind us. When rates stop going lower or reverse the positive effect will ebb and become a major headwind. With massive government debt in many countries and the economy still weak the headwinds we face have the potential to become devastating. The collision of MMT, social unrest over inequality, and other destabilizing factors have the potential to create the perfect storm. Bruce Wildshttps://www.blogger.com/profile/10181323607060607040noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-16653543175736985342014-12-12T06:11:28.689-08:002014-12-12T06:11:28.689-08:00Bruce, I share your concerns and have been express...Bruce, I share your concerns and have been expressing similar views on my Seeking Alpha Instablog (www.SeekingAlpha.com search for Mike Holt). <br /><br />Debt and Demographics are the two underlying trends at the heart of the "weirdness" that you describe. We also need to understand that economic growth is a requirement for our economy, as it is designed, to function as we expect. This is especially true when debt levels are as high as they are. But, Demographics (aging populations in developed countries) create headwinds for that growth. So, we rely more heavily upon emerging market countries to provide the needed growth, but as their economies grow, the influence of their heavier state involvement in their economies also becomes more pronounced, and concerns about shifts in power and the existing "world order" prompt further government and central bank interventions that distort markets and our economy still further. <br /><br />So, instead of reducing debt to reduce the risk of deflation from a disorderly deleveraging process, debt levels continue to grow, allowing fundamental problems to remain unresolved. <br /><br />But, there are two schools of thought that influence how this is perceived, namely the Austrian School of Economics and the Classical School of Economics that has essentially redefined Monetarism as another indirect avenue for government intervention through "monetary policies" implented by not so independent central banks (accompanied by increased influence of banks who hold the government purse strings) in lieu of the direct fiscal policies characterizing Keynesian Economics that were relied upon more heavily prior to the 1986 Tax Act that eliminated the tax loopholes that had been used during the 1970's as an alternative means of artificially inflating asset prices for activities that otherwise would have no economic value.<br /><br /> Those in favor of greater government involvement (power) argue that the weirdness we are witnessing makes perfect sense and that if desirable outcomes don't result it is due to insufficient intervention that could be maintained through tax increases if limits on debt capacity ultimately caused interest rates, thus debt carrying costs, to increase. <br /><br />The Austrian Economists on the other hand argue that artificially low interest rates orchestrated by central banks--acting as policy makers rather than merely lenders of last resort for banks responding to natural market shifts in the supply of deposits and demand for loans--distort markets and contribute to asset bubbles that could lead to a restoration of market equilibriums but because of the pain this would cause are accompanied by even more central bank intervention, and more debt, to achieve an unsustainable "stable disequilibrium" instead. <br /><br />The ideologic differences between adherents to these two schools of thought colors the reporting of activities and events, making it more difficult to understand what is happening and where it is likely to lead. The growing influence of state capitalism variously employed in emerging market countries, particularly China and the OPEC countries, adds further to this confusion. <br /><br />Traditional analysis of market forces must now be accompanied by geopolitical analysis in which most investors and businesspeople have very little formal training, and would be hard pressed to predict political risks even if they were. Welcome to the New Normal where debt doesn't matter.Anonymoushttps://www.blogger.com/profile/08554406594786053935noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-88036987622502802122014-12-10T10:42:26.186-08:002014-12-10T10:42:26.186-08:00Thanks Bruce for the informative article. Happy Ho...Thanks Bruce for the informative article. Happy Holiday'sbadger10https://www.blogger.com/profile/02328760269429346895noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-25898285149510232122014-12-10T10:39:54.496-08:002014-12-10T10:39:54.496-08:00Continuing climbing debt leads to slow growth. Bew...Continuing climbing debt leads to slow growth. Beware.badger10https://www.blogger.com/profile/02328760269429346895noreply@blogger.com