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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Andy Sutton
March 17, 2011
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In reading the analysis of last month’s huge increase in the trade deficit to over $46 billion, the assertion was actually made that this is a good thing because the numbers indicate a healthy demand for imported goods. We still haven’t learned a thing. Of course, totally discounted in the report was the erosion of the dollar over the same period, which was notable. What also wasn’t noted was the effect of rapidly increasing energy prices on finished goods. Double that for increases in commodity prices in general. It is much the same as the situation with retail sales. Much emphasis is put on the headline numbers while little is done in the way of analyzing what the numbers actually mean or how they were derived.

Keynesian apologists love the big trade deficit because it indicates that the borrow- and-spend engine is getting revved up for another round. Maybe. Never do they look at the ability of the economy, particularly consumers, to support another round of excess. I wouldn’t go nearly as far as calling the consumer dead. The American consumer is like Sanka – good to the last drop, and will be around until it is absolutely impossible to remain. But we must wonder if consumer will be able to spend money at a rate that will cause another bubble to form with enough velocity and be of a large enough magnitude to keep the system afloat? More than likely, this endeavor will require additional rounds of QE by the Fed. Make no mistake about it – QE is now a permanent part of the discussion.

2010 Trade Deficit

Similarly, Keynesian apologists also love the concomitant decline in the Dollar because it helps inflate things like asset prices (the ‘good’ inflation), thereby supporting the idea that somehow all of this is a good thing. They are breathing a sigh of relief because their precious status quo has seemingly returned. The fact that so many people are paying attention to the debt is something they find offensive and annoying. After all, debt hasn’t mattered before, why should we be worried about it now?

And so it would seem we are back to 2005 and it is déjà vu all over again. There are, however, some significant differences between now and then. In 2005, there was little awareness and discussion about America’s debt levels, which were already very significant. As recently as 2006, the US fiscal gap was around $65 trillion – already a massive number. Now, just four and a half years later, the gap is more than 3 times that – and growing rapidly. Many would argue it is already beyond help. States are coming to grips with their own insolvency, and austerity, while not specifically mentioned yet, is already on the table in most areas. Foreign creditors have backed away from buying additional US debt and have been diversifying for several years now. This gap in demand has been filled by the Fed, first covertly, and now, overtly in the form of quantitative easing. Direct monetization. The end game common to all fiat currencies has begun. Our world is clearly not the same one we left back in 2005.

Since 2005, we’ve had one global financial meltdown, an oil shock, the European mess, and are working on our second oil shock and a food shock simultaneously. While our thinking and desires for respite may be stuck in 2005, our world is well past that.