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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

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 Doug Noland
November 30 , 2010
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With Eurozone tensions on the rise, Wednesday’s headline from the Financial Times read “Anger at Germany boils over.”  “Bernanke Fires Back, Takes Aim at China,” was how the Wall Street Journal titled its analysis of the Fed Chairman’s speech this morning in Frankfurt.  Paul Krugman also takes direct aim at Germany and China – and throws in the Republicans – with his “Axis of Depression” piece in today’s New York Times.  In a troubled backdrop beckoning for level-headed analysis and cooperation, the mood has turned decidedly ideological and hostile.

Dr. Bernanke has compiled speeches and academic papers that will be scrutinized for generations to come.  He added one more to his list this morning.  Global policymakers – already deeply skeptical – will not be impressed.  Officials from the “developing” economies are sure to be displeased.  The Chinese must be incensed – and it is difficult for me to discern how this will work to our advantage.  We’re the big debtor and importer.  In no way does our policymaking qualify as the “moral high ground.”  Indeed, most would argue we’ve been permanently disqualified.  QE2 was one step too far – it crossed the line.

The Bernanke Fed has boxed itself in a corner.  QE2 has been poorly received at home and abroad.  Yet with this policy having succeeded in inflating global markets, there will be no turning back from our monetary experiment.  Bernanke came out swinging today – or at least finger pointing.  Appreciating that QE3, 4, and 5… are now anything but sure things, he calls for help from additional fiscal stimulus.  In the following breath, he pays lip service to the need to resolve long-term fiscal challenges.  We’re at the point where it all lacks credibility.  Dr. Bernanke has always been an inflationist – and these stripes are increasingly apparent for all to observe.  Having been unsuccessful in “marketing” his latest installment of Treasury debt monetization, it is apparently now time to identify culprits. 

From Dr. Bernanke’s speech, “Rebalancing the Global Economy”:  “As currently constituted, the international monetary system has a structural flaw: It lacks a mechanism, market based or otherwise, to induce needed adjustments by surplus countries, which can result in persistent imbalances. This problem is not new…  In particular, for large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account.  Thus, it would be desirable for the global community, over time, to devise an international monetary system that more consistently aligns the interests of individual countries with the interests of the global economy as a whole.”

After Treasury Secretary Geithner’s “global rebalancing” proposals smacked up against a cement wall at the G20, Chairman Bernanke must know his global rebalancing speech will be flatly rejected in terms of providing a legitimate policymaking proposal.  It was instead a rehash of flawed doctrine – and a stinging slap in the face.  Our economy has been running Current Account Deficits since the eighties.  The Fed has been accommodating financial excesses since the eighties.  We’ve had insufficient household and national savings since the eighties.  Monetary policy has nurtured imbalances for decades.  So, we’re going to castigate the Chinese?

I find it embarrassing - to blame our trade partners and Creditors for our predicament.  Worse yet, it is frightening that there is obviously no plan of attack for dealing with our nation’s structural issues.  The Geithner/Bernanke “global rebalancing” gimmick is to have China and the “developing” economies inflate domestic demand and stimulate imports.   In the meantime, we stay the course with massive deficits, monetization and near-zero interest rates.  This approach has no chance of rectifying our deep structural impairment nor resolving global imbalances.  It does, however, increase the odds of a crisis of confidence in our debt markets and currency.