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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 Doug Noland
December 9, 2010
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When I read of Chinese policy moves intended to suppress Credit and financial flows going to speculative endeavors – while actively promoting lending to more productive enterprises and to ensure ongoing economic expansion – I am reminded of the failed course of U.S. monetary management in the latter years of the “Roaring Twenties.”  It is the nature of Bubble economies that they become Credit gluttons.  Credit growth and financial flows grow increasingly unwieldy – and the greater the inevitable imbalances the greater the overall Credit expansion required to sustain the boom.  Efforts to sustain boom-time prosperity – while at the same time attempting to harness asset inflation and suppress increasingly destabilizing speculation – are prone to spectacular failure.

Chinese authorities recognize they have a problem – a serious monetary dilemma compounded and complicated by our QE2.  Today’s Politburo statement adds further evidence that more aggressive tightening measures will commence in 2011.  Yet the markets have turned numb to such warnings.  And I’ll be the first to admit skepticism that the Chinese will administer the necessary harsh medicine.  Chinese authorities have waited too long and allowed “terminal” Bubble excess to gain a powerful foothold.  With the Fed and ECB kicking the can down the road, the markets can be forgiven for believing that Chinese policymakers will lack the fortitude to truly tighten system Credit and liquidity. 

Global markets could be at a bit of a crossroad here.  Commodities are on the move again, and mounting inflationary pressures – especially in China and Asia – are a serious issue.  And it wouldn’t take much renewed dollar weakness to push this issue to the forefront.  The European peripheral debt crisis has muddied the waters somewhat, but the upward bias on global yields was back in play this week.  The U.S. municipal bond market has stabilized.  Yet the small decline in yields following the big spike higher would seem to suggest further vulnerability.  A huge list of municipal issuers is lined up to sell debt.
The gamey U.S. stock market has placed a big wager on the “risk on” trade.  With QE2 in the early phase, greed has thus far held fear at bay.  It surely won’t take months of disappointing data to spark QE3 banter.  And there’s nothing like a world of synchronized speculative asset markets to embolden those banking on global policymaker liquidity backstops – the Fed, the ECB, BOJ, PBOC…  Perhaps U.S. equities will begin to decouple from global asset inflation when the fragile U.S. economy and Credit system come to be viewed as relatively more vulnerable to surging commodities prices and rising global yields.
An important facet of my thesis holds that – with the post-Greek crisis global focus on structural debt issues - the U.S. is in the process of becoming a major focal point.  In the grand scheme of things, Ireland may be only loud noise.  Gold, silver and commodities prices don’t seem to be signaling sustainable dollar strength or overall confidence in the way things are heading.
It took months for mortgage Credit contagion to spread from subprime to attack the heart of the U.S. Credit system.  Perhaps it’s a stretch to analyze in terms of an unfolding bursting of a global government finance Bubble - as opposed to a European peripheral debt crisis.  I just don’t think so.  And I fully expect that after market ebbs and flows – and near panics that incite more speculator-emboldening central bank market interventions/liquidity injections – the markets will inevitably discipline Washington.  In the meantime, we are left with a game of counting the number of global policymakers kicking the can down the road.