This forgets the Japanese yen carry trade at 0% for much longer; the end of that carry trade triggered (more than caused) the current troubles.

«a consumer that borrowed too much, spent too much and saved too little»

That means that the median consumer had too little income, and policy was to encourage that median consumer to spend more byy borrowing more, instead of spending according to that stagnant or deflating income.

«in Asia where savings rates are also dramatically higher.»

Asian do save a bit more (the Japanese not any longer), but it is really their government that save for them.

«a big destruction in global demand for commodities but producers have responded with big supply destruction as projects have gotten canceled left and right»

It will be difficult to reabsorb all the new money being pumped into the system, and supply has need been underfunded, but what about the impact of dearer oil? A lot of commodities are mined far away from where they are consumed and are used in high energy intensity processes and machines. Higher energy costs mean less demand for other commodities.

«why do you believe high inflation is the inevitable outcome? Of course printing money is an inflationary force, but there are powerful deflationary forces at work as well, such as debt destruction.»

Because ultimately turkeys don’t vote for Christmas. Western consumers and governments are heavily indebted, and debtors never vote for deflation.

Who was at this *pension conference*?

You know it’s roundly considered rude to speak over the audience’s head, right?

Otherwise well done.

x2

Dunno if I agree with your comments on commodities and Asia. Awhile back, I had come to the conclusion that China in 2009 is the analog of the US of the 1929. Michael Pettis, who is based there, has the same idea, so I naturally think he is a wise man.

China’s economy is built on exports and it looks like they are just trying to continue doing the same thing, much as the US did. While they aren’t imposing new tariffs, the Chinese are subsidizing their exporters and just increasing their overproduction. The buildup in commodities by China right now is based in large part on jawboning , armtwisting and subsidising of commodity industries by the government, which is more effective under their political system.

No way to know who is right because you can trust figures coming out of China even less than those coming out of Washington. If we are right, the Chinese are in for a long, deep contraction and possible political instability.

http://mpettis.com/2009/04/new-trade-and-reserve-numbers-from-china/

“The Federal Reserve in the person of Alan Greenspan arrived like the fairy in Cinderella. With the wave of a wand he dropped interest rates to 1%, released the monster of unregulated banking and financial engineering to turn all the pumpkin houses that eat up incomes in maintenance, interest, and taxes into diamond studded carriages that produce endless capital gains from asset price appreciation. That ended forever in 2006; the houses have been turning back into pumpkins ever since, but most home buyers do not understand this.”

I think Janszen, who wrote a cover story for Harper’s Magazine about the next bubble awhile back, would be a worthy add to The Big Picture Conference.

I agree with Peter/tranchefoot as well; the Fed doesn’t operate in a vacuum. It’s pushing, but the economy is pushing back, perhaps even harder.

TIA,

Peter

98 + 88 = 186

Until the White Sox won in 2005, it had been 186 combined years since a Chicago baseball team had won a championship (and that’s despite there only being about 12 teams for a number of years…)

The White Sox had last won in 1917 and the Cubs in ’07, fyi.

I guess Bernanke’s “grand experiment” can be likened to Sammy Sosa’s sudden bulking up for the ’98 season?!? How’d that work out? Is Mark McGwire in the Hall of Fame yet? Hasn’t Peter Gammons got him in yet???