Category: Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “Sleepwalking Toward a Precipice”

  1. bonerici says:

    that cup of coffee was sitting there every panel until the last one, then it got CHUGGED.

    Nothing interesting in this piece but the graphics are pretty and what the hell is a damn “double-wide” economy.

  2. dougc says:

    “double-wide” refers to trailer homes that are 24 ft wide. I assume it refers to a poorly built, temporaily acceptable economy that will quickly deteriorate.

  3. GeorgeBurnsWasRight says:

    I, on the other hand, merely skimmed it because I found the presentation manner so off-putting. YMMV.

  4. davefromcarolina says:

    Yet another explanation of what went wrong, in which the word “fraud” never appears.

  5. gordo365 says:

    Very cool. There are alot of “back of napkin” drawings. I wonder if they are more grounded in reality than the Laffler curve…

    OK – I’ll have to read it now…

  6. reedsch says:

    “…personal outcome is an outcome of business hiring. The idea that consumption drives growth is a fallacy.”

    So business hiring is an outcome of…?
    And chickens are a way for eggs to make more eggs.
    Still waiting for someone to tell me how we get cash into the pockets of consumers so they can buy the output of robot factories. Or do they envision robot consumers? (no sarcasm intended…well, maybe a little)

    p.s. glory days are here again for US software developers, at least until the Indians succeed in taking it over completely.

  7. WallaWalla says:

    Thanks, I found that quite interesting and actually enjoyed the presentation manner. It’s stuff like this that is approachable by many people outside of the finance industry. Please keep us updated on any later parts.

    One question: what is this ‘twist’ fed policy?

  8. JimmyDean says:

    EXCELLENT WORK. This fairly well articulates what many in investment business have been saying (to general population’s mostly deaf ears) since 2008-2009. It should be sent to every politician and fed member with the caption: “How do you want to be judged by history?” Thank you Barry for flagging this.

  9. Greg0658 says:

    one of the slides reminded me of another Bernanke (yesterday) link provided in the thread ‘Laws Don’t Prevent ..’
    at 1h07m25s .. 3 points one being on Jan 1st 2013 Law sets a massive fiscal cliff

    ‘double wide economy’ not sure on that but
    fyi – a 24foot double wide trailer/home* I’ve seen at home shows and actually set in place = 2 halves built in a factory setting, delivered via highway semihauler – set over a slab / crawl space / full basement with a crane

    this presentation style reminds me of fav book for j6p building:
    http://www.amazon.com/dp/0470087811/ref=asc_df_04700878111919593?smid=ATVPDKIKX0DER&tag=hyprod-20&linkCode=asn&creative=395093&creativeASIN=0470087811#reader_0470087811

    * not included in this book (memory serves) and that 12 foot wide is about tops
    USA DOT Truck Size/Weight Regs
    http://www.ops.fhwa.dot.gov/freight/sw/permit_report/index.htm

  10. Terry says:

    I don’t know if these guys can spell “economics,” but–as StrawberryBlonde says–their presentation is clever.

  11. MacroEconomist says:

    Clear and succint and absolutely on point. Bravo.

  12. constantnormal says:

    There’s a bit a a joke on slide 4, on the napkin sketch titled “The Virtuous Cycle”, wherein supposedly businesses “invest” by hiring more people … actually, it hasn’t happened that way in this country for Quite Some Time …

    Instead, what occurs is that businesses “invest” by moving operations to lower-wage countries, or by replacing jobs with automation, resulting in higher profits, bigger bonuses for the senior managers, and a higher rate of unemployment in the nations the senior managers live in, and a higher percentage of their revenue coming from outside the country (where it is presumably also taxed at a lower rate as well).

    The net result being that the wealth and prosperity of the nation hosting these companies is being pumped out into the rest of the world, with the senior managers being incredibly well-compensated to perform this global service. Additionally, due to the lower tax revenue from wages and business profits (fewer of which are occurring domestically), society does an increasingly poorer job of educating the next generation, who move straight to the dole, do not pass go, do not collect a growing wage …

    However, I tend to agree completely with the rest of the message, and in the end, it all winds up in the same place …

    There are many paths, and they all lead downward …

  13. jaymaster says:

    Pretty good summary, but the presentation style was just a little TOO clever for me.

    That damn font is horrendous!

    It took me probably three times longer to read than it should have, and now I have a headache to boot….

  14. Icouldabenacontendah says:

    The giveaway on where this is coming from is the two views of GDP, particularly the virtuous cycle. It supposedly “starts here” with business investment. It supposedly does not “start here” with consumer spending. This is nothing but a clever straw man created to discredit Keynesianism, which it doesn’t do because it is a straw man. The cycle is justifiably depicted as a circle. However, the starting point on a circle is necessarily arbitrary. You can predetermine a starting point and draw a circle from it, which in some cases can be a valuable illustrative tool. But the predetermination here leads to a false dichotomy over precedence, i.e. business investment vs. consumer spending. That’s a chicken and egg argument. There surely is something precedent to both, but I will spare you any speculation of the Hobbes-Locke_Rousseau sort about the state of nature. It gets down to this: Keynes did not call for a new economic engine but said that we needed to tinker with the one that we had — the so-called magneto problem that needed to be fixed. Something was preventing the engine from operating at its full level of power, and all of the accumulation of investable business funds would not bring bring the economy back without a tuneup to stimulate the demand that had been pummeled by the financial collapse of that day. The point is the balance needed between the factors to keep the whole system operating at an acceptable level, not that it starts “here” or starts “here.” At times, it may be beneficial to analyze it from one perspective (starting point) rather than another. But analysis is one thing; advocacy is something else. These folks are as free to advocate as anyone else. But we shouldn’t let the elegant simplicity of their graphics mislead us into regarding their effort as analytical. This is a selling job for a political agenda.

  15. ezrasfund says:

    I also noticed the virtuous cycle discussion as falsely stating that hiring and not consumer spending is where the cycle begins. Clearly this cycle can begin with either one and the question is how to get hings started. Consumers with cash to spend and needs to be met, or businesses with money to invest and the need for return on equity.

    Here is where I would like to suggest moderation in all things. One of those things is inflation. Too much is obviously bad, but too little (even without deflation) can be equally harmful. Without moderate inflation investors and corporations (those “job creators”) can sit on their wealth without concern. Moderate inflation means that capital must be put to work or its buying power will diminish. This is one answer to why we cannot get that virtuous cycle moving right now. Corporations are sitting on huge wealth, but without the “use it or lose it” incentive of moderate inflation they have no reason to risk that wealth to find higher returns on capital.

  16. gordonq says:

    It seems the developed world’s economies have far too much drag to get going again like during the 1993 – 2006 period. This could change if a radical new cheap energy source were to be discovered (unlikely). I see the following as being “drags” to the needed recovery of the over-spent developed economies. (In no particular order.)

    1. Land use planning (zoning) artificially restricting room for expansion and keeping home prices and business real estate exclusive and expensive.
    2. Energy costs continuing to rise as resources become more difficult and costly to extract.
    3. Industrial metals becoming more expensive as 90% of the world strives for the lifestyle of the more affluent 10% and needing those metals.
    4. The aging population turning from producers to just consumers.
    5. Educational slippage in comparison to the rest of the world. Way too many Western youngsters would rather be cool than usefully skilled.
    6. Increasingly stringent environmental regulations increasing costs of production.
    7. Increased industrial automation creating fewer jobs towards the point where just a few highly trained and skilled workers can replace many workers.
    8. Unions (public and private workers) working to make labor rare and expensive to try to maintain wage and benefit levels.
    9. Continued pressure for increased government spending so as to “buy” votes for politicians who are richly rewarded for their jobs and are largely unaffected by their lawmaking.
    10. Continued pressure to over-reward managerial and technical people at the expense of the less well positioned and trained people, to the point where they work hard and still can’t “make a living”.

  17. emcsull says:

    is this the diary of a wimpy investor ?

  18. roeske says:

    good, but awful font. what kind of designer would recommend such a font, which made me re-read because the eye pain was too distracting to concentrate??

  19. ilsm says:

    Loved “Restoration Infrastructure”, from the title through the %’s mis information.

    Start: compare ’65 to ’10. Odd years military waste was not peaked in ’65, was near historic peak in real dollars in ’10.

    Worse government R&D is mostly on things that make smoke, noise and waste (carbon and nuke) and is better declining in real terms which is not the case.

    The only “declines” in non entitlements come in terms of % GDP and share of spending.

    Got to look at the out comes.

    And ten years ago, during the panicky misinformation blizzard about the war budget declining to 3% of GDP they were saying entitlement at 65%.

    So much misinformation.

    Did I say government R&D like military intelligence is an oxymoron? Welfare for inept, high margin engineering house.