Thursday, February 19, 2009

Inspirational Morning Reading

There is nothing like a shot of Roubini to get your morning going:
It is now clear that this is the worst financial crisis since the Great Depression and the worst economic crisis in the last 60 years. While we are already in a severe and protracted U-shaped recession (as the deluded hope of a short and shallow V-shaped contraction has now evaporated) there is now a rising risk that this crisis will turn into an uglier multi-year L-shaped Japanese style stag-deflation (a deadly combination of stagnation, recession and deflation). The latest data on Q4 2008 GDP growth (at an annual rate) around the world are even worse than the first estimate for the US (-3.8%): -6.0% for the Eurozone; -8% for Germany; -12% for Japan; -16% for Singapore; -20% for Korea. The global economy is now literally in free fall as the contraction of consumption, capital spending, residential investment, production, employment, exports and imports is accelerating rather than decelerating.
Now I am inspired.

3 comments:

  1. Its almost verbatim what Murray Rothbard says happens after a long period of Bank Credit Expansion fuels a boom....
    The bust will not be over until all the bad debt has been flushed from the system and we know who to trust in the marketplace (ie allow bad actors to go bankrupt and debt to be liquidated)

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  2. So as a high-ranking military officer, are you concerned about the potential national security implications of a global economic slump?

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  3. Well, Im still considered a "junior officer" in the Navy, (O-4 and below) however it is of grave concern to me and my fellow military officers how much debt we are selling to mainland china. I can tell you that of the likely adversaries in a major scrum, China is our most likely candidate and we spend no small amount of time training for this. I personally think this Trillion dollar a year "war on terrorism" as well as this massive Keynsian response is going to weaken us in the long term and make us vulnerable in a strategic sense to countries who dont revere the Bill of Rights like we do in this country.
    To answer your question though, I see the political instability created by this economic slump as our most serious national security concern.....

    I just think the Govts response has been wholly incorrect. The market must be allowed to correct the malinvestments in the system. Housing prices (and I do have one) must fall to market levels. Banks that msde very poor decisions or are too big to compete in today's market should be allowed to fail (although I prefer a controlled FDIC style demolition). Most important, the Govt and banks need to tell everyone the truth about how bad it really is with these banks.... The market (through equity prices and bond yields) already suspects the truth and has been trying to price it in. But the truth is these Bankers are very well politically connected are are still holding hopes out that they can come up with some way to charge off their losses to the taxpayers. I hope my new CIC has enough stones to tell them to take a hike.....

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