http://www.debtdeflation.com/blogs/ subtitled: Analysing Australia’s 45 Year Obsession with Debt, a new addition to blogs I'm following after seeing him on the 7:30 report. Choice quotes:
"As the experience and the memory of the Great Depression receded, academic economics produced a hybrid of Keynes’s macroeconomic ideas grafted on top of Neoclassical microeconomics that they called “the Keynesian-Neoclassical Synthesis”.
Unfortunately, the ideas were incompatible–and over time, wherever there was a conflict, academic economics rejected the Keynesian graft, rather than the underlying Neoclassical microeconomics. After fifty years of this, Keynes’s ideas were completely ejected from the economic mainstream, the Neoclassical belief that the economy is self-correcting became dominant once more, and economists trained in this belief came to dominate Treasuries and Central Banks around the world. They ignored levels of private debt, championed deregulation of finance, and virtually encouraged asset price speculation.
Now we have twice as much debt as caused the Great Depression, and inflation so low that, were it not for unprecented factors (the rise of China, global warming and peak oil), deflation would almost be a certainty.
Having thus unlearnt the real lessons of the Great Depression, the economics profession may yet make us relive it."
"I can be pro-inflation and anti-gold at the same time because I have supreme confidence in the ability of our economic managers to FAIL to cause inflation. So I actually expect deflation in the future, in which case the money price of gold may well fall (though it will surely fall less than other commodities).
However, I could be gazumped by global warming and peak oil, which could cause the inflationary surge that our economic managers will finally realise is needed, but not know how to consciously cause. There is also the slim possibility that truly over the top increases in fiat money could trigger a hyperinflation.
So given those two possibilities, I’m not anti-gold; it depresses me to say that I have actually started considering whether I might put some of my money into gold. But I would still prefer to remain in both bank deposits and my super fund’s so-called cash accounts."
"As the experience and the memory of the Great Depression receded, academic economics produced a hybrid of Keynes’s macroeconomic ideas grafted on top of Neoclassical microeconomics that they called “the Keynesian-Neoclassical Synthesis”.
Unfortunately, the ideas were incompatible–and over time, wherever there was a conflict, academic economics rejected the Keynesian graft, rather than the underlying Neoclassical microeconomics. After fifty years of this, Keynes’s ideas were completely ejected from the economic mainstream, the Neoclassical belief that the economy is self-correcting became dominant once more, and economists trained in this belief came to dominate Treasuries and Central Banks around the world. They ignored levels of private debt, championed deregulation of finance, and virtually encouraged asset price speculation.
Now we have twice as much debt as caused the Great Depression, and inflation so low that, were it not for unprecented factors (the rise of China, global warming and peak oil), deflation would almost be a certainty.
Having thus unlearnt the real lessons of the Great Depression, the economics profession may yet make us relive it."
"I can be pro-inflation and anti-gold at the same time because I have supreme confidence in the ability of our economic managers to FAIL to cause inflation. So I actually expect deflation in the future, in which case the money price of gold may well fall (though it will surely fall less than other commodities).
However, I could be gazumped by global warming and peak oil, which could cause the inflationary surge that our economic managers will finally realise is needed, but not know how to consciously cause. There is also the slim possibility that truly over the top increases in fiat money could trigger a hyperinflation.
So given those two possibilities, I’m not anti-gold; it depresses me to say that I have actually started considering whether I might put some of my money into gold. But I would still prefer to remain in both bank deposits and my super fund’s so-called cash accounts."
Bron,
ReplyDeleteI have been reading Steve's blog off and on for a couple of years. His thoughts on the debt burden are most useful and illuminating. You may recall I linked to his blog when discussing inflation/deflation. I too was impressed with his 730 report interview. His presentation seems to be improving with further media exposure. He was also recently on Insight and 60 minutes.
A bit scary when even economists start thinking of acquiring gold - a contrarian indicator ?
Not in this case I think.
Missed the link unfortunately, sometimes so much information to digest and follow up on.
ReplyDeleteMaybe Steve's a leading indicator of a paradigm shift in economic thought? OK, lets not get ahead of ourselves, he did say he was only thinking about buying gold, he hasn't actually bought any. When they start talking about going back to the gold standard then we know we are in trouble.
He sounds like a complete fool, praising Keynes and blaming free market... er, freedom. Okay, I understand Aussies like socialism. Socialize my unallocated gold and I'll blank your blank off.
ReplyDeleteBron,
ReplyDeleteInformation overload ?
I totally sympathise. One can keep reading and assimilating information, and still have the gnawing feeling that you're not really informed.
On the theme of information flows, I am really curious, if not to say perturbed, that the LBMA have shut down their already meagre information flows.
Generally they publish their activity stats (with commentary) on a monthly basis, usually with a one month lag. Their gold lease rate stats are usually published on a daily basis, with little to no lag.
Currently the latest activity stats are June 08 - they should have published the August figures by now.
Meanwhile the GOFO rates are still posted, but they are no longer willing to post LIBOR or the Gold Lease Rate which is derived from these.
This might seemingly be a minor point, but I certainly find this data to be more than merely interesting (incorporated with other data) in terms of both short term and long term market structure.
I am pretty sure participants in the LBMA market still receive the data - why not the rest of us ?
Kitco continues to publish gold lease rates, but their source is bloomberg. Given where LIBOR has gone recently, and given the LBMA-posted GOFO rate, the Kitco charts appear to be functioning correctly. The LBMA was much easier to download to a spreadsheet. Oh well.
Keith
Firstly, I think the delay may be because they were all at the recent LBMA conference.
ReplyDeleteI have corresponded with a few others who track lease/forward data and they have noticed the drop. I believe it was because of LIBOR and that the lease rate data should be coming back. Lets see.