A Bubble in Gold Bubble Stories
Between this blog, Illusion of Prosperity, Bill Bonner of The Daily Reckoning, and a myriad of other sites the only thing I can say with 100% confidence is that there is a bubble in "Gold Bubble" stories! At this point I am firmly with Mr. Bonner when he says:
Too many ‘possibles.’ Too many things we know we don’t know. And too many things we don’t know we don’t know too. And too many things about which we have no clue. We’re tired of thinking about it.Sounds about right!
I have a new poll question up for a vote: Where is gold on the bubble scale?
Deflation is a Riddle Wrapped in a Mystery Inside an Enigma
Thanks to Winston Churchill! Starting off the "dazed and confused" parade is the concept of deflation. Economic Disconnect wants to be honest and admit this animal is a hard one to fully appreciate. No wonder all governments aim for inflation, it just makes more sense!
We will begin with an expansive piece my Mish Shedlock. You will need a spare half an hour to really read the entire detailed post, but it is worth it.
Now you would think that after that great primer on deflation, all would be clear. I guess I am a slow learner!
As if I needed more help, one of my favorite writers anywhere is Mr. Practical (who posts on Minyanville infrequently). Today Mr. Practical weighs in on deflation and offers this juicy nugget:
In deflation, there’s too much debt. If the economy is slowing down, it makes it more difficult to pay back that debt and you would expect more to default. The more debt that forfeits, the more dollars are destroyed. The more dollars destroyed, the more they’re worth.
Now I understand this in principle. What I am having a real issue with is this idea applied to our "printing press" gunners at the FED. Thus far we have seen zero, count them zero, limits on the US ability to print as much money as we darn well please. If dollars are destroyed, just make more. To round this out, if deflation results in a stronger currency then:
-Would it not make sense to have rampant deflation for some time, allow the dollar to rise to some obscene number on the index, then use those extremely valuable dollars to buy the entire world?
How come nobody has thought of this before? I will take full credit for the original idea here!
All kidding aside, what are the limits to what I just outlined? At some point this all gets silly (if say $10 could buy Japan) so there must be something else I am missing. Where are the traps? Where does it hit a wall? I would really like some creative ideas in the comments on this one all.
Economists Love Bubbles
Maybe I am naive, and maybe I am just so nice on the inside that I would imagine an economist would strive to find sustainable growth, a stable currency, job creation, and maintenance of a standard of living to be ideal goals. I get a bit confused when they openly are looking for some kind of bubble to achieve their goals instead of long term solutions to problems.
Today's whopper comes from a recurring contributor to this award, Economist's View. My second favorite Keynesian (gaining ground on Krugman all the time though) Mark Thoma highlights a piece by Tim Duy and just goes right out and says what we all knew anyway; these guys are praying for another bubble. Short excerpt so I do not throw up:
So, given the unemployment outlook is sad, wage growth continues to deteriorate, core inflation is falling, and we seem to lack an institutional arrangement to force higher prices, should they even emerge, into higher wages, what is the Fed thinking? Should they really be worried about winding down programs? Are they really confident enough that an inventory correction that will undoubtedly spike GDP numbers will also translate into sustainable growth? Even knowing full while that after the last recession, the US economy languished despite the inventory correction, only to be revived on the back of the housing bubble? In effect, the Fed looks to be putting much weight on the cyclical story playing out, while ignoring the structural story of the necessity of asset bubbles to fuel growth.
Advice for the economists: start using your vast superior intelligence to SOLVE problems instead of inventing ways to MASK them and I will apologise for everything I ever said about your profession. I am serious. And don't call me Shirley.
Lost in the Ether
The two following tales are so over my head I am just going to provide the links and allow you the honor of wrapping yourself around the twisted path that MBS are looking at right now:
Mortgage Bonds: It's a Trap via Accrued Interest
PPIP Get's its Debut via Rortybomb
Friday Night Entertainment
After that parade of confusion, lets move on to the easy stuff!
Gift for that Special Lady
What do you get that special lady in your life to say "Thanks for tolerating me?" Diamonds are to expensive. Coach bags MUST be matched to the lady perfectly and by this I mean she has to buy it or tell you exactly which one to get, and that's no surprise! Here is a suggestion, a teddy bear jacket:
I think this could be huge this Christmas. Story and ordering information via Geekologie.
Economic Disconnect is in the market for a new kitty as you know, but I was shocked that Amazon has so much confidence in their 1 day shipping policy that they would chance this kind of package:
see more Lolcats and funny pictures
I am just KIDDING!
I am not sure anyone really checks this section out, but I get a kick out of it and it leaves my favorite clips someplace I can easily find them, so it goes on.
A film that not many people have seen is "The Prophecy". I love the film (NOTE: I am not religious, just love the film). Here are some clips of Christopher Walken playing Archangel Gabriel:
I love the film "The Outsiders". Take a look at the opening credits and see the that this cast became the heart of Hollywood for the next era:
Ending the night with the music!
My message to the markets, provided by Hall and Oates, is "Out of Touch":
I finally found out the name and artist of a song from the film Heat that I really liked. Enjoy New Order (featuring Moby) and "New Dawn Fades":
I have had this one before, but the piano music ran into my head this week, so enjoy "Tubular Bells" made well known in the film "The Exorcist":
Last one, I am a bit out of steam!
Closing the show with another song from a movie! At least I am consistent!
I loved the film "At Close Range" with Sean Penn and the already mentioned Christopher Walken (was he in everything??). Madonna wrote this song for the film, so try out "Live to Tell" along with plenty of cool clips from the must see film:
Have a good night.