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Old 04-07-2010, 10:56 PM   #61
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People are of course entitled to their opinion. And I've (almost) learned that conspiracy theorists are impervious to empirical evidence and therefore shouldn't be argued with.
Never attribute to conspiracy that which can adequately be explained by stupidity. There is plenty of stupidity in DC.
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Old 04-07-2010, 10:58 PM   #62
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Banana Ben will speak about rates going lower...
I give points to someone who knows what a "banana" is.
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Old 04-07-2010, 11:02 PM   #63
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I thought it was "Helicopter Ben"......

OK - what's a banana?

Audrey
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Old 04-08-2010, 07:25 AM   #64
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Originally Posted by Ed_The_Gypsy View Post
I give points to someone who knows what a "banana" is.
In this context it's a demeaning term for less developed countries in the tropics as in:
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Helicopter Ben Bernanke has earned the new moniker of Banana Ben. He has earned the new name because of his desire to make the United States resemble a banana republic instead of embracing the policies that made the U.S. the greatest nation on earth. It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation. Their efforts are derived from the mistaken belief that inflation can solve everything.
Well, this tread certainly deteriorated - from a discussion on if/how/when the economy recovers to mindless babble.

My view of the next year or so

the economy is recovering and will continue to do so
the number of employed people is increasing and will continue to do so
public opinion of the aggregate debt and obligation of the federal gov’t will get worse but public finances will actually start to improve (2011)
inflation will rise significantly (>3%) in 2011
Employment for college grads will rebound
There will be lots of volatility in asset markets but no bears...Jan 09 levels will not be revisited.
Investors who cashed their equities waiting for the next shoe to drop won't be able to afford shoes and will end up barefoot

We’ve had it so good and so easy for so long that we’ve forgotten what it’s like when times get tough and how to look beyond the current gloom.
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Old 04-08-2010, 08:14 AM   #65
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Treasury auction's need to go well... They pull out Greece and a little market pullback

Turbo Tim is cooking up a deal in China...

Weekly jobless claims back down to 460,000 doesn't look too good...

Earnings are good though, I look for the banks to keep doing well as long as they can keep cooking the books with "mark to fantasy" accounting...

Housing market is fragile, higher mortgage rates wont help...

Kansas City Fed chief says he want's to raise the discount rate to a brutal 1% and the markets freak out...

I think were gonna be stuck between 1150 and 1200 for a while...

If employment doesn't pick up we could easily see 1100 again...

But all that considered the market probably keeps going up
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Old 04-08-2010, 08:23 AM   #66
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In this context it's a demeaning term for less developed countries in the tropics as in: Well, this tread certainly deteriorated - from a discussion on if/how/when the economy recovers to mindless babble.
And this is different from other threads how?

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My view of the next year or so

the economy is recovering and will continue to do so
the number of employed people is increasing and will continue to do so
public opinion of the aggregate debt and obligation of the federal gov’t will get worse but public finances will actually start to improve (2011)
inflation will rise significantly (>3%) in 2011
Employment for college grads will rebound
There will be lots of volatility in asset markets but no bears...Jan 09 levels will not be revisited.
Investors who cashed their equities waiting for the next shoe to drop won't be able to afford shoes and will end up barefoot

We’ve had it so good and so easy for so long that we’ve forgotten what it’s like when times get tough and how to look beyond the current gloom.
I hope you're right. I'm concerned that job growth might continue to be dominated by the public sector. I don't see that as being sustainable in a supposedly free market society.

I don't see how inflation can be contained in the mid to long run at 3% with all the debt and newly printed cash floating around. Once again, I hope you're right.

I definitely hope we don't see Jan '09 levels in the market again, but I wouldn't be surprised to see one or more significant bear markets over the next 3-5 years. Based on " one generally accepted measure is a price decline of 20% or more over at least a two-month period". (Vanguard)

I've got no problem seeing beyond the current media induced gloom, but until I see significant improvement in productive job growth and housing I'm not anticipating happy days being here again. I'm talking in society here, not the stock market. The Dow is not the measure of economic and social health.

So, there are my thoughts. I'm sure this thread will be unearthed regularly over the next few years, so I'll be able to see how I did.
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Old 04-08-2010, 09:17 AM   #67
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Originally Posted by MichaelB View Post
\
My view of the next year or so

the economy is recovering and will continue to do so
the number of employed people is increasing and will continue to do so
public opinion of the aggregate debt and obligation of the federal gov’t will get worse but public finances will actually start to improve (2011)
inflation will rise significantly (>3%) in 2011
Employment for college grads will rebound
There will be lots of volatility in asset markets but no bears...Jan 09 levels will not be revisited.
Investors who cashed their equities waiting for the next shoe to drop won't be able to afford shoes and will end up barefoot
That's a pretty nice forecast overall.

>3% inflation in 2011, eh? That would be a surprise to me, but I don't ignore the possibility.

I tend to favor the long market cycles theory that says we in one of those secular bears 2000 to 2017 or so, so I expect plenty of long-term volatility with no breakout above past peak levels until 2017 or so. We might not see Jan 2009 levels again, but there is plenty of room for at least one more 20% bear market type sell-off before the end of the period. Rebalancing has been a real sanity saver in this type of range-bound market environment.

ECRI has also convinced me that much higher unemployment rates are here to stay for a long time. Really back to what was more typical before the unusually high full employment of the 1990s and 2000s. This limits economic growth long-term, but also helps limit inflation. We'll see.

Audrey

P.S. I certainly understood the phrase "banana republic". I must admit I get a kick out of referrals to the US as a "third world country". If you have ever lived in one of those, you realize it's pretty far fetched.
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Old 04-08-2010, 09:22 AM   #68
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Helicopter Ben Bernanke has earned the new moniker of Banana Ben. He has earned the new name because of his desire to make the United States resemble a banana republic instead of embracing the policies that made the U.S. the greatest nation on earth. It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation. Their efforts are derived from the mistaken belief that inflation can solve everything.
Note: What's to follow is not a criticism of MichaelB who posted this quote as an explanation.

Begin rant . . .

The above quote is the kind of hyperbole that gets picked up and mindlessly repeated as if it is some kind of wisdom. This is becoming a pet-peeve of mine. Calls for hyper-inflation date back to at least the early part of 2008. And yet, what has inflation done? (See below)

Will we ever get the prophets of doom to come out and say they were wrong? No. They just roll their predictions forward without ever bothering to consider or incorporate any evidence that doesn't fit their specific narrative of the Apocalypse.
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Old 04-08-2010, 09:28 AM   #69
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>3% inflation in 2011, eh? That would be a surprise to me, but I don't ignore the possibility.

I tend to favor the long market cycles theory that says we in one of those secular bears 2000 to 2017 or so, so I expect plenty of long-term volatility with no breakout above past peak levels until 2017 or so. We might not see Jan 2009 levels again, but there is plenty of room for at least one more 20% bear market type sell-off before the end of the period. Rebalancing has been a real sanity saver in this type of range-bound market environment.

ECRI has also convinced me that much higher unemployment rates are here to stay for a long time. Really back to what was more typical before the unusually high full employment of the 1990s and 2000s. This limits economic growth long-term, but also helps limit inflation. We'll see.

Audrey
This all sounds pretty reasonable to me.

2017 to hit new highs makes sense. It took 5 years (subject to check) to get from peak to peak the last time around. A longer recovery this time makes sense.

High long-term unemployment also seems to be in the cards, if for no other reason than adding millions of new jobs takes time.

I also wouldn't rule out a 20% type pull back. Valuations for all asset classes seem to me to be "normal" for a good economy. But we still don't have a good economy yet. So there is certainly risk to the downside.
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Old 04-08-2010, 09:31 AM   #70
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Not that I agree with Michael Pento (Banana Ben Bernanke) but I don't think you can negate the ptential for in flation by showing a chart covering 2 years. As long as the interest rates are artificially held down, inflation may be able to be controlled. But they can't hold them down forever. Hopefully Ben and Tim are right when they assure us they can sloooowwwwly increase rates while keeping inflation in check. I just worry it they will react to slowly and it will get away from them. Tune in next year (or so) to find out!
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Old 04-08-2010, 09:35 AM   #71
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High long-term unemployment also seems to be in the cards, if for no other reason than adding millions of new jobs takes time.
Not to mention that "voluntary attrition" rates seem to be very low right now. So not only are new jobs not being created rapidly, but also people are "guarding" their current j*bs with their life and not leaving (this board is an outlier in terms of saving for the future). The net result is that job openings -- whether a new job or through attrition -- look to be minimal in the next several years.
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Old 04-08-2010, 09:39 AM   #72
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But I think the phrase
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It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation.
is valid. Because of course you want SOME inflation! You don't want deflation! Specifically you want 2% inflation. Below that things are just not so great economically. Of course you don't want to go way above that either - other problems. But there is an inflation "sweet spot" that is justifiably sought after by the Fed, etc. IMO no administration wants to see sub-2% inflation.

The problem with the inflation rants is the leap from any inflation at all to hyperinflation. Completely different situation. But of course regular inflation and hyperinflation get lumped together for all those black-and-white thinkers out there.

I'm not saying hyperinflation can't happen. But I don't see the germs of it now, so until I do it's not going to be on my list of major concerns.

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Old 04-08-2010, 09:46 AM   #73
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But I think the phrase is valid. Because of course you want SOME inflation! You don't want deflation! Specifically you want 2% inflation. Below that things are just not so great economically. Of course you don't want to go way above that either - other problems. But there is an inflation "sweet spot" that is justifiably sought after by the Fed, etc. IMO no administration wants to see sub-2% inflation.
IMO, the "ideal" inflation rate is precisely zero. But it's better to have a little inflation than to have deflation, so I think monetary policy understandably errs on the side of inducing a little inflation given the bad economic impact of deflation.

Of course, none of this accounts for the idea that inflation is good for the federal government's debt load as the "real" debt shrinks with high inflation. Of course, they have to balance that with cooking the inflation statistics creating inflation in ways that don't fully materialize in the CPI so they don't have to pay out all the "reduced real debt" in I-bonds, TIPS, SS and COLA'd pensions...
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Old 04-08-2010, 09:49 AM   #74
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Not that I agree with Michael Pento (Banana Ben Bernanke) but I don't think you can negate the ptential for in flation by showing a chart covering 2 years. As long as the interest rates are artificially held down, inflation may be able to be controlled. But they can't hold them down forever.
I agree, to an extent. Inflation is a threat. But so is deflation. And while I can't negate the possibility of inflation forever and always, many of these hyperbolic predictions had dates attached to them . . . 2009, 2010 etc. etc. And now those dates have moved back. But what we see is that inflation has declined, and the trend for median inflation is still heading downward.

Consider what would have happened had policy makers listened to Peter Schiff and his supporters back in 2008. Instead of the moderate deflation and disinflation shown in those charts we'd have an outright depression. But never mind that Peter and his parrots were dangerously wrong, just give it time and eventually he'll be right (and just don't consider what wreckage there would have been had we listened to him initially).

Look, I'm not asking for unanimity of opinion. All I'm asking is for people to walk back the hyperbole. We can have legitimate concerns about Fed policy without drawing stupid parallels to "Banana Republics" and Weimar Germany.
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Old 04-08-2010, 10:05 AM   #75
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IMO, the "ideal" inflation rate is precisely zero. But it's better to have a little inflation than to have deflation, so I think monetary policy understandably errs on the side of inducing a little inflation given the bad economic impact of deflation.
Maybe 0% inflation would be great for a retiree. But for economies - I don't think so! There is a reason even the super conservative Eurozone targets 2%. Sub 2% inflation is usually associated with economic hardship.

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Old 04-08-2010, 10:07 AM   #76
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Unemployment will contain our inflation - up to a point. Economic policy in China will have an upward impact as well. The large population developing countries will continue to industrialize and consume greater quantities of materials and manufactured goods. Lots of variables and very complex.

Inflation never solves problems – it just redefines them.

As for Banana Republic and Third World – I lived in the “Third World” for half my life, my wife and children were born and raised there, where we still have lots of family and friends, as well as many close and personal ties to “banana republic” inhabitants. The terms themselves are derogatory, and my experience is they are used most by people that understand them the least and rely on biased and stereotypical imagery to make points they are unable to make intellectually. ‘nuff said on this...
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Old 04-08-2010, 10:10 AM   #77
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Maybe 0% inflation would be great for a retiree. But for economies - I don't think so! There is a reason even the super conservative Eurozone targets 2%. Sub 2% is usually associated with economic hardship.
The U.S. economy had very little overall inflation from 1790 until WW1, with a few inflationary and deflationary fluctuations in between. I don't think the entire 125 year period was a lousy economy.

Or has the Federal Reserve, "fiat money" and fractional reserve lending changed the rules?
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Old 04-08-2010, 10:15 AM   #78
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Stable prices are ideal for an economy and greatly enable long term investing. Economists consider 2% as "reasonable" because monetary tools are blunt and cycle times too long to guarantee avoiding deflation if inflation drops below that number.
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Old 04-08-2010, 10:17 AM   #79
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The U.S. economy had very little overall inflation from 1790 until WW1, with a few inflationary and deflationary fluctuations in between. I don't think the entire 125 year period was a lousy economy.

Or has the Federal Reserve, "fiat money" and fractional reserve lending changed the rules?
Ah - back when the US really was a third-world country!

I don't care to return there. To an agrarian economy and some really devestating global economic busts? No thank you! Maybe inflation averaged out to zero, but there were some horrible deflationary periods, so there must have been some bad inflation as well. Not sure the point then.

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Old 04-08-2010, 10:32 AM   #80
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Ah - back when the US really was a third-world country!

I don't care to return there. To an agrarian economy and some really devestating global economic busts? No thank you!
Correlation does not equal causation. Do you have any evidence to suggest that a lack of long-term inflation is a *cause* for a weak, unstable economy and excessive boom/bust cycles? For almost all of history until the rise of fiat money and fractional reserve lending, the long term inflation rate was a lot lower than it has been in the last century. As I said before, I don't think there was a constantly "bad" economy, though there were some busts and panics as there still are today (albeit more "managed" today).

I'm not suggesting that a 21st century economy return to a 19th century banking and economic system. But I do think that we've been conditioned to "accept" inflation as a fact of life and that it is "healthy." A little inflation is much better than deflation, I'd agree -- but personally I think that is really the only reason why targeting 2-3% inflation is reasonable; even a weak economy is less likely to fuel a devastating deflationary spiral.

Inflation -- in moderation -- is "healthier" than deflation, for sure, but I don't think it's desirable to have policy which intentionally causes a dollar to buy a lot less 10 years from now than it does today.
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