Regrettably, your editor was back at the doctor’s office early this morning being diagnosed with tonsillitis after a lousy night. We were especially disappointed because scheduled for today was a noon lunch with Dr. Michael Hudson. His tour of the country is being sponsored by Prosper Australia and tonight at the Melbourne Town Hall at 6:30 Dr. Hudson and Dr. Steve Keen will be “lifting the lid on the GFC.”
We’re not sure if there are still places available. It’s free, but you’ll have to RSVP. You can do so here. It’s a great chance to hear two independent thinkers offer an alternative explanation for what’s going on, an alternative to the rosy everything’s fine clap trap in the mainstream.
If you’re not in Melbourne or can’t make it, don’t worry. We’re going to take up some of Dr. Hudson’s main contentions over the next month and “unpack them” as the saying goes. Among other things, he’s arguing that we are moving to a “Neo-Feudal” world where the landlords and the bankers are again in charge of the economy (and the world).
Their strategy is to get the rest of the country into as much debt as possible. Whether this is so they can increase their claims on financial wealth (rents, interest payments, and capital gains on asset prices) or whether it’s a political program to subjugate the population…that’s one of the questions we were going to ask.
We were also going to ask if the “de-industrialisation” of advanced Western economies that Dr. Hudson talks about is a reversible process. Can Europe and America ever compete with China and Asia in manufactured goods? And if they can only do so in high-end goods (capital goods, technology, aerospace, IT etc.) what does that mean for the structure of employment in Western economies and corporate earnings.
Dr. Hudson, it seems to us, is right to point out that there is a kind of “Financial Oligarchy” that seems to be benefitting the most from the financialisation of the economy. But everyone else – those betting on higher share and house prices to pay for retirement (and pay off huge debts) – may not fare so well. What should you do? What can you do? More on this in future reckonings.
For today, we’ll go to the mailbag and see what your fellow readers have to say.
Global governments are attempting to levitate a collapsing private sector debt fuelled asset bubble by using a debt fuelled public sector bubble.
There is now raging inflation out there. Property prices have gone mad; the stock market is doing the same. Everyone feels great at the moment which is a classical sign of the early stages of inflation. Prices are rising for goods and services.
The US has passed the limit where government deficits exceed 40% of government spending. This 40% figure has been found to be the tipping point for hyperinflation, 20 such episodes occurring after 1980. (Berholz: Monetary Regimes and Inflation: History, Economic and Political Relationships).
In the Weimar Germany hyperinflation, the masses were impoverished but the government debt was wiped out.
Is this the fate awaiting us from all the massive public sector stimulation of a seriously wounded private sector economy?
One needs to remember that even a dead body will twitch if enough electricity is applied to the corpse.
Enjoy reckoning…just sometimes wonder why so many experts underestimated the strength of this bear market rally. Do you think it may be because bear markets rallies on average run 70% from their lows and can last for 17 months or longer so why all the amazement?
Yeah so the IOUSA sucks. What’s new? Bankers are rewarded for stealing, families living in car parks – banks making big profits circulating taxpayers money between themselves and the government while they public starve.
Top line growth bah humbug nar that’s a thing of the past – sure it’s a sham but it’s as good as it gets.
It’s really all about the US dollar carry trade i.e. sell us dollars and buy any other real asset on the planet and it comes with helicopter Ben’s blessing.
In reality the last days of Rome are really about having fun not warning people about the abyss we are descending into. When in Rome do as the Romans do. I’m really a perma-bear but have invested in a set of darts just for the time being.
I enjoy your daily comments. They provide balance to the relentless spruiking of property provided by all with an interest in selling it. Our stock market is way too high for real earnings and I feel we have learned absolutely nothing over the past two years.
Aussie debt is ballooning with the crazy message that we need to keep spending. I read a lot of financial and economic material every day and we need your comments for a reality check.
If the Western Govt’s keep printing and throwing money around as at present then we are destined to finally fall into a depression around 2012 or 2013. There are too many real facts which unfortunately do not support the general belief that all is coming right.
From another Ralph…
Thank you for your daily analysis. It’s refreshing to read common sense occasionally. The western world culture has become the masters of spin.
You write “the Keynesian approach to monetary policy focuses on demand, not on production.” As you have often said in relation to real estate, price is a major factor in (housing) demand, so also for any demand (unless you are a government spending other peoples’ money!) so perhaps we should “focus on productivity” rather than just “production,” the difference being that productivity will increase demand because the price will improve [drop] or the ‘bang’ will be bigger.
For me to buy something for myself with my money, three things must happen – I must want it, I must be able to afford it, and it must represent to me better value for money than something else (or nothing – i.e. saving). Price is up there in two of the three.
Little Hartley, NSW Australia
for The Daily Reckoning Australia