I’ll be speaking at the Australian Museum’s regular monthly talk this coming Tuesday evening on the topic of “The Next Great Depression?”. In a nutshell, the details are:
Title: Museum Australia Monthly Talk
Location: Australian Museum (entry via William Street)
Start Time: 18:30
Date: 2009-08-25
End Time: 20:00
Bookings and prepayment are essential: call 02 9320 6225 to book.
The cost is $20 for members of the Australian Museum and $30 for non-members. The event begins with light refreshments, followed by a one-hour talk, and then an open question time.
I’d like to give more details, but as noted in earlier posts, my lecture-writing load doesn’t allow time for lengthy blog posts right now.
August 20th, 2009 at 12:37 am
er positive article from professor Hudson claiming Iceland negotiating to only pay what it can reasonably afford without shrinking the economy and selling assets, ie only paying out of current account surplus if it has one and only up to certain limit, means the end of the post Bretton Woods era of neoliberal pro creditor austerity policies and that we should all be very happy. Hope he’s right!
http://www.counterpunch.org/hudson08182009.html
August 20th, 2009 at 8:25 am
I have to second that recommendation marvenger–an article well worth reading. There may be further “unexpected” shocks to the global economy coming from debt-payment revolts like Iceland’s.
August 20th, 2009 at 8:53 am
thanks for that link – sounds like some real positive news
August 20th, 2009 at 9:26 am
In the same vein, check out MARSHALL AUERBACK on “Why a Debtor’s Revolt Would Work”:
http://www.counterpunch.org/auerback08142009.html
August 20th, 2009 at 10:32 am
Seems the majority of ‘expert commentators’ see inflation risk as the main short term challenge. Interesting link to Adam Carr, particularly the frustrated comments about groundhog day pasted below – a repeat of the last few years.
The worry – Raise interest rates to fight the inflation bogey, then find the economy stalls & falls. The duel between inflation & deflation arguements is coming to a head – this is where the fundamental belief systems of economists will be tested in the real world. Strap yourselves in.
http://www.businessspectator.com.au/bs.nsf/Article/SCOREBOARD-Inflation-watch-pd20090820-V3THR?OpenDocument&src=sph
“Regular readers may remember that one of my key concerns has been that central banks would keep rates too low for too long – ” &
“The added pressure for low rates will come from very high levels of government debt. The last thing any government wants to see are interest rates going up – they’ve got debt they need to roll over. So I’m not seeing much to change my view – strap yourselves in. The negative of course is that further down the track the risk of a double dip recession is high (as central banks panic about the eventual inflation burst – again). It’s like frikin groundhog day – it’s a seriously crazy world. I mean hasn’t this happened already, you know…just recently?”
August 20th, 2009 at 11:02 am
Can someone please explain to me why the economies of Asia are supposedly booming again with huge increase just a few short months after they were dropping like lead in water? Is this real or are we being duped. I hear that the China Stock market is down 20% in 2 mths so if things are doing so well why is the market falling? All this is so bloody confusing for the average Joe like me.
August 20th, 2009 at 11:18 am
Yes, one of the ironies of the current time–when conventional economists who didn’t see this crisis coming are now proclaiming that it is over–is the odds that they make take away the stimuli that are propping things up, and thus expose the underlying debt-deflationary pressures that the stimuli have to some extent masked.
Their successors some years hence may then well blame the Depression of 2010s on bad economic policy… just like this current lot blame their predecessors in the Fed for causing the Depression of the 1930s.
The trouble is that, just as in 1930, in the midst of a developing Depression, it can seem that we’re coming out of one. This blog that covers stories from the New York Times in the 1930s is well worth reading:
http://newsfrom1930.blogspot.com/
Here’s an extract from today’s excerpt, covering stories published on August 19 1930:
Alan Kohler recently commented that, reading this blog, it was obvious that in 1930 most people didn’t appreciate that they were in a Depression.
The blogger’s “About” page is also well worth a read:
http://newsfrom1930.blogspot.com/2009/06/why-this-blog-socratic-monologue_3441.html
August 20th, 2009 at 11:36 am
The King has spoken… Let the printing games continue.
http://www.guardian.co.uk/business/2009/aug/19/mervyn-king-deflation-economic-policy
From the British perspective it is deflation very much.
August 20th, 2009 at 12:39 pm
New here, and learning a lot – quickly. Thanks.
I know Steve sold his house a while back. May I ask the nature of the way in which the proceeds are now “parked”? My reason for asking is that I am starting to become a little worried that some banks may go down.
Supplementary question;
1 What are the chances of any of the Australian banks collapsing?
2 Short of digging a hole in the garden, where is a good, safe place to park funds?
Thanks for tolerating an entire novice to this game.
Mike
August 20th, 2009 at 12:54 pm
Hi Mike,
If I had the time (which I don’t) they’d be parked in long term (15 year) government bonds, which are currently returning 5.5% and were as high as 5.8% recently. Since I expect deflation I see this as a good income source with a reasonable capital gain if sold in 4 or so years (which I have to do for personal reasons when I turn 60).
However because I haven’t got a minute to scratch myself right now, they’re just in a moderately high yielding bank account.
Whatever happens to banks–and I expect ours to go the way of the UK/US at some stage–deposits will be guaranteed (if that doesn’t happen, then I’m taking up archery). So the money represented by bank accounts should continue. Not to do so would guarantee social breakdown.
August 20th, 2009 at 1:02 pm
Marvenger and all, I read in full the Counterpunch article by professor Hudson you linked above. It seems Iceland and Latvia (both sovereign countries) are both refusing to knucle under to Britain and Holland and be sent down the gurgler like Britain and France and others proposed to do to Germany post WW1. That ewas one of the main causes of WW2.What is the difference between what Iceland counter-proposes and what Argentina did during their economic meltdown over a long period when the World Bank did a similar job on them? It seems quite possible to financilly ruin a small country using “Hedge Fund short sell” tactics to me.
August 20th, 2009 at 2:07 pm
Latvia (and Lithuania) are different – so far they are following the orders from the big boys in the EU because they will pay any price in order not to be left out in cold at a mercy of Russia. They want to join Euro at any price, period (not like Poland where the president wants to stop this process). You cannot underestimate the level of distrust towards the Eastern neighbour there. Where this policy will lead them and whether it is irrational or rational are separate issues – I have never been there and cannot make any predictions.
We should keep in mind that all of them are pocket countries (Lithuania – 3.5 mln, Latvia – 2.3 mln) with large Russian-speaking minorities. Bailing them out is not a problem.
August 20th, 2009 at 2:23 pm
Steve,
You said:
” Whatever happens to banks–and I expect ours to go the way of the UK/US at some stage–deposits will be guaranteed (if that doesn’t happen, then I’m taking up archery). So the money represented by bank accounts should continue. Not to do so would guarantee social breakdown. ”
To date, US bank defaults have usually resulted in the depositor’s funds of the defaulting bank being seamleassly transferred to other US banks.
In Australia if, for example, the Commonwealth Bank became insolvent, would depositor funds be transferred to one of the other local banks or would RBA, Australian Treasury or APRA officials be sent to the CBA to assume control and maintain day-to-day operations?
In other words, how would it work here in Australia and, perhaps more importantly, can we assume that depositors will have full access to their deposits at all times? Is there any recent guidelines or precedents for bank failure in Australia?
Furthermore, what is the most likely mechanism through which the Australian government will finance the guarantee of a defaulting local bank? (i.e would the guarantee be funded through reserves, bonds or QE or a mix)
August 20th, 2009 at 2:24 pm
Steve,
If your expectation is fulfilled that Australian banks will follow UK/USA banks, and depression era events really take hold, do you expect the government to limit access to cash withdrawals, as they did in the GD.
Seems to me, that if that much financial uncertainty eventuates, then ‘trust’ will evaporate. A run on banks could eventuate. The outcomes from that would be horrific.
August 20th, 2009 at 2:28 pm
Thanks very much for your reply, Steve. It confirms what I had been loosely thinking.
Gold seems to look good, but unless it were physical (very impracticle for me), then perhaps it would be no safer than the bank – maybe even less so.
Well, I’m glad my “proceeds” are in good company.
Cheers,
Mike
August 20th, 2009 at 3:37 pm
Hi Citydoc,
What seems like seamless transfers to other banks in the US has caused the FDIC (Federal Deposit Insurance Company) to run out of all the money it has ever collected as insurance from its member banks over the years.
When a bank goes under. There are effectively no deposits left. The cash is not sitting in a vault somewhere to be transferred by armoured trucks. The money has been lent out over and over again. Those loans have gone bad. That is why the bank’s assets (loans) are being sold off to the highest (if any) bidder. The loans are sometimes sold for cents in the dollar by the FDIC. The deposits are sold too, but for a faction of their face value. The new bank is effectively buying the customer base and continuing to pay interest to those customers for that privilege. The customers are being bailed out by the FDIC. It is almost like the FDIC is making a huge deposit into that new bank on behalf of the customers of the old bank. It is then up to the new bank to manage its treasury so that it gets a profitable return on those new deposits. If it can?
August 20th, 2009 at 4:23 pm
hi kbh,
lets hope we dont get the mess we have in the US banking system,
from what i can see, the bad debt and non performing loan postion of the major banks in oz are substantianly less than capital reserves, if one trawls through the apra website.
we would need a 10 to 20 fold increase in bad debts to undermine the soundness such as it is of the big 3 and a half.
i say such as it is, because in my opinion all banks are theoretically insolvent all of the time.
i wont mention any names, but it will be interesting to see if some of the smaller regional banks go under first due to some large exposures to some badly thought out taxation minimisation scemes.
August 20th, 2009 at 4:30 pm
by the way steve,
i must say your looking pretty good for the 56 fruitfull years youve been on the planet from what ive seen of you,
good genetics perhaps,
youll do the walk to kosiosko(if it comes to that) without raising a sweat me thinks
August 20th, 2009 at 5:06 pm
Thanks Mahaish,
A friend of mine worked for the Reserve Bank in the 80-90s, and I recall him telling me at the time that Westpac was insolvent for a while. I guess they pulled through then. I guess if a real crisis hit the banks in Australia, we would have some warning….
August 20th, 2009 at 5:22 pm
BTB,
I agree with your statements.
But in Australia, who is the FDIC equilvalent and what is the mechanism in place for an Australian bank default.
And are we going to be able to access our ‘electronic credits’ at all times during the default process?
August 20th, 2009 at 5:54 pm
Steve, wouldn’t parking your money in 15-year govt bonds be risky? If Australia gets hit by horrible debt deflation and ZIRP, I think the AUD will tank big time. Inflation will go for the moon then.
August 20th, 2009 at 6:32 pm
Hi Citydoc and Daltica,
I haven been the banking bear on this site for a long time. It is interesting to hear people talk about stashing money etc. Last year I desperately tried to engage discussion about where to put one’s money. All people could say was gold. Maybe good, but not convinced on gold. Please don’t start the gold debate, I concede.
In terms of where too. I have a newish strategy. I have referred to it several times over the last 3 or 4 months and that is in $US. This is a very contrarian strategy though, because every trader is convinced that the $US will continue to tank. To do this though, one must be prepared to move out of $US at a time that one thinks is suitable (as deflation becomes intense).
I also agree with Steve’s strategy of Government bonds. Although I am concerned with the long maturities, because risk appetites might go haywire in a total meltdown. But by the textbook. If we have deflation interest rates will fall and the value of (and demand for) the bonds will rise. $A government bonds are also good because our government has very little debt. But, I am concerned about massive capital outflows which could mess with market rates. Disclosure, I own $A government bonds. Just shorter maturities.
To the question of the banking system. I am very concerned that there may be bank runs that will crash the system. In an orderly market, the government can easily backstop the banking system. But in the face of total panic and mis-trust, the best way to avoid a run (in my opinion) is to shut down the system and restrict withdrawals to a minimum. The mortgage funds in Australia did it last year and none of them went broke. They froze people’s money and shut off the run. I do not want to risk that for a 2% (after tax return).
All that I have said is my opinion only.
August 20th, 2009 at 8:45 pm
BTB,
You said:
” To do this though, one must be prepared to move out of $US at a time that one thinks is suitable (as deflation becomes intense).”
There were forecasts (? State Street) late last year that suggested the AUD would fall to 40c due to the strength of the USD coupled with low Australian interest rates and commodity prices. To date, the low for the AUD since the onset of the GFC has been around the 60c mark.
IMHO, your strategy will probably work if the USD is once again viewed as a safe haven currency in a declining stock and commodity market. But the problem I see is that it is a race between Australian deflation vs USD collapse. It is difficult to predict which event will occur first.
August 20th, 2009 at 10:32 pm
An interesting blog entry has been posted by prof Mitchell where he directly challenges certain ideas discussed on this blog from the Chartalist point of view.
http://bilbo.economicoutlook.net/blog/?p=4402
I am not entirely convinced to everything what I read there especially that trying to simulate the economy makes no sense (I would like to see how the Japanese Government Outstanding Debt mentioned on that blog would look like over the next 20 years without having to wait 20 years and whether it has or hasn’t any side effects to the economy).
August 20th, 2009 at 11:41 pm
AK
Thanks for the link. I don’t see where Prof. Mitchell suggests “trying to stimulate the economy makes no sense.” Seems he’s arguing the opposite, in fact.
August 21st, 2009 at 11:15 am
zkaat,
I mentioned numerical simulations not stimulation.
I was referring to the following sentences:
” the final point is the one that fascinated me – the need to “put together a dynamic model than encompasses the entire set of processes and their feedbacks.”
Well, there has already been the ultimate non-linear “dynamic model than encompasses the entire set of processes and their feedbacks” built. I call it Japan others might call it Japan too. In fact, we can all call it Japan.”
As an engineer (not economist) I am always tempted to ask what will happen if somebody tries to crank the public debt machine up even more. What the feedback will be when their public debt/GDP ratio reaches 300% or 700% or 1400%? (I know they will never default as they always can credit the accounts. Oh no! I remember… This was called socialism when I was a kid living in Peoples Republic of Poland).
August 21st, 2009 at 12:23 pm
ak
sorry for the misread! makes sense now, of course.
as for dynamics of debt ratio, pretty simple and explained over and over again by numerous economists. just need the interest rate on national debt to be smaller than growth rate of gdp. also, debt ratio does not matter, debt SERVICE does in terms of inflation impact. but in japan, the rate is set at effectively zero by the boj, so debt service does not grow enough to bring inflation.
August 21st, 2009 at 1:19 pm
I am aware of all of this but I think the size of the public debt (and who it is owed to) does matter.
1. Interest rate cannot be used as an effective tool of monetary policy. Just imagine debt size 1000% and interest rates 10%. Yes I know. They are in deflation so they don’t have that problem. But what if the conditions change and they have a bubble they want to stop from growing? They will have to assume manual control over the economy.
2. If they decide to buy back bonds (or simply are unable to roll the debt over again) and some of the bonds are owned by overseas investors they will have to flood international markets with their currency. This will collapse the exchange rate. This in turn will trigger inflation even if they don’t hit the capacity constraints.
3. Debt can be used as a weapon by a foreign country threatening to flood the markets with the bonds and collapse the currency.
August 21st, 2009 at 1:49 pm
ak
1. mitchell agrees, i think. but his preference is for fiscal policy, anyway. even if monetary policy has perverse effects (massive spending on debt service when rates rise), fiscal policy can still be used, in his view.
2. mitchell/wray/mosler, etc. argue that bond sales are not for finance, but for interest support. so they reject your point here outright. this point is too complex to treat completely here, so i’ll leave it at that and just refer to mitchell and mosler blogs. on another note, though, if fiscal policy keeps the economy at full employment even if foreign investors sell bonds, why would the exchange rate collapse? wouldn’t you want to invest in a country at full employment? worst case scenario is that the currency falls as you said and exports rise, which is what us politicians want, anyway. sidenote: note how schizophrenic us policy toward china is; that is, “please buy our bonds and keep our currency strong” while at the same time “stop manipulating your currency by buying our bonds and instead let our currency weaken.”
3. again, they would disagree as long as the debt is issued in the domestic currency that the government itself creates. and, yet again, bond issuance not necessary in the first place in their view.
August 21st, 2009 at 2:34 pm
z.kaat,
I understand that bond sales are for interest support to manipulate the yield curve but the toxic pile of debt is a by-product of the policy. Just like carbon dioxide is a by-product of burning coal. My point is that it is equally unsustainable in the long run.
The exchange rate is affected by the availability of currencies and this is how central banks intervene on the markets – by selling or buying currencies. The exchange rate would collapse because speculators (investors) don’t care about the full employment policy but they want short-term returns. So if there is an excess of USD due to the trade deficit its exchange rate must fall – when overseas investors stop buying bonds. The excess of USD on the markets will happen sooner or later (probably in a few years time) if the current policy continues. This aspect of reality is ignored in the explanations how the modern monetary system works.
If all the bonds were issued to domestic investors things would look a bit better but strong USD kept to stimulate consumption is correlated with the trade deficit. They are cornering themselves leaving smaller and smaller space to make any adjustments.
The time scale of a currency collapse could be in days (depending on the behaviour of exchanges – they will most likely halt trading in such a case, the response time of automated trading systems is around or below a millisecond).
The time scale to rebuild the productive economy in the US (bearing in mind how much they depend on oil) when petrol costs there several times more than now could be in years.
Of course collapsing the USD is a mutual-destruction scenario for China and it can be only used to blackmail. But the collapse of currencies can also be triggered by short-sellers. They don’t care and they did it in the past (G. Soros).
I understand that without simulating we don’t know what will happen in 20 years if the current trends continue but I am sure that if the US debt keeps growing the system must be extremely unstable.
August 21st, 2009 at 3:03 pm
In the first sentence I was referring to QE used to manipulate the yield curve, issuing bonds itself is used to affect interst rates.
August 21st, 2009 at 4:13 pm
z.kaat
eric janzen of itulip.com argues that capital exporting nations will not experience infaltion in debt deflation, there’s quite a lot of room for the country to increase public debt to make up the balance and keep rates low. The US on the other hand who needs to funds current account deficits will need to raise rates if it is to attract foreign capital and this will cause inflation, why this hasn’t happened yet is because of the US’s special status as reserve currency issuer. Australia seems to fit Eric’s criterea well for inflation, perhaps our special case is that we’ve got a crap load of resources to back the currency and that’s why we haven’t had to raise rates.
August 26th, 2009 at 12:37 pm
I attended last nights lecture by Steve and found it insightful and somewhat scary as the social upheaval from something even close to the Great Depression will be enormous. From the lecture I understand Steve’s fundamental conclusion is that our (western world’s) level of debt is too high and we must go through a period of de-leveraging to bring this down to more manageable proportions. While I wasn’t fast enough on the night to put together a question I would appreciate if Steve could respond to the following issues I thought about last night:
1. What is a sustainable level of debt expressed as a percentage of GDP? It may be a bit simplistic but as an individual I certainly wouldn’t be overly concerned about a debt level of say twice or even three times my earnings. However this seems to be a problem at the national level – I wonder why?
2. Even if there is too much debt couldn’t de-leveraging occur in an easier -‘family unit’ basis. By that I mean that my parents could assist me with reducing debts and in turn I could help my children. Of course not everyone has family or assets that could be used in that way but even grown children moving back home could be a way of reducing their expenses and thus leaving the way open for them to spend more on consumer goods. This coupled with a bit more domestic demand from China, India and others could mean consumer spending globally is close to existing levels. Not that this is necessarily a good thing of course and eventually the house of cards may fall – however it is the timing which most people would be interested in. Another bubble – however created – that goes on for 6 or 7 years is a different proposition to a bubble that bursts in a few months. The implication from Steve’s lecture is that this will happen soon – however I am not sure why.
Anyway thanks again Steve for a good lecture and your web site is a revelation.
August 26th, 2009 at 12:52 pm
Thanks onevoice,
On your questions:
1. Part of why you could pay that debt level in our current society is that someone with initially no debt would buy whatever asset you’ve purchased with your own debt level and take over its servicing. If that person couldn’t be found, then you’d need to finance it solely out of your own income stream, and even with a good income level that can be problematic. Many people in society don’t earn enough to be able to consider taking on debt and purchasing an asset in the first place: they dilute the feasible debt load at the national level. There is no “right” level, but looking at times of economic tranquility (1948-65 for Australia) it seems that a debt level at the national scale of 25-40% is sustainable. Any more than that and the dynamics of debt growth dominate economic activity–leading to the Ponzi bubble we’re now in. That really is the danger–not so much the debt level per se as the reason it’s taken on. When it’s to finance speculation, by definition its a net sum loss for society as a whole, and the burden of supporting that can bring the economy down.
2. The trouble with an individual approach to deleveraging is that it undermines the income stream on which that deleveraging is based. In our demand-driven economy, with demand as the sum of GDP plus the change in debt, deleveraging reduces aggregate demand and the economy tends to shrink–which counteracts the attempt to reduce debt at both the individual and social level. It may well be what ends up happening, and it does eventually work, but it involves a long, drawn out economic decline.
August 27th, 2009 at 6:22 am
Steve, have you done any work to estimate the multiplier effect that would apply to the decrease in debt? If there is a multiplier effect to government deficit spending or credit created spending wouldn’t the reverse hold true as well? That may be where the believe in stimulus comes up short if the multiplier related to new stimulus measures falls far short of the multiplier related to the debt de-leveraging. This could make deficit spending a futile exercise in today’s environment.
August 27th, 2009 at 8:15 am
That’s actually a big “if”, djvoor1–”If there is a multiplier effect to government deficit spending”. As long term readers know, the concept of a “money multiplier” is false. The classic “government multiplier” arguments are derived from static logic: presume the economy is in equilibrium now, add a stimulus and the model iterates to a new, higher equilibrium.
Whether such a concept works in a dynamic setting–i.e., the real world–is a moot point. There is one way this is true in my monetary framework: the spending acts as an addition to the money supply which then turns over at the same rate as money does in general–which is why an addition to private debt of $100 can cause say $400 of economic activity for a multiplier of 4.
In this sense any injection of money into the system, or deduction from it, has the same multiplier.
However in a dynamic setting the non-”ceteris paribus” nature of the real world comes into play, and a government injection might cause changes in other processes, or have to counteract an opposite action by the private sector.
That’s why in general I don’t work with a multiplier concept, but instead look at the scale of injections into and deductions from the active money supply. On that basis, since Australia’s starting with a debt to GDP ratio of 165%, and our historic rate of deleveraging appears to be between 3% and 8%, the deductions from aggregate demand caused by debt deleveraging will start at between 5% and 12% of GDP.
The government’s stimulus has been on the up side of the world average of 18% of GDP over 3 years, according to Rudd’s essay–so say a 7-8% injection equivalent. That’s enough to mask private deleveraging for a while (and there’s also been successful encouragement of the private sector to continue increasing debt via all the housing market manipulations), but it has to be maintained indefinitely to keep aggregate demand from falling.
I have yet to work all this through fully, but this in brief and in part is why I disagree with some of my Post Keynesian colleagues–such as Randy Wray, Warren Mosler and Bill Mitchell–on the sustainability of a government-deficit-driven economic recovery from a private financial crisis. I won’t get into that debate until I have time to work through the issues in my dynamic-modelling manner, but my gut feeling is as stated above.
August 27th, 2009 at 8:19 am
One other thing I forgot to mention: though my credit creation model doesn’t yet contain government money creation, I was able to modify it to simulate a single “one-off” stimulus of either (a) a $100 injection over a year to bank reserves or (b) a $100 injection over a year to debtor’s accounts.
The “bang for the buck” was dramatically larger when given to the debtors, and there’s a simple dynamic reason as to why: the rate of flow of money out of debtor’s accounts is much higher than that out of bank reserves during a credit crunch! So if you’re going to throw money around as a government in the hope of stimulating economic activity, you’re best to throw it at the debtors and not the creditors. On this basis, quantitative easing and the like by Bernanke et al are relatively ineffective, while handing money out via “cash for clunkers” and “tax rebate” measures a la Obama and Rudd are relatively effective.
August 28th, 2009 at 3:37 am
Thanks Steve, yes I meant a multiplier as it relates to the velocity of money and not as it relates to bank reserves. Your credit creation model is a perfect example of what I am trying to understand. If the $100 dollar injection to reserves has almost no velocity, the cash for clunkers injection is better, but primarily used for debt service as it is targeted at debt troubled businesses and thus would have a relatively low level of velocity as well. In addition, if the consumer and businesses continue to de-leverage their debt, which when incurred was at a higher velocity (I assume), would we not lose GDP at the prior rate of velocity even though our velocity today is slower. Based on that general theory, I don’t see how a government-deficit-driven economic recovery can happen if the size of their stimulus only equals the size of the de-leveraging of debt due to the relative differences in velocity, leverage, etc… In addition, due to the international imbalances for the US, I do not believe the credit markets would tolerate economic stimulus by the US of appropriate size to offset the de-leveraging effects. Surplus countries like China would have to be the ones to provide the US sufficient stimulus.
Is my thought process reasonable, or am I mixing too many different things? I feel like I am in a ball of yarn pulling on strings and trying to form an opinion on what will move and how.