Dec20
Max Keiser interviewed me for his 4th Keiser Report when I was in Paris earlier in December. I come in at about the 13 minute mark after Max’s banter with Stacy:
It was a great interview–Max had about ten questions prepared, but only asked about 3 of them because the conversation flowed so well.
We also recorded a program on what 2010 may bring for markets and economies for BBC Radio 5 Live Breakfast; the program will go to air on New Year’s Eve at 10PM London time.
For anyone who has an interest listening to (or reading) Warren Buffett.
The link below is a transcript from an interview on the Burlington Intranet. Interesting comments on which areas of America will do well over the next 100 years.
http://www.sec.gov/Archives/edgar/data/934612/000095015709001025/form425.htm
Hi The USD is Back,
“Also the EU has severe coordination problems and have difficulty agreeing on anything.”
I see that as a very big plus for Europe when considering the coordinated rape, pillaging and fraud of US Taxpayers at the hands of the 3 evil sisters – the Fed, US Treasury and Wall St.
You need to be able to reconcile how the US can fund it’s massive debt issuance without resorting to turbo printing the money itself to argue for a significant strengthening of the USD. China doesnt see itself as a big UST customer at the moment;
http://www.shanghaidaily.com/article/print.asp?id=423054
Hi TITINT,
Insolvency. Probably defined two ways.
1. Liabilities total more than assets (technical insolvency)
2. Inability to pay one’s debts (traditional insolvency)
Based on the second definition, I can see how many would believe that the greater majority were not insolvent in 2008, but rather had temporary cashflow problems that when corrected meant they could repay their debts.
The way I see it though, is that the western world has been seduced by debt and the belief that they must take on higher and higher levels of debt to buy assets. “That’s just what you do”! Such that the value of their assets and the resulting levels of debt flow from a ponzi scheme.
So the question becomes. Are asset values normal or are they ponzi inflated? If you believe that the present levels of debt and asset values are normal you will conclude that in 2008 we had a liquidity crisis. If on the other hand you conclude that asset values are greatly inflated because of the abnormal ponzi. Then in fact the majority are technically insolvent and the soon to return liquidity crisis (inability to convert assets to cash) will find out who is swimming naked. Unfortunately it will be most, as most are indebted.
Ponzi equals technically insolvent.
Normal state equaled temporary liquidity problem.
The world has concluded the latter. Time will tell if it’s the former.
Hi GSM
From 129:
” I see that as a very big plus for Europe when considering the coordinated rape, pillaging and fraud of US Taxpayers at the hands of the 3 evil sisters – the Fed, US Treasury and Wall St. ”
And you don’t think that EU taxpayers are going to be similarly screwed to prop up the dysfuctional countries and economies of the EU?
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” You need to be able to reconcile how the US can fund it’s massive debt issuance without resorting to turbo printing the money itself to argue for a significant strengthening of the USD.”
Like I said before, when push comes to shove America will be ruthless in protecting its own security and national interests.
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” China doesnt see itself as a big UST customer at the moment”
China will continue to be a big UST customer in the foreseeable future. If it doesn’t, it can kiss its own economy goodbye and deal with the resulting consequences which include internal instability and domestic unrest.
bb & TITINT
‘While from an idealist perspective letting the system fail for a socialist agenda sounds good, it would cause an economic crisis the world has never seen and does not deserve’
A socialist agenda would be to jump in and do what has been done (and worse – AK might shed better light on this), a hard capitalist agenda would be to go through bankruptcy and let what happens happen, you might be surprised that although painful it might have been(and still be) the better option for the longer term.
‘Ironically letting the system fail would hurt the poorest people the most.’
Maaannn, way too late; the wheels were set in motion long ago for this event, as it now stands the poor and middle class are getting stuck with it big time in the US and everybody is standing around slapping backs at mission accomplished, job well done.
I would strongly argue that very little has and is being worked out of the system in the way of losses, mark to market got scrapped and now it is all green and groovy baby.
As many people smarter than I have pointed out, if people aren’t working then they are not paying their mortgages and if that isn’t happening then the rest is just window dressing, so the losses will continue to grind on regardless of the tick of health the FED has given the financial sector(the same FED that missed it coming – hummm?) and in the mean time all main street indicators (employment, consumption, debt, etc) point to a long hard grind with little end in sight.
In the end though the US will survive this disaster but it (and the rest of us) have got a long way to go before we are anywhere near
‘saved’.
Moz
bb
From 128,
The Warren Buffett interview at sec.gov was interesting. Buffett’s attitude towards current US debt is certainly different and probably worth considering. At odds with all the in the moment Sturm und Drang. Is he right? In the long run – very possibly. Still, we know what Keynes said about the long run.
I’m reading Alice Schroeder’s SNOWBALL. In the book Buffett references Honore de Balzac’s “Behind every great fortune, a great crime” to which Buffett replies “Not at Berkshire Hathaway”.
No great crime perhaps, but death by a thousand cuts?
“Like I said before, when push comes to shove America will be ruthless in protecting its own security and national interests.”
Are you referring to defending the interests of the state and the society or to defending the interests of certain groups of people (e.g. bankers or investors)?
“Imports do not cause a net loss of jobs in a nation’s economy. Imports may displace some workers in less competitive industries, but the overall level of employment is determined by monetary policy, labor market flexibility and other non-trade factors. Thus, trade benefits an economy in the same way as technology, causing resources to shift to more productive sectors, raising overall living standards. For the overwhelming majority of American workers, imports raise real compensation by keeping prices down and stimulating domestic competition. Research shows that a rising level of imports to the United States usually signals the creation of more jobs, not the loss of jobs. Imports benefit American producers as well, providing capital equipment to make workers more productive and lower-cost inputs, such as steel, electronic components, and raw materials, that make their products more price-competitive in world markets.”
http://www.cato.org/trade-immigration/faqs
“An estimated one in eight Americans depends on the benefit to buy food. With the nation’s unemployment in double digits, more people are expected to enroll. By some government estimates, up to 16 million people who are not receiving food stamps today could qualify.”
http://www.reuters.com/article/idUSTRE5BH2C220091218
I am not saying that the US cannot bounce back but to me days of unchallenged global domination are over. You guys only have a few more years left to stop the deindustrialisation process. I cannot imagine how this can be achieved without restoring tariffs and / or keeping dollar weak to stimulate export.
Mr Keen,
If i come across as arrogant in my postings then i am sorry, as i have said before it is hard to tell the tone of how someone is expressing themself in writing and that is not what i am doing and i am not being rude or abusive to anyone.If disagreeing with you or pointing out your errors is abusive then i am sorry.
But i have to add that whenever i see the video of you giving your seminars it is obvious that you are oozing with arrogance towards the crowds that ask you questions, it is as if you could almost not even be bothered explaining yourself to the inferior audience who should already know what you are talking about.
So i believe it is a case of the pot calling the kettle black.
You can believe whatever you want about me Mr Keen but i do respect your knowledge of your own material and you are a very intelligent academic/economist, even though what you believe will not come about as gold will be the solution to the debt problem.
All,
I have to go on holidays for a week without access to a computer. I’m a little disappointed as the dialog is now getting really interesting.
Moz – appreciate your thoughts, but simply can’t agree. Capitalism is not a binary choice. Hopefully we will catch up next week to discuss further.
Patfla – one could do worse than listed to Warren Buffett. Thankyou for your thoughts.
TUSDIB – couldn’t agree more. The US is only at the beginning of its dominance – not at the end. Read “The next 100 years” by George Friedman (if you have not already done so).
To Steve & everyone else, Happy Xmas / holidays to all & thankyou for your feedback.
bb
Have a safe and happy holiday break and speak to you in the new year
Moz
Moz,
I appreciate your point of view and I enjoy the paradoxes in your reply. I genuinenly like a good paradox and I think paradoxically paradoxes are a good sign your on your way to the truth that does not exist, your reply points out some paradoxes in my thinking as well.
The first paradox is that the hard line capitalism action would be to let the system fail, which would in my opinion would cause the destruction of captalism.
The second is between your two replies, one you acknowledge that letting things fail would cause a lot of pain, then you seem to say that the pain is already there. Maybe that’s not quite a paradox but it fits with the theme.
Definately agree, US is in deep trouble but they have bought themselves some time. The cause of the trouble is quite fundamental, I like to think about in an abstract sort of way, from a global point of view at some point the US has started to extract more from the system then putting back in, they have created a financial system which accomodates this. The nice thing is, is that at least somehow this system works in a way where this situation is not sustainable and the pressure will always be there for it to unwind itself.
Hi The USD is Back,
“China will continue to be a big UST customer in the foreseeable future. If it doesn’t, it can kiss its own economy goodbye and deal with the resulting consequences which include internal instability and domestic unrest.”
I think you assign a lot of credit where little is in fact due.The Hurricane Katrina experience showed bare what awaits the US in a breakdown of services. I’m not saying the US will collapse, but you are dreaming if you believe the average US person is not suffering and will moreso suffer a dramatic drop in living standards. While Europe has had to deal with calamity of this type twice last century (WW1&2), the US has no experience really to speak of so I’m very sceptical indeed that current MTV etc generations will adapt so easily to hardship.
You haven’t yet responded to the core question afflicting the US: ” From where will the money come to fund the absurd Public debt and debt servicing costs?”. Find an answer that doesn’t involve turbo dollar printing and you have solved Bernanke’s great dilemna.
“”The US current account deficit is falling as residents’ savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world,” he added. “The world does not have so much money to buy more US Treasuries.”-Zhu Min, deputy governor of the People’s Bank of China.
Patriotism is a fine thing The USD is Back. But it simply doesn’t pay the bills- especially the foreign obligations.
“… let’s not forget LB was allowed to fail and so are many other smaller ‘insolvent’ banks.”
Lehman Bros and Bear Sterns were allowed to fail. It is a pure coincidence that they were the two largest competitors to Goldman Sachs. GS has had a strong connection with the Federal Reserve and with Congress for many years.
See: http://www.zerohedge.com/article/study-finds-all-factors-determining-bailoutability-crappy-banks-ties-federal-reserve-are-mos
Thank you Elliottwave,
I don’t deny that I have some arrogance too, but I try to restrain that in personal communication. I think the problem you occasionally have on this list is possibly a lack of experience with how words come across in print when they cannot be accompanied by facial expressions, etc. I’ve had plenty of that on internet discussion lists, and I’ve seen them descend into exchanges of abuse, which is why I’m so vigilant against similar things happening here.
Disagreement is not abuse of course–I’m glad that you contribute an alternative perspective to this alternative list. But try to do what sometimes others have had to do when receiving a particularly strongly stated assertion from you: take a few breaths before you reply and try to reply to the issue rather than to the person. What I objected to in your previous comment was the (false, as it happens) accusation that BTB had changed is moniker to TheUSDisBack to fight you.
As you note yourself, and I agree, disagreement isn’t abuse: it’s the way one states disagreement that can lead to hurt feelings. I want to keep that to a minimum here, and I do appreciate your reply.
Hi AK
From 134:
” Are you referring to defending the interests of the state and the society or to defending the interests of certain groups of people (e.g. bankers or investors)? ”
The answer is both. That’s the way all society has operated for time and memorial. Nothing unique to the US.
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” I am not saying that the US cannot bounce back but to me days of unchallenged global domination are over. You guys only have a few more years left to stop the deindustrialisation process. I cannot imagine how this can be achieved without restoring tariffs and / or keeping dollar weak to stimulate export.”
Our global domination has been challenged previously (e.g during the Cold War). Also the primary issue for America is to maintain and expand our sphere of influence across the globe. America is and still remains a global leader today and will continue to do so in the future. Sure, we’ve had our problems in the past, but we have always survived and thrived.
Now its time for some shut eye.
New year’s resolutions (draft):
1. Less blogging! Such a time waster, yet strangely compelling. All the best for 2010 to this community. I think I’ll fail at this one.
2. Swim more. I have become a lazy sloth in the last 6 months.
3. Get more small.
4. Re-double my efforts to improve my human capital.
In the next phase, IMO one’s human capital will be the difference between moving sideways and going backwards. I hope to do more sideways than backwards. But the learning curve will be steep.
Hi GSM
From 139:
” I think you assign a lot of credit where little is in fact due.The Hurricane Katrina experience showed bare what awaits the US in a breakdown of services. I’m not saying the US will collapse, but you are dreaming if you believe the average US person is not suffering and will moreso suffer a dramatic drop in living standards. ”
A breakdown in services is nothing unique to the US. Happens everywhere. For example, what about the earthquakes in China.
And yes, we are suffering. We have suffered in the past, are suffering now and will suffer again in the future. That’s just life. But like I said to ak, as a country we will survive and thrive again.
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” You haven’t yet responded to the core question afflicting the US: ” From where will the money come to fund the absurd Public debt and debt servicing costs?”. Find an answer that doesn’t involve turbo dollar printing and you have solved Bernanke’s great dilemna. ”
” The US current account deficit is falling as residents’ savings increase, so its trade turnover is falling, which means the US is supplying fewer dollars to the rest of the world,” he added. “The world does not have so much money to buy more US Treasuries.”-Zhu Min, deputy governor of the People’s Bank of China.”
Don’t worry. Other countries have and will continue to lend to us because it is in their vested interest to do so. In other words, if other countries attempt to screw America, they will be screwing themselves in the process.
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” Patriotism is a fine thing The USD is Back. But it simply doesn’t pay the bills- especially the foreign obligations.”
Patriotism is what has made America great. You’d be surprised what it can do.
See you guys tomorrow.
TITINT
138
I suppose in my limited way I was trying to point out the inverse nature of some of our statements, ‘we must save the system to help the poor’ but in reality the poor are and have already been slammed from on high(really we are just trying to save our own financial necks and why not!).
On the point of:
‘The first paradox is that the hard line capitalism action would be to let the system fail, which would in my opinion would cause the destruction of capitalism.’
is a strong argument but it doesn’t allow for the fact although capitalism would more than likely take a beating ‘it’ would survive in some form or another having tipped through bifurcation.
Moz
Clean & mess free, no, potential to go forward, great.
Poor China… Built their mercantilist economy supplying US consumer demand > $7 trillion wages + $1 trillion debt = $8 trillion demand p.a. now China is trying to compensate for a masssive down turn in US demand > $7 trillion wages – $1 trillion debt = $6 trillion demand ~ 25% change in end demand.
Any wonder they are trying to bridge the absent 25% demand gap with 33% bank loan growth and government stimulus to ‘build GDP’
Prof Keen,
Long time reader, first time poster. I was just hoping to ask a quick question: why are you predicting a drop of “only” 5% in house prices in 2010, when you have been far more bearish than this in the past? Why the change of heart?
Thanks.
Moz,
I know what you mean and a ‘cleansing’ is an attractive idea but I think if we are to step into the unknown it should be through positive change and with control. It is an unpredictable world and I would be very worried losing economic control because some idealists think that’s the best thing to do in a tough love kind of way. The risks of being wrong are huge.
GFC was a big wake up call and people are paying attention. Saving the system bought time and therefore the chance, however small that may be to fix things in some way. If disaster is inevitable anyway I would prefer it to happen in a slower and more controlled way, would you really want to see people suffer because of an idea that this is the best thing. I think there is a very cynical way to perceive this.
The whole system is a kind of illusion anyway, it really comes to down to very basic things related more to power than wealth. The western world especially is living a very unreal and largely ignorant existence, this sort of artificial support is just another manifestation of this illusion.
http://www.moneymorning.com.au/20091222/property-bears-becoming-an-endangered-species.html
Steve , I think Money Morning might be mis-quoting your views.
(Also having problems submitting comments – tried a few times on the above comment, it was submitted but didn’t appear.) Hopefully this time lucky.
The USD is Back,
@ 123
“Would you rather bet on America or the 16 countries of the Eurozone, some of which are complete basketcases?”
The first keyword is “bet”. Not invest. Not build. Not save. Bet.
The second keyword is “basketcases”. Says who? Can these basketcases feed themselves in the EU? Do the majority of the citizens of Europe have the debt levels of the average US citizen?
TITINT
I should really clarify my general idea of change(for want of a better word) as without this then it all does look and sound very drastic.
I do agree that a gradual change is what is ideal as a sudden shock only harms the community leaving great wreckage. Unfortunately slow change does also allow old habits to be carried and modified along into the new landscape (natural really) with the desire to continue making disproportionate gains(what we have learned to do – will continue to do)
I really want people to feel free and alive to their roles on this globe and definitely don’t want suffering, the cynic in me sometimes does want calamity as some of the best personal lessons can be the most painful but I know that this is not right nor reality. I would much prefer to see change through decent education in a manner of areas that gets people just asking a few more hard to answer questions, this is also not likely but I am hopeful.
You are spot on to point at power, this above all else keeps things in place in a particular manner that does allow this construction to be maintained. I just get a bit saddened by what I see as a lack of justice when lots of very good people are not considered beyond what they are ‘worth’ and you get a sick feeling that it is always going to be that way.
Moz
Steve Keen,
@ 141
“I don’t deny that I have some arrogance too …”
Stay arrogant. (Postscript – get more arrogant.)
SK, 2+2=4….. Summers, but I want it to equal 5.
SK, sorry 2+2=4…. Krugman, but I want it to equal 6.
SK, sorry 2+2=4.
Mathematics is an arrogant SOB. I have a book called “The Book Of Heroic Failures”. Would you believe that two US States have a law on their books to round out Pi to an even number?
I love that earlier witty observation about you being the founder of Austria-lian Economics. Fine with me but you need a credo. How about this:
The Australian School of Economics asserts that any number presented by an Economist, of any school, should be derived from mathematics NOT pulled out of their arse.