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Thread 8462

Thread ID: 8462 | Posts: 3 | Started: 2003-07-26

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Rudel [OP]

2003-07-26 07:46 | User Profile

Sir Alan Greenspan's (aka "Maestro") cult of personality continuues unabated in parallel with the disastrous financial bubble he is frantically trying to sustain. By flooding the world markets with dollar denominated liquidity he seems to have (for now) succeeded where medieval alchimists failed - producing gold out of thin air. Alas, to me it looks more and more like an increasingly desperate attempt to inflate a tire riddled with holes. As far as Sir Greenspan is concerned, you can be sure that some years from now he will still be sought after - with bloodhounds. Enjoy the indian summer of the american economy while it lasts - the winter will be dark and long. From the "[url=http://www.prudentbear.com/creditbubblebulletin.asp]Credit Bubble Bulletin[/url]" web site, where it is possible to follow weekly the unfolding of the cataclysmic US debt bubble:

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If it were not silly enough to trumpet that (asset inflation-induced) “net worth of households is estimated to have risen 4 ½ percent” during the first half, Mr. Greenspan [During his testimony before the House Committee on Financial Services this week] further pushed the envelope of acceptable central banking with the following:

“Is it important for an economy to have manufacturing? There is a big dispute on this issue. What is important is that economies create value, and whether value is created by taking raw materials and fabricating them into something consumers want, or value is created by various different services which consumers want, presumably should not make any significant difference so far as standards of living are concerned because the income, the capability to purchase goods is there. If there is no concern about access to foreign producers of manufactured goods, then I think you can argue it does not really matter whether or not you produce them or not.”

Again, future financial historians will not be impressed. This returns us to the critical issue of the “Quality of Output.” And it is similar to how companies can inflate earnings (“quality of earnings”) for quite some time seemingly without consequences, until the inevitable day arrives when it is discovered that assets have been overvalued. If assets are worth less than liabilities, crisis is then unavoidable. I have argued that a service sector economy is in reality a monetary economy. And, yes, as long as money and Credit are fabricated in great abundance, we do command the wherewithal to provide “services” to one another, seemingly without a hitch. We can treat each other to massage, consulting and legal services, brokerage inflating home and security transactions, and prepare each other’s meals. There is also nothing stopping us from gleefully boasting of our “economic output” and miraculous ‘productivity.” But, at the end of the day, there’s a balance sheet problem: there’s no getting around the reality that we are creating (inflating) financial claims with little true economic value supporting the market value of this debt. We are simply playing an illusion with imputed market values detached from true wealth creation.

Mr. Greenspan is dead wrong on this most important issue. It matters tremendously that our economy continues to lose its capacity to create sufficient manufactured goods. First, we are no longer self-sufficient, and are vulnerable to price inflation and availability issues for energy and an increasing array of products. Second, **we have lost the capability for mutually beneficial trade and balanced global growth – sustainable trade of goods for goods. Instead, we trade new financial claims for goods, building up a mountain of foreign liabilities, while fearing the day our creditors question the financial integrity of their holdings. **

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NeoNietzsche

2003-07-26 15:58 | User Profile

But "we" command the Army.

Septimius Severus thus understood that a creditor's position is only as good as his ability to enforce it.

All hail the Greater Judean Empire.

jay

2003-07-26 19:25 | User Profile

*Originally posted by NeoNietzsche@Jul 26 2003, 09:58 * ** Septimius Severus thus understood that a creditor's position is only as good as his ability to enforce it. **

That's exactly right. Enforcement is all that matters, ultimately. People I know want immigration restriction. "Pass more laws" they howl. Or, pass different laws. Maybe even tweak existing laws.

However, this won't make Bushie & the executive branch enforce it. The blame for our demographic crisis rests more with that branch than with our Congress.

-Jay