As the East Coast braces for Hurricane Earl, the stock markets brace for the next trend. After yesterday's rally ( a respectable 2%), stock direction is uncertain today.
Nouriel Roubini is a respected professor of economics who predicted the housing bubble and the current recession. He has also warned about the looming public debt crisis, which is becoming more noticed by commentators and voters even while it becomes worse.
Roubini Global Economics' table of trends (roubini.com/analysis/129876.php) shows a 40% likelihood of an " above-trend recovery" at 40%. It also shows the possibility of a double-dip recession at 30%. The possibility of a "severe" double-dip is 10%, stagnation is at 12.5%, and financial collapse at 2.5%.
The possibility of a "classic", above-trend recovery -- the type that has heretofore been normal in US economic cycles -- is at 5%. In other words, the possibility of normality is 5%.
According to my admittedly un-scientific analysis of the table, the combined likelihood of things getting worse (double-dip, severe double-dip, and collapse) is 42.5%. The possibility of recovery, whether normal or slow, is 45%. Of course, that's less than 100%. The missing 12.5% is in a category titled "stagnation".
In event of stagnation, governments may well be tempted to keep interest rates low by buying government bonds, including their own. In fact, this is already happening; it's referred to as "monetizing the debt". The government prints its own money and then finances its operation by purchasing the bonds it issues. As one may imagine, the consequences of these actions are not desirable.
Stagnation is itself a form of failure. If you lump it with the other negative outcomes, the likelihood of things staying bad or getting worse is 57.5%.
What about deflation, which this blog warned about previously? According to RGE, there's a 42.5% chance of some degree of deflation.
While examining these figures, it's wise to keep in mind that an unexpected shock, such as a major terrorist action or war, could have consequences of its own.
Finally, back to that 5% chance of a classic recovery from recession. When normality becomes statistically unlikely, it's time to reassess one's expectations. How does that play out in an average American's life?
Many people have investments through 401Ks and other retirement accounts, through mutual funds, or by individual purchase. Typically, a large portion of those investments will be in stocks. As we have noted before, stock prices may indeed be artificially inflated by government policies such as banning short selling. And please keep in mind that the market's behavior is NOT logical.
Are you willing to risk what wealth you may have by leaving it in stocks? Roubini himself currently invests no money in stocks. Consider very seriously whether or not you can place your faith in "normality" as we've known it.
Thursday, September 2, 2010
Tuesday, August 31, 2010
Welcome!
The Morning blah is the new incarnation of Freedompundit. Thanks for following here to the new site.
The Morning Blah: August 31, 2010
Here in Beaumont-land, we're inagurating a new feature. The Heritage Foundation has its Morning Bell feature; however, my morning behavior is anything but bell-like. Bill the Cat, from the old "Bloom County" comic strip, is my role model for the pre-9AM hours.
So, I hereby announce (with a fanfare of coughs and grunts) the Morning Blah. A concise analysis of the day's trends with no attempt whatever at slippery concepts like "balance" or "fairness".
Seriously, if you aren't convinced that the country is in trouble, them you haven't been paying attention. Pull your head out, abandon your preconceptions, and think things through.
Oil prices continue to drop. CORN prices are dropping; not a trend that most would anticipate, maybe. Folks, when bulk commodity prices drop -- including foodstuffs -- it illustrates a deeper weakness in the economy than generally realized. As we have previously noted, we like lower prices, but the process of deflation would entail a great deal of pain for most people.
Contrast the USA's economic decline with the BRIC economies (Brazil, Russia, India, China), which are growing, some with rates approaching 10%. Are these countries going to be the new world leaders? Well, not necessarily.
Brazil is energy-independent and exports many agricultural products; Russia has oil and natural gas; India has a rapidly growing industrial base. China, however, is much more dependent on exports of finished goods than the others, and has been playing a shell game with its currency for years. The Chinese must maintain an appearance of rapid growth or face devastating unrest.
Consider this scenario: as the capacity (due to economic circumstances) or willingness (due to resurgent patriotism) of the US to import Chinese goods diminishes, China would face a crisis. As a nation built on exports --primarily to the US -- founders, the losses must be made up in some way. The huge stocks of precious and strategic metals that the Chinese government has accumulated will begin to lose value as the world economy weakens further.
In order to provide at least a temporary infusion of cash, and also "save face" ( a concept the West understands little of) the Chinese dump large quantities of metals on world markets. Gold, silver, platinum, germanium, etc. -- prices drop abruptly.
In the past, we have seen that abrupt price drops in one commodity can begin a cascade effect among other commodities. One result is that world currencies can be diluted. When that happens, Brazilian grain, Russian oil, Indian goods are all worth less to buyers, and cost more to produce. Of course, the same factors affect the US, Europe, and Japan. We can see where it goes from there.
Some economists are beginning to toss around the term "depression". That would seem an accurate desription of the effects of such a scenario.
So, I hereby announce (with a fanfare of coughs and grunts) the Morning Blah. A concise analysis of the day's trends with no attempt whatever at slippery concepts like "balance" or "fairness".
Seriously, if you aren't convinced that the country is in trouble, them you haven't been paying attention. Pull your head out, abandon your preconceptions, and think things through.
Oil prices continue to drop. CORN prices are dropping; not a trend that most would anticipate, maybe. Folks, when bulk commodity prices drop -- including foodstuffs -- it illustrates a deeper weakness in the economy than generally realized. As we have previously noted, we like lower prices, but the process of deflation would entail a great deal of pain for most people.
Contrast the USA's economic decline with the BRIC economies (Brazil, Russia, India, China), which are growing, some with rates approaching 10%. Are these countries going to be the new world leaders? Well, not necessarily.
Brazil is energy-independent and exports many agricultural products; Russia has oil and natural gas; India has a rapidly growing industrial base. China, however, is much more dependent on exports of finished goods than the others, and has been playing a shell game with its currency for years. The Chinese must maintain an appearance of rapid growth or face devastating unrest.
Consider this scenario: as the capacity (due to economic circumstances) or willingness (due to resurgent patriotism) of the US to import Chinese goods diminishes, China would face a crisis. As a nation built on exports --primarily to the US -- founders, the losses must be made up in some way. The huge stocks of precious and strategic metals that the Chinese government has accumulated will begin to lose value as the world economy weakens further.
In order to provide at least a temporary infusion of cash, and also "save face" ( a concept the West understands little of) the Chinese dump large quantities of metals on world markets. Gold, silver, platinum, germanium, etc. -- prices drop abruptly.
In the past, we have seen that abrupt price drops in one commodity can begin a cascade effect among other commodities. One result is that world currencies can be diluted. When that happens, Brazilian grain, Russian oil, Indian goods are all worth less to buyers, and cost more to produce. Of course, the same factors affect the US, Europe, and Japan. We can see where it goes from there.
Some economists are beginning to toss around the term "depression". That would seem an accurate desription of the effects of such a scenario.
Thursday, August 26, 2010
Unstable? Really?
Uber-leftist MSNBC host Ed Schultz recently learned that he had not been included in a promo for the network. He launched into a tirade, yelling, "I'm gonna burn this f------ place down!"
When management told him that any repetition of such behavior would result in his dismissal, he reportedly broke down and cried on the spot.
Our culture views such people as "unstable" or "stressed". No doubt those descriptions are true within a limited frame of reference. But is there a deeper reality behind such definitions?
I submit that there is. Popular American thought (now there's an oxymoron) likes to avoid the mere suggestion that spirituality issues may be involved with emotional or mental issues.
Obviously, this is not news to people of faith. But we tend to forget it.
Allow me to suggest a refresher for those who have neglected this idea, or a primer for those who have never considered it. Pick up a copy of C.S. Lewis' "That Hideous Strength". I can virtually guarantee that you will recognize people you know in the characters. Possibly, even yourself.
When management told him that any repetition of such behavior would result in his dismissal, he reportedly broke down and cried on the spot.
Our culture views such people as "unstable" or "stressed". No doubt those descriptions are true within a limited frame of reference. But is there a deeper reality behind such definitions?
I submit that there is. Popular American thought (now there's an oxymoron) likes to avoid the mere suggestion that spirituality issues may be involved with emotional or mental issues.
Obviously, this is not news to people of faith. But we tend to forget it.
Allow me to suggest a refresher for those who have neglected this idea, or a primer for those who have never considered it. Pick up a copy of C.S. Lewis' "That Hideous Strength". I can virtually guarantee that you will recognize people you know in the characters. Possibly, even yourself.
Tuesday, August 24, 2010
Economic education the easy way
Many Americans have little or no understanding of how the U.S. economy works. This is not surprising, since our government schools (not "public" schools) rarely teach anything of the sort, and the material they do offer is geared toward big-government, Keynesian/authoritarian schools of thought. Little or no effort is devoted to teaching the principles of economic freedom that made the USA the world's most successful economy -- not just in its own era, but in the world's history.
I have been asked to offer some suggestions as to how a person with little background in either political thought or economics can educate themselves. It's actually not difficult, and I can offer two sources in particular that will enlighten the seeker in both areas.
The first is Thomas Sowell. An economist of long standing, he has written more books on the free market than anyone else this blogger is aware of. A good starting place would be his articles at www.jewishworldreview.com. After that, one could go to his classic book "Basic Economics", or his current one, "Dismantling America".
The second is Walter Williams. Another economist, he speaks and writes frequently on free-market issues. His columns can be found at www.creators.com/opinion/walter-williams.html. For books, try "Liberty Versus the Tyranny of Socialism".
These men are literally founts of wisdom. Warning: exposure to their writings will change your view of the world.
I have been asked to offer some suggestions as to how a person with little background in either political thought or economics can educate themselves. It's actually not difficult, and I can offer two sources in particular that will enlighten the seeker in both areas.
The first is Thomas Sowell. An economist of long standing, he has written more books on the free market than anyone else this blogger is aware of. A good starting place would be his articles at www.jewishworldreview.com. After that, one could go to his classic book "Basic Economics", or his current one, "Dismantling America".
The second is Walter Williams. Another economist, he speaks and writes frequently on free-market issues. His columns can be found at www.creators.com/opinion/walter-williams.html. For books, try "Liberty Versus the Tyranny of Socialism".
These men are literally founts of wisdom. Warning: exposure to their writings will change your view of the world.
Down the rabbit hole we go...
... but, unlike Alice, we won't find Wonderland at the other end.
Major stock benchmarks have dropped for a second consecutive week. Existing home sales dropped 27% in July. Oil prices are dropping due to pessimism in economic forecasts. More and more people are aware of threats hanging over our economy, ranging from the incipient crisis in public-employee pensions to the massive tax increase due in 2011.
Is this the beginning of an all-but-inevitable decline in the US (and, by extension, the world) economy? Does pessimism play a role in making the situation a self-fulfilling prophecy? And does that matter?
The answers are 1) very possibly so, 2) yes, and 3) no.
At this point in time, no real hope is evident for avoiding an economic crisis. Boosterism and blind hope are maintaining an image of an economy in recovery -- in other words, nobody wants to believe it's as bad as it really is. The only real question is the timing of that event, and no one can accurately predict it prior to its beginning.
When the hammer does fall, however, look for many talking heads and self-proclaimed experts to say that they knew it all along. Accord them the level of respect they deserve.
As to pessimism, the challenge is to define it. Yesterday's negativity is today's realism. In large part, our economy runs on wishful thinking. The problems we face are legion, and no one is attempting to seriously address them. Eventually, fantasy will be forced aside by reality, and whatever we would like to believe simply won't matter.
Despite all this, we have no reason to abandon hope. Events will run their course, and the innate tendency of economies is to seek equilibrium. We may suffer greatly in the interim, as the failed policies of the last hundred years are exposed and discarded, but if we remain committed to sound principles, we will prosper again.
Those principles are both personal and national. They are identical in both cases. Don't live beyond your means. Insist on value given and received. Live according to a high standard.
As odd as it may sound, the only requirement for freedom and prosperity is a "moral and virtuous people". That's something the Founders were well aware of, and something we have, today, largely lost sight of.
Major stock benchmarks have dropped for a second consecutive week. Existing home sales dropped 27% in July. Oil prices are dropping due to pessimism in economic forecasts. More and more people are aware of threats hanging over our economy, ranging from the incipient crisis in public-employee pensions to the massive tax increase due in 2011.
Is this the beginning of an all-but-inevitable decline in the US (and, by extension, the world) economy? Does pessimism play a role in making the situation a self-fulfilling prophecy? And does that matter?
The answers are 1) very possibly so, 2) yes, and 3) no.
At this point in time, no real hope is evident for avoiding an economic crisis. Boosterism and blind hope are maintaining an image of an economy in recovery -- in other words, nobody wants to believe it's as bad as it really is. The only real question is the timing of that event, and no one can accurately predict it prior to its beginning.
When the hammer does fall, however, look for many talking heads and self-proclaimed experts to say that they knew it all along. Accord them the level of respect they deserve.
As to pessimism, the challenge is to define it. Yesterday's negativity is today's realism. In large part, our economy runs on wishful thinking. The problems we face are legion, and no one is attempting to seriously address them. Eventually, fantasy will be forced aside by reality, and whatever we would like to believe simply won't matter.
Despite all this, we have no reason to abandon hope. Events will run their course, and the innate tendency of economies is to seek equilibrium. We may suffer greatly in the interim, as the failed policies of the last hundred years are exposed and discarded, but if we remain committed to sound principles, we will prosper again.
Those principles are both personal and national. They are identical in both cases. Don't live beyond your means. Insist on value given and received. Live according to a high standard.
As odd as it may sound, the only requirement for freedom and prosperity is a "moral and virtuous people". That's something the Founders were well aware of, and something we have, today, largely lost sight of.
Thursday, August 19, 2010
Two tastes that don't taste great together: Obama and faith
The NY Times, CNN, et al., are very upset at the results of a TIME magazine poll indicating that a growing number of likely voters (89% of the respondents, self-identified) believe that Barack Obama is a Muslim. This poll follows closely upon his endorsement of the Hamasque project, and his hosting of a Ramadan dinner in the White House. Such actions on the part of a sitting President do not sit well with many Americans. Why, then, do the media seem so shocked at the poll results? Could it be that Barry really is Muslim?
It is more likely that Obama is not a person of faith at all, although he is undoubtedly a Muslim sympathizer. Now, why should you credit this idea? Let's examine some incidents from his history:
His father was Muslim, and so under Islamic law, he is considered Muslim.
After abandonment by his father, he was raised by his mother's family, who endorsed socialist and communist ideals. Socialism and its ideological fellows are not sympathetic to religious faith.
When his mother remarried, he attended a Muslim school in Indonesia.
Upon arriving in Chicago, he began attending Jeremiah Wright's church, Trinity United Church of Christ. Now, despite its name, the church teaches black liberation theology. This is not a theology that most Christians would recognize as Christian at all. Among other things, they endorse "collective salvation", the belief that unless all are saved, no one can be saved. The Pope has denounced this idea as demonic, as it is directly opposed to the idea of individual salvation through acceptance of Christ.
Wright's church was regarded as the premier black church in Chicago. As such, it was the perfect place for a young black man with political ambitions.
Obama is known to carry a small statue of a Hindu monkey god in his pocket. After his election, Hindus in India built and dedicated a new statue of the god in a temple, in his honor.
Since his election, despite many protestations of faith and Biblical-sounding references in speeches, he has not attended church.
In summary, then, Barack Obama appears to be nothing more than an opportunist who will don whatever theological garment he believes will serve him best, as long as such devices do not conflict with his inborn prejudices. For evidence of those prejudices, examine his treatment of Israel, of conservative Christians, and of the Dalai Lama.
And ask yourself how much you can trust him.
It is more likely that Obama is not a person of faith at all, although he is undoubtedly a Muslim sympathizer. Now, why should you credit this idea? Let's examine some incidents from his history:
His father was Muslim, and so under Islamic law, he is considered Muslim.
After abandonment by his father, he was raised by his mother's family, who endorsed socialist and communist ideals. Socialism and its ideological fellows are not sympathetic to religious faith.
When his mother remarried, he attended a Muslim school in Indonesia.
Upon arriving in Chicago, he began attending Jeremiah Wright's church, Trinity United Church of Christ. Now, despite its name, the church teaches black liberation theology. This is not a theology that most Christians would recognize as Christian at all. Among other things, they endorse "collective salvation", the belief that unless all are saved, no one can be saved. The Pope has denounced this idea as demonic, as it is directly opposed to the idea of individual salvation through acceptance of Christ.
Wright's church was regarded as the premier black church in Chicago. As such, it was the perfect place for a young black man with political ambitions.
Obama is known to carry a small statue of a Hindu monkey god in his pocket. After his election, Hindus in India built and dedicated a new statue of the god in a temple, in his honor.
Since his election, despite many protestations of faith and Biblical-sounding references in speeches, he has not attended church.
In summary, then, Barack Obama appears to be nothing more than an opportunist who will don whatever theological garment he believes will serve him best, as long as such devices do not conflict with his inborn prejudices. For evidence of those prejudices, examine his treatment of Israel, of conservative Christians, and of the Dalai Lama.
And ask yourself how much you can trust him.
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