Bonddad versus Bonddad

Last week Bonddad posted a diatribe against the entire economic blogosphere.

Reading blogs that in any way write about economics has generally become an exercise in utter futility. According to most good news is either propagated by corporate whores who are blind to the realities around them or presented without considering "all" the facts. All government statistics and all economists are wrong -- unless they support or present a bearish viewpoint.

Normally I wouldn't notice, but someone pointed it out to me and it got me thinking. How did we arrive at this point, where the bullish and bearish are drawn up against one another in much the same way that Democrats and Republicans in Congress are?
It occurred to me that perspective has everything to do with it.

The Case for the Green Shooters

I'm going to use Bonddad as my example of a Green Shooter. Bonddad's diatribe, by virtue of lumping together everyone that disagrees with him, and his large following, has put himself into that spot.

How Bonddad sees the economy can be seen quite easily by his recent essays. To see some examples: here, here, and here.

The essays are full of charts that shout one word: trend.
When Bonddad isn't actually using the word "trend" he is implying it.

What Bonddad is doing is called technical analysis or chart analysis. There is a multi-million dollar industry behind it on Wall Street.
And do you know what? Bonddad is right. Based on a technical analysis, Bonddad is reading the charts correctly. I have no disagreement with his bullish interpretation of the charts, and I doubt that many other people do.

And yet I am still a bearish doom-and-gloomer. How can that be?

Because technical analysis has its limits. Those limits involve time.
Technical analysis has a short half-life. The further out you try to predict the more inaccurate the analysis becomes. Predictions of more than a quarter or two are almost useless. (For an example, see this report by the Federal Reserve which predicted an economic rebound in the 2nd half of 2008.)

So what do doom-and-gloomers use to predict the future economy if not for technical analysis? We use fundamentals.

The Case for the Doom-and-Gloomers

I will use Bobswern (without his permission) as an example of a Doom-and-Gloomer, mostly because of his public conflict with Bonddad.

Good examples of Bobswern's essays are here, here, and here.
If you look at these articles you will notice three things: 1) lots of links, 2) lots of numbers, 3) a complete lack of charts.

Bobswern, and most of the Doom-and-Gloomers, aren't all that interested in short-term economic movements. Their horizon is further out.
That's why they aren't trying to do technical analysis, which is only good on a short timeline. The fundamentals are looking 6 months, a year, or several years down the road. Completely unlike technical analysis, fundamentals are useless in the near-term, but are increasingly more useful the further out you go.

So who's right?

It's because of this basic difference in perspective that Bonddad's essays and Bobswern's essays come to radically different conclusions. Both are probably correct in using their methodology, but both are going to come to different conclusions because they are looking at different periods of time.
Any obvious mistakes would be using fundamental analysis to predict short-term trends, or technical analysis to predict long-term trends. This is where Bonddad makes his mistake.

Bonddad likes to overlay current charts and compare them to charts from previous recessions as proof of what the future will be like. In doing so he makes two major mistakes, both of which he should know better than to make.

1) "Past performance may not be indicative of future results" is the oldest saying on Wall Street. What has happened in the past means exactly zilch compared to what is going to happen in the future. Sure you can still make the comparisons, but that doesn't mean they actually mean anything.

2) The economy of late 2009 is not the same economy of 2001, 1991, or any other recession year.
Unemployment and poverty is more chronic, and debt levels are far higher at every sector of the economy. Any fundamental analysis would show this. In fact, Bonddad's own fundamental analysis show this.
Before Bonddad became a Green Shooter he used to write about the fundamentals of the economy, such as the problems with chronic government deficits.

we're creating a situation that is rife with possible future problems. And some of these problems are serious -- as in they could lead to the financial system freezing from a random world event.

I completely agree with Bonddad the fundamental analysis. The question I have to ask is why do these deficits no longer matter, especially when they are massively larger now?
Before Bonddad became a Green Shooter he used to write about the fundamentals of the economy, such as the problems with economic growth based on massive borrowing.

On paper, the economy has grown. Economists can point to the raw data and say "we grew". That is not the question. The question is "how did we achieve that growth"? It wasn't from the growth in incomes. Instead it is from a ton of borrowing. And considering the credit melt-down we've had over the last year from excessively easy credit, maybe we need to ask ourselves if this is the best way to grow a country.

I completely agree with Bonddad the fundamental analysis. The question I have to ask is why this debt no longer matters, especially when encouraging private borrowing in an already debt saturated society seems to be the only trick the government knows?
When Bonddad said that the country is collapsing under the weight of debt he was right. His statement is still right, even though he no longer appears to believe it.
When Bonddad said that Obama's plan for spending our way out of economic trouble is unworkable he was right. His statement is still right, even though he no longer appears to believe it.

I understand the message when people say that we can't worry about deficits and debt levels in middle of an economic crisis, I just think that people are missing the most important idea here: massive amounts of debt are the cause of this economic mess, so why would even larger amounts of debt be the solution?

Bonddad the fundamental analysis is right. We need to address this problem and soon, otherwise the economy is going to crash. Bonddad the Green Shooter is right that the trend has turned up in the short-term.
Bonddad the taunting, "I know better than all these bearish people" is wrong, he doesn't know the future any better than the rest of us.

Meta: 

Comments

It is all about perceptions.

For instance, I believe that not all debt is the same. Government and private debt are very different. What caused this crisis was way too much private sector debt.

Now, this doesn't mean that deficits don't matter. They do and that is why we need government spending that yields better results. In my view, government should spend, if the private sector cannot, enough to create full employment without increasing inflation. I know a tough task but not impossible.

The thing to remember is that yes there are consequences and trade-off with whatever we do. Just like at our current fiscal situation - huge giveaway to big pharma in the form of Medicare Part D, huge tax cuts and 2 wars adds up and increases deficits and more debt but what happens if we choose to focus on addressing the budget deficit and federal debt levels now - private sector is certainly not in a situation to produce much of anything right now.

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BTW - the fundamentals still suck

Private debt is still high. Unemployment is still high. Consumer confidence isn't good. Labor force participation is trending down. What else? Oh, CRE is still bad. Negative equity is still a huge problem. China is still pegging its currency which is destroying our manufacturing sector. What else? Nothing is changing in terms of policy.

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China & US Manufacturing per Bonddad

“China is still pegging its currency which is destroying our manufacturing sector”

WOW! You have just gone head to head with Bonddad, New Deal Democrat and SilverOz. They have be trumpeting the ‘myth of American Manufacturing in decline'. I don’t know how to link but see one example: “No, Virginia, US Manufacturing Isn’t Dead” -Bonddad 2/23/2010. I hope you would comment.

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I don't bother to read them frankly

I can read junk every day of the week but why would I bother? I'm much more busy trying to learn and read other sites, many listed here. VoxEU is also good and these are the ones who really dig into economic theory...

Why would I waste my time? I just noticed this time they managed to bring down the ire of a host of economists, heavily focused on manufacturing, including EPI via that HuffPo piece, which gave me a chuckle.

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EPI spanks Bonddad

I don't know how to link but you do. I wish you had linked me to the EPI piece it took me about of half hour to find it. But, it was time well invested. Most criticism of Bonddad that I have seen has been nuanced almost ideological. This is the first time I've seen him seriously criticized in terms of the factual substance. I was really taken back. Thanks for the hint if not the link.

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here it is again

link.

To make links you can either follow the code example in the user guide or click on the rich text editor and use the icon buttons to fill in with a label and the URL.

I think Scott should have used more graphs. I know what he's talking about with the compounded average but I don't think so many can visual, anywho, Scott is right of course....

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Bonddad punches back

I spoke to soon! Even as I was writing over the weekend, Bonddad posted a very rigorous response to EPI. Say what one will about his blog, and I say plenty that is critical especially of New Deal Democrat, Bonddad is still to my mind a must read for those engaged in the US economy.

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you're kidding right?

There is nothing "rigorous" about it! Complete denial about using spurious data, i.e. he did not use the correct graph to look at manufacturing output and then of course insult Scott claiming he must think "all trade is bad"...

Well, I'm sorry but incorrect graphs and then using insult as a defense is not good analysis.

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insults and economics

Well there is no shortages of insults begin throw around the economic blogs. I guess it is a sign of the times. As New Deal democrat has been posting for a couple of days, we are experiencing a historic unique "bifurcated recovery". So I guess insults are being thrown back and forth across the bifurcation line.
Also, when I say rigorous, I don’t necessarily mean true. But, I thought his comments regarding the log charts vs. not-log charts and the nature of the data that is used was an important consideration in the discussion. It would be interesting to see the specific data sets each is using, the specific charts and logical arguments. I don’t see where the issue of increase or decrease manufacturing has been settled. But, that’s me!
But, I’m definitely not kidding when I say Bonddad is a must read. Today’s charts and comments posted by New Deal are a very important contribution to the discussion about the current state of this very fascinating economic milieu we are experiencing - regardless of which side of the bifurcation one is on. But, again, that’s me!

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"Bifurcation"?

To me this is just another way of saying "Jobless Recovery". But we don't have to have one if we would just implement a direct jobs program. I don't believe the private sector will be able to deliver on jobs for quite some time.

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Rebel, you see that outrageous feeds on "Build America" bonds?

That should blow your stack. We cannot even get corporate lobbyist written health care reform passed, never mind one that is non-profit....how the heck can we get a direct jobs program? Seriously the AAM study is just the cats meow in terms of efficient, investment, to help long term U.S. economic growth, plus a direct jobs right now....

so, where did that end up in D.C.? Trash? Snowmageddon in D.C. ain't the weather, it's all of the policies in white papers being thrown out in the trash.

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Last thing on this topic

Look, please do not promote that site on here. Not only did they do the most outrageous attempt to libel and slander our entire site, I believe they did that out of jealousy because we're pretty popular and they are not as much. (which is ridiculous because there are plenty of great economic blogs out here which are way more popular!) I have no idea what happened to NDD, but I do know there is a huge difference to say someone is incorrect on points A,B,C versus name calling them, insulting them and slandering them, libeling their entire name in a title... on the whole.

Also, once again we have incorrect analysis, there was no, is no "V", as I repeatedly show with the compound, logs, the absolutes and the slope actual value. Even with Industrial production, sure while it's looking really good, that's coming from a trough! It's not a "V" by a long shot, and if one goes past the start of the trough you can see a long overall downward slope growth rate. How the hell does one believe a sector which contributed > 15% to GDP is now 12%? It shrank in relation to the rest of the economy....

anywho, I just don't want to spend any time on this...I think for great graphs, I like EconomPic Data and then Calculated Risk is better than Bloomberg in terms of reporting releases, with graphs as soon as they are released (accurate as hell too!).

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hmmmmm

Ok, I will disagree somewhat on the technical analysis. I'm looking at the same charts and especially unemployment, while they (lumping the don't worry, be happy people together) point to trends, deltas, slopes...I'm looking at the aggregate totals and knowing that even with a dramatic trend line it will take years to reduce those aggregate totals to come up to 4% unemployment.

So, on this point I disagree and I would claim those who are now being lumped together as the "doom and gloom" blogosphere who "don't know jack shit about econ" are also chart and analysis happy and they too disagree with the Bonddad camp (or don't worry, be happy, the world is just a big cycle, it's all karma camp).

Then on trade, from the few things I remember it's a 100% disagreement and I'm coming from the deficit as well as the number of jobs offshore outsourced, the global wage figures and esp. the China PNTR.

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I was trying to be diplomatic

My major point was that the gloom-and-doomers and the green shooters were using entirely different methodology.
I can sort of see the Green Shooters point...as long as you take an entirely different economy and assume that everything is still the same.

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Thanks for a good stiff shot of "medicinal"

whatever it is you drink when you need one.

I began to question Bonddad when he began praising Paul Volcker. That's over a year ago, now, I believe. Anyone who remembers the 1980s and who wasn't part of the financial ruling class, or a toady for the financial oligrachy, remembers that Volcker's high interest rate squeeze on inflation wrecked half the U.S. industrial base, and laid the other half open to financial predators like Mike Ivan Boesky, Ron Perlman, Peter Peterson, Bill Simon, Kohlberg Kravis and Roberts, and the whole slew of "buyout" bandits. For anyone who believed that the real economy meant manufacturing and transportation, the 1980s were pure, unadulterated hell, and there can be no forgiving Paul Volcker for unleashing the dogs of usury.

But I remember when Bonddad was writing some great material focusing on the growth of debt as an indicator of a fake recovery, like you quote. The question is: what happened to him?

Well, he's a bond trader, as well as a lawyer, I believe. And I think it is the very, very rare person who can make a living in the financial markets, and still retain his or her soul intact. I think that as the financial crisis progressed from mid-2007 to its climax in Sept 2008, there were people like me who pumped out repeated jeremiads excoriating the financial markets as being net drains on the economy. I believe Bonddad reached a point where he realized that if those jeremiads were correct, than the way he made a living was morally unacceptable. One way out of the soul-wrenching realization would be to begin believing that the financial crisis was just a sort of massive correction, not an actual breakdown of the financial system that called for the radical transformation of that system.

These kinds of epic struggles that take place within one person is the stuff of great literature, and make great tragedies. Like Macbeth.

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I've praised Volcker

because he has said reinstate Glass-Stegall and some other very good juju.

Yeah, I know his history but honestly I think if Nixon were alive today he would be called a card carrying pinko socialist, environmentalist, flower power bleeding heart in comparison to some of the sanity going on.

I knew Volcker's history too so all of this surprised me but he's been forced out of power by team Larry "Rubin" Summers so that tells you he's obviously recommending better stuff for that to happen. ;)_

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Just keeping it real....

Most excellent blog, midtowng, and most excellent comments by Tony.

While I've never cared for Bonddad (with the exception of those debt remarks), considering him one of those individuals who comments on one variable while either ignoring or failing to comprehend the other nine hundred and ninety-nine variables.

But how anyone can be other than "doom-and-gloom" today, given the fantasy finance environment we exist in, where debt-financed billionaires destroy entire economies, and other execrable types promote "me-first" again and again, boggles my little mind.

The debt is beyond comprension, and "Barry the Bankster" (formerly known as President Obama) just layers on more debt-driven pro-bankster, anti-real economy policies.

I seriously believe anyone who actively comprehends the macro picture of the present economic state of North America realizes there is no economy, simply a 65% to 70% financial engineering bubble --- and how that doesn't promote doom-and-gloom thinking is beyond me.

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oh so lovely

Bonddad just insulted us and called us "Economic idiots" in a blog title.

Moreover, because you did this call out piece, instead of focusing on the many other economics bloggers who have said he's dead wrong, which we for the most part have stayed out of that blogosphere melodrama until now.

He's now putting all of the focus on us.

What a charming guy.

Well, Bonddad, at least we're not grandiose and rude, busy poo pooing the entire economic blogosphere.

Secondly, Bonddad claims we do not know the "first thing" and do not use charts.

Obviously he has never read the site or bothered to note all of the charts, stats and references.

I guess all of those with higher education in econ, public policy, posting on this site, esp. those who are Professors, from top tier schools, all just a bunch of wankers.

I'd had it with that sort of bogus insult du jour crap.

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For some people its about ego and prestige

of being able to say "I was right" "I called the bottom before anyone else". Good luck with that.

To me there is a lot more to the story. We have serious economic structural defects that will not show up in charts. And that is what we are doing here - IMO - is trying to make the case for a better stronger economic structure that benefits the most people instead of a select few.

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LOL! I love it

He doesn't realize just how petty he has made himself look.
I went out of my way to be fair to Bonddad, even to the point of taking heat from some of his critics. Instead of having a reasonable reply, he takes everything personal.

To which I say: Great! We look reasonable and calculated. He looks petty and insecure.
If you were trying to decide which economics blog to read based on these two essays, which would you chose? Obviously EP.

BTW, as for his reply, he makes several mistakes:
1) "To argue that using graphs is bad economics is..." a strawman is what it is. That isn't even close to what I said. Not only is it not in the same ballpark, it isn't even the same game.

2) "Technical analysis is the analysis of price charts for trading purposes."
That much is true. What Bonddad doesn't realize is that is exactly the way he is using them. I have no problem with that. It's Bonddad that is overly sensitive about it.

Bonddad was the one who decided to call names and lump together everyone who disagrees with him. As far as I'm concerned he is welcome to his mudslinging. I'm not here for it.

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Mudsling r not us

Well, you jumped into this fray way after it happened which resulted in the "Good-bye Cruel World" on Dailykos (which ya know, DK isn't exactly always statistics oriented, so ...)

and when I saw that diatribe against the entire economics blogosphere, I assuredly "shook my head" too....

But this name calling stuff takes the cake.

But in terms of readers, yes EP is more popular.

As you can see here, here, here (#52 vs. #251) and here (Technorati 1437 vs. 3542).

So, that said, you've had your say, my response to this bullshit, is just that.

So, EP is a community site. We're growing to the point I think we're going to have to get new servers and I think we should just continue to do our thing, encourage others who have insight to write as well and make EP the best damn community economics blog we can.

I'm not in high school last I checked so I don't want to waste much more time on this absurdity.

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gets even better

now BruceMF is claiming we're not "logical". Pure crap. I went through the mathematics of a VAT and cited so many sources and he literally would deny mathematical equations, plus insults because I quoted the mathematics. An equation is an equation to explain how it works as a trade tool. so, i.e. arguing over mathematics to have something so black and white argued against is where I quit for this site is based on facts, not useless argument. He picked up his toys and railroad obsession and went home in a pout over it. Since an obsession on rail over and over, isn't exactly macro econ, that seemed like a damn good idea of him.

We just had a major report from the China commission (see China, the ultimate protectionist, describing how China manipulates at the border adjustments on their VAT for unfair trade advantage, and this is why it's a major initiative as described from multiple economists to Nancy Pelosi.

This is quite the useless crying beer fest, claiming we don't use graphs or even know or have cited 70% of the economy is consumer driven, clearly not reading the site, just posting slander and libel at this point.

Boy, sad, sad state of affairs, they don't even realize we're not the site/people who blasted Bonddad in the 1st, 2nd.....100th place.

But back to the point, EP is based on well cited, well reasoned fact with a hell of a lot of middle class, layperson's Populist rage sprinkled, usually thrown at multinational corporations and corporate lobbyists running our country into the ground.

We're not doing this to get into some absurd pie fight.

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Good News Bad News

The easiest way to explain things the way I see them is that all the good news is the result of interest rates being kept at zero percent and the banks being allowed to kill mark to market. This has to end sooner or later because commodities will rise and the dollar will fall creating an untenable position as the money supply is inflated. Housing starts and car sales numbers inflated from unsustainable tax breaks and credits. So when the Fed increases interest rates to stop oil and everything else from going through the roof the stock market and everything else will crash again.

The bad news is in hard data, unemployment, bankruptcies, lay offs, the spread between interest rates seen by consumers versus what the banks are paying. My state (RI) just showed a decrease in unemployment last month but today announced they are closing unemployment offices several days a month from now on because they are way way behind in processing claims and they have hired twice this year to try and keep up. Oil has more than doubled this year, my property taxes have gone up 5%, BlueCross here is asking for a 20% rate increase, National Grid is asking for a 33% increase in distribution rates which will raise prices overall by 11% and prices at the grocery store look like they have gone down because the packages are smaller. But hey we are experiencing deflation right?

All government statistics are faked. I read that the worlds Central banks have inflated the money supply some 15% a year for the last twenty years. Thats not inflation? All the growth is on paper or in zeros and ones not in anything real. Its a faux economy based on a house of cards.

I'm not an economist so I can't offer any charts but in the real world somethings not right. People can't eat charts.

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all stats are not faked

and we do charts here all of the time.

The real issue here is the charts clearly show, with the correct analysis.....that the middle class cannot eat them.

So, beyond someone posting out on the Internets some absurd insult, smear post, the real issue is the incorrect analysis and ignoring many of the very serious statistics, "charts" indicators which show the U.S. middle class, i.e. most of America is in a serious world of hurt and it's not really improving much. Jobs being the most critical to most of America.

But please don't believe that somehow we ignore economic theory, EIs, charts, stats or somehow believe all of this is pure bunk. I sure do not and that's one of the huge points of EP, is to highlight these very gov. stats, which are not pure bunk to show that the U.S. middle class and the national economic interests are in big trouble.

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?

I gave several examples that absolutely show some government stats are pure bunk. Not to say they all are but the ones used to 'feed' the populace sure are.

Is unemployment here lower in RI in fact despite the employment office now admitting being so overwhelmed they are closing down several days a month now just to catch up? Or is that an example of a faked stat that doesn't show the real world?

Is there deflation when things that people need to buy are going up fast while things they own are worth less? Thats how I figure they are showing deflation using housing the same housing they allowed the banks an out on killing mark to market is being used with different numbers to show inflation being non existent. I may be wrong on that but I bet there is something to it. Inflation stats have been rigged since we went off the gold standard to hold down cola costs on union contracts. Its not more expensive if you can buy it at walmart cheaper made by a chinese prison labor - as if killing the US labor market has become a good thing. A cars price doesn't go up by $10-15k if they change the model name even though the old model no longer exists to purchase -thats always been a favorite of mine.

Are healthcare and energy costs rising fast but not counted unless they go down? Maybe those rate increases I know will get approved are a hallucination?

I swear I wish they didn't bail the wealthy bank shareholders out and for awhile we returned to a barter economy where people who have actual skills would be worth more than people who make charts.

Society is so screwed up people who actually do things that people need are paid the least while those that do next to nothing but look good doing it are paid the most.

Banking at one time was a means to an end but has become disproportionately important. The middlemen are paid the most for lending? IMO the whole thing is a scheme. How can the worlds central banks inflate the money supplies worldwide by 15% year after year and yet we show no or little inflation? Where is all the paper money going?

If we can turn $1.00 into $1.10 by laying off 1,500 people it is justified because that ten cents is for shareholders who get bailed out by taxpayers (who used to have jobs) when we make bad decisions. They never lose do they? Thats a stat there is no chart for.

Sorry for the rant it certainly isn't aimed at anyone here this is a great blog and one that I look forward to reading.

I'm just one frustrated soul at this point as the bailed out banks with a ton of cash drawing interest on deposit at the Fed are killing whats left of my small business. I suppose if I could have declared myself a bank had access to zero percent interest loans and been able to make loans 40 times the size of my no longer valued realistically assets or just turn around and deposit them for interest with the people who loaned me the money for zero interest plus guarantee all my bad debt I'd be rolling in it also.

He (Obama) has imo sold us out on the financial reform which would be all thats necessary to reinvigorate this nation. They are literally sucking the life from us. I knew there was a problem when Summers was in and Stiglitz and Krugman were locked out.

Still an Obama supporter since the alternatives are worse , no longer a cheer leader but a realist.

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Jim D., you make astute observations, IMO.

I find little in your rant that I can't sympathize with. I am a former small business owner/operator, so I know the dilemma you face and also value immensely, your intuitive understanding of how the real economy works. However, please understand that we are most definitely in a deflationary cycle at this point in time. As John Rubino said back in 2007:

Doug Noland has for years been pointing out that one of the drivers of the credit bubble has been the ever-broadening definition of money. As the global economy expanded without a hic-up, more and more instruments came to be used as a store of value or medium of exchange or even a standard against which to value other things—in other words, as money. Thus mortgage-backed bonds and even more exotic things came to be seen as nearly risk-free and infinitely liquid. In Noland's terms, credit gained "moneyness," which sent the effective global money supply through the roof. This in turn allowed the U.S. and its trading partners to keep adding jobs and appearing to grow, despite debt levels that were rising into the stratosphere. For a while there, borrowing actually made the world richer, because both the cash received and the debt created functioned as money.

So, as one who has been following the charts, you know that credit has been contracting and needs to contract much more as we go along. Therefore, the money supply is also contracting along with it. While some prices go up and others go down (largely relating to the value of the USD, imo), asset prices are definitely going down. The office building/corporate condo/warehouse you work out of, the home you live in, etc. is worth less now than a year or two ago. And the values have much further to fall, once the extraordinary interventions of the "O" administration finally cease. In short, we are in a period of "monetary" contraction, i. e. deflation.

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sorry Jim D.

I'm referring to the tirade being spewn at us because of the call out by midtowng.

Well, there are a lot of stats, in particular employment statistics, that really need to be updated to accurately reflect the real state of the labor market, no doubt.

I think on EP, we try to look at the actual stats released from the gov. and reach our own conclusions as well as examine discrepancies. i.e. we don't buy into the MSM cheerleading headlines here.

Because of the Internets, one can get access to a slew of raw data.

We're focus on the facts, policy, stats, bills so if you want to say you're disappointed in Obama who voted and supported him, you're in good company.

I think I'm the odd duck out in terms of really sitting out on the Pres. election because I didn't like anybody.

Anyway, I'm trying to stop the "other party" smear campaign that we don't look at statistics, EIs, reports, raw data and so on. We do indeed.

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I Should Have Said...

I understand where you were coming from with this topic I was really kind of going off the main focus here. I definitely see the satire of debating someone with their own quotes!

I have seen Bonddad like posts on Dkos and there are more pom pom cheerleaders going on there for those while diaries from BonSwern are outright attacked. I stopped going there when I started to read about a movement to stop what the in crowd viewed as attacks on the cheerleaders etc. They only want to represent one POV. There is a gang mentality there.

When the economy starts rebounding I'll be the first one to leap for joy. Right now the stimulus has focused on union jobs at the municipal and construction level which don't help me at all. The private sector middle class taxpayer and independent business people are left in the cold.

I have a question though regarding this deflationary period.
If they are printing money as fast as possible and it appears they are and it appears the Fed has a private set of books that we never see (Bloomberg over $9 trillion unaccounted for at the Fed). How is the money supply contracting?

On a larger scale I see that when Bernanke started raising interest rates during his tenure the economy started to tank. He is holding them at zero and they are propping up banks left and right but Wall Street is now stuck in neutral so there is more and more money and its worth less because really even commodities which have gone up this year appear to have hit a wall. I guess technically when the amount of dollars is increasing and the commodities based on dollars is flat thats deflation but the money supply is expanding still. Its an odd situation isn't it?

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velocity

yes it is. Yeah, we try to keep that cheerleading, personalities and TR gangs out of here so we can just have a conversation. It's hard enough to get a real detailed handle on what's happening without all of that additional noise.

(Welcome to EP btw!)

ok, the money supply is not only affected by Ben's printing press but also velocity. So, if there are less transactions, even though he's printing like mad, the actual affects through reduced velocity are the same.

See this for the equations.

We haven't done a M1 for a while but I believe he's cut it back somewhat.

Here's the latest M1:

yeah, there is a massive carry trade where people are funding foreign investments with U.S. dollars because of the zero interest rates, (cheap, free money) and watching the dollar tank.

This is one of the cases for long on Gold.

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Japonification.

Good observation RO. The USD is supplanting the Yen carry trade of the last decade or so. For all of Ben's QE, the velocity of money has stayed pretty close to zero or even negative. The (illegal?) purchase of MBS and other toxic assets has fueled a "non-moral hazzard" rally in the stock market, at the expense of the US taxpayer. Every reasonable assault on the logical basis for the stock market rally is met by another irrrational equivocation from the Treasury Dept. or the FED. Realistically, the fundamentals most assuredly suck, but some .gov agency finds a way of dissenting. Kind of reminds me of climate change deniers.

The average citizen has no awareness of the extra tax burden that has been heaped upon them in the name of economic recovery. We are a retracement of Japan over the past 20 years. Our elected officials and their appointments in the key positions of government agencies know it! Their choice to ignore the consequences of history is an idictment of their intent to do harm to the US economy, and it's citizen tax payers.

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just a FYI

I have not read Krugman's book on Japan (or any other)....considering we're going down the same road, someone who has read it, who wants to write up a "book review" to share with the rest of the class would be a great addition.

Or a blog post on how we're all Japanese now. (wasn't that a song in the 1980's?)

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So No Spending/Velocity is a Check on M1

The contracted credit and people sitting on their money is kind of keeping M1 in check then otherwise we'd see runaway inflation.

Is this the dreaded stagflation just not yet labeled as such?

The latest swirls I'm catching is a consensus that jobs aren't coming back and we know the home as an ATM days are over so they can't count on consumers or small business to lead a recovery.

Have you seen this:

http://secessioplebis.blogspot.com/2009/11/trust-busting-by-people-for-p...

Interesting concept overall.

I'll have to dig into some of this formula wise etc, its not like I don't have the time these days.

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right, the "new normal" is being shoved down our throats

to try to say to the American people that we should "get used to" high unemployment as permanent. We, or at least I, think this is utter bullshit. If they would enact a host of policies that would not be.

Right that monetary view on the money supply seems to hold although there are others on inflation.

Stagflation is defined as high inflation with economic malaise or slow growth. I'm not an expert, haven't even written anything on stagflation but my guess for the biggest cause was the oil crisis. Modern economies are so highly dep. on this commodity, a sudden shortage will cause pretty much all prices to rise, but no real resulting GDP corresponding rise. (That's off the top of my head).

Interesting piece. There was a "movement" although it would have to be done on a massive scale, to simply refuse to pay off debt to the banks.

Yeah, obviously banking on the "next election" ain't working out too well.

In the middle column, there is a blog pension pulse, who writes a lot on retirement, pension funds (of which most have none and then those who do....it's at risk).

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Even powerful New Deal-level

Even powerful New Deal-level stimulus that truly breathes life into the real economy won't do us a whit of good as long as the squid of big finance is draining our financial life blood faster than we can pump it. The sooner we remove the squid, the better our chances of surviving the surgery.

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Mish takes a swipe at Bonddad

I didn't know that Mish was even aware of Bonddad.

Bondad goes on to say “The absolute last thing we need is for anyone to second guess the Fed's interest rate decisions.”
I strongly disagree. It is entirely correct to second guess the Fed’s interest rate policy. The reason is the Fed has done nothing but blow bubbles of increasing magnitude for decades.
It should be crystal clear to everyone that the Fed held interest rates too low, too long spawning off the world’s biggest credit bubble as well as the world’s biggest real estate bubble.
Amazingly, Bondad does not want anyone questioning Fed policy, no matter how bad it is. Apparently the Fed is God, who cannot be questioned or make a mistake.

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give a plug to EP then

that should start a little on air flame war just by mentioning us. ;) I'm sure you saw the insult empty rant in response to midtowng's using bonddad's own quotes against him.

Bonddad's bringing them on himself (or themselves). you cannot write posts claiming "Paul Krugman is WRONG" and "Brad Delong is WRONG" and anyone who wants to audit the fed is equivalent to a "Birther" and not draw the ire of many in the process.

I don't read a lot of these sorts of attack/insult headline posts, just seen it all flying by and I also didn't get involved in the DK flame whatever that was.

My issue is it really helps to be right if one is going to do economic analysis. ;)

On the other hand, never stopped cable news from having the same guests on over and over...or even giving them a show.

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They actually have done that

They actually have done that from time to time, but mainly they stick to me being the day trader and bonddad being the huffington post or financial blogger (he isn't, as far as I can tell, on DailyKos any longer.)

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Really?

I have a hard time believing that, considering they made a point, in a blog title headline, to use our name and claim our name means "idiot". Very nice. So, as far as I'm concerned, fuck them.

EP is a community site as it is. There isn't "one opinion" dictated by "on high". It's a bottom up architecture. Nobody is dictating to someone else what to write about or conclude. The only rules are to be cited, statistically accurate, well referenced....(plus the other types of things).

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no no no

that's not what I meant. I think I may have replied in the wrong space here. What I meant was that when I've been on the air, they've said my name and then "who blogs at times on Economic Populace". But mainly, it's my name then "day trader". They've only said DailyKos once for my name, but about 5 or 6 times with EP, which I think the last time was when I was on the Randi Rhodes show a few months back.

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ah, ok

Then, you might be aware that bonddad, called EP "economic idiots" as if the site is one author or has some sort of rule that only a few chosen ones can write here. So, in a nutshell, bonddad called you an economic idiot since you write here and put it in a blog post headline "EP=Economic idiots" and then went on some rant/tirade which is completely untrue, inaccurate as hell, to go out on every RSS feed and be saved for all eternity on Google.

Very clearly a personal attack w/o any substance, merit of anyone who writes, reads, uses EP....which is a community site for all sorts of people.

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Amazing

A Friedman-school monetarist like Hale Stewart is on Air America. I thought the show was leftist?

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In Hale's defense, the guy

In Hale's defense, the guy is pretty progressive. He's called for things like public works projects for infrastructure. I don't think anyone is just one school, though it may be easy to say you're this or that.

Actually, at the risk of getting everyone's ire, I've had a theory that really most economic philosophies are simply a mirror opposite of the other. And that I think the ultimate key for a pure economic system is to find a way to link them. A little project I've been working on for the past couple of years. The economist version of the physicists' "M Theory."

Anyways, back to Bonddad, all I'm saying is while we can disagree on the fed thing and his bullish stance, he's still a good guy. It's not like he's Steve Forbes or Larry Kudlow, far far from that.

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problem is....he's been wrong so often

I don't care about absolutes or economic "schools of thought" in so much as I care what models economic reality, down here, on the ground with us peanut gallery.

IMHO, we have way, way too much "philosophy" and pigeon holing people as "Socialists" and "Communists" and so forth and not enough raw, real time, accurate statistics and we sure as hell do not have a government that minds those statistics and prescribes common sense legislation and policy accordingly!

To be honest, beyond my past nodding friendly acquaintance with bonddad, in terms of real economic insight, I didn't get much and to make matters worse, I cannot count the number of posts that were plain dead ass wrong.

That's a serious problem to me. Promoting things like bad trade deals, when the statistics on China alone are enough to make your hair stand on end.

Which reminds me. It's very easy to be dead ass wrong in econ and I'm sure we'll all aware even Nobel Prize winners have indeed been.....dead ass wrong. So, if one remembers a post they wrote that is now proved dead ass wrong.....you can update and edit anything on EP to rewrite a past post or admit the error and correct.

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His accuracy wasn't that bad

At least not how I remember.
The problem I have with Bonddad is his total lack of depth. By that I mean he tends to repeat the current financial media spin. He doesn't dig. He doesn't analyze. He doesn't put things into historical context. He doesn't say anything that I couldn't read elsewhere.

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Mish on Bonddad thanks

Thanks for this report, I read Mish everyday but missed this. Interestingly, I have this strange ‘approach avoidance’ conflict about him. His anti labor (unionism) is to my mind appalling. Not that I don’t have problems with unions. I’ve been in a couple and know the problems with them up close. But, Mish seems to think the way to economic recovery is to reduce all labor to the least common denominator. Apart from the ethics, what does that do to purchasing power and in turn the impact on the economy?

But, I digress. Nevertheless, he is a wealth of information on a wide range of economic topics and always a good read. Also, Calculated Risk got him started in blogging and links his blog. That’s a heck of a recommendation.

But, I digress. New Deal Democrat on the Bonddad blog has taken a couple of swipes at Mish and they seemed to me to be ‘cherry picking’ as is, it seems to me, NDD’s style. Once I responded to NDD on Mish, but I never read where Mish responded directly, although there were times that he seemed to respond obliquely. The very direct response to Bonddad in the headline no less is interesting.
Thank for bringing it to my attention

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