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“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”     Thomas Sowell

June 1, 2009

Monday Open Thread — DoubleDip?

by Brad Warbiany

All, if you’ve been reading me for any extended period of time, you know that I’m a bit of a Cassandra when it comes to the economy. I think the fundamentals are f***ed, and that this little lull of stock market strength is the calm before the storm. I have a lot of reasons to continue my bearishness, such as the recent rapid rise in foreclosures, but economic news lately has been slowly improving, and I’m left wondering what to think. As Keynes said when accused of flip-flopping on monetary policy:

When the facts change, I change my mind. What do you do, sir?

I suppose that there’s at least some evidence that the facts have changed. Dale @ QandO points out data points released this morning here, here, and here that point to an improvement in economic conditions.

So I’m opening this up to everyone. Where are we headed, and why? Stabilization and a return to a growth trend, or is the light at the end of the tunnel an oncoming freight train?

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10 Comments

  1. A friend of mine whose job depends on being right about this sort of thing is a bit perplexed that the Dow’s fall hasn’t been worse. Then again, as I pointed out to him, it may be a leading indicator of inflation. My guess (keeping in mind my economics background consists of a minor in college a decade ago, and little else)? I’ll stick with my initial assessment of an overreaction to the situation that is going to result in increased inflation (though not hyperinflation) but a weaker recovery than we would have had if little had been done in response beyond temporary extension of certain benefits.

    Comment by Mark Thompson — June 1, 2009 @ 11:38 am
  2. Found this video and he speaks great things about Liberty!

    http://www.youtube.com/watch?v=MV6QXt975TM

    Wow, go Adam Kokesh!

    Comment by Slitshock — June 1, 2009 @ 1:09 pm
  3. That light is indeed a freight train I fear.

    Consumer spending up, check. Tax refunds began flowing but while initial unemployment claims may have calmed to a little, +500k a month is still a blistering pace, add to that rising gas prices and it’s hard to see what will be there to support spending in a month or two.

    Construction spending up, check. It’s May and for a large portion of the country the season has just begun but it should be worrisome that last month permits were down.

    ISM bottoming out or has it reached terminal velocity?

    There is still much destruction that will take place before all is said and done.

    Comment by SWilliams — June 1, 2009 @ 3:22 pm
  4. “All, if you’ve been reading me for any extended period of time, you know that I’m a bit of a Cassandra when it comes to the economy.”

    lmfao, ego much?

    Comment by cybersecurity — June 1, 2009 @ 3:48 pm
  5. I’ve been listening to Peter Schiff’s video blog lately, and he’s not providing a lot of fuel for optimism. I started listening to Schiff after he proved to be one of the few forecasters who accurately predicted the current recession. I’m still amazed that all the forecasters who repeatedly get things wrong are still listened to.

    This is kind of a sampling of the abuse Schiff got for accurately predicting coming events. You will see snide laughter by the big names opposing him, and might note that they are both arrogant, and completely wrong.

    But more to your question. I think Schiff’s blog posts on May 21 and May 22 still ring in my mind as ominous warnings that this is not over yet.

    Comment by Akston — June 1, 2009 @ 6:36 pm
  6. Akston,

    You can often find Schiff’s writings here as well.

    But I worry about following anyone just because they predicted this. As they say in the investment world, “past performance does not guarantee future results”… Just as you see irrational exuberance on the upside, you can see irrational pessimism on the downside. As I pointed out in Keynes quote, if the facts change I’d rather change my opinion than miss the turn.

    Comment by Brad Warbiany — June 1, 2009 @ 9:47 pm
  7. Schiff is definitely the Marvin the Robot of the financial community these days.

    The basic underlying issue that continues to give credence to his point of view for me is that fiscal and monetary policies in Washington have not improved. If anything, they’re getting worse. The same types of policies that inflated each prior bubble are being turned to again to remedy that last one – all at the expense of the dollar.

    How does a heroin addict know his current pleasant state will be sustainable? If he got there by shooting up some China cat, my money is on another crash.

    Comment by Akston — June 2, 2009 @ 3:55 am
  8. I’ll put my wager on freight train. Montary inflation on a yearly average is running well over 100%. That is gonna hit, well, like a freight train.

    Comment by tkc — June 2, 2009 @ 10:32 am
  9. Mark me down for a freight train vote too. A real big train. And quite possibly, instead of a 1979 model train, it could like like a train from the early 1930s – or even worse, look like a German train from the late 1920′s. And we all know where THAT led.

    But I hope and pray I am wrong. Not for me. I’ll manage. And I’ve had a good life, no matter what happens from here. But for my kids. I do fear that the 2010′s and beyond may be pretty awful.

    I get the concept of stocking up on food – although we have neither the funds nor the storage space for anywhere near the recommended SIX months. A month, maybe. Water purification tabs and equip? Check. Guns and Ammo? Check. A couple thousand in cash in small bills? Nope – don’t have the spare dough to convert to hard cash unless I yank it from the bank.

    Gold, silver, etc.? No….I am still unable, so far, to mentally wrap myself around the concept that there WILL be people who WILL give me food or provide services to me, in exchange for things like silver coins or gold chain links. It just seems so unreal. I was in college in the late 70′s and therefore remember the last bad recession. My parents grew up very poor, as kids in the Depression, and I’ve heard all their stories. But the whole total-collapse of the currency/worst case/doomsday scenario concept still seems too surreal to grasp…..

    Oh to have a crystal ball….

    Comment by southernjames — June 2, 2009 @ 11:03 am
  10. The reason the inflation bomb hasn’t hit yet is because the new money is taking the place of credit that disappeared last fall. Once banks start releveraging on this increased base of dollars, inflation will hit, and hit hard.

    My call is, take advantage of the stock market while you can, but once credit starts expanding, get out of anything in dollars.

    Comment by Quincy — June 2, 2009 @ 4:45 pm

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