Friday, February 12, 2010

The Bright Hope

I admire Menzie Chinn, but this set of charts are particularly worthless, and I should say Why. I would rerun the charts in two ways, if I had the capacity. The first would translate all data into 1980 prices, the second would transfer current Interest rate into a common 5.5% for all national debt. The first scenario is totally unlikely, the second quite likely. Smart young graduate students might attempt creating such scenes, and do not worry if it begins to smell quite early in the analysis. A third scenario could be to run the created analysis out say some half-Century. I have a minor rule of thumb which I use for almost any economic unit: Everything must eventually pay for itself, else the unit will disintegrate somewhere along the scale of Interest rates. My favorite disaster point for Government debt is around 7.5%. What is the probability that We will reach that Interest rate? Consider the probability of global tax revenues not advancing over the next two years, with Government Spending maintained at current levels; a sleight of hand I will not explain estimates a Interest rate of 9.1% (I do not explain my math exercises simply because I am tired of my work being called childish–whether it may be or not!).

This link is another one of those Posts which I feel disheartened to find. I cannot remember when initial unemployment claims were less than 400,000, or the 4-Week average less than 450,000. Identification of such things during a Recession, though totally necessary, should be added without fanfare. I personally would desire a switch to a Statement of permanent Hires employed longer than 6 months, with the Unemployment claims added only as an addendum. It would simply present a cheerier atmosphere. Of course, such would only be an act of delusion, as We need a new Hire number much higher than 450,000 to get back to relative full employment.

Serious Students of economics can attempt to read this Paper. I have not, and don’t intend to do so; it is all a question of time, and present sufficient discouragement as to the competence of financial leadership. What is necessary is only to recognize that our leaders are operating in a fantasy world equal to that of the Nazi leadership in 1943-45. They are saying that things are not so bad, and will continue to do so, until the economic situation explodes. What my Readers must understand is that the situation will get worse before it gets better, that a realistic tax policy will have to be introduced in order to straighten out the mess, and that our leadership cannot destabilize our basic life pattern; the Common Man has worked too hard to have his life stolen from him, though the Corporate structure continually tries to do so. We will get back to a functioning economy at some point, no matter How Much our leadership acts stupid. lgl

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