Open Thread (3/25/2009)

IP - nobody is forgetting what Obama was handed when he took office: the worst economic disaster since the Great Depression, brought on by tax cuts for the wealthiest and massive deregulation. When I see those red bars I think one thing: conservative economics is dead.

OMG! I've got health care for my kid! That means I'm going to bemoan any movement toward other people's kids not dying and it costing less like everywhere else in the world!

There is no decoupling from the dollar.  There is only empty jawboning about decoupling from the dollar.

The vast majority of the world's debt is denominated in dollars.  That is why, in this credit crunch, the dollar has gotten so much stronger--there is a massive competition for the dollars that are out there.

We are in the most massive global deflation the world has ever seen.  Already well over $50 trillion in wealth has been destroyed in global stock markets alone--the extent of the deflation across all asset classes globally is well into the hundreds of trillions of dollars.  And it is far from over.

The debt that has yet to be issued by the US Federal Government is added competiton for dollars.  Government will get wildly more expensive to operate--that is why Bernanke has started to engage the Fed in a Quantitative Easing policy; basically printing dollars out of thin air to buy the long Treasury bond.

Bernanke has only promised to print $1 Trillion US so far.  He will have to print such a more massive amount before we even ever get a slight whiff of inflation.

The name of the game is still deflation, and on a massive scale.  Use any rally to raise cash and pay off debt.

We will still be in a deflationary environment for a couple years, an event which will massively strain the federal government's ability to fund itself, due to high yields on Treasury debt sales, and massively reduced tax reciepts.  This talk about massive new entitlement programs from the Federal government is nothing but just that, talk.  They will never happen.  The same goes with a lot of the bailout and stimulus "dollars", which are really debt sales that have yet to be issued.  For as much debt as they plan to issue, there will fail to be buyers at a point soon in the future.  Supply and demand.

If Bernanke tries to print to cover for the whole lack of demand for Treasury issuance, he will end up owning all the long end Treasuries the Fed issues.  Which would, infact, devalue the dollar and destroy the economy so much, that it would have even a worse effect on the government's ability to fund itself as if he had not printed at all.  Either way, our federal government is going to shrink in the next decade, and massively so.

Yes.  That is what I mean.  If the Fed tries to inflate its way out of the deflation via printing, they will have to print a massive amount of dollars.  It would wreak havoc on the economy--and even though it would theoretically help them solve their debt obligation problem, it would come at the expense of obliterating the savings and buying power of every single American citizen--thus collapsing the economy, and thus, tax reciepts... leading to the inability of the government to fund itself.

But that is not what we have right now.  The dollar is not yet being massively devalued... and it should continue to strengthen throughout the year.  We have a little trickle of printing, in the face of a tidal wave of deflation.  The printing has to get a LOT worse before we have a significant devaluation.

So MTD got some stimulus money and said they were going to buy new vans for handicapped people. I saw one today. They are sprinter 3500's - manufactured in DUSSELDORF, GERMANY. I'm glad that the Germans are going to get all stimulated by the MTD. Volk is a German name, right?