“Our grasp of deflation’s logic began with the 1976 book, The Coming Deflation, by the late C.V. Myers, and continued with Davidson and Rees-Mogg’s The Great Reckoning. Although Myers’ work was obviously premature, the concepts it emphasized are timeless, particularly this one: “Ultimately, every penny of very debt must be paid – if not by the borrower, than by the lender.” This is the crux of the inflation vs. deflation debate, and because of the way Myers framed it, we’ve never had any doubt that the U.S. would eventually experience a catastrophic deflation. We were early in thinking the financial system would topple as a result of the allegedly “mild” recession of 1990-91 and its S&L crisis. In retrospect, it’s clear that we lacked the imagination to see that the huge amounts of Third World debt that threatened the global economy at the time were relative chump change compared to the galactic sums that Bush, Obama and the Federal Reserve have put into play in the last three years in hopes of saving the system.”
My Comment
I posted this to support my reiterated position that the recession cannot possibly be corrected as simply as advocates of the stimulus programs like to argue. It´s been in the making for more than a quarter of a century. Can a few months change everything so fast? I could be mistaken, but I don´t think so,…
I also posted the Ackerman piece to counter the establishment media spin that Nouriel Roubini was so much “ahead” of others in predicting the recession.
I call Roubini an establishment figure because of several things, including the fact that he does business with Larry Summers. Here is Roubini warning about housing in 2006...
He himself said the earliest he predicted the housing crash was in July and August 2006.
But by then, even a layman, like yours truly had already done that, and done it earlier – July 2005
And I was, at least in part, drawing on my reading of Mises. org, Lew Rockwell, and The Daily Reckoning, when I wrote the piece…which is where they spotted me on the web, and offered me a gig.
(As I said, I´m always walking into synchronicities in my life..)
Compare that with what other experts were saying in 2005, which is, there´s no housing bubble. That´s Ritholtz, by the way, who writes the excellent blog, The Big Picture (At least, Ritholtz also did say that housing was extended).
But then, in that same piece, Ritholtz also predicted that 2008 would be a good time to reenter the housing market. Oops. [Dec 12. On second thoughts, maybe oops isn´t really warranted. Housing may not have bottomed out everywhere, but I´ll bet you could have picked up good bargains in a few places in 2008]
That shows that you can have very good number-crunching skills, but then miss some of the…..dare I say it?…big picture.…because the big picture has nothing to do with number-crunching but with perspective
And that takes a knowledge of history…. and not simply economic history either. It takes a broader knowledge of the world than professional money-managers usually have.
Meanwhile, compared to Austro-libertarians (see those cited above in Ackerman´s post), Roubini was some twenty-five years late in his analysis.
Yet the media studiously ignores Austrian theory and Austrian theorists (Mark Thornton, for example, called the housing bubble exactly on time and called gold $1200 back in 2005) and stamps approval on people who were either late or wrong…and turns to them for solutions.
Why is all that important? Because it shows the intellectual dishonesty that is at the heart of the corruption of the system. Fraud and force go together, and for political and financial fraud to succeed, they need intellectual and academic fraud to cover their sins… and prep the soil.
Deep lack of trust of anyone who adheres to a rival political theory (or to a rival political party)…. and the arrogance of power…lead the establishment media to rewrite history…. and this intellectual dishonesty is the rag behind which the emperor (the state) hides his moral nudity.