KEYNESIANS AT “THE ECONOMIST” FREAKING OUT – Watch out It is only a matter of time before the next recession strikes. The rich world is not ready
Only one news story worthy of note today. When psychotic Keynesians start freaking out over the results of their “fixes,” and encourage more of the same, it is best to take notice. This entire article was SMFH, again and again and again. The basic message is “A recession is inevitable at least once a decade, and since central banks are already at next to zero percent to boost the economy and prevent deflation, and with the last recession occurring in 2008, they will have no wiggle room to respond to the next downturn.” Or something.
Fucking duh, that’s what we’ve been saying all along regarding ZIRP.
We’ll go through the article one frustrating quote at a time:
“THE struggle has been long and arduous. But gazing across the battered economies of the rich world it is time to declare that the fight against financial chaos and deflation is won. In 2015, the IMF says, for the first time since 2007 every advanced economy will expand. Rich-world growth should exceed 2% for the first time since 2010 and America’s central bank is likely to raise its rock-bottom interest rates.”
If winning means papering over the problem, okay. If every economy expanding means growth based on debt, government spending, and funny money, okay. If “raising interest rates” means even slightly above zero, okay, but I doubt it.
“Few economies have ever gone as long as a decade without tipping into recession—America’s started growing in 2009. Sod’s law decrees that, sooner or later, policymakers will face another downturn. The danger is that, having used up their arsenal, governments and central banks will not have the ammunition to fight the next recession. Paradoxically, reducing that risk requires a willingness to keep policy looser for longer today.”
Whenever “paradoxically” is used in defining problems and solutions, bullshit is soon to follow. This is basically “damned if you do, damned if you don’t” line of reasoning, with the flawed, accepted premise being the fucking government should meddle and artificially influence the economy in the first place.
“The good news comes mainly from America, which leads the rich-world pack. Its unexpected contraction in the first quarter looks like a blip, owing a lot to factors like the weather.”
America, fuck yeah! The best of a bunch of bad alternatives. Yay! And of course, negative growth quarters are always unexpected, and always due to something other than the economy structurally fucking sucks, and has continually sucked since “The Great Recession” that is in truth the first stage of the larger “Greatest Depression.”
“In other parts of the rich world things are also looking up. In the euro zone unemployment is falling and prices are rising again.”
That great bogeyman Deflation. That hero Inflation. Only psychotic Keynesians believe that working people paying more for the same goods is a good thing.
“Inevitably fragilities remain. Europe is deep in debt and dependent on exports. Japan cannot get inflation to take hold. Wage growth could quickly dent corporate earnings and valuations in America.”
More psychotic Keynesian psychobabble. Since when is an economy producing and exporting things a bad thing? Since when is prices not increasing a bad thing? Since when is wage growth a bad thing? These are the people running world economies, and they do not have your best interests at heart. They see the world and reality from a completely different perspective than anything approaching goodness and righteousness.
“Rarely have so many large economies been so ill-equipped to manage a recession, whatever its provenance, as our “wriggle-room” ranking makes clear. Rich countries’ average debt-to-GDP ratio has risen by about 50% since 2007. In Britain and Spain debt has more than doubled. Nobody knows where the ceiling is, but governments that want to splurge will have to win over jumpy electorates as well as nervous creditors. Countries with only tenuous access to bond markets, as in the euro zone’s periphery, may be unable to launch a big fiscal stimulus.”
The cognitive dissonance in this paragraph is truly something to behold. The debt-based spending splurge undertaken since 2008 to combat the bogeyman deflation and stimulate the economy didn’t fucking work! And now they are worried that they don’t have any more to spend to fix the economy they never fixed when reality finally hits and their manipulations of data don’t work anymore. But they’ll try to “stimulate” again because it’s all they know and “no one knows where the ceiling is.” The economy was never fixed. The numbers showing improvement are manipulated. They are just papering over the problem.
“Monetary policy is yet more cramped. The last time the Federal Reserve raised interest rates was in 2006… When central banks face their next recession, in other words, they risk having almost no room to boost their economies by cutting interest rates. That would make the next downturn even harder to escape.”
We never “escaped” the last downturn. They never stopped the ZIRP monetary stimulus. Can’t they see that by now? This is why they want to outlaw cash, so that they can go negative on interest rates, and you’ll have to pay your bank to forcibly store your money for you.
“The logical answer is to get back to normal as fast as possible. The sooner interest rates rise, the sooner central banks will regain the room to cut rates again when trouble comes along. The faster debts are cut, the easier it will be for governments to borrow to ward off disaster. Logical, but wrong.”
So now the “right” answer is illogical? Beam me up, Scotty! Higher interest rates do not exist such that central banks have room to cut them when the next downturn hits. I don’t know what kind of logic that is, but it’s insane. Higher interest rates are a good idea because they prevent malinvestment. They attract monetary investment. They act as a store of wealth. They increase wealth if outpacing inflation. They encourage productivity. They discourage bad debt. But that would be too “logical” for these psychotic, soft-money Keynesians.
But please, do tell us why raising rates would be logical but wrong.
“Raising rates while wages are flat and inflation is well below the central bankers’ target risks pushing economies back to the brink of deflation and precipitating the very recession they seek to avoid… Better to wait until wage growth is entrenched and inflation is at least back to its target level. Inflation that is a little too high is a lot less dangerous for an economy than premature rate rises are.”
The great, scary, evil bogeyman of Deflation again. You know, paying less for something is bad bad bad and must be avoided at all costs, even trillions and trillions of debt. Because, apparently, if it’s cheaper tomorrow than it is today, people will just wait forever to buy the things they need, just sitting there doing nothing and finally starving to death because they would save some money if they ate that cheeseburger tomorrow instead of today. Deflation: this is the single greatest reason for their madness, and yet they use deflation in such things as electronics and computers to fuck with their bogus target CPI inflation calculations.
So, it is dangerous if a working family gets a little more interest on their savings in the bank and pays a little less at the grocery store with a “premature rate rise”? Much less dangerous to make fuckall on your savings at the bank and pay more for that cheeseburger. So we don’t starve to death. Or something.
“Hawkish voices at the Fed argue that, with unemployment below 6% and hiring continuing at a torrid pace, it is plainly time to start raising interest rates. In this view, wages and prices are bound to pick up in future. Meanwhile excessively low rates are inflating asset prices and creating long-run financial risks. Those risks are real but manageable. Regulators have the ability to let the air out of asset prices by tightening rules on leverage and liquidity. An economy at full employment and with a healthy level of inflation will be better positioned to withstand a bout of financial instability than one that is flirting with deflation.
Deflation goes “Mwah-ha-hah!” and the psychotic Keynesians wet themselves. To the “hawks” trying to bring some sanity to central bank interest rates: Low unemployment rates are a sham. The numbers are low because people have permanently left the workforce and are no longer looking. Labor force participation is at an all-time low. Hiring hot and heavy? What? Where? For part-time, low-wage jobs? For illegal immigrants given “temporary” work visas? But low rates indeed are inflating asset prices, in the stock and housing markets to name a few.
That’s called INFLATION you psychotic Keynesian fuckwits, and likely not reflected in your bogus CPI inflation numbers. But that’s “manageable.” To whom? The rich can “manage” high asset prices very well, but what about a young family trying to buy a fucking starter home to raise the next generation? You know, the generation that is tasked with taking care of you all as you live it up at “The Villages,” go golfing every day, and ride off into the sunset (which is actually a mushroom cloud)?
“Governments can also do their bit. There has still been shamefully little growth-boosting investment in infrastructure… Growth is better than austerity as a policy for bringing debts under control.”
The great “Roads and Bridges” canard. Public infrastructure projects are Boondoggles. They are not good investments that spur economic growth and productivity. Government bureaucrats never want to fix crumbling roads, collapsing bridges, cracked sewer and water mains, a vulnerable electrical grid – they’d rather build expensive choo-choo trains, bike trails, and other feel-good nonsense. The projects they decide to build are economic sinks.
“Having fought off the effects of the financial crisis, governments and central banks are understandably eager to get back to normal. The way to achieve their goal is to allow the recovery to gather strength first.”
SMFH – Shake My Fucking Head.