Searched query: confluence
If there was only one causal factor nudging the economy into recession, it might be a mild, brief recession. But with all five conditions in confluence, this recession will be unlike any other.
My default for this bear market rally was "Longer than I would ever think possible." I should modify that to "Much much much longer than I would ever think possible."
I may carefully increase my position a bit more this week if they can keep it going.Higgenbotham wrote: Thu Apr 16, 2020 3:04 am I posted this awhile back about how brutal counter trend rallies in the stock market can be. Assuming we have seen the high in the stock market, we're in one now - a big one.
Or, if one prefers, instead of "the resulting deflation event very well may be the worst in centuries", "the economic crisis very well may be the worst in centuries".agnostic wrote: Sat Oct 18, 2008 8:59 am I find the resolution by Bernanke et al. to avoid deflation "at all costs" a lot like the policy sometimes used by US Forest Service in regard to fires in our national parks. Over the last century, the policy generally has been to suppress fires "without exception". However, some enlightened folks are debating whether this is the right policy and argue we should let "natural forest fires" burn without intervention. The reasoning follows .. bear with me. [that's a joke]
In the middle of last century, most people in the forest service had this notion: forest fires are "bad". Then, along about the 60s some people with a scientific bent realized that maybe natural forest fires weren't all bad. These naysayers argued that periodic buring of underbrush and dead vegetation was good. They said you shouldn't suppress all the fires, because on occasional big fire would keep the accumulation of burnable material from getting too high in the forest as a whole. Even in the forest service, some people thought a change in policy would be worth trying. They could see that major forest tracts (such as Yellowstone Park) were accumulating too much flammable material .. and that if a fire ever did get out of control, then it likely would end up burning 80% of the forest, instead of just 10% or 20% for a normal "big fire".
This new approach had been in effect for a decade or so, but then Yellowstone was hit in 1988 by a confluence of smaller fires that ended up being close to a worst case fire. See this article in Wikipedia
http://en.wikipedia.org/wiki/Yellowstone_fires_of_1988
Fanned on by misleading media reports, the general populace cried "no more fires". I'm not sure but I think the forest service managed to resist the media storm and still does allow a certain level of natural fires.
In the same vein, I would argue that occasional deflation is a good thing. This fixation by government leaders on avoiding deflation may put off the day of reckoning. But when that day comes, and natural forces break through the firewalls put in by the government, the resulting deflation event very well may be worst in centuries.
http://www.acting-man.com/?p=16451Now, we don't deny that if market forces had been allowed to work unhindered on occasion of the 2008 credit crisis, there would have been a painful deflation of the money supply and a severe economic downturn. Many big banks would have gone bust, instead of being allowed to continue to vegetate as zombies. However, this severe downturn would likely have been brief and have given way to a genuine recovery relatively quickly. Instead, the authorities essentially followed Duncan's recommendation: they bailed everyone out, inflated the money supply and went on a deficit spending spree. They even invested in 'green energy', with predictable results (see Solyndra as a pertinent example). This has ensured that the 'recovery' is a sham – the moment the artificial support by inflation and deficit spending is lessened even a little bit, corrective forces will immediately take over again. We have essentially exchanged 'short term pain and long term gain' for 'short term pain avoidance and long term misery'.
Now what will happen if these policies continue unabated? At some point, market forces will intervene anyway. If one continues to inflate at every sign of an economic downturn, one will eventually end up with the complete destruction of the underlying currency system. Likewise, governments can not hope to spend without limit. They will either face a market revolt at some point and become unable to roll over their debt (as has happened with several euro area member nations), or they will have to risk destruction of the currency by printing the money to buy their debt (the path the US, UK and Japan are currently on). But there is no way of avoiding the eventual catastrophe – the later it comes, the more profound and all-encompassing it will be.
I think Noland and Hussman are a couple of very smart guys with a good understanding of what is going on. What they are saying fits with the idea of a spike before a crash. It seems likely to me.Higgenbotham wrote:Back to the stock market. We'd previously talked about the fact that the stock market had passed the normal time element for an ending spike but that an ending spike is typically seen. It looks like we are now experiencing that spike. I had sort of described it as the idea that if Bernake panicked again in a similar manner to how he panicked and slammed interest rates down in 2007, we might see this spike.
