Much optimism flowed from last week’s declaration by the National Bureau of Economic Research that the US recession officially ended in June 2009. How nice of them to let us know.
Markets reacted warmly and the 8 per cent rally in US stocks through September seemed more important than the revelation that the US Fed is worried enough about deflation to be planning another round of quantitative easing — dubbed ‘QE 2’.
I made the mistake of posting the talks from the AMI conference in SWF rather than Flash Video format; I’ll amend that post shortly, but in the meantime here are the talk by myself and Michael Hudson, and the panel discussion.
Stephen Zarlenga of the American Monetary Institute invited me to speak at the 2010 conference in Chicago, which I did on the topic of “why a credit money system doesn’t have to crash, and why it always does”. My speech, the discussion, the speeches of Michael Hudson and Kaoru Yamaguchi, and a panel discussion, are linked at the end of this post. I recommend watching them all if you can spare the time.
I was pleased to be invited, since this indicated a very open-minded approach by the AMI: they are campaigning to have the American Monetary Act passed to establish a 100% reserve monetary system, which is a proposal that I have expressed ambivalence about in the past.
I’m presenting this talk to the Australian Conference of Economists this morning (at 11 am). If you’d like to see the slideshow, right click on the link to save it to your PC (a simple click may bring it up in Google Docs where you lose the animations and some of the formatting).
The latest Flow of Funds release by the US Federal Reserve shows that the private sector is continuing to delever. However there are nuances in this process that to some extent explain why a recovery appeared feasible for a while.
The aggregate data is unambiguous: the US economy is delevering in a way that it hasn’t done since the Great Depression, from debt levels that are the highest in its history. The aggregate private debt to GDP ratio is now 267%, versus the peak level of 298% achieved back in February 2009–an absolute fall of 31 points and a percentage fall of 10.3% from the peak.
I took part in this debate hosted by Intelligence Squared Australia (an initiative of the St James Ethics Centre) last month. I was on the opposition side, along with Paul Gilding and Kate Jennings; the government position was put by Lucy Turnbull, Ross Gittins and Geoffrey Cousins. Details on all the speakers are available here, as is a video of the entire debate from beginning to end. In this post I’m reproducing this video in bite-sized chunks–9 minutes for each of the speakers (plus a 2 minute summing-up period), plus the audience discussion that included a couple of Debtwatch stalwarts.
My last post on the Commonwealth Bank’s “there’s no housing bubble in Australia” document focused simply on the use of two different data sources for the House Price to Income ratio; I left the arguments the bank made untouched.
Not so David Llewellyn-Smith, who ran a logician’s eye over the bank’s document and found “logic” of Monty Python “if she weighs more than a duck, she’s a witch” calible. David published this post in the Henry Thornton blog, and he has kindly consented to me reproducing it here.
On Thursday September 9th 2010, the Commonwealth Bank released a document on the Australian housing market, to support a tour that its senior executives are making to meet overseas investors. The press release for the document was as follows:
Australian Residential Housing
Sydney, 9 September 2010: Senior executives from the Commonwealth Bank of Australia (“the Group”) will soon be travelling overseas to meet with some of the Group’s offshore shareholders and other investors interested in Australia and the Australian banking sector.
My recent post “What Bernanke doesn’t understand about deflation” has hit a chord, with a number of sites around the world reproducing it—including John Mauldin’s Outside the Box column. But it has raised a couple of queries in people’s minds too:
Things are looking grim indeed for the US economy. Unemployment is out of control—especially if you consider the U‑6 (16.7%, up 0.2% in the last month) and Shadowstats (22%, up 0.3%) measures, which are far more realistic than the effectively public relations U‑3 number that passes for the “official” unemployment rate (9.6%, up 0.1%).
The US is in a Depression, and the sooner it acknowledges that—rather than continuing to pretend otherwise—the better. Government action has attenuated the rate of decline, but not reversed it: a huge fiscal and monetary stimulus has put the economy in limbo rather than restarting growth, and the Fed’s conventional monetary policy arsenal is all but depleted.
