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Ferguson: Overwhelming US Crisis Looms
Money News ^ | 07/26/10 | Julie Crawshaw

Posted on 07/26/2010 7:47:13 AM PDT by TigerLikesRooster

Ferguson: Overwhelming US Crisis Looms

Monday, July 26, 2010 09:41 AM

By: Julie Crawshaw

Economic historian Niall Ferguson says Keynesian economists are stuck in the 1930s, completely unaware that a US debt crisis could come quite suddenly.

“All it takes is one piece of bad news — a credit rating downgrade, for example — to trigger a sell-off,” Ferguson writes in the Financial Times.

“And it is not just inflation that bond investors fear. Foreign holders of US debt — and they account for 47 percent of federal debt in public hands — worry about some kind of future default.”

Yet some economists “seem not to have noticed that the big academic winners of this crisis have been the proponents of behavioral finance, in which the ups and downs of human psychology are the key,” says Ferguson.

As evidence, he points to a recent poll showed that 45 percent of Americans “think it likely that their government will be unable to meet its financial commitments within 10 years.”

(Excerpt) Read more at moneynews.com ...


TOPICS: Business/Economy; News/Current Events
KEYWORDS: debt; default; ferguson; keynesian

1 posted on 07/26/2010 7:47:16 AM PDT by TigerLikesRooster
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To: TigerLikesRooster; PAR35; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; happygrl; ...

P!


2 posted on 07/26/2010 7:47:46 AM PDT by TigerLikesRooster (The way to crush the bourgeois is to grind them between the millstones of taxation and inflation)
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To: TigerLikesRooster
I am constantly struck by the fact that about half the "experts" think that inflation is going to kill us, while the other half of the "experts" say that deflation is going to kill us. Meanwhile, there is a large camp of "experts" who think that the numbers look good and we have been recovering for awhile now. Of course, there is a large camp of people who think that we have not yet started any sort of recovery and things are getting worse and worse.

I'm very pessimistic about how things are going. But the utter lack of any consensus agreement on virtually any economic topic is very worrisome. It's like we're groping in the dark without a clue. That just can't end well.

3 posted on 07/26/2010 8:03:33 AM PDT by ClearCase_guy
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To: ClearCase_guy

The utter lack of agreement among experts is ... we don’t know what will happen. We have never been at this insane point where debt and spending is staggering.


4 posted on 07/26/2010 8:07:53 AM PDT by whitedog57
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To: ClearCase_guy
"But the utter lack of any consensus agreement on virtually any economic topic is very worrisome. It's like we're groping in the dark without a clue. That just can't end well."

No wonder you're confused. These headlines are on the same business page:

Whoa, Barton Biggs Is An Uber Bull Again After Disowning Stocks A Month Ago

David Rosenberg: You Know You Are In A Depression When...

5 posted on 07/26/2010 8:12:14 AM PDT by blam
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To: TigerLikesRooster

Keynesian economists = Democrat economists = Names? I’d wish said author had names some names;

Transcript of Pelosi, House Democratic Leaders, and Economists’ Press Conference Following Economic Forum 10/21/2009

http://www.speaker.gov/newsroom/pressreleases?id=1414

Speaker Pelosi. “...We just had a very instructive meeting with some leading economists about the number one subject on the minds of the American people: jobs. Jobs, jobs, jobs, and jobs.

...I was very pleased that for the entire session of nearly four hours ...I am pleased that we had the benefit of the thinking of Dr. Mark Zandi, Dr. Alan Blinder, Bob Kuttner, Heather Boushey, Bill Hambrecht, and Allen Sinai.”


6 posted on 07/26/2010 8:13:41 AM PDT by Son House (No Scammers or Spammers CASH ONLY SALE! No coupons, IOU's, Foodstamps, Checks, etc THIS IS CASH ONLY)
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To: TigerLikesRooster
“All it takes is one piece of bad news — a credit rating downgrade, for example — to trigger a sell-off,” Ferguson writes in the Financial Times.

IF Moody's, Fitch or the S&P dowengrade the US Treasury bonds from AAA it will be because someone is PLANNING and managing the crash of the dollar.

7 posted on 07/26/2010 8:15:58 AM PDT by Centurion2000 (Three things you don't discuss in public; politics, religion, and choice of caliber.)
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To: ClearCase_guy

>> It’s like we’re groping in the dark without a clue.

I’m taking the Occam’s Razor approach that that simple explanation is the best fit answer to the question of why the “experts” can’t reach a consensus.

Collectively, we DON’T have a clue.

We’re just gonna have to see how it all shakes out.


8 posted on 07/26/2010 8:18:36 AM PDT by Nervous Tick (Eat more spinach! Make Green Jobs for America!)
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To: ClearCase_guy

Did Blinder say this in the meeting as well?

“an absolutely horrendous long-term fiscal outlook”

Transcript of Pelosi, House Democratic Leaders, and Economists’ Press Conference Following Economic Forum 10/21/2009

http://www.speaker.gov/newsroom/pressreleases?id=1414

Former Federal Reserve Vice Chairman Alan Blinder

“So for that reason, despite the fact that we’re looking at an absolutely horrendous long-term fiscal outlook,

...I, like Mark, and I think most of us around the table, believe that at least a modest, now this is where people will disagree, but at least a modest increase in the deficit is targeted very strongly on job creation. Not a scatter shot, but targeted very strongly on job creation would be appropriate.”

^
“a modest increase in the deficit is targeted very strongly on job creation.”
[Democrats and their economist talked about tax cuts for the rich]
“Not a scatter shot, but targeted very strongly on job creation would be appropriate.”
[Social engineering tax credits aren’t broad enough]


9 posted on 07/26/2010 8:20:43 AM PDT by Son House (No Scammers or Spammers CASH ONLY SALE! No coupons, IOU's, Foodstamps, Checks, etc THIS IS CASH ONLY)
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To: ClearCase_guy
Ignorance, denial, spin, propaganda all mixed up together.

In the past, the market just crashed and deflation ensued. Now they think they learned the lesson and believe they found a way to solve it: pump in astronomical amount of money to resuscitate the crashing market.

So what may become a deflation(or depression) could now turn into huge inflation. Or we could have really malignant stagflation. Nobody has tried so far to neutralize mega debt implosion with astronomical infusion of money in the past. At least not on this scale.

10 posted on 07/26/2010 8:22:36 AM PDT by TigerLikesRooster (The way to crush the bourgeois is to grind them between the millstones of taxation and inflation)
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To: ClearCase_guy

That bothers me too. Either they really don’t know what’s going on . . . or there IS some answer out there and many people are subconsciously avoiding it because it’s too terrible to contemplate.

Chicken Little alert!


11 posted on 07/26/2010 8:28:29 AM PDT by cvq3842
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To: Son House
Bill Gross: Bonds Have Seen Their Best Days And Stocks Are The Better Investment
12 posted on 07/26/2010 8:28:53 AM PDT by blam
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To: TigerLikesRooster
“Part of this strategy is to first run up huge deficits through tax breaks to the wealthy and increased defense budgets, and then claim that due to deficits, social programs have to be cut,” Samuels writes at the investingcontrarian.com.

BULLCRAP. The author makes it seem as if this is some sort of nefarious plot by The Man to keep the poor down.

13 posted on 07/26/2010 8:33:41 AM PDT by bolobaby
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To: ClearCase_guy

Economics has become part and parcel to politics. If you support the side in charge, things are looking up. If not, things are getting worse. Simple as that.


14 posted on 07/26/2010 8:34:20 AM PDT by Wolfie
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To: Wolfie

I got an Example that kinda of covers double talk too:

Former Federal Reserve Vice Chairman Alan Blinder

#1
Transcript of Pelosi, House Democratic Leaders, and Economists’ Press Conference Following Economic Forum 10/21/2009

http://www.speaker.gov/newsroom/pressreleases?id=1414

“So for that reason, despite the fact that we’re looking at an absolutely horrendous long-term fiscal outlook,”

or

#2
Wall St. Journal : The Case for Optimism on the Economy 12/16/2009 | Alan Blinder

http://www.freerepublic.com/focus/news/2408814/posts?page=24

“Let me offer instead, in deliberately one-sided fashion, the case for optimism.”


15 posted on 07/26/2010 8:40:17 AM PDT by Son House (No Scammers or Spammers CASH ONLY SALE! No coupons, IOU's, Foodstamps, Checks, etc THIS IS CASH ONLY)
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To: Son House

The WSJ is a seperate case, IMHO. They’re all about getting people to buy into the stock market.


16 posted on 07/26/2010 8:41:57 AM PDT by Wolfie
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To: ClearCase_guy

I don’t know exactly how the inflation versus deflation scenario will play out but those who talk of recovery are simply refusing to see what is happening. There IS NO RECOVERY and there WILL BE NO RECOVERY so long as people who have no real world experience are running things. Think of it this way, IDIOCRACY is a documentary.

http://www.youtube.com/watch?v=2fq2ga4HkGY


17 posted on 07/26/2010 8:52:24 AM PDT by RipSawyer (Trying to reason with a leftist is like trying to catch sunshine in a fish net at midnight.)
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To: ClearCase_guy
"I am constantly struck by the fact that about half the "experts" think that inflation is going to kill us, while the other half of the "experts" say that deflation is going to kill us."

Economics - it's called "The Dismal Science" for a reason.
18 posted on 07/26/2010 9:10:13 AM PDT by indthkr
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To: Wolfie

It was the same author/economist, Blinder, I was pointing out


19 posted on 07/26/2010 9:15:36 AM PDT by Son House (No Scammers or Spammers CASH ONLY SALE! No coupons, IOU's, Foodstamps, Checks, etc THIS IS CASH ONLY)
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To: TigerLikesRooster
Cheney disagrees.

"Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis.

O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key constituency.

O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired."

20 posted on 07/26/2010 9:24:52 AM PDT by ex-snook ("Above all things, truth beareth away the victory")
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To: Nervous Tick; ClearCase_guy

The problem is that there are so many mixed signals coming from the economic data right now that you can make a case for contradictory outcomes. This isn’t a normal cyclical economic downturn, it’s a structural downturn and it isn’t going to respond like a cyclical event. The damage to the banking system is substantial.

Inflationists look at the Fed’s quantitative easing and its ultra low interest rates and they see inflation coming. Deflationists look at the massive amount of bad debt in the banking system with more on the way and they see deflationary forces overwhelming the Fed’s attempts to reflate the banking system.

Bulls look at increased traffic and some strength in commodity prices and they see a new bull market starting. Market bears look at the data and see a sucker’s rally that will fail because of serious problems with the consumer.


21 posted on 07/26/2010 6:22:45 PM PDT by Pelham (There is no "close the border first". Deport illegals now.)
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To: bolobaby

That wasn’t the author’s own conclusion. She was quoting two economists with different views.


22 posted on 07/26/2010 6:25:43 PM PDT by Pelham (There is no "close the border first". Deport illegals now.)
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To: ex-snook

“O’Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. “You know, Paul, Reagan proved deficits don’t matter,” he said, according to excerpts.”

If Cheney actually said that then he is a fool who has no real knowledge of Reagan’s economic program. Neither Reagan nor his economic team ever took such a cavalier attitude towards deficits. ERTA in 1981 included spending cuts to balance the tax cuts, but Speaker Tip O’Neill reneged on the deal. The resulting deficits prompted Reagan to sign the 1982 TEFRA tax increase in order to reduce the growing tax shortfall. In his farewell address Reagan mentioned if he had any regrets upon leaving office, and the first thing he brought up was the deficit.

An indifference to deficits is a hallmark of Keynesian politicos, although in fairness to Keynes himself he had enough sense to only advocate them in recessions. Cheney and Dubya ran them during boom times, and judging from Cheney’s statement they did it without regret. Whatever lesson they think they learned from Reagan wasn’t one that he was teaching.


23 posted on 07/26/2010 6:55:49 PM PDT by Pelham (There is no "close the border first". Deport illegals now.)
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