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"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Monday, November 05, 2007

Some Stories Worth Reading

1) Is Bernanke facing a death spiral?

Should Bernanke and his cohorts drag their feet with interest rate cuts, there is more than a sporting chance of the US economy slipping into recession and dragging the rest of the world down. This will, in my opinion, unleash the forces of deflation with rather dire consequences, especially given the highly-leveraged state of the US economy.

On the other hand, should Bernanke throw increasing amounts of money at the problem and cut interest rates aggressively, the dollar can fall down a precipice. Inflating the economy out of its quandary, however, may be the only policy option with a chance of success.

2) The bloodbath in credit and financial markets will continue and sharply worsen

It is now clear that the delusional hope that the severe credit and liquidity crunch that hit US and global financial markets would ease has been shattered by the events of the last few weeks. This credit crunch is getting much worse and its financial and real fallout will be severe.

3) The Worst Economy Of Our Lifetime, pt. II
Last week the economic news was upbeat. The US economy grew 3.9% and the economy added 166,000 jobs. Shouldn't people be happy about those developments?

The answer is no they shouldn't. As I noted in the first installment in this series, job and wage growth for this expansion is poor at best. Simply put, if you hadn't had a meaningful raise for the duration of "greatest story never told" you'd be frustrated to. But that poor job and pay growth only tell part of the story. The bottom line is the underpinnings of the Bush economy are terrible – and they are starting to come home to roost in a big way.


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