Excerpts from Dr. Enzio von Pfeil's Novemer 26, 2008 appearance on CNBC Cash Flow:
- Discuss expectations and outlook for the U.S. economy, on the back the economic data due this week.
- America’s consumers as well as investment banks are de-leveraging.
- This means that banks won’t lend, or in the jargon of our Economic Clock®, there is an excess demand for money.
- That will intensify America’s excess supply of goods.
- The lame duck Congress, at best, will pass an extension of unemployment benefits. (The Economist, 22/11/08: "...serious debate about a broader stimulus has been put off until the new president and legislature take over in January". Congress re-convenes on 6th January and Obama takes office on 20th January....)
- How long will it take for the U.S. economy to recover?
- My guess is that the consumer will see an improving Economic Time® on the horizon in the first half of 2010.
- What are your views on Obama's top economic team, the transition of power in Washington and Obama's plans to steer the U.S. economy out of the doldrums?
- Obama’s economic team: Timothy Geithner is fabulous as the head of Treasury, as he understands how it works, is experienced in disaster management, AND has an international upbringing.
- The transition to power in Washington:
- He inherits two wars and the worst economic crisis since the Depression, according to The Economist on 15th November 2008 (TE 15/11/08).
- According to the same magazine, he is a good organizer. He has been working on this transition since the summer with John Podesta, a former White House Chief of Staff to Bill Clinton.
- He is handling this in a very focused, open-minded and positive manner. The great thing is that America has a very deep pool of talented experience to draw upon.
- For his transition, according to TE 15/11/08, he is adopting Reagan's model of transition: he, too, understood that the the Administration's real engine of power is in its White House staff - rather than in the cabinet. Besides, Obama, too, wants to hit the ground running.
- His key challenge is manage expectations. His buzzword was "change" - but by appointing previous war horses such as Larry Summers, John Podesta, Kerry and Gore, how much room for "change" is he really creating?
- Obama cannot do that much to get the economy going, however:
- The chickens of irresponsibility will keep coming home to roost.
- Another impediment is that individual states, on the whole, may not run state budget deficits, so their room for fiscal maneuvering is limited.
- Crucially, even if the basics of the Economic Clock® keep ticking, there are some important caveats as to its structure that the investor had best be aware of.
- There also are structural reasons why Obama's "plans" cannot "steer" the economy out of its doldrums, for instance:
- you cannot “skip a cycle”. Unless you are jetting to totally different hemispheres, nature doesn't allow you to just switch from summer to spring without going through winter first!
- Besides, never forget that certain investment banks have vested interests in driving the market, and thus the economy, down...
- What are your views on the U.S. government's move to save Citi (C), and the implications for the U.S. financial sector?
- This is really where the chickens of irresponsibility come home to roost. Compare the executive pay and perks with the money that these guys have lost, and the whole thing becomes an acerbic joke. I wonder how many private jets Citigroup has? More than the "Three Musketeers" festooned as running "VIP" car companies? Maybe the $306 bn Treasury injection will help to upgrade their fleet of luxury cars and jets?
- Citi just moved itself into the “too big to fail” league, as did the Club that got the USD 700 bn bailout funds, and as did the "big 3" automakers.
- But, in most instances, executive pay levels have remained the same.
- Implications for the US financial sector:
- It seems like “why me” will rear its head, as in, "why did 'they' let Lehman go under but not Citibank?"
- I hope that tax payers won’t stand by idly to watch their banking friends’ compensation “protected” by the US government!
- Having said this, it is good that Washington is doing something; thus, it is stopping the rot.
- What should investors do in the present investment environment?
- Fear has to overtake greed.
- In God we trust, but cash is better!
- Beware of holding time deposits at your “trusted” bank.
- Are there other issues or concerns that you would like to highlight?
- How China could influence the US economy. There are two routes:
- First, via interest rates. China could stop buying so much Treasury debt. This would push US long bond yields up.
- Second, via the Chinese operations of US MNCs.
- The chickens of irresponsibility are coming home to roost
- So where were all of today’s “smart guys” nine months ago? Who was foretelling a global slowdown?
- Where were the rating agencies, the regulators, Congress, indeed the IMF, etc.?
- What about the lies propagated by the chief economists and chief strategists of some major investment banks – propelled by what their gods were telling them to say?
- Now they all “authoritatively” talk of the meltdown – which makes one suspicious of just how conflicted all of this “research” is.
- In this age of the internet, it is striking just how “mental independence”, too, has vanished down the drain of cyberspace…
- How China could influence the US economy. There are two routes:
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This article has 4 comments:
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investfarm
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3 Comments
Nov 26 04:23 AMFarm owner Chris Miller said they had expected between 5,000 and 10,000 people to show up. A scheduled second day of the free gleaning was canceled because the farm had been picked clean. ``People obviously need food,'' Miller told the Rocky Mountain News.
In Lakewood, west of Denver, the Jeffco Action Center helped 5,141 people who lined up early for a Thanksgiving food box give-away, the biggest demand in 40 years.
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john s. gordon
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708 Comments
Nov 26 08:25 AM> jack
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Kunst
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774 Comments
Nov 26 10:46 PMThere is no way we can borrow enough dollars to cover all these bailouts. If we try, interest rates will skyrocket, pushing the lever on the toilet our economy is already in. No, it's time for "quantitative easing", AKA printing money. We'll pretty it up as a loan from us to us, but it's new money to replace at least some of the old money that got incinerated when the real estate and stock market bubbles popped.
You have to think the eventual result of this will be inflation, but with all the asset destruction that's already occurred, maybe not. I wonder how our creditors are going to feel about it. They still hold our debt, they still get (low) interest. If inflation doesn't occur, those dollars still have the same purchasing power. Maybe we'll get away with it. After all, if they decide they don't want to buy US treasuries any more, we'll just buy them from ourselves!
Of course, at some point, someone is going to ask why they are giving us all these goods for dollars created out of thin air. When oil stops being priced in dollars, the jig is up.
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PacificGatePost
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26 Comments
My Website
Nov 28 03:56 AMpacificgatepost.blogsp...
... back to reality and common sense, please.