Paul Murray's weblog, with news you may have missed and my $0.02 worth on a number of topics.
"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it."
I bet you don't have a friend who's an acupuncturist
E-mail me: pmurray [at] despammed.com
Tuesday, May 09, 2006
Bill Gross: GM is the canary in the coal mine. Bond king Bill Gross says that "General Motors is a canary in this country's economic coal mine; a forerunner for what's to come for the broader economy. Their mistakes have resembled this nation's mistakes; their problems will be our future problems." And he grimly predicts that our solutions will analogous to theirs, which will affect everyone, including investors (emphasis in the original):
Owners of these liabilities (either existing/future debt holders, or tax paying corporations/citizens) will likely be the sacrificial lambs of the future. Investors, therefore, should factor in an increasing propensity for higher inflation in future years as debt principal is eroded much like the shaved edges of a Roman coin. Higher taxes, as well, are just around the corner. Finally, currency devaluation effected through a low Fed Funds policy vs. competitor nations and/or global policy coordination should apply the coup de grace for foreign holders of U.S. liabilities. Chinese, Japanese, OPEC, and other substantive holders of U.S. Treasuries will have two ways to lose in future years: they will watch U.S. inflation erode their principal and on top of that the real dollar value of their global purchasing power will decline as the dollar sinks. Actually, the same applies to U.S. citizens although the decline in global purchasing power can be masked by domestic asset appreciation in the short-term (houses, stocks).
Monday, May 08, 2006
So much for "starving the beast." For more than two decades, the GOP has argued that cutting taxes will force the government to rein in spending. Well, guess what? Not only is this not true, but the opposite is true -- government spending actually increases when taxes are cut. From Sebastian Mallaby in today's Washington Post:
Everybody knows that the Reagan tax cuts did not actually cause spending to come down in the 1980s; most people have surely noticed that the Bush I and Clinton tax hikes were followed by spending constraint in the 1990s; and the Bush II tax cuts certainly have not stopped Congress from spending like a drunken sailor recently. But then the plural of anecdote is not data, and until the starve-the-beast theory is conclusively discredited, tax cutters won't stop hiding behind it.