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Thoughts From the Frontline, June 2013

“This Country Is Different”

June 30, 2013

Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works.

– John Mills, "On Credit Cycles and the Origin of Commercial Panics," 1867

Hyman Minsky developed an economics of financial instability, of instability bred by stability itself…. Minsky's approach, very different from Godley's, is conceptual rather than statistical. A key virtue is that it puts finance at the center of economic analysis,...

Austerity is a Four-Letter French Word

June 21, 2013

The France that I see as I look out from the bullet train today is far different from the France I see when I survey the economic data. Going from Marseilles to Paris, the countryside is magnificent. The farms are laid out as if by a landscape artist – this is not the hurly-burly no-nonsense look of the Texas landscape. The mountains and forests that we glide through are glorious. It is a weekend of special music all over France, and last night in Marseilles the stages were alive and the...

Economists Are (Still) Clueless

June 15, 2013

Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.

- John Maynard Keynes, A Tract on Monetary Reform

There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have insight to appreciate the incredible wonders of the...

Banzai! Banzai! Banzai!

June 8, 2013

I shot an Arrow into the air
It fell to earth I know not where….

Henry Wadsworth Longfellow

As kids, not knowing that we were being politically incorrect on so many levels, we would shout “Geronimo!” when we were playing war or getting ready to do something reckless. (For those not familiar, Geronimo was a rather fearsome Apache chief who plagued Mexico and the American cavalry.) Sam Houston and his fellows cried, “Remember the Alamo!” as they rode down upon Santa Ana at San Jacinto. The...

Central Bankers Gone Wild

June 1, 2013

When Jonathan Tepper and I wrote Endgame some two years ago, the focus was on Europe, but we clearly detailed how Japan would be the true source of global volatility and instability in just a few years. “A Bug in Search of a Windshield” was the title of the chapter on Japan. This year, I wrote in my forecast issue that 2013 would be “The Year of the Windshield.” For the last two weeks we have focused on the problems facing Japan, and such is the importance of Japan to the world economy that...