“Krugman’s view… a deflationary depression.” By David Rosenberg

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Subject:	FWC: "Krugman's view… a deflationary depression." By David Rosenberg
Date:	Mon, 28 Jun 2010 08:15:36 -0700
From:	Jas Jain <jas_jain@hotmail.com>

"...Krugman's view on what this cycle is all about is right on the mark: a deflationary depression."

Didn't some crank warn about the fact that this cycle must end in deflationary depression? Some born-and-bred American dopes tried to educate me on the theory that "any central banker worth his salt can avoid deflation." Krooksman is one of those born-and-bred American dopes that believe that govt intervention, including the Fed, could always forestall a depression by pushing more debt. These idiotic theories would be proven wrong once again, soon, except that these neo-Keynesian crooks would get no more chances to prove their theories if properly applied as per their current pope, Mr. Krooksman. The whole system of the moneyed crooks, debt pushers whom Mr. Krooksman serves, would be toppled. Enjoy while the system of democracy and the rule of the moneyed crooks lasts in America and India, because it ain't going to be there in another 10-20 years. We are definitely living thru a critical phase in the world order. The order dominated by Europeans for the past 300 years, or so, would come to an end. The moneyed crooks were behind-the-scene operators of the Anglo-American Empire, an empire that is ripe for collapse. And India is very much a consequence of that empire.

Jas

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David Rosenberg; 06/28/10:

""THE THIRD DEPRESSION" -- That is the title of today's spirited column by Paul Krugman in the NYT's editorial section. His arguments can be debated as we are sure the entire Austrian school (along with Robert Barro) would take him to task on the efficacy of even more government intrusion at this point. However, Krugman's view on what this cycle is all about is right on the mark: a deflationary depression. In our view, the best medicine from governments is to prevent credit bubbles from occurring in the first place – it's not as if the U.S. didn't have warning signs once Fannie and Freddie morphed into de facto hedge funds. In any event, here are some snippets from the Krugman piece that the perma-bulls should consider (especially with the consensus still north of $96 on 2011 EPS projections):

"Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as "depressions" at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31."

"We are now, I fear, in the early stages of a third depression ... primarily by a failure of policy."

"There is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners' medicine."

"The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won't authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels."

"In the face of this grim picture, you might have expected policy makers to realize that they haven't yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy."

"... both the United States and Europe are well on their way toward Japan-style deflationary traps."

Monday, June 28, 2010: Bob Brinker Market Outlook + 5 Root Causes of a Bear Market

Bob Brinker remains bullish on the stock market and views any short-term weakness as a health-restoring event. Brinker's advice for new stock market money is to dollar cost average into the market and, if possible, to take advantage of the volatility that brings lower prices.