Keynesian thinking at it's best. The following article "CLICK HERE" appeared on msnbc.com yesterday. Although I wouldn't usually waste your time, I do check in with Bloomberg, CNBC, MSNBC, etc from time to time, and MSNBC does a great comparison between previous quarter and current FOMC announcements... the above attachment is NOT that article. Instead, this is something I stumbled across and is what the media is feeding the masses today. Written by John Schoen, it's amazing how little someone actually has to know about economic theory today to get to have an opinion that both paid for and wide-spread, and for anyone who understands the two arguments today representing economic theory, it's worth taking a look at. I guess I bring this article up because it frustrates me. Although I am neither a scientist nor a theologian, this reminds me of the creation vs. evolution debate. Churches tell you "that's just the way it is" and school tells you "that's just the way it is."
I won't take too much time run through the whole article and point out his regurgitation's of concepts he probably is incapable of defining. I must first point out at least one point he conflicts himself on ... he points out that economic growth has slowed, yet he says that companies are having a hard time getting loans "despite healthy profits..." In this article, Schoen tells you that the reason we are having so many problems right now and the economy has faded in it's recovery is because banks and people are "saving" when they should be spending or lending. Therefore the only solution is for the Fed to dump more money into the system. No mention what-so-ever about why the savings today are taking place... the average person and certainly the average bank (I know the numbers, I get through Weiss' ratings service, every quarter now run by theStreet.com) is not increasing liquid net worth, they are trying to replace lost net worth. See a chart of the DJIA over the past 10 years and tell me we have had any semblance of actual "growth." Tell me there's someone out there why has had the "buy and hold" mentality over the past 15 years and is happy about the value of their 401(k).
My favorite paragraph in the article is the last one, although it is stupid, it gives you the understanding of what the author has been told is the ultimate authority... the policy makers... Keynesian economic theory at it's best. "Two things happen when you get into a deflationary trap. One is policy becomes totally inneffective. Second, the politics of deflation are really hard. No one agrees on what to do, because there is no optimal policy solution." Frankly, that sounds like two benefits to me, not too negatives... neither of these things are what the true dangers of a deflationary depression are, but that would take an understanding of what deflation actually is, which the author clearly does not have, but instead is just regurgitating what he has been told is bad. I'll bet you the author considers running for politics some day, as he's clearly pandering to what he reveres.
I urge you to debunk the group-think. Do your research, make your OWN decisions, ask lots of questions, and trust the Financial Advisors and Consultants who build portfolios that are flexible in asset class and grow with you over time, regardless of which market is the right market to be in, as opposed to the brokers who peddle the same asset regardless of the world around them.
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