Nouriel Roubini: Brown manure, not green shoots

[Winehole23]

You assume that if things fail they recover. Sure, what goes up must come down, but does what go down necessarily have to come up?

That. Good point, Manny.

Technical analysis isn't a good predictor in an upside down market. After prices adjust to the new deflationary mean, there's no obligatory schedule for the uptick.

We're in the middle of a crash.

[Viva Las Espuelas]

That. Good point, Manny.

Technical analysis isn't a good predictor in an upside down market. After prices adjust to the new deflationary mean, there's no obligatory schedule for the uptick.

We're in the middle of a crash.

ha. that's funny. personally i thought he was channeling The Sphinx

[Winehole23]

ha. that's funny. personally i thought he was channeling The Sphinx

All he was saying is that when prices crater, recovery is not always prompt.

[MannyIsGod]

All he was saying is that when prices crater, recovery is not always prompt.

No actually what I'm saying is there are crashes you don't recover from. People assume that if we had let everything unravel with no government intervention that we would have seen some kind of recovery. Why?

[Winehole23]

No actually what I'm saying is there are crashes you don't recover from.

Don't recover from? Ever?

]People assume that if we had let everything unravel with no government intervention that we would have seen some kind of recovery. Why?

Deflation leads to price discovery and purges bad debt and malinvestment more quickly, but the social pain that accompanies a deflation spiral seems to recommend the Keynesian medicine.

While you were correct in my view to point out that recovery from deflation is not automatic, I don't really see what prompts you to rule out a recovery in advance. IMO that is just as rigid and dogmatic as what WC said.

In the deflation spiral scenario bad debt is rapidly purged and malinvested capital seeks productivity. The purchasing power of money is restored, favoring savers and investors. Once the bottom is reached, the conditions are there for recovery, even if that recovery is not automatic.

The real reason deflation is not seriously considered is that it destroys the wealth and power of political donors. Amd we couldn't have that.

[SnakeBoy]

The real reason deflation is not seriously considered is that it destroys the wealth and power of political donors.

Inflation is a much better option for them. It only seriously affects those who can least afford it.

[Viva Las Espuelas]

oh i forgot. government solves all problems. i need to write that down.

[MannyIsGod]

oh i forgot. government solves all problems. i need to write that down.

You could just send me another note to yourself, but I never said that.

Bitter Viva lives on!

[MannyIsGod]

Don't recover from? Ever?

Deflation leads to price discovery and purges bad debt and malinvestment more quickly, but the social pain that accompanies a deflation spiral seems to recommend the Keynesian medicine.

While you were correct in my view to point out that recovery from deflation is not automatic, I don't really see what prompts you to rule out a recovery in advance. IMO that is just as rigid and dogmatic as what WC said.

In the deflation spiral scenario bad debt is rapidly purged and malinvested capital seeks productivity. The purchasing power of money is restored, favoring savers and investors. Once the bottom is reached, the conditions are there for recovery, even if that recovery is not automatic.

The real reason deflation is not seriously considered is that it destroys the wealth and power of political donors. Amd we couldn't have that.

But what happens in a world where the country who is on top lets things unravel "naturally" while other countries don't? What happens when that countries standard of living is artificially high? What happens when that country falls harder than the rest and takes a much harder fall due to lack of intervention and said standard of living?

I simply dispute the notion that allowing everything to fail without any intervention was anything other than another ty option that hard far higher risk. Its justifiable to be cynical about government actions, of course. You can argue the case for intervention was made out of political fear but I can argue that the case against intervention now is made in the same way.

[Viva Las Espuelas]

You could just send me another note to yourself, but I never said that.

People assume that if we had let everything unravel with no government intervention that we would have seen some kind of recovery

hmmmmm. whatever you say..................

[MannyIsGod]

I'd be bitter too if my reading comprehension was so bad

[101A]

Hurray!

Thank goodness we gave all that money to banks to distribute to assholes who got us into this mess in the first place!

On a side note: Why do raised taxes automatically mean that the price of the product must be raised, or, as it's frequently put, "passed along to the consumer"? Why not just less profit? I know that sounds ridiculous, but surely, some company heads could realize, "Hey, I could live off 500 million a year nearly as well as I could on 400 million a year"?

Because most company heads aren't pulling in that kind of dough - most are employees of their company, and receive a salary from that company - their compensation is not "profit". Profit is what is left AFTER all expenses (including paying the owner/manager) are made by the corporation. Most companies, btw, are small businesses. My business spends 5% of its revenue on ownership compensation. If we were to take a 10% reduction in salary, that would save the business 1/10 of 5%, or 1/2 of 1% of revenue. Insignificant. Even cutting our salaries completely only nets a 5% savings for the business.

For example, last year Texas implemented a new style Corporate Franchise tax - essentially without calling it one, Texas implemented a corporate income tax. With the new calculation, the tax increased (no ) 3200%. Now, that corresponded to about 15% of ownership's annual salary. Our jobs didn't change - and we don't make a ridiculous income to begin with (in fact I have an employee that makes MORE than I do - and another that makes as much) - so why should I take a 15% pay cut? We raised our fees to our clients (who were also all in Texas, who ALSO had paid increased franchise taxes - so they passed our increase ALONG with their increased tax load along to THEIR clients - or if they are in an industry that has no room for increased fees; had to find other ways to cover the expense - lower salaries/fewer hours/layoffs, etc....

[LnGrrrR]

Because most company heads aren't pulling in that kind of dough - most are employees of their company, and receive a salary from that company - their compensation is not "profit". Profit is what is left AFTER all expenses (including paying the owner/manager) are made by the corporation. Most companies, btw, are small businesses. My business spends 5% of its revenue on ownership compensation. If we were to take a 10% reduction in salary, that would save the business 1/10 of 5%, or 1/2 of 1% of revenue. Insignificant. Even cutting our salaries completely only nets a 5% savings for the business.

For example, last year Texas implemented a new style Corporate Franchise tax - essentially without calling it one, Texas implemented a corporate income tax. With the new calculation, the tax increased (no ) 3200%. Now, that corresponded to about 15% of ownership's annual salary. Our jobs didn't change - and we don't make a ridiculous income to begin with (in fact I have an employee that makes MORE than I do - and another that makes as much) - so why should I take a 15% pay cut? We raised our fees to our clients (who were also all in Texas, who ALSO had paid increased franchise taxes - so they passed our increase ALONG with their increased tax load along to THEIR clients - or if they are in an industry that has no room for increased fees; had to find other ways to cover the expense - lower salaries/fewer hours/layoffs, etc....

Thanks for the great points 101A. You are right that many times, small businesses just make enough to make it worthwhile. I appreciate your real-world experience and fair-mindedness on this board, as well as your ability to speak with logic and facts.