A priest, a rabbi, and an atheist walk into a bar…
Various Notes Of The Fisc
Arnold Kling doesn’t like Scott Sumner’s argument that re-inflating money (by dropping interest payments on reserve holdings and quantitative easing) will get us out of our current economic problems. To me, it would seem that Sumner’s plan would be to bring us right back into another bubble. At least wait for the current cycle to end before starting a new one, guys…
Speaking of Kling, he is very pessimistic on index funds at the moment, stating that many of the stocks in a standard fund won’t be around, so he thinks he can beat the market over a medium-term horizon (10 years). I wouldn’t go that far, personally. I probably would stay out of the Dow Jones and S&P 500 funds, but would jump into broader market funds and hedge with gold. Oil futures might also be a good buy, given that the price is so low. For the big-depression side of things, though, I’d go with municipal bonds, as high-grade corporate bonds wouldn’t get you much more in terms of interest after you factor in the tax incentives, and if you’re going to go, you may as well go whole-hog.
While we’re in a recession, we might as well jump right into full-blown, 10-year depression, right? So it’s a good thing that the Obama administration is pushing cap-and-trade, with long-term goals of carbon output at 1700s levels. On top of that, card check gets worse by the day. If these two things pass, I’m definitely turning bearish on any recovery in the next 4 years (right now, I’m moderately bullish on 2 years).
Just a quick reminder: the New Deal didn’t end the Great Depression. World War II didn’t end the Great Depression. Only post-war prosperity, a loosening of regulations (with Germany being the best example of this), and a continent in desperate need of imports and a United States moving toward free trade ended the Great Depression.