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A brief philosophical argument about the role of government, stimulus and recession

A brief philosophical argument about the role of government, stimulus and recession

I was chatting with Marshall Auerback about some of my recent posts on Keynesianism and Austrian Economics — Marshall is a Keynesian — and he convinced me that my posts were somewhat misleading and that I had only presented half of the argument for stimulus. This led me to thinking about the role of government, stimulus and recession which I felt compelled to present here.

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Nouriel Roubini: Will massive stimulus ward off stag-deflation?

I am certainly of the view that a considerable worsening of the recession is baked in the cake for 2009. But will fiscal and monetary stimulus prevent worst case scenarios? I certainly hope so, as I have laid out in recent posts. But, don’t take my word for it. The RGE Monitor headed by Nouriel Roubini, the omni-present Professor of […]

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Distraction of the day: “The Reader” with Kate Winslet

December is a big month for Hollywood as some of the biggest and most critically acclaimed movies come out in December. One such movie is “The Reader” starring Kate Winslet. I am a big fan, so I thought I’d provide you with a little distraction from the usual fare of dismal economic news with a short clip from the film.

Enjoy.

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Pre-market update: 2008-12-12

Pre-market update: 2008-12-12

Pre-market trading is not looking good. Everyone is pointing to the auto bailout failure as the cause. If you’re in treasuries, you are very happy because yet again the flight to lunacy continues as equity markets sell off.

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What does Mises say about trying to stimulate the economy out of recession

Recently I wrote a post which claimed that Keynesian stimulus is what we need in the global economy right now. These ideas are considered heresy in Austrian School circles because trying to stimulate the economy out of recession only puts off the day of reckoning and often worsens that day of reckoning. This is exactly what we saw when Alan Greenspan lowered interest rates to 1% after the last recession.

So what exactly does Ludwig von Mises, the most revered Austrian School economist, say about this?

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Jamie Dimon: November was terrible, December is terrible

Jamie Dimon: November was terrible, December is terrible

Jamie Dimon tells it like it is. When asked by CNBC’s Erin Burnett’s how business is going, Dimon replied “terrible.” Here’s how Reuters describes his comments: “November itself has been a terrible trading month … (and) December so far is pretty terrible,” Jamie Dimon told CNBC. “It will be a tough quarter.” Dimon said he was referring to the trading, loans and mortgage segments of the largest U.S. bank.

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An Icelandic post-mortem

The Economist does a very good post-mortem on Iceland and its spectacular collapse with a number of lessons for other countries, especially those with oversized financial sectors like Ireland, Switzerland and the U.K.  Below is a snippet from their article which I highlight because it also demonstrates the real risk of social unrest due to economic collapse. Atop a hill […]

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Links: 2008-12-11

The big news today (at least in my mind) is the outsized jobless claims number of 573,000. This number confirms the view that the employment situation is worsening quite rapidly. I think we could see 7.2% unemployment next month given numbers of this magnitude. In other news, a huge row is developing in Europe over whether Keynesian spending is a […]

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Quote of the day: William White and inflation

Caroline Baum had a good column today at Bloomberg in which she suggests central banks consider asset prices in monetary policy going forward. In the piece she quoted William White, a former economist from the Bank for International Settlements. He said: “The most calamitous downturns were not preceded by any degree of inflation. There was no inflation in 1873-74, in […]

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U.S. unemployment claims hit a 26-year high of 573,000

U.S. unemployment claims hit a 26-year high of 573,000

Weekly jobless claims rose in the U.S. to the highest level since 1982, signaling a further deterioration in the U.S. employment market. The seasonally-adjusted number for initial claims was 573,000 while the real number was an eye-popping 757,481. Meanwhile continuing claims surged to 4.4 million, up 338,000 in one week alone. In the reporting of these numbers, I have yet to see anyone realize this is the largest weekly increase in jobless ever. Only one data point from November 1974 matches this weekly surge in continuing unemployment claims and the data series goes back to 1967.

Granted, there are significant data challenges during the holiday season due to seasonal adjustments, but there is no way to spin this data.They are grim. Expect some serious job losses when the December unemployment report comes out in early January.

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Level Three Assets: banks are hiding the ball on credit writedowns

Yves Smith has a good post over at Naked Capitalism that brings attention to the fact that banks are hiding potential losses in Level Three assets. Ultimately, these losses are going to have to be recorded and that means more credit writedowns and a larger bailout for the financial services sector. You have been warned.

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Sweden: competitive auto bailouts begin with Saab and Volvo

Yesterday, I mentioned an article I caught in the German newspaper Die Welt which outlined the desire for VW and Daimler Benz to receive bailouts in response to the state aid being offered to American car makers. I warned that a competitve bailout situation was underway. Now, this competition has spread to Sweden, where the Swedish government has introduced a bailout package for its auto makers Saab and Volvo.

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