Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

[metalman]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

And I did note that above as well as touched on it in The Great Depression parallels... busted thread:


...



Not only that, but using April 2008 is even further after the current stock market peak and current official recession start date (and in the other direction) that June 1929 is ahead of the actual start of the Great Depression.


It still seems quite misleading to me, and significantly skews all the charts.

How many have read that article and all the references and links to it on other sites, and don't realize that most of the charts are not aligned with either the start of the Great Depression or the current recession?

ok if i send your version to Barry Eichengreen & Kevin H. O’Rourke? i'd like to hear what they say.

[whitetower]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

I remember studying Eichengreen in my doctoral program in Intl Relations back in the mid-90s. He's in the camp of the Great-Depression-could-have-been-avoided-by-looser-money/credit-policies. The chief culprit for the Great Depression being "Great": lingering attachments to the gold standard.

He was also a bigwig advisor to the IMF in the late 90s if I recall. He's basically a monetarist, although sometimes it's hard to tell the difference between them and Keynesians in that they both want to throw money at the "problem" of recession.

(Check out this recent article by Eichengreen -- is he a monetarist or Keynesian?)

Going back to E.J.'s and iTulip's main point: there has never truly been "deflation" since the Great Depression, due to the influence of economists and international trade theorists like Eichengreen.

Bizarrely however, inflation/hyperinflation is essentially thought as a "normal" and welcome condition to these modern theories of political economy.

[metalman]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

I remember studying Eichengreen in my doctoral program in Intl Relations back in the mid-90s. He's in the camp of the Great-Depression-could-have-been-avoided-by-looser-money/credit-policies. The chief culprit for the Great Depression being "Great": lingering attachments to the gold standard.

He was also a bigwig advisor to the IMF in the late 90s if I recall. He's basically a monetarist, although sometimes it's hard to tell the difference between them and Keynesians in that they both want to throw money at the "problem" of recession.

(Check out this recent article by Eichengreen -- is he a monetarist or Keynesian?)

Going back to E.J.'s and iTulip's main point: there has never truly been "deflation" since the Great Depression, due to the influence of economists and international trade theorists like Eichengreen.

Bizarrely however, inflation/hyperinflation is essentially thought as a "normal" and welcome condition to these modern theories of political economy.

you can always tell a fire economy economist but you can't tell him much...

he's clearly identified by what he cannot see... asset price inflation (what bubble?)... only wage price inflation.

asset price inflation good, wage price inflation bad.

who benefits from one not the other?

pure politics.

[Mega]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

YYYYEEESSSSSS...................
Enough of all this twoddle.............Mega require a bit of guide-ance on how to get a Hot Bitch & Fast car sort of a thing.......????

The Next Bubble will be?

I honesty don't know, but i bet that Goldman & J P Morgan are trying to "Magic" one up right now. I guess that Atomic power will from 2011 start to gather pace.

Mike

[bart]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

ok if i send your version to Barry Eichengreen & Kevin H. O’Rourke? i'd like to hear what they say.

Send them here if you like:
The Great Depression tight parallels... busted (v 2.0)
It's still a work in progress but there's changes to my original article and a new chart, as well as commentary on their article and charts.

I still maintain that its quite misleading, especially for the average person.

I've seen multiple conclusions on the 'net like "It’s a Depression alright" which in my opinion can be quite a dangerous conclusion to make especially given things like the US industrial production index having dropped 53% during the Great Depression... and 48% in the mid 1970s recession.


And *many* thanks to all that commented on my charts & work, it does help.

It can get quite frustrating at times to try and cleanly and clearly get a point or points across, especially when I see how things are misinterpreted (*cough, cough*) on various blogs via incoming emails to me, etc.

[bart]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

i would also point out that the money supply charts are of different forms- yours a rate of change chart, theirs a chart of money supply size itself. you'd need to take the first derivative of their chart, then align the start dates to see if there's any difference at all. if so, that would mean that someone has wrong, or at least wrongly labeled data.

From the data and understanding that I do have about world money supply history, I believe that their data is generally correct.

But its misleading, partially because it starts in 1925 instead of 1929, partially because its yearly and partially because the data from current day is not current.

As far as the chart style (change rate vs. a level), my chart could be off a bit since I visually estimated their data points, but if you look at my actual line shape and extend the scale in your mind I think you'll see that it comes quite close to matching theirs.

I also chose to go with change rates since that's my convention, and I also already had the current data in that format.

[bart]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

Points taken on the start dates for the data. However, we stand by the point that we make with the global money markets and fiscal spending charts and want to make sure that readers don't miss that point in the data minutia.

In the first year of this debt deflation crisis versus in 1930 governments are spending vastly more money more quickly to try to spend their way out of one kind of trouble, and in our opinion into another kind of trouble. In the final quarter of 2008 and first quarter of 2009 alone governments spent $2.2 trillion on fiscal stimulus as GDP fell. This level of deficit spending dwarfs any that occurred during The Great Depression.

Very much agreed Fred (as my own comparison chart show in the new The Great Depression tight parallels... busted (v 2.0) thread), and sorry for diverting the thread into relative minutia.

Hopefully the side points will move into that thread instead of confusing this one, which overall is one of iTulip's best in my opinion.

Truly excellent work on Argentina, and my own data confirms the iTulip data/chart on China.

Safe to say that is not going to happen--we'll get more stimulus spending before it does. :eek:

As for the global money supply, again the philosophy and practice today are quite different than in the early 1930s. Compare interest rates in major countries in 1930 versus today and you'll see what I mean. That said, it's not strictly relevant to our point; what matters is not the global money supply but the difficulty that the U.S. is having expanding broad money, as your excellent M3 chart shows.

There's virtually no doubt in my mind about more stimulus ahead, and not just in the US... like the $600 billion move by the ECB last week.

Thanks for the atta-boy on my M3, and I also should remind you about MZM and that it tracks M3 reasonably well - or vice versa.




Apologies again for the diversion, I went a bit over the top with my d posts due to concerns about misinterpretations on those depression charts.

[bart]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

Bart, Thank you for the charts.

I have to ask:

you seem to be making a MAJOR implication as to what it would MEAN if the start of the derpression is misaligned.

Could you please (for me, since I'm a simpleton) explicitly state what the implication is? It looks to be a big one, and I'm missing it, so I have to ask, because I want to CLEARLY UNDERSTAND what you are saying.

Thank you.

How about an analogy?
A friend tells you something that he did in the past that's distasteful at best and you think it was 2 years ago, but it turns out later that it was 20 years ago. My point is that your opinion of him or her would be quite different after you found out that it was *actually* 20 years ago.

It's also, more specifically, an issue of using a yardstick that you thought was one thing (the start of the Great Depression) but turned out to be something else (the peak of industrial production). The conclusions drawn would likely be quite different.

Even more specifically, the world money supply in my current chart shows as having dropped *much* more now than during the comparable period in the 1930s. And the added note ("neither credit nor government debt is included in the data.") is intended as a warning that neither period include either credit or government debt, both of which are huge factors. In other words and as EJ's article covers quite well, take as many factors of the whole picture into account as possible.

I also want to stress that its not so much that the other charts were wrong (and I likely over reacted since I handle so many emails, conversations and forum posts where folk have been inadvertently misled - and it does get to me sometimes) as it is that partial or incomplete or wrongly understood charts can be worse than none at all.

[Wiley]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

Is there data to support the "bubble" in Argentina's economy pre-crisis. What is the comparison to our bubble in consumption/debt, money expansion, etc?

It would seem that our would be larger by orders of magnitude and what does that portend for the outcome if we follow their path?

[bart]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

This may help some.

[FRED]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

Two additional charts from an analysis we did in 2007 on the first Argentine hyperinflation in the early 1990s:

The peso was managed via a currency board starting in 1989
following the hyperinflation as part of the stabilization program.
Inflation fell from over 50% to near zero starting in 1985
before climbing to the above 20% before rising in an
out-of-control hyperinflation.


Close up of the inflation event from 1988 to 1989

[d_limiter]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

And *many* thanks to all that commented on my charts & work, it does help.

I just want to add to the chorus - thanks for the additional explanation and charts. I feel I can just barely follow main points EJ makes, and so I really rely on commentary from you and others to help me understand the implications.

[Jay]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

Even more specifically, the world money supply in my current chart shows as having dropped *much* more now than during the comparable period in the 1930s. And the added note ("neither credit nor government debt is included in the data.") is intended as a warning that neither period include either credit or government debt, both of which are huge factors.

This bears on a point that I have been ruminating over: even though the dollar is a piece of crap, since world trade and world financial transactions are primarily denominated in the dollar, which is now hard to come by (artificially?), does that mean it has a natural floor? At least until the various and sundry weaker powers of the world, who look to be constantly playing catchup, can wean the world off the greenback? It looks to me that the Fed and the Treasury might still have a few tricks up their sleeves.

[FRED]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

In the Argentina vs USA article last we asked:

Terminal Velocity of Unemployment: 6 million?

Today we get our answer: No. Total unemployed since the start of the FIRE Economy Depression now stands at 7,300,000.

The trend is still rising.

[bart]

Re: Does USA 2009 = Argentina 2001? Part I: Falling economy reaches terminal velocity - Eric Janszen

This bears on a point that I have been ruminating over: even though the dollar is a piece of crap, since world trade and world financial transactions are primarily denominated in the dollar, which is now hard to come by (artificially?), does that mean it has a natural floor? At least until the various and sundry weaker powers of the world, who look to be constantly playing catchup, can wean the world off the greenback? It looks to me that the Fed and the Treasury might still have a few tricks up their sleeves.

Tough question since its based so much on sentiment & opinion... but basically I don't think any currency these days has a "natural floor".

No question that the world's major central banks have many more tricks up their sleeves - for all I know, we could see something like the Plaza Accord in 1985 in the future. I also don't think that things like the SDR will have less importance as the months & years go by and also think it likely that other currencies will be added to the SDR around the end of this year

My basic take is that the major currencies take turns depreciating against each other, which masks that they're all losing purchasing power. It's misdirection in a way for one to be focused on the movements of one currency or currency group against another.





And on the basic Argentina parallel, here's a general picture of velocity there from 1990-2005.