About a Half Paradigm

[Raz]

I've developed a habit of reading Doug Noland and found this piece to be most interesting.
He seems to be touching upon some of EJ's thoughts in The Shrinking Pie.

PS. When you take the hyperlink scroll down near the bottom of the article to begin reading.



About a Half Paradigm:

Doug Noland - November 4, 2009

There were key developments this week providing added confirmation to my macro thesis. First of all, this morning’s dismal payroll data (10.2% unemployment!) - after a year of unprecedented fiscal and monetary stimulus - confirm the depth of structural impairment overhanging U.S. recovery. Our economy is badly lagging the globe’s rebound.

Over some months, I have worked to construct a framework for analyzing the unfolding global reflation. I’ve been expecting this reflation to unfold with altogether different dynamics than previous reflationary periods. After watching developments, I am willing to go so far as to argue that we are witnessing a historic Paradigm Shift. The most robust Credit dynamics have shifted from the “Core” (U.S.) to the “Periphery” – with major ramifications. This atypical global reflationary backdrop is dictated by the emergence of a Global Government Finance Bubble and dynamics that support powerful financial flows to non-U.S. markets and economies.

Previous bouts of reflation were powered primarily by Wall Street Credit - specifically mortgage finance, securitizations and speculative leveraging. From an economic perspective, U.S. housing, consumption and the Credit/asset-inflation/consumption-based U.S. Bubble economy were at reflation’s heated epicenter. From the perspective of global speculative financial flows, dollar-denominated securities markets were consistently and predictably the asset market demonstrating the most robust inflationary biases (global financial players had to participate).

Like clockwork, systemic stress would eventually provoke the activist Federal Reserve into slashing rates, inciting higher (dollar) securities prices, and promoting speculative leveraging. This incredible mechanism would immediately inject cheap liquidity directly into U.S. housing and, only somewhat delayed, throughout the general economy. The vulnerable dollar persevered through the generosity of global flows attracted to the inflationary biases percolating throughout U.S. securities and asset markets (with the Fed and GSEs acting as powerful market liquidity backstops). ...

http://www.prudentbear.com/index.php...w?art_id=10306

[Raz]

Re: About a Half Paradigm

Well, apparently I was the only iTuliper who found this article interesting.

In The Shrinking Pie EJ said that we most likely wouldn't have another banking crisis because the Fed has taken the bank's garbage onto its balance sheet, and so has the Treasury.

Noland said much the same thing, and while being unsure of the timing ("It is not clear to me whether it will unfold over months or years") he said the next crisis would erupt as soon as the Fed loses control over market yields.

Raz believes that if (when) the U.S. Dollar Index makes a weekly close below 70.00 the Fed will have lost control. That is when the Bond Market is going to wake up and smell the coffee. :eek:

[swannmex]

Re: About a Half Paradigm

FWIW, I have been reading Doug Noland for years. He is without a doubt one of the top analysts writing about macro economics and the credit bubble.

I never posted any of his stuff here because I assume anyone who is reading EJ's work is also reading Doug Noland. If they are not, they should be.

Thanks and good luck.

[Penguin]

Re: About a Half Paradigm

I read him as well. His articles have added a lot to my understanding of how the global economy is responding to this mess. He has been right on a whole lot and he has adapted early and well when he hasn't been.

But posting him was a good thing. May be some folks out there who aren't familiar with him.

Will

[FRED]

Re: About a Half Paradigm

I read him as well. His articles have added a lot to my understanding of how the global economy is responding to this mess. He has been right on a whole lot and he has adapted early and well when he hasn't been.

But posting him was a good thing. May be some folks out there who aren't familiar with him.

Will

We are fans of Noland and quote his material from time to time. He's excellent and original.

[ThePythonicCow]

Re: About a Half Paradigm

We are fans of Noland and quote his material from time to time. He's excellent and original.

Ah -- I see the key to reading Doug is to read his closing comments first. I've usually started reading from the top down, and quickly decided that the recitation of dry numbers with which he usually opens was too much effort to read. But his closing comments are much better reading.

[Chomsky]

Re: About a Half Paradigm

Ah -- I see the key to reading Doug is to read is closing comments first. I've usually started reading from the top down, and quickly decided that the recitation of dry numbers with which he usually opens was too much effort to read. But his closing comments are much better readnig.

Always. Well, except on the occasions when he omits any concluding commentary.

[ASH]

Re: About a Half Paradigm

Well, apparently I was the only iTuliperwho found this article interesting.

I never posted any of his stuff here because I assume anyone who is reading EJ's work is also reading Doug Noland. If they are not, they should be.

But posting him was a good thing. May be some folks out there who aren't familiar with him.

Thanks for posting this, Raz, and thanks to everyone else who recommended Noland. As Penguin surmised, not everyone is familiar with him, and I thank you for bringing him to my attention. (I have had less time to read or post on iTulip recently, and I'm glad this article didn't slip by unnoticed.)

[Prazak]

Re: About a Half Paradigm

I'm an avid reader of his Friday column as well, leaping straight toward the last entry where he presents his ideas.

This bit in last week's column seems to imply divergent conclusions to iTulip with respect to the Bubble with Chinese Characteristics:

""Of late, there’s some loud clamoring with respect to the dollar carry trade and global asset Bubbles. Little doubt the “carry trade” (borrowing at low rates in the U.S. to play higher-yielding assets globally) is a meaningful source of global liquidity, although it should not be overstated in the context of rapid synchronized Periphery Credit growth. And, clearly, speculative excess has found its way to “developing markets” (some years ago I would write “liquidity loves inflation” to describe how financial flows inherently gravitate toward the inflating asset classes). But I would stress that a reasonable portion of this year’s spectacular market gains are associated with a fundamentally-based revaluation of Periphery and commodity-based assets. There’s more to this year’s global market moves than mindless buying of risk assets and Bubble excess. Furthermore, I believe the Core-to-Periphery Dynamic is a secular trend that will prove less vulnerable to bursting Bubbles than others would contend.""

It would be interesting to have EJ interview Mr Noland. No doubt there would be much overlap. But it would be particularly instructive on those points where there are significant absences of accord.