ECB: Slaves of defunct economists. A self-professed Keynesian who, refreshingly, does not sound completely mad.
For example, some recent suggestions have gone to the extreme of advising monetary policy to target a higher rate of inflation than what central banks currently do, so as to create more room for manoeuvre for monetary policy to react when bubbles burst without prematurely hitting the zero lower bound for interest rates. It’s as if to say that the main problem with monetary policy in the recent past was that the so-called Greenspan put had not been potent enough to avoid the negative consequences of the bursting of the bubble, rather than being a mistaken policy which fuelled the bubble in the first place. “Errare humanum est, perseverare diabolicum!”
I believe the actions and policies were unsustainable because they were aiming at an objective which was not sustainable. At the heart of the wrong decisions that were made in the past, and which led to the crisis, was the expectation that the increase in prosperity experienced by our societies in previous decades would simply continue, unaffected by the ongoing integration of emerging market countries into the global system
Too bad nobody’s listening. (Thanks jck.)
How to handle the sovereign debt explosion, by Bill Gross’s co-CIO.
This leads to the sixth and final point. We should expect (rather than be surprised by) damaging recognition lags in both the public and private sectors. Playbooks are not readily available when it comes to new systemic themes. This leads many to revert to backward-looking analytical models, the thrust of which is essentially to assume away the relevance of the new systemic phenomena.
I assume he’s trying to say sell stocks and buy bonds.
Hugh Hendry: We hedge fund managers are on your side. We are overdue for a Hendry appearance on Squawk Box Europe. We might have to wait for the S&P to hit triple digits, though.
Joe Wiesenthal on the Keiser Report. Fun stuff.