Mea Culpa: Why I Was Wrong on Interest Rates

In December 2007, I wrote an article titled "The Impending Destruction of the U.S. Economy." It was one of the more popular articles I've written for The Motley Fool. Readers cheered along with its message. It received almost no pushback or rebuttals -- a rarity. I still get the occasional laudatory email to this day.

And it was almost entirely wrong.

The article was straightforward: The economy was buried in debt, and the chicken was coming home to roost. That part was right, and late 2007 indeed marked the beginning of a debt-fueled recession that lingers today.

But here's what I anticipated would ignite the mayhem:

How do we keep our foreign investors happy? With a rapidly depreciating currency, there is but one way to keep them enticed: higher interest rates. You heard it: higher interest rates. With the housing and credit markets swimming in turmoil, the idea of higher interest rates sends shivers down the backs of homeowners facing foreclosure.

Bah. The day I wrote the article, a 30-year mortgage cost 6.4%. Today, the same loan runs at around 4%. Short-term interest rates were 4.5% back then. Today, they're 0.07%. Far from rapidly depreciating, the U.S. Dollar Index went on to surge to multiyear highs, and is roughly unchanged four years later.

It was a good example of how you can be right for the wrong reason. Or wrong, in other words.

What happened? Looking back, a few points stick out.

Few saw the recession coming. Even fewer predicted what would happen.
As obvious as the bust of 2008 is in hindsight, very few people saw it coming before, say, 2007. Of those who did, almost none foresaw exactly what would cause the devastation.

Take Peter Schiff. Schiff is widely recognized as one of the few who saw the recession coming before anyone else, bearish before it was fashionable. There's a great video on YouTube of Schiff making the rounds on cable news circa 2006 being mocked as a Chicken Little as he warns of impending trouble. "This is going to be an enormous credit crunch. The party is over for the United States. We cannot continue borrowing to live beyond our means," Schiff warned to audible giggles from other guests in the background. "I don't believe any of it whatsoever," economist Art Laffer responds, laughing.

Schiff got it right. He deserves credit. But was he right for the right reason? That's harder to say. Consider his more detailed predictions, like this one in 2002:

As the dollar falls, you're going to have significant flows out of U.S. financial assets from all around the world. And that is going to send interest rates through the roof. And when that happens, this whole consumer-led, borrow-and-spend economy is going to come tumbling down.

My prediction for the Nasdaq is that it's going to fall to around 500. Right now, it's about 1,700. It's got a long way to go down. The Dow Jones is still above 10,000. It's probably going to fall to between 2,000 and 4,000. But it might go below 2,000.

And in 2007, from The New York Times:

Given the state of the U.S. economy, Schiff said, the dollar could continue to fall in the coming years against the euro to $2.50 or even $3. [By 2010, it rallied to $1.19.]                                                         

And 2008:

We could see … $150 to $200 [per barrel of oil] next year ... At a minimum, the dollar will lose another forty to fifty percent of its value. I'm confident by next year we'll see more aggressive movements to abandon the dollar by the Gulf region and by the Asian bloc. [Oil fell to $33 a barrel a few months later, and the dollar rallied to a multiyear high.]

Schiff knew things would end badly. He knew this before most. But he, like myself, misread what would actually push the economy over the ledge. It wasn't hyperinflation and higher interest rates. It was deflation followed by record-low interest rates that would define the recession.

If there's one lesson I took away from this, it's that the more precise a forecast is, the greater the odds are that it will be wrong. Predicting that a debt-fueled economy will end badly is one thing. Claiming to know exactly what's going to happen next is another -- and one that far too many fall for.

The U.S. really is the world's sanctuary
In the early days of the crisis, people looked at how bad America's problems were and assumed they'd be safer somewhere else. The dollar looks bad, so buy the euro, they said. Load up on Chinese stocks. Consider emerging-market bonds. Anything but America and its doomed dollar.

What many (including me) underestimated was that every major nation, not just the U.S., had big problems. Yes, the U.S. runs big budget deficits, but have you seen how the Europeans treat their public finances? Sure, the U.S. has a dysfunctional and inefficient political system, but have you read about China? "If the U.S.'s political situation looks bleak, consider [the] alternative," Ian Bremmer recently wrote. "Our stable government is why foreign investors continue to flood into the dollar." Strength is relative, not absolute, in a global economy, and the U.S. is relatively strong. We are the skinniest kid at fat camp, so to speak.

The implications of that are huge. When hedge funds want safety, they seek dollars. When banks want safety, they seek dollars. Central banks, whether they like it or not, need dollars. Whether you think that's good or not doesn't make it less true. At the peak of every bout of panic over the past three years has been an insatiable, almost manic demand for dollars. That's kept our interest rates at historic lows.

Perhaps counterintuitively, it might continue until there's less, not more, global instability. We really are the world's sanctuary.

Everyone believes it; most will be wrong
I mentioned that my call for higher interest rates received almost no rebuttals or pushback. In hindsight, that should have been a giveaway that I was wrong.

It was so easy in 2007 to say, "the dollar is doomed, interest rates will surge, the rest of the world is going to abandon us." Virtually every talking head on TV was making the same call. It seemed so obvious; so guaranteed to happen. That alone should have given me pause. It was the classic safety-in-numbers, follow-the-lemmings analysis that is almost always wrong.

Phil Tetlock, a U.C. Berkeley professor who has spent his career studying how and why people make bad forecasts, has some advice I try to remember now: "Listen to yourself talk to yourself," he says. "If you're being swept away with enthusiasm for some particular course of action, take a deep breath and ask: Can I see anything wrong with this? And if you can't, start worrying; you are about to go over a cliff."

Which is what I did with my prediction -- went over a cliff. I'm sorry. I've learned from my mistake. Hopefully you can, too.

If you haven't already, check out my latest book, Everyone Believes It; Most Will Be Wrong for your Kindle or iPad. It's one of the best-selling investment books on Amazon's Kindle bookstore, and it can be yours for less than a buck.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel doesn't own shares of any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On November 25, 2011, at 1:19 PM, DJDynamicNC wrote:

    "Listen to yourself talk to yourself. If you're being swept away with enthusiasm for some particular course of action, take a deep breath and ask: Can I see anything wrong with this? And if you can't, start worrying; you are about to go over a cliff."

    That is excellent advice.

    As I go through life, I am going to be wrong, and often. Just like everybody else. It's good to keep that in mind.

  • Report this Comment On November 25, 2011, at 5:03 PM, xetn wrote:

    The center bank (Federal Reserve) doesn't need dollars; it creates them out of thin air any time it wishes with the click of a mouse. Since late 2008 it has created several trillion of those dollars with a large part of them going to the EU.

    And the users of those dollars have been subsidizing all the bailouts, both with tax money and a decreasing purchasing power of the dollar.

    The Fed is a central planner and would make any socialist very proud.

  • Report this Comment On November 25, 2011, at 7:33 PM, Shawnerz wrote:

    Morgan:That's one heck of a masochistic rant. ;) Don't be so hard on yourself. No one is perfect and everyone makes mistakes.

    Your insite and and other explainations of other event far make up for this oversite.

    And to everyone else: "Yay for the United States: We suck the least!"

  • Report this Comment On November 25, 2011, at 11:01 PM, skypilot2005 wrote:

    +rec

    Great "lesson".

    Superior management consultants agree with you.

    re.: In situations where a diverse group of people all agree on a complicated topic / course of action, it is best to "table it" and come back to discuss it at a later date. Depending on the urgency, that could be the next day, week or month.

    So Morgan, how long will the dollar be a "sanctuary"?

    I was absolutely with your view in 07' Still am, today. We know why we were wrong. But, that doesn't change the premise forever.

    I feel the dollar is going lower with all major currencies except for possibly, the Swiss franc.

    Do we set back and wait? No.

    I am investing in hard assets such as precious metals and their miners. It is a prudent action given the circumstances.

    I vividly remember the 70s......

    Thanks, for the article.

    Sky Pilot

  • Report this Comment On November 26, 2011, at 5:26 AM, CaptainWidget wrote:

    I don't get it? Why are you recanting? Because the economy is doing so great now??? Just because what you advocated didn't happen doesn't mean it shouldn't.

    You were right, just too early. I'm sure in 1974 there were people calling for higher interest rates too. If they changed their minds in 1977, admitting "nevermind, the economy is awesome, low interest rates FTW" then they were 100% dead wrong. The economy needed higher interest rates to get the savings rate back up. And it initiated a massive stimulation in the economy. It worked....higher interest rates were the correct course of action.

    I'm sure if you took a poll, 9 out of 10 businesses would rather have an extra 8% interest rather than jump through all the hoops to get a low interest loan. Simply put, there just isn't enough savings to go around for all the good ideas. If savings actually yielded more than inflation destroyed, people would start putting money back into the banking system, making it available for loans to entrepreneurs.

    now the incentive (much like during zimbabwae hyper-inflation era) is to spend your money as soon as you get it, because you know it'll be worth less tomorrow. Unless you're smart enough to make money on the risk curve, then your best bet is to spend spend spend.

    And anyone with any common sense knows that's harmful for the economy. The economy needs more production, not more consumption. Higher interest rates would help greatly towards this end.

  • Report this Comment On November 26, 2011, at 10:07 AM, jamyang wrote:

    Several interesting takeaways in this piece. First, there seems to be an inherent bias in the financial media to fear higher interest rates. Understandable to those who experienced the terrible days of the late 1970's. It has taken four years for Housel to concede that his prediction was wrong. Even now, the other commenters above seem unready to follow.

    Second, the fact that Arthur Laffer was making fun at him when he correctly predicted that the then trajectory in spending and low interest rates was dangerous. This probably tells you everything you need to know about the credibility (not) of this 'guru' of supply-side economics. We are still waiting for him to confess the fallacy of his own mathematically flawed predictions (but not holding our breath).

    Third, the idea that the US dollar as the steadiest currency in the world (I discount gold because it is not a currency). This should have been obvious but apparently wasn't, in part because most Americans don't travel to the rest of the world, and so could be forgiven for not knowing that the same real estate bubble disease that we suffered is to be found everywhere, only other countries may be late to the cycle. Europe is still in denial about its inflated home prices, which means that their problems are only beginning.

  • Report this Comment On November 26, 2011, at 1:32 PM, WikiCPA wrote:

    "Strength is relative, not absolute, in a global economy, and the U.S. is relatively strong. We are the skinniest kid at fat camp, so to speak."

    It is so easy to get stuck in our own world and believing that it's the only one out there. Sound advice, you've got a career in speaking. Great article!

  • Report this Comment On November 26, 2011, at 3:01 PM, okkarma wrote:

    So what's your best guess on USA interest rates over the next 5 years?

  • Report this Comment On November 26, 2011, at 7:50 PM, whereaminow wrote:

    Please define deflation and then provide one shred of evidence that we had it.

    You can't make up history Morgan.

    David

  • Report this Comment On November 26, 2011, at 11:04 PM, CaptainWidget wrote:

    I agree, there's been 0 inflation. Food, oil, gold, silver, the price of good labor, high quality companies are all priced through the roof.

    Go figure, print off a few trillion extra dollars, and all the cool stuff gets more expensive. I'd call that inflation.

  • Report this Comment On November 26, 2011, at 11:05 PM, CaptainWidget wrote:

    Type: 0 deflation...there's been TONS of inflations....

  • Report this Comment On November 27, 2011, at 7:22 AM, jcnasia wrote:

    Good article. The Modern Monetary Theory (MMT) guys did predict lower interest rates in the U.S., and they've been predicting higher interest rates in Europe.

    @ Captain Widget

    "If savings actually yielded more than inflation destroyed, people would start putting money back into the banking system, making it available for loans to entrepreneurs."

    I've seen this line of thinking elsewhere, and unless you're referring to a bunch of your friends who are stashing cash under their mattresses, it's flat wrong. Money never leaves the banking system; it just moves from bank to bank.

  • Report this Comment On November 27, 2011, at 2:09 PM, whereaminow wrote:

    ^ They've also been predicting deflation, which let me as clear as I can: never happened and has never happened in any industrialized nation since at least WWII.

    Now they claim we have something called dis-inflation (a made up term), which we don't have even by their own definition.

    What we have is a central bank that is targeting low rates. That's why we have low rates. They can keep rates low for a long time. Not forever, but for a long time.

    The reason we have avoided very bad inflation is because the central bank is paying interest on excess reserves. That also cannot go on forever. A long time, perhaps, but not forever.

    David

  • Report this Comment On November 27, 2011, at 2:24 PM, TMFHousel wrote:

    I can't think of many things I'd rather avoid than argue over semantics, but the CPI was sharply negative YOY in 2009.

    http://research.stlouisfed.org/fred2/graph/fredgraph.png?&am...

  • Report this Comment On November 27, 2011, at 3:12 PM, whereaminow wrote:

    Morgan, it's not semantics.

    Deflation is a PERSISTENT drop in the GENERAL price level or a PERSISTENT drop in the quantity of money.

    The CPI went negative for one quarter (and maybe some change). That's not any economist's definition of persistent.

    If you're going to write about economics, at least know a little about it. And don't cry semantics when your poor knowledge is on display.

    Happy Holidays,

    David

  • Report this Comment On November 27, 2011, at 3:45 PM, TMFHousel wrote:

    Textbook definition of deflation from Mankiw's Macroeconomics: "A decrease in the overall level of prices." Full stop.

    People disagree about the relative time it needs to take place before considered deflation. I use YOY, since it's how most people think about the performance of asset prices. When prices increase YOY, most would say there's been inflation. I see no reason to change the definition for deflation. But again, I can think of few things that waste more time than arguing over definitions when the vast majority already understand the point of the issue at hand.

    <<If you're going to write about economics, at least know a little about it.>>

    You've used that line more times than I can count. If you're consistently convinced that I don't know what I'm talking about, why do you keep reading my stuff? There are a lot of writers I'm unimpressed with. I usually just stop reading them.

  • Report this Comment On November 27, 2011, at 4:20 PM, CaptainWidget wrote:

    <<I've seen this line of thinking elsewhere, and unless you're referring to a bunch of your friends who are stashing cash under their mattresses, it's flat wrong. Money never leaves the banking system; it just moves from bank to bank.>>

    Not true for several reasons. Firstly, companies have receiving departments, no? Is this is because money is instantly transfered to them upon completion of their customers spending transaction? Of course not. The longer they wait on receivables, the longer the money stays out of circulation. Secondly, they don't have to put their money in the bank. Don't be confused by apple and microsoft, most companies don't have huge cash hoards. They spend it on things, creating a new receivable for some other company, creating another 3-6 month lag until the money can get back into the banking system and become loanable capital.

    But more importantly, money that's not in savings is used in consumption. When money is used for consumption, the total amount of money stays the same, while the total amount of resources stays the same. This is how inflation happens.

    When people put their money in the bank (earmarked for nothing) then it's available for entrepreneurs to combine with labor and other resources to create wealth (as opposed to consumption, which destroys wealth)

    If it's under your mattress, it's available for nobody, thus actually taking capital out of the lending system (paradox of thrift). The argument you've used is a counter to the exact opposite scenario. If people stuff their money in the mattress is destroys the value of savings. The longer it stays in the bank (IE not hanging out in receivables) the more useful that capital is for lending to entrepreneurs.

  • Report this Comment On November 27, 2011, at 4:27 PM, TheDumbMoney wrote:

    Hi David,

    I've heard you complain about y-o-y inflation fears too many times to take you seriously when you go all fact-hating and refuse to look at y-o-y deflation.

    As a matter of fact, if I do recall, you posted quite a bit in 2009 and/or 2010 about all of the inflation that QE and/or QE2 was likely to cause. I am happy to see I got you on the right track with regard to the interest payment of excess reserves, such that you are now correctly citing it as one reason why we did not have such inflation! (I well remember my post earlier this year when you posted a couple of comments indicating you had know clue at the time what that was.)

    With regard to the Fed holding rates low, all that really matters is that it can hold rates low for a sufficiently long time for it to matter. As I have noted in the past, nothing about the Fed's current actions are really unprecedented -- it held rates super low for nearly a decade after the +100%-of-GDP national debt runnup of WWII, and then successfully unwound its balance sheet. The Bank of Japan has similarly kept rates low for over a decade now, even with national debt over 200% of GDP, if I'm correctly remembering. The UK has run up tremendous debts both in this century (at one point nearly 250% of GDP after WWII, and well in the +150%s during WWI, and it hit 250% in the Napoleonic wars, and to the best of my knowledge has never actually 'defaulted', though particularly in the early 19th century it did suffer severe inflation, for a variety of reasons not entirely having to do with the actions of the Bank of England.

    It would not shock me at all to see US national debt hit 200% of GDP within five years and yet see interest rates lower than today, depending upon the forcefulness of the Fed and other events happening both here and elsewhere in the world and the relative strength of other countries/currencies.

    Happy Non-Statist Holidays to you!

    DTAF

  • Report this Comment On November 27, 2011, at 4:32 PM, TheDumbMoney wrote:

    Also, David, I'm posting a link just for you, from my man Krugman:

    http://krugman.blogs.nytimes.com/2011/11/27/the-euro-curse/?...

    I particularly like the part where he talks about how the ECB's hard-money madness may have been the catalyst for the destruction of the Euro.

    DTAF

  • Report this Comment On November 27, 2011, at 4:49 PM, dwot wrote:

    I thought we'd see higher rates as well. I think what happened was those who enabled the bad loans and had their money at risk were bailed out. If you had to think about whether you'd get your money back, well, for sure you'd be demanding higher rates for the risk. I was very concerned about losing money in bank failures, but instead banks were bailed and losses were transferred to tax payers.

  • Report this Comment On November 27, 2011, at 5:05 PM, FoolTheRest wrote:

    <<If you're consistently convinced that I don't know what I'm talking about, why do you keep reading my stuff? There are a lot of writers I'm unimpressed with. I usually just stop reading them.>>

    You see, Morgan, voting with your feet is just not something folks seem to do online. No, rather it is important to use the voice that the internet has given each one of us to complain about the free advice rather than stop reading. Equally as important is to make sure to use this voice to attempt to discredit others in ways which would never be done in a face-to-face conversation. This is, of course, in lieu of doing actual research and bringing forth viable counterpoints.

    But who has time for all that research? It is much more simple and quick to tell you you are wrong, ignorant, or in some other manner mentally diminished. I also prefer the strong arguments of "naw-uh" and "no, you are (insert adversary's most recent description of me).

  • Report this Comment On November 27, 2011, at 6:51 PM, Frankydontfailme wrote:

    DTAF - well yeah nations can maintain artificially low interest rates to service exponential debt increases. The question is, at what cost?

    For Japan, the cost was multiple lost decades. Their deleveraging was offset by federal deficit spending which was enabled by ZIRP. They are now getting to the point where the savings of their population can no longer support their federal deficit and so they will default or hyperinflate (See Kyle Bass thesis).

    The United States is similarly in a deleveraging cycle as you well know. They will maintain low interest rates by printing money through QE. The money will not get into the economy because their is no demand for further loans (we're deleveraging, not releveraging).

    Our options are multiple lost decades, or a jubilee of private debt.

    We'll probably stick with the status quo, keep the banks alive, print enough money to offset deflation etc. Since we will not be productive during this period of deleveraging, excess money will move away from equities (eventually moving away from treasuries too as they will eventually default or hyperinflation -see Japan -see Kyle Bass thesis) and money will move into inflation hedges (see Ray Dalio - How the economic machine works).

    It's disingenuous to say that nations can build up debts of 100% of GDP without costs.... massive inflation or default or both.

  • Report this Comment On November 27, 2011, at 7:08 PM, dbjella wrote:

    dumberthanafool -

    "I particularly like the part where he talks about how the ECB's hard-money madness may have been the catalyst for the destruction of the Euro."

    I think that is a little disingenuous. Those gov'ts are responsible for the destruction! The ECB is just an enable of bad behavior

  • Report this Comment On November 27, 2011, at 7:09 PM, dbjella wrote:

    Oops, sorry Frankydontfailme. You said it better.

  • Report this Comment On November 27, 2011, at 7:37 PM, TheDumbMoney wrote:

    Franky,

    A smart distinction to make (and the one I hope keeps Bernanke awake at night, since he didn't discuss it in his seminal 2002 speech on these issues) would be that the late-1940s debt problem in the U.S. was in fact almost purely governmental, not like today, where it is both governmental and private/individual, as you do note. At that time, growth of the economy, combined with that era's version of ZIRP, allowed us essentially to grow our way out of the national debt problem -- which did in fact happen, to the best of my knowledge, without either significant inflation, or a default.

    Today we do not have really signfiicant private-sector growth, and in Japan they do not have it. While I would agree that has a lot to do with the high level of household debt-deleveraging going on (which didn't exist in late-1940s America), where I disagree with you is in the idea that the Fed's ZIRP policy or QE2 is in any way remotely responsible for this economic growth problem.

    In fact the ZIRP policy has allowed corporations to reduce their WACCs, and has allowed consumers immense relief on their own interest payments, while not causing massive inflation and while not leading to significant additional private leveraging -- though it has likely slowed the household deleveraging process, likely by reducing outright defaults.

    Finally, as to Japan, you and Bass are only correct to the extent that private deleveraging does not get completed (and ready to reverse into releveraging) at such time as (not only private Japanese but world) savings and appetite forces Japan either to default or hyperinflate. (To date, there is zero indication that Japan is reaching any such tipping point, with debt-to-GDP something like twice what ours is.)

    The same is true here: if in the private sector deleveraging cycle completes itself, and starts a releveraging growth period, before the Fed- and Eurocrat-, and Chinese-currency-peg-assisted appetite for Treasuries ends and we reach a default-or-hyperinflation tipping point, then I think we can in fact get at least a discounted if not a totally free lunch -- unless one is a holder of long-term Treasuries who buys them at the wrong time. (And, there are very few such holders since the majority of our nation's debt is short term.)

    Since we do not know when the Fed- (and Eurocrat, et al) assisted appetite for Treasuries will dry up, and since we do not know when household deleveraging will end, we are left farting in the wind and claiming one is more likely to happen before the other. What I can say is that right now the default-or-hyperinflation tipping point seems nowhere near-at-hand, and meanwhile household deleveraging and household net worth formation continue apace..., and corporate balance sheets are on average at or near a position of all-time strength....

    DTAF

  • Report this Comment On November 27, 2011, at 7:40 PM, TheDumbMoney wrote:

    dbjella, actually it looks like the actual cause of the implosion is the initial Euro structure itself, and the capital imbalances it created.

    Notice I appoved of him calling the ECB hard-money the catalyst. A catalyst is something you add to chemicals, for example, to start a reaction. The chemicals in the beaker are the structure of the Eurozone, and the actions of the governments relating thereo. Me approving of him calling ECB hard money policy a catalyst for the destruction is therefore not meant to imply it is the cause.

    All best,

    DTAF

  • Report this Comment On November 27, 2011, at 8:46 PM, TheDumbMoney wrote:

    Tweeted today by David Frum:

    "If your principles require a global depression, you need new principles."

  • Report this Comment On November 28, 2011, at 11:25 AM, TheDumbMoney wrote:
  • Report this Comment On November 28, 2011, at 11:36 AM, TMFBent wrote:

    Morgan, if comments and blogs haven't taught you how to handle this, I can. When you're wrong, you don't examine it; you simply repeat yourself, repeat your arguments, because someday, you might be right. Heck, don't just repeat! Lace the repetition with exclamation points!!! MAYBE COME ALLCAPS!!!

    Then, you run for office.

  • Report this Comment On November 28, 2011, at 11:59 AM, DJDynamicNC wrote:

    @WhereamInow: "Deflation is a PERSISTENT drop in the GENERAL price level or a PERSISTENT drop in the quantity of money."

    This didn't sound right, so I checked Investopedia and Mirriam-Webster. Neither agreed with your newly modified definition of deflation. Can you cite your source for that definition?

    This is eerily reminiscent of another thread, where you made the claim that an entity could "default" even if it paid the full amount of every bill on time, because it would "default in spirit" or something. You can believe that if you want, but that isn't want "default" means.

    If you find you have to constantly redefine terms in order to bolster your argument, you may wish to consider that it is the argument which needs modification, not the English language.

  • Report this Comment On November 28, 2011, at 12:13 PM, jpanspac wrote:

    Tetlock's advice should be:

    "If you're being swept away with enthusiasm for some particular course of action, take a deep breath and ask A FRIEND OR YOUR SO: Can I see anything wrong with this? And if you can't, start worrying; you are about to go over a cliff."

    If you find yourself swept away with enthusiasm, the last person you should ask for advice is yourself.

  • Report this Comment On November 28, 2011, at 4:29 PM, muddlinthrough wrote:

    Kahuna,

    The link just went to the school website...where's the CODE stashed? :)

    If it's someone's thesis, who's the author?

    Thanks,

    muddlin

  • Report this Comment On November 28, 2011, at 8:24 PM, hbofbyu wrote:

    "Everyone believes it; most will be wrong"

    I'm pretty sure everyone believes China will dominate the 21st Century. I think they are wrong for various reasons. Who's in?

  • Report this Comment On November 29, 2011, at 10:14 AM, DJDynamicNC wrote:

    @hbofbyo - I'm with you on this. I don't discount America quite yet. And I don't think China is quite the powerhouse that people think it is - remember, in the early part of the cold war, people were legitimately afraid that Russia was going to crush the United States economically. Didn't quite happen.

    Remains to be seen, I suppose, but a lot can happen in a hundred years.

  • Report this Comment On December 12, 2011, at 9:58 AM, whereaminow wrote:

    ---------->This didn't sound right, so I checked Investopedia and Mirriam-Webster. Neither agreed with your newly modified definition of deflation. Can you cite your source for that definition?<---------

    DJ,

    http://en.wikipedia.org/wiki/Deflation

    They don't use the word Persistent, which is sad. I want to you to think about that. If prices fall 10% one day and go up 15% the next, was it deflation, or is that a temporary drop in prices?

    Likewise if prices go up 10% in one day, is that hyperinflation? That would annualize at over 3000%!! I would say that's not hyperinflation. That's a temporary price rise.

    Morgan is confusing disinflation and temporary price drops with deflation. If prices fall for one quarter, that's a price drop. If prices rise more slowly than previously, that's disinflation.

    This is why economics is so screwed up.

    In classical economics (the only kind worth a crap), inflation is defined as an increase in the money supply that is artificial. It is understood that prices will rise as a result of money madness. Deflation isn't even worth discussing, since under hard money there is no deflation past the available stock of metal. It's not actually possible to have a deflationary spiral under hard money. (It's not actually possible to have a deflationary spiral under paper either, but for the simple reason that nobody's going to stop printing.)

    But to say we had a deflationary recession is just nonsense all around.

    David

  • Report this Comment On December 15, 2011, at 2:55 PM, thidmark wrote:

    ^^ LOL

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Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1595231, ~/Articles/ArticleHandler.aspx, 10/23/2014 6:19:42 PM

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