Friday, August 22, 2014

Michael Shaoul needs to read Krugman and Piketty

Michael Shaoul was on Bloomberg talking about when the Fed might raise rates:

Bloomie - Michael Shaoul interview.

As a reminder, Shaoul has been going on for months about how he thinks the data is over-estimating slack, and the US may see inflation pick up strongly before the Fed's targeted first rate rise.

The old guy with the gravelly voice (forget his name, I used to listen to his Bloomie podcasts) facetiously asks "what would happen if the Fed raised rates sooner than expected, just to add a bit of discipline to the market?", and Shaoul replies with a facetious answer.

And there he proves that while he's generally whip-smart, Shaoul doesn't have a clue in one vital area.

Krugman likes to remind us that the EZ tried to raise rates early in the post-2008 recovery, and that pushed them right back into depression.

For all I've been putting the boots to the "secular stagnation" thesis recently, I do agree with the Kruggatolah that Yellen probably is wary of being too early in raising rates, because the last thing you want to do is sabotage a six-year recovery that's only been looking hopeful for the past year.

And hey, if the secular stagnation theory is right, then maybe a too-early rate raise will push the US back into depression.

And in any case, OMG WTF?!? Shaoul is warning against wage inflation, and yet (speaking as a member of the oppressed working class) we do really need some wage inflation right about now. How the fuck is wage inflation a bad thing?

Oh, sure it's a bad thing for the ruling kleptocrats. But like I've been saying, maybe the "secular stagnation" thing is only an artefact of the rentier class' victory over the proletariat, and this is exactly what the endgame should look like when you have thirty years of workers' wage stagnation and Piketty's continued concentration of capital among the rentier class.

There's too many people trying to collect rents, and not enough people able to pay any more rents.

I've had my suspicions for a few months that Shaoul was a closet Reaganite, and this kinda confirms it.

He's still way damn smarter than any other market commentator out there, as far as understanding market cycles, so I'll keep reading him. But from now on I'll stick to listening to his interpretation of data, and from now on I'll ignore his opinions of what the Fed "should" do.

I mean, if he really truly knew what the Fed "should" do, he'd be working there, right?

I really do think he needs to get out of his shell and start reading some of the recent higher-level commentary on the peculiar nature of the US economy.

Also, saying the US market needs "discipline" is truly facetious and fucking pig-ignorant.

SPY, for all its recent excitement, is still only up about 30% since 2007.

And the 2007 equity top was not a bubble top.

A market that's still way below the long-term trend, trading at a vaguely reasonable P/E, does not need "disciplining". If you believe it does, then you probably also believe the old 19th-century commandment that a father should beat his wife and kids regularly, even when they do no wrong, just to remind them who's in charge.

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