WHAT PASSES FOR THE TRUTH

excerpt from "Let's change the Debate" Doug Noland (weekly MUST read)

"As the great German economist Dr. Kurt Richebacher was fond of saying, “The only cure for a Bubble is not to allow it to inflate.” Regrettably, there is little government policymaking can do in the short run to improve the situation. There is, however, a great deal policymakers are doing to make a bad situation worse. The current backdrop – certainly impacted by the Greek debt crisis, related market tumult and a faltering U.S. recovery – has created an elevated risk of further policy mistakes.

A multi-decade Credit Bubble badly distorted our economy’s underlying structure. The harsh reality is that this structural maladjustment can only be rectified gradually over a period of many years. There’s just no quick fix. Ongoing massive fiscal and monetary stimulus only exacerbates our economy’s ills. Moreover, it risks an inevitable crisis of confidence in our debt markets and monetary system.

The economy is muddling through right now. It’s frustrating and discouraging but, under the circumstances, this is about the best we could have hoped for. I am increasingly troubled by the direction (and tone) of economic analysis and policy discussion. All the inflationism histrionics, including the notion that the Fed and Congress are committing a dereliction of duties by not stimulating more aggressively, are unhelpful. Describing fiscal policy as increasingly “austere” is ridiculous. But mostly, calls for the (un-independent) Federal Reserve to monetize a massive federal spending plan are as irresponsible as they are dangerous."

I could argue we are in some kind of "muddle thru" economy, but IMHO that is a temporary phenomenom that cannot be sustained through FED action and Government stimulus....to UNDERSTAND the issues, the predicament we are currently in is paramount to surviving it.

ONE IN TEN American's are running behind in their mortgage payments. ALL the REAL DATA coming show the housing crisis is very much with us, the only thing that has appeared to change is the perilous plight of the banks. This IMHO is just a smoke screen for many of them as if any of us could show an asset at original or better value instead of CURRENT MARKET VALUE....we'd look pretty good....until we actually had to produce a sale fro the asset at prevailing market value.

Banks are paid on their "excess" banking reserves...of which they got from the FED of which the FED chose to pay .25% of which no doubt they use to buy Treasuries, of which there is no incentive to lend, from which regulators have imposed higher levels of RESERVES to cover potential capital losses leaving less to actually lend, to wit the BANKS have RAISED lending standards to which few can pass, and add to all of that the DESIRE TO BORROW has waned greatly from the masses after decades of debt gourging.......and the topper is the ABILITY to borrow has been crippled by the drop in the average home valuation....good luck fixing all that.

SO as I had said yesterday, what passes for good news to rally these days ain't what it used to be either......a GDP that "BEAT ESTIMATES" and came in a pathetic 1.6% instead of 1.4% or LOWER.....HOORAHHHH? good luck bulls building a rally on that.

D