Projection

Paul Krugman fails to realize he’s talking about himself:

And I don’t know about you, but I’ve got a sick feeling in the pit of my stomach — a feeling that America just isn’t rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.

Keynesian fiscal stimulus failed after the 1922-1929 boom. It failed after the 1980-1989 Japanese boom. Monetary stimulus sufficed to prop things up after the 1996-1999 equity boom, but it’s clear that both monetary and Keynesian stimuli are going to fail again following the 2003-2007 housing boom. One would do well to describe it as a grotesque failure, even as adherents of the doctrine roll out their excuses that it wasn’t big enough… again.

Mailvox: on the college scam

JP points to the recent Forbes article underlining the obvious for the benefit of those who haven’t been paying attention:

I have personal experience with this. I have one brother who graduated from St. Cloud State two years ago with a Business Admin degree who is currently waiting tables at Olive Garden in Maple Grove. I have another one who is getting ready to graduate from the Cloud this year who wants to go to Hamline for a law degree. He will have to use student loans as the folks said he was off the tit after St. Cloud. It is ironic because I went in the Navy after High School then went to work at a utility and worked my way up into management and make over $100k per year with no college. They both asked me how it was possible to do what I have done without college.

They do not understand that the degree just gets you a cubicle and that once you go to work you have to provide value. My answer was that I have created millions of dollars of shareholder value so in other words I am an earner for the company. They just sit there with a puzzled look on their face as if they never heard that one in any Business Administration courses. The one interesting observation is that talking with these guys and their friends they are pretty pissed that they bought the line from parents, school counselors, the media, et al that getting a degree was a ticket to the land of milk and honey and they are finding out it was BS. I told the one guy waiting tables to go to North Hennepin or North Harvard as we call it and get an HVAC ticket so he could work on furnaces and Air Conditioning units and he could probably make $80k per year. My stepmom got pissed and told me to mind my own business as her baby went to college and wasn’t going to be a working man. I laughed and shook my head.

There’s nothing inherently wrong with a university degree. But it’s not the Magic Vellum Ticket to effortless riches that so many people dumb enough to go into debt to pursue them assume it to be. The irony is that if you’re intelligent enough to figure out that you don’t need a degree in order to be financially successful, you’re probably smart enough to take advantage of having one. And vice-versa.

As numerous observers have pointed out, the college bubble should be the next to pop.

Zombie banks

The insolvency of fractional reserve banks really isn’t news:

Some of the large banks in the United States, according to economists and other finance experts, are like dead men walking. A sober assessment of the growing mountain of losses from bad bets, measured in today’s marketplace, would overwhelm the value of the banks’ assets, they say. The banks, in their view, are insolvent.

At its core, fractional reserve banking is no different than investing with leverage. At any time, even small movement against the position will render it insolvent; obviously, that small movement has taken place. It looks as if the Japanese zombie bank phenomenon has finally crossed the Pacific.