Here are Chris’ and Adam’s takeaways from their second day at the conference.
Chris’s Observations
Today was a quite interesting day, but also, in many ways, simply reconfirmed yesterday. I would have to say that the most powerful money and policy people are all in agreement; they believe more stimulus money is both necessary and proper here. None seem to think that there’s any real risk to the US dollar. The usual litany of perfectly reasonable rationalizations applied. “China needs the US more than the US needs China.” “The Euro is a weak substitute with plenty of risks all its own.”
These are reasonable propositions, but that’s the problem. By accepting these ideas, exploration of other risks seems to have been short-circuited, as no other discussion could follow them. That places them into the bucket of “rationalizations” as opposed to reasoned ideas. That is, they are beliefs, not facts.
The good news, such as it is, is that plenty of work remains for us to do in this world.
To me one of the largest stories of the day is the degree to which resource scarcity, and especially oil, was completely off of most people’s radar screens.
Countering this was an interaction with a lovely woman who operates out of London and does private equity deals in Africa. Her perspective was that India and China are everywhere in Africa, buying this and carting off that, and her remark was that America is almost entirely out of the game. This puzzled her greatly because the interest of China was so keen and with every passing day the ability of the US to get in that game slips. She had the opportunity to raise the issue with some very high level political types (at the DNC) and was told that Africa is a place that the US sends aid to, and that’s about it.
Think about that for a minute. Not only is the rest of the world already engaged in a fast-paced pursuit for natural resources and actively competing over them, the US has not even begun to get involved. This is nothing new to us here (check out the Martenson Report on China that we ran abut a year ago).
The highlight of my day was recording a podcast with an extremely interesting individual who is a leader in the field of behavioral economics. The punch-line is simple; people will always prefer a future pain over a present pain. I won’t give much more away right now, but the implication of this is that deflation, which represents an immediate pain, will lose out to inflation which represents a future (and uncertain) pain.
I’ve made that exact point before, but now there’s some hard science behind the assertion that makes me all the more confident that we’re on the right track and that we now have some hard explanation to underlie the Rogoff and Reinhardt work which shows that inflation is nearly always the final outcome of ‘too much debt.’
Adam’s Observations
Today brought new subject matter, including one field of study – behavioral economics – that, as I process it, is having a material impact on my thoughts about the future.
by mobius