I read your letter (The Bob Livingston Letter™) every month and have a question about some of the conclusions you have come to in December. I know that the Fed is increasing money, which causes inflation. But I just read a book by Harry Dent and he makes a great case for deflation a la Japan style. His work is based on demographics, and, he says, we are entering a “winter season” in the economy. Per Mr. Dent, this happens about every 80 years or so. That the Fed, no matter how hard they try, cannot outdo the baby boomers who are saving rather than spending now. Japan has tried desperately to stimulate its economy (which is about 12 years older than ours) and it hasn’t worked. What is your view of this?
We are in an economic winter season because of the Fed’s money printing and government bailouts. The Fed created the bubble by setting interest rates that were artificially low. When the bubble burst, government began bailing out the firms that helped to create and profit from the bubble and the government began inflating the money supply. These actions only take money from the middle class and distribute it to the wealthy. The system is not allowed to clean out the debt, which creates the stagnate economy. These actions were also taken in Japan, and they are still languishing economically. We will do the same thing unless government gets out of the way and allows the natural process of debt and destruction to take place. And by the way, baby boomers are no longer saving. Their savings are being consumed by inflation, a stagnant stock market and, in many cases, the need to draw down their retirement funds in order to remain in their homes and provide food for their families because they are no longer able to find jobs.