Jul

31

Dear Thin Air:

Your post regarding the debt cycle  may be witty and droll, but your content is (pardon the pun) “hot air.” Or, as Professor Feynman would say, “You got the physics wrong.” Not to mention the economics.

First the physics:

Atmospheric pressure is 15 pounds/sq inch or roughly 10^5 Newtons/Sq. Meter. (10^4 Kg.) As the approximate surface area of the earth is 4 x 10^14 sq. meters, your mass is: 10^4 Kg/sq meter x 10^14 sq. meters = 4 x 10^18 kg.

Thin Air, you ridicule Rosie O’Donnell and Bill Clinton for their girth – and write that you are being “dissed in relation to the thins,” yet your girth (mass) is actually 4 billion-billion kilograms — more than the mass of the entire Alps! People in glass houses shouldn’t throw stones. In your case, Thin Air in glass houses expand when heated – so it’s little wonder that you’re a blowhard.

Next the economics:

You take umbrage at Dr. O’Donnell’s quote: “So in effect the loss of consumer debt is being replaced by increased government debt and conscious efforts to print money out of thin air."

The economics seem as clear as the air in Aspen. It does not take a pangloss, as you suggest, to understand the transmission of monetary policy (and fiscal deficit spending) through an economy with high levels of debt. Without regard to real growth, the Fed’s monetization of debt should reduce private debt burdens, increase inflation, and, absent a Japanese-style deflation, make debt a questionable investment. Contrary to your statement, “one can hardly blame the debt buyers,” the Sage is on record as being “concerned about inflation.” 

Your analogies with past financial panics (LTCM, Russia, etc) actually contradict your own conclusions. Rather than arguing that “this time is different,” you are actually arguing that this time is the same. Following your own logic, whether the growth comes from a garage in Silicon Valley or a garage in Guangxi Province, opportunities for pragmatic optimists remain.

In concluding you write, “please leave me alone.” Thin Air, that won’t be happening. And it’s your own fault. In a little more than a decade, your fraternal twin, Mr. Ether (of Ethernet fame) has revolutioned the world – once again demonstrating the powerful combination of human spirit, capital and FRESH air.

With the utmost respect and regards, Rocky Humbert.


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