Doug Noland Calls PIMCO the Bane of Capitalism

[Post Summary]

His mouth is most sweet, Yes, he is altogether lovely.
—Song of Solomon

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Doug Noland is one person whose insightful analysis of credit markets over the still young 21st century has proven incredibly reliable in providing confirmation to this Elliott Wave analyst's stock market outlook time and time again. His command over the inner-workings of Structured Finance and the securities-based credit system is pure gold.

Mr. Noland writes a weekly column called the Credit Bubble Bulletin. It is a "must read" for me.

This week's column titled, "Inflationism: The Bane of Capitalism," attacks the [faulty] analytical mindset of the folks who run PIMCO and separates Noland as a courageous critic of policy whose outcome continues taking the world further down the road to financial ruin.

(I have the sneaking suspicion that, were Doug Noland to read the animated introduction at the PIMCO website, he would wonder whether the firm's lawyers approve. Claiming power to both manage risk and deliver returns in a day and age when the financial models of Nobel Laureates — particularly those at LTCM — have been shown abysmal failures could prove an unwelcome legal liability sometime in the not-too-distant future.)

In calling to question policy prescriptions put forward by PIMCO's Bill Gross and Paul McCully Doug Noland lays out truth about the strong current against which PIMCO is swimming in its desperate attempt to sustain its mission statement's viability.

The financial sector is a black hole right now. With myriad assets Bubbles having burst, there is an enormous amount of debt today insufficiently backed by asset values. At the same time, there is a tremendous amount of debt backed by households, businesses, municipalities and our federal government. In terminology I have used in the past, the Credit Bubble has left both the Financial Sphere and the Economic Sphere grossly inflated. Total system debt has been severely impaired.

In other words there just is not enough real wealth being generated by the physical economy to sustain current debt structures. This is not rocket science, folks. Rather, it is the plain reality driving the Inflate or Die mentality of those whose portfolios are experiencing headwinds like never before.

—Tom Chechatka