Here is a collection of insights by GMO's Jeremy Grantham from his latest outlook where he lists of the harsh lessons learned during the last decade.
Lessons Learned in the Decade: (Grantham in bold highlights) [comments mine]
-The Fed wields even more financial influence than we thought.
[This is nothing new. Mr. Grantham hasn't learned from 7th US President Andrew Jackson who caused the bankruptcy the Second National Bank of the United States. As per President Jackson, “Money is power, and in that government which pays all the public officers of the states will all political power be substantially concentrated.”]
-Low rates have a more powerful effect on driving financial assets than on driving the economy.
[The Austrians have been saying this long long long time ago.]
-The Fed is capable of being extremely out of touch with the real world – “what housing bubble?” – plus more doctrinaire – “no, the low rates had no effect on housing” – than anyone could have imagined.
[It's called delusions of grandeur, or as per Friedrich A. Hayek, 'Fatal Conceit']
-Congress is nearly dysfunctional, primarily controlled by large corporations, and hamstrung by the supermajority now routinely required in the Senate.
[This is proof that this isn't about the failure of free markets but of corporatism, or crony capitalism. To quote Ron Paul, ``We don't have socialism here, but a mild form of fascism—corporatism--with corporations on the dole, making money off the military-industrial complex, while the banks and financial houses are making money off the monetary system." Again this is nothing new.]
-Government administrations can be incompetent for long periods.
[activist government administrations are almost always incompetent or affected by political goals (public choice economics) or a result of hubris, as Professor Arnold Kling recently wrote, "Libertarianism would indeed say that it takes a genius to do nothing"]
-Poor leadership can really damage a country’s hardwon reputation in a mere 10 years.
[see above]
-Obama is not a miracle worker!
[Again from F. A. Hayek, ``The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." ]
-The leadership of major corporations can be very lacking in insight and competence on a fairly routine basis.
[When governments engage in inflationism, they distort and affect economic calculation of the entrepreneurs, hence the leadership resorts to "lobbying" for political privileges instead]
-The two time-tested investment tools, value (P/E ratios and P/B ratios) and price momentum, are now much more heavily used and not so reliable as they once were, say from 1977 to 1997.
[A validation of Fritz Machlup ``A continual rise of stock prices cannot be explained by improved conditions of production or by increased voluntary savings, but only by an inflationary credit supply." see our Are Stock Market Prices Driven By Earnings or Inflation?]
-Asset classes really are more inefficiently priced than individual stocks on average, and therefore offer greater opportunities for adding value and reducing risk.
[inflationism distorts pricing, as noted above]
-Developed countries, including the U.S., are past their prime compared with developing countries: it is indeed a new world order.
[too much Keynesianism eventually strips economic advantage of developed countries by diluting wealth through boom bust cycles]
-Education and training are the keys to increasing wealth on a sustainable basis and the U.S. is in danger of losing its once large edge here.
-We all live on an island, which can be overexploited and turned into a barren Easter Island if we are not careful. Resources are finite and biodiversity is fragile, and both must be protected. Carbon emissions are the single greatest threat.
[False! Environmentalism has been a key channel for promoting socialism. The global warming bubble is presently imploding. Besides commodity prices have been on a downtrend for centuries even amidst growing population until today, where inflationism has caused serious dislocations such that these have become underinvested. Moroever, government regulations have caused price surges or overexploitation. Example, oil reserves are 90% owned by state or state owned companies this restricts supply. Further subsidized energy prices leads to greater demand.]
-Being a global policeman is expensive, and somewhere between difficult and impossible.
[Inflationism promotes imperialism that benefits the military-industrial complex.
Again from Ron Paul, ``The pressures exerted on our leadership from the military industrial complex and big business is not in favor of peace or freedom, or especially nonintervention. Intervention is big business. Defense contracts topped $300 billion last year, and total spending on war and our overseas empire is up to $1 trillion per year. That represents a lot of people earning a living off of war and conquest. But rather than adding to our economy, all of this money is taken from the economy in order to wage war and destruction. Imagine if those resources were put to creative, productive use here at home!"]
-The Fed learns no lessons!
[Then Abolish the Fed!]
Overall, it doesn't really take a decade to learn of such harsh lessons, since they have long been studied and transcribed by the Austrian School of Economics into various books or documents.
Lessons Learned in the Decade: (Grantham in bold highlights) [comments mine]
-The Fed wields even more financial influence than we thought.
[This is nothing new. Mr. Grantham hasn't learned from 7th US President Andrew Jackson who caused the bankruptcy the Second National Bank of the United States. As per President Jackson, “Money is power, and in that government which pays all the public officers of the states will all political power be substantially concentrated.”]
-Low rates have a more powerful effect on driving financial assets than on driving the economy.
[The Austrians have been saying this long long long time ago.]
-The Fed is capable of being extremely out of touch with the real world – “what housing bubble?” – plus more doctrinaire – “no, the low rates had no effect on housing” – than anyone could have imagined.
[It's called delusions of grandeur, or as per Friedrich A. Hayek, 'Fatal Conceit']
-Congress is nearly dysfunctional, primarily controlled by large corporations, and hamstrung by the supermajority now routinely required in the Senate.
[This is proof that this isn't about the failure of free markets but of corporatism, or crony capitalism. To quote Ron Paul, ``We don't have socialism here, but a mild form of fascism—corporatism--with corporations on the dole, making money off the military-industrial complex, while the banks and financial houses are making money off the monetary system." Again this is nothing new.]
-Government administrations can be incompetent for long periods.
[activist government administrations are almost always incompetent or affected by political goals (public choice economics) or a result of hubris, as Professor Arnold Kling recently wrote, "Libertarianism would indeed say that it takes a genius to do nothing"]
-Poor leadership can really damage a country’s hardwon reputation in a mere 10 years.
[see above]
-Obama is not a miracle worker!
[Again from F. A. Hayek, ``The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." ]
-The leadership of major corporations can be very lacking in insight and competence on a fairly routine basis.
[When governments engage in inflationism, they distort and affect economic calculation of the entrepreneurs, hence the leadership resorts to "lobbying" for political privileges instead]
-The two time-tested investment tools, value (P/E ratios and P/B ratios) and price momentum, are now much more heavily used and not so reliable as they once were, say from 1977 to 1997.
[A validation of Fritz Machlup ``A continual rise of stock prices cannot be explained by improved conditions of production or by increased voluntary savings, but only by an inflationary credit supply." see our Are Stock Market Prices Driven By Earnings or Inflation?]
-Asset classes really are more inefficiently priced than individual stocks on average, and therefore offer greater opportunities for adding value and reducing risk.
[inflationism distorts pricing, as noted above]
-Developed countries, including the U.S., are past their prime compared with developing countries: it is indeed a new world order.
[too much Keynesianism eventually strips economic advantage of developed countries by diluting wealth through boom bust cycles]
-Education and training are the keys to increasing wealth on a sustainable basis and the U.S. is in danger of losing its once large edge here.
-We all live on an island, which can be overexploited and turned into a barren Easter Island if we are not careful. Resources are finite and biodiversity is fragile, and both must be protected. Carbon emissions are the single greatest threat.
[False! Environmentalism has been a key channel for promoting socialism. The global warming bubble is presently imploding. Besides commodity prices have been on a downtrend for centuries even amidst growing population until today, where inflationism has caused serious dislocations such that these have become underinvested. Moroever, government regulations have caused price surges or overexploitation. Example, oil reserves are 90% owned by state or state owned companies this restricts supply. Further subsidized energy prices leads to greater demand.]
-Being a global policeman is expensive, and somewhere between difficult and impossible.
[Inflationism promotes imperialism that benefits the military-industrial complex.
Again from Ron Paul, ``The pressures exerted on our leadership from the military industrial complex and big business is not in favor of peace or freedom, or especially nonintervention. Intervention is big business. Defense contracts topped $300 billion last year, and total spending on war and our overseas empire is up to $1 trillion per year. That represents a lot of people earning a living off of war and conquest. But rather than adding to our economy, all of this money is taken from the economy in order to wage war and destruction. Imagine if those resources were put to creative, productive use here at home!"]
-The Fed learns no lessons!
[Then Abolish the Fed!]
Overall, it doesn't really take a decade to learn of such harsh lessons, since they have long been studied and transcribed by the Austrian School of Economics into various books or documents.
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