This video of Milton Friedman espousing greed and self-interest as expressed by free enterprise and free trade is making the rounds again:

Friedman reduces all of human behavior to greed. "You think Russia doesn't run on greed? You think China doesn't run on greed?" "You think the communist commissar rewards virtue?.... Do you think American Presidents reward virtue? Is it really true that political self interest is more noble than economic self-interest? Tell me where in the world you are going to find these angels who are going to organize society for us?"

Professor Friedman, we do not need nor do we seek angels to organize society. While Phil Donahue may have been flummoxed, none other than chief framer of the US Constitution James Madison had a complete answer to your prescription of increasing concentration of wealth and plutocracy, over 200 years ago.

We all know by now that the economy is cliff-diving. Many bloggers can ably describe the dive in progress. One of the distinguishing things I have been trying to do over the last year is to look ahead to determine, "Where is the bottom of the cliff, and When do we get there?" Unlike most recessions, which might be described as bungee-jumps, where you get to the bottom and rebound quickly, this recession heralds a secular change, as housing and financial bubbles burst. In those circumstances, typically there is a crash or cliff-diving stage (also described by Russ Winter as the "guillotine" phase) followed by a slower, more sideways, grinding stage (described by Russ Winter as the "sandpaper" stage). Or, as I've described it many times, a Slow Motion Bust.

A more visual depiction of such crashes is to liken them to going over the American falls. First there is the free-fall, then the bouncing to the bottom of the rubble. For example, in my last blog, I noted how new home sales almost had to be nearing the bottom of the cliff. Or, visually:

So says Tim Iacono of "The Mess that Greenspan Made", and who am I to disagree? After all, I've been writing about the dangers of deflation for awhile now.

Actually, Tim makes the comment in a mocking sense, noting that

In the U.S., the latest consumer price data will be reported on Friday and we may be in for a veritable "Deflation Tsunami" from the mainstream media since we were teetering on the brink of a negative consumer price index last month.

Tim's essential point, if I read him correctly, is that the deflation we have experienced is really just the popping of the Oil price bubble.

So, am I going to get into a mud-pie flinging contest with Tim? Hardly. Actually our two views aren't that far apart.

“Once upon a time, a man went on a journey, and summoned his slaves and entrusted his property to them. To one he gave five talents, to another two, and to another one, each according to his ability. Then he went on his journey.

The one who had received five talents went off right away and put his money to work in a Wall Street investment bank speculating in complex derivatives.

In the same way, the one who had two took out a negative-amortization, stated income subprime mortgage on a McMansion.

But the one who had received one talent went out and invested in a money market account, which dug a hole in the ground and hid his master’s money in it, earning only 2% a year.

This is the concluding installment in my series examining how the most reliable economic indicators during the Inflationary Era, perform during periods of deflation. I have done this by examining the Roaring Twenties, Great Depression, New Deal, and the Post WW 2 deflationary recession. The reason for doing so is that we are now in the midst of the first deflationary recession in 60 years. Most indicators used by economists and pundits do not exist or have never been tested that far back in time. Indicators which may work during inflations may not work during deflations. Having set forth the data for you, today we show exactly how two such indicators -- monetary and interest rates -- panned out, and the implications of those conclusions to our present situation.