"But unless they were made available at an appropriate penalty rate, they would encourage in future the very risk-taking that has led us to where we are."
Can we get this sentenced tattooed onto Bernake's forearm? And the whole letter onto Greenspan's body?
Here's the thing for me: Talking tough is great, but the point of promoting stability usualy doesn't include the attitude of "tough titties". The haircut along with the penalty of the discount is fine until the problem may be beyond control. Barclays & RBS are chest deep, King is almost Reichian in his zeal.
Get the idiots thru it as best you can(with the most amount o pain that doesn't kill the patient), then set the rules of the game so it doesn't happen this bad again.
US consumers getting drilled by speculators for oil profits:
There's a huge amount of hedge fund money moving into the long side of the crude-oil market,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.The global supply balance will be tight as we go into the fourth quarter. There's already a lot of concern about low stocks.''
Oil prices have risen 31 percent this year as hedge funds and other speculators purchased futures because of surging energy demand. Long positions are bets that prices will rise.
The gamblers are taking over and gutting the economy for personal gain (myself included). Right now I'd have to say the Fed action/inaction is benefiting them at the expense of everybody else.
I'm fairly productive in my day job, but it's getting to the point where I've taken enough money from other people that I can quit and play my XBOX 360 all day instead of contributing to the real economy.
King exposes BB and Paulson for their public ineptitude.
However, there are sharp pencils at FedRes; they're a dime a dozen at the finer B'Schools and LawSchools. And as long as there's nobody here who's a specialist in FedRes law, I'll take the longshot bet that there's gonna be a "surprise" that's will resolve some of this mess.
If it were any of us, we'd use the academic and recent-graduate brain trusts to kiss and uncover every rock in the legal garden.
Concerted action by many CB's is the most obvious. Something massive appears to be the solution. We're thinking within the box. Where's thinking outside the box?
Could someone explain to me how this White house could possibly put this implosion off off till after the election? Maybe somebody in this forum could explain the type of "leverage" (threats) or Monetary policy could slow a train wreck. Or is this too big for the White house & Co.? Some creativity may be required. Thanks in advance
You know, if the Fed does elect to delay the day of reckoning and create another bubble, and there are more dire consequences at a later date, Mervyn is going to look like a genius. It's almost a game of chicken now. Mervyn is saying to BB, "Go ahead and try it. You know how it is going to end up. History will document you as the fool and me as the prescient voice of reason." I don't think BB will call this guy's bluff.
Could someone explain to me how this White house could possibly put this implosion off off till after the election? Maybe somebody in this forum could explain the type of "leverage" (threats) or Monetary policy could slow a train wreck. Or is this too big for the White house & Co.? Some creativity may be required. Thanks in advance
Well, George Jr. can't run again and I don't know that the White House really cares that much about the republican party.
Given that the party currently in control of congress could potentially benefit from economic trauma in the 2008 elections, we might have a recipe for inaction for another year or so.
As SIVs face judgement week in rolling over their short term debt, most will be presented with a stark choice: draw down on bank credit lines or sell assets.
The first of those two options varies in its usefulness from SIV to SIV. Conduits - which are SIVs run by and for banks - have committed liquidity lines to cover all their short term debt. They, at least, have the luxury of knowing they can pay off their debts without selling assets at a loss.
[snip]
Faced with this gloomy dilemma, Moodys have added a new seduction.
In the Q&A session after a teleconference last week, the rating agency slipped in the announcement that it would be allowing SIVs to use repo financing in their debt structures, should they so choose.
[snip]
But there are some big questions with SIVs using repo financing. CreditSights raise a couple in a report out Wednesday:
Firstly, what happens to the SIVs net asset value calculations? NAV is calculated on the basis of a SIVs overall portfolio value minus its existing senior debts, divided by existing capital. It is basically, therefore, a measure of the collateral available to capital note holders. Selling assets would ordinarily have to be accompanied by a decrease in the number of a SIVs capital notes - otherwise the NAV would drop, and could trigger a Major Capital Loss test, and a forced wind-down. A repo will sell SIV assets, albeit on the understanding that theyll be sold back. So where does that leave the NAV?
Secondly, not only will repo financing leave SIV capital note holders with less collateral - but poorer quality collateral too, since repos will take out the most highly rated assets in the SIV portfolio. According to CreditSights:
Repo counterparties will have first claim on the collateral posted in the repo. And because troubled SIVs are likely, because of the haircut limit on repos, to post higher-quality collateral in the repos, senior note holders may end up with not only less collateral backing the SIV program, but with a collateral pool diluted in quality.
Taking those unknowns into account, its hard to see repo financing enamouring institutions to the idea of investing in SIV paper. Rather than solve the current crisis in the commercial paper market, repo financing could well just underscore the problem which is creating it: fear.
"US consumers getting drilled by speculators for oil profits:"
Royal Dutch Shell Plc's top executive said on Wednesday he sees no fundamental reason for crude oil prices to have jumped above $78 a barrel.
"No one has to wait at the gas pumps of the world. There is no physical problem," Shell Chief Executive Jeroen van der Veer told reporters in Calgary.
"(There is) a lot of psychology in the price," he said.
Oil rose above $80 a barrel for the first time on Wednesday, touching $80.18 on the New York Mercantile Exchange before falling back to a record close of $79.91 a barrel as U.S. government data showed crude inventories took an unexpected drop last week.
Van der Veer said the price had risen above what the industry needs to sustain its operations. But he added that he expected more volatility in prices because of "the psychological component."
His comments echoed those made by the chief executive of Exxon Mobil Corp last week. Rex Tillerson told a Calgary business audience that $70 a barrel oil prices were not justified by market fundamentals.
Gaudia Ray - I'm with you! They make up rules when the old rules don't work. We may see it on a massive scale. Something BIG is going to go down. But, as the tan man is fond of saying are we going to GAG on it?
I think there is a little back-story behind some of the remarks in this paper that hasn't really been brought up here.
Willem Buiter and Anne Sibert, in a series of recent articles (start here) argue that the central banks should be willing to become market makers of last resort for both banks and non-banks for a broad range of financial instruments.
The argument goes, basically, that functioning markets are a social good. Even markets in subprime ABS, CDO's, CPDO's, as evidenced by the impact of the meltdown of those relatively obscure instruments on the greater marketplace. The importance of non-bank financial businesses (IB's) to our economic system has overshadowed the traditional banking sector.
By being able to become the market-maker of last resort, the central banks could inject "liquidity" precisely where it is needed, in specific markets, rather than just opening the monetary floodgates by cranking down the short-term interbank rate.
These smaller markets could effectively be restored to normal operation with the direct, targeted commitment of a few billion or tens of billions of dollars. However, when you basically have to pour money in the system and hope a little bit of it ends up where you are seeing the problems, well that is just not efficient, and leads to the next bubble.
The counter argument, raised by Martin Wolf, Raghuram Rajan, and now King, is of moral hazard, as well as the repricing of illiquid assets due to the known presence of the governmental backstop.
It's an interesting idea, and an interesting debate, to say the least.
"They make up rules when the old rules don't work."
(Reuters) - The Federal Reserve Bank of Cleveland on Wednesday said it has improved the way it constructs its median and trimmed-mean consumer price index to help reduce distortions caused by the owners' equivalent rent, or OER, component.
The new methodology breaks the OER into four regional subindexes, giving it less influence on the overall CPI figures, the bank said.
To reduce monthly volatility in the CPI, components that show the most extreme monthly prices changes above or below a certain threshold are excluded or "trimmed."
But when one of the components, such as OER, has an unusually large weight, the influence of that component can grow disproportionately as the proportion of extreme changes trimmed from the data increases, the bank said.
By breaking it into 4 regional subindexes, the OER will produce less distortion on the overall inflation measures, the bank said.
The influence of the new methodology is small on the trimmed-mean CPI figure the bank calculates but its influence on the median CPI can be signficant, the bank said.
GAwd I hate those stories.. The trap isn't prepayment penalties, teaser rates. it was running up a $10000 credit card bill for a trip to Thailand for their wedding ( in the SO's home country).. This, when they earned $45,000 pa in total.
Jeez.. when we got married we did it in.. and the reception was in.. and the guests, WHAT guests ( j/k)... but that's gonna sound like the Monty Python born in a shoe sketch so I'll stop. But you get the point..
And to get the point that MP were making here's the link
By breaking it into 4 regional subindexes, the OER will produce less distortion on the overall inflation measures, the bank said.
Less distortion? How?
They can smooth the measurement of the signal but does that make the smoother measurement right? What if the measurement is spiking because the actual signal is spiking?
Plus in a world that is getting more and more 'global' is measuring data more 'regional' the right thing to do?
And if inflation is essentially a money supply event... then is the money in Cleveland going to stay in Cleveland and the money in San Francisco stay in San Fran... or is it gonna slosh around and go where it will?
I have no problem with them measuring regionally so long as they don't throw out data that doesn't fit their preconceived conclusions.
I think these guys are trying to stretch the yard stick to make it fit a growing problem.
I'm fairly productive in my day job, but it's getting to the point where I've taken enough money from other people that I can quit and play my XBOX 360 all day instead of contributing to the real economy.
I'm not kidding.
I know you aren't. Been there, doing that. Each additional person who joins us makes me that much more stagflationist. I'm not kidding either.
I'm a marginal retiree and could easily get sucked back into the workforce if I make a stupid call at some point (perhaps on the heavily leveraged and nearly opposite deflation vs. inflation debate for instance). If the government becomes adamant about confiscating my weatlh, they'll likely succeed at some point. They only need to be right once to pull it off. I can't afford to be wrong once. Diversification "might" help but I tend to think of it as death by a thousand cuts (if we're headed where I think we're headed).
How's that for gloomy? Quick throw me a permabull! Medic!
No Orlando I didn't - it must be a meme I picked up from the same place the author did. Seriously.
But isn't it fishy that they only now go after equiv rent when it has an additive effect on inflation metics? When the boom was going bonkers and OER was minimal - nothing was done? WTF!
WASHINGTON (AP) - A Senate panel on Wednesday approved an increase in the limit on the national debt to $9.82 trillion, the fifth increase in the government's borrowing limit since President Bush took office.
The move came in response to a request by Treasury Secretary Henry Paulson to increase the debt limit before the government reaches the current $8.97 trillion limit in early October. The Senate Finance Committee approved the $850 billion debt limit increase by voice vote.
It's not clear when the measure will come before the full Senate, but leaders of both parties are likely to try to orchestrate smooth passage of the measure.
Do yourself a favor and order a copy/loan it from a library - it's incredibly amusing and childish, from the father of Peter 'world economy will decouple' Schiff.
I have no problem with them measuring regionally so long as they don't throw out data that doesn't fit their preconceived conclusions.
I think these guys are trying to stretch the yard stick to make it fit a growing problem.
To me it just looks like they're altering their methodology because they don't like the results. Even if the alterations are valid, the timing is such that it looks really bad.
And if they couldn't identify this as a problem ahead of time, then what basis is there for considering the other components of the index valid?
This also suggests to me that the unmodified Median CPI might be getting dangerously close to negative territory.
I think this is all an artifact of the Fed trying to disguise the excess speculation/credit expansion issue as an inflation issue. While there's some relationship between the two I think it's fundamentally disingenuous to do this. It's like they think everybody in the US is so phenomenally dumb that they just couldn't cope with the truth.
"We've improved our methodology in the most recent release. From now on the annualized Median CPI will be 3."
I know you aren't. Been there, doing that. Each additional person who joins us makes me that much more stagflationist. I'm not kidding either.
Me too. My wife & I would drop out tomorrow if they cut her health benefits - that's about the only thing keeping her working.
On the other hand this IS starting to smells a lot like the 80s S&L mess and I made a ton of money in the 80s... working for small job shops that were in effect 'maggots on the decaying body of corporate America'... lovely image huh?
Anywho... might have to start taking inventory of local small fab & machine shops... low cost, low over head & very flexible. Have broken shit will fix.
Think asteroid speeding across the sky & impacts planet earth, all the giant dinosaurs die. I want to ally with the like mammals scurrying around at their feet gnawing on the remains. Yum.
Now if no asteroid hits... eh, change that order, garcon.
I would argue that this new methodology isn't designed to show less inflation, but a more accurate inflation (and in this case, more inflation).
For example, using the original methodology, the increase in the median CPI in May 2007 was 1.0 percent on an annualized basis. Under the new approach, the increase in the median CPI for may 2007 would be 2.4 percent.
We should be pleased with the change, as inflation watchers.
Here's why I think they want to make the change. They are claiming that when the OER is HUGE it is thrown out entirely (trimmed) in the old system.
In the new system, since it is broken into four pieces, not all of it would be thrown out when calculating the median.
If anyone has ever met a true bean counter you will know that bean counters really do want to count all the beans. There's something almost obsessive compulsive about it, not that I speak from personal experience or anything (as I parse my Costco receipts so I can track every penny by category, lol). cough
Just my two cents (one of which is miscellaneous opinion and the other is budgeted as food for thought).
In any event, this is just the median CPI. It is used for predictive purposes and is not the CPI-U we all love (hate) and know.
If they start excluding stuff from the CPI-U just because it is "big", then I'd be right there with you guys screaming bloody murder.
I must say though, "3" has a nice ring to it. It certainly would reduce some government overhead (fewer needed to calculate it) AND would tell me where to put my money again (gold and silver!). Hahaha!
"AND would tell me where to put my money again (gold and silver!)."
Will Gold Continue To Shine?
13:28:00, September 12, 2007
Gold has been on a tear in recent trading days, decisively breaking out of its trading range. However, further upside is likely.
The precious metals complex (especially gold) is sniffing out more plentiful liquidity conditions. Real interest rates will fall in the U.S. both in absolute terms and relative to the rest of the world in the wake of the housing debacle. This will spur a flood of liquidity and drive up gold prices as investors and central banks search for alternatives to paper currencies. Demand for gold should also benefit from further depreciation in the U.S. dollar. Moreover, the Tokyo Stock Exchange is planning on introducing a gold ETF in the near future, which should further increase demand, albeit marginally. Finally, our fair value model has also been trending higher, suggesting that the bull market in gold is genuine and still has further upside. Bottom line: Our Commodity & Energy Strategy service recommends long positions in gold as the outlook has improved considerably.
Why did they wait until now? Maybe they don't go to Costco as often as you do.
They are probably in head scratching mode over what to do about all these spikes in the data. After thinking it through, perhaps they just now figured out that the spikes ARE the data!
For example, oil is $80. Do we still look to the core inflation rate to figure out where inflation is headed or do we, well, freak out a bit?
There has to be some small part of them that is like us (freaked out and human).
There has to be some small part of them that is like us (freaked out and human).
Ya all day keeping the brave face. Telling a bunch of Rotarians & their plate of rubber chicken everything is fine... after a long day of that one must be pretty edgy.
I'd hate to be one of their dogs. You can bet he doesn't run to the door to meet his master... hell he goes and hides under the bed and hopes the old man kicks the cat instead. Fat chance of that though... stupid cats are never around when you need them.
The one flaw in my stagflationary thinking (and why I no longer own gold or silver) is that nobody wanted gold when it was cheap. Now it is in the headlines and not so cheap. Even Suze Orman is on board (as of a year ago).
I told myself that if I couldn't, using hindsight, know to sell gold in the early 1980s, I probably wouldn't know when (if ever) to sell this time around.
There are multiple ways to cause pain. One could simply be a deflationary Great Depression once everyone is on the wrong side of the boat.
Houses, gold, and oil all moved up together. There's no proof that they won't move the other direction together. I think I'd need proof these days.
Here's my attempt to at least tie some of this to the topic and refer to CR's emphasis in the article.
But unless they were made available at an appropriate penalty rate, they would encourage in future the very risk-taking that has led us to where we are.
If risk continues to be under-priced, the next period of turmoil will be on an even bigger scale.
I just want to sit on the sidelines as best I can.
I'd hate to be one of their dogs. You can bet he doesn't run to the door to meet his master... hell he goes and hides under the bed and hopes the old man kicks the cat instead. Fat chance of that though... stupid cats are never around when you need them.
Okay, so that's some tough talk from BofE. But where were they on this issue during the easy credit years? This is a global credit bubble, and England was complicit in the runup as much as the US was. Just take a gander at England's consumer debt levels - historic. Real estate prices - even worse than the bubbliest US cities. If anything, they have an even longer way to fall than the US. It'll be interesting to see if King walks the walk after talking the talk.
For the past several days, the MAQS -- a group of analysts in the Federal Reserve's Macroeconomic and Quantitative Studies unit -- have run a series of what-if scenarios on the U.S. economy that will play a critical role in next week's interest- rate decision.
Investors notified New York-based Goldman last month that they plan to withdraw $1.6 billion from the fund, or almost a fifth of its assets as of July 31.
Last month, huh? Like, maybe, on August 15th that the bill due was laid forth?
And on the 16th, the markets went...(and the dollar went...)
King exposes BB and Paulson for their public ineptitude.
However, there are sharp pencils at FedRes; they're a dime a dozen at the finer B'Schools and LawSchools. And as long as there's nobody here who's a specialist in FedRes law, I'll take the longshot bet that there's gonna be a "surprise" that's will resolve some of this mess.
If it were any of us, we'd use the academic and recent-graduate brain trusts to kiss and uncover every rock in the legal garden.
Concerted action by many CB's is the most obvious. Something massive appears to be the solution. We're thinking within the box. Where's thinking outside the box?"
Hedgies ramp up hard assets while trashing the dollar; sell into huge gains with stradle and other strike techniques. That covers '07 even though WE ARE AWASH IN CRUDE AND NG.
These funds already know the party is over.... I couldnt help but laugh when seeing that JNJ stock price ACTUALLY moved today in either direction. Not too many bubbles left to blow/pop.
I opened a small position today in SDS, cant think of a better long....
You guys in the USA trust the BoE Governor - King far too much. You think YOU invented spin ? From hmm Henry V ( fighting for England in France ? IN france ? ) to Harold Wilson, Prime Minister assuring the populace that a 14% devaluation of the UK pound would NOT affect the pound in your pocket to Margaret Thatcher's desperate defence of sinking the General Belgrano ship outside of the 200 mile exclusion zone ( I wish she'd just said - this is f**cking war - we lie, cheat do whatever is need to win - this was WAR and no - it was not a fictitious War on Terror but one where a country really invaded an area called Falklands/Malvinas where the vast number people were Brit, all 3000 odd of them, had been for 150 years and genuinely wanted to remain that way) to the infamous phrase by the cabinet Secretary Robert Armstrong in the SpyCatcher trial in 1986 - he said "I was economical with the truth" - then there are the recent ... well you get the point.
Is he speaking with forked tongue now ? I have no idea. But I offer evidence that believing him is a bad idea.
And people claim there's no inflation...
the rest of the world are Sucka's !
without that flow, everything else would be stupid expensive.
With that... I'd like to express my thanks to my future battlefield combatants..
Thanks Chan, for the inexpensive tennis shoes
Thanks Tran, for the inexpensive Ipod
Thanks Alaweed, for the cheap Oil
Thanks Jose, for the cheap Spinach
Thanks to all those i've missed
Holy smoke! Just received notice from BAC about my BofA CC. Apparently they have re-calculated the risk of issuing uncollateralized debt. New stipulations:
Cash advances and direct deposits will now have an APR of 24.4%, as well a 4% fee for the transaction!
The new penalty for two or more late payments (or exceeding card limit) is that a new APR of 32.24% kicks in!
And that's for a cardholder with an excellent credit record and virtually no debts. When they re-price risk, they don't screw around!
"Heard it from a reliable source that Washington Mutual may be done for. Looks like Bank of America may be entertaining buying them in whole or in part. Turns out the hedge funds in Germany that tanked were WAMU's. I heard the numbers are in the mid billions for losses and that there is no way to sustain business."
re:
Central bankers can afford to talk tough when their currency is appreciating.
dryfly
Ahhhhh.. very well put. And perhaps explains my puzzlement at my angst at $50 /head bills in not so good restaurants in Kalkan, Turkey when the motley cru of Brit, German and French residents I was with didn't bat an eyelid. But I'm doing just as well or BETTER than all of them I reckoned... I still earn in US$,THINK in dollars and feel in dollars, the transfer of lots of funds out of US$ notwithstanding. The pysche issue is very interesting.
"In an interview with The Daily Telegraph, the Chancellor signals the end of the era of easy money, calling on large international banks to think about returning to "good old-fashioned banking".
.....
Mr Darling says: "They [borrowers] need to ask themselves, 'can I repay this?' and lenders need to ask themselves, 'If it goes wrong can I get it back?'
"People do need to think long and hard about this. One of the by-products of the current situation is that, not just at a high level but right across the piece, people will be a bit more cautious.
"Institutions have in some cases been prepared to lend to people without checking if they were ever going to repay it. It doesn't do any good for anybody, particularly the person in debt but also the lender, to be getting into a situation where you have bad debts."
NB: Chancellor == Treasury secretary but a political hack with years in the party - not someone parachuted in like Paulson, Rubin etc
NB2: like in the US, there was nary a peep from them during the boom times..
NB3: Odd name Darling.. very Scottish, especially when you consider his first name Alistair. With a Scot as PM as well, do we have an ethnic bias and stereotype playing out here ? I bloody hope so.
PM prices aren't cyclic; they move inversely to perceived political & economic stability. That's why it's called a "safe haven" (duh!).
ac, Boyz,
Peak Oil is here, dudes. Instead of whining about it, invest in it. Played right you can make more money investing in energy than you'll ever have to spend on using it.
One of the major oil companies has begun developing an oil field off shore Texas in 5000 ft of water. This led me to two conclusions. First, oil prices will stay high enough to justify developing very expensive fields like this one. And more importantly, that large pools of oil exist in deep water where little drilling had been done because of cost couldn't be justified and technology didn't exist to drill in water this deep. The truth is that we don't know how much oil is located beneath the ocean floor because much of it hasn't been drilled yet.
"Total's Mr de Margerie points (out)"there is tremendous opportunity if we look at deep horizons'(offshore). He believes that there are large deposits (of hydrocarbons) 10,000 metres (32,800 feet) or more underground. The snag is that they are usually under very high pressure or very hot, and may be extremely acidic. But as technology improves, he thinks, 'these very strange hydrocarbons' will become economic."
BoE leadership has the appropriate approach dead-on. BB and Paulson are working for the I-banks and hedge funds - it's disgusting and sick. They would rather devalue the dollar than force companies to be fiscally responsible.
It's not too late for Bernanke to show what he is made of. All he has to do is point to the price of oil and other commodities (and therefore the continuing risk of inflation) and say that one month of weak employment does not make a trend. Then hold or (dare I wish it?) raise rates. C'mon Ben, who has the bigger "brass knockers"?
The problem if they left REO alone two things happen: OASDI taxes get ratcheted up as the income limit goes up with the CPI, an inflation tax, like the AMT but for everyone working.
And the SS monthly payment goes up too.
Need to stretch the yard to keep things under wraps.
And who said OASDI was to prevent poverty in the elderly?
He is dead right about re-pricing. It has not happened. We hear the whine: "There is no deal to be had at any price."
BS.
There is no deal to be had at a price that does not hurt, so everybody just balks and waits for the Fed to bail them out. It is time to shoot one out of ten; that will get the attention of everybody else and then there will be markets again, but re-priced.
Twalt,
that was a great trade over the last two years in the steal and pipe makers's.
At 6 miles down, and 30ft sections @600lbs per, you need plenty of iron.
CLF, LSS, ati,rs
remember those stories!
$100 million dollar dry holes, but they keep trying
And that's for a cardholder with an excellent credit record and virtually no debts. When they re-price risk, they don't screw around!
unirealist
I'm not impressed...
If they cut your limit , from say 25k down to 2k, then I would think they were serious.
You can still transfer all your assett's to offshore acct, tap the card for it all, live well on there dime, and pull the plug in under 18 months thru BK.
Some parts of this party are still going strong , even after the punchbowl was removed.
As mr fisher is known to say... Lever UP
"Clearly, if the current state of the economy is such that interest rate cuts would support the real economy without raising the risk of inflation, there is no short-run trade-off, no dilemma and no need for risk-based decision theory. Unfortunately, I dont think were are in such a welcoming environment. Gauging the risk to price stability not from the Feds will o the wisp indicator of core inflation but rather from the underlying behaviour of headline inflation, US inflation has been above the Feds comfort zone for five years. Unit labour cost growth is rising, quite likely a reflection of a decline in productivity growth that is not just cyclical.
To play fast and loose with inflation at this point risks undermining all that has been achieved since Volcker took over as Chairman of the Fed. This is even more pertinent because we have a new Chairman whose first real test this is. Should he choose to act in a way that undermines the credibility of the Feds commitment to price stability, and should this lack of credibility get embodied in inflation expectations and long-term contracts, the cost of regaining virtue would be much higher than the cost of having a slowdown or even a recession now."
first
London Times
Governor stands firm on refusing to bail out banks over risky behaviour
Governor stands firm on refusing to bail out banks over their ‘risky behaviour’ - Times Online
Wow. Totally right. Old Mervyn has som brass knockers between those legs.
CR,
Can you explain what monetary policy has to do with risk pricing.
Would a plot of Feds Funds rate vs
coporate bonds spreads do the trick?
"But unless they were made available at an appropriate penalty rate, they would encourage in future the very risk-taking that has led us to where we are."
Can we get this sentenced tattooed onto Bernake's forearm? And the whole letter onto Greenspan's body?
F. Frederson,
LOL!
My god, a sensible Banker,can we trade Britney spears for him?
Talk about a Dear John letter.
Alistair Darling attacks banks' reckless lending - says the key is to make the system 'more open and transparent'
Alistair Darling attacks banks' reckless lending - Telegraph
Here's the thing for me: Talking tough is great, but the point of promoting stability usualy doesn't include the attitude of "tough titties". The haircut along with the penalty of the discount is fine until the problem may be beyond control. Barclays & RBS are chest deep, King is almost Reichian in his zeal.
Get the idiots thru it as best you can(with the most amount o pain that doesn't kill the patient), then set the rules of the game so it doesn't happen this bad again.
Guardian
King blames banks for taking too many risks
King blames banks for taking too many risks |
Business |
The Guardian
US consumers getting drilled by speculators for oil profits:
There's a huge amount of hedge fund money moving into the long side of the crude-oil market,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.The global supply balance will be tight as we go into the fourth quarter. There's already a lot of concern about low stocks.''
Oil prices have risen 31 percent this year as hedge funds and other speculators purchased futures because of surging energy demand. Long positions are bets that prices will rise.
The gamblers are taking over and gutting the economy for personal gain (myself included). Right now I'd have to say the Fed action/inaction is benefiting them at the expense of everybody else.
I'm fairly productive in my day job, but it's getting to the point where I've taken enough money from other people that I can quit and play my XBOX 360 all day instead of contributing to the real economy.
I'm not kidding.
Oil Rises to Record $80.18 on Larger-Than-Expected Supply Drop - Bloomberg.com
Economist.com
Uphill work
Market turmoil raises concerns about the Basel 2 banking accord- "Sisyphus was lucky."
Premium content | Economist.com
King exposes BB and Paulson for their public ineptitude.
However, there are sharp pencils at FedRes; they're a dime a dozen at the finer B'Schools and LawSchools. And as long as there's nobody here who's a specialist in FedRes law, I'll take the longshot bet that there's gonna be a "surprise" that's will resolve some of this mess.
If it were any of us, we'd use the academic and recent-graduate brain trusts to kiss and uncover every rock in the legal garden.
Concerted action by many CB's is the most obvious. Something massive appears to be the solution. We're thinking within the box. Where's thinking outside the box?
Could someone explain to me how this White house could possibly put this implosion off off till after the election? Maybe somebody in this forum could explain the type of "leverage" (threats) or Monetary policy could slow a train wreck. Or is this too big for the White house & Co.? Some creativity may be required. Thanks in advance
You know, if the Fed does elect to delay the day of reckoning and create another bubble, and there are more dire consequences at a later date, Mervyn is going to look like a genius. It's almost a game of chicken now. Mervyn is saying to BB, "Go ahead and try it. You know how it is going to end up. History will document you as the fool and me as the prescient voice of reason." I don't think BB will call this guy's bluff.
Could someone explain to me how this White house could possibly put this implosion off off till after the election? Maybe somebody in this forum could explain the type of "leverage" (threats) or Monetary policy could slow a train wreck. Or is this too big for the White house & Co.? Some creativity may be required. Thanks in advance
Well, George Jr. can't run again and I don't know that the White House really cares that much about the republican party.
Given that the party currently in control of congress could potentially benefit from economic trauma in the 2008 elections, we might have a recipe for inaction for another year or so.
From FT Alphaville...
SIVs repo what they sow
As SIVs face judgement week in rolling over their short term debt, most will be presented with a stark choice: draw down on bank credit lines or sell assets.
The first of those two options varies in its usefulness from SIV to SIV. Conduits - which are SIVs run by and for banks - have committed liquidity lines to cover all their short term debt. They, at least, have the luxury of knowing they can pay off their debts without selling assets at a loss.
[snip]
Faced with this gloomy dilemma, Moodys have added a new seduction.
In the Q&A session after a teleconference last week, the rating agency slipped in the announcement that it would be allowing SIVs to use repo financing in their debt structures, should they so choose.
[snip]
But there are some big questions with SIVs using repo financing. CreditSights raise a couple in a report out Wednesday:
Firstly, what happens to the SIVs net asset value calculations? NAV is calculated on the basis of a SIVs overall portfolio value minus its existing senior debts, divided by existing capital. It is basically, therefore, a measure of the collateral available to capital note holders. Selling assets would ordinarily have to be accompanied by a decrease in the number of a SIVs capital notes - otherwise the NAV would drop, and could trigger a Major Capital Loss test, and a forced wind-down. A repo will sell SIV assets, albeit on the understanding that theyll be sold back. So where does that leave the NAV?
Secondly, not only will repo financing leave SIV capital note holders with less collateral - but poorer quality collateral too, since repos will take out the most highly rated assets in the SIV portfolio. According to CreditSights:
Taking those unknowns into account, its hard to see repo financing enamouring institutions to the idea of investing in SIV paper. Rather than solve the current crisis in the commercial paper market, repo financing could well just underscore the problem which is creating it: fear.
"US consumers getting drilled by speculators for oil profits:"
Royal Dutch Shell Plc's top executive said on Wednesday he sees no fundamental reason for crude oil prices to have jumped above $78 a barrel.
"No one has to wait at the gas pumps of the world. There is no physical problem," Shell Chief Executive Jeroen van der Veer told reporters in Calgary.
"(There is) a lot of psychology in the price," he said.
Oil rose above $80 a barrel for the first time on Wednesday, touching $80.18 on the New York Mercantile Exchange before falling back to a record close of $79.91 a barrel as U.S. government data showed crude inventories took an unexpected drop last week.
Van der Veer said the price had risen above what the industry needs to sustain its operations. But he added that he expected more volatility in prices because of "the psychological component."
His comments echoed those made by the chief executive of Exxon Mobil Corp last week. Rex Tillerson told a Calgary business audience that $70 a barrel oil prices were not justified by market fundamentals.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
"the psychological component." = Greed
Gaudia Ray - I'm with you! They make up rules when the old rules don't work. We may see it on a massive scale. Something BIG is going to go down. But, as the tan man is fond of saying are we going to GAG on it?
I think there is a little back-story behind some of the remarks in this paper that hasn't really been brought up here.
Willem Buiter and Anne Sibert, in a series of recent articles (start here) argue that the central banks should be willing to become market makers of last resort for both banks and non-banks for a broad range of financial instruments.
The argument goes, basically, that functioning markets are a social good. Even markets in subprime ABS, CDO's, CPDO's, as evidenced by the impact of the meltdown of those relatively obscure instruments on the greater marketplace. The importance of non-bank financial businesses (IB's) to our economic system has overshadowed the traditional banking sector.
By being able to become the market-maker of last resort, the central banks could inject "liquidity" precisely where it is needed, in specific markets, rather than just opening the monetary floodgates by cranking down the short-term interbank rate.
These smaller markets could effectively be restored to normal operation with the direct, targeted commitment of a few billion or tens of billions of dollars. However, when you basically have to pour money in the system and hope a little bit of it ends up where you are seeing the problems, well that is just not efficient, and leads to the next bubble.
The counter argument, raised by Martin Wolf, Raghuram Rajan, and now King, is of moral hazard, as well as the repricing of illiquid assets due to the known presence of the governmental backstop.
It's an interesting idea, and an interesting debate, to say the least.
"They make up rules when the old rules don't work."
(Reuters) - The Federal Reserve Bank of Cleveland on Wednesday said it has improved the way it constructs its median and trimmed-mean consumer price index to help reduce distortions caused by the owners' equivalent rent, or OER, component.
The new methodology breaks the OER into four regional subindexes, giving it less influence on the overall CPI figures, the bank said.
To reduce monthly volatility in the CPI, components that show the most extreme monthly prices changes above or below a certain threshold are excluded or "trimmed."
Cleveland Fed revises methodology for CPI measures
| Reuters
But when one of the components, such as OER, has an unusually large weight, the influence of that component can grow disproportionately as the proportion of extreme changes trimmed from the data increases, the bank said.
By breaking it into 4 regional subindexes, the OER will produce less distortion on the overall inflation measures, the bank said.
The influence of the new methodology is small on the trimmed-mean CPI figure the bank calculates but its influence on the median CPI can be signficant, the bank said.
A Home Loan Trap
A Home Loan Trap - NY Times
Kudos Kevin
Kudos - Wikipedia, the free encyclopedia
Dear Bank of England,
Can we please borrow Mr. King for a few months?
Love,
The non-pigmen of America
RE: Home loan trap
GAwd I hate those stories.. The trap isn't prepayment penalties, teaser rates. it was running up a $10000 credit card bill for a trip to Thailand for their wedding ( in the SO's home country).. This, when they earned $45,000 pa in total.
Jeez.. when we got married we did it in.. and the reception was in.. and the guests, WHAT guests ( j/k)... but that's gonna sound like the Monty Python born in a shoe sketch so I'll stop. But you get the point..
And to get the point that MP were making here's the link
YouTube - Monty Python - Four Yorkshiremen
-K
By breaking it into 4 regional subindexes, the OER will produce less distortion on the overall inflation measures, the bank said.
Less distortion? How?
They can smooth the measurement of the signal but does that make the smoother measurement right? What if the measurement is spiking because the actual signal is spiking?
Plus in a world that is getting more and more 'global' is measuring data more 'regional' the right thing to do?
And if inflation is essentially a money supply event... then is the money in Cleveland going to stay in Cleveland and the money in San Francisco stay in San Fran... or is it gonna slosh around and go where it will?
I have no problem with them measuring regionally so long as they don't throw out data that doesn't fit their preconceived conclusions.
I think these guys are trying to stretch the yard stick to make it fit a growing problem.
"I think these guys are trying to stretch the yard stick to make it fit a growing problem."
LOL - You've read "The Kingdom of Moltz" by Irwin Schiff, I see.
ac,
I'm fairly productive in my day job, but it's getting to the point where I've taken enough money from other people that I can quit and play my XBOX 360 all day instead of contributing to the real economy.
I'm not kidding.
I know you aren't. Been there, doing that. Each additional person who joins us makes me that much more stagflationist. I'm not kidding either.
I'm a marginal retiree and could easily get sucked back into the workforce if I make a stupid call at some point (perhaps on the heavily leveraged and nearly opposite deflation vs. inflation debate for instance). If the government becomes adamant about confiscating my weatlh, they'll likely succeed at some point. They only need to be right once to pull it off. I can't afford to be wrong once. Diversification "might" help but I tend to think of it as death by a thousand cuts (if we're headed where I think we're headed).
How's that for gloomy? Quick throw me a permabull! Medic!
No Orlando I didn't - it must be a meme I picked up from the same place the author did. Seriously.
But isn't it fishy that they only now go after equiv rent when it has an additive effect on inflation metics? When the boom was going bonkers and OER was minimal - nothing was done? WTF!
Cause:
WASHINGTON (AP) - A Senate panel on Wednesday approved an increase in the limit on the national debt to $9.82 trillion, the fifth increase in the government's borrowing limit since President Bush took office.
The move came in response to a request by Treasury Secretary Henry Paulson to increase the debt limit before the government reaches the current $8.97 trillion limit in early October. The Senate Finance Committee approved the $850 billion debt limit increase by voice vote.
It's not clear when the measure will come before the full Senate, but leaders of both parties are likely to try to orchestrate smooth passage of the measure.
Effect:
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Do yourself a favor and order a copy/loan it from a library - it's incredibly amusing and childish, from the father of Peter 'world economy will decouple' Schiff.
I have no problem with them measuring regionally so long as they don't throw out data that doesn't fit their preconceived conclusions.
I think these guys are trying to stretch the yard stick to make it fit a growing problem.
To me it just looks like they're altering their methodology because they don't like the results. Even if the alterations are valid, the timing is such that it looks really bad.
And if they couldn't identify this as a problem ahead of time, then what basis is there for considering the other components of the index valid?
This also suggests to me that the unmodified Median CPI might be getting dangerously close to negative territory.
I think this is all an artifact of the Fed trying to disguise the excess speculation/credit expansion issue as an inflation issue. While there's some relationship between the two I think it's fundamentally disingenuous to do this. It's like they think everybody in the US is so phenomenally dumb that they just couldn't cope with the truth.
"We've improved our methodology in the most recent release. From now on the annualized Median CPI will be 3."
Here's a link to other amusing titles in its ilk: Yahoo! GeoCities: Get a web site with easy-to-use site building tools.
Extreme right cartoon books rock hard$
I know you aren't. Been there, doing that. Each additional person who joins us makes me that much more stagflationist. I'm not kidding either.
Me too. My wife & I would drop out tomorrow if they cut her health benefits - that's about the only thing keeping her working.
On the other hand this IS starting to smells a lot like the 80s S&L mess and I made a ton of money in the 80s... working for small job shops that were in effect 'maggots on the decaying body of corporate America'... lovely image huh?
Anywho... might have to start taking inventory of local small fab & machine shops... low cost, low over head & very flexible. Have broken shit will fix.
Think asteroid speeding across the sky & impacts planet earth, all the giant dinosaurs die. I want to ally with the like mammals scurrying around at their feet gnawing on the remains. Yum.
Now if no asteroid hits... eh, change that order, garcon.
"We've improved our methodology in the most recent release. From now on the annualized Median CPI will be 3."
LOL.
Kevin,
I would argue that this new methodology isn't designed to show less inflation, but a more accurate inflation (and in this case, more inflation).
For example, using the original methodology, the increase in the median CPI in May 2007 was 1.0 percent on an annualized basis. Under the new approach, the increase in the median CPI for may 2007 would be 2.4 percent.
We should be pleased with the change, as inflation watchers.
Here's why I think they want to make the change. They are claiming that when the OER is HUGE it is thrown out entirely (trimmed) in the old system.
In the new system, since it is broken into four pieces, not all of it would be thrown out when calculating the median.
If anyone has ever met a true bean counter you will know that bean counters really do want to count all the beans. There's something almost obsessive compulsive about it, not that I speak from personal experience or anything (as I parse my Costco receipts so I can track every penny by category, lol). cough
Just my two cents (one of which is miscellaneous opinion and the other is budgeted as food for thought).
In any event, this is just the median CPI. It is used for predictive purposes and is not the CPI-U we all love (hate) and know.
If they start excluding stuff from the CPI-U just because it is "big", then I'd be right there with you guys screaming bloody murder.
I must say though, "3" has a nice ring to it. It certainly would reduce some government overhead (fewer needed to calculate it) AND would tell me where to put my money again (gold and silver!). Hahaha!
One last thought. Using a rough back of envelope calculation I think the government could calculate "3" with no more than 1,000 workers.
Think of the savings! Heck, they could subcontract the job to us. We could be like the Haliburton of CPI engineers.
(I would like to be the one who centers the big "3" on the data page if nobody else has a preference.)
Stagflationary Mark
Why did they wait until now? Maybe they don't go to Costco as often as you do.
"AND would tell me where to put my money again (gold and silver!)."
Will Gold Continue To Shine?
13:28:00, September 12, 2007
Gold has been on a tear in recent trading days, decisively breaking out of its trading range. However, further upside is likely.
The precious metals complex (especially gold) is sniffing out more plentiful liquidity conditions. Real interest rates will fall in the U.S. both in absolute terms and relative to the rest of the world in the wake of the housing debacle. This will spur a flood of liquidity and drive up gold prices as investors and central banks search for alternatives to paper currencies. Demand for gold should also benefit from further depreciation in the U.S. dollar. Moreover, the Tokyo Stock Exchange is planning on introducing a gold ETF in the near future, which should further increase demand, albeit marginally. Finally, our fair value model has also been trending higher, suggesting that the bull market in gold is genuine and still has further upside. Bottom line: Our Commodity & Energy Strategy service recommends long positions in gold as the outlook has improved considerably.
BCA Research
Yeah baby.
Why did they wait until now? Maybe they don't go to Costco as often as you do.
They are probably in head scratching mode over what to do about all these spikes in the data. After thinking it through, perhaps they just now figured out that the spikes ARE the data!
For example, oil is $80. Do we still look to the core inflation rate to figure out where inflation is headed or do we, well, freak out a bit?
There has to be some small part of them that is like us (freaked out and human).
There has to be some small part of them that is like us (freaked out and human).
Ya all day keeping the brave face. Telling a bunch of Rotarians & their plate of rubber chicken everything is fine... after a long day of that one must be pretty edgy.
I'd hate to be one of their dogs. You can bet he doesn't run to the door to meet his master... hell he goes and hides under the bed and hopes the old man kicks the cat instead. Fat chance of that though... stupid cats are never around when you need them.
Kevin,
The one flaw in my stagflationary thinking (and why I no longer own gold or silver) is that nobody wanted gold when it was cheap. Now it is in the headlines and not so cheap. Even Suze Orman is on board (as of a year ago).
A Savvy Investment for a Tough Market
It's been hard not to take a shine to gold lately.
This is the same person who hated gold when it was cheap (and said she would never invest in commodities, never).
Headline Google Search:
"Dollar": 94,156 news articles
"Gold": 101,883 news articles
I told myself that if I couldn't, using hindsight, know to sell gold in the early 1980s, I probably wouldn't know when (if ever) to sell this time around.
There are multiple ways to cause pain. One could simply be a deflationary Great Depression once everyone is on the wrong side of the boat.
Houses, gold, and oil all moved up together. There's no proof that they won't move the other direction together. I think I'd need proof these days.
Here's my attempt to at least tie some of this to the topic and refer to CR's emphasis in the article.
But unless they were made available at an appropriate penalty rate, they would encourage in future the very risk-taking that has led us to where we are.
If risk continues to be under-priced, the next period of turmoil will be on an even bigger scale.
I just want to sit on the sidelines as best I can.
dryfly,
I'd hate to be one of their dogs. You can bet he doesn't run to the door to meet his master... hell he goes and hides under the bed and hopes the old man kicks the cat instead. Fat chance of that though... stupid cats are never around when you need them.
For your amusement.
Goldman's Global Alpha Fund Fell 22 Percent in August (Update3) - Bloomberg.com
Goldman Global Alpha Fund Fell 22% in August, Most in Any Month
Okay, so that's some tough talk from BofE. But where were they on this issue during the easy credit years? This is a global credit bubble, and England was complicit in the runup as much as the US was. Just take a gander at England's consumer debt levels - historic. Real estate prices - even worse than the bubbliest US cities. If anything, they have an even longer way to fall than the US. It'll be interesting to see if King walks the walk after talking the talk.
Bernanke Spurns Greenspan Quick Fix, Seeking Data, Deliberation
Bernanke Spurns Greenspan's Quick Fix, Seeking Data (Update1) - Bloomberg.com
For the past several days, the MAQS -- a group of analysts in the Federal Reserve's Macroeconomic and Quantitative Studies unit -- have run a series of what-if scenarios on the U.S. economy that will play a critical role in next week's interest- rate decision.
Lehman Brothers Conference audio casts and presentation slides:
Lehman Brothers 2007 Financial Services Conference
Lots of stuff to chew on here, 3 days worth. You can put in junk info for name/email/company to gain access.
REBear, from that link:
Investors notified New York-based Goldman last month that they plan to withdraw $1.6 billion from the fund, or almost a fifth of its assets as of July 31.
Last month, huh? Like, maybe, on August 15th that the bill due was laid forth?
And on the 16th, the markets went...(and the dollar went...)
dotcommunist,
It looks like they figured out the problem.
Goldman blamed its losses on too many quantitative funds making the same trades, and said in mid-August it would have to develop new strategies.
From Ray:
King exposes BB and Paulson for their public ineptitude.
However, there are sharp pencils at FedRes; they're a dime a dozen at the finer B'Schools and LawSchools. And as long as there's nobody here who's a specialist in FedRes law, I'll take the longshot bet that there's gonna be a "surprise" that's will resolve some of this mess.
If it were any of us, we'd use the academic and recent-graduate brain trusts to kiss and uncover every rock in the legal garden.
Concerted action by many CB's is the most obvious. Something massive appears to be the solution. We're thinking within the box. Where's thinking outside the box?"
Hedgies ramp up hard assets while trashing the dollar; sell into huge gains with stradle and other strike techniques. That covers '07 even though WE ARE AWASH IN CRUDE AND NG.
These funds already know the party is over.... I couldnt help but laugh when seeing that JNJ stock price ACTUALLY moved today in either direction. Not too many bubbles left to blow/pop.
I opened a small position today in SDS, cant think of a better long....
You guys in the USA trust the BoE Governor - King far too much. You think YOU invented spin ? From hmm Henry V ( fighting for England in France ? IN france ? ) to Harold Wilson, Prime Minister assuring the populace that a 14% devaluation of the UK pound would NOT affect the pound in your pocket to Margaret Thatcher's desperate defence of sinking the General Belgrano ship outside of the 200 mile exclusion zone ( I wish she'd just said - this is f**cking war - we lie, cheat do whatever is need to win - this was WAR and no - it was not a fictitious War on Terror but one where a country really invaded an area called Falklands/Malvinas where the vast number people were Brit, all 3000 odd of them, had been for 150 years and genuinely wanted to remain that way) to the infamous phrase by the cabinet Secretary Robert Armstrong in the SpyCatcher trial in 1986 - he said "I was economical with the truth" - then there are the recent ... well you get the point.
Is he speaking with forked tongue now ? I have no idea. But I offer evidence that believing him is a bad idea.
-K
or i.e. since the economy is botched anyway why not drive crude to $ 100 a brrl, who the hell needs some lame ass lie-excuse like a hurricane anyway.
$850 billion ....
in one year....
And people claim there's no inflation...
the rest of the world are Sucka's !
without that flow, everything else would be stupid expensive.
With that... I'd like to express my thanks to my future battlefield combatants..
Thanks Chan, for the inexpensive tennis shoes
Thanks Tran, for the inexpensive Ipod
Thanks Alaweed, for the cheap Oil
Thanks Jose, for the cheap Spinach
Thanks to all those i've missed
Is he speaking with forked tongue now ? I have no idea. But I offer evidence that believing him is a bad idea.
Central bankers can afford to talk tough when their currency is appreciating.
Holy smoke! Just received notice from BAC about my BofA CC. Apparently they have re-calculated the risk of issuing uncollateralized debt. New stipulations:
Cash advances and direct deposits will now have an APR of 24.4%, as well a 4% fee for the transaction!
The new penalty for two or more late payments (or exceeding card limit) is that a new APR of 32.24% kicks in!
And that's for a cardholder with an excellent credit record and virtually no debts. When they re-price risk, they don't screw around!
Repost from Broker Outpost Mortgage Forums
Rumor Mill.... Washington Mutual
"Heard it from a reliable source that Washington Mutual may be done for. Looks like Bank of America may be entertaining buying them in whole or in part. Turns out the hedge funds in Germany that tanked were WAMU's. I heard the numbers are in the mid billions for losses and that there is no way to sustain business."
Anyone hear more on this?
re:
Central bankers can afford to talk tough when their currency is appreciating.
dryfly
Ahhhhh.. very well put. And perhaps explains my puzzlement at my angst at $50 /head bills in not so good restaurants in Kalkan, Turkey when the motley cru of Brit, German and French residents I was with didn't bat an eyelid. But I'm doing just as well or BETTER than all of them I reckoned... I still earn in US$,THINK in dollars and feel in dollars, the transfer of lots of funds out of US$ notwithstanding. The pysche issue is very interesting.
Thanks for the insight.
-K
Ottawan
No new WaMu news on google yet.
More UK news in the same vein.
"In an interview with The Daily Telegraph, the Chancellor signals the end of the era of easy money, calling on large international banks to think about returning to "good old-fashioned banking".
.....
Mr Darling says: "They [borrowers] need to ask themselves, 'can I repay this?' and lenders need to ask themselves, 'If it goes wrong can I get it back?'
"People do need to think long and hard about this. One of the by-products of the current situation is that, not just at a high level but right across the piece, people will be a bit more cautious.
"Institutions have in some cases been prepared to lend to people without checking if they were ever going to repay it. It doesn't do any good for anybody, particularly the person in debt but also the lender, to be getting into a situation where you have bad debts."
Alistair Darling attacks banks' reckless lending - Telegraph
Alistair Darling signals the end of easy money - Telegraph
NB: Chancellor == Treasury secretary but a political hack with years in the party - not someone parachuted in like Paulson, Rubin etc
NB2: like in the US, there was nary a peep from them during the boom times..
NB3: Odd name Darling.. very Scottish, especially when you consider his first name Alistair. With a Scot as PM as well, do we have an ethnic bias and stereotype playing out here ? I bloody hope so.
-K
Stag Mark,
PM prices aren't cyclic; they move inversely to perceived political & economic stability. That's why it's called a "safe haven" (duh!).
ac, Boyz,
Peak Oil is here, dudes. Instead of whining about it, invest in it. Played right you can make more money investing in energy than you'll ever have to spend on using it.
tj & the bear,
Once an investment reaches the level of "duh!" I tend to get a bit extra worried when I'm on that side of the fence, lol.
That being said, I suspect peak oil might be here and I suspect those holding gold will do better than me.
However, if you are right I still won't be doing THAT poorly compared to most (stagflationary IS in my name after all
), now will I?
One of the major oil companies has begun developing an oil field off shore Texas in 5000 ft of water. This led me to two conclusions. First, oil prices will stay high enough to justify developing very expensive fields like this one. And more importantly, that large pools of oil exist in deep water where little drilling had been done because of cost couldn't be justified and technology didn't exist to drill in water this deep. The truth is that we don't know how much oil is located beneath the ocean floor because much of it hasn't been drilled yet.
re trader walt
O c'mon. Names, sources and links please.
-K
-K,
MMS has an over view of deep water drilling here: http://www.mms.gov/Assets/PressConference11152004/MSGlossySingle_110404.pdf
Walt
Via Implode-O-Meter:
WAMU Closing Three Fulfillment Centers
and among the feeds on the rhs of CR's page, one from Housing Wire says
Report: WAMU Will Exit Warehouse Business
[Sigh] Was it just 3 or 4 years ago that they arrived in Chicago to bring subprime ARMs and the like unto the heathen who knew not of such things?
-K,
From a 2005 Economist:
Premium content | Economist.com
"Total's Mr de Margerie points (out)"there is tremendous opportunity if we look at deep horizons'(offshore). He believes that there are large deposits (of hydrocarbons) 10,000 metres (32,800 feet) or more underground. The snag is that they are usually under very high pressure or very hot, and may be extremely acidic. But as technology improves, he thinks, 'these very strange hydrocarbons' will become economic."
BoE leadership has the appropriate approach dead-on. BB and Paulson are working for the I-banks and hedge funds - it's disgusting and sick. They would rather devalue the dollar than force companies to be fiscally responsible.
Bernanke needs to be removed immediately.
It's not too late for Bernanke to show what he is made of. All he has to do is point to the price of oil and other commodities (and therefore the continuing risk of inflation) and say that one month of weak employment does not make a trend. Then hold or (dare I wish it?) raise rates. C'mon Ben, who has the bigger "brass knockers"?
Stretch the yardstick!!
Great.
The problem if they left REO alone two things happen: OASDI taxes get ratcheted up as the income limit goes up with the CPI, an inflation tax, like the AMT but for everyone working.
And the SS monthly payment goes up too.
Need to stretch the yard to keep things under wraps.
And who said OASDI was to prevent poverty in the elderly?
He is dead right about re-pricing. It has not happened. We hear the whine: "There is no deal to be had at any price."
BS.
There is no deal to be had at a price that does not hurt, so everybody just balks and waits for the Fed to bail them out. It is time to shoot one out of ten; that will get the attention of everybody else and then there will be markets again, but re-priced.
Twalt,
that was a great trade over the last two years in the steal and pipe makers's.
At 6 miles down, and 30ft sections @600lbs per, you need plenty of iron.
CLF, LSS, ati,rs
remember those stories!
$100 million dollar dry holes, but they keep trying
And that's for a cardholder with an excellent credit record and virtually no debts. When they re-price risk, they don't screw around!
unirealist
I'm not impressed...
If they cut your limit , from say 25k down to 2k, then I would think they were serious.
You can still transfer all your assett's to offshore acct, tap the card for it all, live well on there dime, and pull the plug in under 18 months thru BK.
Some parts of this party are still going strong , even after the punchbowl was removed.
As mr fisher is known to say... Lever UP
There's an article by Willem Buiter on the following page (3rd comment) that's definitely worth reading.
FT.com | Economists' Forum | Challenge of rescuing world economy
Love the conclusion:
"Clearly, if the current state of the economy is such that interest rate cuts would support the real economy without raising the risk of inflation, there is no short-run trade-off, no dilemma and no need for risk-based decision theory. Unfortunately, I dont think were are in such a welcoming environment. Gauging the risk to price stability not from the Feds will o the wisp indicator of core inflation but rather from the underlying behaviour of headline inflation, US inflation has been above the Feds comfort zone for five years. Unit labour cost growth is rising, quite likely a reflection of a decline in productivity growth that is not just cyclical.
To play fast and loose with inflation at this point risks undermining all that has been achieved since Volcker took over as Chairman of the Fed. This is even more pertinent because we have a new Chairman whose first real test this is. Should he choose to act in a way that undermines the credibility of the Feds commitment to price stability, and should this lack of credibility get embodied in inflation expectations and long-term contracts, the cost of regaining virtue would be much higher than the cost of having a slowdown or even a recession now."
"US inflation has been above the Fed’s comfort zone for five years."
Realistically then, this means they were not truthful about their 'comfort zone' because, obviously, they were comfortable with it. They accepted it.
how odd: the new median CPI tweak is exactly taken from a paper from the Reserve Bank of Australia from last year... RBA:RDP2006-10 The Performance of Trimmed Mean Measures of Underlying Inflation
Those Antipodeans strike again.