Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot.
I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.
The writer was chairman of the Federal Reserve from 1979 to 1987. This article is adapted from a speech in February at an economic summit sponsored by the Stanford Institute for Economic Policy Research.
What I'm really talking about boils down to the oldest lesson of financial policy in Central Banking: A strong sense of monetary and fiscal discipline.
I suspect discipline will be offered by a "ruler" since there is very little of our rust "belt" left.
Ah good ol PV, the man who "saved" the dollar from Stagflation. He won in the short term against Dr. Kurt Richebächer, but now we have implosion and deflation in front of us. Sorry Stagflationary Mark, I just moved to the 70/30 line of deflation vs stagflation.
Hey Chucky and Shiti here's a song for the weekend meeting. Enjoy.
pardon me for interrupting your current thread, but, I have a question in regard to the BLS payroll numbers and why some seem to concentrate on the Birth/Death assumptions and point out the potential flaws in the data due to the ongoing adjustments (assuming due to BLS's own admission, the weaknesses of the data at turning points), when other economists always seem to totally ignore these figures and take the headline number as gospel?
I guess my primary question is that you regularly look deep into the data, in particular on housing, paying close attention to historical data, and at the same time you always seem open to potential differences that may exist during this particular cycle. Your pattern seems to suggest that you believe that this is indeed a turning point, that said, in regard to the payroll and potentially all data currently coming forward, it would seem more prudent to question every piece and look deeper, yes?
"What I'm really talking about boils down to the oldest lesson of financial policy in Central Banking: A strong sense of monetary and fiscal discipline."
Conjure got all misty eyed when the The Great One spoke this line.
Cuz when the big boys go down the debt pyramid collapse and this brings down asset prices. Money is destroyed as debt blows up. Gold may or may not hold up but debt based money will vanish. Poof! It could still be massive inflation, but the conduit for that is debt growth, and that's going to dry up, IMHO.
NYSE Eliminates Trading Curbs Dating Back to 1987 (Update1)
By Edgar Ortega
Enlarge Image/Details
Oct. 26 (Bloomberg) -- The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they're no longer as effective in damping swings in prices.
NYSE Eliminates Trading Curbs Dating Back to 1987 (Update1)
By Edgar Ortega
Enlarge Image/Details
Oct. 26 (Bloomberg) -- The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they're no longer as effective in damping swings in prices.
Best weekend regards,
Falcor | 11.02.07 - 9:44 pm | #
2 different things. The trading curbs are restrictions on program trading (selling baskets of stock to hedge futures trades). The trading curbs became a joke as such a huge % of NYSE volume goes up on other markets now. Trust me - if the Dow is down 10% there will be a market halt.
Aaron Krowne had an interesting theory about the removed curbs. He feels the big boys are loading up on shorts to allow them to really stick it to the small investor once stocks start moving down in earnest.
Misean-that won't stop the Fed from cutting rates to the bone which will only fuel the move into commodities. Oil is helped along b/c i think there is truly some structural shortages of production. This will put upward pressure on rates.
Since I'm in government paper as a stagflation defense these days, I'm comfortable with the deflation story.
I have two fears the way I'm positioned.
First, a productivity miracle story would push real yields up. I'm not holding my breath on that one. Even then, I'd probably do okay long-term. Real yields rising in the short-term (hurting me) would be offset by future real yields being high.
Second, a hyperinflation story would crush me. I'm in the rather wimpy paper versions of stagflation defense, not the real thing (hard assets like oil and gold).
Deflation though? Bring it on. TIPS and I-Bonds did very well during the dotcom bust though, for what it is worth.
I joke about the "bring it on" by the way, with the same swagger our president might have. My girlfriend is still looking for a job. It isn't good for either of us. The mission is most certainly not accomplished.
If anybody's interested, I made graph that tries the make sense of the commodity situation. I also put up two old graphs I made a while back but didn't have time to post.
First 3 posts may contain information you may find useful, or not:
"I joke about the "bring it on" by the way, with the same swagger our president might have. My girlfriend is still looking for a job. It isn't good for either of us. The mission is most certainly not accomplished.
Stagflationary Mark"
Sorry man. I wasn't attacking you, and your blog has some GREAT charts. I just think the Stagflation thing, which I have been on the fence over and never opposed is looking thin now. I think now we're eith deflation or hyper...and I ain't happy about either. I don't think my assets will well weather a strong storm of either, though. You can't eat gold or silver, and if markets disintegrate, it'll be tough to trade it for necessities.
I know I got the Super Colendar Tin Foil Hat on, but I'm just getting a bit scared...
Black Friday hell, Monday may look like a black hole set amidst the flock. If this one site is any example of the rumors and speculation that will build thru the weekend, the poop is gonna fly! And if anything else big comes out of the Sunday meeting, just get some pages ready for history.
I know this has been discussed recently, but I'm not sure I'd be able to find where.....
Anyone know a good way to find "ratings" of banks? My cash is currently sitting in BoA, and I'm not too thrilled about that. Any other suggestions or pointers greatly appreciated.
I didn't mean to imply you were attacking me. It certainly wasn't taken that way.
I think now we're eith deflation or hyper...
That implies the Fed can still pick the middle ground to me. The middle ground of stagflationary quicksand that is, since I'm not a believer that the Fed can make the pain go away.
That being said, part of me suspects the deflationists and inflationists are both right. The debate between the two may never end.
The patient is being kept at room temperature by immersing one foot in hot lava while simultaneously immersing the other foot in a liquid nitrogen bath.
(Let's not forget the leeches. They may not cure what ails us. They may not even be good for us. I'm not sure what my point is, lol.)
"I come now to the heart of the problem, as a Nation we are consuming and investing, that is spending, about 6% more than we are producing. What holds it all together? - High consumption - high leverage - government deficits - What holds it all together is a really massive and growing flow of capital from abroad. A flow of capital that today runs to more than $2 Billion per day."
We hear this basically since Pres. Reagan took office in 1980. In reality, it has been a prosperous and stable time with only minor and infrequent recessions over the last 27 years. I don't know what makes these calls now any more credible.
Of course, other pundits have proclaimed the Great Depression of 1990, 1991, 1992, 1993, .... 2005, 2006, 2007. You could have not been any more wrong.
i'm not sure how u can dismiss stagflation with gold over 800 and oil at 95.
idoc,
Stagflation typically refers to the period in the late seventies when prices and wages were going up despite a stagnant economy. The point was that the inflation represented an acceleration in the entrainment of money in to the monetary supply via accelerating wages and prices beyond the creation of wealth, and far more importantly, beyond the increase in the real burden of debt.
This is true "70s-style inflation".
Today we have a fundamentally different phenomenon -- prices are rising not because of an accelerating induction of money into the economy via wages and earnings, but instead by an increase in the velocity and substitution of credit-based assets for "money".
In other words:
The 1970s Stagflation Scenario
Independent of economic factors, more money was being "sucked" into the economy because wages and earnings were increasing faster than the cost of monetizing debt to create new money. The cost of creating new money was declining. Hence the acceleration of prices and the treat of runaway hyperinflation.
Today's Scenario
Less money is being "sucked" in to the economy, but that money is increasing in availablity due to lax lending standards and a strong motivation to borrow to "build wealth" through asset appreciation. But the cost of monetizing new debt to create money is increasing because income and earnings aren't keeping pace with debt servicing costs. The cost of creating new money is increasing. Hence the threat that earnings/incomes will no longer suffice to service debt once the asset appreciation stops, which may lead to the cost of creating new money to accelerate to the point where wealth is being created faster (destroyed slower) than money. This is deflation.
All that stuff pv was was talking about isn't what has put the bank's tits in a wringer. 'twas greed. The Paulsons and Princes of the world bail out on the wings of platinum parachutes while the innocent, the frugal, pay for the sins of the world with their abundance of misery.
I'm with ya bro...I know Austrian theory expects deflation hard...but these yoyo's on War Shriek keep the top spinning. My concern is that now that this bubble is truly global, unless Mars and Saturn enter the picture...well things are going to be fugly.
As far as oj is concerned, he got off in ~95, this time it ain't lookin' so good.
You might want to pick up a copy of Running On Empty by Peter Peterson chairman of the Blackstone group. He basical says the same thing a Voelker.
If America keep doing business as we are we are going to be screwed. You may out run it but your kids if you have any damn sure will not.
Has anyone heard anything recently about the processing backlog of derivatives trades?
As I remember it, about two years ago there was worry that derivative trades were being done with paper and that there was a huge backlog in processing them. The NY Fed got involved and last I heard, things were going better, but there was still a backlog. The worry was that if some sort of crisis came along, things could ugly.
I haven't heard anything about this recently, so I'm assuming it's no longer an issue, but I'm wondering if anyone has heard anything.
If I were Buffet/Greenburg or someone of that ilk, I'd see if I could hire Spector, Maheras and Costa, give them a $2-4 billion fund and say go to work. I'll pay you each $1 million/year. Find assets you like, no more than 4x leverage and in five years we chop the profits 75/25.
Some very sharp guys are going to make a fortune here ala Leon Black.
My name sake Ludwig von Mises said that decades ago. Essentially to keep an inflation alive, not only does the rate of money supply need to continue to increase, the rate at which it increases need to also increase.
As I've said in earlier posts, not only does dM/dt>0 but d2M/dt>0 to continue. I use d2 as the second derivative instead of d prime as it is harder to type.
It's a deflationary situation for consumer assets, aka Japan.
That doesn't mean that world-traded assets such as oil and wheat won't go up.
But everyone should stop and think seriously about the problems of this type of inflation in a world with such severe income inequalities. There is a huge mass of human beings who are suffering from high inflation for basic necessities such as food and energy combined with very low incomes. "How long can this continue?" I ask myself. I keep coming up with the answer "not long."
"But everyone should stop and think seriously about the problems of this type of inflation in a world with such severe income inequalities. There is a huge mass of human beings who are suffering from high inflation for basic necessities such as food and energy combined with very low incomes."
That dang second derivative is the heart of the matter IMNSHO - it takes not only increasing debt but accelerating debt to keep the good ship Titanic afloat - the question is are we at the heel over point yet?
Has anyone heard anything recently about the processing backlog of derivatives trades?
Banking staff face derivatives backlog
The Financial Times ^ | 10/24/07 | Stacy-Marie Ishmael
Posted on 10/24/2007 9:38:56 PM PDT by bruinbirdman
Investment banks back office staff are facing mounting piles of paperwork linked to soaring trade volumes in the $45,500bn ($45trillion) credit derivatives market.
The average number of unconfirmed trades more than 30 days old rose to its highest level since the beginning of 2006, data from derivatives index administrator Markit showed.
A survey of 18 major banks showed an average of 3,000 trades outstanding at each bank, Markit said, from fewer than 2,000 in June.
Volker is a senile old partypoop. I be he hasn't had the fun of spending like crazy and then wiping it all off with bankruptcy and then doing it again, ever.
Loosen up, Paul, and get with the party.
My name sake Ludwig von Mises said that decades ago. Essentially to keep an inflation alive, not only does the rate of money supply need to continue to increase, the rate at which it increases need to also increase.
As I've said in earlier posts, not only does dM/dt>0 but d2M/dt>0 to continue. I use d2 as the second derivative instead of d prime as it is harder to type.
Cheers,
Misean,
Accepting deflation requires a degree of discipline that I'm not sure we have.
I think that's where we're headed, but I wouldn't rule out an inflationary response to a deflationary threat.
Fed research papers discuss employing "money rains" to combat deflation.
In my opinion this is like a drug dealer who's about to lose his best customer due to a near fatal overdose by offering him free speedballs to help him through his "recovery".
It's self-serving megalomania IMO. These economists think they can become heroes by saving the world from economic hardship.
And yet history, if nothing else, tells us that integrity, progress, and prosperity are born in times of hardship.
Sometimes people need to be put into a position where they have to work, use their brains, and be compelled by some primoridal emotion to follow a path that makes the world a better place.
"That dang second derivative is the heart of the matter IMNSHO - it takes not only increasing debt but accelerating debt to keep the good ship Titanic afloat - the question is are we at the heel over point yet?
energyecon"
Dunno, but my guess is that the man in the crow's nest sees the iceberg without the aid of binoculars.
Start with 1970s style commodity price growth. Add a trade deficit which could only be compared to a banana republic. Add on a printng press that can work 24/7 "at virtually no cost." Add on rising wages where the jobs are (China). That's an inflation risk.
Subtract off Great Depression style debt. Subtract off China's unsustainable rise (just like we did right before our Great Depression).
Where does that leave us? I don't know about you, but I'm on the fence. I'm not trying to be smug. I'm simply saying that I have no idea!
"Fed research papers discuss employing "money rains" to combat deflation."
Yes but how do they get it into the system they created? They can't force people to take on debt. I just don't know. It's really freaking scary out there...maybe gov't sponsered M-bLECh's are what's in store. That "might" do it. Dunno.
Up until now we Fed and War Shriek had places to play bubbles. Now that "emerging" markets are part of the "global" economy (actually global financial ponzi scheme) there are no new players to tap. So I am of the opinion that deflation must ensue.
"11/2/07
Credit Suisse Purchased Money Fund Securities Says Wall Street Journal. In the second confirmed instance of a fund advisor purchasing securities to protect its money market funds during the recent asset-backed commercial paper crisis, Credit Suisse said on its earnings call, "We took steps to reposition certain of our U.S. money-market funds and purchase securities from these funds" to "address liquidity concerns caused by the U.S. market's extreme conditions," reports The Wall Street Journal. Credit Suisse purchased ABCP, FRNs (floating rate notes) and "notes issued by collateralized-debt obligation vehicles and structured investment vehicles" from its CS Inst Prime MMF. The company booked unrealized "value reductions" totalling approximately $125 million and said it saw over $20 billion in money fund outflows, including "offshore" funds and "cash" separate accounts. It was the only money fund manager with substantial asset declines during the 3rd quarter, down over 45%, according to Money Fund Intelligence's Distribution Survey. Northern and First American's money funds had marginal asset declines, falling 1.5% and 2.9%, respectively. But all other fund families showed gains among the 30 largest, averaging increases of 13.9% in the 3rd quarter." Crane Data Money Market Mutual Fund News and Intelligence
"[W]e live in a globalized environment and in a country which has enormous fiscal and external deficits. So you have to figure out some way -- which I have not done I might add -- to protect yourself if we should have a real currency problem here." - Robert Rubin, Former Treasury Secretary
I don't see how pv's actions in 80/81 will work now. My premise is that money now has two components - fiat money that is controlled by the Fed, and debt/credit money created by assorted financial institutions only minimally tied to oldstyle reserve requirements and controlled only by Basel prudent accounting and solvency requirements. Since the deregulation of financial institutions so that deposit institutions can own investment, can own insurance, we've got a lot of self-dealing going on here too.
The second types money, the credit/debt money, dwarfs the first, and losses, especially defaulting counter party losses here is going to be money REALLY going to heaven. Given the huge size of these losses - there's little doubt about that now - from the perspective of the common man, its almost better that they lossesmsit, unrealized, on the books for a long time, a la the Japanese. If we look at what's happened there, from the perspective of O-Joe, it hasn't been so bad these last 16 years. I'm surprised at myself for thinking this - but "take the medicine" is going to hurt the common man a LOT. All this is IMO.
Start with 1970s style commodity price growth. Add a trade deficit which could only be compared to a banana republic. Add on a printng press that can work 24/7 "at virtually no cost." Add on rising wages where the jobs are (China). That's an inflation risk.
Subtract off Great Depression style debt. Subtract off China's unsustainable rise (just like we did right before our Great Depression).
Where does that leave us? I don't know about you, but I'm on the fence. I'm not trying to be smug. I'm simply saying that I have no idea!
Add Peak Oil.
When was all time record production of crude+condensate (i.e. actual petroleum). When do you think it was? Notice, prices now are extreme and have been high for quite a while.
All time production peaked in mid to late 2005. So far, peak oil was two years ago. Remember, when $60 oil was 'extreme' and people were looking for $40 imminently?
What does that lead?
Africa's standard of living today is lower than it was at the end of colonialism, and it was pretty bad then.
For them, there are no good jobs except by kissing ass to a warlord, and everything is really expensive.
Peak oil is destroying economies of Africa.
Is that inflation or deflation?
wages are going down, but you can't buy anything with the less money anyway.
the second confirmed instance of a fund advisor purchasing securities to protect its money market funds during the recent asset-backed commercial paper crisis
Ahh, the good old American way...
London Times - Top US analyst hits back after death threats over Citigroup downgrade.. "Meredith Whitney, the analyst who prompted a $369 billion plunge in the value of US shares on Thursday by issuing a negative note on Citigroup, hit out at Wall Street's culture of intimidation yesterday after receiving several death threats from investors in the bank." Top US analyst hits back after death threats over Citigroup downgrade - Times Online
YOU GO GIRL!
At the meeting on Sunday, directors are also expected to discuss the possibility of another write-off, just weeks after announcing large losses related to the subprime mortgages and credit market turmoil. Mr. Prince did not return calls yesterday for comment.
WSJ - Double Squeeze for Homes Pressed Borrowers Find Help Only After Falling Behind on Mortgages
"We can't help you unless you first fall behind on payments." Double Squeeze for Homes - WSJ.com
And yet history, if nothing else, tells us that integrity, progress, and prosperity are born in times of hardship.
So where Auschwitz, Lubyanka* and the 'Killing Fields'.
Hardship may at times be unavoidable but avoiding the harshest hardships via 'moderation' & shared sacrifice is a noble and necessary pursuit. We might fail but it is still a noble pursuit. There are worse things than losing money.
::::
*A joke from the Soviet period is that the Lubyanka had a great view. From there one could see Siberia (from wiki).
Geez, now you guys are depressing me, and I'm the depression guy.
I doubled my lunch money on SPY puts these last two days, but they hit my trailing stop just before the bell. Figures this kind of news would come out late on a Friday.
Gotta revisit those IB options over the weekend...
So where Auschwitz, Lubyanka* and the 'Killing Fields'.
Hardship may at times be unavoidable but avoiding the harshest hardships via 'moderation' & shared sacrifice is a noble and necessary pursuit. We might fail but it is still a noble pursuit. There are worse things than losing money.
There's a big difference between contemplating your life while standing in a soup line, and herding decent productive human beings into a gas chamber due to your own self-loathing and insecurity.
I'm suggesting that decency and prosperity imply confronting hardship. I'm not suggesting that selfishness, small-mindedness, and cruelty are productive.
Life is hard. At best attempting to avoid that reality leads to self-annihilation. More likely the result is an eternity of insignificance.
"Meredith Whitney, the analyst who prompted a $369 billion plunge in the value of US shares on Thursday by issuing a negative note on Citigroup, hit out at Wall Street's culture of intimidation yesterday after receiving several death threats from investors in the bank."
Rarely in life does one's vindication arrive so rapidly; hers will arrive this weekend.
(And here's hoping her callers get their "Instant Karma" with as little delay...)
There are lots of other death threat examples. Galbraith describes a lot of hostility after congressional testimony plugging his 1929 crash book (see the preface). I think Raymond Dirks got some threats around the time of the Equity funding thing.
--
Anyone who has read or listened to comments of Volcker can see that we are dealing with a real central banker who believes in its disciplinary function. Greenspan and Bernanke, on the other hand, are crooks if you read and listen to their comments over the years. Their real skill is in manipulation and deception that invariably led to fraud. Greenspan openly prided on his vagueness. Greenspan and Bernanke have helped create the system of...
The end result of the crooks game, enabled by Greenspan and Bernanke, is abundantly clear to me the Greater Depression that is fully baked in the cake. Bernanke was chosen to give us something much bigger than the Great Depression!
Bringing up Volcker prompted me to go back into my archives...
Here's a WSJ article excerpt from June 2005 (Greg Ip)
Since 1941, stocks had never declined three years in a row until 2000-2002. The fact they did reflected the magnitude of the preceding run-up. Housing prices have not seen a sharp drop in 30 years, but they've also never risen as much as they have since 1995.
If housing prices do fall, what would it mean for the economy? "A housing bust would be worse [than the stock bust]," says Kenneth Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund.
Why? Well, for one thing, housing is worth a lot more. According to the Fed, Americans' homes were worth the equivalent of 145% of gross domestic product in March; by comparison, their stocks and mutual funds were worth 130% at the market's peak in 2000, and just 82% now. Second, stock wealth is concentrated in the hands of the wealthiest Americans while housing is much more evenly distributed. A 2001 Fed survey found 68% of families own a home and the home's median value was $122,000. Just 52% owned stocks, either directly or through a mutual or pension fund, and the median value was $34,300. That disparity has since widened.
Families are also better able to tap into the value of their homes to finance the purchase of new homes and other items. Homes are collateral for about $7.7 trillion in mortgage and home-equity debt, whereas total margin debt in investors' stock brokerage accounts is only $194 billion. For the same reason, a decline in housing prices would put more bank loans at risk; mortgages make up 40% of the assets of U.S. commercial banks, mortgage-backed securities another 16% and stocks less than 1%.
Some economists dispute the notion that housing has a bigger impact on spending than stocks. "The evidence is consistent with sizable 'wealth effects' from both sources," says Dean Maki, chief economist at Barclays Capital. The rich do own most of the stocks, but they also do most of the spending. That means they have a disproportionate impact on the economy.
But Mr. Greenspan thinks homes have a bigger "wealth effect." Mr. Rogoff agrees, citing IMF research that from 1984 to 2000 in the U.S. and similar economies, a dollar reduction in stock wealth cuts household spending by four cents, but a dollar lost in housing wealth reduces it by seven cents. Mr. Rogoff says the effect may have since grown because home buyers are more leveraged.
The IMF found after studying housing cycles world-wide that "private consumption fell sharply and immediately in the case of housing price busts while the decline was smaller and more gradual after equity price busts." That's even though housing price declines were usually smaller at 30%, adjusted for inflation, compared with 45% for stocks. The U.S. had never experienced a decline of such a size in the period the IMF studied, so it's unclear how much
The destruction of labor, land and capital during the war caused European products to be less competitive in world markets and made Europe dependent on capital flows from the United States. The unproductive deployment of these inflows, most notably in Germany, sowed the seeds for the debt crisis that began to simmer in 1927. As concerns about debt servicing grew, governments became more willing to impose tariffs and quotas on imports to protect foreign exchange. Moreover, the structural shift in the balance of payments and emergence of the United States as a net creditor shifted the "balance of monetary power" to the Federal Reserve. According to Clavin, this was a problem because the Federal Reserve lacked the experience and "cosmopolitan" perspective on questions of international finance to provide effective leadership to the system.
The destruction of labor, land and capital during the war caused American products to be less competitive in world markets and made America dependent on capital flows from the Asia. The unproductive deployment of these inflows, most notably in the US housing markets, sowed the seeds for the debt crisis that began to simmer in 2007. As concerns about debt servicing grew, governments became more willing to impose tariffs and quotas on imports to protect foreign exchange. Moreover, the structural shift in the balance of payments and emergence of the China as a net creditor shifted the "balance of monetary power" to the Bank of China. According to Clavin, this was a problem because the Bank of China lacked the experience and "cosmopolitan" perspective on questions of international finance to provide effective leadership to the system.
This is OT, but I've noticed a glaring contradiction in Greenspan. When he was interviewed on 60 Minutes by Lesley Stahl, he acted shocked and condenscendingly disappointed when Stahl dared to ask him where he invests his money. Of course he refused to answer that question -- it was off limits. I mean, how could she be so stupid to even broach the topic?
But when it comes to the economy or monetary policy, he feels that he has the right to speak freely. "So I then become incarcerated and I'm not allowed to do anything because I might say something?" Greenspan asks.
He says there's no restriction about speaking and he doesn't think there should be one. He also doesnt think he should impose restrictions on himself.
So why then won't he speak about how he invests his own money? Heck, Jim Rogers goes on Bloomberg and calls Bernanke a "nut" and goes on to gives useful tips on how to invest in the wake of the Bernanke's fiscal madness. He's not hiding anything, not afraid to assist in this respect. Indeed, just about any guest on any financial channel is open about how to invest if asked.
But Greenspan still thinks of himself as Holy when it comes to how HE invests his money -- he's the still Chairman of the Fed in this regard.
Jim Cramer joins the army to fight in IRAQ.
Who said, back in April 2005,
Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot.
I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.
man oh man oh manichevitz...
Ah, that new thread smell...
I'd want to resign too after looking at Merill Lynch's golden parachute.
touche, was that Volcker?
Yes.
The writer was chairman of the Federal Reserve from 1979 to 1987. This article is adapted from a speech in February at an economic summit sponsored by the Stanford Institute for Economic Policy Research.
Another weekend bloodletting - this is the third, I believe, at one of the 'majors'.
Weekends just aren't sacred any more.
Santelli (CNBC) said it best -
[The credit markets are telling us that there are more shoes to drop, the Paul Bunyan type.]
CR, I'm glad you give credit where credit is due: Barley at 3:43PM!
touche, I've added the link to the Volcker video (and some quotes). Thanks for reminding me!
Best Wishes.
As I recall, Volcker's comments hit MSM...
What I'm really talking about boils down to the oldest lesson of financial policy in Central Banking: A strong sense of monetary and fiscal discipline.
I suspect discipline will be offered by a "ruler" since there is very little of our rust "belt" left.
Ah good ol PV, the man who "saved" the dollar from Stagflation. He won in the short term against Dr. Kurt Richebächer, but now we have implosion and deflation in front of us. Sorry Stagflationary Mark, I just moved to the 70/30 line of deflation vs stagflation.
Hey Chucky and Shiti here's a song for the weekend meeting. Enjoy.
YouTube -
Cheers,
PV we need some of that old time religion...
CR-
pardon me for interrupting your current thread, but, I have a question in regard to the BLS payroll numbers and why some seem to concentrate on the Birth/Death assumptions and point out the potential flaws in the data due to the ongoing adjustments (assuming due to BLS's own admission, the weaknesses of the data at turning points), when other economists always seem to totally ignore these figures and take the headline number as gospel?
I guess my primary question is that you regularly look deep into the data, in particular on housing, paying close attention to historical data, and at the same time you always seem open to potential differences that may exist during this particular cycle. Your pattern seems to suggest that you believe that this is indeed a turning point, that said, in regard to the payroll and potentially all data currently coming forward, it would seem more prudent to question every piece and look deeper, yes?
Hey Chucky, I'm a giver. Don't like that one try this:
YouTube - Black Sabbath - Black Sabbath (live paris 1970)
Cheers,
risk capital
"it would seem more prudent to question every piece and look deeper, yes?"
Here's a nice link rc:
Mish's Global Economic Trend Analysis: Jobs Report From Alternate Universe
Cheers,
Misean
i'm not sure how u can dismiss stagflation with gold over 800 and oil at 95.
In another vein..
Certainly, the Fed needs Voelker more than Bernanke right now. However, we have who we have.
What should be done to bring responsibility back to the system and the market?
"What I'm really talking about boils down to the oldest lesson of financial policy in Central Banking: A strong sense of monetary and fiscal discipline."
Conjure got all misty eyed when the The Great One spoke this line.
idoc,
Cuz when the big boys go down the debt pyramid collapse and this brings down asset prices. Money is destroyed as debt blows up. Gold may or may not hold up but debt based money will vanish. Poof! It could still be massive inflation, but the conduit for that is debt growth, and that's going to dry up, IMHO.
Cheers,
@ Mike in Long Island (from previous thread)
NYSE Eliminates Trading Curbs Dating Back to 1987 (Update1) - Bloomberg.com
NYSE Eliminates Trading Curbs Dating Back to 1987 (Update1)
By Edgar Ortega
Enlarge Image/Details
Oct. 26 (Bloomberg) -- The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they're no longer as effective in damping swings in prices.
@ CR
"Black Friday" indeed!
Best weekend regards,
Falcor,
Look out below!!!!!!
YouTube -
Cheers,
NYSE Eliminates Trading Curbs Dating Back to 1987 (Update1)
By Edgar Ortega
Enlarge Image/Details
Oct. 26 (Bloomberg) -- The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they're no longer as effective in damping swings in prices.
Best weekend regards,
Falcor | 11.02.07 - 9:44 pm | #
2 different things. The trading curbs are restrictions on program trading (selling baskets of stock to hedge futures trades). The trading curbs became a joke as such a huge % of NYSE volume goes up on other markets now. Trust me - if the Dow is down 10% there will be a market halt.
Aaron Krowne had an interesting theory about the removed curbs. He feels the big boys are loading up on shorts to allow them to really stick it to the small investor once stocks start moving down in earnest.
Misean-that won't stop the Fed from cutting rates to the bone which will only fuel the move into commodities. Oil is helped along b/c i think there is truly some structural shortages of production. This will put upward pressure on rates.
Misean,
Since I'm in government paper as a stagflation defense these days, I'm comfortable with the deflation story.
I have two fears the way I'm positioned.
First, a productivity miracle story would push real yields up. I'm not holding my breath on that one. Even then, I'd probably do okay long-term. Real yields rising in the short-term (hurting me) would be offset by future real yields being high.
Second, a hyperinflation story would crush me. I'm in the rather wimpy paper versions of stagflation defense, not the real thing (hard assets like oil and gold).
Deflation though? Bring it on. TIPS and I-Bonds did very well during the dotcom bust though, for what it is worth.
I joke about the "bring it on" by the way, with the same swagger our president might have. My girlfriend is still looking for a job. It isn't good for either of us. The mission is most certainly not accomplished.
If anybody's interested, I made graph that tries the make sense of the commodity situation. I also put up two old graphs I made a while back but didn't have time to post.
First 3 posts may contain information you may find useful, or not:
Public Files
I'd like to have time to do a blog, but I simply don't.
Isn't it about time for Sebastian to say all is well (and he just covered his Ambac that he short at 60 a couple weeks ago)?
BTW, this graph seems to illustrate Volcker's statement to a degree.
"I joke about the "bring it on" by the way, with the same swagger our president might have. My girlfriend is still looking for a job. It isn't good for either of us. The mission is most certainly not accomplished.
Stagflationary Mark"
Sorry man. I wasn't attacking you, and your blog has some GREAT charts. I just think the Stagflation thing, which I have been on the fence over and never opposed is looking thin now. I think now we're eith deflation or hyper...and I ain't happy about either. I don't think my assets will well weather a strong storm of either, though. You can't eat gold or silver, and if markets disintegrate, it'll be tough to trade it for necessities.
I know I got the Super Colendar Tin Foil Hat on, but I'm just getting a bit scared...
Cheers,
Black Friday hell, Monday may look like a black hole set amidst the flock. If this one site is any example of the rumors and speculation that will build thru the weekend, the poop is gonna fly! And if anything else big comes out of the Sunday meeting, just get some pages ready for history.
Is there a connection between the Fed's adoption of Basel II and the upheavals at Citi?
One seems to have preceded the other by (literally) a few hours.
Paul Volker is a true patriot, and not the self-styled superheroes of the bail-out squad.
Bring on the honesty tsunami.
BTW, this graph seems to illustrate Volcker's statement to a degree.
ac
If I'm reading that right...and I may not be, I'm not going to sleep well tonight until this fifth is gone.
Thanks ac, happy freaking friday.
Cheers,
I know this has been discussed recently, but I'm not sure I'd be able to find where.....
Anyone know a good way to find "ratings" of banks? My cash is currently sitting in BoA, and I'm not too thrilled about that. Any other suggestions or pointers greatly appreciated.
Misean,
I didn't mean to imply you were attacking me. It certainly wasn't taken that way.
I think now we're eith deflation or hyper...
That implies the Fed can still pick the middle ground to me. The middle ground of stagflationary quicksand that is, since I'm not a believer that the Fed can make the pain go away.
That being said, part of me suspects the deflationists and inflationists are both right. The debate between the two may never end.
The patient is being kept at room temperature by immersing one foot in hot lava while simultaneously immersing the other foot in a liquid nitrogen bath.
(Let's not forget the leeches. They may not cure what ails us. They may not even be good for us. I'm not sure what my point is, lol.)
"I come now to the heart of the problem, as a Nation we are consuming and investing, that is spending, about 6% more than we are producing. What holds it all together? - High consumption - high leverage - government deficits - What holds it all together is a really massive and growing flow of capital from abroad. A flow of capital that today runs to more than $2 Billion per day."
We hear this basically since Pres. Reagan took office in 1980. In reality, it has been a prosperous and stable time with only minor and infrequent recessions over the last 27 years. I don't know what makes these calls now any more credible.
Of course, other pundits have proclaimed the Great Depression of 1990, 1991, 1992, 1993, .... 2005, 2006, 2007. You could have not been any more wrong.
O-Joe
Transient,
HSGFX mutual fund. Ultra safe, My own money is in there too. Best I can do
in 30 seconds.
Misean
i'm not sure how u can dismiss stagflation with gold over 800 and oil at 95.
idoc,
Stagflation typically refers to the period in the late seventies when prices and wages were going up despite a stagnant economy. The point was that the inflation represented an acceleration in the entrainment of money in to the monetary supply via accelerating wages and prices beyond the creation of wealth, and far more importantly, beyond the increase in the real burden of debt.
This is true "70s-style inflation".
Today we have a fundamentally different phenomenon -- prices are rising not because of an accelerating induction of money into the economy via wages and earnings, but instead by an increase in the velocity and substitution of credit-based assets for "money".
In other words:
The 1970s Stagflation Scenario
Independent of economic factors, more money was being "sucked" into the economy because wages and earnings were increasing faster than the cost of monetizing debt to create new money. The cost of creating new money was declining. Hence the acceleration of prices and the treat of runaway hyperinflation.
Today's Scenario
Less money is being "sucked" in to the economy, but that money is increasing in availablity due to lax lending standards and a strong motivation to borrow to "build wealth" through asset appreciation. But the cost of monetizing new debt to create money is increasing because income and earnings aren't keeping pace with debt servicing costs. The cost of creating new money is increasing. Hence the threat that earnings/incomes will no longer suffice to service debt once the asset appreciation stops, which may lead to the cost of creating new money to accelerate to the point where wealth is being created faster (destroyed slower) than money. This is deflation.
All that stuff pv was was talking about isn't what has put the bank's tits in a wringer. 'twas greed. The Paulsons and Princes of the world bail out on the wings of platinum parachutes while the innocent, the frugal, pay for the sins of the world with their abundance of misery.
Stagflationary Mark,
I'm with ya bro...I know Austrian theory expects deflation hard...but these yoyo's on War Shriek keep the top spinning. My concern is that now that this bubble is truly global, unless Mars and Saturn enter the picture...well things are going to be fugly.
As far as oj is concerned, he got off in ~95, this time it ain't lookin' so good.
I'll leave it at that OJ.
Cheers,
Optimistic Joe
You might want to pick up a copy of Running On Empty by Peter Peterson chairman of the Blackstone group. He basical says the same thing a Voelker.
If America keep doing business as we are we are going to be screwed. You may out run it but your kids if you have any damn sure will not.
Has anyone heard anything recently about the processing backlog of derivatives trades?
As I remember it, about two years ago there was worry that derivative trades were being done with paper and that there was a huge backlog in processing them. The NY Fed got involved and last I heard, things were going better, but there was still a backlog. The worry was that if some sort of crisis came along, things could ugly.
I haven't heard anything about this recently, so I'm assuming it's no longer an issue, but I'm wondering if anyone has heard anything.
Thanks.
If I were Buffet/Greenburg or someone of that ilk, I'd see if I could hire Spector, Maheras and Costa, give them a $2-4 billion fund and say go to work. I'll pay you each $1 million/year. Find assets you like, no more than 4x leverage and in five years we chop the profits 75/25.
Some very sharp guys are going to make a fortune here ala Leon Black.
ac,
NICE!
"The cost of creating new money is increasing."
My name sake Ludwig von Mises said that decades ago. Essentially to keep an inflation alive, not only does the rate of money supply need to continue to increase, the rate at which it increases need to also increase.
As I've said in earlier posts, not only does dM/dt>0 but d2M/dt>0 to continue. I use d2 as the second derivative instead of d prime as it is harder to type.
Cheers,
It's a deflationary situation for consumer assets, aka Japan.
That doesn't mean that world-traded assets such as oil and wheat won't go up.
But everyone should stop and think seriously about the problems of this type of inflation in a world with such severe income inequalities. There is a huge mass of human beings who are suffering from high inflation for basic necessities such as food and energy combined with very low incomes. "How long can this continue?" I ask myself. I keep coming up with the answer "not long."
Bankrate.com has free bank ratings transient. I've spread my cash (future down payment) around at 3 different banks, good luck.
Click your heels together three times now O-Joe...
Banker,
From last thread my friend,
YTMND - Apology accepted, Captain Needa.
Nice to see you.
As to your last post, only if the Titanic stays afloat.
BTW I make the Super Colandar Tin Foil Hars personally. I'll sell you one at a discount.
Cheers,
MOM,
"But everyone should stop and think seriously about the problems of this type of inflation in a world with such severe income inequalities. There is a huge mass of human beings who are suffering from high inflation for basic necessities such as food and energy combined with very low incomes."
Comming as designed to a theater near you.
Cheers,
Misean,
That dang second derivative is the heart of the matter IMNSHO - it takes not only increasing debt but accelerating debt to keep the good ship Titanic afloat - the question is are we at the heel over point yet?
Has anyone heard anything recently about the processing backlog of derivatives trades?
Banking staff face derivatives backlog
The Financial Times ^ | 10/24/07 | Stacy-Marie Ishmael
Posted on 10/24/2007 9:38:56 PM PDT by bruinbirdman
Investment banks back office staff are facing mounting piles of paperwork linked to soaring trade volumes in the $45,500bn ($45trillion) credit derivatives market.
The average number of unconfirmed trades more than 30 days old rose to its highest level since the beginning of 2006, data from derivatives index administrator Markit showed.
A survey of 18 major banks showed an average of 3,000 trades outstanding at each bank, Markit said, from fewer than 2,000 in June.
Banking staff face derivatives backlog
Volker is a senile old partypoop. I be he hasn't had the fun of spending like crazy and then wiping it all off with bankruptcy and then doing it again, ever.
Loosen up, Paul, and get with the party.
ac,
NICE!
"The cost of creating new money is increasing."
My name sake Ludwig von Mises said that decades ago. Essentially to keep an inflation alive, not only does the rate of money supply need to continue to increase, the rate at which it increases need to also increase.
As I've said in earlier posts, not only does dM/dt>0 but d2M/dt>0 to continue. I use d2 as the second derivative instead of d prime as it is harder to type.
Cheers,
Misean,
Accepting deflation requires a degree of discipline that I'm not sure we have.
I think that's where we're headed, but I wouldn't rule out an inflationary response to a deflationary threat.
Fed research papers discuss employing "money rains" to combat deflation.
In my opinion this is like a drug dealer who's about to lose his best customer due to a near fatal overdose by offering him free speedballs to help him through his "recovery".
It's self-serving megalomania IMO. These economists think they can become heroes by saving the world from economic hardship.
And yet history, if nothing else, tells us that integrity, progress, and prosperity are born in times of hardship.
Sometimes people need to be put into a position where they have to work, use their brains, and be compelled by some primoridal emotion to follow a path that makes the world a better place.
"That dang second derivative is the heart of the matter IMNSHO - it takes not only increasing debt but accelerating debt to keep the good ship Titanic afloat - the question is are we at the heel over point yet?
energyecon"
Dunno, but my guess is that the man in the crow's nest sees the iceberg without the aid of binoculars.
Cheers,
ac,
I'm not sure what it is.
Start with 1970s style commodity price growth. Add a trade deficit which could only be compared to a banana republic. Add on a printng press that can work 24/7 "at virtually no cost." Add on rising wages where the jobs are (China). That's an inflation risk.
Subtract off Great Depression style debt. Subtract off China's unsustainable rise (just like we did right before our Great Depression).
Where does that leave us? I don't know about you, but I'm on the fence. I'm not trying to be smug. I'm simply saying that I have no idea!
(Enjoyed looking at your charts by the way.
)
ac,
"Fed research papers discuss employing "money rains" to combat deflation."
Yes but how do they get it into the system they created? They can't force people to take on debt. I just don't know. It's really freaking scary out there...maybe gov't sponsered M-bLECh's are what's in store. That "might" do it. Dunno.
Cheers,
ac Stag,
Up until now we Fed and War Shriek had places to play bubbles. Now that "emerging" markets are part of the "global" economy (actually global financial ponzi scheme) there are no new players to tap. So I am of the opinion that deflation must ensue.
Cheers,
Dunno, but my guess is that the man in the crow's nest sees the iceberg without the aid of binoculars.
No fears! He's asleep. It is the guy in the engine room I'm worried about. He's spending way too much time treading water. D'oh!
Yeah I'm vacillating...thhhlllppptt!.
Have another martini boyz!
Cheers,
"11/2/07
Credit Suisse Purchased Money Fund Securities Says Wall Street Journal. In the second confirmed instance of a fund advisor purchasing securities to protect its money market funds during the recent asset-backed commercial paper crisis, Credit Suisse said on its earnings call, "We took steps to reposition certain of our U.S. money-market funds and purchase securities from these funds" to "address liquidity concerns caused by the U.S. market's extreme conditions," reports The Wall Street Journal. Credit Suisse purchased ABCP, FRNs (floating rate notes) and "notes issued by collateralized-debt obligation vehicles and structured investment vehicles" from its CS Inst Prime MMF. The company booked unrealized "value reductions" totalling approximately $125 million and said it saw over $20 billion in money fund outflows, including "offshore" funds and "cash" separate accounts. It was the only money fund manager with substantial asset declines during the 3rd quarter, down over 45%, according to Money Fund Intelligence's Distribution Survey. Northern and First American's money funds had marginal asset declines, falling 1.5% and 2.9%, respectively. But all other fund families showed gains among the 30 largest, averaging increases of 13.9% in the 3rd quarter."
Crane Data Money Market Mutual Fund News and Intelligence
Credit Suisse Net Sags 31% After Hefty Write-Downs - WSJ.com
Transient,
If you're going to hold dollars, there's not much safer/better than:
VMSXX 50K
This quote is as good as Volcker's:
"[W]e live in a globalized environment and in a country which has enormous fiscal and external deficits. So you have to figure out some way -- which I have not done I might add -- to protect yourself if we should have a real currency problem here." - Robert Rubin, Former Treasury Secretary
Whoops, one more time:
Transient,
If you're going to hold dollars, there's not much safer/better than:
VMSXX less than 50K initial deposit
VUSXX more than 50K initial deposit
I don't see how pv's actions in 80/81 will work now. My premise is that money now has two components - fiat money that is controlled by the Fed, and debt/credit money created by assorted financial institutions only minimally tied to oldstyle reserve requirements and controlled only by Basel prudent accounting and solvency requirements. Since the deregulation of financial institutions so that deposit institutions can own investment, can own insurance, we've got a lot of self-dealing going on here too.
The second types money, the credit/debt money, dwarfs the first, and losses, especially defaulting counter party losses here is going to be money REALLY going to heaven. Given the huge size of these losses - there's little doubt about that now - from the perspective of the common man, its almost better that they lossesmsit, unrealized, on the books for a long time, a la the Japanese. If we look at what's happened there, from the perspective of O-Joe, it hasn't been so bad these last 16 years. I'm surprised at myself for thinking this - but "take the medicine" is going to hurt the common man a LOT. All this is IMO.
-K
Start with 1970s style commodity price growth. Add a trade deficit which could only be compared to a banana republic. Add on a printng press that can work 24/7 "at virtually no cost." Add on rising wages where the jobs are (China). That's an inflation risk.
Subtract off Great Depression style debt. Subtract off China's unsustainable rise (just like we did right before our Great Depression).
Where does that leave us? I don't know about you, but I'm on the fence. I'm not trying to be smug. I'm simply saying that I have no idea!
Add Peak Oil.
When was all time record production of crude+condensate (i.e. actual petroleum). When do you think it was? Notice, prices now are extreme and have been high for quite a while.
All time production peaked in mid to late 2005. So far, peak oil was two years ago. Remember, when $60 oil was 'extreme' and people were looking for $40 imminently?
What does that lead?
Africa's standard of living today is lower than it was at the end of colonialism, and it was pretty bad then.
For them, there are no good jobs except by kissing ass to a warlord, and everything is really expensive.
Peak oil is destroying economies of Africa.
Is that inflation or deflation?
wages are going down, but you can't buy anything with the less money anyway.
Thanks for the recommendations.
OT,
Seems there are no listings for tin foil hats on ebay. Just thought you would all like to know.
Whenever I think of Chuck "gotta dance" Prince, I'm reminded of this video: Fatboy Slim - Weapon of Choice Video
the second confirmed instance of a fund advisor purchasing securities to protect its money market funds during the recent asset-backed commercial paper crisis
Wow...we knew it would get there, but..!!!!
Add Peak Oil.
I spent extra time on this chart and the video is one of my favorites (from a cringing point of view anyway).
Yeah. I'm not much of a believer in the candy bars will be getting cheaper should oil prices continue to climb theory.
transient -
Set up an account at Treasury Direct. Zero risk of default. And you can move cash around to and from any bank you want.
Ahh, the good old American way...
London Times - Top US analyst hits back after death threats over Citigroup downgrade.. "Meredith Whitney, the analyst who prompted a $369 billion plunge in the value of US shares on Thursday by issuing a negative note on Citigroup, hit out at Wall Street's culture of intimidation yesterday after receiving several death threats from investors in the bank."
Top US analyst hits back after death threats over Citigroup downgrade - Times Online
YOU GO GIRL!
Does this mean our Prince is really a frog?
From the NYT, out 16 minutes ago:
At the meeting on Sunday, directors are also expected to discuss the possibility of another write-off, just weeks after announcing large losses related to the subprime mortgages and credit market turmoil. Mr. Prince did not return calls yesterday for comment.
Citigroup Chief Is Set to Exit Amid Losses - NY Times
I serriously doubt is that there is no more rain.
YouTube -
Cheers, and goodnight
WSJ - Double Squeeze for Homes Pressed Borrowers Find Help Only After Falling Behind on Mortgages
"We can't help you unless you first fall behind on payments."
Double Squeeze for Homes - WSJ.com
And yet history, if nothing else, tells us that integrity, progress, and prosperity are born in times of hardship.
So where Auschwitz, Lubyanka* and the 'Killing Fields'.
Hardship may at times be unavoidable but avoiding the harshest hardships via 'moderation' & shared sacrifice is a noble and necessary pursuit. We might fail but it is still a noble pursuit. There are worse things than losing money.
::::
*A joke from the Soviet period is that the Lubyanka had a great view. From there one could see Siberia (from wiki).
dryfly
Nice....and realy goodnight.
Cheers,
Geez, now you guys are depressing me, and I'm the depression guy.
I doubled my lunch money on SPY puts these last two days, but they hit my trailing stop just before the bell. Figures this kind of news would come out late on a Friday.
Gotta revisit those IB options over the weekend...
So where Auschwitz, Lubyanka* and the 'Killing Fields'.
Hardship may at times be unavoidable but avoiding the harshest hardships via 'moderation' & shared sacrifice is a noble and necessary pursuit. We might fail but it is still a noble pursuit. There are worse things than losing money.
There's a big difference between contemplating your life while standing in a soup line, and herding decent productive human beings into a gas chamber due to your own self-loathing and insecurity.
I'm suggesting that decency and prosperity imply confronting hardship. I'm not suggesting that selfishness, small-mindedness, and cruelty are productive.
Life is hard. At best attempting to avoid that reality leads to self-annihilation. More likely the result is an eternity of insignificance.
Man, ac, you are deep tonight.
"Meredith Whitney, the analyst who prompted a $369 billion plunge in the value of US shares on Thursday by issuing a negative note on Citigroup, hit out at Wall Street's culture of intimidation yesterday after receiving several death threats from investors in the bank."
Rarely in life does one's vindication arrive so rapidly; hers will arrive this weekend.
(And here's hoping her callers get their "Instant Karma" with as little delay...)
O-Joe:
"It has been a prosperous and stable time with only minor and infrequent recessions over the last 27 years."
You're not only a fool, but glib and heartless, too.
There are lots of other death threat examples. Galbraith describes a lot of hostility after congressional testimony plugging his 1929 crash book (see the preface). I think Raymond Dirks got some threats around the time of the Equity funding thing.
I would like to dedicate a song to Chuck Prince: an oldie but a goodie!!!
Google Videos Error
I'll be a bit absent from these discussions during the day for a while. I'm doing care giving for my dad and there is no internet there yet.
I think that we need to stop importing soviet era jokes and generate our own for the sake of the trade deficit.
Anonymous, thanks!
I think this could be a big deal...
--
Anyone who has read or listened to comments of Volcker can see that we are dealing with a real central banker who believes in its disciplinary function. Greenspan and Bernanke, on the other hand, are crooks if you read and listen to their comments over the years. Their real skill is in manipulation and deception that invariably led to fraud. Greenspan openly prided on his vagueness. Greenspan and Bernanke have helped create the system of...
The end result of the crooks game, enabled by Greenspan and Bernanke, is abundantly clear to me the Greater Depression that is fully baked in the cake. Bernanke was chosen to give us something much bigger than the Great Depression!
Jas
Bringing up Volcker prompted me to go back into my archives...
Here's a WSJ article excerpt from June 2005 (Greg Ip)
Since 1941, stocks had never declined three years in a row until 2000-2002. The fact they did reflected the magnitude of the preceding run-up. Housing prices have not seen a sharp drop in 30 years, but they've also never risen as much as they have since 1995.
If housing prices do fall, what would it mean for the economy? "A housing bust would be worse [than the stock bust]," says Kenneth Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund.
Why? Well, for one thing, housing is worth a lot more. According to the Fed, Americans' homes were worth the equivalent of 145% of gross domestic product in March; by comparison, their stocks and mutual funds were worth 130% at the market's peak in 2000, and just 82% now. Second, stock wealth is concentrated in the hands of the wealthiest Americans while housing is much more evenly distributed. A 2001 Fed survey found 68% of families own a home and the home's median value was $122,000. Just 52% owned stocks, either directly or through a mutual or pension fund, and the median value was $34,300. That disparity has since widened.
Families are also better able to tap into the value of their homes to finance the purchase of new homes and other items. Homes are collateral for about $7.7 trillion in mortgage and home-equity debt, whereas total margin debt in investors' stock brokerage accounts is only $194 billion. For the same reason, a decline in housing prices would put more bank loans at risk; mortgages make up 40% of the assets of U.S. commercial banks, mortgage-backed securities another 16% and stocks less than 1%.
Some economists dispute the notion that housing has a bigger impact on spending than stocks. "The evidence is consistent with sizable 'wealth effects' from both sources," says Dean Maki, chief economist at Barclays Capital. The rich do own most of the stocks, but they also do most of the spending. That means they have a disproportionate impact on the economy.
But Mr. Greenspan thinks homes have a bigger "wealth effect." Mr. Rogoff agrees, citing IMF research that from 1984 to 2000 in the U.S. and similar economies, a dollar reduction in stock wealth cuts household spending by four cents, but a dollar lost in housing wealth reduces it by seven cents. Mr. Rogoff says the effect may have since grown because home buyers are more leveraged.
The IMF found after studying housing cycles world-wide that "private consumption fell sharply and immediately in the case of housing price busts while the decline was smaller and more gradual after equity price busts." That's even though housing price declines were usually smaller at 30%, adjusted for inflation, compared with 45% for stocks. The U.S. had never experienced a decline of such a size in the period the IMF studied, so it's unclear how much
Just noticing some parallels...
The destruction of labor, land and capital during the war caused European products to be less competitive in world markets and made Europe dependent on capital flows from the United States. The unproductive deployment of these inflows, most notably in Germany, sowed the seeds for the debt crisis that began to simmer in 1927. As concerns about debt servicing grew, governments became more willing to impose tariffs and quotas on imports to protect foreign exchange. Moreover, the structural shift in the balance of payments and emergence of the United States as a net creditor shifted the "balance of monetary power" to the Federal Reserve. According to Clavin, this was a problem because the Federal Reserve lacked the experience and "cosmopolitan" perspective on questions of international finance to provide effective leadership to the system.
The destruction of labor, land and capital during the war caused American products to be less competitive in world markets and made America dependent on capital flows from the Asia. The unproductive deployment of these inflows, most notably in the US housing markets, sowed the seeds for the debt crisis that began to simmer in 2007. As concerns about debt servicing grew, governments became more willing to impose tariffs and quotas on imports to protect foreign exchange. Moreover, the structural shift in the balance of payments and emergence of the China as a net creditor shifted the "balance of monetary power" to the Bank of China. According to Clavin, this was a problem because the Bank of China lacked the experience and "cosmopolitan" perspective on questions of international finance to provide effective leadership to the system.
Banker falls on his sword.
Facing jail, banker leaps to death : More Business : The Rocky Mountain News
thats not OUR Banker is it
"He broke a tree"
Sad.
It's rainin' bankers.
I hope his insurance will cover his fraud victims.
I thought I could count on O-Joe to keep it contained over the weekend.
Greed and dishonesty are everywhere.Coming Greater Depression is a sad fact.You do not have to be an economist to figure it out.
Greenspan openly prided on his vagueness.
This is OT, but I've noticed a glaring contradiction in Greenspan. When he was interviewed on 60 Minutes by Lesley Stahl, he acted shocked and condenscendingly disappointed when Stahl dared to ask him where he invests his money. Of course he refused to answer that question -- it was off limits. I mean, how could she be so stupid to even broach the topic?
But when it comes to the economy or monetary policy, he feels that he has the right to speak freely. "So I then become incarcerated and I'm not allowed to do anything because I might say something?" Greenspan asks.
He says there's no restriction about speaking and he doesn't think there should be one. He also doesnt think he should impose restrictions on himself.
So why then won't he speak about how he invests his own money? Heck, Jim Rogers goes on Bloomberg and calls Bernanke a "nut" and goes on to gives useful tips on how to invest in the wake of the Bernanke's fiscal madness. He's not hiding anything, not afraid to assist in this respect. Indeed, just about any guest on any financial channel is open about how to invest if asked.
But Greenspan still thinks of himself as Holy when it comes to how HE invests his money -- he's the still Chairman of the Fed in this regard.
I'm going bankers.
Just kidding folks, I would never do that.
The Retro Cocktail hour
The Retro Cocktail Hour on Kansas Public Radio
oh boy, I bow to the crowd.
Next. And what can you do for me today.
Thanks for the attention. Wink to CR.
But time is a waste'n more news, more news, oh please mooore news
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