Just remember, folks. The Federal Reserve KILLS PEOPLE:
Global food prices have spiked 60 percent since the beginning of 2007, sparking riots in more than 30 countries that depend on imported food, including Cameroon and Egypt. The surge in prices threatens to push the number of malnourished people in the world from 860 million to almost 1 billion, according to the World Food Programme in Rome.
That's an interesting thought...
Bush has killed hundreds of thousands through his arrogance and incompetence, but Bernanke ends up killing millions through his arrogance and incompetence.
Calculated Risk portends the next wave of delinquencies and foreclosures - prime borrowers who used adjustable-rate mortgages (ARMs) as a tool to overstep their affordability
http://www.wallstreetoasis.com/ Give a reference to CR.
A little surprised, in general the the tone of the site has been the typical "wall street we know it all".
CR, thanks for the entertainment...especially enjoyed the second one re: my very own SillyCon valley. It's amazing that RIMM, Apple, and all the rest are at nosebleed levels in this environment.
much prefer the Richter Scales in the Valley to this East Coast imitation. Merle Hazzard is a better rendition of Manhattan and Long Island, for my money.
I don't think he gets the other side of the equation. Wall street may be able and willing to buy mortgages again (non toxics) but isnt' he forgetting that no one has money for a down payment? And that we're going to have even less for a downpayment?
Not only are we a nation of non-savers, that people out there are in horrendous debt? I guess predictions are free, but unfounded optimism does not do much for your credibility.
Just remember, folks. The Federal Reserve KILLS PEOPLE:
Keep sayin' that - if it helps you sleep at night. But its still BS.
These imbalances have been building for a long time... a generation of deficits on our part & currency manipulation on theirs. The events of last summer including the 'liquidity crisis' & 'emergency' fed rate cuts were just the knife that finally cut them loose releasing all kinds of pent up forces. It was gonna happen somehow, someday and when it did it was gonna be ugly.
The fed was & still is reacting to events that for the most part are beyond their control.
Looks like people may have to stop spending like drunken sailors (on useless crap from china and fat ass SUVs) and start to save a few bucks for a while to get back on track.
Our consumption levels have become grotesque. Time to scale back a bit.
Damn right our 536 elected leaders in DC have a hell of a lot more to do with this then the FED
Anonymous | 06.20.08 - 12:55 am |
And the 300 mil citizens who would rather borrow & spend than invest & produce. It astonishes me we 'blame' the fed for shit we as a society want to do anyway - say what?
C'mon dryfly, what are ya gonna do if you're a citizen, save money in a CD paying 3% while inflation is more than 4%???? How can you not lay some blame on the Fed, the same Fed that refused to regulate the ridiculous lending practices? Their failure to raise rates earlier, coincident with their failure to regulate lending abuses, means they must now bail out the banks by stealing from savers.
Don't get me wrong - I think the fed over did it, cut too much, too fast - but the real cause of the mess were these imbalances building up. Deficits coupled to currency manipulation resulting in a generation of over consumption & investment distortions.
Pump that much paper out into the world & what do you expect to happen?
The shit we are seeing now was baked in the cake for a generation - the timer went off last summer & Ben was the lucky guy who got to open the oven door.
ShortCourage writes:
C'mon dryfly, what are ya gonna do if you're a citizen, save money in a CD paying 3% while inflation is more than 4%???? How can you not lay some blame on the Fed, the same Fed that refused to regulate the ridiculous lending practices? Their failure to raise rates earlier, coincident with their failure to regulate lending abuses, means they must now bail out the banks by stealing from savers.
You lay no blame on the Fed for that?
ShortCourage | 06.20.08 - 1:06 am | #
Maybe you could make something instead of just consuming? That after all was the root cause consumption exceeding production.
So if you don't want to save 'cause rates are too low, then produce.
dryfly, what do you think transformed this nation of industrious workers/savers to borrow/spenders?
The rules of play make a big difference in how "we the people" behave. That and the fine art of advertising, which convinces people what they want is what they need.
Anyways, I don't disagree with you about consumerism run rampant. I simply take issue with you defending the Fed in any way whatsoever. They have displayed incompetence, or worse.
Anyways, I don't disagree with you about consumerism run rampant. I simply take issue with you defending the Fed in any way whatsoever. They have displayed incompetence, or worse.
ShortCourage | 06.20.08 - 1:24 am | #
I am not defending the fed - I am just not BLAMING the fed. The fed is almost a non-factor. Incompetence on the part of a non-factor isn't the end of the world.
I'm telling you - sloppy monetary policy on the part of the fed has made us less wealthy in real terms but did not make us shut down our factories & import to WalMart.
The fed also didn't force congress to run massive deficits.
People put too much blame on the fed when things go badly & too much credit when it goes well... fed is only one piece of the puzzle.
ShortCourage writes:
dryfly, what do you think transformed this nation of industrious workers/savers to borrow/spenders?
In short deficits. Big ones lasting a generation during which the WORLD kept lending to us mostly through their central banks & SWF to ensure we continued to import from them (becoming even less industrious & borrow spending even more). Now how exactly did the fed do this to us?
It was only this last summer that the non-central bank foreign lending community had a double take about our 'credit worthiness'... from what I read the foreign central banks & SWFs ARE STILL buying our debt at close to record levels regardless of what the fed is doing. Read Setser.
"The squeeze on real take-home pay from higher fuel bills will arguably be an even more significant restraint on consumer spending this year than the credit crunch.
That will also further deflate the housing market.
The squeeze on real-income growth is likely to mean that both house prices and consumer spending weaken together.
The era of cheap mortgage finance that underpinned the housing market in 2006 and the first half of 2007 is over and,
as a result, it is reasonable to expect the ratio of house prices to incomes to fall back."
King also said that British living standards will slip and economic growth needs to weaken as policy makers refuse to flinch in their fight against accelerating inflation.
"It will not be an easy time, and I know that some families will find it particularly difficult.
These changes to our spending power and to the housing market are real shifts that, although not easy to accept, we cannot side-step."
At least Swerving Mervin is telling them straight up: you gonna get bent over and it's gonna to hurt.
Right, I'll tell my 78 year old arthritic Mother-in-Law to get her ass out there and produce.
Anon | 06.20.08 - 1:42 am | #
That's something her grandchildren should be doing. If she's 78 - her generation already did their part - they didn't run monster deficits. It was boomers, Xers & Nexters running up the red - progressively getting worse with each one.
We are not to blame for taking shit they gave us... but then we blame the fed for when we can't pay it back & blow up the financial markets? How's that work?
I get what you're saying, but when I look back and try to imagine the US behaving differently, knowing what I do of human nature,...I guess these Crazy Eddie cycles are inevitable.
The Feds policy of intentionally running negative real interest rates is a pernicous form of currency debasement. In the long run it is not consistent with a free society.
It's not who it's what. That be the Dollar which is the world reserve fiat currency and global fractional reserve banking.
Anonymous | 06.20.08 - 1:51 am | #
Exactly. That and the US continuing to be the consumer of last resort. Combine the two & you have the recipe of how we got to where we are - after 20 some years of rinse repeat.
But it is so much easier & fulfilling to blame the fed - whatever.
I look back and try to imagine the US behaving differently, knowing what I do of human nature
Just look to the Greatest Generation, or most immigrants. When I was growing up, I thought we were in poverty; I mean, a baloney sandwich and HALF of a Little Debbie for lunch. Next thing I know, my parents paid for 32 years worth of college for the four of us.
The Feds policy of intentionally running negative real interest rates is a pernicous form of currency debasement. In the long run it is not consistent with a free society.
Anon | 06.20.08 - 1:59 am | #
Opinion - everyone has one, you and me both.
The fed has a mandate - they perform it in reaction to events. That 'free society' has set events in motion. That 'free society' can correct them anytime they want. They haven't.
Consume less - produce more & the currency fixes itself & the fed goes back to sleep.
And of course no one is is stopping you from owning glod if you are so concerned about debasement - better hope somebody grows food though instead of everyone just hoarding glod. Can't eat glod.
If the FFR is in double digits, No cheap loans =>> Produce =>> Savings =>> less deficit...
anon | 06.20.08 - 2:00 am | #
There are two ways to bring down the CAD...
One is produce more, the other is consume less. The recipe you give is the latter - drive down deficits by cutting consumption... hopefully MORE than production.
Not sure the SWFs & FCBs would let us get away with that either... they love to borrow short anyway.
But you highlighted the fed's current dilemma: cut rates to improve climate for domestic production & risk weakening the currency OR raise rates to drive down consumption hoping consumption falls more than output.
One leads to debasement & the other unemployment. But the reason we are in this position of a Hobson's Choice is because we ran monster CADs for a generation. That won't fix quickly or painlessly.
Actually a take off from a sci-fi book by Larry Niven and Jerry Pournelle, "A Mote in God's Eye" Wacky intelligent aliens doomed to cycles of over-population by biology (recovery/boom/crash repeat). Just before each blow-up "Crazy Eddie" bizarre ideas surface in a desperate attempt to avoid the inevitable,...and why not?... the status quo is certain to lead to failure.
The Fed, Congress, spendthrift citizens: all culpable? No argument from me.
But, not a word about the captains of capital feeding at the fed's trough, buying and selling congressmen and policy favors, and dominating the airwaves with overt and subliminal messages that set the national mindset?
What's up with that?
If you're going to be spreading responsibility for calamity around don't forget the investors, the executives and the money managers.
If the FFR is in double digits, No cheap loans =>> Produce =>> Savings =>> less deficit...
anon | 06.20.08 - 2:00 am | #
Also - if the FFR is in DD... that becomes the hurdle rate for ALL investments.
Were you in biz in the 80s? I was. I sat in meetings where I was told if an investment didn't double existing FFR it was 'NO-GO'... so to get approval on a very safe project we had to show a return of something like 25%-30%... minimum. Risky projects had to pay back in a year (100%). These were on capital equipment projects that were expected to last 10-15 years or more!!!
Every NO-GO means fewer people hired. Its less business for our suppliers & fewer jobs for their community too... its less consumption though & less output.
Now compare the opposite - ZIRP. Hell everything goes... even those projects that maybe shouldn't. And of course all that money chasing scarce 'project resources' inflates their price.
In the end both are self-correcting in a non-manipulated system. The curse we have is ours is the worlds reserve currency & we are viewed as the consumer of last resort... so these imbalances have built for a long time & with a lot of water behind the dam. When it goes - if it isn't already - its gonna be one helluva flood.
BTW- I referenced the book because CR made a passing reference a few months back, the aliens had three hands: on the one hand, on the other hand, on the gripping hand,...
Means we need the second option. You cannot control consumption with easy money any where in the world. Just my opinion.
anon | 06.20.08 - 2:28 am | #
They are trying to reduce the job loss from the collapse in 'output'. The side effect is currency debasement. There is no free lunch - you get one or the other.
But you are right - we had other options YEARS AGO - and didn't take them. Now we pay.
Were you in biz in the 80s? I was. I sat in meetings where I was told if an investment didn't double existing FFR it was 'NO-GO'... so to get approval on a very safe project we had to show a return of something like 25%-30%... minimum. Risky projects had to pay back in a year (100%). These were on capital equipment projects that were expected to last 10-15 years or more!!!
Those are the Businessmen who made America as THE "SUPERPOWER". We can cure ourselves if we want to .....
But, not a word about the captains of capital feeding at the fed's trough, buying and selling congressmen and policy favors, and dominating the airwaves with overt and subliminal messages that set the national mindset?
What's up with that?
I would include them in the 'spend thrift citizen' category... it was hand in glove. Think of them as uber-spend thrifts.
But we could have voted around them - silenced them - we didn't, we were too comfortable. Both left & right.
"we had other options YEARS AGO - and didn't take them. Now we pay."
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our
children a legacy of bankruptcy. We have defrauded our country to get ourselves elected."
dryfly pardon me, but FED is directly responsible for the food price fiasco.
they swap liquid treasuries for illquid mbs to banks who then sell the treasuries and invest in the only place still going up, the commodities.
so yes there is a direct link, if the FED was not giving the banks the treasuries the food prices will be lower because there would be less liquidity in commodities.
Those are the Businessmen who made America as THE "SUPERPOWER". We can cure ourselves if we want to .....
anon | 06.20.08 - 2:41 am | #
I was a grunt engineer - came in with suggestions to save energy & reduce waste on chemical process equipment projects... if they didn't meet the hurdle - NO-GO. It was considered 'cheaper' to 'waste the resource' than to 'waste the tight money' even when there was a payback - just not enough to overcome the tight money hurdle.
If money is TOO EASY then EVERY project is a GO... and you produce more than society 'should' consume. Think $1 gas.
There are no easy answers. Blaming the fed for everything is just one more easy answer that is wrong.
I'll have to check it out...summer travels coming up and I'll be looking for books. I keep thinking about getting the Kindle...but it doesn't look like the book is available on Kindle yet.
If money is TOO EASY then EVERY project is a GO... and you produce more than society 'should' consume.
Lot of them fail too .... Overall, there will be more failures than successful biz. (eg Financials)
You understood the value of money due to the hard times of 80's. How do you teach that to a biz person of the current decade?
they swap liquid treasuries for illquid mbs to banks who then sell the treasuries and invest in the only place still going up, the commodities.
Who is 'they'? The fed? The banks?
I'll tell you what caused the food riots - a strong dollar going back 20 years. It enticed rural rice growers in Thailand, China, etc., to leave their farms go to cities to work in factories to make crap to send to WalMart to get the powerful US dollar.
And what kept the dollar strong? Their SWF buying MBS & SIVs by the bankful.
Meanwhile fewer folks are growing rice, the population is expanding. They can't eat MBS, dollars or the crap they make for Walmart - they need rice!!
When the fraud that was MBS was exposed & the dollar falls, its the feds fault food riots occur countries wh grow rice shut their borders???
The fed didn't make all that MBS - it tried to keep the banks from failing FAST. Remember last summer & fall?
Imagine how weak the dollar would have become if the banks in the US had failed?
The fed reacted to events way outside their immediate control - the forces powering those events had been building for a generation or more.
"How do you teach that to a biz person of the current decade?"
It's the money in the bank not the oil in the tank was my lesson. 1984 after the last oil bust. Million dollar projects completed and never started. They were eventualy robbed for parts. People that had been hired a year earlier were canned. If it's to good to be true it probably is.
they swap liquid treasuries for illquid mbs to banks who then sell the treasuries and invest in the only place still going up, the commodities.
Who is 'they'? The fed? The banks?
ofcourse they = FED, who else has treasuries to swap.
this is probably changing into the debate what was first, chicken or the egg
the dollar is falling because there is just too much of it, and who controls the dollar amount in the world? the FED.
usd cost 50skk in 2000 now in 2008 it costs under 20skk. ofcourse there is a lot of speculation with my currency going on, but if you look at usd/eur there you can see clearly that usd has gone from 0.8 to 1.55 basicaly losing close to 50% of its value.
U.S Defense should lift our manufacturing and related services sector by this war. Deficits doesn't matter if we control the middle east (More recycling).
How do you teach that to a biz person of the current decade?
anon | 06.20.08 - 2:59 am | #
Maybe by putting them through the mistakes of the 70s first (half sarcastically). We are well on the way there with war & domestic spending going crazy - and resultant price inflation.
I've said all along we'll get our Volcker eventually - but we'll get him when the time is right, we are way too early for that. My guess is the fed govs are fattening the banks for rate increases later this year or early next. The liquidity mess is behind us - now the market will need to sort out the 'solvency crisis' - that's next. Its worse.
Meanwhile it is a good idea to try and keep as many 'average Americans' working as possible & a lower hurdle helps - even if we end up working for weaker dollars for a while.
There are no easy outs from this. No quick ones either.
btw. dont you sleep dryfly time to go to bed
revro | 06.20.08 - 3:15 am | #
I got to the party late tonight - missed all the fun early. Going to bed now.
BTW - mull over this:
the dollar is falling because there is just too much of it, and who controls the dollar amount in the world? the FED.
Yes too much dollar out in the world - whose fault is that? The fed didn't create the deficits!!! Congress & US consumers did!!!
Next - the fed controls the US currency valuation? I'd say NOT ANY MORE. Not in a pegged currency environment.
I'd say the SWF & FCBs have a bigger role on dollar support than the fed - that is the root of the problem. You can argue that the US treasury & fed under Bush & Clinton LET the dollar get away but the fact is its out of the feds hands now. All they can do is react - weakly.
The fed/greenspan are almost wholly to blame for the housing crisis. He brought the interest so low you were almost forced to play the real estate game or get left behind economically.
We have run up more federal debt in the last seven years then during the entire history of the country.
Drfly is way off by saying this was a long time coming. Way off.
Oh, and Bernake is almost wholly responsible for the inflation we are currently experiencing. He could clamp down with higher interest rates and let the whole thing play out, but he has elected not to.
The first video comments "Only Goldman Always Gets It Right".
So--why is Goldman consistently right? What do they know that others don't? Is it just luck? Better analysts?
It reminds me of the historical stock market crash in '39 when the Powers That Be "by luck" just happened to have liquidized their assets and gotten out of the stock market in time. ("The Money Masters" video includes an interview with someone who used to work for the Kennedy family who describes the night when someone came to warn them to get their assets out, and the Kennedy patriarch told this person about it.)
When we were on an international gold standard, there was, at the very least, some mechanism for dealing with global trade imbalances. Now, savings and hard work in Japan and China lowers the interest rate in the U.S. As dryfly points out, it is this arrangement, not a toothless Fed, that lowers the bar for many a silly project or speculation. Great for us if we use the money wisely, but we have not. We've spent most of it in the casino and the rest on oil (fun times, though). Why work hard and save when someone else will do it for you? (said the grasshopper to the ant).
In the end it is the hard working people of Asia that are truly hurt by this arrangement.
The shit we are seeing now was baked in the cake for a generation - the timer went off last summer & Ben was the lucky guy who got to open the oven door.
Ah, classic dryfly! I agree with what you say, both about the Fed and 'we, the people'. I'd just say that there were two good reasons the Greatest Generation didn't spend the way subsequent generations have: 1) Experiencing the Depression at an age where it made a permanent impression and 2) the difficulty of getting and keeping access to credit.
When we boomers were young adults it was still pretty hard to get credit. Lay away plans (remember those?) were still what you did if you wanted a high-ticket item. Getting your first credit card was a big deal and took more than just the means to repay-- somehow, some way, you needed to get someone to give you a loan and report your repayment to one of the credit companies. And God help you if you ever had a credit 'ding' for any reason. The bank might cancel your card-- and it would be years before you had another piece of plastic in your hot little hands. And of course, the requirements for buying a house were even more stringent.
Another thing is the fixed expenses that most middle class families consider essentials have become vastly more expensive and represent a much higher portion of a family's disposable income than in the past. Elizabeth Warren's lecture at Berkeley about this was a real eye-opener for me: (YouTube
- Broadcast Yourself.
Compared to a one-income family in 1970, the 2 income family of 2005 is actually spending considerably less on things that most of us would identify as 'frills'-- or at least things on which you could easily cut back. Currently families spend 32% less on clothes, 18% less on food (including eating out), 52% less on appliances, and 24% less on cars.
So where are they spending so much more? 76% more for a 3 bdrm. 1 ba. house, 74% more on employer sponsored health care premiums, some 50% more for cars (because they need at least one more car than the one-income family), child-care -- a new expense that the family in 1970 didn't have at all, and taxes 25% (due to being taxed on a progressive scale at a higher rate due to having the extra person's income). Finally, a high school education was sufficient for a middle-class job in 1970: it's not in 2005-- so middle-class families are casting desperately about for some way to give their children the education they need to remain in the middle class.
Is it any wonder that people succumb to 'sure-thing' investments in this situation?
Changing this is going to take a very fundamental shift in the way we think-- towards a European-style consensus that things like health care, child-care and education have to be available to all citizens-- and paid for by taxing more than just wages. Once we get back to having some disposable income again I think getting people to save will not be nearly as hard.
Changing this is going to take a very fundamental shift in the way we think-- towards a European-style consensus that things like health care, child-care and education have to be available to all citizens-- and paid for by taxing more than just wages. Once we get back to having some disposable income again I think getting people to save will not be nearly as hard.
Sarah | 06.20.08 - 6:59 am | #
Be careful -- people will accuse you of being a socialist or worse, a Euro-sympathizer
As for saving, I hope that it won't be simply "in vogue" but a true change. A shift in behavior like that does take time or it takes a cataclysmic event such as a Depression, an unsanitized war (unlike the ones we are fighting now) to really make us tighten our belts and do something different.
I recall way back in the late 80s, a friend who was concerned about the current accounts deficit (at that time it was with Japan). He wondered how long it would take for it to come back and hit us in the eye. I think we finally know the answer.
Collectively we are responsible for the situation we are in. While it would be nice to scapegoat the Federal Reserve, changes in our behaviour will be the ONLY thing that can get us out of this mess.
I hope that we have a depression-level event to shake us out of our stupidity. We may suffer, but for most of us that is the only way we will learn.
"The June issue of the Moodys/REAL Commercial Property Price Index (CPPI), based on data through the end of April, experienced the largest one-month decline since the inception of the index. Furthermore, this is the first time that the index is showing a negative return year over year."
Nationally, YOY....
Apartments down 3.4%
Industrial down 3.0%
Office up 1.8%
Retail down 1.2%.
Apartment prices in the South are now down 15% over 2 years.
good arguments all, wish I had something of substance to add.
Overall, I agree with dryfly's point, except that although I also don't blame the Fed for current fiasco, I also give them a little more credit than what dryfly does...
they're not that impotent IMO. their actions do significantly alter current events, even though most of the crapola happening now was had seeds from the distant past.
I guess I'll use a gardening example. if you have seeds, soil, the sun, and the rain you're gonna get some plant growth. it's pretty much set in stone once seed hits Earth.
But the garderner's decision can also radically alter the final look of the garden, even though s/he cannot stop the growth and does not control the growth per se. A weeding here, a rearranging there is the difference between a parterre and a wild field. Some gardens have many gardeners... each one is less important for the overall structure, but gives significant contributions nonetheless.
The Fed is one of the many gardeners of our garden economy. Fiat currencies, fractional reserve lending, a reserve currency, and global trade are the seeds, soil, and sun. things could have been different had the Fed acted differently, even though there are competing gardeners around the world. The fed is therefore culpable even though they are neither omnipotent, the cause of the problem or even dare say I the root of the problem.
this is what the "Jeckyll Island" crowd and the reactionary glod bugs don't understand IMO. much too easy to have the "Evil Fed from Jeckyll Island" controlling the entire Earth, absolving the rest of us from our own personal guilt.
Is there a topic to be off in this thread? I read most of the comments (esp. dryfly's) and what I find most egregious is the phrase produce something used again and again by mr. dryfly. It sounds like he means goods production or manufacturing rather than services, but wtf - most of my consumption is in services and I'm friggin employed there! I'm working and saving over half my salary; on a personal individual level none of this is my fault - so f-ck that produce somthing spiel and change our figgin' policies!!
and combining mine with revro's and dryfly's point (I think)
Although the Fed isn't responsible for everything happening now (seeds planted long ago) I also believe that the Fed's combination of lowering interest rates and swapping of toxic securities for Treasuries is DIRECTLY responsible for part (not all) of the rapid runup in commodities prices. I have NO DOUBT in my mind that shitheads like goldman are swapping out shit securities for treasuries and then taking the proceeds and funneling them right into commodities. once the bubble starts it takes legs of it's own.
there are other causes of course... but the rapid run up we've seen would not have happened as fast or as quick (i.e. now) as it did without the various "lending facilities"
in the same way, the Fed's actions were DIRECTLY responsible for the housing bubble. that is not to say that there weren't 1000 other causes of said bubble... but the Fed as gardener could have intervened differently and shut off the housing bubble if they had raised reserve requirements, raised interest rates, and not come out with rediculous statements that the housing boom was based on sound fundamentals and there was no sign of a "bubble". They had a choice to make: and their decision reinforced the housing bubble. Just as their current decisions reinforce elevated commoditites prices.
The people that saved/didn't overleverage through the bubble are going to be o.k.. I personally will always be a saver but my extra cash from the last 4-5 years is about to start picking up toys that morons borrowed to much for. We are not quite at the "Oh shit,gotta unload it",moment yet. I figure late this year,early next. I have zero problems capitalizing on peoples stupidity during the bubble years...
Yeah, the DOW will break under 12K at least in the morning, but I wish we'd all agree to use a better measure of the overall equities market. Yeah, I know, it's really just a psychological measure and all.
Back to the early morning rants, I take a more general view regarding production. I still consider both goods and services as production. Information, while a less tangible thing, is still something that I produce and consume. Many of us may be "pixel pushers" but we still are still employed in the management of information. We still use it to potentially enrich our lives (or else most of us would not be on this forum). So in my opinion, yeah, we produce something even if only exists somewhere in the ether.
So yeah, I agree with Anonymouse about opening up the definition of "producing" to include services. I'm still a fan of dryfly's commentary even if I disagree on occasion (don't want to be a dittohead, you know).
anonymouse:
I think you misunderstand dryfly's point (or perhaps I do)
the point isn't that one must manufacture a good to produce something... the point is that we as a nation consume more than we produce as a nation. This includes production of services.
we know this because our national debt and trade deficits continue to skyrocket.
thus "produce something" means that we as a nation must produce more than we consume... we haven't done that in decades.
doesn't matter what it is we produce... a good, a service, whatever... but it must be more than we consume.
and one insidious part that most Americans miss:
we ALL benefitted materially from the trade imbalances... we got goods and services MUCH CHEAPER than we otherwise would have due to the artificially depreciated overseas costs
so I, too, sit in my ivory tower and say "I produce a lot!" and "I save a lot!" (I do... I save over 75% of my salary). but I could never have done this if there weren't cheap goods to buy that allowed me to save so much. and those cheap goods got to me because other countries artificially debased their currencies so that their laborers worked for less than their "worth"... I got their labor for cheap!
now the chicken is roosting... our currency is starting to go BACK WHERE IT BELONGS (worth less). this is despite the fact that these other countries are still PROPPING UP the dollar (the chinese, the petrodollar, etc).
so the problem it would seem is that most of the gardeners are not allowing the dollar to fall where it "should" be based on our contribution to the world economy. i'm sure most Americans wouldn't like the feeling if it were allowed to fall where it should be. (perhaps we'd have $10-15 gas, food prices double or treble, $35k Honda Civics, etc)
"Apartment prices in the South are now down 15% over 2 years.
Based on repeat sales of the same properties."
rich | 06.20.08 - 8:55 am | #
rich,
There are certain markets here in SW Florida that make those drops look minor. Think "Cape Coral". I can show you numerous projects at 50% off and not selling...
This is day #11 of a fairly narrow consolidation in oil price - look at USO on an hourly over the last 10 days - it's building cause to do something, obviously either bust up or bust down hard. I suspect the former.
Fremont General Corp. said Wednesday it has filed for bankruptcy protection as part of its plan to sell Fremont Investment & Loan to CapitalSource Inc.
The filing came to satisfy federal regulators as part of the sale.
On Tuesday, CapitalSource (NYSE: CSE) announced that regulators had granted it federal deposit insurance for CapitalSource Bank and approved its purchase of $5 billion in deposits and 22 bank branches from Fremont.
That deal is expected to close later this summer.
Fremont (Pink Sheets: FMNT), a mortgage lender based in Brea, was ordered by the Federal Deposit Insurance Corp. to stop making subprime loans in March 2007.
The Washington Business Journal contributed to this report
anonymouse:
CNBC had a guest on today (heard on Radio, not sure who it was) who predicted $500 oil by 3-5 years.
they had another commentator on to disagree with the first. and the second commentator said "well... we really can't say that he's not right. In my opinion $500 oil has equal chances as $50 oil"
Yes but not for very long. I sense 12,000 has assumed a Verdun-like character in the eyes of policy makers and they are defending the fort because defending the fort is what you do.
Also, I think there is trading information changing hands between private and public players in an attempt to provide rigged markets so the big boys can make enough money to unzombify. Alas for my nation, Ben's a poker mule and can't tell they're wringing out his bankroll.
Personally, I thought it was going to go last Friday. Will it be today? Better to say, "I think when they give it up and it stays given up, it will be a sign they are at the extremity of their means" and await the tell.
IMO, if I were taking money off the Index Short table at a certain number, I would make that trade automated 'cause I do not think any number is safe from a miracle recovery.
I'm not disagreeing with your point there, my point was that we need a change in policy, i.e. Fiscal and Monetary policy, not our individual "go out and produce something" solution. That's why many posters were (corectly) so indignant over dryfly's comments.
Who here still believes that rates will be raised?
BB | 06.20.08 - 9:47 am | #
I think he will try. There will be lots of very hard phone calls after a quarter point and he will get all verklempt and wuss out. Maybe if his therapist tells him to hang in there, he will get to a full half point before he cuts again.
The people that saved/didn't overleverage through the bubble are going to be o.k.. I personally will always be a saver but my extra cash from the last 4-5 years is about to start picking up toys that morons borrowed to much for. We are not quite at the "Oh shit,gotta unload it",moment yet. I figure late this year,early next. I have zero problems capitalizing on peoples stupidity during the bubble years...
Chris
Cobradriver |
toys? what 'toys' are you after? i intend to buy an rc model yacht for cca 50$, 50Eur here in europe :/, but i kind of have no lake in my close vicinity xD
well maybe i stick to my rc car model, it also cost cca 50$ when i bought it
I think I'm reading dry differently than others, because I agree with all of you.
I think we need to produce more/consume less (per dryfly)... and one of the ways of achieving that is throught monetary and fiscal policy (per you). The problem as I see it is that globalization and pegged currencies are negating some/much of our control of monetary policy.
Normally, if we debase our currency then we would export more and we would need to consume less imports. (i.e. produce more and consume less). However, given that the yuan and other currencies are pegged to us this process doesn't work. as we debase our currency theirs debases equally... everybody is trying to debase relative to the others in order to be an export nation, except the Europeans (for now).
fiscal policy on the other hand is controllable... but this has nothing ot do with the Fed. It is the bloated greedy stupid short-term thinking American populace and legislators...
why have "tax and spend" policies when we can have "cut taxes, borrow and spend" policies instead?
I personally feel we need more fiscal change (which isn't gonna happen until forced... look at what happened when Carter suggested we wear sweaters). the SUV keys will be pulled from our dessicated mummified fingers.
I also feel that monetary policy is being implemented. I have suspicions that the Fed/treasury are purpusefully debasing the dollar in an attempt to
1) cuase us to import less and export more
2) cause massive inflation in the pegged currencies in an effort to FORCE them to depeg.
I'm still not sure if they're doing this because they're smart, or if it's just happening by itself...
Just remember, folks. The Federal Reserve KILLS PEOPLE
ac,
You are forgetting the other guilty party the Government of the United States of America (USG for short). And they both work for the Crooks who really run our economy and financial system with the professional help of economists.
Arent born-and-bred American dopes lucky to have such smart masters? What would the dopes do without them and their control and manipulation of the USG and the Fed for the benefit of the mankind??
America's dopes are so fortunate to have an opportunity to vote for the agents acceptable to their real masters. What a system!
Having fun in the California sun and away from the dopes and the Crooks,
--
"I love it when people who were so clever and farsighted that they voted for Bush twice explain to the rest of us what idiots we are."
Sarah,
Assuming that you are addressing me, you are lying when you claim that I voted for Bush twice. I voted once in 2000 and recognized my mistake within 3 months. Second, it takes guts and honesty to admit to one's mistakes without anyone asking for it. A born-and-bred American dope, or dopette, is incapable of identifying his, or her, mistake and then admitting to it.
Born-and-bred American dopes have major psychological problems. Sorry, if you are offended by the truth about the general population and the system as it exists and not some fantasy version of it.
Goodnight, til Manana
I think I'm off to bed too.
Just remember, folks. The Federal Reserve KILLS PEOPLE:
Global food prices have spiked 60 percent since the beginning of 2007, sparking riots in more than 30 countries that depend on imported food, including Cameroon and Egypt. The surge in prices threatens to push the number of malnourished people in the world from 860 million to almost 1 billion, according to the World Food Programme in Rome.
Free Trade in Food Is `On the Ropes' Amid Shortages, Price Rise
does the third MBI/ABK rating downgrade act as a tripwire that the first and second didn't?
The USed up of A is a freakin joke throughout the world. Any respect we once had is long gone.
Those food riots are something to worry about. I really wonder when the first gas riot will be here in the USA.
I'm amused the Trolls are, again, trying to silence the bears by troll posting. Time to reference the "Barbara Streisand effect" again.
Got Popcorn?
Neil
is this mish's blog?
That's an interesting thought...
Bush has killed hundreds of thousands through his arrogance and incompetence, but Bernanke ends up killing millions through his arrogance and incompetence.
Blog-Wrap: Housing Crisis Not Close To Over
Calculated Risk portends the next wave of delinquencies and foreclosures - prime borrowers who used adjustable-rate mortgages (ARMs) as a tool to overstep their affordability
http://www.wallstreetoasis.com/
Give a reference to CR.
A little surprised, in general the the tone of the site has been the typical "wall street we know it all".
CR, thanks for the entertainment...especially enjoyed the second one re: my very own SillyCon valley. It's amazing that RIMM, Apple, and all the rest are at nosebleed levels in this environment.
Lessons will be learned, again.
I'm going long friendship bracelets.
Nite.
much prefer the Richter Scales in the Valley to this East Coast imitation. Merle Hazzard is a better rendition of Manhattan and Long Island, for my money.
Have no fear. The Lusk Center at USC says everything is going to be just fine:
Mortgage markets could rebound in ‘09 - Mortgage Insider : The Orange County Register
I don't think he gets the other side of the equation. Wall street may be able and willing to buy mortgages again (non toxics) but isnt' he forgetting that no one has money for a down payment? And that we're going to have even less for a downpayment?
Not only are we a nation of non-savers, that people out there are in horrendous debt? I guess predictions are free, but unfounded optimism does not do much for your credibility.
I think I'm off to bed too.
Just remember, folks. The Federal Reserve KILLS PEOPLE:
Keep sayin' that - if it helps you sleep at night. But its still BS.
These imbalances have been building for a long time... a generation of deficits on our part & currency manipulation on theirs. The events of last summer including the 'liquidity crisis' & 'emergency' fed rate cuts were just the knife that finally cut them loose releasing all kinds of pent up forces. It was gonna happen somehow, someday and when it did it was gonna be ugly.
The fed was & still is reacting to events that for the most part are beyond their control.
"Not only are we a nation of non-savers"
I'm a saver but I ain't doing it in no stink-en dollars. Maybe I'm turning Japaneses.
YouTube - Turning Japanese - Gridlock covers The Vapors
"The fed was & still is reacting to events that for the most part are beyond their control."
Damn right our 536 elected leaders in DC have a hell of a lot more to do with this then the FED
It was gonna happen somehow, someday and when it did it was gonna be ugly.
Ah... the Great Deleveraging
Looks like people may have to stop spending like drunken sailors (on useless crap from china and fat ass SUVs) and start to save a few bucks for a while to get back on track.
Our consumption levels have become grotesque. Time to scale back a bit.
Damn right our 536 elected leaders in DC have a hell of a lot more to do with this then the FED
Anonymous | 06.20.08 - 12:55 am |
And the 300 mil citizens who would rather borrow & spend than invest & produce. It astonishes me we 'blame' the fed for shit we as a society want to do anyway - say what?
The people get the government they deserve - One that reflects their personal undisciplined reckless borrowing and spending habits.
The short-sighted behavior problems in the Government mirror those of the self indulgent populous.
C'mon dryfly, what are ya gonna do if you're a citizen, save money in a CD paying 3% while inflation is more than 4%???? How can you not lay some blame on the Fed, the same Fed that refused to regulate the ridiculous lending practices? Their failure to raise rates earlier, coincident with their failure to regulate lending abuses, means they must now bail out the banks by stealing from savers.
You lay no blame on the Fed for that?
Hmmm,... Night Music,...Eine Kleine NachtMusik,....A Little Night Music,....Send in the Clowns,...our government,...it all fits.
Don't get me wrong - I think the fed over did it, cut too much, too fast - but the real cause of the mess were these imbalances building up. Deficits coupled to currency manipulation resulting in a generation of over consumption & investment distortions.
Pump that much paper out into the world & what do you expect to happen?
The shit we are seeing now was baked in the cake for a generation - the timer went off last summer & Ben was the lucky guy who got to open the oven door.
That is how the cookie crumbles
ShortCourage writes:
C'mon dryfly, what are ya gonna do if you're a citizen, save money in a CD paying 3% while inflation is more than 4%???? How can you not lay some blame on the Fed, the same Fed that refused to regulate the ridiculous lending practices? Their failure to raise rates earlier, coincident with their failure to regulate lending abuses, means they must now bail out the banks by stealing from savers.
You lay no blame on the Fed for that?
ShortCourage | 06.20.08 - 1:06 am | #
Maybe you could make something instead of just consuming? That after all was the root cause consumption exceeding production.
So if you don't want to save 'cause rates are too low, then produce.
Zephyr writes:
The people get the government they deserve - One that reflects their personal undisciplined reckless borrowing and spending habits.
The short-sighted behavior problems in the Government mirror those of the self indulgent populous.
Zephyr | Homepage | 06.20.08 - 1:04 am | #
Exactly. On both the left & the right of the political spectrum too - more than enough blame to go around.
dryfly, what do you think transformed this nation of industrious workers/savers to borrow/spenders?
The rules of play make a big difference in how "we the people" behave. That and the fine art of advertising, which convinces people what they want is what they need.
Anyways, I don't disagree with you about consumerism run rampant. I simply take issue with you defending the Fed in any way whatsoever. They have displayed incompetence, or worse.
Anyways, I don't disagree with you about consumerism run rampant. I simply take issue with you defending the Fed in any way whatsoever. They have displayed incompetence, or worse.
ShortCourage | 06.20.08 - 1:24 am | #
I am not defending the fed - I am just not BLAMING the fed. The fed is almost a non-factor. Incompetence on the part of a non-factor isn't the end of the world.
I'm telling you - sloppy monetary policy on the part of the fed has made us less wealthy in real terms but did not make us shut down our factories & import to WalMart.
The fed also didn't force congress to run massive deficits.
People put too much blame on the fed when things go badly & too much credit when it goes well... fed is only one piece of the puzzle.
dryfly,
Agreed, blame goes to Congress too.
But calling the Fed "almost a non-factor" is completely wrong, IMHO. Controlling the money supply rivals the power of legislative control.
Dryfly,
Right, I'll tell my 78 year old arthritic Mother-in-Law to get her ass out there and produce.
ShortCourage writes:
dryfly, what do you think transformed this nation of industrious workers/savers to borrow/spenders?
In short deficits. Big ones lasting a generation during which the WORLD kept lending to us mostly through their central banks & SWF to ensure we continued to import from them (becoming even less industrious & borrow spending even more). Now how exactly did the fed do this to us?
It was only this last summer that the non-central bank foreign lending community had a double take about our 'credit worthiness'... from what I read the foreign central banks & SWFs ARE STILL buying our debt at close to record levels regardless of what the fed is doing. Read Setser.
So again, who is to blame for these imbalances?
"The squeeze on real take-home pay from higher fuel bills will arguably be an even more significant restraint on consumer spending this year than the credit crunch.
That will also further deflate the housing market.
The squeeze on real-income growth is likely to mean that both house prices and consumer spending weaken together.
The era of cheap mortgage finance that underpinned the housing market in 2006 and the first half of 2007 is over and,
as a result, it is reasonable to expect the ratio of house prices to incomes to fall back."
King also said that British living standards will slip and economic growth needs to weaken as policy makers refuse to flinch in their fight against accelerating inflation.
"It will not be an easy time, and I know that some families will find it particularly difficult.
These changes to our spending power and to the housing market are real shifts that, although not easy to accept, we cannot side-step."
At least Swerving Mervin is telling them straight up: you gonna get bent over and it's gonna to hurt.
So again, who is to blame for these imbalances?
Those foreign bastards that lent us money!
I guess.
Dryfly,
Right, I'll tell my 78 year old arthritic Mother-in-Law to get her ass out there and produce.
Anon | 06.20.08 - 1:42 am | #
That's something her grandchildren should be doing. If she's 78 - her generation already did their part - they didn't run monster deficits. It was boomers, Xers & Nexters running up the red - progressively getting worse with each one.
I guess.
sdtfs | 06.20.08 - 1:46 am | #
How else do you explain it?
We are not to blame for taking shit they gave us... but then we blame the fed for when we can't pay it back & blow up the financial markets? How's that work?
"So again, who is to blame for these imbalances?"
It's not who it's what. That be the Dollar which is the world reserve fiat currency and global fractional reserve banking.
Dryfly,
Just confiscate all savings and require 60 hours per week. Utopia.
Those foreign bastards that lent us money!
Gas->OPEC->petrodollars->US Bonds, which kept rates low->mortgages->MEW->SUV->recession/foreclosure->dollar destruction->$4 gas->foreclosure->dollar destruction->$5 gas->dollar desctruction...
Anon writes:
Dryfly,
Just confiscate all savings and require 60 hours per week. Utopia.
Anon | 06.20.08 - 1:51 am | #
Cool part is the weakening dollar does that for you - like magic. All the SWF have to do is stop lending to us & we IMMEDIATELY go Pay-Go everywhere.
So you get your pay back either voluntarily or involuntarily - we get to choose.
You forgot one BigR, a 2 trillion dollar war funded with borrowed money.
I get what you're saying, but when I look back and try to imagine the US behaving differently, knowing what I do of human nature,...I guess these Crazy Eddie cycles are inevitable.
Dryfly,
The Feds policy of intentionally running negative real interest rates is a pernicous form of currency debasement. In the long run it is not consistent with a free society.
It's not who it's what. That be the Dollar which is the world reserve fiat currency and global fractional reserve banking.
Anonymous | 06.20.08 - 1:51 am | #
Exactly. That and the US continuing to be the consumer of last resort. Combine the two & you have the recipe of how we got to where we are - after 20 some years of rinse repeat.
But it is so much easier & fulfilling to blame the fed - whatever.
dryfly ...
The long end is controlled by the FCB. But how about the short rates?
So Fed is doing its part to discourage savings and investment too.
If the FFR is in double digits, No cheap loans =>> Produce =>> Savings =>> less deficit...
I look back and try to imagine the US behaving differently, knowing what I do of human nature
Just look to the Greatest Generation, or most immigrants. When I was growing up, I thought we were in poverty; I mean, a baloney sandwich and HALF of a Little Debbie for lunch. Next thing I know, my parents paid for 32 years worth of college for the four of us.
The Feds policy of intentionally running negative real interest rates is a pernicous form of currency debasement. In the long run it is not consistent with a free society.
Anon | 06.20.08 - 1:59 am | #
Opinion - everyone has one, you and me both.
The fed has a mandate - they perform it in reaction to events. That 'free society' has set events in motion. That 'free society' can correct them anytime they want. They haven't.
Consume less - produce more & the currency fixes itself & the fed goes back to sleep.
And of course no one is is stopping you from owning glod if you are so concerned about debasement - better hope somebody grows food though instead of everyone just hoarding glod. Can't eat glod.
dryfly,
You seem pretty astute on these things. From a national point of view, is "saving" (e.g. CDs) more beneficial then investing (e.g. equities)?
Dryfly,
At some point opionion and fact intersect. Time for bed. Thanks for the interesting discussion.
Crazy Eddie...haven't thought of him in years. He went bankrupt, iirc.
And..SHG soars! The volatility in that market is just amazing over the last few days.
Think the DOW will be the same, let's see later today
dryfly
Any comments for the anon 06.20.08 - 2:00 question?
If the FFR is in double digits, No cheap loans =>> Produce =>> Savings =>> less deficit...
anon | 06.20.08 - 2:00 am | #
There are two ways to bring down the CAD...
One is produce more, the other is consume less. The recipe you give is the latter - drive down deficits by cutting consumption... hopefully MORE than production.
Not sure the SWFs & FCBs would let us get away with that either... they love to borrow short anyway.
But you highlighted the fed's current dilemma: cut rates to improve climate for domestic production & risk weakening the currency OR raise rates to drive down consumption hoping consumption falls more than output.
One leads to debasement & the other unemployment. But the reason we are in this position of a Hobson's Choice is because we ran monster CADs for a generation. That won't fix quickly or painlessly.
Crazy Eddie...haven't thought of him in years.
Actually a take off from a sci-fi book by Larry Niven and Jerry Pournelle, "A Mote in God's Eye" Wacky intelligent aliens doomed to cycles of over-population by biology (recovery/boom/crash repeat). Just before each blow-up "Crazy Eddie" bizarre ideas surface in a desperate attempt to avoid the inevitable,...and why not?... the status quo is certain to lead to failure.
That won't fix quickly or painlessly.
Means we need the second option. You cannot control consumption with easy money any where in the world. Just my opinion.
"That won't fix quickly or painlessly."
I'm more worried about what the politicians are doing then I am what the FED is. They have a lot more to do with how bad this will get.
The Fed, Congress, spendthrift citizens: all culpable? No argument from me.
But, not a word about the captains of capital feeding at the fed's trough, buying and selling congressmen and policy favors, and dominating the airwaves with overt and subliminal messages that set the national mindset?
What's up with that?
If you're going to be spreading responsibility for calamity around don't forget the investors, the executives and the money managers.
Just sayi
If the FFR is in double digits, No cheap loans =>> Produce =>> Savings =>> less deficit...
anon | 06.20.08 - 2:00 am | #
Also - if the FFR is in DD... that becomes the hurdle rate for ALL investments.
Were you in biz in the 80s? I was. I sat in meetings where I was told if an investment didn't double existing FFR it was 'NO-GO'... so to get approval on a very safe project we had to show a return of something like 25%-30%... minimum. Risky projects had to pay back in a year (100%). These were on capital equipment projects that were expected to last 10-15 years or more!!!
Every NO-GO means fewer people hired. Its less business for our suppliers & fewer jobs for their community too... its less consumption though & less output.
Now compare the opposite - ZIRP. Hell everything goes... even those projects that maybe shouldn't. And of course all that money chasing scarce 'project resources' inflates their price.
In the end both are self-correcting in a non-manipulated system. The curse we have is ours is the worlds reserve currency & we are viewed as the consumer of last resort... so these imbalances have built for a long time & with a lot of water behind the dam. When it goes - if it isn't already - its gonna be one helluva flood.
Not much the fed can do but react.
BTW- I referenced the book because CR made a passing reference a few months back, the aliens had three hands: on the one hand, on the other hand, on the gripping hand,...
Means we need the second option. You cannot control consumption with easy money any where in the world. Just my opinion.
anon | 06.20.08 - 2:28 am | #
They are trying to reduce the job loss from the collapse in 'output'. The side effect is currency debasement. There is no free lunch - you get one or the other.
But you are right - we had other options YEARS AGO - and didn't take them. Now we pay.
Were you in biz in the 80s? I was. I sat in meetings where I was told if an investment didn't double existing FFR it was 'NO-GO'... so to get approval on a very safe project we had to show a return of something like 25%-30%... minimum. Risky projects had to pay back in a year (100%). These were on capital equipment projects that were expected to last 10-15 years or more!!!
Those are the Businessmen who made America as THE "SUPERPOWER". We can cure ourselves if we want to .....
But, not a word about the captains of capital feeding at the fed's trough, buying and selling congressmen and policy favors, and dominating the airwaves with overt and subliminal messages that set the national mindset?
What's up with that?
I would include them in the 'spend thrift citizen' category... it was hand in glove. Think of them as uber-spend thrifts.
But we could have voted around them - silenced them - we didn't, we were too comfortable. Both left & right.
"we had other options YEARS AGO - and didn't take them. Now we pay."
"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our
children a legacy of bankruptcy. We have defrauded our country to get ourselves elected."
-- John Danforth (R-Mo)
dryfly pardon me, but FED is directly responsible for the food price fiasco.
they swap liquid treasuries for illquid mbs to banks who then sell the treasuries and invest in the only place still going up, the commodities.
so yes there is a direct link, if the FED was not giving the banks the treasuries the food prices will be lower because there would be less liquidity in commodities.
Those are the Businessmen who made America as THE "SUPERPOWER". We can cure ourselves if we want to .....
anon | 06.20.08 - 2:41 am | #
I was a grunt engineer - came in with suggestions to save energy & reduce waste on chemical process equipment projects... if they didn't meet the hurdle - NO-GO. It was considered 'cheaper' to 'waste the resource' than to 'waste the tight money' even when there was a payback - just not enough to overcome the tight money hurdle.
If money is TOO EASY then EVERY project is a GO... and you produce more than society 'should' consume. Think $1 gas.
There are no easy answers. Blaming the fed for everything is just one more easy answer that is wrong.
I'll have to check it out...summer travels coming up and I'll be looking for books. I keep thinking about getting the Kindle...but it doesn't look like the book is available on Kindle yet.
If money is TOO EASY then EVERY project is a GO... and you produce more than society 'should' consume.
Lot of them fail too .... Overall, there will be more failures than successful biz. (eg Financials)
You understood the value of money due to the hard times of 80's. How do you teach that to a biz person of the current decade?
they swap liquid treasuries for illquid mbs to banks who then sell the treasuries and invest in the only place still going up, the commodities.
Who is 'they'? The fed? The banks?
I'll tell you what caused the food riots - a strong dollar going back 20 years. It enticed rural rice growers in Thailand, China, etc., to leave their farms go to cities to work in factories to make crap to send to WalMart to get the powerful US dollar.
And what kept the dollar strong? Their SWF buying MBS & SIVs by the bankful.
Meanwhile fewer folks are growing rice, the population is expanding. They can't eat MBS, dollars or the crap they make for Walmart - they need rice!!
When the fraud that was MBS was exposed & the dollar falls, its the feds fault food riots occur countries wh grow rice shut their borders???
The fed didn't make all that MBS - it tried to keep the banks from failing FAST. Remember last summer & fall?
Imagine how weak the dollar would have become if the banks in the US had failed?
The fed reacted to events way outside their immediate control - the forces powering those events had been building for a generation or more.
"How do you teach that to a biz person of the current decade?"
It's the money in the bank not the oil in the tank was my lesson. 1984 after the last oil bust. Million dollar projects completed and never started. They were eventualy robbed for parts. People that had been hired a year earlier were canned. If it's to good to be true it probably is.
How do you teach that to a biz person of the current decade?
You mean peeps that have no problems borrowing 50k/year for a college education?
Yep. we're screwed
Israel appears to rehearse Iran attack: report
Israel appears to rehearse Iran attack: report
| Reuters
"Israel appears to rehearse Iran attack"
Another problem child.
they swap liquid treasuries for illquid mbs to banks who then sell the treasuries and invest in the only place still going up, the commodities.
Who is 'they'? The fed? The banks?
ofcourse they = FED, who else has treasuries to swap.
this is probably changing into the debate what was first, chicken or the egg
the dollar is falling because there is just too much of it, and who controls the dollar amount in the world? the FED.
usd cost 50skk in 2000 now in 2008 it costs under 20skk. ofcourse there is a lot of speculation with my currency going on, but if you look at usd/eur there you can see clearly that usd has gone from 0.8 to 1.55 basicaly losing close to 50% of its value.
btw. dont you sleep dryfly
time to go to bed 
U.S Defense should lift our manufacturing and related services sector by this war. Deficits doesn't matter if we control the middle east (More recycling).
How do you teach that to a biz person of the current decade?
anon | 06.20.08 - 2:59 am | #
Maybe by putting them through the mistakes of the 70s first (half sarcastically). We are well on the way there with war & domestic spending going crazy - and resultant price inflation.
I've said all along we'll get our Volcker eventually - but we'll get him when the time is right, we are way too early for that. My guess is the fed govs are fattening the banks for rate increases later this year or early next. The liquidity mess is behind us - now the market will need to sort out the 'solvency crisis' - that's next. Its worse.
Meanwhile it is a good idea to try and keep as many 'average Americans' working as possible & a lower hurdle helps - even if we end up working for weaker dollars for a while.
There are no easy outs from this. No quick ones either.
Not much new in the article...but just in case. 400 charged as U.S. cracks down on mortgage fraud
btw. dont you sleep dryfly
time to go to bed 
revro | 06.20.08 - 3:15 am | #
I got to the party late tonight - missed all the fun early. Going to bed now.
BTW - mull over this:
the dollar is falling because there is just too much of it, and who controls the dollar amount in the world? the FED.
Yes too much dollar out in the world - whose fault is that? The fed didn't create the deficits!!! Congress & US consumers did!!!
Next - the fed controls the US currency valuation? I'd say NOT ANY MORE. Not in a pegged currency environment.
I'd say the SWF & FCBs have a bigger role on dollar support than the fed - that is the root of the problem. You can argue that the US treasury & fed under Bush & Clinton LET the dollar get away but the fact is its out of the feds hands now. All they can do is react - weakly.
The fed/greenspan are almost wholly to blame for the housing crisis. He brought the interest so low you were almost forced to play the real estate game or get left behind economically.
We have run up more federal debt in the last seven years then during the entire history of the country.
Drfly is way off by saying this was a long time coming. Way off.
Oh, and Bernake is almost wholly responsible for the inflation we are currently experiencing. He could clamp down with higher interest rates and let the whole thing play out, but he has elected not to.
The first video comments "Only Goldman Always Gets It Right".
So--why is Goldman consistently right? What do they know that others don't? Is it just luck? Better analysts?
It reminds me of the historical stock market crash in '39 when the Powers That Be "by luck" just happened to have liquidized their assets and gotten out of the stock market in time. ("The Money Masters" video includes an interview with someone who used to work for the Kennedy family who describes the night when someone came to warn them to get their assets out, and the Kennedy patriarch told this person about it.)
When we were on an international gold standard, there was, at the very least, some mechanism for dealing with global trade imbalances. Now, savings and hard work in Japan and China lowers the interest rate in the U.S. As dryfly points out, it is this arrangement, not a toothless Fed, that lowers the bar for many a silly project or speculation. Great for us if we use the money wisely, but we have not. We've spent most of it in the casino and the rest on oil (fun times, though). Why work hard and save when someone else will do it for you? (said the grasshopper to the ant).
In the end it is the hard working people of Asia that are truly hurt by this arrangement.
Good thread!
Paul N writes:
In the end it is the hard working people of Asia that are truly hurt by this arrangement.
So long as the cycle continues. What if it breaks?
The shit we are seeing now was baked in the cake for a generation - the timer went off last summer & Ben was the lucky guy who got to open the oven door.
Ah, classic dryfly! I agree with what you say, both about the Fed and 'we, the people'. I'd just say that there were two good reasons the Greatest Generation didn't spend the way subsequent generations have: 1) Experiencing the Depression at an age where it made a permanent impression and 2) the difficulty of getting and keeping access to credit.
When we boomers were young adults it was still pretty hard to get credit. Lay away plans (remember those?) were still what you did if you wanted a high-ticket item. Getting your first credit card was a big deal and took more than just the means to repay-- somehow, some way, you needed to get someone to give you a loan and report your repayment to one of the credit companies. And God help you if you ever had a credit 'ding' for any reason. The bank might cancel your card-- and it would be years before you had another piece of plastic in your hot little hands. And of course, the requirements for buying a house were even more stringent.
Another thing is the fixed expenses that most middle class families consider essentials have become vastly more expensive and represent a much higher portion of a family's disposable income than in the past. Elizabeth Warren's lecture at Berkeley about this was a real eye-opener for me: (YouTube
- Broadcast Yourself.
Compared to a one-income family in 1970, the 2 income family of 2005 is actually spending considerably less on things that most of us would identify as 'frills'-- or at least things on which you could easily cut back. Currently families spend 32% less on clothes, 18% less on food (including eating out), 52% less on appliances, and 24% less on cars.
So where are they spending so much more? 76% more for a 3 bdrm. 1 ba. house, 74% more on employer sponsored health care premiums, some 50% more for cars (because they need at least one more car than the one-income family), child-care -- a new expense that the family in 1970 didn't have at all, and taxes 25% (due to being taxed on a progressive scale at a higher rate due to having the extra person's income). Finally, a high school education was sufficient for a middle-class job in 1970: it's not in 2005-- so middle-class families are casting desperately about for some way to give their children the education they need to remain in the middle class.
Is it any wonder that people succumb to 'sure-thing' investments in this situation?
Changing this is going to take a very fundamental shift in the way we think-- towards a European-style consensus that things like health care, child-care and education have to be available to all citizens-- and paid for by taxing more than just wages. Once we get back to having some disposable income again I think getting people to save will not be nearly as hard.
U.S. says exercise by Israel seemed directed at Iran - The New York Times
The world economy may soon be deeply indebted to Israel for all the blessings it bestows upon us.
Changing this is going to take a very fundamental shift in the way we think-- towards a European-style consensus that things like health care, child-care and education have to be available to all citizens-- and paid for by taxing more than just wages. Once we get back to having some disposable income again I think getting people to save will not be nearly as hard.
Sarah | 06.20.08 - 6:59 am | #
Be careful -- people will accuse you of being a socialist or worse, a Euro-sympathizer
As for saving, I hope that it won't be simply "in vogue" but a true change. A shift in behavior like that does take time or it takes a cataclysmic event such as a Depression, an unsanitized war (unlike the ones we are fighting now) to really make us tighten our belts and do something different.
I recall way back in the late 80s, a friend who was concerned about the current accounts deficit (at that time it was with Japan). He wondered how long it would take for it to come back and hit us in the eye. I think we finally know the answer.
Sarah and Dryfly have it right.
Collectively we are responsible for the situation we are in. While it would be nice to scapegoat the Federal Reserve, changes in our behaviour will be the ONLY thing that can get us out of this mess.
I hope that we have a depression-level event to shake us out of our stupidity. We may suffer, but for most of us that is the only way we will learn.
"The June issue of the Moodys/REAL Commercial Property Price Index (CPPI), based on data through the end of April, experienced the largest one-month decline since the inception of the index. Furthermore, this is the first time that the index is showing a negative return year over year."
Nationally, YOY....
Apartments down 3.4%
Industrial down 3.0%
Office up 1.8%
Retail down 1.2%.
Apartment prices in the South are now down 15% over 2 years.
Based on repeat sales of the same properties.
wow. wish I were up at 3am.
good arguments all, wish I had something of substance to add.
Overall, I agree with dryfly's point, except that although I also don't blame the Fed for current fiasco, I also give them a little more credit than what dryfly does...
they're not that impotent IMO. their actions do significantly alter current events, even though most of the crapola happening now was had seeds from the distant past.
I guess I'll use a gardening example. if you have seeds, soil, the sun, and the rain you're gonna get some plant growth. it's pretty much set in stone once seed hits Earth.
But the garderner's decision can also radically alter the final look of the garden, even though s/he cannot stop the growth and does not control the growth per se. A weeding here, a rearranging there is the difference between a parterre and a wild field. Some gardens have many gardeners... each one is less important for the overall structure, but gives significant contributions nonetheless.
The Fed is one of the many gardeners of our garden economy. Fiat currencies, fractional reserve lending, a reserve currency, and global trade are the seeds, soil, and sun. things could have been different had the Fed acted differently, even though there are competing gardeners around the world. The fed is therefore culpable even though they are neither omnipotent, the cause of the problem or even dare say I the root of the problem.
this is what the "Jeckyll Island" crowd and the reactionary glod bugs don't understand IMO. much too easy to have the "Evil Fed from Jeckyll Island" controlling the entire Earth, absolving the rest of us from our own personal guilt.
Is there a topic to be off in this thread? I read most of the comments (esp. dryfly's) and what I find most egregious is the phrase produce something used again and again by mr. dryfly. It sounds like he means goods production or manufacturing rather than services, but wtf - most of my consumption is in services and I'm friggin employed there! I'm working and saving over half my salary; on a personal individual level none of this is my fault - so f-ck that produce somthing spiel and change our figgin' policies!!
and combining mine with revro's and dryfly's point (I think)
Although the Fed isn't responsible for everything happening now (seeds planted long ago) I also believe that the Fed's combination of lowering interest rates and swapping of toxic securities for Treasuries is DIRECTLY responsible for part (not all) of the rapid runup in commodities prices. I have NO DOUBT in my mind that shitheads like goldman are swapping out shit securities for treasuries and then taking the proceeds and funneling them right into commodities. once the bubble starts it takes legs of it's own.
there are other causes of course... but the rapid run up we've seen would not have happened as fast or as quick (i.e. now) as it did without the various "lending facilities"
in the same way, the Fed's actions were DIRECTLY responsible for the housing bubble. that is not to say that there weren't 1000 other causes of said bubble... but the Fed as gardener could have intervened differently and shut off the housing bubble if they had raised reserve requirements, raised interest rates, and not come out with rediculous statements that the housing boom was based on sound fundamentals and there was no sign of a "bubble". They had a choice to make: and their decision reinforced the housing bubble. Just as their current decisions reinforce elevated commoditites prices.
Enough of this intellectual admonitions!
let the big question begin, will the DOW break 12K?
Anonymouse | 06.20.08 - 9:00 am |
The people that saved/didn't overleverage through the bubble are going to be o.k.. I personally will always be a saver but my extra cash from the last 4-5 years is about to start picking up toys that morons borrowed to much for. We are not quite at the "Oh shit,gotta unload it",moment yet. I figure late this year,early next. I have zero problems capitalizing on peoples stupidity during the bubble years...
Chris
BB,
Yeah, the DOW will break under 12K at least in the morning, but I wish we'd all agree to use a better measure of the overall equities market. Yeah, I know, it's really just a psychological measure and all.
Back to the early morning rants, I take a more general view regarding production. I still consider both goods and services as production. Information, while a less tangible thing, is still something that I produce and consume. Many of us may be "pixel pushers" but we still are still employed in the management of information. We still use it to potentially enrich our lives (or else most of us would not be on this forum). So in my opinion, yeah, we produce something even if only exists somewhere in the ether.
So yeah, I agree with Anonymouse about opening up the definition of "producing" to include services. I'm still a fan of dryfly's commentary even if I disagree on occasion (don't want to be a dittohead, you know).
anonymouse:
I think you misunderstand dryfly's point (or perhaps I do)
the point isn't that one must manufacture a good to produce something... the point is that we as a nation consume more than we produce as a nation. This includes production of services.
we know this because our national debt and trade deficits continue to skyrocket.
thus "produce something" means that we as a nation must produce more than we consume... we haven't done that in decades.
doesn't matter what it is we produce... a good, a service, whatever... but it must be more than we consume.
and one insidious part that most Americans miss:
we ALL benefitted materially from the trade imbalances... we got goods and services MUCH CHEAPER than we otherwise would have due to the artificially depreciated overseas costs
so I, too, sit in my ivory tower and say "I produce a lot!" and "I save a lot!" (I do... I save over 75% of my salary). but I could never have done this if there weren't cheap goods to buy that allowed me to save so much. and those cheap goods got to me because other countries artificially debased their currencies so that their laborers worked for less than their "worth"... I got their labor for cheap!
now the chicken is roosting... our currency is starting to go BACK WHERE IT BELONGS (worth less). this is despite the fact that these other countries are still PROPPING UP the dollar (the chinese, the petrodollar, etc).
so the problem it would seem is that most of the gardeners are not allowing the dollar to fall where it "should" be based on our contribution to the world economy. i'm sure most Americans wouldn't like the feeling if it were allowed to fall where it should be. (perhaps we'd have $10-15 gas, food prices double or treble, $35k Honda Civics, etc)
"Apartment prices in the South are now down 15% over 2 years.
Based on repeat sales of the same properties."
rich | 06.20.08 - 8:55 am | #
rich,
There are certain markets here in SW Florida that make those drops look minor. Think "Cape Coral". I can show you numerous projects at 50% off and not selling...
CHris
This is day #11 of a fairly narrow consolidation in oil price - look at USO on an hourly over the last 10 days - it's building cause to do something, obviously either bust up or bust down hard. I suspect the former.
Another subprime lender files!
Fremont General Corp. said Wednesday it has filed for bankruptcy protection as part of its plan to sell Fremont Investment & Loan to CapitalSource Inc.
The filing came to satisfy federal regulators as part of the sale.
On Tuesday, CapitalSource (NYSE: CSE) announced that regulators had granted it federal deposit insurance for CapitalSource Bank and approved its purchase of $5 billion in deposits and 22 bank branches from Fremont.
That deal is expected to close later this summer.
Fremont (Pink Sheets: FMNT), a mortgage lender based in Brea, was ordered by the Federal Deposit Insurance Corp. to stop making subprime loans in March 2007.
The Washington Business Journal contributed to this report
anonymouse:
CNBC had a guest on today (heard on Radio, not sure who it was) who predicted $500 oil by 3-5 years.
they had another commentator on to disagree with the first. and the second commentator said "well... we really can't say that he's not right. In my opinion $500 oil has equal chances as $50 oil"
even on the radio I could hear the jaws dropping.
"Will the DOW break 12K"
Yes but not for very long. I sense 12,000 has assumed a Verdun-like character in the eyes of policy makers and they are defending the fort because defending the fort is what you do.
Also, I think there is trading information changing hands between private and public players in an attempt to provide rigged markets so the big boys can make enough money to unzombify. Alas for my nation, Ben's a poker mule and can't tell they're wringing out his bankroll.
Personally, I thought it was going to go last Friday. Will it be today? Better to say, "I think when they give it up and it stays given up, it will be a sign they are at the extremity of their means" and await the tell.
IMO, if I were taking money off the Index Short table at a certain number, I would make that trade automated 'cause I do not think any number is safe from a miracle recovery.
Yearning to Learn | 06.20.08 - 9:23 am,
I'm not disagreeing with your point there, my point was that we need a change in policy, i.e. Fiscal and Monetary policy, not our individual "go out and produce something" solution. That's why many posters were (corectly) so indignant over dryfly's comments.
Methinks the DOW will end above 12K today.
This despite the fact that oil looks really bullish today, up 3 bucks already.
Start a war, cut taxes and bad things happen. Now that is really a surprise.
But when "Debts don't matter" as Reagan proved, you can have deficit spending forever.
No surprise at all, all very predictable.
John writes:
But when "Debts don't matter" as Reagan proved, you can have deficit spending forever.
Think you hit the nail on its head, this one was a long time in the making.
Wonder why no one is worried about MBIA and AMBAC getting downgraded, before BS this would have sent the markets down 500 in the very least.
Some deals must have been struck, smell more bailouts.
In this environment don't see a stronger dollar.
Who here still believes that rates will be raised?
I'm going to go on the record that the dow will drop below 12000 today. But might not end there. Now where's my Nobel prize for economics?
Who here still believes that rates will be raised?
BB | 06.20.08 - 9:47 am | #
I think he will try. There will be lots of very hard phone calls after a quarter point and he will get all verklempt and wuss out. Maybe if his therapist tells him to hang in there, he will get to a full half point before he cuts again.
The people that saved/didn't overleverage through the bubble are going to be o.k.. I personally will always be a saver but my extra cash from the last 4-5 years is about to start picking up toys that morons borrowed to much for. We are not quite at the "Oh shit,gotta unload it",moment yet. I figure late this year,early next. I have zero problems capitalizing on peoples stupidity during the bubble years...
Chris
Cobradriver |
toys? what 'toys' are you after?
i intend to buy an rc model yacht for cca 50$, 50Eur here in europe :/, but i kind of have no lake in my close vicinity xD
well maybe i stick to my rc car model, it also cost cca 50$ when i bought it
anonymouse:
gotcha.
I think I'm reading dry differently than others, because I agree with all of you.
I think we need to produce more/consume less (per dryfly)... and one of the ways of achieving that is throught monetary and fiscal policy (per you). The problem as I see it is that globalization and pegged currencies are negating some/much of our control of monetary policy.
Normally, if we debase our currency then we would export more and we would need to consume less imports. (i.e. produce more and consume less). However, given that the yuan and other currencies are pegged to us this process doesn't work. as we debase our currency theirs debases equally... everybody is trying to debase relative to the others in order to be an export nation, except the Europeans (for now).
fiscal policy on the other hand is controllable... but this has nothing ot do with the Fed. It is the bloated greedy stupid short-term thinking American populace and legislators...
why have "tax and spend" policies when we can have "cut taxes, borrow and spend" policies instead?
I personally feel we need more fiscal change (which isn't gonna happen until forced... look at what happened when Carter suggested we wear sweaters). the SUV keys will be pulled from our dessicated mummified fingers.
I also feel that monetary policy is being implemented. I have suspicions that the Fed/treasury are purpusefully debasing the dollar in an attempt to
1) cuase us to import less and export more
2) cause massive inflation in the pegged currencies in an effort to FORCE them to depeg.
I'm still not sure if they're doing this because they're smart, or if it's just happening by itself...
Sarah, thanks for providing the youtube link.
Just remember, folks. The Federal Reserve KILLS PEOPLE
ac,
You are forgetting the other guilty party the Government of the United States of America (USG for short). And they both work for the Crooks who really run our economy and financial system with the professional help of economists.
Arent born-and-bred American dopes lucky to have such smart masters? What would the dopes do without them and their control and manipulation of the USG and the Fed for the benefit of the mankind??
America's dopes are so fortunate to have an opportunity to vote for the agents acceptable to their real masters. What a system!
Having fun in the California sun and away from the dopes and the Crooks,
Jas
I love it when people who were so clever and farsighted that they voted for Bush twice explain to the rest of us what idiots we are.
--
"I love it when people who were so clever and farsighted that they voted for Bush twice explain to the rest of us what idiots we are."
Sarah,
Assuming that you are addressing me, you are lying when you claim that I voted for Bush twice. I voted once in 2000 and recognized my mistake within 3 months. Second, it takes guts and honesty to admit to one's mistakes without anyone asking for it. A born-and-bred American dope, or dopette, is incapable of identifying his, or her, mistake and then admitting to it.
Born-and-bred American dopes have major psychological problems. Sorry, if you are offended by the truth about the general population and the system as it exists and not some fantasy version of it.
Jas
"Born-and-bred American dopes have major psychological problems."
I'm getting one.