Few top government officials, whether elected or appointed, have managed
to emerge as unscathed from a half dozen years in the Washington, D.C.
spotlight as former Treasury Secretary Robert Rubin. And Rubin did better
than escape without scratches -- he ended his term of office with his
image enhanced.
Odd - the CR pages shows 3 comments, but haloscan shows none
Anyway - folks asked about C CDS:
As of Friday close, the 1-year CDS was 172, Thursday was 203 and Friday the week before was 211. No crush sighting there
Rubin, 70, intends to “deepen his involvement in outside activities and organizations to which he has been strongly committed,” the New York-based bank said in a statement on Jan. 9.
“My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today,” Rubin said in a letter to Chief Executive Officer Vikram Pandit.
At Treasury, Rubin was instrumental in the dismantling of the 1933 Glass-Steagall Act, which separated commercial lending from investment banking. The repeal of the law allowed Weill, and later former CEO Charles “Chuck” Prince, to build Citigroup into its current form.
There's tremendous overcapacity in financial services, so it makes sense to consolidate (I can see lots and lots of layoffs from a MS/C brokerage linkup).
Anyone see in the WashPost that Bush wants the remainder of the $350 billion TARP to steal? Seriously, the theft is a gimmie, but just how brazen they make it remains to be seen.
Anyone see in the WashPost that Bush wants the remainder of the $350 billion TARP to steal? Seriously, the theft is a gimmie, but just how brazen they make it remains to be seen. Doofus | 01.10.09 - 9:57 am | #
The fact that they'd even try, so close to Jan 20, might tell you just how close the feces are to the rotating blades.
I may be nuts, but taking:
1) Citi's sale of Smith Barney,
2) Rubin's departure from Citi's board, and
3) (less directly) Citi's "approval" of Durbin's Bankruptcy cramdown plan for residential loans*,
leads me to conclude that the "powers that be" at Citibank are anticipating a re-imposition of Glass-Steagall.
That (IMHO) would be a truly positive regulatory REFORM
(*Why a major bank needs to "approve" this proposal seems bizarre to some of us Matthew Yglesias
Why would they pay for Smith Barney? Once Merrill brokers find out what it is like working for B of A, they'll be bolting for a new home. (What? You want me to wear a name tag? Um, this is Armani.)
my very first job in the industry... Smith Barney, Beverly Hills office 1980... as a wire operator (also, first time I came face to face with real sleaze since I was fresh out of Indiana... many of them later went to work with a firm down the street named Drexel
Duke, before you run off for a Happy Shake, I'm interested to know what your cost of living is over there. I spent some time on islands in Thailand and that was dirt cheap, but where you are was supposedly much cheaper.
After being AWOL on most issues for weeks, Bush comes out 10 days before the end of his Presidency demanding the rest of TARP money, under threat of veto. If this isn't clear evidence of his determination to fleece the taxpayers one last time on behalf of his Wall St. buddies, I don't know what is. If Congress caves, without new rules of transparency and accountability in place, there is no hope for the Union.
What could they know other than the Treasury Bubble popping? Crewman | 01.10.09 - 10:37 am | #
No one knows when the T bond market will bust... even they don't know... they only know it will bust and what their exposure to it is [probably high]. That alone would be scary.
What's your name?" "F**k you, that's my name! You know why, mister? Because you drove a Hyundai to get here tonight, I drove an $80,000 BMW. That's my name...
Anonymous writes:
After being AWOL on most issues for weeks, Bush comes out 10 days before the end of his Presidency demanding the rest of TARP money, under threat of veto. If this isn't clear evidence of his determination to fleece the taxpayers one last time
Bush won't see the money, he'll be gone, congress has 2 weeks to act. Wrong angle on your part. But then why is he asking for it? Surely not because he's concerned about us citizens. There is another event on the horizon.
Please read the EESA mechanism for disbursement of remaining $350B. It was discussed on several threads last night. The outrage is not that Bush is trying to loot the $350B, because it's impossible for him to access it, but what he's probably getting behind the scenes to "start the clock early" for Obama.
There may be some gamesmanship with the request for the other 350 B. Congress may reject the request, whether it comes from a Bush or an Obama administration. At that point, the money could become available with the president's veto of Congress' rejection of the request (assuming that Congress could not override the veto). Obama might prefer that Bush do the veto thing.
Merrill was not even on my radar screen. Morgan (only AAA in US) returned my calls in 5 minutes, you guys at days end, if lucky!
12th Percentile - Thailand in the last few years has jecked up their prices esp. during the season. Police corruption on rise. Many drug busts set-ups - cost to foreigner, about 400 $.
yes, Cambodia is very cheap... only beat by Burma...
dryfly writes:
"No one knows when the T bond market will bust... even they don't know... they only know it will bust and what their exposure to it is [probably high]. That alone would be scary."
For those who are concerned about the "Treasury Bubble popping", SAFE (Chinese reserve managers)might have an idea about timing. For anybody else, it's just guesswork.
MOGADISHU, Somalia (AP) - Five of the Somali pirates who released a hijacked oil-laden Saudi supertanker drowned with their share of a reported $3 million ransom after their small boat capsized, a pirate and port town resident said Saturday. Pirate Daud Nure says the boat with eight people on...
MOGADISHU, Somalia (AP) - Five of the Somali pirates who released a hijacked oil-laden Saudi supertanker drowned with their share of a reported $3 million ransom
They should have listened to Mom when she told them to get swimming lessons
How interesting. I no longer work for Merrill. Personally, I feel sorry for the B of A employees and I like hearing Punditry's views of what's going on. I don't know what they were thinking.
one more thing... bonds are in my hazy diatant past... but I did write the Credit Memorandum for the Street when Citibank took a 7.2 billion loan loss reserve for their LDC exposure in Latin America around May 1987 ... this totally scewed a number of banks in US that could not match that reserve %. Remember Mannie Hannie? (MHC)
Outsider writes:
"What happens if T bonds bust? I don't want to be caught unawares, but don't know anything about Treasurys."
Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working.
The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them. Bank reserves are Fed liabilities which are created when the Fed buys anything. There is no "limit" to that process.
People will then say, wait a second, bond guy. Isn't that printing money?
Is there not inflationary consequences? And the answer to those questions is "sort of" and "yes".
So the thing you really have to worry about is inflation wiping out the real value of the bonds, rather than a bankruptcy-style event.
It is possible that this standard analysis is wrong - the Treasury would decide to default rather than inflate. Although possible, it's unclear what the advantage would be of such a default.
The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them. Bank reserves are Fed liabilities which are created when the Fed buys anything. There is no "limit" to that process.
OT to Morocco...took middle kid to see Tom Cruise's "Valkyrie" last night - good movie and engendered decent history lesson.
Homedad43 | Homepage | 01.10.09 - 8:34 am | #
It looks like a decent movie. I definately want to see it...but will probably wait until it comes out on rental. I can't stand Tom Cruise, though.
I had a lesson point with my 10 year old daughter today. She's in the process of trying to arrange a playdate with her friend of 7 years. As they get older, they are starting to develop identifiable behavioral patterns, many of which are developed through modeling other's behavior. My daughter's friend comes from a family with money (both parents are doctors and the mother's parents are highly successful business owners). Also, this friend lives in Alpharetta (she moved a couple of years prior), so you can imagine her current group of friends. Anyhow, her friend has developed this attitude of "come to me" rather than reciprocation. One manifestation of this is that this friend, when my daughter suggests doing something, or even when the friend suggests doing something, says "call me." The latest issue is that the friend wants to enter an American Girl contest and she wants to do it with my daughter. My daughter had already initiated the process on her own before this friend proposed the idea. They did this once before, for a poem contest, several years prior. The friend didn't do anything except put her name to the poem with my daughter, but took credit for it when the poem made the cut and was published.
The lesson point with my daughter was that this is how it all begins. I told her about my experience in corporate america where corporations are separated into the executives and the underlings. She asked which group I was in, and I told her I was, reluctantly and sadly, in the underling group, and that I hated it and wished I could change the it. I then indicated that the reason it was so hard to change it was because it was a matter of changing people's attitudes and behaviors that were developed from a very early age....her age, and the age of her friend. I told her that executives don't earn their lofty positions, but rather they achieve that status because they have honed and developed the behavior her friend is currently exhibiting. They have a sense of entitlement. They expect people to do their bidding and they expect people to "come to them." I told her that I never want her to be like that, but that I also don't want her to cater to people who exhibit that behavior. I told her that if enough people stop catering to the entitled executives, we can break the power they hold over us.
forgot one more thing... Liar's Poker .... about 87% pure fiction... - when book came out they went through it page by page on the 44th floor trading floor at 2 NY Plaza... (he was right about Ranieri's suits) Mike Lewis and I were involved in a few sales meetings trying to unload a bunch of Bank of Scotland bonds... he had an affected mid-Atlantic speech pattern, thought he was from across the pond but was from New Orleans I think, but attended London School of Economics
Anonymous writes:
"'The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them.'
So the U$D goes bad before Treasuries?"
USD versus real goods, certainly (i.e., inflation; gold price rising, etc.).
Versus other currencies - it depends what's happening in the other currencies. If all countries inflate their way out of the current problem, then USD versus external currencies can go up or down. This kind of process went on throughout the 1970s-1980s, when inflation was high throughout the OECD.
bond guy writes:
the Treasury would decide to default rather than inflate. Although possible, it's unclear what the advantage would be of such a default.
Back in 1998 the Russian Central Bank decided to do just that, to default on its ruble-denominated bonds. Shock to the economy, of course, but much of it was absorbed by foreign investors and, thanks to oil&gas, less than 10 years later Russia was able to borrow again.
The ruling elites got replaced after the default, of course, but it was not necessarily a bad thing.
Bond Girl writes:
"Didn't someone post something here recently on China starting to settle in other currencies?"
The Chinese can just easily ask for settlement in Martian Megacredits. It is just about as easy to get your hands on Martian Megacredits as it is CNY if you are outside China.
yep, I knew Michael Lewis... he was junior guy on the floor... very preppy... played that Anglophile card well... read that recent Portfolio article he wrote, can't believe John Gutfreund said, "your book made your career and destroyed mine!" doesn't sound like the man I remember... I think the Paul Mozur or Mosher(sp?) scandal destroyed it...
MrM writes:
"Back in 1998 the Russian Central Bank decided to do just that, to default on its ruble-denominated bonds. Shock to the economy, of course, but much of it was absorbed by foreign investors and, thanks to oil&gas, less than 10 years later Russia was able to borrow again."
Russia is a rather special place when it comes to government policies.
I agree there is an attraction to sticking the bill to foreigners. But U.S. multinationals have very large foreign asset bases, which is essentially collateral for foreign governments holding UST's.
bond guy writes:
Outsider writes:
"What happens if T bonds bust? I don't want to be caught unawares, but don't know anything about Treasurys."
Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working.
The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them.
In theory they can buy unlimited amounts. But at a certain point, why would they? What is the benefit other than delaying a collapse?
12th Percetile: hate to be hogging space but my money's on Phnom Penh becoming the next Bangkok... Shianoukville with some luck is headed towards the the Singapore model... gov. very stable here now... Hun Sen in power for a long time to come... when the old man dies in Thailand watch out!
I agree, but things could change quite a bit over the next year as the world is flooded with govt bonds. Surely everyone is wondering why they are buying dollar assets. From an economic standpoint, sure, other countries may respond with inflationary measures also, but the value of the dollar versus other currencies will increasingly be determined by political events, I think.
Maybe China has said enough is enough! You can have your worthless dollars back. Crewman | 01.10.09 - 10:47 am | #
Not according to recent articles by Brad Setser - the day they say have your worthless dollars back is the same day they go looking for a HUGE new market for their export mfg sector.
The question is how aggressively China will shield itself from what increasingly looks like a suckers bet. Economists at Deutsche Bank AG in Frankfurt, for example, estimate China will trim the share of dollars to about 45 percent this year from more than 70 percent in 2003.
Of course, having entered into this arrangement, China is hard-pressed to get out of it. Its economy is largely about selling manufactured goods overseas.
I am not suggesting this model is irrevocable, says David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut. Like anything in economics, situations evolve. But in the midst of a global slowdown the world has not seen since World War II, now is not the time for China to throw out the existing economic model for a new one.
Relying on domestic demand is a long-term goal that will require deft policy making and a high level of tolerance for disruptions in the short run. Its not clear 2009 is the year to make that transition.
The best scenario for China is for American consumers to resume buying its goods. China has a vested interest in not doing anything to complicate things for the biggest economy. Pulling the plug on Treasuries would make headlines, precipitate a run on the dollar and hurt U.S. growth.
That doesnt mean China wants to risk more money on a Ponzi scheme in its last throes. The world is littered with examples of how that can turn out. And Chinas 1.3 billion people could sure use some of that cash back home as their own economy falters.
Per Bloomberg, Obama's plan will now create or save 4 million jobs (a million more than last week). 600,000K of these in retail. Let's see this happen.
"Didn't someone post something here recently on China starting to settle in other currencies?"
At some point in the near future, theri is a chance that the only "other" currencies to be considered will be guns, gold and physical assets. Since the U.S. owns two of the three, where are other nations going to go?
If U-3 UE hits 20 percent(i-tulip), what other type of long-term paper would you want to be holding in that tpye of environment? Nothing would be impervious.
If Treasuries go, so goes the System.
China knows that as do all the relevant Nations(G-7).
For those who are concerned about the "Treasury Bubble popping", SAFE (Chinese reserve managers)might have an idea about timing. For anybody else, it's just guesswork. bond guy | 01.10.09 - 10:51 am | #
I agree there is an attraction to sticking the bill to foreigners. But U.S. multinationals have very large foreign asset bases, which is essentially collateral for foreign governments holding UST's.
Sticking it to the foreigners AND closing all those factories overseas the multi's shipped our jobs off to? Where do I sign up?
Methinks the discussion about possible dislocations in the UST market has to be specific to certain parts of the yield curve.
Arguments about safety haven apply mostly to the short-term maturities.
Bond Girl writes: Surely everyone is wondering why they are buying dollar assets.
Maybe the Fed has already bought $2 Trillion and they don't want us to know.
Dec. 12 (Bloomberg) -- The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers
Anonymous writes:
...Sticking it to the foreigners AND closing all those factories overseas the multi's shipped our jobs off to? Where do I sign up?...
I agree there is an attraction to sticking the bill to foreigners. But U.S. multinationals have very large foreign asset bases, which is essentially collateral for foreign governments holding UST's.
bond guy | 01.10.09 - 11:13 am
Not according to recent articles by Brad Setser - the day they say have your worthless dollars back is the same day they go looking for a HUGE new market for their export mfg sector
When you have a couple of billion people, maybe you sell to your own. Kind of like when we used to manufacture things and sell them to our own people.
The normal hold time on a check is up to five days, but new customers can be longer. I once needed to deposit $120,000 from out-of-state as a new customer with a regional bank. They did free up a few thousand of that in a few days, but they held the final amount for ten business days (throw in weekends and it feels like 3 weeks).
In theory they can buy unlimited amounts. But at a certain point, why would they? What is the benefit other than delaying a collapse? Anonymous | 01.10.09 - 11:14 am | #
Besides that what is a collapse anyway? Just an increase in yield and a decrease in the market price... the bond is still there, the gov't still pays at the face value & nominal terms... it's the secondary market players who were hung out and at these prices & yields they ought to be hung out.
With its heavy reliance on Construction, Retail, and Leisure/Hospitality, I don't understand how this won't be another "jobless recovery" since those sectors are notoriously unreliable for official job creation.
Of course, having entered into this arrangement, China is hard-pressed to get out of it. Its economy is largely about selling manufactured goods overseas. Anonymous | 01.10.09 - 11:21 am | #
Evenly split between US & EU... dollars or euros. Talk about rock and a hard place.
The normal hold time on a check is up to five days
Just because a check gets debited from your account by an institution doesn't mean it's actually gone. There's still a netted settlement that must occur behind the scenes. Banks are afraid that these settlements might fail.
forgot one more thing... Liar's Poker .... about 87% pure fiction... Duke of Con Dao | 01.10.09 - 11:05 am | #
Many of the details may have been "pure fiction", but the tone and essence were right.
In the 1980s, dealt on the buyside with many of the names mentioned in the book. And yes, I experienced a "cramdown" as a newbie trader, but learned from the episode.
Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working.
Evenly split between US & EU... dollars or euros. Talk about rock and a hard place.
dryfly
If you see a expanding, consumer based middle class in China, what will they want? French perfumes, Swiss chocolates, European designer clothes or US treasuries?
Just because a check gets debited from your account by an institution doesn't mean it's actually gone. There's still a netted settlement that must occur behind the scenes. Banks are afraid that these settlements might fail.
anonymous | 01.10.09 - 11:43 am | #
If you see a expanding, consumer based middle class in China, what will they want? French perfumes, Swiss chocolates, European designer clothes or US treasuries?
Anonymous | 01.10.09 - 11:44 am | #
China products now have A STIGMA attached to them as did Japan products after the war.
In my families Christmas presents(made in china) was like the best I could do, spent hours looking for something made at home, yet had to settle for this junk. Three generations opened presents togeather.
After dinner coffee was made in a China made coffee pot that leaked all over the counter, this created another discussion about how many of these have I bought the last three years and they are all just junk.
It appears our American public now gets it, and basically are on strike toward the retailing of foreign made junk. Multinational's FU and a happy new year.
NorkaWest... name Tom Bernard ring a bell? yes, we were cowboys... didn't have a CFO until mid 1988... Goldman was our bete noire when it came to a classier operatio
"Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working."
Glod damn it! Now I have to get out the nail gun. Standard analysis only works in normal environments.
Let's see...10 penny nails out to do the trick...toss in a few screws...
obviously, you've never been to central america. that's how you find a bank. it's the place with the guy with the automatic out front. oddly enough, you get used to it, and see it as security, which is what it is in fact.
Mozo Maz writes:
The normal hold time on a check is up to five days, but new customers can be longer. I once needed to deposit $120,000 from out-of-state as a new customer with a regional bank. They did free up a few thousand of that in a few days, but they held the final amount for ten business days (throw in weekends and it feels like 3 weeks).
I wannaKnow, my Christmas was like that too. We also joked about all of us buying Chinese stuff to give to each other, or re-mail to other relatives in other states, after it was shipped from China to a local store for us to buy.
Is Setser capturing indirect purchases of Ts in his response to the NYT article? Bond Girl | Homepage | 01.10.09 - 11:33 am | #
I'm not certain what Setser's sources are but I trust his sources better than the NYTs - Times would do well to interview Setser.
In recent postings BS has suggested no matter what the rhetoric coming from SAFE & PBoC recent purchases by them have stayed high or even increased. Add to that the rumors that the PBoC wants to see the RMB some 30% weaker vis a vis USD by year end... and it all dovetails.
in eraly 1988 we set up a Hi-Yield group (yeah... junk by any other name)... schooled a newbie in our Bond Portfolio Index (around 4,300 ) named Tom Meharis... yes... that Tom Meharis
Brontide writes:
Holy crap... just got back from the bank.
Out of state personal checks: Hold time 50% after 3 business days rest after 4 days.
Bank of America in state electronic check: Hold time 9 business days!!!
Yeah something similar happened to me. I deposited a 30K check from Prudential (stock sale) at Wachovia, about a month before I bought my house.
Month goes by and I go in to get my cashier's check (for about 18K) and you would think I walked in waving a gun. I had 3 managers, 4 tellers and everyone else making calls, checking my license, etc. Made me wait about an hour, they called Prudential, yadda yadda yadda. Incidentally , they gave me zero interest the whole time it was in there due to a 'hold'.
That event, plus the fact they generally SUCK, made me close all my accounts and dump them last year.
Anyone wanna guess how long it took me just to close the account?
When you have a couple of billion people, maybe you sell to your own. Kind of like when we used to manufacture things and sell them to our own people. Crewman | 01.10.09 - 11:34 am | #
They could do it - nothing stopping them - but not only haven't they done it nor are they doing it now... they aren't even setting up the logistics & distribution infrastructure to do it in the future. They are however increasingly 'facilitating' to grow their export sector [more port capacity & better roads and railways from inland to the ports].
No matter how you might wish for this reversal away from dollar manipulation - there is no evidence it is happening. No market evidence, no physical evidence.
Sorry about that but social hierarchies in primates are mostly based on parents social status of dads and moms. They "alpha" kinds support their kids to take over as you have observed with the friend.
Obama is a good example-look at what his families of origin had done.
Best was round this is in jobs without strong hierarchies as sports and arts. Or where they are not yet developed as start-up industries or after revolutions
I have been told, by B of A no less, that ACH or wire transfer: that there is NO hold..
I do not think that is true. Even ACH still has to clear the Federal Reserve. When I do an ACH, it may be "displayed" to me as there on the day, by the reciving institution.. based on trust.
But the sending institution shows no holds on my account until the second business day.
If you see a expanding, consumer based middle class in China, what will they want? French perfumes, Swiss chocolates, European designer clothes or US treasuries? Anonymous | 01.10.09 - 11:44 am | #
More and better pork first. Then a better house & affordable vehicle. All of that WAY before perfume & chocolate. That model actually fits well w/ a US-China bilateral trade agreement... just have to do it.
It is possible that this standard analysis is wrong - the Treasury would decide to default rather than inflate. Although possible, it's unclear what the advantage would be of such a default.
Explicit default rather than inflationary default spares the country a hyperinflation. That's a whopper of an advantage. It does seem to be less of a black mark for the government to hyperinflate, although I'd say that relies on people not thinking it through - does it really matter to the bondholder whether he loses his money through inflation or default? It's still gone.
The only people worse off are those who borrow to invest in Treasuries. But who does that at these rates?
For a mild partial default, only a few percent per year, inflation is preferable because the damage will be minor and the country not much blamed (it could be passed off as a mistake). But that's not what we're talking about, right?
There's a huge amount of misinformation regarding the 19??) Glass-Steagall Act that appears on this web site.
Glass-Steagall represented a deal cut by the Wall Street investment banks and the commercial banks in the city to split up the banking business. Both sides were happy with the compromise, or it never would have been enacted into law. It was then confirmed by Congress and somehow has become enshrined as web site dogma. No one on this web site, however speaks ex cathedra.
As BondGirl noted, were Glass-Steagall's mandatory distinctions between investment banking and commercial banking to be reinstated, there would be a massive grandfathering mess as the recent combinations that saved Merrill, Morgan Stanley, Goldman, et al, would have to be unwound over time. To what end? So leverage could go to 50-1 again?
The fact that Citi's management couldn't handle the transition to life after Glass-Steagall is not a condemnation of the decision in 1998 to finally end this charade. The other bank holding companies did pretty well in the aftermath while the investment banks who, after 1998 still saw advantages in being "regulated" by the SEC, are no longer with us.
The fact that BofA, JPMorgan et al are part of "TARP" is more the result of the Fed and Treasury wanting to give Citi some cover while it was being rescued by forcing membership in TARP on the others. Citi is the outlier and all hands are at battle stations at the Treasury and the Fed until this mess can be unwound without a Lehman-type bankruptcy.
Remember, "This sucker's going down?" Which particular sucker did our President have in mind?
Backgrounder: A timeline of China's recent economic-stimulus measures
A timeline of China's macro-economic policy shifts over 30 years
BEIJING, Nov. 9 (Xinhua) -- China said on Sunday it will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.
This is a shift long advocated by analysts of the Chinese economy and by some within the government. It comes amid indications that economic growth, exports and various industries are slowing.
A stimulus package estimated at 4 trillion yuan (about 570 billion U.S. dollars) will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation
"No matter how you might wish for this reversal away from dollar manipulation - there is no evidence it is happening. No market evidence, no physical evidence."
That's why it's called a bust. Those playing the game never see it coming.
...They are however increasingly 'facilitating' to grow their export sector [more port capacity & better roads and railways from inland to the ports].
dryfly | 01.10.09 - 11:54 am
I'm becoming more and more suspicious that the "stimulus plan" is nothing more than a stick save for the MNC's doing business there.
I was only asking because I remembered the NYT article citing other economists who suggested that the problem with using government data alone is that it does not take into account indirect purchases/sales of Ts (that is, through banks). He suggests that their purchases appear to be increasing overall, which may be true for their direct purchases only, especially if they are shifting a portion of their indirect purchases to direct purchases on account of the decreasing credit quality of financial institutions. They could still be decreasing the indirect component, and thus their overall purchases of Ts, and it would not be reflected in the data. I do not know.
Angry Saver writes:
For the life of me I can't understand why individual investors are still using a retail brokerages.
You're paying extra for incompetence and continually bad advice.
Agree. I figgered' that out 10 years ago. Even my 70 year old dad is catching on.... "Why let some retail guy downtown tell me to buy stocks, only to get stopped out at a loss?"
"To what end? So leverage could go to 50-1 again?"
it was my impression was that the whole point was inoculating the leverage-prone, speculative aspects from the financial infrastructure aspects, such that in a real crisis, we wouldn't incinerate trillions to save a poisoned whole to preserve basic banking functions.
The pay of executives employed by TARP would be capped in a standardized manner, regardless of what type of aid they received under the program. It would also make the pay limit provision retroactive to existing program participants.
"If they don't like it, they can give the money back," Frank said, referring to the retroactive limits on pay, Reuters reported Friday.
I was only asking because I remembered the NYT article citing other economists who suggested that the problem with using government data alone is that it does not take into account indirect purchases/sales of Ts (that is, through banks). Bond Girl | Homepage | 01.10.09 - 12:02 pm | #
I believe Seitzer includes China Treasury purchases through UK to capture indirect buying.
JP Morgan is a house of cards imo. They are by far the world's largest derivatives player. Absent the massive government backstops, JPM would be a mushroom cloud.
Jamie Diamond is far and away the most overrated bank CEO in history. He helped engineer the Citi fiasco. And his results at JPM are horrendous.
The fact that the financial entertainment networks say that Diamond is a great CEO doesn't make it so.
Citi, JPM, GS, LEH, BSC, MS, DB, Weill, Rubin, Fuld, Paulson, Diamond, etc. all leaders of massive failure.
"What makes rescue so difficult is the force that drove the crisis: the interplay between persistent external and internal imbalances in the US and the rest of the world. The US and a number of other chronic deficit countries have, at present, structurally deficient capacity to produce tradable goods and services. The rest of the world or, more precisely, a limited number of big surplus countries particularly China have the opposite. So demand consistently leaks from the deficit countries to surplus ones."
"In times of buoyant demand, this is no problem. In times of collapsing private spending, as now, it is a huge one. It means that US rescue efforts need to be big enough not only to raise demand for US output but also to raise demand for the surplus output of much of the rest of the world. This was a burden that crisis-hit Japan did not have to bear."
...
"Now think what will happen if, after two or more years of monstrous fiscal deficits, the US is still mired in unemployment and slow growth. People will ask why the country is exporting so much of its demand to sustain jobs abroad. They will want their demand back. The last time this sort of thing happened in the 1930s the outcome was a devastating round of beggar-my-neighbour devaluations, plus protectionism. Can we be confident we can avoid such dangers? On the contrary, the danger is extreme. Once the integration of the world economy starts to reverse and unemployment soars, the demons of our past above all, nationalism will return. Achievements of decades may collapse almost overnight."
As BondGirl noted, were Glass-Steagall's mandatory distinctions between investment banking and commercial banking to be reinstated, there would be a massive grandfathering mess as the recent combinations that saved Merrill, Morgan Stanley, Goldman, et al, would have to be unwound over time. To what end? So leverage could go to 50-1 again?
To the end that if a major bank makes a mistake in investment banking, it doesn't threaten the entire world financial system. Our choices are: a) separate investment banking from core, regulated banking services or b) ensure no major bank ever makes a big mistake in its invesment arm. Which is more realistic?
Oh, and the banks HATED Glass-Steagall. HATED, HATED, HATED. They fought like demons to prevent it and were only forced to accept it when Congressional hearings exposed outrageous fraud where bankers shoved their own bad paper onto clients. Repealing it was their #1 goal for 60 years.
I learned the hard way. I started buying individual stocks in the 1970s. Back then, brokerage fees were really expensive especially on odd lots. I lost a pile of dough.
After a few years of tomfoolery, I moved to Schwab and then Vanguard.
in that times graph on obama job creation the 608,000 retail jobs is a winner. Being that none of them pay enough to support further discretionary spending....let alone a family....
With congressional budget analysts predicting a $1.2 trillion deficit this year and a government stimulus package in the works, there is no doubt a huge supply of Treasuries is going to hit the market.
Fixed mortgage rates typically track the yield on the 10-year treasury note. "The 30-year mortgage tends to have roughly the same [sensitivity to interest-rate changes] as a 10-year treasury," says T.J. Marta, a fixed-income strategist at RBC Capital Markets. "On average, people pay off their mortgage roughly every 10 years." The outlook for inflation plays a key role in determining the yield on the 10-year treasury, Marta says.
If that is true, then they have to stop sterilizing. That should mean a decrease in T buys...which weekens the dollar....
Things are a tad too messy right now for standard CB tricks these days, methinks. Comrade Misean is Dope | Homepage | 01.10.09 - 11:55 am | #
They can continue to sterilize IF their people go along [voluntarily buy their own 'sterilization bonds]... there is every indication they are willing to do it now that they have had their fun with stocks (see the Shanghai 'spike' - now well along on the cliff dive down).
I see no reason this can't continue IF SAFE & PBoC continue to accept losses on the purchase of our assets [to recycle dollars back & weaken the RMB]...
The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
bgates: "it was my impression was that the whole point was inoculating the leverage-prone, speculative aspects from the financial infrastructure aspects, such that in a real crisis, we wouldn't incinerate trillions to save a poisoned whole to preserve basic banking functions.
please correct me if that's wrong."
No, that's correct. It's the public policy reason. But there are two flaws. First, the investment and commercial bankers wanted the deal, which immediately makes one suspicious and, second, the inoculation from risk didn't work, as the Lehman affair and Citi's meltdown gruesomely shows. Lehman was an unstoppable cancer that metastisized all over the U.S. and Europe. Citi would be similar, hence the extensive efforts now underway to keep it afloat.
I fault Greenspan and the Treasury after 1998 for allowing the bank holding companies under their jurisdiction to engage in creating and selling so many types of derivatives thereby tossing the assets off their balance sheets and exponentially raising their risk exposures. This was an understandable market response to Basel II capital requirements and should have been nipped in the bud by the regulators. Instead, Greenspan encouraged it.
Of course, if the regulators had been tough on the bank holding companies, the discrepancy between commercial bank ROE and investment bank ROE would have been even more pronounced. Over time, we will see a return to much more restrictive regulation wherein all financial intermediaries will be made to behave. It looks as if the initiative for this reform is coming from Angela Merkel and Nicolas Sarkozy, with Pres. Obama expected (by them) to sign on in London in April.
The spread between the average 30-year fixed mortgage rate and the 10-year Treasury yield has ballooned nearly 60 percent over the past year, to about 2½ percentage points, according to HSHAssociates.com, which tracks mortgage rates. "That spreadthe normal 1.5 percentage pointshas gone haywire," says Orawin Velz of the Mortgage Bankers Association.
Um, Barney, look up "ex post facto" and then get back to us, m-kay?
"Ex post facto" prohibitions don't apply in this situation, because there is no enforcement against past actions. The terms of the TARP funds are governed strictly under contract law principles.
A similar case was decided in the aftermath of S&L crisis.
Every day I like to google for news on the california budget, even though I don't even live there anymore. Every day, one step closer to the abyss. I was around in 1992 and remember the IOUs being mailed then.
Just use "California crisis" without even mentioning the busget and you'll get hits.
The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good. dryfly | 01.10.09 - 12:18 pm | #
I think that has it exactly right. SAFE won't be the ones to pop the T bubble. Either it will be lack of demand here, or so much borrowing that all of our export "partners" together can't support it. Or some combination of the two.
Rhetoric vs 'action'? Their main activities have been to increase export competitiveness NOT increase domestic consumer demand... even their stimulus is geared toward infrastructure to improve logistics & mfg. Watch what they do, not what they say.
For the life of me I can't understand why individual investors are still using a retail brokerages.
You're paying extra for incompetence and continually bad advice.
Angry Saver | 01.10.09 - 12:00 pm | #
Yes, this individual investor using a retail broker has realized this and is rectifying the situation. Plus, in this America, what you do with your money is a primary (the? I wish not) political power.
I see that now from clicking on the link to the earlier post, thanks. The problem with what he is doing there, however, is that he is relying on a pre-meltdown survey to make an assumption about the portion of UK purchases attributable to China and then assuming that percentage holds.
It strikes me that only insiders really understand what is happening in the current environment, which doesn't support either argument.
But the sending institution shows no holds on my account until the second business day.
ACH is just paperless checks.
Mozo Maz | 01.10.09 - 11:56 am | #
well, what im saying: so you have incoming 100K. With ACH or Wire, you wait 2 days for your cash rather than 9 days. ACH is free and Wire= small fee compared to lost opportunity of 9 days. Who is the sending instituion? Im interested because i will be doing alot of this soon. Effeciency and no tie ups are important to me.
But to me...Those in charge at the top have more retards than the US public at large..At large has got it, retards are still trying to figure it out according to Cheney last week.
personally, i see these abuses as baked-in to fiat paper, and would remind everyone that only rep paul consistently grilled greenspan in that era. all 600 of the rest were too busy genuflecting.
do you worry that our currency itself is built for abuse?
Regardless, it is better for them to be in a position of building real jobs through infrstructure as a creditor nation, than for us as the Supreme Debtor Natio
I'm becoming more and more suspicious that the "stimulus plan" is nothing more than a stick save for the MNC's doing business there. Doc at the Radar Station | 01.10.09 - 12:00 pm | #
And also activity to keep the workers working and not rioting ANY WAY POSSIBLE...
The difference between yields on Washington-based Fannie Maes current-coupon 30-year fixed-rate mortgage bonds and 10- year Treasuries today widened 3 basis points to 133 basis points as of 3:45 p.m. in New York, holding near the lowest since October 2007, according to Bloomberg data. A basis point is 0.01 percentage point. The yield on Fannie Maes bonds was down 2 basis points at 3.77 percent, near a record low set two days ago. Fed Buys $10.2 Billion of Mortgage Bonds to Cut Rates (Update2) - Bloomberg.com
I was only asking because I remembered the NYT article citing other economists who suggested that the problem with using government data alone is that it does not take into account indirect purchases/sales of Ts (that is, through banks). He suggests that their purchases appear to be increasing overall, which may be true for their direct purchases only, especially if they are shifting a portion of their indirect purchases to direct purchases on account of the decreasing credit quality of financial institutions. They could still be decreasing the indirect component, and thus their overall purchases of Ts, and it would not be reflected in the data. I do not know. Bond Girl | Homepage | 01.10.09 - 12:02 pm | #
I think he spends a LOT of time hunting down all the sources - including the FCB & SWF proxies as best he can. He isn't perfect but far better than the Times I'd gather. And I generally 'like' the Times vs say WSJ [which I no longer subscribe to].
Ah, the playbook in CA sounds familiar. Cutting back on the public schools to find money, now. (I remember the dead trees on Cal State Fresno's campus because they had stripped the landscaping budget in the 1990s.)
The period between the IOUs and Orange County's bankruptcy seemed to be the bottom of it all at that time, though. This time I wonder if it will involve more than just one county going under.
Paulson promised us 500,000 new jobs in the second half of 2008. He was only off by 2,000,000 or so. Ok, I guess that is laughable. 12th Percentile | 01.10.09 - 12:14 pm | #
The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
dryfly | 01.10.09 - 12:18 pm | #
So dryfly, the cynical part of me thinks: so if the jig is up, but no one (very few) are SURE the jig is up, then issue huge amounts of Treasuries, and instead of propping up consumption (what China needs) use it to upgrade infrastructure (especially energy and agriculture) and massively build new internal energy sources. It seems the biggest danger to the US if the dollar becomes significantly weaker is energy imports. Given the huge credit expansion necessary to sustain the US consumer, I don't think these project would resurrect that consumption.
Then the current trade system falls apart, and we have a nice infrastructure left over and we don't go completely broke buying energy.
Yesterday: The difference between yields on Washington-based Fannie Maes current-coupon 30-year fixed-rate mortgage bonds and 10- year Treasuries today widened 3 basis points to 133 basis points
March 28, 2008: Spread @ 2½ percentage points
Historically, the typical difference between mortgage rates and the 10-year treasury yieldknown as the spreadhas been roughly 1½ percentage points. In the mortgage industry, the difference between these two rates is often referred to as a "risk premium."
And also activity to keep the workers working and not rioting ANY WAY POSSIBLE...
dryfly | 01.10.09 - 12:26 pm
Good grief, that would be totally unsurprising. The momentum and inertia to maintain the status quo is truly mind boggling. Somehow, a reversal of that would be a lot more macabre than just herding cats.
On the prestigious Barron's 2008 Roundtable, prominent Wall Street analyst Abby Joseph Cohen predicted the Dow would end the year at 14,750. (It finished at 8,776.)
"Bear Stearns is fine ... Don't move your money from Bear!" - Stock guru Jim Cramer on March 11. Six days later, Bear Stearns stock collapsed from $63 to less than $4.
"I do, in fact, believe the crisis is over." - Bank-stock analyst Richard Bove in a note to clients March 20 recommending buying stocks such as Citigroup, saying: "This is a once-in-a-generation opportunity."
Then the current trade system falls apart, and we have a nice infrastructure left over and we don't go completely broke buying energy. Red Pill | 01.10.09 - 12:33 pm | #
I can't think that far ahead... if you can you ought to contact Obama's people, send in a resume... they don't seem to be able to think real far ahead either.
I fault Greenspan and the Treasury after 1998 for allowing the bank holding companies under their jurisdiction to engage in creating and selling so many types of derivatives thereby tossing the assets off their balance sheets and exponentially raising their risk exposures. This was an understandable market response to Basel II capital requirements and should have been nipped in the bud by the regulators. Instead, Greenspan encouraged it.
Greenspan may have encouraged it, but John Snow was too dumb to realize there even was a problem with what they were doing.
"Freddie Mac and Fannie Mae are fundamentally sound. They're not in danger of going under." - House Financial Services Committee chairman Barney Frank (D-Mass.) on July 14. Less than two months later the mortgage giants were on the verge of collapse and were effectively taken over by the government.
"I do, in fact, believe the crisis is over." - Bank-stock analyst Richard Bove in a note to clients March 20 recommending buying stocks such as Citigroup, saying: "This is a once-in-a-generation opportunity." Anonymous | 01.10.09 - 12:42 pm | #
Why does Bove (and Cohen and cramer) still have a career?!
IMHO that was the best news I've heard in prolly 2-3 years... means RMB will be that much more difficult to peg & dollar harder to manipulate. If Chinese trade w/ others in RMB AND in dollars... think how hard it gets to peg to the dollar? If you don't get my drift google 'arbitrage'. Soros prolly wishes he were young again.
"Current Trade System"....Where/What or who has said WTO as is may have to be scraped all to geather..Hate to keep repeating, but Cheny said no one smart enough to figure it out.
What is stranger than fiction to me is how quite Bush who pushed "GLOBAL ECONOMY" has been in the last month on this subject.
Without Industrial output made and consumed by the American people is not started and started soon this sucker is down now and will take 20 years to get us back to where we were 20 years ago.
I don't see the Calvin Ball analogy. The debtor-creditor relationship still exists unless and until, as Barney Frank says, they pay the money back.
As Basel Too pointed out, it's a matter of contract law. I haven't read the contract, but I'll bet there's something in there about "whatever Treasury decides will apply in the future does apply to this here loan of taxpayer money."
What is stranger than fiction to me is how quite Bush who pushed "GLOBAL ECONOMY" has been in the last month on this subject. IWannaknow | 01.10.09 - 12:49 pm | #
All Bush wants to do is sharpen chain saws & cut brush back in Texas - he'd have been gone in August if events had let him.
sportsfan writes:
I hope current legislation does impose additional terms on the first TARP funds, not in a punitive way, but in a realistic debtor-creditor sense.
Frank's proposed TARP amendment is retroactive:
"Stricter auto bill rules apply. Also applies the executive compensation requirements included in auto bill to any new receipt of TARP funds:
1)prohibits paying or accruing any bonus or incentive compensation to the 25 most highly compensated employees;
2)prohibits any compensation plan that would encourage manipulation of earnings to enhance compensation; and
3)requires divestment of private aircraft or leases.
Authority retroactive. Provides authority to Treasury to apply these expanded executive compensation provisions retroactively to existing recipients of direct assistance."
>Predictions of job creation from any level of government are laughable.
Its's a big mistake for Obama to be putting out specific estimates of new jobs to be created, in total and by sector. There's no upside for him in it, and it will come back to haunt him.
He should be saying -- creating private sector jobs is tough work for government to do, and there's no guarantees.
"It seems the biggest danger to the US if the dollar becomes significantly weaker is energy imports."
via our own stupidity in terms of neglecting the saudi arabia in our own backyard - PRV coal.
we piss away hundreds of bils on broke IBs, but don't want to spend 20 or 30 billion to create zero-emission sequestered western coal infrastructure which would ensure all of our energy needs for generations. mind-boggling.
I think Rosenberg has a better grasp on the situation than most right now. Of course, he'd been actively warning about housing forever (too bad Stan paid him no mind).
The situation in CA will depend first on whether Obama gets a muni commercial paper facility up and going with haste. After that, it will depend on whether the stimulus can offset enough essential government services to make up for lost revenues. And after that, it will depend on whether officials will ever be able to make tough spending choices to improve their structural financial condition or if they will merely be drunk off of federal money for the foreseeable future.
He can just tweedle a flute at Cerberus/Fluffy, and the heads will sleep.
lawyerliz | 01.10.09 - 12:33 pm |#
I am the ultimate and indestructable Bank Holding Company. I am too big to fail. I am suprume (combination of subprime and supreme). My private equity minions guard the gates of Hades. My cape is a green treasury TARP, and I wipe my ass with the repealed Glass-Steagall Act.
....and, I had Cheese Product mixed with Rotel Tomatoes last night accompanied by several Hoegaardens.
dryfly has commented about treasuries and the bubble here...
"The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
dryfly | 01.10.09 - 12:18 pm | #
and up thread from that
his views get support from an interesting interview of james fallows, who is a journalist living in china
he gives terry gross specific reasons why he believes the "dance" trade imballance, financing of current account deficit etc is not over
click link at npr for "next show" and listen to interview about gold production...very dramatic the death and misery around the world in search of the yellow metal and why markets will get tight
click link at npr for "next show" and listen to interview about gold production...very dramatic the death and misery around the world in search of the yellow metal and why markets will get tight
mock turtle
I have an idea for the 3 million new jobs and it kills two birds with one stone. Put white people to work in the fields picking cotton. You don't have to pay them, either. The value they generate can be used as reparations for slavery.
"very dramatic the death and misery around the world"
there's hardly any of it left to mine, and the places that have it are generally miserable places based on resource exploitation in the first place. would you rather have indonesians cutting down orangutan teak? are they reduced to recycling current national geographic stories without the pictures?
Just last week, four firms -- Goldman, Blackrock, Wellington and PIMCO -- were selected to manage the $500 billion account of mortgage-backed securities for the Fed. But how they were selected, what they're getting paid, and what they plan on doing with the money is all under wraps. "The selection of these managers seems incredibly opaque," Jeffrey Gundlach, an expert in mortgage-backed securities, told TPMmuckraker.
The head of one of the firms, Bill Gross of PIMCO, assured CNBC last month that "PIMCO would be the leader here in suggesting to the Treasury that we would work for no fee." So is Gross holding to his no fee pledge? We don't know - and the government isn't in any rush to tell us.
Break up to make up, that's all we do
First you love me then you hate me, that's a game for fools.
Break up to make up that's all we do,
First you love me then you hate me, that's a game for fools.
Quincy k(Unrated) writes: If U-3 UE hits 20 percent(i-tulip), what other type of long-term paper would you want to be holding in that type of environment? Nothing would be impervious.
If Treasuries go, so goes the System.
China knows that as do all the relevant Nations(G-7).
I think you confuse "highly undesirable" and "tragically unavoidable".
You can only blackmail people into insanity while they have the resources to pay the blackmail.
Duke of Con Dao writes:
anyone know of a good brokerage to go with overseas for trading? not inclined to use a USA address, maybe Bangkok or Jakarta?
Duke of Con Dao
I think interactive brokers will let non-US residents open up accounts and trade. They let you trade forex, futures, pretty much whatever you want.
Anonymous writes:
...On the prestigious Barron's 2008 Roundtable, prominent Wall Street analyst Abby Joseph Cohen predicted...
and
Anonymous writes:
..."Freddie Mac and Fannie Mae are fundamentally sound...
Thank you for :
a) reminding us about these facts (the ludicrous statements!) and
b) showing us how much of "Hollywood" has now changed to "Wall Street" (or how much the hilarious entertainment industry of Hollywood has shifted to/about Wall Street).
In his latest article, Henry C K Liu demolishes Cheney's spin, discussing in detail the onset of the crises in the autumn of 2006, and erupting full force in July 2007
it predates this also.
the spring 2005 GM correlation contagion. cds wipeout leading to GMAC section sale.
Allen C(Unrated) writes: Anyone predicting deflation is misguided. This seems as obvious as the credit bubble burst. Widespread devaluation is going to occur. It has to.
I'm agnostic. I'm so agnostic.
But, here's a scenario --
Imagine that the dollar is worthless paper.
Now, imagine that there is so little real economic activity that most of those dollars are being used to settle external to the US economy, but there is so little domestic employment that while prices are marking up, they cannot catch up with hyperinflation taking place due to a collapse in dollar confidence.
Not saying this is likely or unlikely, but you can describe scenarios where you get retail price and wage deflation even with the money presses running at full speed.
this is why communism was an easy sell in the 3d world - you can very easily have commodity inflation (and asset inflation) without wage inflation when your currency is an international joke. it will be a somewhat new experience here, however.
"Not saying this is likely or unlikely, but you can describe scenarios where you get retail price and wage deflation even with the money presses running at full speed."
So those who have enough money income and are not affected by wage deflation will be OK, materially, while those who have not and are not will not?
Pavel Chichikov(Excellent) writes: So those who have enough money income and are not affected by wage deflation will be OK, materially, while those who have not and are not will not?
Yes, tall narrow economic pyramids are the rule. People at the top will generally be paid in real money and only covert as much as they need to meet immediate expenses.
"So tell me why we arent looking at a very large risk of getting into a deflationary trap, in which falling prices make consumers and businesses even less willing to spend. Tell me why this risk wouldnt remain high, though lower, even with the Obama plan, which as far as I can tell is expected to reduce cumulative excess unemployment by about a third." -Krugman
I'll tell you why, because people/businesses are not stupid and know things are bubble priced, and thus will know when it's time to buy, just like CR will let us know when housing is priced about right to buy.
Imagine a 20-30% devaluation. It resolves the basic issue of unsupportable debt service. Go back and review the 30s and the 70s (US).
Regarding US wages, the wage gap is troubling. A decline in the standard of living is quite probable.
One of America's great strengths is innovation. A basic wealth metric is non-farm:farm ratio. The US is likely over 130:1 by now. We need an enhanced focus on real, life-changing innovation. Technology is the real source of an improved standard of living.
I'll tell you why, because people/businesses are not stupid and know things are bubble priced, and thus will know when it's time to buy, Anonymous | 01.10.09 - 1:46 pm | # What exactly explains why all those intelligent people were buying in the first place?
Bond Girl writes:
"Didn't someone post something here recently on China starting to settle in other currencies?"
I think they are trying to do it on an experimental basis and with select countries. It matters only in the context of a fracturing of global trade sort of like the Imperial preferences amongst British colonies and dominions who settled their accounts in sterling.
Allen C(Unrated) writes: Imagine a 20-30% devaluation. It resolves the basic issue of unsupportable debt service.
Only in current terms! Don't you think lending terms will adjust after we ruin all our creditors? Or to see it from another perspective, are ruined by them.
Won't it be funny to see the US settling in export credits? And maybe the price schedule will be set by our creditors and not the market. Just add a little extraterritoriality and first-call access to resources (i.e., "free market auction") and you're set.
Drill here, drill now, drill to send your children's future petro-wealth to the Pearl River Delta today, LOL.
Technology is the real source of an improved standard of living.
Sorry man, real standard of living is determined by units of output per unit of real input. Yield per kw/hour and per man/hour are the real metrics. Technology just drives them, and is driven by them because that is the path of economic least resistance. Energy over subsistence is energy for toolset refinement, and that brings further capability and increased output multipliers.
We do not have many technological innovations that markedly increase entropy in the production process, although it is a fertile field for invention.
Allen C writes:
...Technology is the real source of an improved standard of living...
Exactly, history shows us.
And, since most of young america is/was educating for a career on "fast buck" Wall Street, it indicates the real trouble ahead for americas "turn around".
Nothing more useless than a broker/lawyer/banker, etc. to produce "real, life-changing innovation"!
Allen C writes: "One of America's great strengths is innovation."
Innovation? Ain't that sum intellecktul LIEBRUL new-agey kuumbayah clap-trap???
This he-ah is a CONservative country now, boy! We is going back to teh Ol' Days nowah. Nun of that slick "in-o-va-shun" mumbo-jumbo. Wuzzat, sum mooslim name anyhew? Suonds gey!
Honestly, didn't people even investigate what the Conservative movement was and what it meant for America?
Anyone who voted "Conservative" voted to send this country and the world Back in Time.
So Praise Jesus and past the ammo! It's time for relivin' history, courtesy of the Conservatives. Just lovable lil' fuzzballs, is all they are.
No matter how you might wish for this reversal away from dollar manipulation - there is no evidence it is happening. No market evidence, no physical evidence.
dryfly | 01.10.09 - 11:54 am | #
drtfly,
I agre with Misean here. Setser is an excellent forensic analyst but IMO a highly questionable predictor. These are two totally different skills.
He didn't foresee just about any of these major economic problems that have recently come about. As late as May/June 2007, he still believed that the fiscal 2008 budget deficit would be even or lower than 2007 instead of a huge increase. I had a debate with him on this at his blog at RGE.
You might also remember his slight slaps at Roubini's negativism throughout his blogging career. He only recently started to tacitly apologize for those. I consider Setser to be an extremely conventional thinker who is additionally significantly biased by his patriotism (and therefore psitive outcome) but one with excellent forensic skills and great attention to detail.
IMO he is a must read but I do not pay significant attention to his predictions.
May I remind you that a legal system based on British common law, based on Henry ummm, II's (?) innovations is important to material progress.
Enforcing contracts is a big deal. Having at least the illusion of a fair order is important in reducing riots.
The Romans kept their empire both before and after the Republic because of their law.
It's not nothing. It prolly would be better if it could be run by civilians, but lawyers keep getting reinvented, so I guess a complicated, subtile system needs specialists.
I find the comparison with Zimbabwe silly. Zimbabwe's real GDP is less than $30B. We and most developed countries already have a history of devaluation. A 20-30% devaluation is within reason and supported by relatively recent history.
I dunno, I think that in the race between in and de- flation, that de-
might win.
People are just not buying stuff. And they won't be until they're feeling a bit richer, and that won't be for a while.
Slowdown in the velocity of money and all that stuff.
Even if China really tries to turn its workers into consumers I think it will be too little too late.
I actually think the possibility of unrest is much higher in China than here.
"Nothing more useless than a broker/lawyer/banker"
They as well as politicians have their uses if deployed and compensated reasonably. Remember the 130:1 ratio. It is far better to to have the non-farm folks actually producing real output. Bloated bureaucracies and egregiously overcompensated financial intermediaries are clearly a drag.
JAR(Unrated) writes: Anyone who voted "Conservative" voted to send this country and the world Back in Time.
We make up more than half the country, stupid. Better get your wedge between the conservatives and the Republicans if you want to go anywhere. The Republicans were derailed by the conservatives who won't sit for their policies any more.
If you want to go anywhere other than the graveyard of history, you had better discover and promulgate a universal and inclusive image of the Republic. And that means actually inclusive. Your line of rhetoric will break the state quite neatly.
IMHO that was the best news I've heard in prolly 2-3 years... means RMB will be that much more difficult to peg & dollar harder to manipulate. If Chinese trade w/ others in RMB AND in dollars... think how hard it gets to peg to the dollar? If you don't get my drift google 'arbitrage'. Soros prolly wishes he were young again. dryfly | 01.10.09 - 12:48 pm | #
I agree. But its effect on the stability of BW2 at least at the margin is going to be quite interesting. I am also quite concerned about hot money OUTFLOWS from China which would force increased domestic spending at much higher levels.
With all the bad news coming out of China, this has to be a concern and could really tip the scales. As I have said here before, I wouldn't be at all surprised to see the Yuan decline on fundamentals over the next one or two years. That, in itself, would spell the end of BW2. This is just one of the reasons why I tend to think that we can expect to see a fourth Dollar devaluation in the past 30 years.
[A 20-30% devaluation is within reason and supported by relatively recent history.
Allen C ]
I would like to agree, but how does the government stop it at 30%? And in the meantime they have massive funding needs to cover all the existing bailouts, new ones and stimulus. That can only be done with a relatively stable dollar.
Energy over subsistence is energy for toolset refinement, and that brings further capability and increased output multipliers.
We do not have many technological innovations that markedly increase entropy in the production process, although it is a fertile field for invention.
Comrade Byzantine_Ruins | Homepage | 01.10.09 - 1:59 pm | #
correct, I would agree that it is the creation of "slack" or leisure which constitutes the basis of material advancement, and technology is really only a means to that end, one which relentlessly pursues its own efficiency.
we have created sufficient "leisure", but this time has been given over to the pleasures of consumption, instead of constituting the basis of further productivity gains or new fields of endeavour. eventually you hit diminishing returns in the optimization process and the gains to be had are outweighed by the cost of the technology and expertise necessary to realize those gains. consider that if the phantom gains in consumer real estate had been plowed into invention, further education, hobbies or entrepreneurship instead of granite countertops, BMWs, or the privilege of an even bigger mortgage, and the time pissed away being American Idle.
He didn't foresee just about any of these major economic problems that have recently come about. As late as May/June 2007, he still believed that the fiscal 2008 budget deficit would be even or lower than 2007 instead of a huge increase. I had a debate with him on this at his blog at RGE. RE | 01.10.09 - 2:14 pm | #
He was and continues to be 100% correct on the persistence & longevity of the US-China dollar cycle. Until the Chinese give up on the US consumer market either as a result of finding an even bigger fool OR as a result of the US consumer ceasing to be able to consume then he is likely to remain 'correct'.
Most of the people saying it will end are projecting their own values on why it should end [I was guilty of this for many years myself - it had to end, right? Who would be such a fool to give away their labor and hard earned gains in such a scheme?]... those predicting it will end soon do this from all sorts of angles... but in the end the Chinese continue to buy treasuries [and to a lesser degree agency] and the RMB stays in bound and looks to get weaker in 2009 to revitalize exports. Setser hasn't missed a thing on this going back to 2004 or earlier.
The only error he and Roubini made was expecting & predicting a dollar crisis back then... That wasn't just 'early' it was wrong... missing the timing that much is to miss it all.
I am also quite concerned about hot money OUTFLOWS from China which would force increased domestic spending at much higher levels. RE | 01.10.09 - 2:27 pm | #
I expect hot money outflows. A lot of the FDI that went into China when RMB was still 8 plus to the dollar wasn't to 'cash flow' on going operations... rather it was in anticipation of RMB appreciation. I personally know companies who pursued that strategy... built a $200MM factory in China when RMB was at 8:1 and want to sell said factory when RMB goes to say 6:1 or better... the transaction will be in RMB then they hope to convert to dollars & 'repatriate' someday to reward their PE investors... if they saw the RMB going the other way... they would want out and FAST. They can't be the only ones thinking this.
Comment to first comment one thread down regarding Miami house prices. I find it completely plausible that Miami prices will be, in the end 45% to 55% off, depending how unlucky we are. It's 38.3% off peak as of October.
I rather think we will be unlucky and it will be 55% off. Still that puts a whole lot of housing within range of average people, and first time home buyers.
He was and continues to be 100% correct on the persistence & longevity of the US-China dollar cycle. Until the Chinese give up on the US consumer market either as a result of finding an even bigger fool OR as a result of the US consumer ceasing to be able to consume then he is likely to remain 'correct'. dryfly | 01.10.09 - 2:33 pm | #
... In late 2004, Nouriel Roubini and I wrote that âthe tensions created [by the Bretton Woods 2 system] are large, large enough to crack the system in the next three to four years." In a 2005 Wall Street Journal online debate with Michael Dooley I tried to hedge a bit, and gave the system six years. âwe [Roubini and Setser] never said the system would collapse at the end of 2005. A collapse in 2006, maybe. A collapse before 2008, likely; before 2010, almost certainly. ...
I run a private investment company. My performance last year was excellent (info only; no solicitation). I will simply state that the next two years (perhaps more) have many challenges including devaluation.
Gold is a somewhat complex investment, but offers a store of value far beyond ANY currency in existence EVER. Ultimately, investment in productive assets offers the greatest benefit to the investor and to society at large.
This is where our leaders are failing us. Real money follows real opportunity. Hiding losses and protecting failures impedes opportunity. It is a horrible example especially when we strongly advised all the little countries to be tough and take in on the chin.
Darn, dry, isn't that more or less the same stupid thing our people did? lawyerliz | 01.10.09 - 2:42 pm | #
When where?
I don't consider the Chinese stupid for initiating the dollar cycle - I find them stupid for not working harder, faster & sooner to get out of it & 'rebalance' their economy away from total dependence on export mfg once they received the lions share of benefit from the development [they are there]. Lord knows they have enough domestic 'needs' they could now feed... but instead they appear to continue to be going back to the well and with bigger and bigger buckets.
We on the other hand were never smart to have run the CAD & gov't deficits we did whether we 'balanced' that off against FIRE economy or not. My guess is our wonks are trying just as hard to find a way back to that well as Chinese are to theirs. Now THAT is depressing.
Hihi, I seem to have hit a sensitive spot there.
But seriously lawyerliz, do you really think lawyers are useful in making "real, life-changing innovations" ?
That is was I was talking about! And that does not come from lawyers, it comes from people trained in physics, mathematics, engineering etc. , and it takes entrepreneurs to make it into the real world (lawyers participate here in a subordinate way like accountants, etc.). Sorry for that little bit of sobriety.
But, I do not in any way deny the need of an (elaborate) legal system. As you aptly pointed out, any developed society needs it. No dispute here.
However, you also can overdo it !
America is famous for being over-lawyered. Watching educated persons, senators, bankers, etc. declaring in hearings that they do not understand their house-buing/mortgage contracts with their 40+ signatures required, makes I guess the point.
(and remember, behind each of these 40 signatures is a family to be feed by that poor buyer, I guess it amounts to ca. 1/3rd of a house price.)
So, yes, lawyers are needed (in appropriate numbers), but they are absolutesy useless in making "real, life-changing innovations".
Please, do correct me if I am wrong.
(and please, do not take anything personal here at all lawyerliz, I like your posts.)
Anonymous(Unrated) writes: > "Your line of rhetoric will break the
state quite neatly."
It may already be broken.
All states are reinvented in the hearts of each young citizen. To be broken is to invite a new vision.
The Dynastic cycle is as necessary for great states -- as measured in expanse and cultural footprint -- as the fire cycle is for forests. Without wholesale institutional renewal, you have choking-out by vested interests.
You would prefer an intradynastic renewal, I assure you. So get that inclusive image of the state out there and going from mind to mind.
I was referring to the factory and the appreciation bet. Sounded like the New York real estate rental mkt. lawyerliz | 01.10.09 - 2:58 pm | #
Got it now - ya that's a common path to tears - same one that lead to the farm crisis in the 1980s... Hoocoodanode that $3000/acre land with LTVs >80% and financed w/ balloons in the 12-14% APR range producing 180 bushel an acre corn at $3/bushel might someday end in tears. They aren't making any more farm land after all.
Later, after they went bust and left the Midwest to move to Cali & Fla their kids probably grew up to be 'flippers'...
Nobody reads their mtges. Actually, a mtg should be readable for a high school graduate. And a note certainly should be. It's not like we are asking the citizens to read a medical text.
My grandma always said to read what you sign, and so I actually read the first mtg and note and stuff when I bought my first house, before I thought to become a lawyer.
Civilization on any scale at all can't exist without a legal system, how about all of civilization existing or not being a life changing event.
You can't see this because it is the water in which we all swim.
Most civilizations look back to their law-givers with immense respect. Remember Solon and Athens?
And we look back with great respect to our founders, who were much better educated than we are on Greek and Roman law.
The Romans were happy when the 12 Tables were set up so anyone literate could read them. Before that it was custom and a ruler had far too much power to say what custom was and was not. The 12 Tables, I understand were extremely harsh. But one at least knew what one was dealing with.
I don't know how you do recording of deeds in Germany, but I assure you that if no one could know who owned land and what liens encumbered it, it would shortly be a life changing experience, and not in a good way. Americans have a couple of whole industries devoted to checking, recording and insuring title.
And I do not even get into criminal law, about which I know practically nothing, but it is what most people think of when they think of the legal system.
"Isn't 15T just about what the net worth loss is?"
The final tally is years away. The main impetus for devaluation is the unsupportable debt service and the unsupportable GDP. Devaluation is the lesser evil. The eventual alternative is to go BK. When you control the fiat currency underlying the debt, that alternative is completely avoidable.
All states are reinvented in the hearts of each young citizen. To be broken is to invite a new vision.
Comrade Byzantine_Ruins | Homepage | 01.10.09 - 3:05 pm | #
On that note, today is the anniversary of the publication of Thomas Paine's Common Sense in 1776.
I think interactive brokers will let non-US residents open up accounts and trade. They let you trade forex, futures, pretty much whatever you want. Anonymous | 01.10.09 - 1:08 pm | #
You could give it a try, but be prepared for AML (Anti-Money Laundrying) issues. Also, verify the tax withholding treatment, if they categorize you as a foreign investor.
Institutions have a choice when manageing risk. It's called a Sell ticket. Fill it out,find a buyer, and your risk disappears. PonziMonetizaCoruptiCapitalism | 01.10.09 - 1:31 pm | #
I will not say first
The great Dispersion has started.
Can we stop playing games and nationalize the banks already?
WoHoo!
Am I last?
Is the RSS feed broken for everyone else, or just me?
If it's CR doing it for humor value, it's pretty funny... top articles are about U.S. and Citigroup from 11/23/08.
1)
They must be operating on the dirty glass of water theory.
Take a glass of dirty water (SB)
Take a glass of clear water (MS)
Mix the two together.
You get a glass of ...
Let's try it again.
Mix a glass of poluted water...
The next logical step, although it may be politically controversial, would be
to do the opposite of what the Tories suggest. Instead of reducing taxes
on interest payments, the Government could tax all bank deposits and
other risk-free savings. This would create a negative risk-free interest
rate, encouraging savers either to invest in property, shares and other
productive assets - or simply to save less and consume more. In either
case, the result would be more consumption and physical investment, less
unemployment and faster recovery from the slump
angry saver, indeed
From a previous post, interesting :-
Teflon Bob and Banking Deregulation
Teflon Bob and Banking Deregulation
-Date: Sat, 6 Nov 1999 13:25:03 -0500 (EST)
Few top government officials, whether elected or appointed, have managed
to emerge as unscathed from a half dozen years in the Washington, D.C.
spotlight as former Treasury Secretary Robert Rubin. And Rubin did better
than escape without scratches -- he ended his term of office with his
image enhanced.
And dealing off the bottom of the deck.
Odd - the CR pages shows 3 comments, but haloscan shows none
Anyway - folks asked about C CDS:
As of Friday close, the 1-year CDS was 172, Thursday was 203 and Friday the week before was 211. No crush sighting there
Rubin’s Career at Citigroup Ends After $20 Billion of Losses
Rubin’s Career at Citigroup Ends After $20 Billion of Losses - Bloomberg.com
Rubin, 70, intends to “deepen his involvement in outside activities and organizations to which he has been strongly committed,” the New York-based bank said in a statement on Jan. 9.
“My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today,” Rubin said in a letter to Chief Executive Officer Vikram Pandit.
At Treasury, Rubin was instrumental in the dismantling of the 1933 Glass-Steagall Act, which separated commercial lending from investment banking. The repeal of the law allowed Weill, and later former CEO Charles “Chuck” Prince, to build Citigroup into its current form.
There's tremendous overcapacity in financial services, so it makes sense to consolidate (I can see lots and lots of layoffs from a MS/C brokerage linkup).
Let's keep it all UNDER the tarp....
I call "Financial Incest."
I call "Financial Incest."
IWannaknow | 01.10.09 - 9:51 am | #
Certainly seems to have bred a bunch of retards.
Anyone see in the WashPost that Bush wants the remainder of the $350 billion TARP to steal? Seriously, the theft is a gimmie, but just how brazen they make it remains to be seen.
@ FIV Sagas
-Buy shares in safe, coffee can, and mattress companies if that route is taken.
Anyone see in the WashPost that Bush wants the remainder of the $350 billion TARP to steal? Seriously, the theft is a gimmie, but just how brazen they make it remains to be seen.
Doofus | 01.10.09 - 9:57 am | #
The fact that they'd even try, so close to Jan 20, might tell you just how close the feces are to the rotating blades.
Anyone else seeing the "madoff ad" below this post? 10.5% rate of return. $50,000 minimum investment.
Takes balls to run that ad these days.
I may be nuts, but taking:
1) Citi's sale of Smith Barney,
2) Rubin's departure from Citi's board, and
3) (less directly) Citi's "approval" of Durbin's Bankruptcy cramdown plan for residential loans*,
leads me to conclude that the "powers that be" at Citibank are anticipating a re-imposition of Glass-Steagall.
That (IMHO) would be a truly positive regulatory REFORM
(*Why a major bank needs to "approve" this proposal seems bizarre to some of us Matthew Yglesias
that will never happen, jay.
not very well thought out, on your part.
not one person in congress is advocating seperation of banking and securities sales.
Why would they pay for Smith Barney? Once Merrill brokers find out what it is like working for B of A, they'll be bolting for a new home. (What? You want me to wear a name tag? Um, this is Armani.)
Resurrect Glass-Steagall after IBs had to become bank holding companies to survive?
the interesting part is watching the infighting between bofa pcs and merrill guys for retail deposit lists.
at Smith Barney we make money the old fashioned way... we ( complete phrase)
my very first job in the industry... Smith Barney, Beverly Hills office 1980... as a wire operator (also, first time I came face to face with real sleaze since I was fresh out of Indiana... many of them later went to work with a firm down the street named Drexel
Punditry,
I bet there is a ton of resentment all around.
Is B of A letting the Merrill people keep their teams?
Bond Girl... odd moniker... do you or have you worked for a major house?
still hush, hush. like a well lubed guillotine
the interesting part is watching the infighting between bofa pcs and merrill guys for retail deposit lists.
Punditry | 01.10.09 - 10:24 am | #
From Glengarry Glen Ross...
These are the new leads. These are the Glengarry leads. And to you they're gold, and you don't get them. Why? Because to give them to you would be throwing them away. They're for closers.
Eric writes:
The fact that they'd even try, so close to Jan 20, might tell you just how close the feces are to the rotating blades.
What could they know other than the Treasury Bubble popping?
It is scary!!
Bond Girl... I only ask this because you toss around Glass-Steagall like you actually might know something about it?
Duke, before you run off for a Happy Shake, I'm interested to know what your cost of living is over there. I spent some time on islands in Thailand and that was dirt cheap, but where you are was supposedly much cheaper.
Duke,
Yes. And my first job out of school was at Merrill.
So I know how much everyone hates Merrill-types and how much Merrill-types deserve it
Eric writes:
The fact that they'd even try, so close to Jan 20, might tell you just how close the feces are to the rotating blades.
I suspect the important date is not Jan 20, but Jan 22 (Q4-2008 earnings release)
MrM writes:
Eric writes:
I suspect the important date is not Jan 20, but Jan 22 (Q4-2008 earnings release)
But what do they do with $350 Billion?
Buy stocks?
After being AWOL on most issues for weeks, Bush comes out 10 days before the end of his Presidency demanding the rest of TARP money, under threat of veto. If this isn't clear evidence of his determination to fleece the taxpayers one last time on behalf of his Wall St. buddies, I don't know what is. If Congress caves, without new rules of transparency and accountability in place, there is no hope for the Union.
I was a corporate bond research analyst at Salomon Brothers in the mid to late 1980s. My sector? Top 100 US Banks.
What could they know other than the Treasury Bubble popping?
Crewman | 01.10.09 - 10:37 am | #
No one knows when the T bond market will bust... even they don't know... they only know it will bust and what their exposure to it is [probably high]. That alone would be scary.
Crewman writes:
But what do they do with $350 Billion?
Buy stocks?
Capitalize nationalized banks
What's your name?"
"F**k you, that's my name! You know why, mister? Because you drove a Hyundai to get here tonight, I drove an $80,000 BMW. That's my name...
Anonymous writes:
After being AWOL on most issues for weeks, Bush comes out 10 days before the end of his Presidency demanding the rest of TARP money, under threat of veto. If this isn't clear evidence of his determination to fleece the taxpayers one last time
Bush won't see the money, he'll be gone, congress has 2 weeks to act. Wrong angle on your part. But then why is he asking for it? Surely not because he's concerned about us citizens. There is another event on the horizon.
Maybe China has said enough is enough!
You can have your worthless dollars back.
China to launch pilot program of trade settlement with yuan
Re: Second tranche of the TARP bill
Please read the EESA mechanism for disbursement of remaining $350B. It was discussed on several threads last night. The outrage is not that Bush is trying to loot the $350B, because it's impossible for him to access it, but what he's probably getting behind the scenes to "start the clock early" for Obama.
There may be some gamesmanship with the request for the other 350 B. Congress may reject the request, whether it comes from a Bush or an Obama administration. At that point, the money could become available with the president's veto of Congress' rejection of the request (assuming that Congress could not override the veto). Obama might prefer that Bush do the veto thing.
What happens if T bonds bust? I don't want to be caught unawares, but don't know anything about Treasurys.
Bond Girl, Bummer ,I thought you were 007 like? Tell me you are
Merrill was not even on my radar screen. Morgan (only AAA in US) returned my calls in 5 minutes, you guys at days end, if lucky!
12th Percentile - Thailand in the last few years has jecked up their prices esp. during the season. Police corruption on rise. Many drug busts set-ups - cost to foreigner, about 400 $.
yes, Cambodia is very cheap... only beat by Burma...
dryfly writes:
"No one knows when the T bond market will bust... even they don't know... they only know it will bust and what their exposure to it is [probably high]. That alone would be scary."
For those who are concerned about the "Treasury Bubble popping", SAFE (Chinese reserve managers)might have an idea about timing. For anybody else, it's just guesswork.
Ain't life a bitch:
MOGADISHU, Somalia (AP) - Five of the Somali pirates who released a hijacked oil-laden Saudi supertanker drowned with their share of a reported $3 million ransom after their small boat capsized, a pirate and port town resident said Saturday. Pirate Daud Nure says the boat with eight people on...
Anonymous writes:
MOGADISHU, Somalia (AP) - Five of the Somali pirates who released a hijacked oil-laden Saudi supertanker drowned with their share of a reported $3 million ransom
They should have listened to Mom when she told them to get swimming lessons
Duke,
How interesting. I no longer work for Merrill. Personally, I feel sorry for the B of A employees and I like hearing Punditry's views of what's going on. I don't know what they were thinking.
one more thing... bonds are in my hazy diatant past... but I did write the Credit Memorandum for the Street when Citibank took a 7.2 billion loan loss reserve for their LDC exposure in Latin America around May 1987 ... this totally scewed a number of banks in US that could not match that reserve %. Remember Mannie Hannie? (MHC)
Outsider writes:
"What happens if T bonds bust? I don't want to be caught unawares, but don't know anything about Treasurys."
Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working.
The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them. Bank reserves are Fed liabilities which are created when the Fed buys anything. There is no "limit" to that process.
People will then say, wait a second, bond guy. Isn't that printing money?
Is there not inflationary consequences? And the answer to those questions is "sort of" and "yes".
So the thing you really have to worry about is inflation wiping out the real value of the bonds, rather than a bankruptcy-style event.
It is possible that this standard analysis is wrong - the Treasury would decide to default rather than inflate. Although possible, it's unclear what the advantage would be of such a default.
The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them. Bank reserves are Fed liabilities which are created when the Fed buys anything. There is no "limit" to that process.
So the U$D goes bad before Treasuries?
Which is exactly what the Chinese might be afraid of happening in the future.
Didn't someone post something here recently on China starting to settle in other currencies?
OT to Morocco...took middle kid to see Tom Cruise's "Valkyrie" last night - good movie and engendered decent history lesson.
Homedad43 | Homepage | 01.10.09 - 8:34 am | #
It looks like a decent movie. I definately want to see it...but will probably wait until it comes out on rental. I can't stand Tom Cruise, though.
I had a lesson point with my 10 year old daughter today. She's in the process of trying to arrange a playdate with her friend of 7 years. As they get older, they are starting to develop identifiable behavioral patterns, many of which are developed through modeling other's behavior. My daughter's friend comes from a family with money (both parents are doctors and the mother's parents are highly successful business owners). Also, this friend lives in Alpharetta (she moved a couple of years prior), so you can imagine her current group of friends. Anyhow, her friend has developed this attitude of "come to me" rather than reciprocation. One manifestation of this is that this friend, when my daughter suggests doing something, or even when the friend suggests doing something, says "call me." The latest issue is that the friend wants to enter an American Girl contest and she wants to do it with my daughter. My daughter had already initiated the process on her own before this friend proposed the idea. They did this once before, for a poem contest, several years prior. The friend didn't do anything except put her name to the poem with my daughter, but took credit for it when the poem made the cut and was published.
The lesson point with my daughter was that this is how it all begins. I told her about my experience in corporate america where corporations are separated into the executives and the underlings. She asked which group I was in, and I told her I was, reluctantly and sadly, in the underling group, and that I hated it and wished I could change the it. I then indicated that the reason it was so hard to change it was because it was a matter of changing people's attitudes and behaviors that were developed from a very early age....her age, and the age of her friend. I told her that executives don't earn their lofty positions, but rather they achieve that status because they have honed and developed the behavior her friend is currently exhibiting. They have a sense of entitlement. They expect people to do their bidding and they expect people to "come to them." I told her that I never want her to be like that, but that I also don't want her to cater to people who exhibit that behavior. I told her that if enough people stop catering to the entitled executives, we can break the power they hold over us.
forgot one more thing... Liar's Poker .... about 87% pure fiction... - when book came out they went through it page by page on the 44th floor trading floor at 2 NY Plaza... (he was right about Ranieri's suits)
Mike Lewis and I were involved in a few sales meetings trying to unload a bunch of Bank of Scotland bonds... he had an affected mid-Atlantic speech pattern, thought he was from across the pond but was from New Orleans I think, but attended London School of Economics
You knew Michael Lewis?
Anonymous writes:
"'The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them.'
So the U$D goes bad before Treasuries?"
USD versus real goods, certainly (i.e., inflation; gold price rising, etc.).
Versus other currencies - it depends what's happening in the other currencies. If all countries inflate their way out of the current problem, then USD versus external currencies can go up or down. This kind of process went on throughout the 1970s-1980s, when inflation was high throughout the OECD.
bond guy writes:
the Treasury would decide to default rather than inflate. Although possible, it's unclear what the advantage would be of such a default.
Back in 1998 the Russian Central Bank decided to do just that, to default on its ruble-denominated bonds. Shock to the economy, of course, but much of it was absorbed by foreign investors and, thanks to oil&gas, less than 10 years later Russia was able to borrow again.
The ruling elites got replaced after the default, of course, but it was not necessarily a bad thing.
Didn't someone post something here recently on China starting to settle in other currencies?
Yves Smith at nakedcapitalism
Bond Girl, here's an article on it, but I'm sure who owns the Korea Times. If it's Moon, it can't be trusted, but at least it's worth a look see.
Yuan Not Ready to Replace US Dollar as Fiat Currency
Bond Girl writes:
"Didn't someone post something here recently on China starting to settle in other currencies?"
The Chinese can just easily ask for settlement in Martian Megacredits. It is just about as easy to get your hands on Martian Megacredits as it is CNY if you are outside China.
Funny.. The Fed and Treasury are using TARP money to destroy jobs while Obama plans to print money to save jobs.
Maybe Obama will give all the former Smith Barney employees spoons so they can dig a trench, then fill it back it, then dig it again.
(Using shovels would mean less jobs)
yep, I knew Michael Lewis... he was junior guy on the floor... very preppy... played that Anglophile card well... read that recent Portfolio article he wrote, can't believe John Gutfreund said, "your book made your career and destroyed mine!" doesn't sound like the man I remember... I think the Paul Mozur or Mosher(sp?) scandal destroyed it...
Maybe Obama will give all the former Smith Barney employees spoons so they can dig a trench, then fill it back it, then dig it again.
(Using shovels would mean less jobs)
Longwaver | 01.10.09 - 11:09 am | #
Those will be Silver Spoons, and the only thing they will be shoveling is Gazpacho.
There is an article in China Times about trading in their currency....01-07-09
MrM writes:
"Back in 1998 the Russian Central Bank decided to do just that, to default on its ruble-denominated bonds. Shock to the economy, of course, but much of it was absorbed by foreign investors and, thanks to oil&gas, less than 10 years later Russia was able to borrow again."
Russia is a rather special place when it comes to government policies.
I agree there is an attraction to sticking the bill to foreigners. But U.S. multinationals have very large foreign asset bases, which is essentially collateral for foreign governments holding UST's.
Satyajit Das has a newish post from January 4th, with some book reviews - overarching them, "we are all Austrians now!"
Satyajit Das's Blog - Fear & Loathing in Financial Products
bond guy writes:
Outsider writes:
"What happens if T bonds bust? I don't want to be caught unawares, but don't know anything about Treasurys."
Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working.
The U.S. Treasury borrows in U.S. dollars. If there is insufficient demand for those securities, the Fed can buy an unlimited amount of them.
In theory they can buy unlimited amounts. But at a certain point, why would they? What is the benefit other than delaying a collapse?
Deal on Bank Bill Was Helped Along By Midnight Talks October 24, 1999
12th Percetile: hate to be hogging space but my money's on Phnom Penh becoming the next Bangkok... Shianoukville with some luck is headed towards the the Singapore model... gov. very stable here now... Hun Sen in power for a long time to come... when the old man dies in Thailand watch out!
Chinese Central Bank to Test Program to Settle Trade in Yuan Rather Than Dollars « naked capitalism
bond guy,
I agree, but things could change quite a bit over the next year as the world is flooded with govt bonds. Surely everyone is wondering why they are buying dollar assets. From an economic standpoint, sure, other countries may respond with inflationary measures also, but the value of the dollar versus other currencies will increasingly be determined by political events, I think.
But what do they do with $350 Billion?
Buy stocks?
Crewman | 01.10.09 - 10:42 am | #
I think you meant buy "more" stocks.
Maybe China has said enough is enough!
You can have your worthless dollars back.
Crewman | 01.10.09 - 10:47 am | #
Not according to recent articles by Brad Setser - the day they say have your worthless dollars back is the same day they go looking for a HUGE new market for their export mfg sector.
hey Bond Girl, know a guy at Merrill named Jay Weintraub?
Hey, this was a successful merger. I think some executive bonuses are in order for a job well done!
China Risks the Madoff Treatment From Treasuries: William Pesek - Bloomberg.com
Suckers Bet
The question is how aggressively China will shield itself from what increasingly looks like a suckers bet. Economists at Deutsche Bank AG in Frankfurt, for example, estimate China will trim the share of dollars to about 45 percent this year from more than 70 percent in 2003.
Of course, having entered into this arrangement, China is hard-pressed to get out of it. Its economy is largely about selling manufactured goods overseas.
I am not suggesting this model is irrevocable, says David Gilmore, partner at Foreign Exchange Analytics in Essex, Connecticut. Like anything in economics, situations evolve. But in the midst of a global slowdown the world has not seen since World War II, now is not the time for China to throw out the existing economic model for a new one.
Relying on domestic demand is a long-term goal that will require deft policy making and a high level of tolerance for disruptions in the short run. Its not clear 2009 is the year to make that transition.
The best scenario for China is for American consumers to resume buying its goods. China has a vested interest in not doing anything to complicate things for the biggest economy. Pulling the plug on Treasuries would make headlines, precipitate a run on the dollar and hurt U.S. growth.
That doesnt mean China wants to risk more money on a Ponzi scheme in its last throes. The world is littered with examples of how that can turn out. And Chinas 1.3 billion people could sure use some of that cash back home as their own economy falters.
Stimulus plan is already working.
Per Bloomberg, Obama's plan will now create or save 4 million jobs (a million more than last week). 600,000K of these in retail. Let's see this happen.
Sorry, too unskilled to linky.
"Didn't someone post something here recently on China starting to settle in other currencies?"
At some point in the near future, theri is a chance that the only "other" currencies to be considered will be guns, gold and physical assets. Since the U.S. owns two of the three, where are other nations going to go?
If U-3 UE hits 20 percent(i-tulip), what other type of long-term paper would you want to be holding in that tpye of environment? Nothing would be impervious.
If Treasuries go, so goes the System.
China knows that as do all the relevant Nations(G-7).
For those who are concerned about the "Treasury Bubble popping", SAFE (Chinese reserve managers)might have an idea about timing. For anybody else, it's just guesswork.
bond guy | 01.10.09 - 10:51 am | #
Yup. They 'might' know...
Holy crap... just got back from the bank.
Out of state personal checks: Hold time 50% after 3 business days rest after 4 days.
Bank of America in state electronic check: Hold time 9 business days!!!
I agree there is an attraction to sticking the bill to foreigners. But U.S. multinationals have very large foreign asset bases, which is essentially collateral for foreign governments holding UST's.
Sticking it to the foreigners AND closing all those factories overseas the multi's shipped our jobs off to? Where do I sign up?
Holy crap... just got back from the bank.
Out of state personal checks: Hold time 50% after 3 business days rest after 4 days.
Bank of America in state electronic check: Hold time 9 business days!!!
Brontide | 01.10.09 - 11:24 am | #
Pretty sure that's actually illegal.
Former Treasury Secretary Joins Leadership Triangle at Citigroup
Methinks the discussion about possible dislocations in the UST market has to be specific to certain parts of the yield curve.
Arguments about safety haven apply mostly to the short-term maturities.
thanks, duke. Have a happy shake for me.
There is no "limit" to that process.
http://en.wikipedia.org/wiki/File:Boyle%27sSelfFlowingFlask.png
this is what you've described. clearly there is no limit, but the futility is eveident.
At any such time that the treasury decides to buy a bond route en mass, will be the day the dollar dies.
Morocco Bama | Homepage | 01.10.09 - 11:04 am | #
Welcome to the world of pretween girls. My heart goes out to you.
Bond Girl writes: Surely everyone is wondering why they are buying dollar assets.
Maybe the Fed has already bought $2 Trillion and they don't want us to know.
Dec. 12 (Bloomberg) -- The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers
Anonymous writes:
...Sticking it to the foreigners AND closing all those factories overseas the multi's shipped our jobs off to? Where do I sign up?...
Probably at the lunatic asylum closest to you.
. Its economy is largely about selling manufactured goods overseas.
falacious to the n^th degree.
any society must first care for their own prior to engaging in export activity.
% of gdp going to export likely under 10%.
Is Setser capturing indirect purchases of Ts in his response to the NYT article?
I agree there is an attraction to sticking the bill to foreigners. But U.S. multinationals have very large foreign asset bases, which is essentially collateral for foreign governments holding UST's.
bond guy | 01.10.09 - 11:13 am
Hmmm. Can anybody say hostage crisis?
So the U$D goes bad before Treasuries?
Anonymous | 01.10.09 - 11:01 am | #
Goes bad BECAUSE the dollars go bad... a simultaneous event & 'coupled'.
dryfly writes:
Not according to recent articles by Brad Setser - the day they say have your worthless dollars back is the same day they go looking for a HUGE new market for their export mfg sector
When you have a couple of billion people, maybe you sell to your own. Kind of like when we used to manufacture things and sell them to our own people.
Me in Mass
The normal hold time on a check is up to five days, but new customers can be longer. I once needed to deposit $120,000 from out-of-state as a new customer with a regional bank. They did free up a few thousand of that in a few days, but they held the final amount for ten business days (throw in weekends and it feels like 3 weeks).
Legal holdups: Fine print hides banks' check-holding rules.
In theory they can buy unlimited amounts. But at a certain point, why would they? What is the benefit other than delaying a collapse?
Anonymous | 01.10.09 - 11:14 am | #
Besides that what is a collapse anyway? Just an increase in yield and a decrease in the market price... the bond is still there, the gov't still pays at the face value & nominal terms... it's the secondary market players who were hung out and at these prices & yields they ought to be hung out.
Sorry, too unskilled to linky.
Here is the chart from the WSJ.
With its heavy reliance on Construction, Retail, and Leisure/Hospitality, I don't understand how this won't be another "jobless recovery" since those sectors are notoriously unreliable for official job creation.
Is Setser capturing indirect purchases of Ts in his response to the NYT article?
Bond Girl
Brad Setser: Follow the Money » Blog Archive
Brad Setser: Follow the Money » Blog Archive » Deep thoughts
Of course, having entered into this arrangement, China is hard-pressed to get out of it. Its economy is largely about selling manufactured goods overseas.
Anonymous | 01.10.09 - 11:21 am | #
Evenly split between US & EU... dollars or euros. Talk about rock and a hard place.
dryfly writes:
Besides that what is a collapse anyway?
Maybe a run on the bank like we have never seen before...guys with machine guns at the ATM's and Banks
One world currency would solve all of our problems.
The normal hold time on a check is up to five days
Just because a check gets debited from your account by an institution doesn't mean it's actually gone. There's still a netted settlement that must occur behind the scenes. Banks are afraid that these settlements might fail.
forgot one more thing... Liar's Poker .... about 87% pure fiction...
Duke of Con Dao | 01.10.09 - 11:05 am | #
Many of the details may have been "pure fiction", but the tone and essence were right.
In the 1980s, dealt on the buyside with many of the names mentioned in the book. And yes, I experienced a "cramdown" as a newbie trader, but learned from the episode.
Lewis had it right...
bond guy writes:
Outsider writes:
Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working.
Dude...you just made my morning!
Evenly split between US & EU... dollars or euros. Talk about rock and a hard place.
dryfly
If you see a expanding, consumer based middle class in China, what will they want? French perfumes, Swiss chocolates, European designer clothes or US treasuries?
Just because a check gets debited from your account by an institution doesn't mean it's actually gone. There's still a netted settlement that must occur behind the scenes. Banks are afraid that these settlements might fail.
anonymous | 01.10.09 - 11:43 am | #
One world bank would solve this problem.
I think the Paul Mozur or Mosher(sp?) scandal destroyed it...
Duke of Con Dao | 01.10.09 - 11:11 am | #
Go Northwestern!
One world bank would solve this problem.
Morocco Bama | Homepage | 01.10.09 - 11:44 am | #
Don't we already have that? Isn't it run by the masons?
If you see a expanding, consumer based middle class in China, what will they want? French perfumes, Swiss chocolates, European designer clothes or US treasuries?
Anonymous | 01.10.09 - 11:44 am | #
Meat...lots of it, and grains to feed the cattle.
China products now have A STIGMA attached to them as did Japan products after the war.
In my families Christmas presents(made in china) was like the best I could do, spent hours looking for something made at home, yet had to settle for this junk. Three generations opened presents togeather.
After dinner coffee was made in a China made coffee pot that leaked all over the counter, this created another discussion about how many of these have I bought the last three years and they are all just junk.
It appears our American public now gets it, and basically are on strike toward the retailing of foreign made junk. Multinational's FU and a happy new year.
One world bank would solve this problem.
Let's have one employer and one health care provider too, while we're at it.
(And ya know, one world religion might solve a lot of problems as well.)
Obama advisers say plan would create 3.5m new jobs
20% new govvie jobs.
I'll take the job 'Sandy's Beach bikini checker' ,tyvm
NorkaWest... name Tom Bernard ring a bell? yes, we were cowboys... didn't have a CFO until mid 1988... Goldman was our bete noire when it came to a classier operatio
(And ya know, one world religion might solve a lot of problems as well.)
Mozo Maz | 01.10.09 - 11:47 am | #
Will their be a suprume deity with that one world religion? If so, who would you nominate?
"Under standard analysis, worrying about T bonds going bust is somewhat like worrying about nailing down all you possessions in case gravity stops working."
Glod damn it! Now I have to get out the nail gun. Standard analysis only works in normal environments.
Let's see...10 penny nails out to do the trick...toss in a few screws...
Nostrovia,
"we have never seen before"
obviously, you've never been to central america. that's how you find a bank. it's the place with the guy with the automatic out front. oddly enough, you get used to it, and see it as security, which is what it is in fact.
Mozo Maz writes:
The normal hold time on a check is up to five days, but new customers can be longer. I once needed to deposit $120,000 from out-of-state as a new customer with a regional bank. They did free up a few thousand of that in a few days, but they held the final amount for ten business days (throw in weekends and it feels like 3 weeks).
Bankrate.com: Let us help you find what you're looking for 19991102.asp
Mozo Maz | 01.10.09 - 11:37 am | #
I have been told, by B of A no less, that ACH or wire transfer: that there is NO hold..
I wannaKnow, my Christmas was like that too. We also joked about all of us buying Chinese stuff to give to each other, or re-mail to other relatives in other states, after it was shipped from China to a local store for us to buy.
Don't we already have that? Isn't it run by the masons?
Eric | 01.10.09 - 11:46 am | #
I thought the Jews ran it.
Is Setser capturing indirect purchases of Ts in his response to the NYT article?
Bond Girl | Homepage | 01.10.09 - 11:33 am | #
I'm not certain what Setser's sources are but I trust his sources better than the NYTs - Times would do well to interview Setser.
In recent postings BS has suggested no matter what the rhetoric coming from SAFE & PBoC recent purchases by them have stayed high or even increased. Add to that the rumors that the PBoC wants to see the RMB some 30% weaker vis a vis USD by year end... and it all dovetails.
IWannaknow writes:
It appears our American public now gets it, and basically are on strike toward the retailing of foreign made junk.
We can thank Wal-Mart for that. I dream of seeing a sign at Wal-Mart that says "Made in the USA". But I won't shop there
Brontide, see Fed Regulation CC.
I gave my children Melamine and Lead Paint for Christmas. We skipped the Middle Man. They built their own Dialysis Machines with the kits.
in eraly 1988 we set up a Hi-Yield group (yeah... junk by any other name)... schooled a newbie in our Bond Portfolio Index (around 4,300 ) named Tom Meharis... yes... that Tom Meharis
Brontide writes:
Holy crap... just got back from the bank.
Out of state personal checks: Hold time 50% after 3 business days rest after 4 days.
Bank of America in state electronic check: Hold time 9 business days!!!
Yeah something similar happened to me. I deposited a 30K check from Prudential (stock sale) at Wachovia, about a month before I bought my house.
Month goes by and I go in to get my cashier's check (for about 18K) and you would think I walked in waving a gun. I had 3 managers, 4 tellers and everyone else making calls, checking my license, etc. Made me wait about an hour, they called Prudential, yadda yadda yadda. Incidentally , they gave me zero interest the whole time it was in there due to a 'hold'.
That event, plus the fact they generally SUCK, made me close all my accounts and dump them last year.
Anyone wanna guess how long it took me just to close the account?
Morocco Bama writes:
I gave my children Melamine and Lead Paint for Christmas
Both very funny and very sad. I guess we allowed this to happen so our kids should take the "poison"
When you have a couple of billion people, maybe you sell to your own. Kind of like when we used to manufacture things and sell them to our own people.
Crewman | 01.10.09 - 11:34 am | #
They could do it - nothing stopping them - but not only haven't they done it nor are they doing it now... they aren't even setting up the logistics & distribution infrastructure to do it in the future. They are however increasingly 'facilitating' to grow their export sector [more port capacity & better roads and railways from inland to the ports].
No matter how you might wish for this reversal away from dollar manipulation - there is no evidence it is happening. No market evidence, no physical evidence.
dryfly,
"Add to that the rumors that the PBoC wants to see the RMB some 30% weaker vis a vis USD by year end"
If that is true, then they have to stop sterilizing. That should mean a decrease in T buys...which weekens the dollar....
Things are a tad too messy right now for standard CB tricks these days, methinks.
Nostrovia,
Morocco Bama
Sorry about that but social hierarchies in primates are mostly based on parents social status of dads and moms. They "alpha" kinds support their kids to take over as you have observed with the friend.
Obama is a good example-look at what his families of origin had done.
Best was round this is in jobs without strong hierarchies as sports and arts. Or where they are not yet developed as start-up industries or after revolutions
Just shuffling the TARP money ...
Shuffling for the banks. But as far as the public is concerned, Paulson gave away the store.
Biggest swindle ever.
I have been told, by B of A no less, that ACH or wire transfer: that there is NO hold..
I do not think that is true. Even ACH still has to clear the Federal Reserve. When I do an ACH, it may be "displayed" to me as there on the day, by the reciving institution.. based on trust.
But the sending institution shows no holds on my account until the second business day.
ACH is just paperless checks.
If you see a expanding, consumer based middle class in China, what will they want? French perfumes, Swiss chocolates, European designer clothes or US treasuries?
Anonymous | 01.10.09 - 11:44 am | #
More and better pork first. Then a better house & affordable vehicle. All of that WAY before perfume & chocolate. That model actually fits well w/ a US-China bilateral trade agreement... just have to do it.
It is possible that this standard analysis is wrong - the Treasury would decide to default rather than inflate. Although possible, it's unclear what the advantage would be of such a default.
Explicit default rather than inflationary default spares the country a hyperinflation. That's a whopper of an advantage. It does seem to be less of a black mark for the government to hyperinflate, although I'd say that relies on people not thinking it through - does it really matter to the bondholder whether he loses his money through inflation or default? It's still gone.
The only people worse off are those who borrow to invest in Treasuries. But who does that at these rates?
For a mild partial default, only a few percent per year, inflation is preferable because the damage will be minor and the country not much blamed (it could be passed off as a mistake). But that's not what we're talking about, right?
Damn. I wish haloscan allowed editing. Soerry about the unclosed italcs. .
name Tom Bernard ring a bell
Duke of Con Dao | 01.10.09 - 11:48 am | #
Was he a Salomon and then Lehman?
I was a little fish, so I just got to watch while the big sharks fought over the chum in the water.
Both very funny and very sad. I guess we allowed this to happen so our kids should take the "poison"
Crewman | 01.10.09 - 11:54 am | #
My thinking is that if they're exposed to it enough, they'll develop immunity.
Morocco Bama writes:
One world currency would solve all of our problems.
The world economy without fiscal and monetary policies.
Not sure whether to love it or fear it. Probably the latter.
There's a huge amount of misinformation regarding the 19??) Glass-Steagall Act that appears on this web site.
Glass-Steagall represented a deal cut by the Wall Street investment banks and the commercial banks in the city to split up the banking business. Both sides were happy with the compromise, or it never would have been enacted into law. It was then confirmed by Congress and somehow has become enshrined as web site dogma. No one on this web site, however speaks ex cathedra.
As BondGirl noted, were Glass-Steagall's mandatory distinctions between investment banking and commercial banking to be reinstated, there would be a massive grandfathering mess as the recent combinations that saved Merrill, Morgan Stanley, Goldman, et al, would have to be unwound over time. To what end? So leverage could go to 50-1 again?
The fact that Citi's management couldn't handle the transition to life after Glass-Steagall is not a condemnation of the decision in 1998 to finally end this charade. The other bank holding companies did pretty well in the aftermath while the investment banks who, after 1998 still saw advantages in being "regulated" by the SEC, are no longer with us.
The fact that BofA, JPMorgan et al are part of "TARP" is more the result of the Fed and Treasury wanting to give Citi some cover while it was being rescued by forcing membership in TARP on the others. Citi is the outlier and all hands are at battle stations at the Treasury and the Fed until this mess can be unwound without a Lehman-type bankruptcy.
Remember, "This sucker's going down?" Which particular sucker did our President have in mind?
Dryfly,
It is small but it is a start...
China's 4 trillion yuan stimulus to boost economy, domestic demand
English_Xinhua
2008-11-09 19:35:15 Print
Special Report: Global Financial Crisis
Backgrounder: A timeline of China's recent economic-stimulus measures
A timeline of China's macro-economic policy shifts over 30 years
BEIJING, Nov. 9 (Xinhua) -- China said on Sunday it will loosen credit conditions, cut taxes and embark on a massive infrastructure spending program in a wide-ranging effort to offset adverse global economic conditions by boosting domestic demand.
This is a shift long advocated by analysts of the Chinese economy and by some within the government. It comes amid indications that economic growth, exports and various industries are slowing.
A stimulus package estimated at 4 trillion yuan (about 570 billion U.S. dollars) will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation
For the life of me I can't understand why individual investors are still using a retail brokerages.
You're paying extra for incompetence and continually bad advice.
dryfly,
"No matter how you might wish for this reversal away from dollar manipulation - there is no evidence it is happening. No market evidence, no physical evidence."
That's why it's called a bust. Those playing the game never see it coming.
Nostrovia,
...They are however increasingly 'facilitating' to grow their export sector [more port capacity & better roads and railways from inland to the ports].
dryfly | 01.10.09 - 11:54 am
I'm becoming more and more suspicious that the "stimulus plan" is nothing more than a stick save for the MNC's doing business there.
schooled a newbie in our Bond Portfolio Index (around 4,300 ) named Tom Meharis...
Duke of Con Dao | 01.10.09 - 11:51 am | #
SSSooo it's all your fault?
dryfly,
I was only asking because I remembered the NYT article citing other economists who suggested that the problem with using government data alone is that it does not take into account indirect purchases/sales of Ts (that is, through banks). He suggests that their purchases appear to be increasing overall, which may be true for their direct purchases only, especially if they are shifting a portion of their indirect purchases to direct purchases on account of the decreasing credit quality of financial institutions. They could still be decreasing the indirect component, and thus their overall purchases of Ts, and it would not be reflected in the data. I do not know.
Angry Saver writes:
For the life of me I can't understand why individual investors are still using a retail brokerages.
You're paying extra for incompetence and continually bad advice.
Agree. I figgered' that out 10 years ago. Even my 70 year old dad is catching on.... "Why let some retail guy downtown tell me to buy stocks, only to get stopped out at a loss?"
"To what end? So leverage could go to 50-1 again?"
it was my impression was that the whole point was inoculating the leverage-prone, speculative aspects from the financial infrastructure aspects, such that in a real crisis, we wouldn't incinerate trillions to save a poisoned whole to preserve basic banking functions.
please correct me if that's wrong.
(Oh, and the $400 transaction fees also get him to reconsider that value of this personal brokerage service)
Will their be a suprume deity with that one world religion? If so, who would you nominate?
--Morocco Bama
I nominate you Bama. You're head is sure big enough.
"nothing more than a stick save for the MNC's doing business there."
seems like a lot to spend just so GE can sell the odd turbine... who owns CNBC anyways?
REBear writes:
Obama advisers say plan would create 3.5m new jobs
Yahoo! 404 - Page Not Found obama_economy
The pay of executives employed by TARP would be capped in a standardized manner, regardless of what type of aid they received under the program. It would also make the pay limit provision retroactive to existing program participants.
"If they don't like it, they can give the money back," Frank said, referring to the retroactive limits on pay, Reuters reported Friday.
I was only asking because I remembered the NYT article citing other economists who suggested that the problem with using government data alone is that it does not take into account indirect purchases/sales of Ts (that is, through banks).
Bond Girl | Homepage | 01.10.09 - 12:02 pm | #
I believe Seitzer includes China Treasury purchases through UK to capture indirect buying.
JP Morgan is a house of cards imo. They are by far the world's largest derivatives player. Absent the massive government backstops, JPM would be a mushroom cloud.
Jamie Diamond is far and away the most overrated bank CEO in history. He helped engineer the Citi fiasco. And his results at JPM are horrendous.
The fact that the financial entertainment networks say that Diamond is a great CEO doesn't make it so.
Citi, JPM, GS, LEH, BSC, MS, DB, Weill, Rubin, Fuld, Paulson, Diamond, etc. all leaders of massive failure.
"If they don't like it, they can give the money back," Frank said,
Anonymous | 01.10.09 - 12:09 pm | #
Um, Barney, look up "ex post facto" and then get back to us, m-kay?
The Martin Wolf piece that Setser is worth reading:
FT.com / Columnists / Martin Wolf - Choices made in 2009 will shape the globe’s destiny
"What makes rescue so difficult is the force that drove the crisis: the interplay between persistent external and internal imbalances in the US and the rest of the world. The US and a number of other chronic deficit countries have, at present, structurally deficient capacity to produce tradable goods and services. The rest of the world or, more precisely, a limited number of big surplus countries particularly China have the opposite. So demand consistently leaks from the deficit countries to surplus ones."
"In times of buoyant demand, this is no problem. In times of collapsing private spending, as now, it is a huge one. It means that US rescue efforts need to be big enough not only to raise demand for US output but also to raise demand for the surplus output of much of the rest of the world. This was a burden that crisis-hit Japan did not have to bear."
...
"Now think what will happen if, after two or more years of monstrous fiscal deficits, the US is still mired in unemployment and slow growth. People will ask why the country is exporting so much of its demand to sustain jobs abroad. They will want their demand back. The last time this sort of thing happened in the 1930s the outcome was a devastating round of beggar-my-neighbour devaluations, plus protectionism. Can we be confident we can avoid such dangers? On the contrary, the danger is extreme. Once the integration of the world economy starts to reverse and unemployment soars, the demons of our past above all, nationalism will return. Achievements of decades may collapse almost overnight."
I nominate you Bama. You're head is sure big enough.
Anonymous | 01.10.09 - 12:06 pm | #
Great! My first act as "suprume" deity is to banish you to hell for your egregious grammatical error. I'll tell Cerberus you're on your way.
Predictions of job creation from any level of government are laughable.
How many of the jobs in their estimate will be permanent?
I believe Seitzer includes China Treasury purchases through UK to capture indirect buying.
NorkaWest | 01.10.09 - 12:10 pm | #
He had a blog entry a few days ago regarding this. The data were pretty convincing.
As BondGirl noted, were Glass-Steagall's mandatory distinctions between investment banking and commercial banking to be reinstated, there would be a massive grandfathering mess as the recent combinations that saved Merrill, Morgan Stanley, Goldman, et al, would have to be unwound over time. To what end? So leverage could go to 50-1 again?
To the end that if a major bank makes a mistake in investment banking, it doesn't threaten the entire world financial system. Our choices are: a) separate investment banking from core, regulated banking services or b) ensure no major bank ever makes a big mistake in its invesment arm. Which is more realistic?
Oh, and the banks HATED Glass-Steagall. HATED, HATED, HATED. They fought like demons to prevent it and were only forced to accept it when Congressional hearings exposed outrageous fraud where bankers shoved their own bad paper onto clients. Repealing it was their #1 goal for 60 years.
Predictions of job creation from any level of government are laughable.
Government predictions of any form that involve dollars or bodies are laughable. They do OK with the weather. Usually.
Predictions of job creation from any level of government are laughable.
Paulson promised us 500,000 new jobs in the second half of 2008. He was only off by 2,000,000 or so. Ok, I guess that is laughable.
Mozo Man,
I learned the hard way. I started buying individual stocks in the 1970s. Back then, brokerage fees were really expensive especially on odd lots. I lost a pile of dough.
After a few years of tomfoolery, I moved to Schwab and then Vanguard.
job predictions-
When is the O bubble going to pop?
in that times graph on obama job creation the 608,000 retail jobs is a winner. Being that none of them pay enough to support further discretionary spending....let alone a family....
Bond Girl,
"How many of the jobs in their estimate will be permanent?"
Well, if they're Congang staff jobs...all of them.
Now if they could get people to completely roll over and have 100% gov't funding of elections, then the number of campaign jobs would become infinite.
Of course, an election based economy might not be much better than a housing based one, but never put it past a politician to give it a try.
Nostrovia,
OT
With congressional budget analysts predicting a $1.2 trillion deficit this year and a government stimulus package in the works, there is no doubt a huge supply of Treasuries is going to hit the market.
I see no reason why yields will go up!
Why Mortgage Rates Aren't Lower - US News and World Report
If that is true, then they have to stop sterilizing. That should mean a decrease in T buys...which weekens the dollar....
Things are a tad too messy right now for standard CB tricks these days, methinks.
Comrade Misean is Dope | Homepage | 01.10.09 - 11:55 am | #
They can continue to sterilize IF their people go along [voluntarily buy their own 'sterilization bonds]... there is every indication they are willing to do it now that they have had their fun with stocks (see the Shanghai 'spike' - now well along on the cliff dive down).
I see no reason this can't continue IF SAFE & PBoC continue to accept losses on the purchase of our assets [to recycle dollars back & weaken the RMB]...
The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
Bah. It's Jamie Dimon, not Diamond. Bob Diamond is from Barclays.
bgates: "it was my impression was that the whole point was inoculating the leverage-prone, speculative aspects from the financial infrastructure aspects, such that in a real crisis, we wouldn't incinerate trillions to save a poisoned whole to preserve basic banking functions.
please correct me if that's wrong."
No, that's correct. It's the public policy reason. But there are two flaws. First, the investment and commercial bankers wanted the deal, which immediately makes one suspicious and, second, the inoculation from risk didn't work, as the Lehman affair and Citi's meltdown gruesomely shows. Lehman was an unstoppable cancer that metastisized all over the U.S. and Europe. Citi would be similar, hence the extensive efforts now underway to keep it afloat.
I fault Greenspan and the Treasury after 1998 for allowing the bank holding companies under their jurisdiction to engage in creating and selling so many types of derivatives thereby tossing the assets off their balance sheets and exponentially raising their risk exposures. This was an understandable market response to Basel II capital requirements and should have been nipped in the bud by the regulators. Instead, Greenspan encouraged it.
Of course, if the regulators had been tough on the bank holding companies, the discrepancy between commercial bank ROE and investment bank ROE would have been even more pronounced. Over time, we will see a return to much more restrictive regulation wherein all financial intermediaries will be made to behave. It looks as if the initiative for this reform is coming from Angela Merkel and Nicolas Sarkozy, with Pres. Obama expected (by them) to sign on in London in April.
The spread between the average 30-year fixed mortgage rate and the 10-year Treasury yield has ballooned nearly 60 percent over the past year, to about 2½ percentage points, according to HSHAssociates.com, which tracks mortgage rates. "That spreadthe normal 1.5 percentage pointshas gone haywire," says Orawin Velz of the Mortgage Bankers Association.
Um, Barney, look up "ex post facto" and then get back to us, m-kay?
"Ex post facto" prohibitions don't apply in this situation, because there is no enforcement against past actions. The terms of the TARP funds are governed strictly under contract law principles.
A similar case was decided in the aftermath of S&L crisis.
It's noon and we seem to be into offtopic land.
Every day I like to google for news on the california budget, even though I don't even live there anymore. Every day, one step closer to the abyss. I was around in 1992 and remember the IOUs being mailed then.
Just use "California crisis" without even mentioning the busget and you'll get hits.
anyone know of a good brokerage to go with overseas for trading? not inclined to use a USA address, maybe Bangkok or Jakarta?
The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
dryfly | 01.10.09 - 12:18 pm | #
I think that has it exactly right. SAFE won't be the ones to pop the T bubble. Either it will be lack of demand here, or so much borrowing that all of our export "partners" together can't support it. Or some combination of the two.
China's 4 trillion yuan stimulus to boost economy, domestic demand
Crewman | 01.10.09 - 12:00 pm | #
Rhetoric vs 'action'? Their main activities have been to increase export competitiveness NOT increase domestic consumer demand... even their stimulus is geared toward infrastructure to improve logistics & mfg. Watch what they do, not what they say.
For the life of me I can't understand why individual investors are still using a retail brokerages.
You're paying extra for incompetence and continually bad advice.
Angry Saver | 01.10.09 - 12:00 pm | #
Yes, this individual investor using a retail broker has realized this and is rectifying the situation. Plus, in this America, what you do with your money is a primary (the? I wish not) political power.
You don't like the financial industry? Well. . .
Norka,
I see that now from clicking on the link to the earlier post, thanks. The problem with what he is doing there, however, is that he is relying on a pre-meltdown survey to make an assumption about the portion of UK purchases attributable to China and then assuming that percentage holds.
It strikes me that only insiders really understand what is happening in the current environment, which doesn't support either argument.
But the sending institution shows no holds on my account until the second business day.
ACH is just paperless checks.
Mozo Maz | 01.10.09 - 11:56 am | #
well, what im saying: so you have incoming 100K. With ACH or Wire, you wait 2 days for your cash rather than 9 days. ACH is free and Wire= small fee compared to lost opportunity of 9 days. Who is the sending instituion? Im interested because i will be doing alot of this soon. Effeciency and no tie ups are important to me.
RadarDOC...I had thoughts along that line also...
But to me...Those in charge at the top have more retards than the US public at large..At large has got it, retards are still trying to figure it out according to Cheney last week.
thanks for the response, john.
personally, i see these abuses as baked-in to fiat paper, and would remind everyone that only rep paul consistently grilled greenspan in that era. all 600 of the rest were too busy genuflecting.
do you worry that our currency itself is built for abuse?
Dryfly:
Regardless, it is better for them to be in a position of building real jobs through infrstructure as a creditor nation, than for us as the Supreme Debtor Natio
I'm becoming more and more suspicious that the "stimulus plan" is nothing more than a stick save for the MNC's doing business there.
Doc at the Radar Station | 01.10.09 - 12:00 pm | #
And also activity to keep the workers working and not rioting ANY WAY POSSIBLE...
The difference between yields on Washington-based Fannie Maes current-coupon 30-year fixed-rate mortgage bonds and 10- year Treasuries today widened 3 basis points to 133 basis points as of 3:45 p.m. in New York, holding near the lowest since October 2007, according to Bloomberg data. A basis point is 0.01 percentage point. The yield on Fannie Maes bonds was down 2 basis points at 3.77 percent, near a record low set two days ago.
Fed Buys $10.2 Billion of Mortgage Bonds to Cut Rates (Update2) - Bloomberg.com
I was only asking because I remembered the NYT article citing other economists who suggested that the problem with using government data alone is that it does not take into account indirect purchases/sales of Ts (that is, through banks). He suggests that their purchases appear to be increasing overall, which may be true for their direct purchases only, especially if they are shifting a portion of their indirect purchases to direct purchases on account of the decreasing credit quality of financial institutions. They could still be decreasing the indirect component, and thus their overall purchases of Ts, and it would not be reflected in the data. I do not know.
Bond Girl | Homepage | 01.10.09 - 12:02 pm | #
I think he spends a LOT of time hunting down all the sources - including the FCB & SWF proxies as best he can. He isn't perfect but far better than the Times I'd gather. And I generally 'like' the Times vs say WSJ [which I no longer subscribe to].
David Rosenberg's letter to private clients
David Rosenberg
Ah, the playbook in CA sounds familiar. Cutting back on the public schools to find money, now. (I remember the dead trees on Cal State Fresno's campus because they had stripped the landscaping budget in the 1990s.)
The period between the IOUs and Orange County's bankruptcy seemed to be the bottom of it all at that time, though. This time I wonder if it will involve more than just one county going under.
Paulson promised us 500,000 new jobs in the second half of 2008. He was only off by 2,000,000 or so. Ok, I guess that is laughable.
12th Percentile | 01.10.09 - 12:14 pm | #
Close enough for gov't work.
So you are Zeus or Jupiter, Bama???
He can just tweedle a flute at Cerberus/Fluffy, and the heads will sleep.
The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
dryfly | 01.10.09 - 12:18 pm | #
So dryfly, the cynical part of me thinks: so if the jig is up, but no one (very few) are SURE the jig is up, then issue huge amounts of Treasuries, and instead of propping up consumption (what China needs) use it to upgrade infrastructure (especially energy and agriculture) and massively build new internal energy sources. It seems the biggest danger to the US if the dollar becomes significantly weaker is energy imports. Given the huge credit expansion necessary to sustain the US consumer, I don't think these project would resurrect that consumption.
Then the current trade system falls apart, and we have a nice infrastructure left over and we don't go completely broke buying energy.
Yesterday: The difference between yields on Washington-based Fannie Maes current-coupon 30-year fixed-rate mortgage bonds and 10- year Treasuries today widened 3 basis points to 133 basis points
March 28, 2008: Spread @ 2½ percentage points
Historically, the typical difference between mortgage rates and the 10-year treasury yieldknown as the spreadhas been roughly 1½ percentage points. In the mortgage industry, the difference between these two rates is often referred to as a "risk premium."
Looks like sales will pick up IMHO!
And also activity to keep the workers working and not rioting ANY WAY POSSIBLE...
dryfly | 01.10.09 - 12:26 pm
Good grief, that would be totally unsurprising. The momentum and inertia to maintain the status quo is truly mind boggling. Somehow, a reversal of that would be a lot more macabre than just herding cats.
"If they don't like it, they can give the money back," Frank said,
Um, Barney, look up "ex post facto" and then get back to us, m-kay?
Eric | 01.10.09 - 12:10 pm |
Don't think that would apply, Eric.
I hope current legislation does impose additional terms on the first TARP funds, not in a punitive way, but in a realistic debtor-creditor sense.
Didn't someone post something here recently on China starting to settle in other currencies?
Bond Girl | Homepage | 01.10.09 - 11:03 am | #
Just in case nobody has posted it yet. From China Daily:
China to launch pilot program of trade settlement with yuan
http://www.chinadaily.com.cn/bizchina/2009-01/07/content_7373626.htm
I see a turn around in 2009 and things are not going to crash, just slow down, as things slowly improve to a more sustainable level of growth.
ll,
"So you are Zeus or Jupiter, Bama???"
Bah! Greco-Roman Glods are boring.
I wanna be Thor...or Cthulu...or Dagda...
Nostrovia,
On the prestigious Barron's 2008 Roundtable, prominent Wall Street analyst Abby Joseph Cohen predicted the Dow would end the year at 14,750. (It finished at 8,776.)
"Bear Stearns is fine ... Don't move your money from Bear!" - Stock guru Jim Cramer on March 11. Six days later, Bear Stearns stock collapsed from $63 to less than $4.
"I do, in fact, believe the crisis is over." - Bank-stock analyst Richard Bove in a note to clients March 20 recommending buying stocks such as Citigroup, saying: "This is a once-in-a-generation opportunity."
ROTFLMAO!
Then the current trade system falls apart, and we have a nice infrastructure left over and we don't go completely broke buying energy.
Red Pill | 01.10.09 - 12:33 pm | #
I can't think that far ahead... if you can you ought to contact Obama's people, send in a resume... they don't seem to be able to think real far ahead either.
I fault Greenspan and the Treasury after 1998 for allowing the bank holding companies under their jurisdiction to engage in creating and selling so many types of derivatives thereby tossing the assets off their balance sheets and exponentially raising their risk exposures. This was an understandable market response to Basel II capital requirements and should have been nipped in the bud by the regulators. Instead, Greenspan encouraged it.
Greenspan may have encouraged it, but John Snow was too dumb to realize there even was a problem with what they were doing.
"Freddie Mac and Fannie Mae are fundamentally sound. They're not in danger of going under." - House Financial Services Committee chairman Barney Frank (D-Mass.) on July 14. Less than two months later the mortgage giants were on the verge of collapse and were effectively taken over by the government.
"I do, in fact, believe the crisis is over." - Bank-stock analyst Richard Bove in a note to clients March 20 recommending buying stocks such as Citigroup, saying: "This is a once-in-a-generation opportunity."
Anonymous | 01.10.09 - 12:42 pm | #
Why does Bove (and Cohen and cramer) still have a career?!
sportsfan,
"I hope current legislation does impose additional terms on the first TARP funds"
I hope it changes the terms on those who received stimulus checks, cuz I didn't get one. It's so much fun when the rules change after the game starts.
Calvin ball...FTW!
Nostrovia,
Just in case nobody has posted it yet. From China Daily:
China to launch pilot program of trade settlement with yuan
http://www.chinadaily.com.cn/bizchina/2009-01/07/ content_7373626.htm
RE | 01.10.09 - 12:38 pm | #
IMHO that was the best news I've heard in prolly 2-3 years... means RMB will be that much more difficult to peg & dollar harder to manipulate. If Chinese trade w/ others in RMB AND in dollars... think how hard it gets to peg to the dollar? If you don't get my drift google 'arbitrage'. Soros prolly wishes he were young again.
"Current Trade System"....Where/What or who has said WTO as is may have to be scraped all to geather..Hate to keep repeating, but Cheny said no one smart enough to figure it out.
What is stranger than fiction to me is how quite Bush who pushed "GLOBAL ECONOMY" has been in the last month on this subject.
Without Industrial output made and consumed by the American people is not started and started soon this sucker is down now and will take 20 years to get us back to where we were 20 years ago.
Misean,
I don't see the Calvin Ball analogy. The debtor-creditor relationship still exists unless and until, as Barney Frank says, they pay the money back.
As Basel Too pointed out, it's a matter of contract law. I haven't read the contract, but I'll bet there's something in there about "whatever Treasury decides will apply in the future does apply to this here loan of taxpayer money."
Yahoo news on the arrest of the "economic president of the internet," in Korea.
Yahoo! 404 - Page Not Found
What is stranger than fiction to me is how quite Bush who pushed "GLOBAL ECONOMY" has been in the last month on this subject.
IWannaknow | 01.10.09 - 12:49 pm | #
All Bush wants to do is sharpen chain saws & cut brush back in Texas - he'd have been gone in August if events had let him.
Will their be a suprume deity with that one world religion? If so, who would you nominate?
--Morocco Bama
Conjure
sportsfan writes:
I hope current legislation does impose additional terms on the first TARP funds, not in a punitive way, but in a realistic debtor-creditor sense.
Frank's proposed TARP amendment is retroactive:
"Stricter auto bill rules apply. Also applies the executive compensation requirements included in auto bill to any new receipt of TARP funds:
1)prohibits paying or accruing any bonus or incentive compensation to the 25 most highly compensated employees;
2)prohibits any compensation plan that would encourage manipulation of earnings to enhance compensation; and
3)requires divestment of private aircraft or leases.
Authority retroactive. Provides authority to Treasury to apply these expanded executive compensation provisions retroactively to existing recipients of direct assistance."
Comrade,
thanks for post....great read....
I think his 690 fica is actually high compared to what I'm seeing via auto paper over last 6 months.....
credit score destruction is spiraling down faster than they think...
Only way out is one time adjustment on scoring factors to boost them up.....
Killing Glass-Steagall
>Predictions of job creation from any level of government are laughable.
Its's a big mistake for Obama to be putting out specific estimates of new jobs to be created, in total and by sector. There's no upside for him in it, and it will come back to haunt him.
He should be saying -- creating private sector jobs is tough work for government to do, and there's no guarantees.
Makes you wonder how smart he really is.
"It seems the biggest danger to the US if the dollar becomes significantly weaker is energy imports."
via our own stupidity in terms of neglecting the saudi arabia in our own backyard - PRV coal.
we piss away hundreds of bils on broke IBs, but don't want to spend 20 or 30 billion to create zero-emission sequestered western coal infrastructure which would ensure all of our energy needs for generations. mind-boggling.
Is Barack Obama in the Pocket of Big 3-Legged Puppy Lobby?
Is Barack Obama in the Pocket of Big 3-Legged Puppy Lobby? -- Politics Daily
I think Rosenberg has a better grasp on the situation than most right now. Of course, he'd been actively warning about housing forever (too bad Stan paid him no mind).
The situation in CA will depend first on whether Obama gets a muni commercial paper facility up and going with haste. After that, it will depend on whether the stimulus can offset enough essential government services to make up for lost revenues. And after that, it will depend on whether officials will ever be able to make tough spending choices to improve their structural financial condition or if they will merely be drunk off of federal money for the foreseeable future.
Time for a run.
So you are Zeus or Jupiter, Bama???
He can just tweedle a flute at Cerberus/Fluffy, and the heads will sleep.
lawyerliz | 01.10.09 - 12:33 pm |#
I am the ultimate and indestructable Bank Holding Company. I am too big to fail. I am suprume (combination of subprime and supreme). My private equity minions guard the gates of Hades. My cape is a green treasury TARP, and I wipe my ass with the repealed Glass-Steagall Act.
....and, I had Cheese Product mixed with Rotel Tomatoes last night accompanied by several Hoegaardens.
dryfly has commented about treasuries and the bubble here...
"The real threat to the continuation of this 'cycle' is the US consumer... the minute the Chinese believe they won't achieve the exports even with a manipulated dollar THEN the jig is up. That could very well be happening now. Until the the FCBs game is still good.
dryfly | 01.10.09 - 12:18 pm | #
and up thread from that
his views get support from an interesting interview of james fallows, who is a journalist living in china
he gives terry gross specific reasons why he believes the "dance" trade imballance, financing of current account deficit etc is not over
Fresh Air from WHYY : NPR
also
click link at npr for "next show" and listen to interview about gold production...very dramatic the death and misery around the world in search of the yellow metal and why markets will get tight
"will ever be able to make tough spending choices "
they won't, and as much as i hate GOPers, mcclintock has been 100% right on this for a while
click link at npr for "next show" and listen to interview about gold production...very dramatic the death and misery around the world in search of the yellow metal and why markets will get tight
mock turtle
Waiting for a hold above 9, then I'm all in.
I have an idea for the 3 million new jobs and it kills two birds with one stone. Put white people to work in the fields picking cotton. You don't have to pay them, either. The value they generate can be used as reparations for slavery.
"very dramatic the death and misery around the world"
there's hardly any of it left to mine, and the places that have it are generally miserable places based on resource exploitation in the first place. would you rather have indonesians cutting down orangutan teak? are they reduced to recycling current national geographic stories without the pictures?
Someone asked when the O bubble would be popping.
Lots of chewy details regarding his economic plan here:
Daily Kos: Stumbling Toward Stimulus
Why Are the Media More Interested in Blago Than in Unraveling the Bailout Mystery?
Arianna Huffington: Why Are the Media More Interested in Blago Than in Unraveling the Bailout Mystery?
Just last week, four firms -- Goldman, Blackrock, Wellington and PIMCO -- were selected to manage the $500 billion account of mortgage-backed securities for the Fed. But how they were selected, what they're getting paid, and what they plan on doing with the money is all under wraps. "The selection of these managers seems incredibly opaque," Jeffrey Gundlach, an expert in mortgage-backed securities, told TPMmuckraker.
The head of one of the firms, Bill Gross of PIMCO, assured CNBC last month that "PIMCO would be the leader here in suggesting to the Treasury that we would work for no fee." So is Gross holding to his no fee pledge? We don't know - and the government isn't in any rush to tell us.
Break up to make up, that's all we do
First you love me then you hate me, that's a game for fools.
Break up to make up that's all we do,
First you love me then you hate me, that's a game for fools.
Quincy k(Unrated) writes:
If U-3 UE hits 20 percent(i-tulip), what other type of long-term paper would you want to be holding in that type of environment? Nothing would be impervious.
If Treasuries go, so goes the System.
China knows that as do all the relevant Nations(G-7).
I think you confuse "highly undesirable" and "tragically unavoidable".
You can only blackmail people into insanity while they have the resources to pay the blackmail.
Duke of Con Dao writes:
anyone know of a good brokerage to go with overseas for trading? not inclined to use a USA address, maybe Bangkok or Jakarta?
Duke of Con Dao
I think interactive brokers will let non-US residents open up accounts and trade. They let you trade forex, futures, pretty much whatever you want.
Anonymous writes:
...On the prestigious Barron's 2008 Roundtable, prominent Wall Street analyst Abby Joseph Cohen predicted...
and
Anonymous writes:
..."Freddie Mac and Fannie Mae are fundamentally sound...
Thank you for :
a) reminding us about these facts (the ludicrous statements!) and
b) showing us how much of "Hollywood" has now changed to "Wall Street" (or how much the hilarious entertainment industry of Hollywood has shifted to/about Wall Street).
Great post!
Anyone predicting deflation is misguided. This seems as obvious as the credit bubble burst. Widespread devaluation is going to occur. It has to.
In his latest article, Henry C K Liu demolishes Cheney's spin, discussing in detail the onset of the crises in the autumn of 2006, and erupting full force in July 2007
it predates this also.
the spring 2005 GM correlation contagion. cds wipeout leading to GMAC section sale.
Is anyone here looking for a unique set of wheels?
If so, GM is having a garage sale:
GM's Garage Sale: Selling off the Heritage Collection - BusinessWeek
Allen C(Unrated) writes:
Anyone predicting deflation is misguided. This seems as obvious as the credit bubble burst. Widespread devaluation is going to occur. It has to.
I'm agnostic. I'm so agnostic.
But, here's a scenario --
Imagine that the dollar is worthless paper.
Now, imagine that there is so little real economic activity that most of those dollars are being used to settle external to the US economy, but there is so little domestic employment that while prices are marking up, they cannot catch up with hyperinflation taking place due to a collapse in dollar confidence.
Not saying this is likely or unlikely, but you can describe scenarios where you get retail price and wage deflation even with the money presses running at full speed.
"or how much the hilarious entertainment industry of Hollywood "
which wouldn't exist in present form without europeans' epic appetite for action-movie crapola
"and wage deflation"
this is why communism was an easy sell in the 3d world - you can very easily have commodity inflation (and asset inflation) without wage inflation when your currency is an international joke. it will be a somewhat new experience here, however.
From OP-ED CONTRIBUTORS; How to Repair a Broken Financial World - NY Times
Regulate credit-default swaps
The only way to regulate this inept market is to require 100% margin.
But that would end the golden goose that cds is.
CDS was/is the original tarp.
Institutions have a choice when manageing risk. It's called a Sell ticket.
Fill it out,find a buyer, and your risk disappears.
"Not saying this is likely or unlikely, but you can describe scenarios where you get retail price and wage deflation even with the money presses running at full speed."
So those who have enough money income and are not affected by wage deflation will be OK, materially, while those who have not and are not will not?
In case this has not already been posted, John Mauldin's 2009 forecast is on line. Erm... not optimistic...
http://www.frontlinethoughts.com/pdf/mwo011009.pdf
"while those who have not and are not will not"
that's also part of the 3d-world picture
"I have an idea for the 3 million new jobs and it kills two birds with one stone."
I hear there's a gremlin somewhere who will pay good money for gold woven out of straw.
BTW, rage is understandable but not constructive.
Pavel Chichikov(Excellent) writes:
So those who have enough money income and are not affected by wage deflation will be OK, materially, while those who have not and are not will not?
Yes, tall narrow economic pyramids are the rule. People at the top will generally be paid in real money and only covert as much as they need to meet immediate expenses.
3-5 years means they expect the (financial) recession to last 2-4 years.
"So tell me why we arent looking at a very large risk of getting into a deflationary trap, in which falling prices make consumers and businesses even less willing to spend. Tell me why this risk wouldnt remain high, though lower, even with the Obama plan, which as far as I can tell is expected to reduce cumulative excess unemployment by about a third." -Krugman
I'll tell you why, because people/businesses are not stupid and know things are bubble priced, and thus will know when it's time to buy, just like CR will let us know when housing is priced about right to buy.
Imagine a 20-30% devaluation. It resolves the basic issue of unsupportable debt service. Go back and review the 30s and the 70s (US).
Regarding US wages, the wage gap is troubling. A decline in the standard of living is quite probable.
One of America's great strengths is innovation. A basic wealth metric is non-farm:farm ratio. The US is likely over 130:1 by now. We need an enhanced focus on real, life-changing innovation. Technology is the real source of an improved standard of living.
I'll tell you why, because people/businesses are not stupid
Anonymous | 01.10.09 - 1:46 pm | #
That assumption has been wrong more than it has been right.
I'll tell you why, because people/businesses are not stupid and know things are bubble priced, and thus will know when it's time to buy,
Anonymous | 01.10.09 - 1:46 pm | #
What exactly explains why all those intelligent people were buying in the first place?
"That assumption has been wrong more than it has been right."
By stupid, I didn't mean fraud-based like we have seen.
Remember that devaluation is far easier with fiat currencies. It has already begun.
"What exactly explains why all those intelligent people were buying in the first place?"
Those 'intelligent' people that caused this should be in jail. Krugman should be screaming for that outcome also, not just for big $ stimulus.
Bond Girl writes:
"Didn't someone post something here recently on China starting to settle in other currencies?"
I think they are trying to do it on an experimental basis and with select countries. It matters only in the context of a fracturing of global trade sort of like the Imperial preferences amongst British colonies and dominions who settled their accounts in sterling.
"So tell me why we arent looking at a very large risk of getting into a deflationary trap"
The Fed...BB put it in writing. I predict a Fed balance sheet easily in excess of $5T this year.
Allen C(Unrated) writes:
Imagine a 20-30% devaluation. It resolves the basic issue of unsupportable debt service.
Only in current terms! Don't you think lending terms will adjust after we ruin all our creditors? Or to see it from another perspective, are ruined by them.
Won't it be funny to see the US settling in export credits? And maybe the price schedule will be set by our creditors and not the market. Just add a little extraterritoriality and first-call access to resources (i.e., "free market auction") and you're set.
Drill here, drill now, drill to send your children's future petro-wealth to the Pearl River Delta today, LOL.
Technology is the real source of an improved standard of living.
Sorry man, real standard of living is determined by units of output per unit of real input. Yield per kw/hour and per man/hour are the real metrics. Technology just drives them, and is driven by them because that is the path of economic least resistance. Energy over subsistence is energy for toolset refinement, and that brings further capability and increased output multipliers.
We do not have many technological innovations that markedly increase entropy in the production process, although it is a fertile field for invention.
othing but blue sky"s from now on.
Zimbabwe introduces new $50 billion note
The US treasury will be there in a few years
Allen C writes:
...Technology is the real source of an improved standard of living...
Exactly, history shows us.
And, since most of young america is/was educating for a career on "fast buck" Wall Street, it indicates the real trouble ahead for americas "turn around".
Nothing more useless than a broker/lawyer/banker, etc. to produce "real, life-changing innovation"!
State's normally have to borrow short-term in February-April to refund over-withheld income taxes. If muni-TARP help is on the way, it better hurry.
"Don't you think lending terms will adjust after we ruin all our creditors?"
Devaluation is unpleasant but necessary. The US had multiple devaluations in less than 100 years.
"Technology just drives them"
Yes...Look at the fantastic yield improvements over time.
Allen C writes: "One of America's great strengths is innovation."
Innovation? Ain't that sum intellecktul LIEBRUL new-agey kuumbayah clap-trap???
This he-ah is a CONservative country now, boy! We is going back to teh Ol' Days nowah. Nun of that slick "in-o-va-shun" mumbo-jumbo. Wuzzat, sum mooslim name anyhew? Suonds gey!
Honestly, didn't people even investigate what the Conservative movement was and what it meant for America?
Anyone who voted "Conservative" voted to send this country and the world Back in Time.
So Praise Jesus and past the ammo! It's time for relivin' history, courtesy of the Conservatives. Just lovable lil' fuzzballs, is all they are.
No matter how you might wish for this reversal away from dollar manipulation - there is no evidence it is happening. No market evidence, no physical evidence.
dryfly | 01.10.09 - 11:54 am | #
drtfly,
I agre with Misean here. Setser is an excellent forensic analyst but IMO a highly questionable predictor. These are two totally different skills.
He didn't foresee just about any of these major economic problems that have recently come about. As late as May/June 2007, he still believed that the fiscal 2008 budget deficit would be even or lower than 2007 instead of a huge increase. I had a debate with him on this at his blog at RGE.
You might also remember his slight slaps at Roubini's negativism throughout his blogging career. He only recently started to tacitly apologize for those. I consider Setser to be an extremely conventional thinker who is additionally significantly biased by his patriotism (and therefore psitive outcome) but one with excellent forensic skills and great attention to detail.
IMO he is a must read but I do not pay significant attention to his predictions.
Gee, thanks, Werner.
May I remind you that a legal system based on British common law, based on Henry ummm, II's (?) innovations is important to material progress.
Enforcing contracts is a big deal. Having at least the illusion of a fair order is important in reducing riots.
The Romans kept their empire both before and after the Republic because of their law.
It's not nothing. It prolly would be better if it could be run by civilians, but lawyers keep getting reinvented, so I guess a complicated, subtile system needs specialists.
I find the comparison with Zimbabwe silly. Zimbabwe's real GDP is less than $30B. We and most developed countries already have a history of devaluation. A 20-30% devaluation is within reason and supported by relatively recent history.
Allen C, where are you hiding your money? Surely not in dollars.
I dunno, I think that in the race between in and de- flation, that de-
might win.
People are just not buying stuff. And they won't be until they're feeling a bit richer, and that won't be for a while.
Slowdown in the velocity of money and all that stuff.
Even if China really tries to turn its workers into consumers I think it will be too little too late.
I actually think the possibility of unrest is much higher in China than here.
"Nothing more useless than a broker/lawyer/banker"
They as well as politicians have their uses if deployed and compensated reasonably. Remember the 130:1 ratio. It is far better to to have the non-farm folks actually producing real output. Bloated bureaucracies and egregiously overcompensated financial intermediaries are clearly a drag.
Overcompensate me, please!
JAR(Unrated) writes:
Anyone who voted "Conservative" voted to send this country and the world Back in Time.
We make up more than half the country, stupid. Better get your wedge between the conservatives and the Republicans if you want to go anywhere. The Republicans were derailed by the conservatives who won't sit for their policies any more.
If you want to go anywhere other than the graveyard of history, you had better discover and promulgate a universal and inclusive image of the Republic. And that means actually inclusive. Your line of rhetoric will break the state quite neatly.
IMHO that was the best news I've heard in prolly 2-3 years... means RMB will be that much more difficult to peg & dollar harder to manipulate. If Chinese trade w/ others in RMB AND in dollars... think how hard it gets to peg to the dollar? If you don't get my drift google 'arbitrage'. Soros prolly wishes he were young again.
dryfly | 01.10.09 - 12:48 pm | #
I agree. But its effect on the stability of BW2 at least at the margin is going to be quite interesting. I am also quite concerned about hot money OUTFLOWS from China which would force increased domestic spending at much higher levels.
With all the bad news coming out of China, this has to be a concern and could really tip the scales. As I have said here before, I wouldn't be at all surprised to see the Yuan decline on fundamentals over the next one or two years. That, in itself, would spell the end of BW2. This is just one of the reasons why I tend to think that we can expect to see a fourth Dollar devaluation in the past 30 years.
[A 20-30% devaluation is within reason and supported by relatively recent history.
Allen C ]
I would like to agree, but how does the government stop it at 30%? And in the meantime they have massive funding needs to cover all the existing bailouts, new ones and stimulus. That can only be done with a relatively stable dollar.
why I tend to think that we can expect to see a fourth Dollar devaluation in the past 30 years.
RE | 01.10.09 - 2:27 pm | #
Soory, I should have said 40 years.
Energy over subsistence is energy for toolset refinement, and that brings further capability and increased output multipliers.
We do not have many technological innovations that markedly increase entropy in the production process, although it is a fertile field for invention.
Comrade Byzantine_Ruins | Homepage | 01.10.09 - 1:59 pm | #
correct, I would agree that it is the creation of "slack" or leisure which constitutes the basis of material advancement, and technology is really only a means to that end, one which relentlessly pursues its own efficiency.
we have created sufficient "leisure", but this time has been given over to the pleasures of consumption, instead of constituting the basis of further productivity gains or new fields of endeavour. eventually you hit diminishing returns in the optimization process and the gains to be had are outweighed by the cost of the technology and expertise necessary to realize those gains. consider that if the phantom gains in consumer real estate had been plowed into invention, further education, hobbies or entrepreneurship instead of granite countertops, BMWs, or the privilege of an even bigger mortgage, and the time pissed away being American Idle.
He didn't foresee just about any of these major economic problems that have recently come about. As late as May/June 2007, he still believed that the fiscal 2008 budget deficit would be even or lower than 2007 instead of a huge increase. I had a debate with him on this at his blog at RGE.
RE | 01.10.09 - 2:14 pm | #
He was and continues to be 100% correct on the persistence & longevity of the US-China dollar cycle. Until the Chinese give up on the US consumer market either as a result of finding an even bigger fool OR as a result of the US consumer ceasing to be able to consume then he is likely to remain 'correct'.
Most of the people saying it will end are projecting their own values on why it should end [I was guilty of this for many years myself - it had to end, right? Who would be such a fool to give away their labor and hard earned gains in such a scheme?]... those predicting it will end soon do this from all sorts of angles... but in the end the Chinese continue to buy treasuries [and to a lesser degree agency] and the RMB stays in bound and looks to get weaker in 2009 to revitalize exports. Setser hasn't missed a thing on this going back to 2004 or earlier.
The only error he and Roubini made was expecting & predicting a dollar crisis back then... That wasn't just 'early' it was wrong... missing the timing that much is to miss it all.
"Your line of rhetoric will break the state quite neatly."
It may already be broken.
I've decided we're all doomed. I'm going to get drunk, smoke a joint and call a hooker
I am also quite concerned about hot money OUTFLOWS from China which would force increased domestic spending at much higher levels.
RE | 01.10.09 - 2:27 pm | #
I expect hot money outflows. A lot of the FDI that went into China when RMB was still 8 plus to the dollar wasn't to 'cash flow' on going operations... rather it was in anticipation of RMB appreciation. I personally know companies who pursued that strategy... built a $200MM factory in China when RMB was at 8:1 and want to sell said factory when RMB goes to say 6:1 or better... the transaction will be in RMB then they hope to convert to dollars & 'repatriate' someday to reward their PE investors... if they saw the RMB going the other way... they would want out and FAST. They can't be the only ones thinking this.
Comment to first comment one thread down regarding Miami house prices. I find it completely plausible that Miami prices will be, in the end 45% to 55% off, depending how unlucky we are. It's 38.3% off peak as of October.
I rather think we will be unlucky and it will be 55% off. Still that puts a whole lot of housing within range of average people, and first time home buyers.
He was and continues to be 100% correct on the persistence & longevity of the US-China dollar cycle. Until the Chinese give up on the US consumer market either as a result of finding an even bigger fool OR as a result of the US consumer ceasing to be able to consume then he is likely to remain 'correct'.
dryfly | 01.10.09 - 2:33 pm | #
dryfly,
Here is what he said
in late 2004:
... In late 2004, Nouriel Roubini and I wrote that âthe tensions created [by the Bretton Woods 2 system] are large, large enough to crack the system in the next three to four years." In a 2005 Wall Street Journal online debate with Michael Dooley I tried to hedge a bit, and gave the system six years.
âwe [Roubini and Setser] never said the system would collapse at the end of 2005. A collapse in 2006, maybe. A collapse before 2008, likely; before 2010, almost certainly. ...
Soory, I should have said 40 years.
RE | 01.10.09 - 2:33 pm | #
Time flies when you're having fun.
Darn, dry, isn't that more or less the same stupid thing our people did?
"where are you hiding your money?"
I run a private investment company. My performance last year was excellent (info only; no solicitation). I will simply state that the next two years (perhaps more) have many challenges including devaluation.
Gold is a somewhat complex investment, but offers a store of value far beyond ANY currency in existence EVER. Ultimately, investment in productive assets offers the greatest benefit to the investor and to society at large.
This is where our leaders are failing us. Real money follows real opportunity. Hiding losses and protecting failures impedes opportunity. It is a horrible example especially when we strongly advised all the little countries to be tough and take in on the chin.
Darn, dry, isn't that more or less the same stupid thing our people did?
lawyerliz | 01.10.09 - 2:42 pm | #
When where?
I don't consider the Chinese stupid for initiating the dollar cycle - I find them stupid for not working harder, faster & sooner to get out of it & 'rebalance' their economy away from total dependence on export mfg once they received the lions share of benefit from the development [they are there]. Lord knows they have enough domestic 'needs' they could now feed... but instead they appear to continue to be going back to the well and with bigger and bigger buckets.
We on the other hand were never smart to have run the CAD & gov't deficits we did whether we 'balanced' that off against FIRE economy or not. My guess is our wonks are trying just as hard to find a way back to that well as Chinese are to theirs. Now THAT is depressing.
Hey, we should TRADE WONKS!!! Most of their wonks come here and vice versa.
We could both try them for various crimes many of which they are actually guilty of and then their sentence would be exile!!
Sentences could be reduced as our mirror image problems work themselves out!
Sorry to Tanta's spirit for all the exclamation points.
Time flies when you're having fun.
dryfly | 01.10.09 - 2:41 pm | #
And my spelling gets horrendous. Sometimes even my reasoning seems to suffer...
"but how does the government stop it at 30%?"
30% is huge. It represents around $15T of US asset value and a substantial mark-down of debt.
I was referring to the factory and the appreciation bet. Sounded like the New York real estate rental mkt.
lawyerliz writes:
...Gee, thanks, Werner...
Hihi, I seem to have hit a sensitive spot there.
But seriously lawyerliz, do you really think lawyers are useful in making "real, life-changing innovations" ?
That is was I was talking about! And that does not come from lawyers, it comes from people trained in physics, mathematics, engineering etc. , and it takes entrepreneurs to make it into the real world (lawyers participate here in a subordinate way like accountants, etc.). Sorry for that little bit of sobriety.
But, I do not in any way deny the need of an (elaborate) legal system. As you aptly pointed out, any developed society needs it. No dispute here.
However, you also can overdo it !
America is famous for being over-lawyered. Watching educated persons, senators, bankers, etc. declaring in hearings that they do not understand their house-buing/mortgage contracts with their 40+ signatures required, makes I guess the point.
(and remember, behind each of these 40 signatures is a family to be feed by that poor buyer, I guess it amounts to ca. 1/3rd of a house price.)
So, yes, lawyers are needed (in appropriate numbers), but they are absolutesy useless in making "real, life-changing innovations".
Please, do correct me if I am wrong.
(and please, do not take anything personal here at all lawyerliz, I like your posts.)
Isn't 15T just about what the net worth loss is?
Anonymous(Unrated) writes:
> "Your line of rhetoric will break the
It may already be broken.
All states are reinvented in the hearts of each young citizen. To be broken is to invite a new vision.
The Dynastic cycle is as necessary for great states -- as measured in expanse and cultural footprint -- as the fire cycle is for forests. Without wholesale institutional renewal, you have choking-out by vested interests.
You would prefer an intradynastic renewal, I assure you. So get that inclusive image of the state out there and going from mind to mind.
We export McMansions to China. Labor rates for the extractions are low as are the shipping rates. Let's get started.
I was referring to the factory and the appreciation bet. Sounded like the New York real estate rental mkt.
lawyerliz | 01.10.09 - 2:58 pm | #
Got it now - ya that's a common path to tears - same one that lead to the farm crisis in the 1980s... Hoocoodanode that $3000/acre land with LTVs >80% and financed w/ balloons in the 12-14% APR range producing 180 bushel an acre corn at $3/bushel might someday end in tears. They aren't making any more farm land after all.
Later, after they went bust and left the Midwest to move to Cali & Fla their kids probably grew up to be 'flippers'...
Where to start, Werner?
Nobody reads their mtges. Actually, a mtg should be readable for a high school graduate. And a note certainly should be. It's not like we are asking the citizens to read a medical text.
My grandma always said to read what you sign, and so I actually read the first mtg and note and stuff when I bought my first house, before I thought to become a lawyer.
Civilization on any scale at all can't exist without a legal system, how about all of civilization existing or not being a life changing event.
You can't see this because it is the water in which we all swim.
Most civilizations look back to their law-givers with immense respect. Remember Solon and Athens?
And we look back with great respect to our founders, who were much better educated than we are on Greek and Roman law.
The Romans were happy when the 12 Tables were set up so anyone literate could read them. Before that it was custom and a ruler had far too much power to say what custom was and was not. The 12 Tables, I understand were extremely harsh. But one at least knew what one was dealing with.
I don't know how you do recording of deeds in Germany, but I assure you that if no one could know who owned land and what liens encumbered it, it would shortly be a life changing experience, and not in a good way. Americans have a couple of whole industries devoted to checking, recording and insuring title.
Anyone else seeing the "madoff ad" below this post? 10.5% rate of return. $50,000 minimum investment.
I'm a little surprised an ad like that is allowed to run in a place like this. No, not just surprised - a little disturbed frankly.
And I do not even get into criminal law, about which I know practically nothing, but it is what most people think of when they think of the legal system.
"Isn't 15T just about what the net worth loss is?"
The final tally is years away. The main impetus for devaluation is the unsupportable debt service and the unsupportable GDP. Devaluation is the lesser evil. The eventual alternative is to go BK. When you control the fiat currency underlying the debt, that alternative is completely avoidable.
All states are reinvented in the hearts of each young citizen. To be broken is to invite a new vision.
Comrade Byzantine_Ruins | Homepage | 01.10.09 - 3:05 pm | #
On that note, today is the anniversary of the publication of Thomas Paine's Common Sense in 1776.
Also, sorry to be a grouch, but I have gotten weary of the lawyer jokes.
And the "don't take it personally" stuff.
I think interactive brokers will let non-US residents open up accounts and trade. They let you trade forex, futures, pretty much whatever you want.
Anonymous | 01.10.09 - 1:08 pm | #
You could give it a try, but be prepared for AML (Anti-Money Laundrying) issues. Also, verify the tax withholding treatment, if they categorize you as a foreign investor.
Not good when employers tell employees to hurry up and cash their paychecks:
404 - Error: 404
Institutions have a choice when manageing risk. It's called a Sell ticket.
Fill it out,find a buyer, and your risk disappears.
PonziMonetizaCoruptiCapitalism | 01.10.09 - 1:31 pm | #
That is so old school.
It's also so true.