A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.[1]
The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.
Mortgage rates don't affect buyers, homebuilders. Don't worry, neither does oversupply, high prices, or unemployment. Your companies are secure. A new paradigm.
Curses... pigged again!
ShadowInventory (profile) wrote on Thu, 6/4/2009 - 2:43 pm
What crimes did he commit? He was implementing the intent of the Federal Govt - to get more people into home ownership...
He is far from a sacrificial lamb but he is one scapegoat in the present parade of madness meant to channel public anger. More high-visibility perp walks will appease the herd, and meanwhile thousands of smaller sharks, many far less ethical, will slide on into the memory hole with their payola. Ensuring that the private sector be painted as the bad guy and the moral failure here is equally important to build public support for the government and will help us forget who enabled them, and then utterly failed to correct the behaviors through either negligence or outright payoffs. That's important because to accept Obamanomics we have to continue to believe in a beneficent or at least well-meaning but easily-duped governing class that wants only the best for its sheep... err... people.
We're closing on our refi tomorrow morning--4.75%, no points, 30 yrs. I had been waiting for 4.5% but got nervous and locked three weeks ago.
Excellent. When the Fed hands out free money, you take. My guess is that, at some point down the road on this loan, you'll do better than 4.75% on a 1yr bank CD.
Thanks. We're coming down from 6% so it's a good savings for us.
There comes a point when hanging out for a quarter point ain't worth it. Grab it while you can.
You're so right. I ended up stressing over rates for a couple months watching them go up and down before pulling the trigger. The comments here are a big reason I figured the window was closing and I better get in.
Interesting Times (profile) wrote on Thu, 6/4/2009 - 3:08 pm
At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.[1]
The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.
Ah, I see, it's the Come-to-Jesus moment in the finance world.
["Greenbacks" could then be used to underwrite states for medical, unemployment benefits and social programs
putting much needed help in at thee ground level that would enter the economy immediately ... ]
Sure! Oh but before these dollahs get vaporized on social welfare payments maybe a prereq could be a review of assets and expenses of recipients. If I am paying for some dupe's medical treatment I would want to know whether they have a 60" Plasma, 1MM in stock, a paid off 4k sqft house, 5 cellphones and digital cable/internet...
Would that be reasonable to you generous socialists...
To those of you who understand the bond market : What sort of tricks do you see the Fed trying to contain this situation where we have rising interest rates,a saturated market (is it saturated?) for treasuries and 30 million in new issues next week. Is this a sitution where secret equity purchases bail the fed out?
Not an expert by far but I am sure that the FED tells the large banks beforehand that they are buying Treasuries and what kind of yields that they want. So the banks can make large purchases before an announcement and sell into buying or over time. Or they buy with the FED to magnify the FED actions
ShadowInventory (profile) wrote on Thu, 6/4/2009 - 3:28 pm
Good news - your loan from China is approved!! Bad News - They want Libor + 15% and 10 points up front....
Which are probably still better terms than what the IMF will extract from us one day, when China is again stable on its own, has thrown their experiment with American-style capitalism in the crapper of history, and will no longer lend to us.
Captive lenders were the answer in WWII and will be the answer again. You will be forced to put at least 50% of your retirement monies into government bonds that mature based on your retirement age. It will have a catchy name like Social Security Plus.
/I hesitate too say this and it is probably the death knell for the bear market in bonds but it is difficult to envision any scenario tomorrow in which the market can rally. One has consistently been paid this year to short the supply and cover back later. There has been no reward for buying early. I think that we will see higher yields into the refunding next week and surely a steeper yield curve./
It looks like 30yr mortgages are screaming up to 5.5%, or about 10% in less than a week. Greater volatility than the stock market. Good job, BB. Douche.
Byzantine_Ruins - that is the whole problem in a nutshell, we still have to pay dollars for oil. If the US was energy independent, the main thing inflation would do would be to devalue all the debt that is choking the consumers and the banks.
This is why we absolutely need energy independence... if we didn't need to import oil, inflating our way out of debt would be much, much easier.
And as far as I know, there is no way out of our existing problems except for inflation. Unfortunately, it must be wage inflation. If inflation jacked up home prices by just 50% in 5 years there would be a lot less insolvent banks - hardly hyper inflation but way more than we are used to.
" Byzantine_Ruins (homepage, profile) wrote on Thu, 6/4/2009 - 1:39 pm
M-F (homepage, profile) wrote on Thu, 6/4/2009 - 4:29 pm
If they want to bring the rates back down, all the Fed has to do is print faster, and purchase more MBSs. They could easily do it too.
See you at the gas pump!"
Both true statements. I have no doubt they will print more. I expect BB to increase his purchases of Treasuries to $1T. It will be announced after the next Fed meeting.
"Captive lenders were the answer in WWII and will be the answer again."
Are you old enough to remember the stamp books we kids had? The schools were involved in getting us all to participate. We'd buy a small red stamp for a dime (I think), and paste it into our book. Just like an S&H Green Stamp. When the book was filled with stamps, we could turn it in for a bond.
Captive lenders were the answer in WWII and will be the answer again. You will be forced to put at least 50% of your retirement monies into government bonds that mature based on your retirement age. It will have a catchy name like Social Security Plus.
Oh YEAH! You think we have a problem with offshored mfg and a gutted mfg base now just wait and see what happens when energy gets taxed to the moon. UE to 25%.
broward has it.
Captive lenders were the answer in WWII and will be the answer again. You will be forced to put at least 50% of your retirement monies into government bonds that mature based on your retirement age. It will have a catchy name like Social Security Plus.
Precisely.
~~~~~
This would hurt the economy even more ... taking more spending power away from consumers ...
But this would work well while printing "Greenbacks" ... taking excess liquidity out of the system ....
[Exactly why we need a carbon tax ]
Oh YEAH! You think we have a problem with offshored mfg and a gutted mfg base now just wait and see what happens when energy gets taxed to the moon. UE to 25%.
~~~~
And I said we have an energy import tax with energy rebates for exports ...
"Iceland's central bank cut official interest rates by 1 percentage point to 12 percent on Thursday as it attempts to bolster the tiny island nation's recession-struck economy, defying warnings against further trims from the International Monetary Fund."
Gotta love that IMF... calling them mafia would be an insult to Tony Soprano.
"(Fortune) -- One early Wednesday morning last July, when the subprime mortgage meltdown first began to rock the markets, I found myself sitting with investing legend Julian Robertson in the cabin of his Gulfstream V jet in Auckland, New Zealand. We were en route to one of the two world-class golf courses he has built in the island nation. But his mind was on the markets halfway around the world....
Leftys Liquors Lubricants and Tarp and Bank (profile) wrote on Thu, 6/4/2009 - 4:04 pm:
Yeah World, I think it was '74 when I grabbed a 8 3/4 before it became 9. damn I was smart.
Lefty--
I ran 8.75% through my spreadsheet just for laughs and sure didn't like the monthly payment. For folks in my 40-something generation who have never seen anything >7% on a mortgage the coming years are going to be a hell of a shocker if rates really move up and stick there.
Argentina also allows unemployed workers to expropriate closed factories and operate them as cooperatives. One reason it seized funds is the experience in 2001 when global banks hustled $40 billion out of the country overnight then froze savings accounts. Ordinary savers got shafted with the local currency.
Works only if you have a growing and functioning system.
Look, the real problem is that money stolen by the rich is not used to create more stuff (wealth) but create more money (debt) through financial shenanigans (increasing leverage).
//higher taxes on high income, capital gains, dividends, estates, carbon and financial transactions//
How is that different from a hedge fundie buying a private island?
//Sure! Oh but before these dollahs get vaporized on social welfare payments maybe a prereq could be a review of assets and expenses of recipients. If I am paying for some dupe's medical treatment I would want to know whether they have a 60" Plasma, 1MM in stock, a paid off 4k sqft house, 5 cellphones and digital cable/internet...//
China and Emerging markets are rebounding sharply, DESPITE pretty much no orders from USA.
This is the key event for the bonds, not anything happening within USA.
Capital is going away from USA into these markets -- so to retain the same amount of capital, USA have to pay more for it.
This [Recovery without USA's order] is a key step in global recovery, we're pretty much there.
Next step: China depegs like USA always clamored for. Once they do that, there's no more reason to buy UST at all since they won't have excess USD to recycle back.
I leave it to the readers to imagine what will happen to USD after the depegging. We'll get what we asked for BIG TIME and all at once.
Peter Schiff's revenge doesn't begin to describe this.
Disclaimer: Because of this view, I am in the process of moving my investment to China Non-Exporter investment, as well as foreign bonds and debts not denominated in USD. Oil, Gold, Commodities seem good play, but they're a tad crowded.
Works only if you have a growing and functioning system.
Look, the real problem is that money stolen by the rich is not used to create more stuff (wealth) but create more money (debt) through financial shenanigans (increasing leverage).
//higher taxes on high income, capital gains, dividends, estates, carbon and financial transactions//
~~~~~
Wrong ...
The higher taxes are being used to underwrite a Sovereign currency and are not an end in themselves ...
In this way money can be recycled through the system instead of stagnating at the top ... The wealthy would have to earn
their profit from productive enterprise rather than rentier economics ...
@bh:
I surprises me how the market can ignore the rising rates. It just can not last. MBS are dead in a rising rate environment. And yet GM is at .75$
Until we reach "hyperinflation" status, an expectation of lower USD valuation does boost stock valuations. The companies are still inherently still worth the same, just the USD used to measure them has dropped.
If the dollar continues to drop, US Exporters are probably good buys, ditto to agriculture and non-housing related industries/manufacturers.
MBS and Housing is dead; but it's been dead for a while now, so it's contribution to GDP is negligible now. Raising rates will guarentee it to continue to be dead. It's really hard for it to be "more dead" anymore, except from the perspective that any homeowners still "hanging on" and looking for a rebound. They should probably sit down and plan on hanging on for a long time, like a decade or two.
Back in the day when feudalism was the governing style the aristocracy spent and spent raising taxes as was necessary. The peons eked out a living and starved, rebelled and died. The law of diminishing returns finally set off the alarm bell and usually started a war with a neighboring area that had some booty for the taking. Should the neighbors be a little too strong then the aristocrats simply waged war on their own people and among themselves until they were so weakened that the neighbors saw the opportunity and seized what little was left.
We have staged our troops in the oil rich areas of the world. We have subs loaded with missiles off the coasts of any possible threat. We use gunboat diplomacy while we seem to offer olive branches. We expect the tribute that has long been paid to continue rolling in and seem to be without a ready solution when the other strapped countries balk at continuing the long standing arrangement. We as a people notice so little and understand even less of the hows and whys. I always felt the internet would level the playing field with the gift of rapid analysis and knowledge. Unfortunately others figured out how to manipulate what was offered faster then curiosity led to change.
I can't remember where I read it but a quote equating nuclear weapons to a rifle hanging on the wall of the set during a 3 act play foreshadowed that by the third act the rifle would come down and be used in a tragic circumstance. Sheer greed and selfishness drives this planet and when the wealth ceases to flow then it will be seized regardless of who owns the resource. The law of the gun can be dressed up but it will always be the law of the land.
Sorry for the gloom but civilization does the same dance while the tune changes. Humans have never had such power to destroy in a time of such instablity.
I was just pointing out that most taxes do not hit the wealthy. I am all for punitive taxation of the wealthy. If you really wanted to get more revenue just dust off the old post-GD tax rates and laws.
Taxes have to be designed such that they encourage investment in real things, real stuff, real jobs, real wealth.. not more financialism!
//The higher taxes are being used to underwrite a Sovereign currency and are not an end in themselves//
Ok, this thread is already pigged, but I did put out something on this yesterday that might shoot a little light on the issue. Note that a spread of say 250 basis points is very differnet if the 10 year is at 10% and the 2 (or one which is what I used) is at 7.5% than if we are where we are now ant you have the 10 year at 3.5% and the one at 1.0%, look at the ratio as well as the spread.
DvD, spoken like a financial salesman. The FIRE economy is dead; get over it. Bernanke bought over 7 billion in debt today alone. Guess what happens if he stops buying? That recent white hair of yours will start falling out.
Sure, the long end is being priced higher due to concerns the US wont be able to service this debt and concerns about inflation. As a consequence, some of this traditionally long money is going into the short term treasuries which is steepening the curve. You also still have a lot of money going into the short end to advert risk.
But don't be mistaken, the bottom in the recession was marked last month and it's expected to see a steepening curve at this point, it's just happened sooner and steeper due to the above factors. Capital invested at the longer end of the curve always expects and demands a higher return after the economy has bottomed. At some point the return on the long end will force short term holders to move capital into the long end and the curve will correct....."somewhat"
My bigger concern is job creation, I'm afraid we will see another 2001-2005 type employment recovery for which we can not afford due to the current high unemployment rate.
hello
You ain't seen nothin yet!<I/>
Bernanke and Geithner are now up against it ...
There's no way to underwrite a deficit of trillions ...
The Chinese could only laugh at Geithner and his "'splanations ...
This could mean?
a) Inflation is getting priced in
b) Bond market dislocation is starting
c) USD has more to fall
d) Minsky Moment
e) All of the above
I for one am shocked! shocked! at this development.
You mean the US just can't keep spending trillions more than its tax revenues without an external consequence? Fascinating.
Well BB it was fun while it lasted
For the new folks:
A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.[1]
The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.
Source: Minsky moment - Wikipedia, the free encyclopedia
Mortgage rates don't affect buyers, homebuilders. Don't worry, neither does oversupply, high prices, or unemployment. Your companies are secure. A new paradigm.
What kinds of down payments are we looking at these days? Anything substantial for non-jumbo?
All we need is more backstop.
I imagine the Chinese would accept 401Ks and mortgage titles at 50% discount.
CR,
You're gonna need a bigger graph and more blue.
Of course the only answer is "Greenbacks" ...
Money printed, not borrowed, underwritten by higher taxes
on high income, capital gains, dividends, estates, carbon and financial transactions ...
For the health of the country taxes on sugar, carbonation and trans fats would be great too.
Lincoln used the "Greenback" to pay for the Civil War when confronting usurious interest rates
that would have bankrupted the country were demanded by American and British Banks ...
Rob Dawg, I've ordered more light blue ink!
We're closing on our refi tomorrow morning--4.75%, no points, 30 yrs. I had been waiting for 4.5% but got nervous and locked three weeks ago.
higher taxes on high income, capital gains, dividends, estates, carbon and financial transactions
I have none of those things.
Okay, I vote yes on MmcKinl Prop #1.
Start sweating, Dawg!
I forgot one:
f) Time for a new currency
Curses... pigged again!
ShadowInventory (profile) wrote on Thu, 6/4/2009 - 2:43 pm
What crimes did he commit? He was implementing the intent of the Federal Govt - to get more people into home ownership...
He is far from a sacrificial lamb but he is one scapegoat in the present parade of madness meant to channel public anger. More high-visibility perp walks will appease the herd, and meanwhile thousands of smaller sharks, many far less ethical, will slide on into the memory hole with their payola. Ensuring that the private sector be painted as the bad guy and the moral failure here is equally important to build public support for the government and will help us forget who enabled them, and then utterly failed to correct the behaviors through either negligence or outright payoffs. That's important because to accept Obamanomics we have to continue to believe in a beneficent or at least well-meaning but easily-duped governing class that wants only the best for its sheep... err... people.
Same as it ever was.
World:
Congratulations.
There comes a point when hanging out for a quarter point ain't worth it.
Grab it while you can.
"Greenbacks" could then be used to underwrite states for medical, unemployment benefits and social programs
putting much needed help in at thee ground level that would enter the economy immediately ...
We're closing on our refi tomorrow morning--4.75%, no points, 30 yrs. I had been waiting for 4.5% but got nervous and locked three weeks ago.
Excellent. When the Fed hands out free money, you take. My guess is that, at some point down the road on this loan, you'll do better than 4.75% on a 1yr bank CD.
Homedad--
Thanks. We're coming down from 6% so it's a good savings for us.
There comes a point when hanging out for a quarter point ain't worth it. Grab it while you can.
You're so right. I ended up stressing over rates for a couple months watching them go up and down before pulling the trigger. The comments here are a big reason I figured the window was closing and I better get in.
Interesting Times (profile) wrote on Thu, 6/4/2009 - 3:08 pm
At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.[1]
The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.
Ah, I see, it's the Come-to-Jesus moment in the finance world.
[Usually a steep yield curve precedes a period of decent growth]
Now it's just another data point on the failures of intervention and how irrelevant these measures are as a market signals.
"Greenbacks" will be fought tooth and nail by the banksters
because they would rather see America fail than give up their monopoly
on the creation of currency and credit ...
One Question:
Why should we borrow our own money?
Answer:
There is no need to, as long as taxes remove excess credit and liquidity ...
Didn't we call China and ask them for a loan mod? Certainly we qualify. We didn't gamble on anything.
Ah, I see, it's the Come-to-Jesus moment in the finance world
I believe that's a "Come-To-Confucius" moment, now.
Good news - your loan from China is approved!! Bad News - They want Libor + 15% and 10 points up front....
If they want to bring the rates back down, all the Fed has to do is print faster, and purchase more MBSs. They could easily do it too.
The problem is Not fiat money ... It is fractional reserve banking.
We have over 8,000 institutions that create 10 times their capital ... 10x leverage or more ...
When the going is good they all run one way, when times get bad, they run the other ...
creating leverage in both directions, up and down ...
and don't even get me started on CDS and derivatives,
which is simply printing money without capital or assets ...
["Greenbacks" could then be used to underwrite states for medical, unemployment benefits and social programs
putting much needed help in at thee ground level that would enter the economy immediately ... ]
Sure! Oh but before these dollahs get vaporized on social welfare payments maybe a prereq could be a review of assets and expenses of recipients. If I am paying for some dupe's medical treatment I would want to know whether they have a 60" Plasma, 1MM in stock, a paid off 4k sqft house, 5 cellphones and digital cable/internet...
Would that be reasonable to you generous socialists...
Right on, mmckinl.
Rob Dawg, hilarious.
As Chief Brody: "We're going to need a bigger graph."
Would that be reasonable to you generous socialists...
Likewise, we'd need to verify that Bearly's asset holdings didn't exceed "acceptable limits".
mmckinl - It's fractional reserve lending WITH fiat money....
Why use a grenade, when you got nukes?
To those of you who understand the bond market : What sort of tricks do you see the Fed trying to contain this situation where we have rising interest rates,a saturated market (is it saturated?) for treasuries and 30 million in new issues next week. Is this a sitution where secret equity purchases bail the fed out?
: What sort of tricks do you see the Fed trying to contain this situation?
Did somebody mention "401K"?!
Tegnost
Not an expert by far but I am sure that the FED tells the large banks beforehand that they are buying Treasuries and what kind of yields that they want. So the banks can make large purchases before an announcement and sell into buying or over time. Or they buy with the FED to magnify the FED actions
ShadowInventory (profile) wrote on Thu, 6/4/2009 - 3:28 pm
Good news - your loan from China is approved!! Bad News - They want Libor + 15% and 10 points up front....
Which are probably still better terms than what the IMF will extract from us one day, when China is again stable on its own, has thrown their experiment with American-style capitalism in the crapper of history, and will no longer lend to us.
bearly
The states have all the info on their recipients ...
This sounds like you want to cut off your nose to spite your face ...
M-F (homepage, profile) wrote on Thu, 6/4/2009 - 4:29 pm
If they want to bring the rates back down, all the Fed has to do is print faster, and purchase more MBSs. They could easily do it too.
See you at the gas pump!
broward has it.
Captive lenders were the answer in WWII and will be the answer again. You will be forced to put at least 50% of your retirement monies into government bonds that mature based on your retirement age. It will have a catchy name like Social Security Plus.
Interesting Times
mmckinl - It's fractional reserve lending WITH fiat money....
Why use a grenade, when you got nukes?
~~~~
We can't service the debt with more debt ...
again ...
Why should we borrow our own money?
With responsible management the profit of money creation is
the property of the UST not the banks ...
/I hesitate too say this and it is probably the death knell for the bear market in bonds but it is difficult to envision any scenario tomorrow in which the market can rally. One has consistently been paid this year to short the supply and cover back later. There has been no reward for buying early. I think that we will see higher yields into the refunding next week and surely a steeper yield curve./
Words of wisdom from across the curve.
[hat tip]
WORLD
4.75% on 30 yrs fixed is very good.
Too bad I can not refinance my mortgage, I paid if off 6 years ago
, It was 7.375% on 30 yrs fixed that I got in 1992.
TBT forever! Thank you Ben! I am getting one hell of a return!
It looks like 30yr mortgages are screaming up to 5.5%, or about 10% in less than a week. Greater volatility than the stock market. Good job, BB. Douche.
Byzantine_Ruins - that is the whole problem in a nutshell, we still have to pay dollars for oil. If the US was energy independent, the main thing inflation would do would be to devalue all the debt that is choking the consumers and the banks.
This is why we absolutely need energy independence... if we didn't need to import oil, inflating our way out of debt would be much, much easier.
And as far as I know, there is no way out of our existing problems except for inflation. Unfortunately, it must be wage inflation. If inflation jacked up home prices by just 50% in 5 years there would be a lot less insolvent banks - hardly hyper inflation but way more than we are used to.
" Byzantine_Ruins (homepage, profile) wrote on Thu, 6/4/2009 - 1:39 pm
M-F (homepage, profile) wrote on Thu, 6/4/2009 - 4:29 pm
If they want to bring the rates back down, all the Fed has to do is print faster, and purchase more MBSs. They could easily do it too.
See you at the gas pump!"
Both true statements. I have no doubt they will print more. I expect BB to increase his purchases of Treasuries to $1T. It will be announced after the next Fed meeting.
Oil will skyrocket to $100/bbl.
It's all relative anyway, isn't it?
Is there any recent news on Iceland ? Have they started going Lord of the Flies yet ?
"Captive lenders were the answer in WWII and will be the answer again."
Are you old enough to remember the stamp books we kids had? The schools were involved in getting us all to participate. We'd buy a small red stamp for a dime (I think), and paste it into our book. Just like an S&H Green Stamp. When the book was filled with stamps, we could turn it in for a bond.
I can see us returning to something like that.
M-F
Exactly why we need a carbon tax ... to push renewable energy ...
Carbon tariffs for imports ...
Higher prices that effect low income could be offset with
progressive utility rates ...
Exports would receive energy tax rebates to compete overseas ...
broward has it.
Captive lenders were the answer in WWII and will be the answer again. You will be forced to put at least 50% of your retirement monies into government bonds that mature based on your retirement age. It will have a catchy name like Social Security Plus.
Precisely.
It looks like 30yr mortgages are screaming up to 5.5%
Unsustainable (despite Beck's flip little word game).
Rates have to drop to the 4-4.5% range to maintain current housing bubble.
Oh, well.
"Is there any recent news on Iceland ? Have they started going Lord of the Flies yet ?"
~~~~
Cod prices have crashed ... more misery ...
.....Who says inflation hasn't hit?
If I were to sell my milk, eggs, cheese, butter, relish, jellies, veggies, and melons, I'd get 30% over spot - just because I can.
[Exactly why we need a carbon tax ]
Oh YEAH! You think we have a problem with offshored mfg and a gutted mfg base now just wait and see what happens when energy gets taxed to the moon. UE to 25%.
Just remember what Ben said yesterday..."We are not going to monetize."
We all saw his nose grow when he said it.
Things are finally starting to get interesting.
ppk
broward has it.
Captive lenders were the answer in WWII and will be the answer again. You will be forced to put at least 50% of your retirement monies into government bonds that mature based on your retirement age. It will have a catchy name like Social Security Plus.
Precisely.
~~~~~
This would hurt the economy even more ... taking more spending power away from consumers ...
But this would work well while printing "Greenbacks" ... taking excess liquidity out of the system ....
bearly
[Exactly why we need a carbon tax ]
Oh YEAH! You think we have a problem with offshored mfg and a gutted mfg base now just wait and see what happens when energy gets taxed to the moon. UE to 25%.
~~~~
And I said we have an energy import tax with energy rebates for exports ...
Found something: Business Week Online > File Not Found
"Iceland's central bank cut official interest rates by 1 percentage point to 12 percent on Thursday as it attempts to bolster the tiny island nation's recession-struck economy, defying warnings against further trims from the International Monetary Fund."
Gotta love that IMF... calling them mafia would be an insult to Tony Soprano.
Yeah World, I think it was '74 when I grabbed a 8 3/4 before it became 9. damn I was smart.
taking more spending power away from consumers ...
Translation - "ti's going to suck".
Well, yeah.
Of course.
Argentina seized pension funds...
AFP: Argentina to nationalize private pension funds
Interesting Times
very good article on iceland from Auto Earth ...
Iceland turns from collapsing banks to disappearing fish |
Business |
The Guardian
17 months ago from Fortune
January 2008
Tiger's Julian Robertson roars again - Jan. 28, 2008
"(Fortune) -- One early Wednesday morning last July, when the subprime mortgage meltdown first began to rock the markets, I found myself sitting with investing legend Julian Robertson in the cabin of his Gulfstream V jet in Auckland, New Zealand. We were en route to one of the two world-class golf courses he has built in the island nation. But his mind was on the markets halfway around the world....
ShadowInventory "Argentina to nationalize private pension funds" Oct 21, 2008
mmckinl - Thanks !
Leftys Liquors Lubricants and Tarp and Bank (profile) wrote on Thu, 6/4/2009 - 4:04 pm:
Yeah World, I think it was '74 when I grabbed a 8 3/4 before it became 9. damn I was smart.
Lefty--
I ran 8.75% through my spreadsheet just for laughs and sure didn't like the monthly payment. For folks in my 40-something generation who have never seen anything >7% on a mortgage the coming years are going to be a hell of a shocker if rates really move up and stick there.
"If they want to bring the rates back down, all the Fed has to do is print faster, and purchase more MBSs. They could easily do it too."
Nah, the Dollar will eventually catch up with that. QE works in the short term, but eventually, inflation will kick your ass.
Shadow Inventory, I especially liked the Google Map with the article. I was planning on driving there after dinner.
For the new folks:
Interesting Times, thank you very much for that explanation. This is why CR and all the comments are so valuable for me. Cheers.
"Words of wisdom from across the curve."
I surprises me how the market can ignore the rising rates. It just can not last. MBS are dead in a rising rate environment. And yet GM is at .75$
Argentina also allows unemployed workers to expropriate closed factories and operate them as cooperatives. One reason it seized funds is the experience in 2001 when global banks hustled $40 billion out of the country overnight then froze savings accounts. Ordinary savers got shafted with the local currency.
Works only if you have a growing and functioning system.
Look, the real problem is that money stolen by the rich is not used to create more stuff (wealth) but create more money (debt) through financial shenanigans (increasing leverage).
//higher taxes on high income, capital gains, dividends, estates, carbon and financial transactions//
bearly,
How is that different from a hedge fundie buying a private island?
//Sure! Oh but before these dollahs get vaporized on social welfare payments maybe a prereq could be a review of assets and expenses of recipients. If I am paying for some dupe's medical treatment I would want to know whether they have a 60" Plasma, 1MM in stock, a paid off 4k sqft house, 5 cellphones and digital cable/internet...//
China and Emerging markets are rebounding sharply, DESPITE pretty much no orders from USA.
This is the key event for the bonds, not anything happening within USA.
Capital is going away from USA into these markets -- so to retain the same amount of capital, USA have to pay more for it.
This [Recovery without USA's order] is a key step in global recovery, we're pretty much there.
Next step: China depegs like USA always clamored for. Once they do that, there's no more reason to buy UST at all since they won't have excess USD to recycle back.
I leave it to the readers to imagine what will happen to USD after the depegging. We'll get what we asked for BIG TIME and all at once.
Peter Schiff's revenge doesn't begin to describe this.
Disclaimer: Because of this view, I am in the process of moving my investment to China Non-Exporter investment, as well as foreign bonds and debts not denominated in USD. Oil, Gold, Commodities seem good play, but they're a tad crowded.
Lucifer
Works only if you have a growing and functioning system.
Look, the real problem is that money stolen by the rich is not used to create more stuff (wealth) but create more money (debt) through financial shenanigans (increasing leverage).
//higher taxes on high income, capital gains, dividends, estates, carbon and financial transactions//
~~~~~
Wrong ...
The higher taxes are being used to underwrite a Sovereign currency and are not an end in themselves ...
In this way money can be recycled through the system instead of stagnating at the top ... The wealthy would have to earn
their profit from productive enterprise rather than rentier economics ...
"I surprises me how the market can ignore the rising rates. It just can not last. MBS are dead in a rising rate environment. And yet GM is at .75$"
Bailout Ben's buying buckets of mortage backed bonds. Bankers will bar borrowing when bailouts abate.
"5 cellphones and digital cable/internet..."
What's that going to run in 5 years, $10/month?
@bh:
I surprises me how the market can ignore the rising rates. It just can not last. MBS are dead in a rising rate environment. And yet GM is at .75$
Until we reach "hyperinflation" status, an expectation of lower USD valuation does boost stock valuations. The companies are still inherently still worth the same, just the USD used to measure them has dropped.
If the dollar continues to drop, US Exporters are probably good buys, ditto to agriculture and non-housing related industries/manufacturers.
MBS and Housing is dead; but it's been dead for a while now, so it's contribution to GDP is negligible now. Raising rates will guarentee it to continue to be dead. It's really hard for it to be "more dead" anymore, except from the perspective that any homeowners still "hanging on" and looking for a rebound. They should probably sit down and plan on hanging on for a long time, like a decade or two.
It surprises me how the market can ignore the rising rates
The market can stay rational longer than you can stay incredulous.
Back in the day when feudalism was the governing style the aristocracy spent and spent raising taxes as was necessary. The peons eked out a living and starved, rebelled and died. The law of diminishing returns finally set off the alarm bell and usually started a war with a neighboring area that had some booty for the taking. Should the neighbors be a little too strong then the aristocrats simply waged war on their own people and among themselves until they were so weakened that the neighbors saw the opportunity and seized what little was left.
We have staged our troops in the oil rich areas of the world. We have subs loaded with missiles off the coasts of any possible threat. We use gunboat diplomacy while we seem to offer olive branches. We expect the tribute that has long been paid to continue rolling in and seem to be without a ready solution when the other strapped countries balk at continuing the long standing arrangement. We as a people notice so little and understand even less of the hows and whys. I always felt the internet would level the playing field with the gift of rapid analysis and knowledge. Unfortunately others figured out how to manipulate what was offered faster then curiosity led to change.
I can't remember where I read it but a quote equating nuclear weapons to a rifle hanging on the wall of the set during a 3 act play foreshadowed that by the third act the rifle would come down and be used in a tragic circumstance. Sheer greed and selfishness drives this planet and when the wealth ceases to flow then it will be seized regardless of who owns the resource. The law of the gun can be dressed up but it will always be the law of the land.
Sorry for the gloom but civilization does the same dance while the tune changes. Humans have never had such power to destroy in a time of such instablity.
mmckinl,
I was just pointing out that most taxes do not hit the wealthy. I am all for punitive taxation of the wealthy. If you really wanted to get more revenue just dust off the old post-GD tax rates and laws.
Taxes have to be designed such that they encourage investment in real things, real stuff, real jobs, real wealth.. not more financialism!
//The higher taxes are being used to underwrite a Sovereign currency and are not an end in themselves//
[How is that different from a hedge fundie buying a private island?]
Uhhh, what's your point ? Because hedgies and banks get to rip the taxpayer off the loafer-scammers need to get some more, to get even ?
I want them all to go get f&cked.
bearly,
I think you want to win your own little scam and hope that other scams fail..
And why would I care if someone bought a lot of stuff with welfare money. It creates jobs!
//I want them all to go get f&cked.//
"If you really wanted to get more revenue just dust off the old post-GD tax rates and laws."
Lucifer ...
If you look at pre GD rates you will see a big tax cut around '26 that enabled the '29 crash ...
Only in around '30 did Hoover raise the rates again ...
Took my chips off the table while ahead on TBT and SLV. Thanks, Rich...
post-GD tax rates = 'new deal' tax rates.. 95%
With mortgage rates ripping higher that should give lenders a little extra incentive to get off their asses and liquidate those REOs.
Yep, I agree, 'Social Security Plus' for your 401(k) and IRAs -- i.e., you can only invest your IRA and 401(k) in Treasury bonds/bills -- is coming.
It happened in Argentina last year and, I read in passing somewhere, in Britain sometime post WWII.
That is why, one year ago, I took the huge tax hit and liquidated my IRAs and took a hardship withdrawal from my 401(k).
My money is now safely overseas, out of the reach -- and imposed constraints -- of the Feds.
Highly recommended, folks.
Ok, this thread is already pigged, but I did put out something on this yesterday that might shoot a little light on the issue. Note that a spread of say 250 basis points is very differnet if the 10 year is at 10% and the 2 (or one which is what I used) is at 7.5% than if we are where we are now ant you have the 10 year at 3.5% and the one at 1.0%, look at the ratio as well as the spread.
Yield Curve: Green-Shoot? Weed?
DvD, spoken like a financial salesman. The FIRE economy is dead; get over it. Bernanke bought over 7 billion in debt today alone. Guess what happens if he stops buying? That recent white hair of yours will start falling out.
Sure, the long end is being priced higher due to concerns the US wont be able to service this debt and concerns about inflation. As a consequence, some of this traditionally long money is going into the short term treasuries which is steepening the curve. You also still have a lot of money going into the short end to advert risk.
But don't be mistaken, the bottom in the recession was marked last month and it's expected to see a steepening curve at this point, it's just happened sooner and steeper due to the above factors. Capital invested at the longer end of the curve always expects and demands a higher return after the economy has bottomed. At some point the return on the long end will force short term holders to move capital into the long end and the curve will correct....."somewhat"
My bigger concern is job creation, I'm afraid we will see another 2001-2005 type employment recovery for which we can not afford due to the current high unemployment rate.