"Without this incredible 227K the number from surveyed companies would have been 345 +227 = 572K of jobs lost in May 2009. So the surveyed companies have LOST 572K jobs and somehow the NET of new companies and bankrupt companies, have CREATED 227K of new jobs!!"
Don't worry, it is all ok. Move on, nothing to see. Unless your boss at the bank office is playing Van Halen's "Panama" at Led Zeppelin volume, packing things up, burning papers and giggling hysterically. Because Panama is exactly where he is going to fly away just before the collapse
The Federal Deposit Insurance Corp. has shut down Silverton Bank, the failed Atlanta "bank of banks," instead of selling it to private-equity investors, according to a person familiar with the situation.
Citizen AllenM (profile) wrote on Fri, 6/5/2009 - 12:20 pm
But, I think Lacker is making the 1931 mistake.
We can't push up interest rates, or the banks will once again croak as defaults soar.
Oil is going to fall, as demand is still cratering.
So, the next question is how long until the fed does raise rates to keep the bond vigilantes and gold and oil vigilantes at bay.
Oh they're never going to raise rates. Not in a meaningful way. They're too negative stimulus averse. If it wasn't true, they'd never have cut to 0 and caused the Flight To Yield bubble in the first place.
Thanks for the auto-refresh. It is the best thing ever when browsing via the iPhone (don't have to scroll up and down every time to refresh and see new comments). I did notice something though. I have a few people on ignore and see that the auto-refresh shows their new comments. Is it possible to stop this? I have found that the comments go away when you manually refresh.
Bob_in_MA, Well, they won't raise rates (although the Fed Funds futures jumped). So what can they do? Buying more MBS and/or more long term treasuries seem to be likely candidates ...
Although some Fed members are worried about inflation, I don't think Bernanke is too concerned at the moment. There will be differing views (so the minutes might be interesting for this meeting).
If you remember, I suggested that Bernanke's conundrum would be the opposite of Greenspan's. Greenspan's conundrum was that he raised the Fed Funds rate and the long rates wouldn't budge. Bernanke has rates at zero and long rates are rising ...
The American working male in our country has been completely gelded, that's why he gets to enjoy all the hamster wheel jobs with low pay, Good. YouTube - I'M BACK
The Federal Deposit Insurance Corp. has shut down Silverton Bank, the failed Atlanta "bank of banks," instead of selling it to private-equity investors, according to a person familiar with the situation.
Raise the target rate. I think they will have to raise .25%.
But it is a big game of chicken right now. Inflationary concerns are probably overstated.
The slow down in unemployment is likely just a pause. Come summer the number starts to tick up: no jobs for college grads, public school teachers getting cut, hell....a lot of government jobs at the municipal and state level getting cut.
That will happen in two waves: July 1 and Jan 1. Unless of course there is some kind of miraculous change in the downward trajectory of revenue streams (rising unemployment / falling property values).
I think we see a shallow pop up in the economy followed by a notch down and flatline for 7 years. Makes going to Japan cheaper if we become Japan.
But hey, carbon tax / sequestration / mitigation is likely to be our next bubble market. So who knows.
do realize that there are two levels at play here. The instinctive, animal level, where we want to punish those who have done us wrong, while those who have done us wrong have done it following their animal desires. There is also the rational level, of which to I am referring to above. Realistically, I know the beast in us will take over and this will end like it did in France in the 1790's. I will, however, not be the one holding the sword.
om your lips to Congress' ear! A comprehensive plan for a sustainable America. I would add two more items to the agenda: eliminate paid lobbyists in Washington and level-fund all campaigns for election to public office. In the age of the internet, there
"The slow down in unemployment is likely just a pause. Come summer the number starts to tick up: no jobs for college grads, public school teachers getting cut, hell....a lot of government jobs at the municipal and state level getting cut."
Down at the trench level, I'm seeing it happening and about to happen. Layoffs announced back in April are now finally going into effect; local school districts are beginning to finalize position cuts for the new school year.
Someone just related to me that the futures contract in Fed Funds implies a 16 percent probability that the Fed will tighten in August, a 33 percent chance in September and a 50 percent chance in November.
Bob_in_MA, Well, they won't raise rates (although the Fed Funds futures jumped). So what can they do? Buying more MBS and/or more long term treasuries seem to be likely candidates ...
I would add to the list the following: stating an explicit target for the 10-yr bond. That might temporarily drive down rates without the FED having to buy anymore bonds. But their bluff will eventually be called again, just as we went a few months before threats of buying Treasurys turned to action.
The Fed can raise the discount rate, increasing the spread between that rate and the Fed Funds rate. Pre-crisis the spread was 100 basis points. The spread was reduced to encourage banks to use the discount window if they need it. It would be an positive sign if the Fed stopped encouraging banks to take emergency loans.
Ken should sell this comment system and make a million bucks. Way better than halo. I won't even compare it to js kit which was as dumb as a wall street banker.
FED lowering rates to near zero = pissing in your pants to keep yourself warm
Quantitative easing with dollar printing = crapping in your pants
"Unconventional measures" = setting your pants on fire.
"Extraordinary measures" = Sticking a hand grenade into pants (hey, blood is WARM!)
Something else to watch over the next week - whether Gordon Brown survives as PM. There are very BIG things happening over here in UK government - Labour ministers dropping like flies and Labour being pummeled in the local authority elections. Election results for European representation will be announced Sunday and next week could be very eventful. Stay tuned...
black dog (profile) wrote on Fri, 6/5/2009 - 9:19 am
"I wonder if killing the stock market would drive rates down?"
otis, I've been thinking of this as well and think it could happen. It would accomplish several missions for the feds. Flight to safety would mean bonds up (yields down) but also stronger $US which would drive down oil. And to put the cherry on top with everyone being broke (due to falling equities) easier to ram through universal health. """"
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Clearly, between bonds, dollars and stocks, equity markets are the lesser sacrificial lamb.
A positive correlation between dollars and equities has been witnessed twice in the last two weeks. If this played out while stocks declined it could get ugly for the dollar. Normally (Before Bizarro) falling U.S. rates would lower Dollars. Now, who knows? Probably the whole deleveraging = dollar bets settled = dollar up theme is played out.
The PTB have signaled they desire a lower dollar in all their actions (and none of their speech). I think they need lower rates and a lower dollar. These goals are, of course, contradictory but our ostrich leaders have already tilted at every paradox.
One thing is certain. Killing the market is something they can do with no effort.
In Fed speak, it is one of "all available tools" at their disposure.
The hoi polloi were limited to knives, pitchforks, pikes and scythes in terms of their armaments in the 1790's, and managed to kill (and occasionally eat) the rich in substantial numbers...
Hymns for the Lord, yes, Silverton was seized a month ago, and the FDIC moved it to a bridge bank. I guess they couldn't find a buyer ... this is a different kind of bank (it is a bank for banks), and the business can be taken over by some competitors.
While taking a hefty toke of the green shoots... It's obvious that as the recession is over it only makes sense to raise interest rates across the spectrum to control inflation.
Additionally raising rates will clearly signal the recession is over.
"The slow down in unemployment is likely just a pause. Come summer the number starts to tick up: no jobs for college grads, public school teachers getting cut, hell....a lot of government jobs at the municipal and state level getting cut."
Pitchforks are almost besides the point. The most potent weapon of the masses is a cessation of belief in the social order, and a refusal to cooperate with it. Chaos ensues, or begins to; this is when regimes that are still functional step back from the brink and maker serious concessions. Or when regimes that are too far gone fail and are replaced by something else ... not necessarily something better.
I see the logic in buying more bonds, but would buying $500B vs $200B in the $7(?)trillion treasury market make much difference if it also increases people's fears of inflation?
One mistake I think Krugman makes is not distinguishing between short-term inflation prospects and medium to long term expectations. Sure, inflation won't be a threat over the next couple of years. But then what? Won't the 10-year bond move with people's longer term expectations?
The hoi polloi were limited to knives, pitchforks, pikes and scythes in terms of their armaments in the 1790's, and managed to kill (and occasionally eat) the rich in substantial numbers...
Today peasants are of course equipped with semi automatic weapons ....
It's the big picture that some of us care about. Not 2 years down the road, but the generation after it, which at this points looks like a 1950s-1980s inflation generational event.
Negative interest rates have been tried with remarkable results.
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google:
Wörgl, Austria great depression
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What's to stop the fed from CHARGING interest on reserves held at the fed? This would force banks to lend.
What happens after ZIRP? the number line does not stop at zero.
Negative REAL interest rates exist. Negative nominal interest rates are not impossible, government and the central bank only have to so ordain.
Negative interest rates, widely implemented, would force savings into useful endeavors and explode the velocity of money. Passive wealth creation would change to active wealth creation.
The problem is that ending passive wealth creation would end what we call modern finance.
Not to mention the polar shift in mindset required.
Also, the environment get majorly raped since any marginally profitable endeavor would have more value than cash with a shelf life.
What would combining an asset backed currency (stocks, mortgages) with negative interest rates do? Would it provide an outside limit to economic expansion?
Will limiting future economic expansion be necessary to steward (ration) natural resources? the economy exists within the natural environment and can not grow at a compound rate indefinitely.
The growth of any system is limited to the size of the larger system of which it is a subset.
Negative interest rates cause defined time decay in money. This would be entropic money. Perhaps entropic money would be better matched to the natural environment.
If commodity speculation starts to get out of hand, the fed will start paying banks interest on reserves. The same reserves the fed handed them in exchange for crap assets.
Using the natural advantage that 85% of our hoi ploy do not possess passports (implying they've never been out of the country) makes it very easy to bugger the buck, and keep stock prices and home prices aloft, as that's all that matters, really.
As future imported item costs go through the roof, blame foreigners for "gouging" us on prices...
If we raise rates, even modestly, does that help protect the dollar and play hell with the yen, pound, and Euro? Of course the Brits and the Europeans could raise rates, but this seems unlikely. There economies are in far worse shape and likely to become stalled sooner than ours.
So how about this: raise the rate .25%, defend the dollar, the Brits and European currencies drop and their bonds become less desirable due debt to GDP, etc and our treasuries become more desirable, despite 3.25 Trillion in issues and the rate spread on mortgages, etc to treasuries drop?
The thing I find interesting is not that 220k jobs were "created", but YoY they've added 50k jobs to the model in a contracting environment.
In comparison, the BED survey for Q308 says we lost 1mm jobs while the corresponding establishment surveys from that period said(even after completely discounting the B/D model) that only 376k jobs were lost.
And the BLS wonders why people think the data is queered.
blackhat (profile) wrote on Fri, 6/5/2009 - 11:43 am
Agree with Bob_in_MA,
It's the big picture that some of us care about. Not 2 years down the road, but the generation after it, which at this points looks like a 1950s-1980s inflation generational event.
We are in the midst of an event of generational significance. History of course will again be written by the victors/conquerors, but history is being written even if some of the tune seems oddly familiar.
The fed would be dumb not to raise rates a little bit- back to 0.75%. It will have ZERO economic impact - its hard to believe that 1.1% libor creates all that much difference when compared with a 0.6% Libor. However, I think it could very well result in quite a bond market rally as it would reaffirm the Fed's bona fides as an inflation fighter. It wold help the dollar and probably reduce the price of oil- all of which would be very helpful in terms of economic growth.
Black Dog from the previous thread: Bernanke this week finally getting around to talking about fiscal responsibility gets me thinking that the bailouts going forward won't be quite as generous. My guess is BB QE's just enough to put the breaks on deflation.
One thing that will make this interesting is whether the coming CRE induced bank failures forces BB to be more generous than planned (if there is a plan).
Isn't this talk about raising rate just to provide an impetus to borrow and spend NOW! They've lowered rates to zero but velocity's still low, so they need some reason to get people to spend now to make any stimulus effective. The tools for fighting inflation are well understood (as has been mentioned by folks smarter than me), but avoiding a deflationary spiral is proving much more difficult. Besides, inflation will be a problem for the next guy. 'nuf said.....
BTW Switzerland in 1979(?) had negative nominal interest rates. If you left Swiss francs in an account the bank charged you interest on it. I know because I had to withdraw cash from my clients accounts and place them in a safety deposit box.
"Gotta wonder how much $$$ the Fed will make on their collosal 4.25% GSE loan portfolio. "
For just about two months they were paying par for the 4s. Now the 4s are pricing at 95.
Assume a similar loss for the 4.5s, which is the other coupon they were cornering.
So, about $500B of MBS, loss of 5%, $25B so far.
I fail to see how that money can be withdrawn from the system. If someone has a better understanding of Fed operations, I welcome comments, but it seems to me that money was created and will never be withdrawn.
If China let their currency float and oil prices stayed elevated, IMO a lot of products mfg by China would not be cost competitive vs mfg in the US any more. The end price of Chinese goods to US buyers would skyrocket. That would drive shift of mfg back to the US. This is one reason why China keeps the currency peg even though it results in them accumulating dollars.
Curious: I would add to the list the following: stating an explicit target for the 10-yr bond. That might temporarily drive down rates without the FED having to buy anymore bonds. But their bluff will eventually be called again, just as we went a few months before threats of buying Treasuries turned to action.
That's what they did during WWII and into the early 1950s. But at the time, we had an absurdly high national savings rate. In 1944, the personal savings rate was 37%!
otishertz (profile) wrote on Fri, 6/5/2009 - 11:43 am
Negative interest rates cause defined time decay in money. This would be entropic money. Perhaps entropic money would be better matched to the natural environment.
otishertz | 11.26.08 - 8:13 pm | #
I tried this in the game Alpha Centauri several weeks ago. I made a faction that generates negative interest on its reserves but has a spiked economic growth rate. Interesting to say the least. The computer AI absolutely doesn't know what to do with it. Make it fast (income) but spend it or you lose it. Keynes taken to an extreme. It's quite a mind game. I figure we might as well start preparing for possible futures.
Bob Dobbs (homepage, profile) wrote on Fri, 6/5/2009 - 12:40 pm
The most potent weapon of the masses is a cessation of belief in the social order, and a refusal to cooperate with it. Chaos ensues, or begins to; this is when regimes that are still functional step back from the brink and maker serious concessions. Or when regimes that are too far gone fail and are replaced by something else ... not necessarily something better.
Winner winner chicken dinner.
Interesting / useful observation:
Small states and states that are pure despotism have the best chance on the consent cusp. Less to turn around, less ownership of the mechanism by vested interests and procedures. Assuming the king has his wits and isn't purely ego driven, he can make any concession he wants and take it back the instant he has the advantage again. It's not the same in a large state, which is why I find the Chinese dynastic experience so instructive.
State operations are part of what decay during the transition to a strained / failing state, so large states / technoctatic states have little ability to perceive their plight, and even less ability to change direction. i think the us will catapult headlong into the abyss of state failure because you won't even be able to generate consent on what is a meaningful substantial reform.
Was the runup in oil due to Obama going to middle east this week..His speech is history, he's in Europe which can't afford high oil either..will it start backing off now with GS targeting 85 to get all the retail in then slam it back to 40?
"There economies are in far worse shape and likely to become stalled sooner than ours. "
Except for the Brits, even Italy is in far more better shape than USofA. Europeans still have manufacturing base left, no overburdening military costs, social safety nets in decent shape etc etc.
What is this job number discussion - link to 227k article?
"Without this incredible 227K the number from surveyed companies would have been 345 +227 = 572K of jobs lost in May 2009. So the surveyed companies have LOST 572K jobs and somehow the NET of new companies and bankrupt companies, have CREATED 227K of new jobs!!"
California is a failed state. Any opinion as to whether we break apart into manageable units or Obama goes Lincoln on us and consolidates us under a Federal umbrella?
I'm not convinced that oil will drop from here. On the fundamentals, current supply and demand, yes it should drop. But its priced in dollars, and there's a massive supply of dollars being created.
"Buying more MBS and/or more long term treasuries seem to be likely candidates ... "
I agree. They probably have enough MBS left over (only spent 500B of the $1.25T so far), but I expect an increase in the number of treasuries, to at least $1T. If you read BB's works, it is pretty obvious he will go down this path.
What I am not sure about are the dynamics on the FRB - can the other guys override him? I think some are starting to realize the guy is a bit nutso.
hiker90 (profile) wrote on Fri, 6/5/2009 - 9:47 am
One thing that will make this interesting is whether the coming CRE induced bank failures forces BB to be more generous than planned (if there is a plan).
CRE will kill the smaller banks, but it may wind up shoring up the 2nd tier "big" banks by passing on deposits while the FDIC gets stuck with the trash.
Russian President Dmitri Medvedev on June 5 said strategic weapons would be a key topic for discussion with U.S. President Barack Obama, KUNA reported. Medvedev said eliminating strategic weapons would be positive for both the United States and Russia, and that both nations would work on improving cooperation with the Non-Proliferation Treaty. He said he was concerned about the U.S. economy’s effect on the global economy, and that Russia is working on making the ruble into a hard currency that would attract investors."
"California is a failed state. Any opinion as to whether we break apart into manageable units or Obama goes Lincoln on us and consolidates us under a Federal umbrella?"
The only thing failed about California is the consensus on who pays for what, and how much? Simply breaking it into two or three pieces wouldn't solve much unless the basic political logjam is solved.
Oh, you might decide to create a "good state" and a "bad state" aka GM, and leave most of the liabilities (aka large concentrations of poor people) to one of them. But then you just get migrations. Rather analogous to US/Mexico population flows.
iceman (profile) wrote on Fri, 6/5/2009 - 9:53 am
I'm not convinced that oil will drop from here. On the fundamentals, current supply and demand, yes it should drop. But its priced in dollars, and there's a massive supply of dollars being created.
But those dollars are not in the hands of the people who consume oil. $80 in Jun '09 is every bit as insane as $147 in Aug '08. IMO this is a bigger head fake than last summer.
"I'm not convinced that oil will drop from here. "
I agree, for the reasons we are discussing here. BB is debasing the currency at an alarming rate, and it isn't just "M2 is growing, etc". So much of inflation is expectations based, and even J6P is watching the nightly news, seeing AIG get bailed out, the banks get bailed out, GM, Chrysler, Universal Health Care, continued expenditures on the wars, and meanwhile BB print money to fund the deficit and the failed Fannie/Freddie.
Sooner or later even J6P gets nervous about the value of something (the USD) that is so easily created out of thin air.
"The Next Fed Meeting Will be Interesting" - yes. But the outcome is known now: BB will win, they will keep rates the same and buy more MBS. Maybe the will get creative with some new program: I am sure they have computer programs that keep suggesting names and alphabet soup until they get it right....
Ken should sell this comment system and make a million bucks. Way better than halo. I won't even compare it to js kit which was as dumb as a wall street banker.
hoocoodanode is awesome cuz kcooper is actually a part of the CR culture and realized the strengths and weakness of the various competing platforms. Sometimes I wonder about the indirect role that Lou Gerstner played in our current economic malaise.
Yup, that is a very deliberate part of Chinese economic strategy. They can't afford to let their currency float.
Accumulate an increasingly worthless $ debt or face the risk of your massive manufacturing employment base heading out of the country with the associated social tumult ?? Hmmm.... They're choosing to take the $ and leave the problems to the next generation of communist leaders.
"He said he was concerned about the U.S. economy’s effect on the global economy, and that Russia is working on making the ruble into a hard currency that would attract investors"
Convertible into Russian oil, perhaps? That would be a smart play, IMHO. X rubles/barrel.
When it costs one thin dime to produce a $100.00 Banknote, and fractions of a cent to create and send Billions via mouse click, your currency might just be overvalued...
Oh, you might decide to create a "good state" and a "bad state" aka GM, and leave most of the liabilities (aka large concentrations of poor people) to one of them.
Only the government of CA is a failure of third world caliber. Thanks to skillful Gerrymandered districts.
Electoral reform needs to happen before the state can recover.
"Sooner or later even J6P gets nervous about the value of something (the USD) that is so easily created out of thin air.
Thus the move to gold, oil, commodities, etc. "
I am wholly unconvinced that J6P understands even the basic concepts of the fiat money system. I once dated a girl who was an Ivy League economics major who had only a passing familiarity with the reality of our currency regime. It was rather disturbing. Bonus - she's now in corporate law.
to prove that he have truly reached the gaga land some more information on the Birth Death model.
First, in May of 2008 B/D added 217,000 jobs, in May 2007 there were 203,000. In May of 2009 the BLS would have one believe that the there were more uncounted small business jobs than in 2008 or 2007 before the financial crisis started!!!
Second, the B/D factors are constant and not seasonally adjusted and the May adjustment is greatest of the year
Rates would imply roughly a 10% hit to affordability with a 20% down payment. I met with someone from my states AG office yesterday and he indicated that some of the mortgage companies (Wells Fargo Mortgage) are back to their old tricks of trying to refinance someone who has a low rate 30 year fixed mortgage into some other crap product (all for the fees mind you).
Rob Dawg (homepage, profile) wrote on Fri, 6/5/2009 - 12:53 pm
Byz,
California is a failed state.
Nah. Failed state is more than shitty administration. Most nations throughout history were mostly manned by doddering old ladies with ledger books and shiftless cousins shuffled off onto the state because they were too drunk to hold real jobs. Muddling is fine. In fact, it's preferable to technocracy because it's more involving.
When the belief becomes widespread that the badge on the officer of the law means nothing more than a gang color, then you have a failed state.
We are close, but the state still provides bread and circuses. But, when they fail to provide essential services, they will find that the reservoirs of trust and belief that make people believe in the state even when it isn't there for them, are mostly vanished. There's a big cohort of geezers who still see the state as their bulwark against the libo-negro-lesbo-hippy-beaner menace. When they are dead in 5-10 years or haven't gotten their checks for a few months, then you will see the state really come apart.
Only the government of CA is a failure of third world caliber. Thanks to skillful Gerrymandered districts.
Electoral reform needs to happen before the state can recover.
splat
I agree. The "failed state" remark is a quote from Rob Dawg. The gerrymandered districts (except Congress) should start to go away in 2010 unless somebody messes with Prop 11; next, open primaries and maybe optional public financing (with a big star you can put next to your name saying you didn't take special interest $$$$."
Comrade Alexei Mikhailovich (profile) wrote (in reply to...) on Fri, 6/5/2009 - 11:56 am
CRE will kill the smaller banks, but it may wind up shoring up the 2nd tier "big" banks by passing on deposits while the FDIC gets stuck with the trash.
Agreed with the caveat that the Treasury is for all practical purposes backstopping the FDIC.
what good is a manufacturing base if you have no economy to sell the goods at a decent rate of return on investment...seriously manufacturing in Europe is a costly affair. and with a very strong Euro, exporting these good abroad is even more of a challenge.
social safety nets are a huge drag and you have an aging population and not enough younger workers to support them (= higher taxes) and not enough jobs even for those workers.
Italy's economic growth averaged only 0.8% in the period 2001-2008; 2008 GDP decreased 1.0%, largely due to the global economic crisis and its impact on exports and domestic demand. GDP is expected to contract further, with a huge decrease in 2009 (ranging from 2% to 3%) as the Euro zone and world economies slow.
The unemployment rate in the European Union pushed higher in April, indicating that nascent signs of economic recovery had yet to be felt in the labor market.
The seasonally adjusted unemployment rate for the 16 countries that use the euro currency rose to 9.2 percent in April, the highest rate since September 1999, from 8.9 percent in March, the Eurostat agency, the bloc’s statistics office, said Tuesday. In April 2008, the unemployment rate was 7.3 percent.
For all 27 members of the European Union, the unemployment rate was 8.6 percent in April, up from 8.4 percent in March and 6.8 percent in April 2008.
Although there has been some evidence in recent weeks that the economic decline that intensified in Europe in the second half of last year is beginning to ease, economists say that the labor market lags behind many economic indicators and that unemployment commonly rises after a downturn.
Among European Union members, the highest unemployment rates were seen in Spain, at 18.1 percent, and Latvia, with 17.4 percent. The lowest unemployment rate was 3 percent recorded in the Netherlands, followed by 4.2 percent in Austria.
The unemployment level in France was 8.9 percent; in Germany it was 7.7 percent. Figures for Britain and Italy were not available. Unemployment stood at 8.9 percent in the United States in April.
The jobless rate has been creeping up despite the efforts of many countries to use public funds to dissuade companies from permanently laying off workers.
France, for example, has a program that allows troubled companies to draw on state money to pay their workers 60 percent of minimum hourly wages when they are temporarily laid off.
Andy Burt on Bloomberg give a B/D number for May 2008 of 176,000 being composed of NR 1, Construction 40, Manufacturing 4, Trade 24, Information 3, Financial 3, Prof.12, Education 7, Leisure 75, Other 7.
They must do revisions to these numbers. It looks like the original number may have been 217,000 and now it's 176,000???
The BLS page says it was last modified on Feb. 6, 2009/
"Except for the Brits, even Italy is in far more better shape than USofA. Europeans still have manufacturing base left, no overburdening military costs, social safety nets in decent shape etc etc."
Well, the USA can just bring our forces home from Europe and we'll see how well the Eurozone can manage it's defense policy. Europe's mfg base is dependent on exports to the US and collapsing CEE economies; and rapidly aging populations mean the social safety nets have to be propped up by shrinking workforces. I'm not saying the US doesn't have serious problems...just that euro-triumphalism isn't appropriate.
@Bob_in_MA Would that have worked if we had needed foreign interests to buy and hold Treasury debt?
A few months ago, I was wondering how high Treasury rates would have to go before American families would consider buying them. At 6-7% on the 10-yr. I might be tempted. But it's hard to dismiss the threat of hyperinflation in the US.
Many of you babble on about the gold standard of yore, but do you understand that only a tiny percentage of dollars were actually backed by gold, and the only fiat mechanism that allowed one to exchange paper money for gold, was Gold Certificate Banknotes?
This in addition to National Banknotes, Silver Certificate Banknotes, Federal Reserve Banknotes, United States Treasury Banknotes, none of which allowed you to exchange them for gold coins...
Put all romantic notions about a gold backed dollar aside.
Never going to happen.
If you look, you can see they have created a de facto asset backed dollar.
Holy smokes, what is Robert Reich smoking? After watching GS and Bernanke pump up the market for the last 6 months, today on his blog, he's getting euphoric and nostalgic while taking us back to the nineties. He's talking asset inflation, a knowledge based economy, and minimalizing manufacturing. I often wondered how he fit in with the Clinton cabinet when they passed NAFTA.
curious (profile) wrote on Fri, 6/5/2009 - 1:18 pm
A few months ago, I was wondering how high Treasury rates would have to go before American families would consider buying them. At 6-7% on the 10-yr. I might be tempted. But it's hard to dismiss the threat of hyperinflation in the US.
That's easy. It's junk debt. Just, does the coupon + discount get you your money back before they rip you off? I'm thinking I will get in at like, 14-19%. With tax advantage and some discount on the par, it should make a good buy in a few years.
Kung.Fu.Panda (homepage, profile) wrote on Fri, 6/5/2009 - 10:17 am
What's that sound? The UK's government shattering...Brown going down? THREE more top Ministers resign from UK Cabinet...the pound to follow?
They can pray it is just the pound. It will be a near miracle if the UK isn't big Iceland.
AllenM, I thought you were bullish? Have you seen something that changed your opinion now, or was your call before simply a short term rebound expectation?
Apparently, Sweden's government isn't owned by bankers.
"We want to be very clear so that people know what could happen," Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership."
I can't figure out this rally at all. So if everyone is staying out of stocks and bonds look to be retreating? What else is there if all you have is a Fidelity mutf and are starting out again? Does it make sense to open up an etrade account and see what little play money I have left can do?
Would combining an asset backed dollar with negative nominal interest rates create a currency that limits economic growth like a gold backed currency would?
Gold is an asset. Gold backed currencies are asset backed currencies. They would behave similarly, except for one major difference:
Paper assets are easily created.
Backing a currency with paper assets would create an inflatable currency. Negative rates would make stocks more attractive than cash. Negative rates would increase total number of enterprises.
I'm wondering, would entropic money put a lid on economic growth after the initial explosion of dollar divestiture caused by the implementation of negative interest rate policy (NIRP)? Negative interest rates would make the dollar only useful as a medium of exchange and no longer as a store of value.
NIRP would cause assets to be used to increase assets, not dollars.
This is harder than growing wealth through finance tricks and requires real effort and thus would be e limiting factor.
Gav, I called that horrific bottom.
My point was not to be long term bullish on US stocks.
Today, I think we will see a drop back down to 7250 area by late summer as the lower profits and continued unemployment begin to take hold.
Further, oil will most likely fall back to $50 or so by then. This green shoots stuff is for the birds.
As I predicted, we find an island of stability, and everyone is ready to restart the bubble.
The stresses encountered in the UK will be here next.
As inflation expectations take root, what people need to remember is that it takes a long time for mainstreet to get the message and begin to buy inflation stuff in quantity.
My prediction of the 70s show continues to hold water.
What is really going to be fun to watch is the shrinkage in the FIRE economy.
The lat on Thursday was close to the floor of its trading range against the euro and investors were betting on devaluation with interest rates on the currency of 70 per cent for three-month forward contracts, compared with 20 per cent last week.
The lat and Estonian kroon are under pressure to de-peg from the euro.
"Well, the USA can just bring our forces home from Europe and we'll see how well the Eurozone can manage it's defense policy. Europe's mfg base is dependent on exports to the US and collapsing CEE economies"
You have your facts straight from the 1950's. Europe has evolved a lot since then but it seems to Americans a tough thing to swallow. Germany alone spends the same as Russia to military, France 150 percent. Anyway, EU exports to US are big but only about five percent of total eurozone GDP. Germany's biggest trading partner is France and intra-eurozone trade is far more important than any exports to USofA.
Europeans also do not have the luxury of having the reserve currency of world. The reserve currency status of dollar has allowed things to go totally out of whack in the USA with 23000 golf courses and shopping malls everywhere. Now it is all breaking apart because the underlying economy was too much based on vendor financing from Asia and easy debt.
But those dollars are not in the hands of the people who consume oil. $80 in Jun '09 is every bit as insane as $147 in Aug '08. IMO this is a bigger head fake than last summer.
Rob Dawg,
That's how I see it. Another thing to consider is that commodity contracts are highly leveraged. Big swings are nothing new. The more important data are the intermediate and finished product prices which indicate actual demand more than speculation.
End demand is in serious trouble imo. People are tapped out and their access to credit has been severely curtailed.
Speed (profile) wrote on Fri, 6/5/2009 - 12:28 pm reply Ignore user
Apparently, Sweden's government isn't owned by bankers.
"We want to be very clear so that people know what could happen," Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership."
Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership. RESISTANCE IS FUTILE . "
Hey my comments don't do that reload thingy everyone keeps talking about...
"California is a failed state"
Correction "failing" we have not stopped getting worse. Cutting free Medical care will deal a serious blow to the poor and working poor and puts Muni's on the hook for the cost.
States cannot declare BK but cities sure can. Say it with me! Yes, we Can!
"Well then you should have been johnny on the spot about fixing things 30 years ago, honored grandfather.
History is not worried about how you will feed the cat, that is for you to worry about. "
Thank you for the honorific, Byz.
I tried in my very humble, invisible way to help keep us from frying one another, along with many people much more important than me. People on both sides knew that it must not happen. I've seen it written lately that it was unlikely to happen, since rational minds would not have permitted it. Reason should have prevented much that has happened.
But if a state is to fail, who can stop it in the long run? I only know that never has so much power in its various forms been concentrated in one nation. If it were to fail, the planet would shake. But I don't, can't believe that it will happen.
If you were an economist circa 1929-33 the thing you would have wanted to avoid the most, especially with the memories being so fresh in their minds, would have been a repeat of any of the hyperinflations (Austria, Hungary, Germany) of the 1920's, especially the Weimar example.
The reason was simple.
We were the largest creditor nation in the world...
The situation is reversed today, as we are the largest debtor nation now.
Rising interest rates when when financial engineering and consumer spending ( 70% of GDP but the Banks want more ) are the 2 key drivers of the debt laden ‘bubble’ US economy and U6 is now about 17%
thanks Rat. please reassure Dr. Ponzi the check is in the mail
At work, ppl are about to break out the torches and pitchforks. There is talk of furloughs for the worker bees who would be the only employees to face reductions. Folks making over 70k a year get to keep their full salaries while playing solitaire half the day. Something is out of whack here. CR and Mish seem to be the only place people are talking about real affects and not just platitudes.
It could hardly be otherwise as long as we have fractional reserve banking. The Fed could perhaps be required to back it's own issuance of currency, but it wouldn't be possible to back the banks' issuance against their Fed reserves and the inflationary machinations of effective reductions in reserve requirements would be just as possible with a gold standard as without.
JD wrote:
This in addition to National Banknotes, Silver Certificate Banknotes, Federal Reserve Banknotes, United States Treasury Banknotes, none of which allowed you to exchange them for gold coins...
By the way, Gold Certificates and Silver Certificates are crystal clear examples of the Federal government defaulting on its promises. Keep that in mind whenever you hear anything from a Washington D.C. or Federal Reserve spokeshole or staffhole. They are lying sacks of liquid crap.
AllenM -- sounds reasonable. I actually was on top of the market rebound in March as well, but I NEVER dreamed we could have a rally of this length & magnitude. In fact, based on the divergence of the market from my personal outlook/expectations, I'm convinced that something large is happening that is not yet public information. There is definitely a floor under the markets now, particularly for financials and REITs. This is either direct intervention by the Fed, or collusion by the banks/pensions/insurance cos. Events that should cause an immediate selloff are met by no selling. And then analysts upgrade shares after 200-300% gains.
The game now is either fraud or .... something larger. Is China gradually exiting it's treasury holdings and rolling them into equities? If so, I don't think they'd be purchasing financials/REITs. They'd want real companies that produce things of value. More likely this is the final desperate gamble of our government to prevent complete collapse. All of the companies know that unless a miracle happens RIGHT NOW, the game is up. They're thus using TARP funds to gamble with insane leverage, and they're backing their bets with our very currency.
It will eventually blow up spectacularly. But it seems obvious that they've gone too far to turn back -- when the scam begins to unravel the destruction will be breathtaking.
@Yalt- I dunno... back in the Depression era, part of the problem was the massive imbalance in gold reserves. The US was gaining a lot due to exports and Europe was on the other side. Today, with no gold standard the next closest thing is the reserve currency... and who has the most of that these days?
The American working male in our country has been completely gelded, that's why he gets to enjoy all the hamster wheel jobs with low pay, Good.
Thanks, Michael, for posting that video. I really love this guy.
I've got all these old TVs and video monitors sitting down in the basement. Until I saw this video, I had no idea what to do with them. Who woulda thought you could hang them by the cord and beat the sh*t out of them with a baseball bat for ten minutes before they fall apart!
Creative recycling!
"You broke my sledge hammer, you mther fcker!"
I mean, for a total wacko maniac, he really can remember a lot of economic facts.
RockyR (profile) wrote on Fri, 6/5/2009 - 10:55 am
reply ignore user
"Well, the USA can just bring our forces home from Europe"
See. THAT'S the kind of change we need. We need leaders with the stones to bring it home and work on US again.
Kewl. National Guardsmen having been previously forcibly deployed now coming home to jobs that are gone. There's a formula for social peace. Not.
When a police chief in a California town makes more in a year than average prime minister abroad it only means one thing: Somebody has been expanding monetary base way beyond any reasonable limit when compared to productive capacity of that particular economy. The appetite abroad for those extra dollars has prevented the inflation...until now.
It's a union thing, of course. And while I'm pro union in general, I think that California public safety unions need to be taken down a notch or three.
This is the problem hear we have a bubble not quite as large in Japan in the 90'spercentage declines but greater in magnitude with a UK currency crisis.
(1930's Britain) + (1990's Japan) - (Hope + Change) = Record gun sales and gold hoarding.
Does anyone else here have the impression that some of us are nostalgic old Trots, romantics of the left, or who knows what? The problem with such dreams is that in reality, when you wake up, the result is a vast inefficiency and a desperate paranoia.
I believe most agree that Mr. Greenspan, et al probably left interest rates too low for too long. Currently we have heard from Atlanta, Kansas City and New York indicating a concern for inflationary pressure.
Mr. Bernanke has greatly disappointed me as I feel he is too invested in his research into the Depression where he concluded that government intervention was too little, too late. I think many will agree that the tactics used during the Great Depression of the 1930's may not have been as effective as some have indicated and may have contributed to its length.
Janet Yellen showed how messages sent by the Fed can be as effective as actually doing something. I believe the message that needs to be sent is the bleeding is under control and we need to set a real interest rate, however, low.
With all the free money in the system there is no basis for 5.5% mortgage rates. That rate is based on the factor of risk (property values and unemployment) and the factor of banks trying to get money into their systems once again.
I fail to see how setting the Fed Funds rate at .5 to .75 will have any effect on long-term interest rates.
Will the other Fed Directors have the nerve to raise prices in a recession only time will tell.
Inverted Hammer of Thor (profile) wrote on Fri, 6/5/2009 - 12:43 pm
Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership. RESISTANCE IS FUTILE . "
Can't believe I missed this... but note this bitter irony as well, Illuminatus Roddenberry on the true nature of the Service economy?
"We are the Borg. Resistance is futile. Your life, as it has been, is over. From this time forward, you will service us."
I really do think the guy in the video Michael posted is making great video art, consciously or not.
He is speaking the rage and values of a lot of middle-age white American guys, and he's showing how they are changing. He does it with enough comic edge to make you laugh, and he is no dummy in analyzing economic data and trends. Reminds me of some people here.
You have to watch all the way to the end (after he's destroyed the monitor) for the best part. He holds up a Discover card and says he maxed it out, $3,300, to buy food and gold, and they can "kiss my ass" to get paid back.
So, like we thought awhile ago, debt destruction is going mainstream as economic/political protest.
If Rich hadn't endorsed it, I would have skipped the video Michael posted. i like this guy, I like him a lot. His sledgehammer must have been chinese-made...it busted after one good hit.
He's decided to go "Wells Fargo" on Discover..."I ain't paying shit".
i am sending this video to friends...I hope it goes viral.
Rob D, the funny thing is I tried to warn him numerous times, and all I got was scorn.
Jas is simply a lucky individual whose luck has most run out.
mortgage pig went from stickshift to automatic. I love it
Er, mostly.
But, I think Lacker is making the 1931 mistake.
We can't push up interest rates, or the banks will once again croak as defaults soar.
Oil is going to fall, as demand is still cratering.
So, the next question is how long until the fed does raise rates to keep the bond vigilantes and gold and oil vigilantes at bay.
Ugh. This is going to be off in volcker land before we know it.
Stagflation.
High unemployment and inflation.
As I predicted three years ago- the 70s show.
Someday this war's gonna end...
"Without this incredible 227K the number from surveyed companies would have been 345 +227 = 572K of jobs lost in May 2009. So the surveyed companies have LOST 572K jobs and somehow the NET of new companies and bankrupt companies, have CREATED 227K of new jobs!!"
Don't worry, it is all ok. Move on, nothing to see. Unless your boss at the bank office is playing Van Halen's "Panama" at Led Zeppelin volume, packing things up, burning papers and giggling hysterically. Because Panama is exactly where he is going to fly away just before the collapse
Gotta wonder how much $$$ the Fed will make on their collosal 4.25% GSE loan portfolio.
The Federal Deposit Insurance Corp. has shut down Silverton Bank, the failed Atlanta "bank of banks," instead of selling it to private-equity investors, according to a person familiar with the situation.
Producers 1968: Sell 25,000% of a play, hope it's a flop
Producers 2009: Sell 25,000% of a play, know it's a flop
Fed policies work until they don't. There is no plan b.
CR,
Put pressure on the Fed, but to do what?
If they buy more bonds, won't that increase fears of inflation and force yields higher?
Citizen AllenM (profile) wrote on Fri, 6/5/2009 - 12:20 pm
But, I think Lacker is making the 1931 mistake.
We can't push up interest rates, or the banks will once again croak as defaults soar.
Oil is going to fall, as demand is still cratering.
So, the next question is how long until the fed does raise rates to keep the bond vigilantes and gold and oil vigilantes at bay.
Oh they're never going to raise rates. Not in a meaningful way. They're too negative stimulus averse. If it wasn't true, they'd never have cut to 0 and caused the Flight To Yield bubble in the first place.
Ken (kcoop),
Thanks for the auto-refresh. It is the best thing ever when browsing via the iPhone (don't have to scroll up and down every time to refresh and see new comments). I did notice something though. I have a few people on ignore and see that the auto-refresh shows their new comments. Is it possible to stop this? I have found that the comments go away when you manually refresh.
Thanks so much,
kahne
Jun 4th 2009 | WASHINGTON, DC
From The Economist print edition
"The Federal Reserve weighs plans to unwind its unconventional stimulus"
Premium content | Economist.com
Bob_in_MA, Well, they won't raise rates (although the Fed Funds futures jumped). So what can they do? Buying more MBS and/or more long term treasuries seem to be likely candidates ...
Although some Fed members are worried about inflation, I don't think Bernanke is too concerned at the moment. There will be differing views (so the minutes might be interesting for this meeting).
If you remember, I suggested that Bernanke's conundrum would be the opposite of Greenspan's. Greenspan's conundrum was that he raised the Fed Funds rate and the long rates wouldn't budge. Bernanke has rates at zero and long rates are rising ...
best wishes
The American working male in our country has been completely gelded, that's why he gets to enjoy all the hamster wheel jobs with low pay, Good.
YouTube - I'M BACK
Fed policies work until they don't. There is no plan b.
There is no plan other than save the banking system and hope wall street saves main street. As if that was ever going to happen.
Finance capitalism is an abject failure for the majority. It's been a painful and expensive experiment for most.
THANK YOU for the autoload feature.
kahne, that's a bug. Thanks for letting me know.
CR,
It's Friday:
No Private-Equity Deal for Failed Silverton Bank - WSJ.com
FDIC Shuts Down Silverton Bank
The Federal Deposit Insurance Corp. has shut down Silverton Bank, the failed Atlanta "bank of banks," instead of selling it to private-equity investors, according to a person familiar with the situation.
Bob,
Raise the target rate. I think they will have to raise .25%.
But it is a big game of chicken right now. Inflationary concerns are probably overstated.
The slow down in unemployment is likely just a pause. Come summer the number starts to tick up: no jobs for college grads, public school teachers getting cut, hell....a lot of government jobs at the municipal and state level getting cut.
That will happen in two waves: July 1 and Jan 1. Unless of course there is some kind of miraculous change in the downward trajectory of revenue streams (rising unemployment / falling property values).
I think we see a shallow pop up in the economy followed by a notch down and flatline for 7 years. Makes going to Japan cheaper if we become Japan.
But hey, carbon tax / sequestration / mitigation is likely to be our next bubble market. So who knows.
do realize that there are two levels at play here. The instinctive, animal level, where we want to punish those who have done us wrong, while those who have done us wrong have done it following their animal desires. There is also the rational level, of which to I am referring to above. Realistically, I know the beast in us will take over and this will end like it did in France in the 1790's. I will, however, not be the one holding the sword.
good reading... finance & economics articles
om your lips to Congress' ear! A comprehensive plan for a sustainable America. I would add two more items to the agenda: eliminate paid lobbyists in Washington and level-fund all campaigns for election to public office. In the age of the internet, there
"The slow down in unemployment is likely just a pause. Come summer the number starts to tick up: no jobs for college grads, public school teachers getting cut, hell....a lot of government jobs at the municipal and state level getting cut."
Down at the trench level, I'm seeing it happening and about to happen. Layoffs announced back in April are now finally going into effect; local school districts are beginning to finalize position cuts for the new school year.
From Across the Curve
:
Someone just related to me that the futures contract in Fed Funds implies a 16 percent probability that the Fed will tighten in August, a 33 percent chance in September and a 50 percent chance in November.
They must be doing some ganja.
Bob_in_MA, Well, they won't raise rates (although the Fed Funds futures jumped). So what can they do? Buying more MBS and/or more long term treasuries seem to be likely candidates ...
I would add to the list the following: stating an explicit target for the 10-yr bond. That might temporarily drive down rates without the FED having to buy anymore bonds. But their bluff will eventually be called again, just as we went a few months before threats of buying Treasurys turned to action.
The Fed can raise the discount rate, increasing the spread between that rate and the Fed Funds rate. Pre-crisis the spread was 100 basis points. The spread was reduced to encourage banks to use the discount window if they need it. It would be an positive sign if the Fed stopped encouraging banks to take emergency loans.
Ken should sell this comment system and make a million bucks. Way better than halo. I won't even compare it to js kit which was as dumb as a wall street banker.
FED lowering rates to near zero = pissing in your pants to keep yourself warm
Quantitative easing with dollar printing = crapping in your pants
"Unconventional measures" = setting your pants on fire.
"Extraordinary measures" = Sticking a hand grenade into pants (hey, blood is WARM!)
Something else to watch over the next week - whether Gordon Brown survives as PM. There are very BIG things happening over here in UK government - Labour ministers dropping like flies and Labour being pummeled in the local authority elections. Election results for European representation will be announced Sunday and next week could be very eventful. Stay tuned...
black dog (profile) wrote on Fri, 6/5/2009 - 9:19 am
"I wonder if killing the stock market would drive rates down?"
otis, I've been thinking of this as well and think it could happen. It would accomplish several missions for the feds. Flight to safety would mean bonds up (yields down) but also stronger $US which would drive down oil. And to put the cherry on top with everyone being broke (due to falling equities) easier to ram through universal health. """"
.
.
Clearly, between bonds, dollars and stocks, equity markets are the lesser sacrificial lamb.
A positive correlation between dollars and equities has been witnessed twice in the last two weeks. If this played out while stocks declined it could get ugly for the dollar. Normally (Before Bizarro) falling U.S. rates would lower Dollars. Now, who knows? Probably the whole deleveraging = dollar bets settled = dollar up theme is played out.
The PTB have signaled they desire a lower dollar in all their actions (and none of their speech). I think they need lower rates and a lower dollar. These goals are, of course, contradictory but our ostrich leaders have already tilted at every paradox.
One thing is certain. Killing the market is something they can do with no effort.
In Fed speak, it is one of "all available tools" at their disposure.
The hoi polloi were limited to knives, pitchforks, pikes and scythes in terms of their armaments in the 1790's, and managed to kill (and occasionally eat) the rich in substantial numbers...
Hymns for the Lord, yes, Silverton was seized a month ago, and the FDIC moved it to a bridge bank. I guess they couldn't find a buyer ... this is a different kind of bank (it is a bank for banks), and the business can be taken over by some competitors.
best wishes
While taking a hefty toke of the green shoots... It's obvious that as the recession is over it only makes sense to raise interest rates across the spectrum to control inflation.
Additionally raising rates will clearly signal the recession is over.
A little jawboning about tightening monetary policy to appease our Chinese overlords.
"The slow down in unemployment is likely just a pause. Come summer the number starts to tick up: no jobs for college grads, public school teachers getting cut, hell....a lot of government jobs at the municipal and state level getting cut."
Pitchforks are almost besides the point. The most potent weapon of the masses is a cessation of belief in the social order, and a refusal to cooperate with it. Chaos ensues, or begins to; this is when regimes that are still functional step back from the brink and maker serious concessions. Or when regimes that are too far gone fail and are replaced by something else ... not necessarily something better.
CR,
I see the logic in buying more bonds, but would buying $500B vs $200B in the $7(?)trillion treasury market make much difference if it also increases people's fears of inflation?
One mistake I think Krugman makes is not distinguishing between short-term inflation prospects and medium to long term expectations. Sure, inflation won't be a threat over the next couple of years. But then what? Won't the 10-year bond move with people's longer term expectations?
Interesting chart plotting European equities against US yield curve over the last ten years.
FT Alphaville » Blog Archive » The (QE)uropean equities rally and yields
Dum Luk
Thanks for that article,,, very nice
The hoi polloi were limited to knives, pitchforks, pikes and scythes in terms of their armaments in the 1790's, and managed to kill (and occasionally eat) the rich in substantial numbers...
Today peasants are of course equipped with semi automatic weapons ....
This will not end well
"Citizen AllenM (profile) wrote on Fri, 6/5/2009 - 9:20 am
Er, mostly.
But, I think Lacker is making the 1931 mistake"
+2
Agree with Bob_in_MA,
It's the big picture that some of us care about. Not 2 years down the road, but the generation after it, which at this points looks like a 1950s-1980s inflation generational event.
--bh
Negative interest rates have been tried with remarkable results.
.
.
google:
Wörgl, Austria great depression
.
.
What's to stop the fed from CHARGING interest on reserves held at the fed? This would force banks to lend.
What happens after ZIRP? the number line does not stop at zero.
Negative REAL interest rates exist. Negative nominal interest rates are not impossible, government and the central bank only have to so ordain.
Negative interest rates, widely implemented, would force savings into useful endeavors and explode the velocity of money. Passive wealth creation would change to active wealth creation.
The problem is that ending passive wealth creation would end what we call modern finance.
Not to mention the polar shift in mindset required.
Also, the environment get majorly raped since any marginally profitable endeavor would have more value than cash with a shelf life.
What would combining an asset backed currency (stocks, mortgages) with negative interest rates do? Would it provide an outside limit to economic expansion?
Will limiting future economic expansion be necessary to steward (ration) natural resources? the economy exists within the natural environment and can not grow at a compound rate indefinitely.
The growth of any system is limited to the size of the larger system of which it is a subset.
Negative interest rates cause defined time decay in money. This would be entropic money. Perhaps entropic money would be better matched to the natural environment.
otishertz | 11.26.08 - 8:13 pm | #
If commodity speculation starts to get out of hand, the fed will start paying banks interest on reserves. The same reserves the fed handed them in exchange for crap assets.
What a system.
methinks some drone at BLS mis-keyed the decimal point in the birth/death adjustment
should have been 22k not 220k...
Using the natural advantage that 85% of our hoi ploy do not possess passports (implying they've never been out of the country) makes it very easy to bugger the buck, and keep stock prices and home prices aloft, as that's all that matters, really.
As future imported item costs go through the roof, blame foreigners for "gouging" us on prices...
If we raise rates, even modestly, does that help protect the dollar and play hell with the yen, pound, and Euro? Of course the Brits and the Europeans could raise rates, but this seems unlikely. There economies are in far worse shape and likely to become stalled sooner than ours.
So how about this: raise the rate .25%, defend the dollar, the Brits and European currencies drop and their bonds become less desirable due debt to GDP, etc and our treasuries become more desirable, despite 3.25 Trillion in issues and the rate spread on mortgages, etc to treasuries drop?
Re: B/D model
The thing I find interesting is not that 220k jobs were "created", but YoY they've added 50k jobs to the model in a contracting environment.
In comparison, the BED survey for Q308 says we lost 1mm jobs while the corresponding establishment surveys from that period said(even after completely discounting the B/D model) that only 376k jobs were lost.
And the BLS wonders why people think the data is queered.
Dawg, nice song at end of previous post.
blackhat (profile) wrote on Fri, 6/5/2009 - 11:43 am
Agree with Bob_in_MA,
It's the big picture that some of us care about. Not 2 years down the road, but the generation after it, which at this points looks like a 1950s-1980s inflation generational event.
We are in the midst of an event of generational significance. History of course will again be written by the victors/conquerors, but history is being written even if some of the tune seems oddly familiar.
The fed would be dumb not to raise rates a little bit- back to 0.75%. It will have ZERO economic impact - its hard to believe that 1.1% libor creates all that much difference when compared with a 0.6% Libor. However, I think it could very well result in quite a bond market rally as it would reaffirm the Fed's bona fides as an inflation fighter. It wold help the dollar and probably reduce the price of oil- all of which would be very helpful in terms of economic growth.
Black Dog from the previous thread:
Bernanke this week finally getting around to talking about fiscal responsibility gets me thinking that the bailouts going forward won't be quite as generous. My guess is BB QE's just enough to put the breaks on deflation.
One thing that will make this interesting is whether the coming CRE induced bank failures forces BB to be more generous than planned (if there is a plan).
Isn't this talk about raising rate just to provide an impetus to borrow and spend NOW! They've lowered rates to zero but velocity's still low, so they need some reason to get people to spend now to make any stimulus effective. The tools for fighting inflation are well understood (as has been mentioned by folks smarter than me), but avoiding a deflationary spiral is proving much more difficult. Besides, inflation will be a problem for the next guy. 'nuf said.....
The reaction of once again easy credit to the masses did not have the desired effect. Ask Walstreetpro2.
BTW Switzerland in 1979(?) had negative nominal interest rates. If you left Swiss francs in an account the bank charged you interest on it. I know because I had to withdraw cash from my clients accounts and place them in a safety deposit box.
"Gotta wonder how much $$$ the Fed will make on their collosal 4.25% GSE loan portfolio. "
For just about two months they were paying par for the 4s. Now the 4s are pricing at 95.
Assume a similar loss for the 4.5s, which is the other coupon they were cornering.
So, about $500B of MBS, loss of 5%, $25B so far.
I fail to see how that money can be withdrawn from the system. If someone has a better understanding of Fed operations, I welcome comments, but it seems to me that money was created and will never be withdrawn.
If China let their currency float and oil prices stayed elevated, IMO a lot of products mfg by China would not be cost competitive vs mfg in the US any more. The end price of Chinese goods to US buyers would skyrocket. That would drive shift of mfg back to the US. This is one reason why China keeps the currency peg even though it results in them accumulating dollars.
Curious: I would add to the list the following: stating an explicit target for the 10-yr bond. That might temporarily drive down rates without the FED having to buy anymore bonds. But their bluff will eventually be called again, just as we went a few months before threats of buying Treasuries turned to action.
That's what they did during WWII and into the early 1950s. But at the time, we had an absurdly high national savings rate. In 1944, the personal savings rate was 37%!
http://mises.org/journals/rae/pdf/rae2_1_14.pdf
Would that have worked if we had needed foreign interests to buy and hold Treasury debt?
otishertz (profile) wrote on Fri, 6/5/2009 - 11:43 am
Negative interest rates cause defined time decay in money. This would be entropic money. Perhaps entropic money would be better matched to the natural environment.
otishertz | 11.26.08 - 8:13 pm | #
I tried this in the game Alpha Centauri several weeks ago. I made a faction that generates negative interest on its reserves but has a spiked economic growth rate. Interesting to say the least. The computer AI absolutely doesn't know what to do with it. Make it fast (income) but spend it or you lose it. Keynes taken to an extreme. It's quite a mind game. I figure we might as well start preparing for possible futures.
Bob Dobbs (homepage, profile) wrote on Fri, 6/5/2009 - 12:40 pm
The most potent weapon of the masses is a cessation of belief in the social order, and a refusal to cooperate with it. Chaos ensues, or begins to; this is when regimes that are still functional step back from the brink and maker serious concessions. Or when regimes that are too far gone fail and are replaced by something else ... not necessarily something better.
Winner winner chicken dinner.
Interesting / useful observation:
Small states and states that are pure despotism have the best chance on the consent cusp. Less to turn around, less ownership of the mechanism by vested interests and procedures. Assuming the king has his wits and isn't purely ego driven, he can make any concession he wants and take it back the instant he has the advantage again. It's not the same in a large state, which is why I find the Chinese dynastic experience so instructive.
State operations are part of what decay during the transition to a strained / failing state, so large states / technoctatic states have little ability to perceive their plight, and even less ability to change direction. i think the us will catapult headlong into the abyss of state failure because you won't even be able to generate consent on what is a meaningful substantial reform.
Was the runup in oil due to Obama going to middle east this week..His speech is history, he's in Europe which can't afford high oil either..will it start backing off now with GS targeting 85 to get all the retail in then slam it back to 40?
"There economies are in far worse shape and likely to become stalled sooner than ours. "
Except for the Brits, even Italy is in far more better shape than USofA. Europeans still have manufacturing base left, no overburdening military costs, social safety nets in decent shape etc etc.
I fail to see how that money can be withdrawn from the system.
I think the assumption is that they'll get a little help from their friends at Treasury.
What is this job number discussion - link to 227k article?
"Without this incredible 227K the number from surveyed companies would have been 345 +227 = 572K of jobs lost in May 2009. So the surveyed companies have LOST 572K jobs and somehow the NET of new companies and bankrupt companies, have CREATED 227K of new jobs!!"
Sorry, I mixed things up, the personal savings rate in 1944 was 25%. That bought a lot of war bonds.
Byz,
California is a failed state. Any opinion as to whether we break apart into manageable units or Obama goes Lincoln on us and consolidates us under a Federal umbrella?
I'm not convinced that oil will drop from here. On the fundamentals, current supply and demand, yes it should drop. But its priced in dollars, and there's a massive supply of dollars being created.
"Buying more MBS and/or more long term treasuries seem to be likely candidates ... "
I agree. They probably have enough MBS left over (only spent 500B of the $1.25T so far), but I expect an increase in the number of treasuries, to at least $1T. If you read BB's works, it is pretty obvious he will go down this path.
What I am not sure about are the dynamics on the FRB - can the other guys override him? I think some are starting to realize the guy is a bit nutso.
hiker90 (profile) wrote on Fri, 6/5/2009 - 9:47 am
One thing that will make this interesting is whether the coming CRE induced bank failures forces BB to be more generous than planned (if there is a plan).
CRE will kill the smaller banks, but it may wind up shoring up the 2nd tier "big" banks by passing on deposits while the FDIC gets stuck with the trash.
Please note last sentence below:
" June 5, 2009
Russian President Dmitri Medvedev on June 5 said strategic weapons would be a key topic for discussion with U.S. President Barack Obama, KUNA reported. Medvedev said eliminating strategic weapons would be positive for both the United States and Russia, and that both nations would work on improving cooperation with the Non-Proliferation Treaty. He said he was concerned about the U.S. economy’s effect on the global economy, and that Russia is working on making the ruble into a hard currency that would attract investors."
"California is a failed state. Any opinion as to whether we break apart into manageable units or Obama goes Lincoln on us and consolidates us under a Federal umbrella?"
The only thing failed about California is the consensus on who pays for what, and how much? Simply breaking it into two or three pieces wouldn't solve much unless the basic political logjam is solved.
Oh, you might decide to create a "good state" and a "bad state" aka GM, and leave most of the liabilities (aka large concentrations of poor people) to one of them. But then you just get migrations. Rather analogous to US/Mexico population flows.
iceman (profile) wrote on Fri, 6/5/2009 - 9:53 am
I'm not convinced that oil will drop from here. On the fundamentals, current supply and demand, yes it should drop. But its priced in dollars, and there's a massive supply of dollars being created.
But those dollars are not in the hands of the people who consume oil. $80 in Jun '09 is every bit as insane as $147 in Aug '08. IMO this is a bigger head fake than last summer.
"I'm not convinced that oil will drop from here. "
I agree, for the reasons we are discussing here. BB is debasing the currency at an alarming rate, and it isn't just "M2 is growing, etc". So much of inflation is expectations based, and even J6P is watching the nightly news, seeing AIG get bailed out, the banks get bailed out, GM, Chrysler, Universal Health Care, continued expenditures on the wars, and meanwhile BB print money to fund the deficit and the failed Fannie/Freddie.
Sooner or later even J6P gets nervous about the value of something (the USD) that is so easily created out of thin air.
Thus the move to gold, oil, commodities, etc.
"The Next Fed Meeting Will be Interesting" - yes. But the outcome is known now: BB will win, they will keep rates the same and buy more MBS. Maybe the will get creative with some new program: I am sure they have computer programs that keep suggesting names and alphabet soup until they get it right....
Ken should sell this comment system and make a million bucks. Way better than halo. I won't even compare it to js kit which was as dumb as a wall street banker.
hoocoodanode is awesome cuz kcooper is actually a part of the CR culture and realized the strengths and weakness of the various competing platforms. Sometimes I wonder about the indirect role that Lou Gerstner played in our current economic malaise.
Yup, that is a very deliberate part of Chinese economic strategy. They can't afford to let their currency float.
Accumulate an increasingly worthless $ debt or face the risk of your massive manufacturing employment base heading out of the country with the associated social tumult ?? Hmmm.... They're choosing to take the $ and leave the problems to the next generation of communist leaders.
"He said he was concerned about the U.S. economy’s effect on the global economy, and that Russia is working on making the ruble into a hard currency that would attract investors"
Convertible into Russian oil, perhaps? That would be a smart play, IMHO. X rubles/barrel.
Byz writs:
"i think the us will catapult headlong into the abyss of state failure "
Better not happen. Consequences unpredictable, incalculable.
When it costs one thin dime to produce a $100.00 Banknote, and fractions of a cent to create and send Billions via mouse click, your currency might just be overvalued...
Oh, you might decide to create a "good state" and a "bad state" aka GM, and leave most of the liabilities (aka large concentrations of poor people) to one of them.
What's good for GM is good for the country!
Bob Dobbs write
"California is a failed state."
Only the government of CA is a failure of third world caliber. Thanks to skillful Gerrymandered districts.
Electoral reform needs to happen before the state can recover.
"Sooner or later even J6P gets nervous about the value of something (the USD) that is so easily created out of thin air.
Thus the move to gold, oil, commodities, etc. "
I am wholly unconvinced that J6P understands even the basic concepts of the fiat money system. I once dated a girl who was an Ivy League economics major who had only a passing familiarity with the reality of our currency regime. It was rather disturbing. Bonus - she's now in corporate law.
to prove that he have truly reached the gaga land some more information on the Birth Death model.
First, in May of 2008 B/D added 217,000 jobs, in May 2007 there were 203,000. In May of 2009 the BLS would have one believe that the there were more uncounted small business jobs than in 2008 or 2007 before the financial crisis started!!!
Second, the B/D factors are constant and not seasonally adjusted and the May adjustment is greatest of the year
Historical Net Birth/Death Adjustments
Rates would imply roughly a 10% hit to affordability with a 20% down payment. I met with someone from my states AG office yesterday and he indicated that some of the mortgage companies (Wells Fargo Mortgage) are back to their old tricks of trying to refinance someone who has a low rate 30 year fixed mortgage into some other crap product (all for the fees mind you).
I am wholly unconvinced that J6P understands even the basic concepts of the fiat money system.
Couldn't agree more... only ignorance has allowed the Creature from Jeckyll Island to perpetuate its fraud for nearly a century
Rob Dawg (homepage, profile) wrote on Fri, 6/5/2009 - 12:53 pm
Byz,
California is a failed state.
Nah. Failed state is more than shitty administration. Most nations throughout history were mostly manned by doddering old ladies with ledger books and shiftless cousins shuffled off onto the state because they were too drunk to hold real jobs. Muddling is fine. In fact, it's preferable to technocracy because it's more involving.
When the belief becomes widespread that the badge on the officer of the law means nothing more than a gang color, then you have a failed state.
We are close, but the state still provides bread and circuses. But, when they fail to provide essential services, they will find that the reservoirs of trust and belief that make people believe in the state even when it isn't there for them, are mostly vanished. There's a big cohort of geezers who still see the state as their bulwark against the libo-negro-lesbo-hippy-beaner menace. When they are dead in 5-10 years or haven't gotten their checks for a few months, then you will see the state really come apart.
"California is a failed state."
Only the government of CA is a failure of third world caliber. Thanks to skillful Gerrymandered districts.
Electoral reform needs to happen before the state can recover.
I agree. The "failed state" remark is a quote from Rob Dawg. The gerrymandered districts (except Congress) should start to go away in 2010 unless somebody messes with Prop 11; next, open primaries and maybe optional public financing (with a big star you can put next to your name saying you didn't take special interest $$$$."
Comrade Alexei Mikhailovich (profile) wrote (in reply to...) on Fri, 6/5/2009 - 11:56 am
CRE will kill the smaller banks, but it may wind up shoring up the 2nd tier "big" banks by passing on deposits while the FDIC gets stuck with the trash.
Agreed with the caveat that the Treasury is for all practical purposes backstopping the FDIC.
what good is a manufacturing base if you have no economy to sell the goods at a decent rate of return on investment...seriously manufacturing in Europe is a costly affair. and with a very strong Euro, exporting these good abroad is even more of a challenge.
social safety nets are a huge drag and you have an aging population and not enough younger workers to support them (= higher taxes) and not enough jobs even for those workers.
really Italy is better?
Italy (10/09)
Italy's economic growth averaged only 0.8% in the period 2001-2008; 2008 GDP decreased 1.0%, largely due to the global economic crisis and its impact on exports and domestic demand. GDP is expected to contract further, with a huge decrease in 2009 (ranging from 2% to 3%) as the Euro zone and world economies slow.
Jobless Rate In Europe Rises Further - NY Times
The unemployment rate in the European Union pushed higher in April, indicating that nascent signs of economic recovery had yet to be felt in the labor market.
The seasonally adjusted unemployment rate for the 16 countries that use the euro currency rose to 9.2 percent in April, the highest rate since September 1999, from 8.9 percent in March, the Eurostat agency, the bloc’s statistics office, said Tuesday. In April 2008, the unemployment rate was 7.3 percent.
For all 27 members of the European Union, the unemployment rate was 8.6 percent in April, up from 8.4 percent in March and 6.8 percent in April 2008.
Although there has been some evidence in recent weeks that the economic decline that intensified in Europe in the second half of last year is beginning to ease, economists say that the labor market lags behind many economic indicators and that unemployment commonly rises after a downturn.
Among European Union members, the highest unemployment rates were seen in Spain, at 18.1 percent, and Latvia, with 17.4 percent. The lowest unemployment rate was 3 percent recorded in the Netherlands, followed by 4.2 percent in Austria.
The unemployment level in France was 8.9 percent; in Germany it was 7.7 percent. Figures for Britain and Italy were not available. Unemployment stood at 8.9 percent in the United States in April.
The jobless rate has been creeping up despite the efforts of many countries to use public funds to dissuade companies from permanently laying off workers.
France, for example, has a program that allows troubled companies to draw on state money to pay their workers 60 percent of minimum hourly wages when they are temporarily laid off.
I anxiously await the results of today's BFF "Bair Which Project?"
An Ancient City, Ruined:
pavel.libsyn.com
BB =
Before Bernanke
Before Bizarro
Ben Bernanke
pavel.chichikov (homepage, profile) wrote on Fri, 6/5/2009 - 1:01 pm
Better not happen. Consequences unpredictable, incalculable.
Well then you should have been johnny on the spot about fixing things 30 years ago, honored grandfather.
History is not worried about how you will feed the cat, that is for you to worry about.
Andy Burt on Bloomberg give a B/D number for May 2008 of 176,000 being composed of NR 1, Construction 40, Manufacturing 4, Trade 24, Information 3, Financial 3, Prof.12, Education 7, Leisure 75, Other 7.
They must do revisions to these numbers. It looks like the original number may have been 217,000 and now it's 176,000???
The BLS page says it was last modified on Feb. 6, 2009/
οἱ πολλοί generally written "hoi polloi" = the herd
hoi ploy = the "scheme to outwit opponent" ?
sorry no idea why the delayed double post...
deleted
woooo now it took both away... freaky, must be the rain...
Our country hasn't rioted (I mean really getting it on) since the 70's, and we are more than a little rusty.
Say what you will about France, but they have an effective system of letting people blow off steam...
"Except for the Brits, even Italy is in far more better shape than USofA. Europeans still have manufacturing base left, no overburdening military costs, social safety nets in decent shape etc etc."
Well, the USA can just bring our forces home from Europe and we'll see how well the Eurozone can manage it's defense policy. Europe's mfg base is dependent on exports to the US and collapsing CEE economies; and rapidly aging populations mean the social safety nets have to be propped up by shrinking workforces. I'm not saying the US doesn't have serious problems...just that euro-triumphalism isn't appropriate.
What's that sound? The UK's government shattering...Brown going down? THREE more top Ministers resign from UK Cabinet...the pound to follow?
@Bob_in_MA
Would that have worked if we had needed foreign interests to buy and hold Treasury debt?
A few months ago, I was wondering how high Treasury rates would have to go before American families would consider buying them. At 6-7% on the 10-yr. I might be tempted. But it's hard to dismiss the threat of hyperinflation in the US.
Many of you babble on about the gold standard of yore, but do you understand that only a tiny percentage of dollars were actually backed by gold, and the only fiat mechanism that allowed one to exchange paper money for gold, was Gold Certificate Banknotes?
This in addition to National Banknotes, Silver Certificate Banknotes, Federal Reserve Banknotes, United States Treasury Banknotes, none of which allowed you to exchange them for gold coins...
Put all romantic notions about a gold backed dollar aside.
Never going to happen.
If you look, you can see they have created a de facto asset backed dollar.
404 - PAGE NOT FOUND
Holy smokes, what is Robert Reich smoking? After watching GS and Bernanke pump up the market for the last 6 months, today on his blog, he's getting euphoric and nostalgic while taking us back to the nineties. He's talking asset inflation, a knowledge based economy, and minimalizing manufacturing. I often wondered how he fit in with the Clinton cabinet when they passed NAFTA.
otis you caught the double bug too...
curious (profile) wrote on Fri, 6/5/2009 - 1:18 pm
A few months ago, I was wondering how high Treasury rates would have to go before American families would consider buying them. At 6-7% on the 10-yr. I might be tempted. But it's hard to dismiss the threat of hyperinflation in the US.
That's easy. It's junk debt. Just, does the coupon + discount get you your money back before they rip you off? I'm thinking I will get in at like, 14-19%. With tax advantage and some discount on the par, it should make a good buy in a few years.
Kung.Fu.Panda (homepage, profile) wrote on Fri, 6/5/2009 - 10:17 am
What's that sound? The UK's government shattering...Brown going down? THREE more top Ministers resign from UK Cabinet...the pound to follow?
They can pray it is just the pound. It will be a near miracle if the UK isn't big Iceland.
sounds like Reich is aiming for a Nobel prize
hahahah nice one broward
hahahah nice one broward
This month's market theme:
YouTube -
and the bottom dropped out!!!
I can hardly wait for the real dawn on the folks that we are just a bigger iceland.
Nothing like defaulting debt.
Oh well, work to do.
Enough wasting time here.
Someday this war's gonna end...
AllenM, I thought you were bullish? Have you seen something that changed your opinion now, or was your call before simply a short term rebound expectation?
Case for CA to be split:
Breakingviews | California breakup
Apparently, Sweden's government isn't owned by bankers.
"We want to be very clear so that people know what could happen," Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership."
I can't figure out this rally at all. So if everyone is staying out of stocks and bonds look to be retreating? What else is there if all you have is a Fidelity mutf and are starting out again? Does it make sense to open up an etrade account and see what little play money I have left can do?
thanks in advance
Would combining an asset backed dollar with negative nominal interest rates create a currency that limits economic growth like a gold backed currency would?
Gold is an asset. Gold backed currencies are asset backed currencies. They would behave similarly, except for one major difference:
Paper assets are easily created.
Backing a currency with paper assets would create an inflatable currency. Negative rates would make stocks more attractive than cash. Negative rates would increase total number of enterprises.
I'm wondering, would entropic money put a lid on economic growth after the initial explosion of dollar divestiture caused by the implementation of negative interest rate policy (NIRP)? Negative interest rates would make the dollar only useful as a medium of exchange and no longer as a store of value.
NIRP would cause assets to be used to increase assets, not dollars.
This is harder than growing wealth through finance tricks and requires real effort and thus would be e limiting factor.
Gav, I called that horrific bottom.
My point was not to be long term bullish on US stocks.
Today, I think we will see a drop back down to 7250 area by late summer as the lower profits and continued unemployment begin to take hold.
Further, oil will most likely fall back to $50 or so by then. This green shoots stuff is for the birds.
As I predicted, we find an island of stability, and everyone is ready to restart the bubble.
The stresses encountered in the UK will be here next.
As inflation expectations take root, what people need to remember is that it takes a long time for mainstreet to get the message and begin to buy inflation stuff in quantity.
My prediction of the 70s show continues to hold water.
What is really going to be fun to watch is the shrinkage in the FIRE economy.
Someday this war's gonna end...
Europe is starting to unglue
The lat on Thursday was close to the floor of its trading range against the euro and investors were betting on devaluation with interest rates on the currency of 70 per cent for three-month forward contracts, compared with 20 per cent last week.
The lat and Estonian kroon are under pressure to de-peg from the euro.
"Well, the USA can just bring our forces home from Europe and we'll see how well the Eurozone can manage it's defense policy. Europe's mfg base is dependent on exports to the US and collapsing CEE economies"
You have your facts straight from the 1950's. Europe has evolved a lot since then but it seems to Americans a tough thing to swallow. Germany alone spends the same as Russia to military, France 150 percent. Anyway, EU exports to US are big but only about five percent of total eurozone GDP. Germany's biggest trading partner is France and intra-eurozone trade is far more important than any exports to USofA.
Europeans also do not have the luxury of having the reserve currency of world. The reserve currency status of dollar has allowed things to go totally out of whack in the USA with 23000 golf courses and shopping malls everywhere. Now it is all breaking apart because the underlying economy was too much based on vendor financing from Asia and easy debt.
But those dollars are not in the hands of the people who consume oil. $80 in Jun '09 is every bit as insane as $147 in Aug '08. IMO this is a bigger head fake than last summer.
Rob Dawg,
That's how I see it. Another thing to consider is that commodity contracts are highly leveraged. Big swings are nothing new. The more important data are the intermediate and finished product prices which indicate actual demand more than speculation.
End demand is in serious trouble imo. People are tapped out and their access to credit has been severely curtailed.
WestSac_grrl, just took a call from Dr Ponzi. He said not to worry about the money and assured me everything is just fine.
Speed (profile) wrote on Fri, 6/5/2009 - 12:28 pm reply Ignore user
Apparently, Sweden's government isn't owned by bankers.
"We want to be very clear so that people know what could happen," Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership."
Link please. Sounds like an excellent article.
Thanks
Article link from our friend Ambrose
Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership. RESISTANCE IS FUTILE . "
Hey my comments don't do that reload thingy everyone keeps talking about...
"California is a failed state"
Correction "failing" we have not stopped getting worse. Cutting free Medical care will deal a serious blow to the poor and working poor and puts Muni's on the hook for the cost.
States cannot declare BK but cities sure can. Say it with me! Yes, we Can!
"Well then you should have been johnny on the spot about fixing things 30 years ago, honored grandfather.
History is not worried about how you will feed the cat, that is for you to worry about. "
Thank you for the honorific, Byz.
I tried in my very humble, invisible way to help keep us from frying one another, along with many people much more important than me. People on both sides knew that it must not happen. I've seen it written lately that it was unlikely to happen, since rational minds would not have permitted it. Reason should have prevented much that has happened.
But if a state is to fail, who can stop it in the long run? I only know that never has so much power in its various forms been concentrated in one nation. If it were to fail, the planet would shake. But I don't, can't believe that it will happen.
"Anders Borg"
I am the Borg. Insolvent banks prepare to be assimilated. Your assets and minus your liabilities will become my own.
Where've you been, AS?
Release Date: October 6, 2008
For release at 8:15 a.m. EDT
The Federal Reserve Board on Monday announced that it will begin to pay interest on depository institutions' required and excess reserve balances....
FRB: Press Release--Board announces that it will begin to pay interest on depository institutions required and excess reserve balances--October 6, 2008
If you were an economist circa 1929-33 the thing you would have wanted to avoid the most, especially with the memories being so fresh in their minds, would have been a repeat of any of the hyperinflations (Austria, Hungary, Germany) of the 1920's, especially the Weimar example.
The reason was simple.
We were the largest creditor nation in the world...
The situation is reversed today, as we are the largest debtor nation now.
Open bond-bay doors, prepare to drop debt bombs
Rising interest rates when when financial engineering and consumer spending ( 70% of GDP but the Banks want more ) are the 2 key drivers of the debt laden ‘bubble’ US economy and U6 is now about 17%
This could get very interesting....
"I am the Borg. Insolvent banks you will be assimilated. Your assets and minus your liabilities will become my own."
Your guts will burst.
Hey Ken, if you ever have an IPO for this thing would you let those who contributed in on it?
thanks Rat. please reassure Dr. Ponzi the check is in the mail
At work, ppl are about to break out the torches and pitchforks. There is talk of furloughs for the worker bees who would be the only employees to face reductions. Folks making over 70k a year get to keep their full salaries while playing solitaire half the day. Something is out of whack here. CR and Mish seem to be the only place people are talking about real affects and not just platitudes.
"The situation is reversed today, as we are the largest debtor nation now.
Open bond-bay doors, prepare to drop debt bombs "
Let's hope not. More incalculable consequences.
It could hardly be otherwise as long as we have fractional reserve banking. The Fed could perhaps be required to back it's own issuance of currency, but it wouldn't be possible to back the banks' issuance against their Fed reserves and the inflationary machinations of effective reductions in reserve requirements would be just as possible with a gold standard as without.
"The situation is reversed today, as we are the largest debtor nation now.
Open bond-bay doors, prepare to drop debt bombs "
Let's hope not. More incalculable consequences.
Can't make it back to base with all these unexploded bonds, cap'n, should we drop em' in the ocean?
It seems to me Britain was the 1929 equivalent to today's US. They devalued but did not hyperinflate.
JD wrote:
This in addition to National Banknotes, Silver Certificate Banknotes, Federal Reserve Banknotes, United States Treasury Banknotes, none of which allowed you to exchange them for gold coins...
By the way, Gold Certificates and Silver Certificates are crystal clear examples of the Federal government defaulting on its promises. Keep that in mind whenever you hear anything from a Washington D.C. or Federal Reserve spokeshole or staffhole. They are lying sacks of liquid crap.
"Well, the USA can just bring our forces home from Europe"
See. THAT'S the kind of change we need. We need leaders with the stones to bring it home and work on US again.
Fed & Treasury are now massive hedge funds without the 2&20 and also without any incentive to make money.
AllenM -- sounds reasonable. I actually was on top of the market rebound in March as well, but I NEVER dreamed we could have a rally of this length & magnitude. In fact, based on the divergence of the market from my personal outlook/expectations, I'm convinced that something large is happening that is not yet public information. There is definitely a floor under the markets now, particularly for financials and REITs. This is either direct intervention by the Fed, or collusion by the banks/pensions/insurance cos. Events that should cause an immediate selloff are met by no selling. And then analysts upgrade shares after 200-300% gains.
The game now is either fraud or .... something larger. Is China gradually exiting it's treasury holdings and rolling them into equities? If so, I don't think they'd be purchasing financials/REITs. They'd want real companies that produce things of value. More likely this is the final desperate gamble of our government to prevent complete collapse. All of the companies know that unless a miracle happens RIGHT NOW, the game is up. They're thus using TARP funds to gamble with insane leverage, and they're backing their bets with our very currency.
It will eventually blow up spectacularly. But it seems obvious that they've gone too far to turn back -- when the scam begins to unravel the destruction will be breathtaking.
@Yalt- I dunno... back in the Depression era, part of the problem was the massive imbalance in gold reserves. The US was gaining a lot due to exports and Europe was on the other side. Today, with no gold standard the next closest thing is the reserve currency... and who has the most of that these days?
Thanks, Michael, for posting that video. I really love this guy.
I've got all these old TVs and video monitors sitting down in the basement. Until I saw this video, I had no idea what to do with them. Who woulda thought you could hang them by the cord and beat the sh*t out of them with a baseball bat for ten minutes before they fall apart!
Creative recycling!
"You broke my sledge hammer, you mther fcker!"
I mean, for a total wacko maniac, he really can remember a lot of economic facts.
"Can't make it back to base with all these unexploded bonds, cap'n, should we drop em' in the ocean?"
One can only assume that the people at the controls understand how sensitive the craft is, and how important it is to maintain trim.
RockyR (profile) wrote on Fri, 6/5/2009 - 10:55 am
reply ignore user
"Well, the USA can just bring our forces home from Europe"
See. THAT'S the kind of change we need. We need leaders with the stones to bring it home and work on US again.
Kewl. National Guardsmen having been previously forcibly deployed now coming home to jobs that are gone. There's a formula for social peace. Not.
Yeah, let's bring them home from Europe and put them on the unemployment roles!
When a police chief in a California town makes more in a year than average prime minister abroad it only means one thing: Somebody has been expanding monetary base way beyond any reasonable limit when compared to productive capacity of that particular economy. The appetite abroad for those extra dollars has prevented the inflation...until now.
"States cannot declare BK but cities sure can. Say it with me! Yes, we Can! "
Uh, "Maybe you won't be able to!" Not in California.
California Assembly passes curb on local government bankruptcy - Sacramento Politics - California Politics | Sacramento Bee
It's a union thing, of course. And while I'm pro union in general, I think that California public safety unions need to be taken down a notch or three.
This is the problem hear we have a bubble not quite as large in Japan in the 90'spercentage declines but greater in magnitude with a UK currency crisis.
(1930's Britain) + (1990's Japan) - (Hope + Change) = Record gun sales and gold hoarding.
This is why I like EFZ. Even though the market has been up the last few days, EFZ is down.
Does anyone else here have the impression that some of us are nostalgic old Trots, romantics of the left, or who knows what? The problem with such dreams is that in reality, when you wake up, the result is a vast inefficiency and a desperate paranoia.
That solution does not work.
I believe most agree that Mr. Greenspan, et al probably left interest rates too low for too long. Currently we have heard from Atlanta, Kansas City and New York indicating a concern for inflationary pressure.
Mr. Bernanke has greatly disappointed me as I feel he is too invested in his research into the Depression where he concluded that government intervention was too little, too late. I think many will agree that the tactics used during the Great Depression of the 1930's may not have been as effective as some have indicated and may have contributed to its length.
Janet Yellen showed how messages sent by the Fed can be as effective as actually doing something. I believe the message that needs to be sent is the bleeding is under control and we need to set a real interest rate, however, low.
With all the free money in the system there is no basis for 5.5% mortgage rates. That rate is based on the factor of risk (property values and unemployment) and the factor of banks trying to get money into their systems once again.
I fail to see how setting the Fed Funds rate at .5 to .75 will have any effect on long-term interest rates.
Will the other Fed Directors have the nerve to raise prices in a recession only time will tell.
Inverted Hammer of Thor (profile) wrote on Fri, 6/5/2009 - 12:43 pm
Finance Minister Anders Borg said. "If the banks come to us with big credit losses, where they have previously earned big money on lending, then shareholders will take the consequences. We're going to be clear that insolvent banks that don't meet legal requirements will see an injection of funds, primarily through government ownership. RESISTANCE IS FUTILE . "
Can't believe I missed this... but note this bitter irony as well, Illuminatus Roddenberry on the true nature of the Service economy?
"We are the Borg. Resistance is futile. Your life, as it has been, is over. From this time forward, you will service us."
I really do think the guy in the video Michael posted is making great video art, consciously or not.
He is speaking the rage and values of a lot of middle-age white American guys, and he's showing how they are changing. He does it with enough comic edge to make you laugh, and he is no dummy in analyzing economic data and trends. Reminds me of some people here.
Here it is, in case you missed it:
YouTube - I'M BACK
You have to watch all the way to the end (after he's destroyed the monitor) for the best part. He holds up a Discover card and says he maxed it out, $3,300, to buy food and gold, and they can "kiss my ass" to get paid back.
So, like we thought awhile ago, debt destruction is going mainstream as economic/political protest.
"When a police chief in a California town makes more in a year"...timmyone, I agree with that 100%.
If Rich hadn't endorsed it, I would have skipped the video Michael posted. i like this guy, I like him a lot. His sledgehammer must have been chinese-made...it busted after one good hit.
He's decided to go "Wells Fargo" on Discover..."I ain't paying shit".
i am sending this video to friends...I hope it goes viral.