Click Click BOOMMMMMM

/all available tools/

Hope? Check.

Trust? Check.

Pixy Dust?

/Wipes nose

Check.

--bh

boe again leads the wayu..boe jas become the feds wilted puppy

I did read it!

surprise surprise- they did exactly what Wall Street said they were going to say.

When I think of "stability" in this sense, I'm thinking terminal velocity not zero gravity.

--bh

Um, that is 1.25 trillion purchase of agency backed securities. Wouch. Very interesting way to keep housing mortgage rates down and housing prices up - just ensure someone will buy the collateralized debt. Bummer it has to me. . .

Hmmm... somebody sprouted a few more neurons perhaps?

Potentially promising...

QE == inflation.

CR-

They will never end it. They can't....instead of outright purchases they will just find another way to accomplish the same thing. Treasury issues into his monetizing so unless they figure out a way to soak up all the coming (and needed-for the wrong reasons IMO) supply it will be done under the radar.

Ciao
MS

Pick-a-Pay

I pick $0.

By the way, how much of that $1.25T of agency mortgage backed securities has it bought so far. If we calculate how fast those purchases are being made, we can really pick the moment that housing prices drop as mortgage rates begin to rise. Something like 10% price hit per additional point in interest rate

Kicking the decision to extend Treasury purchases down the road will set up the October decision as a big one. To extend or not? The Fed can hope economic conditions will make the decision an easy one, but I doubt it.

I think the statement has to be viewed in the context of "what else could they have said". They could hardly have said they were discontinuing purchases nor could they have said they are increasing them while talking up the stability in financial markets.

I think the Euro dollar futures market that is looking for a substantial tightening in 2010 is off the mark. Unlike 2003 this time the market will do all of the Feds work for it. The Fed will only have to decide whether it wants to ratify market actions or not. All that the Fed has to do is take out the "extended period language" and the market will back up interest rates. (what does "extended" mean anyway). They then get a chance to see how things unfold under those circumstances .

QE == inflation.

Please provide timeframe.

Dollar seeing a nice bump here.

Gunning for my trailing stop in SSO (currently 31.04)

so are they buying more Treasuries? Or did they did just extend the existing program through October by slowing the purchases?

Shill - I could not agree more. The one new piece of alphabet soup I see coming from the Fed is for CRE.

it only matters that they are still purchasing, and can see no way to stop purchasing. It doesnt matter whether they say they will stop, or they would like to stop. When they stop, then something is actually different. Id like to see them try to stop now.

Nothingburger still has bread and mayonnaise.
Umm, yum.

We here at the Fed believe that the best way to put out deflationary forest fires is by breaking the dam upstream of it.

We promise to start rebuiling the dam at the first sign of flooding in your villiage down in the valley below.

"The Fed is going to slow the pace of Treasury purchases - probably to see what happens as they slow the purchases instead of ending it abruptly."

The Fed has no exit. Thats the point - extend and pretend

My theory is that less liquidity may drive capital out of emerging stock and commodity bubbles and back into treasuries and mortgages.

Lower mortgage rates and oil prices are what consumers need most, not a new bubble in stocks.

Hopefully this is what the Fed was thinking.

If so, that may be the first sign of intelligent life we've seen from our Central Bank.

cannibolism...

Manute Bol is tall, but too lean for cooking.

ac

It looks like the Fed is experimenting to see if your theory is correct.

Re: Glad to see some healthy dissent without our policy making bodies...

One does not rise to the top by dissenting.

US Banks will collect a Record $38.5 Billion in overdraft fees this year

My question: will they be able to actually collect most of it?

at least there is wisdom in that approach. if this actually works, these guys will be hailed as heroes for years to come.

If I appear "anti-government" at times it's only because I'm "anti-stupidity", and these days the government seems to do many more stupid things than smart things.

Trying to stay under the NSA's Anti-American/Militia (NAAM) unit's radar, eh?

I am curious about what the Fed purchases from the GSEs. Suppose a foreign investor, say Germany, sends back to Fannie and Freddie a MBS due to its non-performance clause. Does Fannie and Freddie get to send that returned MBS back out the door? To the Fed? If so, I can see where we have finally found the answer to SuperSIV, MLEC, etc. Essentially everyone gets to send their trash back to the GSEs who then sell it to the Fed. I mean, the taxpayer.

Perfect thread to report this....
Dismantling the Temple ( the Fed )

http://www.thenation.com/doc/20090803/greider/single
By William Greider
July 15, 2009

1. It rewards failure. Like the largest banks that have been bailed out, the Fed was a co-author of the destruction. During the past twenty-five years, it failed to protect the country against reckless banking and finance adventures. It also failed in its most basic function--moderating the expansion of credit to keep it in balance with economic growth.

2. Cumulatively, Fed policy was a central force in destabilizing the US economy. Its extreme swings in monetary policy, combined with utter disregard for timely regulatory enforcement, steadily shifted economic rewards away from the real economy of production, work and wages and toward the financial realm, where profits and incomes were wildly inflated by false valuations. Abandoning its role as neutral arbitrator, the Fed tilted in favor of capital over labor.

3. The Fed cannot possibly examine "systemic risk" objectively because it helped to create the very structural flaws that led to breakdown. The Fed served as midwife to Citigroup, the failed conglomerate now on government life support. Greenspan unilaterally authorized this new financial/banking combine in the 1990s--even before Congress had repealed the Glass-Steagall Act, which prohibited such mergers.

4. The Fed can't be trusted to defend the public in its private deal-making with bank executives. The numerous revelations of collusion have shocked the public, and more scandals are certain if Congress conducts a thorough investigation.

5. Instead of disowning the notorious policy of "too big to fail," the Fed will be bound to embrace the doctrine more explicitly as "systemic risk" regulator. A new superclass of forty or fifty financial giants will emerge as the born-again "money trust" that citizens railed against 100 years ago. But this time, it will be armed with a permanent line of credit from Washington.

6. This road leads to the corporate state--a fusion of private and public power, a privileged club that dominates everything else from the top down. This will likely foster even greater concentration of financial power, since any large company left out of the protected class will want to join by growing larger and acquiring the banking elements needed to qualify.

Because so many funds are direct deposit: yes.

Ouch. More fleecing for the sheep, and it makes me thankful I still burn dead dinosaurs to deposit my money--whatever little of it there is.

Trying to stay under the NSA's Anti-American/Militia (NAAM) unit's radar, eh?

Nah... just trying to maintain my computer privileges here at the prison library.

My theory is that less liquidity may drive capital out of emerging stock and commodity bubbles and back into treasuries and mortgages

i have long thought its easier to drop it from 1000 than 800

something about music and chairs, etc....

They shook me out, now they're gunnin' 'em. Good thing I hate money.

Swap lines will take up the supposed "discontinuation" of a program that they say, on congressional record, they are not doing. By stopping the official 'non'-official program they will then point to the continued demand from the FCB's even after they stop doing what they say they are not.

Ciao
MS

That's what the pessimist in me says - it's not that they're stopping the liquidity pumping; they're just going to do it surreptitiously.

I was stupid to think I could slip a gross generalization past the smartest mob on the intertubz.

It's not a gross generalization, it is a definition.

The Fed IS performing a monetary inflation, there is no question about that. But its actions are not leading to a price inflation because of all the other credit deflation going on. There is no monetary deflation going on at all. Imagine the price deflation (discovery?) if the Fed did nothing? I can dream, can't I?

Lower mortgage rates and oil prices are what consumers need most, not a new bubble in stocks.

Especially for the bottom 80% of wage earners who have little in the way of equities.

This goes against the grain but I think the fed easing up on QE is bullish for bonds. After 5 months of 'green shoots' and 'glimmers of hopium' credit/wages/consumption still contracting. They might allow the stock markets to fall a bit which would do the work for them in finding buyers for treasuries. More importantly, a falling stock market will give them cover for what they really want - Stimpack 2 (or 3 if you count sping of 2008).

@Citizen AllenM

+1. My thoughts EXACTLY. Saw this right before I hit the send button

Fed doesn't want to monetize anymore, so deflate the stock market and chase everyone out into treasuries and gse paper.

Now, how many can see that the Fed has essentially sanctioned a drop in US equities, oh yeah, a drop in oil would be nice too.

dollar is playing the giants in candlesticks..
INO Futures and Commodities - Currencies - $ INDEX Sep 2009 (E) (NYBOT:DX.U09.E) Price Chart and Quote

end of day moonshot!

"Fed doesn't want to monetize anymore, so deflate the stock market and chase everyone out into treasuries and gse paper."

Not going to happen (at least the equity deflation) you have a system that is still so highly leveraged that it can't even tolerate a 1% loss on a one day basis. Regardless of what he intends to do with rates you still have an equity market that is too closely controlled by an ever shrinking amount of institutes.

And right on cue....the "up" button gets pushed....

Ciao
MS

The Fed reports increases in swaps, the market will react. There is also a cap on total swaps I believe. Increasing FCB swaps to fund monetizing US debt will not fool the market.

"Increasing FCB swaps to fund monetizing US debt will not fool the market. "

Ha....what has it done since March?

Ciao
MS

Little Levity to break this Fed ( boring ) speak up a little

Thinking of Buying a Taser or Stun Gun? Read This!
My wife found this and I thought it might get a few chuckles from some of you.

"I don't know if this is true or not but it really doesn't matter. It is sooo funny and it might be worth considering if you are thinking about buying a tazer.

ONLY A MAN WOULD ATTEMPT THIS

Just try reading this without laughing till you cry!!!

Pocket Tazer Stun Gun, a great gift for the wife. A guy who purchased his lovely wife a pocket Tazer for their anniversary submitted this:

Last weekend I saw something at Larry's Pistol & Pawn Shop that sparked my interest. The occasion was our 15th anniversary and I was looking for a little something extra for my wife Julie. What I came across was a 100,000-volt, pocket/purse- sized tazer. The effects of the tazer were supposed to be short lived, with no long-term adverse affect on your assailant, allowing her adequate time to retreat to safety....??

WAY TOO COOL!

Long story short, I bought the device and brought it home. I loaded two AAA batteries in the darn thing and pushed the button. Nothing! I was disappointed. I learned, however, that if I pushed the button and pressed it against a metal surface at the same time; I'd get the blue arc of electricity darting back and forth between the prongs.

AWESOME!!!

Unfortunately, I have yet to explain to Julie what that burn spot is on the face of her microwave.

Okay, so I was home alone with this new toy, thinking to myself that it couldn't be all that bad with only two triple-A batteries, right? There I sat in my recliner, my cat Gracie looking on intently (trusting little soul) while I was reading the directions and thinking that I really needed to try this thing out on a flesh & blood moving target. I must admit I thought about zapping Gracie (for a fraction of a second) and thought better of it. She is such a sweet cat. But, if I was going to give this thing to my wife to protect herself against a mugger, I did want some assurance that it would work as advertised.. Am I wrong?

So, there I sat in a pair of shorts and a tank top with my reading glasses perched delicately on the bridge of my nose, directions in one hand, and tazer in another. The directions said that a one-second burst would shock and disorient your assailant; a two-second burst was supposed to cause muscle spasms and a major loss of bodily control; a three-second burst would purportedly make your assailant flop on the ground like a fish out of water. Any burst longer than three seconds would be wasting the batteries.

All the while I'm looking at this little device measuring about 5" long, less than 3/4 inch in circumference; pretty cute really and (loaded with two itsy, bitsy triple-A batteries) thinking to myself, 'no possible way!' What happened next is almost beyond description, but I'll do my best.. .?

I'm sitting there alone, Gracie looking on with her head cocked to one side as to say, 'don't do it dipshit,' reasoning that a one second burst from such a tiny little ole thing couldn't hurt all that bad. I decided to give myself a one second burst just for heck of it. I touched the prongs to my naked thigh, pushed the button, and . . . . . . . .

HOLY MOTHER OF GOD . . WEAPONS OF MASS DESTRUCTION . . . WHAT THE HELL!!!

I'm pretty sure Jessie Ventura ran in through the side door, picked me up in the recliner, then body slammed us both on the carpet, over and over and over again. I vaguely recall waking up on my side in the fetal position, with tears in my eyes, body soaking wet, both nipples on fire, testicles nowhere to be found, with my left arm tucked under my body in the oddest position, and tingling in my legs? The cat was making meowing sounds I had never heard before, clinging to a picture frame hanging above the fireplace, obviously in an attempt to avoid getting slammed by my body flopping all over the living room.

Note: If you ever feel compelled to 'mug' yourself with a tazer, one note of caution: there is no such thing as a one second burst when you zap yourself! You will not let go of that thing until it is dislodged from your hand by a violent thrashing about on the floor.. A three second burst would be considered conservative?

IT HURT LIKE HELL!!!

A minute or so later (I can't be sure, as time was a relative thing at that point), I collected my wits (what little I had left), sat up and surveyed the landscape. My bent reading glasses were on the mantel of the fireplace. The recliner was upside down and about 8 feet or so from where it originally was. My triceps, right thigh and both nipples were still twitching. My face felt like it had been shot up with Novocain, and my bottom lip weighed 88 lbs. I had no control over the drooling.

Apparently I pooped on myself, but was too numb to know for sure and my sense of smell was gone. I saw a faint smoke cloud above my head which I believe came from my hair. I'm still looking for my nuts and I'm offering a significant reward for their safe return!

P.S. My wife, can't stop laughing about my experience, loved the gift, and now regularly threatens me with it!"

black dog,
You called it back on Aug 5..."“All this news feels like its building up to some sort of fall/winter collapse in equities"...should be a hoocoodanode hall of fame post. Since the general agreement seems to be that the FOMC statement today pulls the rug out from under equities.

Since the general agreement seems to be that the FOMC statement today pulls the rug out from under equities.

Not until they stop running and look down. Haven't done so yet today.

Ah... looks like instead of Treasuries the Fed is going to start buying stocks directly.

More William Greider on the Federal Reserve....

During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see.

Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities. Among its functions, the Federal Reserve directly regulates the largest banks, but it also looks out for their well-being--providing regular liquidity loans for those caught short and bailing out endangered banks it deems "too big to fail."

The Fed cannot cannot explain or justify its peculiar status but it's clearly the black hole of our democracy ( or former one )

The orders were just given, props for the housing market

Feds don't care about house prices.
They're trying to maintain consumer cash flow.

General comment: Slowing down the purchases is the right thing to do, but it sure as hell isn't a vote of confidence that things have stabilized. More like: "This might be a bad idea, so let's go slow."

The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.

They left his in as a gimme to the commodity markets.

Pay attention, we will make your life miserable if you try to squeeze them again is the message to the traders, plus prices are going to fall as final demand approximates 65% of what it was two years ago. In other words, if you are storing oil in tankers, you had best pass it on to the retail suckers and quietly exit.

Today was a good example- oil shoots up, while oil products drop. Nice baggy pass!

Wall Street should learn to jump to the Fed tune again, this is the 70s show!

No Q.E. or less Q.E- bang, hit the sell button.

Someday this war's gonna end...

Exactly. The hilarious thing is that the system collapsed because housing veered back towards affordability. God forbid.

MS

We will find out in October.

donflamenco (profile) wrote on Wed, 8/12/2009 - 2:56 pm

Is this magic? I mean, there's got to be a downside. Who's paying for all those new fake millionnaires the Fed is creating (or saving)?
Let me get THIS straight- you really have to ask?

Citizen AllenM (profile) wrote on Wed, 8/12/2009 - 3:09 pm

Enjoy the fact there are so many stupid people, it makes life much easier for you and your children to do what you want.

Is your Dad related to PT Barnum by any chance?

OT but a nice summary:

"The reality is "many people on Wall Street knew there was something amiss with Bernie," says Erin Arvedlund, author of the newly published book Too Good To Be True: The Rise and Fall of Bernie Madoff.

Back in 2001, Arvedlund wrote a piece for Barron's questioning the legitimacy of Madoff's stellar returns, while the now defunct trade publication MAR Hedge and would-be whistle blower Harry Markopolos also raised red flags.

Arvedlund said nothing came of those inquiries for a variety of reasons:

Cozy Relations: In the 1970s, Bernie Madoff's innovative use of computer technology helped the Nasdaq break the NYSE's monopoly on trading volume. "As a result," Arvedlund says, "he was spoken about in hushed tones" by regulators who were charged with creating that alternative market but "had not clue how to do it." Madoff ultimately became non-executive chairman of the Nasdaq, further cementing his reputation as a pillar of Wall Street society, and his niece, Shana Madoff, married a former SEC attorney named Eric Swanson.

Fear of Bernie Backlash: Many on Wall Street were afraid to raise concerns about Madoff because some of the industry's biggest names, including two former Merrill CEOs, were invested with him, Arvedlund says. "I think it came done from on high that you don't want to screw around with Bernie," she says.

Don't Stop the Gravy Train: Clearly, the big feeder funds had incentive to turn a blind eye to any wrongdoing, namely the fees Madoff paid them. And many on Wall Street thought Madoff was merely "front-running" his clients, which apparently was an acceptable scam vs. running a Ponzi scheme. Also, anyone who refused to do business with Madoff knew clients would and could take their assets somewhere else. "On Wall Street, that can cost you your job," Arvedlund says."

Just because you are paranoid doesn't mean there isn't a conspiracy

donflamenco,

I think the do you even have to ask comment was directed towards your asking whether there's a downside to what is being done.

Of course there is. For one to believe that there is no downside one must believe the FED knows exactly what they are doing. But if that were the case we wouldn't have gotten into this mess. The FED knows about as much about what they are doing now as they knew leading up to this crisis.

debt destruction or printing money

So far, debt destruction is winning - and people have just started cutting back.

If there's no inflation, I'm not paying any price.

First, sorry for also snarking above.
Second: You've paid a price in that the corrective process which should occur is not occuring. Rather than deal with some fundamental imbalances, we are instead adding another imbalance. It may also result in problems in the future.

BenB thinks this is wise behavior. Others disagree.

your argument is still crap anon2

Liquidity takes what forms? Answer that and you'll see how defeatist it is trying figure out if the market will get fooled or not.

Ciao
MS

Re: America is the most badly deluded society in the world.

It will take more than just debt destruction to fix things. Delusion destruction is just as important.

donflamenco (profile) wrote on Wed, 8/12/2009 - 3:13 pm

Yes I have to ask. Because printing dollars is not the same as borrowing money (that would have to be paid - by me - with taxes). People keep talking about the velocity of money being down, therefore no inflation in sight. If there's no inflation, I'm not paying any price. Please corret me if I'm wrong (with more details than just - you're wrong)..

First, separate price inflation and monetary inflation. They're 2 different things, and in fact, it is possible to have monetary inflation and price deflation simultaneously. Second, either you and I or our descendants (i.e. the tax payer) will get stuck with the bill; you can take that to the bank-

"If you missed Obama's town hall meeting yesterday in NH, he has changed tone. He no longer is showing any affection for any health insurance, pharma or hospital corporations or their economic needs. The gloves are off"

Yeah right. Obama's rhetoric is just that

Never understood all the angst about health care being 17% of the economy. If we said tourism was 17% of the economy would everybody get into a gigantic lather about it?

The entire health care debate is characterized by falsehoods from all sides. The average American expects to be healthy but doesn't want to have to pay for it- either through paying for medical treatments or through life style changes. It is the ultimate entitlement mentality. But here is the kicker we don't want to pay for it nor do we want the government to pay for it. I guess the vast majority of Americans believe in the tooth fairy.

A better discussion would be - are we getting what we are paying for? Are the outcomes better in the United States, are we more secure, is it easier to get health care. But the biggest question we have to answer is "do we have choice in America".

Contrary to what right wingers would have you believe we have no choice in America. We have a one size fits all system. Contrary to what those on the left would say their reforms are not going to change that. Case in point - the biggest criticism leveled against other countries systems is that you have to wait for procedures. But it seems to me that if I as a consumer am prepared to wait to get my my MRI or hip replacement or anything else should I not have the choice to do that in exchange for a lower cost? Is that not a trade off that we allow in every other economic activity. Where did the idea come from that where medicine is concerned everybody must be treated equally and nobody can have the choice to be treated any other way?

A sensible health care system would offer different levels of insurance. A cheap policy that would restrict access to the most expensive treatments and medications e.g. no celebrex only advil which for 90%+ of the population is just as effective. For most Americans this would cover 99% of what they experience. Instead we have a system that force feeds whatever medicine the medical establishment drug companies and special interests want.

@NOTaREALmerican (profile) wrote (in reply to...) on Wed, 8/12/2009 - 12:21 pm

Re: America is the most badly deluded society in the world.

It will take more than just debt destruction to fix things. Delusion destruction is just as important.

In theory perhaps but no way in practice. The wake up call to power elite was late 1960's and since Ronnie Reagan formally put the elite power and media consolidation plan into play every Pres since then have tightened the screws. This current act hope and change was masterful to try and keep the faux American dream alive!

Lets do a thought experiment.

What would happen if the Central Bank printed $100 Trillion dollars and announced their intention to buy all manners of things.

This would instantly devalue dollar against things.

The devaluation would also radically shift the power balance between savers/producers/consumers.

Printing money destroys stored value.

km4 (profile) wrote on Wed, 8/12/2009 - 2:27 pm

In theory perhaps but no way in practice. The wake up call to power elite was late 1960's and since Ronnie Reagan formally put the elite power and media consolidation plan into play every Pres since then have tightened the screws. This current act hope and change was masterful to try and keep the faux American dream alive!

Their solution was to addict us to an artificial substance with artificially-limited supply that is the basis of an artificial system, the sole purpose of which is to preserve and grow the real wealth of those who created it, through timely exploitation of the cyclic fluctuations of the artificial substance.

This artificial substance, the antinomian particle which has either the properties of hopium or changium depending upon one's perspective, is of course credit.

MrBeach (profile) wrote on Wed, 8/12/2009 - 3:28 pm

Lets do a thought experiment.
Let's fix your thought experiment. Fiat money is backed by the economy itself; it's only worth what you can buy with it, but it serves as a useful medium of exchange. It's effectively backed by existing assets including previously produced goods, new produced goods, and services.
If our economy expands, i.e. there is a net production of goods and services above and beyond what already exists, and there is no corresponding increase in the money supply, the value of all of assets and newly produced goods and services will fall (deflation) since there are more of them and no additional money chasing them. Thus, if the economy grows by 7%, including effects of depreciation, you need a 7% increase in the money supply to maintain price stability.

WSJ headline reports, "Fed Leaves Rates Near Zero; Says Economy Leveling Out."

And then dances on the ceiling. It really is that simple, folks. (You may all now weep for your puts.)

"I agree with you that the Fed and its minions can manipulate interest rates, bonds, stocks and dollars.

But I don't believe they have the power to manipulate the price of gold or oil very long. Not even all their horses and men. "

I agree with Rich on that, which is why I went long oil after the March 18th meeting. Sooner or later those selling oil will want to get paid in something other than dollars.

The idea of the Fed ending QE is as ludicrous as when they discussed stopping the FFR at 1%. Isn't going to happen.

Yup, ya gotta hand it to the fascists, they know their dumbasses. It's been masterful to watch. I particularly enjoyed how they destroyed the word "liberal". THAT was brilliant, they (the liberals) never recovered from that.

All social engineering begins with verbal engineering.

Confessions of an Economic Hitman is a must read for those who want an insight into what is going on now. There's a bit of history in there of the petro-dollar recycling process. Anyone who thinks that the US can't manipulate oil prices either up or down hasn't read history.

The Economics of Innocent Fraud by by John Gailbraith has a good explanation of the reality of the FED.

"The Fed officially announces the end of QE, and the dollar tanks"

Maybe the USD market doesn't believe the announcement?

nova, thanks for the building supplies anecdote.

I like Janzen/iTulip's logic, and he lays out a convincing case for price increases coming Q4 '09/Q1 '10, courtesy of suppliers having failed, rising cost of imports, etc.

Here's the link to Janzen's 'inflation is coming soon' post:
iTulip.com

A lot of crap flys around this blog sometimes
.
Make that always but it is usually entertaining, often informative and occasionally insightful - that is some good sh!t, Maynard!

Sorry, TJ; yes, I am a subscriber.

Anyways, he was telling me the builder mag's he gets are saying look for an 8% increase accross the board in the cost of everything building related. - nova

(Picks jaw off floor.) I sure hope that's true, we've had a lot of mill closings, etc. Forest products industry in the toilet. Methinks the magazine guys are hopium.

scone,

That does not mean increased production to me. It just means management wants to charge more.

Where's the volume?

This is bullish, right?

this is a political, more than an economic, question. so of course, every politician will kick the can until it's no longer possible.

"I like Janzen/iTulip's logic, and he lays out a convincing case for price increases coming Q4 '09/Q1 '10, courtesy of suppliers having failed, rising cost of imports, etc."

You mean the ka-pow theory, or whateve it is called? that is very interesting.

"Where's the volume?"

Next to the bass and treble controls!

"Where's the volume?"

Next to the bass and treble controls!

That's balance.

lol - good question, was just snarking a bit - this has been a classic rising prices on falling volumes kind of rally - or what?

ghost-, yes, that part of Ka-Boom -- which makes great sense to me -- will soon be here.

The Mess That Greenspan Made: The Fed says, "Steady as she goes"

Looks like all it took was 5 minutes and a text editor to make changes between the previous and current FOMC meeting minutes.

"Another sign of the desperate economic times, a whopping 16 contractors bid on the construction project that will transform the 1960s-era church building at 740 Old Brandy Road into a modern police headquarters."

Wanna bet the contractors are "eating it" on wages and profit, but not on material costs?

Classic hyperinflation/stagflation at work - we (Americans) have to compete for international goods with countries that aren't basket cases.

Raw materials/commodities will increase in cost, except things that require a lot of US labor, like agricultural products.

"The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities so that it will shut down at the end of October"

or

"the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October"

Shut down means end to me.

Rich, are you suggesting that the solution to taxpayers pick up the tab is taxpayers picking up the tab?

I just read on the WSJ that only $150 billion in agency MBS have been purchased so far YTD. So if the goal is 1.25 trillion by the end of the year....

jg,

You -- a paid subscriber -- should know it's Ka-POOM!

"Wasn't he a socialist, and aren't socialist essentially folks interested in implementing social engineering?"

If I understand him correctly - and I'm not an Orwell scholar - he considered himself a democratic socialist, a proponent of a socialism with a human face and without fangs.

He wrote in one of his essays that he was puzzled by the Catholic Church, which really did seem sincerely to want social justice. He really was a good chap, willing to live his ideals, and he was a dedicated writer, something I have a great deal of respect for. He was as far as you can get from the Mosley type of muscle-bound bully British fascist, or spy-sneak and commissar apologist of the left.

If he was an atheist, as I suppose he was, let's not forget that unfortunately he died in his late forties, without a chance to live through a further maturation in understanding. He was a very sensitive person, as all artists must be.

I think of 1984 as one of the great 20th century works of art, a work of prophecy and deep insight. It may yet prove a powerful enough prophecy indeed, though the technological means of achieving such a dystopia would hardly have been imagined in the late 1940s.

AC@
late to the thread but exactly hiw does easing off of the treasury pruchase program chase people out of oil and into treasuries? Counterfactual. Fed buying supresses yields which would cause people to flee treasuries - ie 10 yer up 6 bps or whatever today. Fed continuing to buy the elephant - and not stopping at a trillion - mortgages is inflationary. Fed swap lines, tglp, and all the other bank subsidies are inflationary. Unless they do something to convincgly roll back that liquidity game over. The probem for the fed is that they are engaged in a psyop with themselves with the large banks willing to play along for now. The excess liquidity helps everyobne - check out HIG on a rocketshot - wasn;t it only a month ago it was DOA? The idea that stopping treasury buys is good for treasuries and oil isjust an illogical conclusion. You either believe they are doing sofor real solid reasons which means more oil demand and oil goes higher - see IEA. Or you believe they are bluffing and when you look around the world at the giant cukcing sound of deflation (comb through the French german and japanese and chinese data today) you realize that the QE may end with Ts but it will be ongoing in other departments.

I stand corrected, TJ.

I've been wrong on lots of things lately, especially this damn market cratering.

C'mon Sep./Oct.!

Orwell was a socialist who hated totalitarianism. Libertarians also hate totalitarianism. Which is why Orwell is often referred to as the socialist that libertarians love. the enemy of my enemy type of thing.

As I was saying before, what they say means nothing. The important thing to note is that they bought themselves a month of time here, stretching the same policy through October. This tells me they dont have an exit strategy, and are scared that its just six weeks away from them having to live up to their expectation/promise that they would be done at end of Sept. This shows a weak hand to me.

ok ive only read half the thread but

help

im stupid

remind me, where again does the FED get the money to:

(quoting CRs pull from fed statement):

"the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year."

really, no snark, where does the FED get the funds to do this?

Mock, they own the printing press, they turn it on

Cynicism: sometimes it goes overboard here. It becomes so bitter and so universal in scope that it effectively bars itself from participation in any further discourse. To divide any society into dumb-asses and masters is certainly to enter into world of 1984. For the most part people have to live in the world they're born into. But human personality is much richer than a simple two-level scheme. If we ever do enter into a deep crisis, you will see amazing things among the people, including the emergence of monsters and saints.

Re: where does the FED get the funds to do this?

I'd like to know (related), what are the account entries (ALSO really no snark).

The next step to provide a large prop to the fed is to allow equities, commodities, and the like to fall- pushing money back into tbonds and safe paper. Thus lowering rates and providing cover for the next big plans that are necessary to really solve the problems.

Lather, rinse, repeat.

Think ahead. The first big reaction on wall street to complex news is always wrong.

Today's rise is tomorrow's fall.

Someday this war's gonna end...

poic, I'm with you. But I don't need your gut. I need something conrete.

Cynicism: sometimes it goes overboard here.

Cynicism is laziness of spirit, that likes to masquerade as wisdom.

Time for memorable Fed quotes again...too bad there aren't any newer ones but after fiercely independent Goldwater virtually all members of Congress are bought and paid for

this quote is more true today than depression years

"We have, in this country, one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board. This evil institution has impoverished the people of the United States and has practically bankrupted our government. It has done this through the corrupt practices of the moneyed vultures who control it". -- Congressman Louis T. McFadden

also these

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning" - Henry Ford

"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States" -- Sen. Barry Goldwater

Americans being sold down the river again with slick Obamanomics after dumb as dirt and completely transparent Bushonomics.

donflamenco (profile) wrote on Wed, 8/12/2009 - 4:07 pm

See, my problem is a moral one. I can't accept that one could give 1 freshly-printed trillion dollar to Bob - making him ultra-rich overnight -, without there being any price to pay. I know, I know, we will pay a price one day. But exactly what is it?

There are probably better qualified folks to speak on this, but I'll give it a shot. The problem is that Bob had a trillion dollars and loaned out 30 trillion for folks to use to buy houses, and these loans were backed by the homes themselves. Unfortunately, the housing market tanks (not collapsed, at least not yet), and Bob found that he was no longer solvent. The Fed stepped in to help because if Bob couldn't provide loans, and no one could afford to buy homes, the the market would go into a free fall. As such, the Fed's money really isn't in circulation right now, but rather sitting on Bob's balance sheet.
Not a big deal right now, but if/when the economy recovers, and many of those loans that Bob had lent out prior to the Fed's QE start performing again, there will be an excess of liquidity out there, and the Fed will begin to draw money back out of the system using high interest rates, hurting businesses, homebuyers, folks with ARMs, etc.

bbartlog

Agree with "future" inflation. But if you look at Japan, they've been doing it for 25 years and still experiencing defllation!

"Cynicism is laziness of spirit, that likes to masquerade as wisdom."

The Cynics (Greek: Κυνικοί, Latin: Cynici) were an influential group of philosophers from the ancient school of Cynicism. Their philosophy was that the purpose of life was to live a life of Virtue in agreement with Nature. This meant rejecting all conventional desires for wealth, power, health, and fame, and by living a life free from all possessions

"poic, I'm with you. But I don't need your gut. I need something conrete. "

LTCM
Latin American Debt Crisis
Asian Currency Crisis
Low rates and the vaunted "Great Moderation"

The FED has staggered from crisis to crisis over the last 20 years. Why would I believe they will handle the mother of all crisis with infinite precision when there is no historical context to backup that conclusion?

All I need to do is look at their actions in the past to get a good feeling of how well they will ultimately handle this crisis.

Rich, are you suggesting that the solution to taxpayers pick up the tab is taxpayers picking up the tab?

No, I'm suggesting that the only "real solution" is for health care costs to come way down.

Obama knows this and is starting to preach it.

He just leaves out the part about how health care companies will tank and employment and salaries will go down.

GOALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL!

Today's rise is tomorrow's fall. - CAM

Or maybe not. The Fed just guaranteed low interest rates to the horizon, and said it would dial down the big scary buying, while keeping it's ammo dry in order to make the losers whole. Or less holey. The Greenspanian obfuscation below basically says they will do anything, absolutely anything, to make the markets, et. al. feel good.

"The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets..."

Nobody, except for the puts and shorts crowd, is motivated to see the markets go down. And their ranks are thinning daily. The lemmings have changed direction. Doesn't mean they are right, but that's the way it is right now, IMO.

I wonder if Doug Short has the action chart porn thingie up.

I like it when people quote congressmen as sources of wisdom.

As the late Honorable Wilfred T. Jammeson (R) TN once said "Beastality is wrong I admit. As is driving in a drunken stupor while wearing my wifes favorite sundress. Regardless, I want you to know I am deeply ashamed of my actions. I can not stress how much I feel I was led astray by the liberal media who influenced me in these decisions."

rich (profile) wrote (in reply to...) on Wed, 8/12/2009 - 4:22 pm
No, I'm suggesting that the only "real solution" is for health care costs to come way down.
Obama knows this and is starting to preach it.

Not likely: Health Professionals: Long-Term Contribution Trends | OpenSecrets

From TF

"Bloomberg reports that PIMCO, the giant bond fund, has substantially cut back its holdings of mortgage in its $169 billion Total Return Fund. At 47% of the portfolio in July, it’s well below the 86% seen in February before the Fed expanded its MBS purchase program in March.

At the FOMC meeting that concludes today, policymakers are expected to decide to let the Treasury purchase program die a natural death in September, when it’s due to expire. The mortgage program could be next. The MBS purchases, which already stand at $721 billion but could go as high as $1.25 trillion, is slated to stop at the end of the year.

When the Fed steps away from MBS, expect valuations to take a hit. PIMCO most likely does and is already positioning for it."

I wouldn't be betting against Bill Gross when it comes to bonds.

presumably we all agree that the only route to prosperity is productivity.

I don't know why we focus on health care spending without considering its efficacy. That is the real issue. The problem is that we spending a lot of money for a very ineffective product. Improving efficacy and reduced spending will actually create more jobs and wealth in the economy.

Unlike tanking manufacturing wages through outsourcing tanking health care wages is largely a closed loop system. The doctors loss is the patients gain. Since most patients are poorer than their doctors that will actually result in increased consumption and a higher multiplier.

Have you noticed we're not "consumers" any more? We're "households." I wonder if Karl Rove is doing their wordsmithing. Could be a lucrative pig...I mean gig.

Japan has multiple times the debt-to-GDP ratio of the US. And Yen is still ok -

what is the structure of the japanese real estate market?

What is the consumer debt situation in japan?

Agre the yen is flawed currency as is the broken export driven model. nevertthless your talking about the japanaese ability to execute this strategy over a decade of massive surpluses in capital and flows.

That no longer exists...although they did swing back to sursplus most recent print.

The US is in a massive deficit with overstretched consumer.s Are you watching the nailbitting auctions everyweek...that should tell you more than you need to know whether the US could remotely come close to pulling off a japanese situation. If that were the case what are the implications for the equity market - and the levered financial institiutions that are only alive becasue of the artificial equity pump and the associated tightening of HY and corproate wides

Dirk van Dirjk

km4

NOTaREALmerican

Comrade Coinz

thanks all for your response...yeah i suspected but wasnt sure...thought maybe the fed sold something in the private markets to rasie funds to buy the GSE MBS

but as you all indicated

the printing presses are a rollin

thanks again

I wouldn't be betting against Bill Gross when it comes to bonds. - poic

Me, too. I've been thinking of putting some of the 401k money there.

FRBSF Economic Letter: U.S. Household Deleveraging and Future Consumption Growth (2009-16, 5/15/2009)

re japan delveraging

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

broward (homepage, profile) wrote on Wed, 8/12/2009 - 4:36 pm
Productivity won't work unless there's a mechanism for income distribution.

There is one; its called getting a job

What stands at the basis of a system that doesn't exist?

Re: What stands at the basis of a system that doesn't exist?

I know, I know!! OPTIMISM!

Dark matter?

health care wages are a problem, but nowhere near the costs of medical IP, whether it be drugs or devices. And unlike wages, there is no closed domestic flow of funds.

Re: called getting a job

Getting enough jobs - that pay enough - to keep the standard of living increasing.

Okay, for the folks that fail to understand once again what a dollar is:

The Fed sees the need for more of these Federal Reserve Notes (circulating debt for convenience sake) to keep the economy moving.

Banks wander up with a bunch of crappy assets. The Fed creates with an accounting entry the amount of circulating debt to purchase these assets.

Banks no longer have those crappy assets, the Fed now owns them.

Banks have a credit with the Fed in the amount of the purchase by the Fed. They can go buy stocks, or leave it on account as a reserve to backstop their other crappy loans;-}

Got it?

Money is fiat. Latin word for let it be.

Money is not backed beyond the Full faith and credit of the United States.

Someday this war's gonna end...

Nova - the economy is a holistic system just like a computer network.
Many people think you can just jam extra capacity on and fix network problems.
Sometimes true for minor cases but usually you have to consciously design network capacity and load balancing.
.
I suspect you know all that, so you've got a grasp of the thing.

"leveling out"

...says it all. Nice phrase; better than 'bottoming', 'recovering', 'turning'.

broward - work is finite only in a closed system. Our system is closed only so long as we stay on one planet. Perhaps our economic future lies where no one has gone before...where work is infinite.

Citizen AllenM (profile) wrote on Wed, 8/12/2009 - 3:44 pm

Money is not backed beyond the Full faith and credit of the United States.

And once that credit is shown (i.e. demonstrated) to be non-existent (no good), what happens to the entire system built on it, as if overnight?

I just finised 'The Economics of Inflation' by Bresciani-Turroni.

I would pay handsomely to see this guy and Taleb having a dialogue.

Well, you have a crisis.

Kinda like every crisis in Argentina since Peron was in power.

Boring really.

The middle class disappears, the rich take flight overseas, and the rest just riot whenever the water gets too hot.

What, you want sunshine from a man ticked off at a ref right now?

Someday this war's gonna end...

Basel Too (profile) wrote on Wed, 8/12/2009 - 4:41 pm

health care wages are a problem, but nowhere near the costs of medical IP, whether it be drugs or devices. And unlike wages, there is no closed domestic flow of funds.
Another issue is that the American public and the US Govt. have in large part subsidized medical developments for the past half century or so. If we squeeze that out of our budget, how will cheap AIDs drugs find their way to Africa? Who'll develop the next generation of MRIs? Would you trust the same bureaucrats that specified the V22 Osprey to be in charge of" THAT" development project? Do you really think that would be a more efficient way to get improvements in medical services? This aspect of care is totally neglected by the folks here who advocate ObamaCare-

This concept has been discredit as the “excessively cynical master and dumbass" model of life which does NOT exist in reality.

It exists only up until a revolution.

"The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities so that it will shut down at the end of October"

MSNBC reporting that the Fed said something isn't quite the same as the Fed saying it. The announcement itself does not say what you or MSNBC claim.

When the system was dangerously destabilized because bank balance sheets did not fit the past rules of the game, the rules of the game were changed (mark to model). When the relatively stable and conventional management of money supply and debt (through interest rates) was no longer adequate, the Fed leaped to unexpected rule-breaking market participation (free money, barely collateralized). We are not adequately imagining how far the system's structure will change to maintain its status quo. The probability of a big move in currency or inflation is therefore smaller than the facts would seem to suggest, especially as long as the dollar is the reserve currency.

$115B portfolio of option ARMs for WFC. Did that come from Wachovia? Anybody know? Thanks!

WFC job anouncement
"Risk Management Manager 3

IA-West Des Moines

Let me tell you what kind of mental horsepower you can get to move to Des Moines....

Great work !really i am glad that our financial situation is getting better and the meeting by Federal open Market Committee decision was pretty well! i think all credit goes to Obama that he is planning good policies to give us better life !chears !
Reverse mortgage information