creditcriminalslovetarp, re: last thread,
On the subject of FICO, you think that might have some implications for online retailing? I agree with energyecon that online retailers will have to pay local sales taxes soon, even before marijuana prohibition is dropped, but maybe FICO -> credit card -> online shopping is an unexpected boundary, or is there way too much slack for that to show up?
So the dip for the current downturn is 70% greater than the average for the previous "severe recessions" (~117 to 100 vs ~110 to 100 peak-to-trough)? Yikes!
This strongly implies that the electricity usage would have been significantly below normal in October and consequently the industrial production data estimates are undoubtedly biased downward.
No. 50 degree days implies GREATER electricity usage for heating in October not less thus biasing the estimates assumed to go to production UPWARD.
re: the actual post
Might I suggest that the 'severe' / v-shaped recessions are demonstrative of economic cycle dominated by the changing context of inventory, and that 1980/1990/2000 ones are demonstrative of ones dominated by the changing context of credit growth? (those factors are not mutually exclusive, which is why I chose to say dominated)
Rob Dawg
I don't see any conflict of opinion. Lower temperature -> biases electricity demand upward
electricity demand relatively low -> should be biased even lower to offset low temperature
From some earlier discussion in the uptick in capacity utilization rate, that appears to be more a function of capacity destruction (if capacity falls at a faster rate than activity, the absolute level of activity could be falling and we would still see an uptick in the utilization rate) energyecon: Industrial Production - Capacity and Utilization Rate
curious, yep - this was a super severe recession! So we'd expect the recovery to be super duper ... uh, not so far.
I understand why the V analysts think we will have a strong recovery, but I disagree.
If the 2007 recession had been caused by the Fed tightening rates to slow inflation (like most recessions), then when the Fed lowered rates, the economy would have come roaring back. But this one was caused by the bursting of the housing/credit bubble, and this type of recession is usually followed by a sluggish recovery.
A steep decline followed by a sluggish recovery ... hey, that is my forecast!
Jonathan, agreed. It is way too early to tell - the channel is so narrow in the early months. Six months from now this will be an interesting graph ...
(because inventory is counter-cyclical and credit is pro-cyclical, but there could be other dominant factors that could substitute for the counter/pro-cyclical nature. like a jump upward in oil prices could lead to CPI and PPI inflation that reduces the real change in credit. or the dropping of a regulatory barrier that unleashes a coherent wave of asset appreciation in a Minsky bubble which does ultimately end)
The Angry Bear guy is saying the exact same thing as youse guys
That increased heating demand is likely responsible for overstating industrial production
chill
I have more questions than answers today, but here's another...
Any correlation between electricity usage and the extension of daylight savings time which used to end in early Oct but now extends to the end of Oct.?
To even attempt to adduce correlation with monthly weather given all the factors affecting electricity usage seems a waste of time.
no it isn't. Utilities use the weather forecast themselves to plan demand. They can even tell when there is a big TV event like the supebowl on because everyone opens the fridge at half-time and causes the compressor to turn on.
Am I missing something? Industrial production is measured by electric consumption??? I really thought they measured output or inputs or sales or something. Or like Larry Summers determined the recession was over because the number of google search's for "economic recession" was down. we're screwed
Twenty-five comments into this thread and I haven't seen a single snarky comment that Spencer's chart has the trough for the current recession in the wrong place (say, 8 months too soon).
Upon my reading the post the first time, Spencer seemed to have it backward. After my having read the post two more times, Spencer still seems to have it backward. The bias in the figures is an upward, not downward, one.
no it isn't. Utilities use the weather forecast themselves to plan demand. They can even tell when there is a big TV event like the supebowl on because everyone opens the fridge at half-time and causes the compressor to turn on.
Electricity demand is expected to soar during England's first World Cup game against Paraguay on Saturday.
The National Grid said usage could increase by 1,500 megawatts - the equivalent of 600,000 kettles being switched on at the same time.
Millions of fans have traditionally turned to the cuppa during breaks to quench their thirst.
Power could be tapped from hydro-electric stations in Scotland and Wales to meet demand.
daylight savings time is stupid.
not the least of which because at best what it does is lower lighting needs of employers and increase them for individuals after working hours
either the workplace will be unaffected (not enough natural lighting, the landlord might like to show off their property by lighting the whole place up at night anyways), or will probably have less energy savings than a homeowner (easier for a workplace to optimize their energy efficiency, individual at home probably has half a dozen rooms lit up by incandescent bulbs. worse yet the individual may have electric baseboard heating and have to crank that up more instead of the natgas powered HVAC at worked)
Daylight Savings Time should be Abolished
daylight savings time is stupid.
not the least of which because at best what it does is lower lighting needs of employers and increase them for individuals after working hours
wrong again. it's Standard time that increases lighting needs for individuals.
No he said "biased downward." He may mean what we are saying but he isn't saying it.
crud, you're right along with Circling the Drain and Charles Kiting upon a careful 3rd reading
using lower temperatures to argue lower electricity demand makes no sense, don't know what he was thinking
That might work in the summer months, but not a whoooole lotta AC demand in October...though it has gotten an occasional workout here on the Third Coast even in November...
Rob Dawg wrote:
No he said "biased downward." He may mean what we are saying but he isn't saying it.
crud, you're right along with Circling the Drain and Charles Kiting upon a careful 3rd reading
using lower temperatures to argue lower electricity demand makes no sense, don't know what he was thinking
Is he in Arizona or something? BTW, NOAA reports this as the 3rd coolest October on record. I blogged about it last week: Exurban Nation: Beach Weather
CFO John Gerspach's annual base salary will increase to $500,000 effective November 1 from $400,000 prior to November, while James Forese is receiving $475,000, compared with $225,000.
Gerspach is also receiving $2.92 million of stock salary for 2009, while Forese will get $5.4 million.
wrong again. it's Standard time that increases lighting needs for individuals.
That may be true, I'm on a roll. Winter afternoon sunlight is extended.
To answer the original question though, energy savings vary but generally are negligible (fractions of 1%)
/still think the sun's peak position in the sky should determine when noon is, why not just have different business hours for each season. we have the technology to cope
still think the sun's peak position in the sky should determine when noon is, why not just have different business hours for each season. we have the technology to cope
The word "noon" is a variant of "nine". The ninth hour of daylight is generally the highest temperature of the day (on days that have 12 or more hours of daylight).
but you are right and I was wrong ditto for every other post that corrected me
Excuse me, but once you become invested in an opinion, is yours to defend no matter how ridiculous it may seem in hindsight! Don't let it happen again-
There are still people living, LIVING, everyday of the YEAR, in Sioux Falls SD, which is frozen, FROOOOZEN SOLID, for three straight month EVERY year, and the people won't leave. It's amazing.
A handful of home buyers line up days before sale west of Boynton Beach
Just can't get enough.
Your cognitive dissonance stems from the fact that you think they're lining up to buy homes.
If you look at them as lining up to buy a 3.5%-down put option on a 30-year inflation hedge - with a more or less free walkaway - and, oh yeah, a place to build a new house thrown into the bargain, the behavior starts to make more sense.
How do you know a surge of powerful blogging didn't cause power usage to surge?
Maybe oil's price rise caused people to switch to electric heaters. I could go on...
the first one is a trivial answer if you care to estimate it yourself
the second one could easily be determined by including the DoE's data on heating oil, but nevertheless I would expect that to be a gentle shift over time. On a side note if the house is equipped with oil, you need more than just a space heater to keep the pipes or doors from freezing. If you were upgrading a house on heating oil it would either be to wood pellets or natural gas if available because they are more cost efficient.
You can literally set your watch to electricity demand. You can very accurately estimate GDP from electricity usage. It could change in the future, but it has a proven record that is probably not matched by anything except tax and survey data.
The combined global land and ocean surface temperature was the sixth warmest October on record, according to NOAA’s National Climatic Data Center in Asheville, N.C. Based on records going back to 1880, the monthly National Climatic Data Center analysis is part of the suite of climate services NOAA provides.
NCDC scientists reported that the average land surface temperature for October was also the sixth warmest on record. Additionally, the global ocean surface temperature was the fifth warmest on record for October.
The combined global land and ocean surface temperature was the sixth warmest October on record
It's a pretty well known fact that when the ice cubes are melting in your refrigerator, the problem is that it's too cold. The earth's cooling coils have frozen over.
lawyerliz
I was going to yell at you for whining about lack of sunlight down near the equator, but summer time in BC is just awesome because of extended daylight. Maybe take a cruise to Alaska next summer?
I think online retailing has issues with scores moving lower (losing sales on CC limit reductions and score destruction) but they are removed from the credit decision....
Well, the first one was a joke, and the second just a small example off the top of my head, but light bulbs in my head usually go on in the hours of darkness.
I still haven't heard whether usage is up or dollars.
Iranian President Mahmoud Ahmadinejad reportedly sees a U.N.-written nuclear fuel proposal as “in line with Iran’s interests,” Reuters reported Nov. 17, citing a senior Iranian official speaking on condition of anonymity. The official reportedly told Reuters that Ahmadinejad “wants the deal to be sealed” and is boosting efforts to “defuse the nuclear dispute with the West.” A senior Western diplomat in the Persian Gulf region reportedly told Reuters the president faces “rhetorical red lines” and opposition from domestic rivals on the issue."
gold is a great conductor of heat and electricity. In fact if it were plentiful enought
it would have been used for wires, instead of copper. Don't know how it compares
to stuff like fiber optic.
Climate is measured in very long waves. What it might have been in October of 2009 is not indicative of a trend. Meanwhile, global ocean temperature, from what I've read, continues to increase. That's as solid an indication of global warming as the thermometer on your porch re the weather in your neighborhood.
Not true- Aluminum is a decent conductor but can reflect heat well. Hence, it has low emissivity. Similarly, they used a gold foil on the Apollo missions to keep the LEM from absorbing too much heat. Thermal conductivity and emissivity do not necessarily correlate, thought thermal conductivity and electrical conductivity often do-
in Sioux Falls SD, which is frozen, FROOOOZEN SOLID, for three straight month EVERY year
Frozen solid for 3 months, man that's a MILD winter up there !! I lived next door for a while
Remember that movie "The Day After Tomorrow". One of my friends laughed their head off at how stupid it was and predicted life in SD would carry on pretty much without interruption, he also predicted his old Grandad would say "IT WAS WAY COLDER WHEN I WAS A YOUNG FELLA".
~splat
They're kind of backing themselves into a corner, aren't they.
I think they are really going to regret blowing a gold bubble. Talk about debt destruction... If J6P starts pulling deposits out of banks to put in in , it makes Shelia cry...
You have MADD and all those groups who want to protect you from yourself, but police groups are also against it. And politicians don't like to take stands on the other side of the police groups. Who wants to be the guy who pushes the age to 18 the next time a 20 year old drunk driver dies and people go on TV to blame you personally for causing the death?
I think Spencer's point is that when it is hot people use air conditioning, which is almost always powered by electricity. When it's cold, some heat is electric, but an awful lot of it is natural gas or other nonelectric sources.
In addition, it takes more power to cool a house one degree than to raise it's temperature one degree. I can pull out some charts and do some physics for you if you would like.
Ive been thinking along these lines, but trying to be less simplistic. You see, there have been a lot of job losses, and yes, those folks are broke. But from what I see, the job losses are mostly younger, and uneducated, so largely, they are lower income to start with, and now they are half or zero income, aside extended UE bennies, etc. But what of the spending of those that havent lost their jobs, and what happened to their spending before and after? Yes, some before was boosted artificially by credit growth and "equity" extraction from homes, the former now in decline, the latter, probably mostly gone. But some of the pullback in spending was people who have jobs who just got scared. And then ends up in a higher saving rate. Bernankes objective, IMO, is to reinflate assets any way he can so as to bring down the saving rate. Screw the people who dont have jobs, they aint saving nothing from nothing. But the people that matter, the already relatively well off are BBs folks, and he wants them to feel rich again and spend like they feel they are getting richer. So, take the 10% decline in spending peak to trough, where we seem to have leveled off. 5% of that is the rise in UE from 5% to 10%. The other bit is largely a 4-5% increase in the savings rate from 0%, and a -1% in credit growth (not mortgage, but revolving, and non) We can argue about the home equity part, and I personally think it was a big part of the housing blowup and otherwise ridiculous mass luxury movement in spending, but that is not really relevant now since it is history for a while, given home price trajectory and credit conditions.
BB isnt going to do squat on the first 5%, since he isnt getting any real job growth any time soon. He's after the asset inflation so that he can claw back the savings rate. Which of course, makes NO sense in terms of actual policy, since we have to save more as a country. And the funny thing is, he professes to say (continually) that bubbles cant be defined, even though he has a policy that is implicity designed to blow them. I really think he believes we can go back to the status quo and cant see anythign else as a way to deal with this. But to say households are broke, well, it's not completely true. The only thing that is completely true is that Bernanke is a fool and should have stayed in academia.
"Hence the bubble will inexorably move to its denouement, at which point gold will probably be north of $3,000 an ounce and oil well north of $150 per barrel."
No question in my mind we will see those levels by the end of next year.
Lots of money printing for MBS yet to be done. As I've said before, no way Bernanke stops buying MBS in March, not with 10% of all mortgages delinquent by that time and unemployment at 12%.
He's too stupid to realize all his money printing and easy money policies are driving up unemployment, so he will keep at it.
They're kind of backing themselves into a corner, aren't they.
And that is classic understatement.
These guys are deflationistas. Y'all on board with that? 53% of the voting commentariat claims to be an inflationista-
At some point, probably before the end of 2010, the bubble will burst. The deflationary effect on the U.S. economy of $150 plus oil will overwhelm the modest forces of genuine economic expansion. The Treasury bond market will collapse, overwhelmed by the weight of deficit financing. Once again, the banking system will be in deep trouble. The industrial sector, beyond the largest and most liquid companies and the extractive industries, will in any case have remained in recession – it is notable that, in spite of the Fed's frenzy of activity, bank lending has fallen $600 billion in the last year. Unemployment, which will probably enter the second downturn at around current levels, will spike further upwards. The dollar will probably not collapse, but only because it will have been declining inexorably in the intervening year, to give a euro value of $2 and a yen value of 60 to 65 yen to the dollar.
Ehp or Crazyv-maybe I'm not understanding the obversation....what would be the unexpected boundary you refer to EHP? taxes being applied...my apologies for disconnect....
fica is really in algorithm basket of all credit....
Why middle-aged ''progressives'' are stunting opportunity in Northern California.
The road north across the Golden Gate leads to some of the prettiest counties in North America. Yet behind the lovely rolling hills, wineries, ranches and picturesque once-rural towns lies a demographic time bomb that neither political party is ready to address.
Paradise is having a problem with the evolving economy. A generational conflict is brewing, pitting the interests and predilections of well-heeled boomers against a growing, predominately Latino working class. And neither the emerging "progressive" politics nor laissez-faire conservatism is offering much in the way of a solution.
These northern California counties--which include Sonoma, Napa, Solano and Marin--have become beacons for middle- and upper-class residents from the Bay Area. These generally liberal people came in part to enjoy the lifestyle of this mild, bucolic region, and many have little interest in changing it.
A DUI costs 10K in fees/legal costs alone. That's an impressive sin tax. Granted, it is pretty bad behavior, but there is a lot of evidence that the drinking age drives bad behavior among the youthful rebels amongst us.
Look at it this way. The govi is the mortgage market. What is going to change in the next five months leading to the private sector taking over? At a minimum, the govi has to explicitly guarantee FNM, FRE paper and the Fed has to support some percentage.
But to say households are broke, well, it's not completely true.
No, I think the statement pretty much holds for the average upper-middle-class on down, and not more than a few used-to-be-rich types, too.
You simply cannot underestimate the lasting impact of the RRE bubble. Despite home prices rising on average greater than 100% during the bubble, homeowner's equity declined throughout. That means every dime of appreciation and more was spent, and when all is said and done the equity that forms the wealth foundation for most of America is gone.
There are many other aspects to this, but I expect they'll be well-covered in the upcoming (and highly anticipated) "Conjure Communique".
I'm sorry, but I'm really weary of all the "inflationista," "deflationista" crap.
Going into this, it was obvious it was going to be deflationary. It's equally obvious that, coming out, it's going to be inflationary.
Everybody gets what they want. Right?
Assuming we come out of it with a fiat money system, then yes; no need to get piss-y. It was just a question.....
Have you noticed that the talk of exit strategies (which was just talk, anyways) has suddenly evaporated? Even the Australians, who have raised interest rates twice, are "we could raise or we could lower; we have to see how the data goes." I think governments around the world are getting the message that a V recovery is off the table.
Well in northern Alaska the grandparents say winter was a month longer when they were young, making life a lot easier for subsistence ice-fishers and hunters.
My grandparents said they walked from Brooklyn to Manhattan several times, under the Bridge. I skied in Vermont on Columbus Day once, and in late June. Just anecdotes, nothing to see here.
Have you noticed that the talk of exit strategies (which was just talk, anyways) has suddenly evaporated?
Wasn't Lacker talking essentially about exit strategy earlier today. Didn't he say we couldn't or shouldn't let weakness in a few sectors from keeping us from raising rates?
My reason is that he can print all he wants... but he can't raise rates w/o exposing the TBTFs insolvency. It's a one way street, unless they decide to address the problems of TBTF.
well, if you mean broke in terms of their paper wealth imploding, well, yes, a lot were broke before the bubble, and many who thought they had saved are now broke. Without a doubt a lot of the paper wealth was turned into debt and spent. The question is, how much of income gets shoveled into filling that hole...right? And BB wants to reflate and make the hole go away, so the income gets spent and not saved. Im not disagreeing with people's hh balance sheets being totally mangled from this, and that spending that occured before for some time was artificially boosted...the issue is, can we really pretend that we'll get away with a reinflation without also destroying the economy through inflation in the things people buy, effectively whacking even further, and already diminished standard of living? I
cclt
I was talking about those who would be the marginal online purchasers losing CC accessibility, something that might show up on Amazon's internal data where they see what looks like a buyers hitting a brick wall because of cuts to their CC limit/credit rating. Unless there is some way for them to purchase conveniently without a CC that I'm unaware of (mailing checks, money orders, and cash ahead of sale... but that's a bit of a barrier in terms of convenience when possible)
The bringing sales tax on to internet sales was something else that I think can be expected later
they are already doing all they can do to fight the deflation which is in motion. They will continue to fight it until it blows up in their face, when they are one day forced to realize where all the liquidity has gushed out, and that this "deficits dont matter" mantra eventually comes back to bite you one day, especially when the demographics are totally against it. It worked before because we got bailed out for various reasons, this time...the tide is pushing in the other direction.
My reason is that he can print all he wants... but he can't raise rates w/o exposing the TBTFs insolvency. It's a one way street, unless they decide to address the problems of TBTF.
Unfortunately, little of what he's been printing has made it into the economy with any sort of velocity. As for printing, the debt we've accrued over the last 40 years, and in particular over the last few should be enough to sink the dollar were it all to be dumped at once. BB is having a hard time making anything happen on the inflation front, and if the worlds largest consumer economy bites it, my suspicion is that other economies will be hurt as bad as ours if not worse. We'll see how it goes.
You're right about the TBTF. RD and I discussed this a few weeks back, and I felt like it's a no win situation.
but he can't raise rates w/o exposing the TBTFs insolvency
He can't raise rates period.
The government couldn't afford it's own debt service, corporate america (which is addicted to cheap credit) would hemorrhage red ink, the RRE market would absolutely roll over and die (taking the GSEs, FHA, and all the MBS in the Fed's portfolio) down with them, etc.
Mauldin seems to think that Ben will someday stand up and tell Timmy and Co. "no", but I just don't see it.
Some foreign countries are asserting US liquidity is popping up in their stock and real estate markets. There was a serious debate a few years ago about exporting inflation. Perhaps now we have also learned how to export bubbles and screw up other people's economies. Awesome economic weapon if you could do it intentionally against an enemy. A $%^&ing mess if it's unintentional and does damage to your allies.
EHP- That would be great data from Amazon....and it has to be happening....thanks for rehash....
I would not be surprised if the PTB haven't made a challenge to banks asking them to ease up on cc card limits/overdrafts for Xmas....hey we saved your ass, now save Santa and the xmas shopping season....or else....
They can't stop buying MBS, and they can't continue either..
By buying MBS, they are allowing Wall Street to continue to create Asset backed Securities. Wall Street can do that indefinitely as long as they can find borrowers (Tax Break, solved), and the government buys. In the process the banks can bail their equity capital positions out, and Wall Street can pay its bonuses.
The problem is, that when the government issues debt to pay for the ABS, that's a real claim on future taxes. So by buying the MBS, they have effectively linked tax income directly to bailing out the banks and paying the bonuses. Offset slightly by the income they're getting from the MBS, but that's imploding just as fast as people foreclose.
As soon as they stop buying, the excess credit issuance by the banks stops, goes into reverse, and we get a full on Fisher debt implosion, just like we were having last year, when they kicked off TARP to stop it. There's no effective way out of that now.
So, ceteris paribus, and frankly who knows what damnfoolthing Bernanke will try next - this doesn't stop now until the consequent growth in public debt becomes unsustainable.
If anyone was brave enough to try and fix it, they wouldn't be stupid enough to volunteer to be blamed for the outcome - so i guess we just have to hope they are working up their contingency plans.
I mean J6P's balance sheet is either net red or not far above it.
Think about it... what are the sources of most people's wealth? Their equity, assets, investments and pensions. Equity? Gone. Assets? Fire sale value on EBay. Investments? Toast. Pensions? Sorry.
Only takes overnight to run up 10 G's on a credit card no matter what your income, but it can take a decade to pay it off. Try paying off that debt while simultaneously saving 10% more and I guarantee your PCE will be down big-time.
Hey, and that only applies to the 80%(????) of people still fully employed at their regular wages. The remaining 20% are either making due on UE, part-time or under-employment.
J6P is well and truly broke. [Of course as averages go, that means some people (like probably most of the commentariat) are in decent shape whereas others are far, far worse.]
turning them into fish food is being too nice for this evil lair........
trolling them off the farallon islands with the back of knees sliced open could turn into a lucrative pay per view program for discovery channel....or the dontmesswithchildrennetwork.com hosted by the mutual omaha.....
There is no end to the Benfoolery in sight IMO. What exactly was he thinking when he chose March 2010 as the end of MBS buying? Did he think some magically recovery would be in place and that he could end such a thing? I mean, he cannot raise rates with the budget deficits financed all on short term rollover. So were stuck with that. But what was his stated logic of why it would be even possible for him to consider and end to buying MBS? Sure, he got away with paring back the Treasury buying, but this is a totally nastier ball of wax to extricate oneself from.
Perhaps now we have also learned how to export bubbles and screw up other people's economies.
Latin America
Japan
Asia, Russia
Emerging Europe, Asia
No kidding eh? Most of the discontent in the world directed at America is not because of its military. It's getting beaten up with the financial system, and then raped by multinationals under the supervision of the IMF.
At first China devalued its currency just so it could build up reserves and protect itself from that kind of stuff. They didn't ease up enough in time. Now everyone goes down together.
Unfortunately, little of what he's been printing has made it into the economy with any sort of velocity.
I suspect that can change with alarming speed. Right now and the special interest beneficiaries of the stimulus, appear to be soaking it all up. But at some point they may feel less risk averse, and spend/invest some of it, somewhere unexpected.
Yeah, we definitely exported bubbles going a ways back.
You have to know that when yields for emerging market debt are within 100 basis points of Treasuries then there's something seriously wrong. Liquidity was the bubble, and we exported it worldwide.
Im realllly looking forward to the next edition of the Survey of Consumer Finances. The 2007 was the last of the illusion, came out just in time not to capture the "wealth" destruction. But when you disaggregate the data in there, it's pretty frightening. The vast majority of households, like you said, have little or no savings, and many are negative net worth..no assets, big debts. Now, for younger households, you arent expecting to see much in the way of net worth, but for older households, you can stratify by income, and you can see that there are many many hhs that never made enough income in their lifetime to squirrel any away, and are going to have to fend on SS. And somehow, we'll manage to not capture the true rise in the cost of living with our hopeless CPI numbers, and the SS increases wont be big enough to offset the ridiculous impact on real budget items. I mean, any one of us who runs a monthly/annual budget can tell you that the inflation in budget costs is not reflected in a basic CPI. But of course, that is by design.
The only reasonable conclusion is that he doesn't understand the root cause of the problem, and actually believes all the silliness about it being liquidity.
My experience of economists is that they're very skewed towards the 'memorise and successfully regurgitate' the textbook academic population, so in this case, since the textbook is wrong, no matter how good an analyst he may be individually, he's screwed.
If anyone eventually wants to solve this mess - well, first, fire all the economists.
Yeah, we definitely exported bubbles going a ways back
Excessive prices are caused by too much money chasing too few goods. Bubbles are simply the asset price form of this inflation: Savings supply the money, and assets are the goods. China is the major source of additional world savings in the last 10 years, in excess of their own investment. So, if any country can be blamed for exporting bubbles, it is China. We just creamed a few hundred billion off the flow, between Wall Street and overborrowed homeowners.
OT: local meetup in Portland, Oregon tonight.
6:30pm at The Lucky Lab brewpub, 915 SE Hawthorne Blvd.
We have six RSVPs so far but walk ins are welcome. I'll make a little place holder with a "CR" on it and let the staff know who I am also.
"What exactly was he thinking when he chose March 2010 as the end of MBS buying?"
He pulled the $1.25T number out of his a** back in March, and then by Sept realized he couldn't spend it all by te end of the year (he is already buying multiples of new issuance - meaning he is buying seasoned product), so he extended it to March.
There was no more thinking beyond that. It's not like he has a plan.
No problem. Just keep sending trillions into the effort to keep asset prices high. That will keep bankers and other people who live off high asset prices rich and happy, and they will use some of the extra money to employ others.
But what was his stated logic of why it would be even possible for him to consider and end to buying MBS? Sure, he got away with paring back the Treasury buying, but this is a totally nastier ball of wax to extricate oneself from.
Just pure speculation, but can the Fed force primary dealers (behind closed doors) to start or increase their purchases of MBS?
Savings supply the money, and assets are the goods.
That was part of it but far from all of it.
Think of the bubble dynamics in RRE. One house on the block rises in value $50K; suddenly all other 20 houses on that block are worth $50K more, and at least 10 of them go ahead and borrow that. That's $500K more money that just "appeared" and has to go somewhere.
Doug Noland (of PrudentBear) has extensively documented how the GSEs were the conduit for creating trillions in liquidity that was necessary to blow the bubble.
My FIL got grumpy because he found a portable tree stand on his property and a crossbow quarrel. That made me read an article in the Post about bowhunting. As an aside it mentioned that some of the local parks have a problem with poaching.
I know my BIL feeds his family on venison because he has too. Then I found out in No. VA. there are people who will buy venison - no questions asked.
Pretty hard to create jobs in the private sector with all the uncertainty of taxes, regulations, banking and government control coming from Washington. Then what will sell besides minimal needs products when many are unemployed and expect to be for a long time. I still see BS and no positive help to move forward.
Isn't it interesting how it's mostly high-placed women in financial power that are making noise, while with their male counterparts are content to keep the status quo intact...
Sorry, brain lapse on the Fed-dealer relationship and I know the MBS in question are issued from Fannie, Freddie, and FHA. Still, can there not be some arm twisting by the Treasury and/or Fed. The Fed does have many alphabet soup programs that benefit some, if not all of the primary dealers it can use as leverage.
Janet Yellen, another Fed insider (unlike Lacker, who is there to amuse the others), hints that reducing leverage ain't gonna happen. The excuse? Because raising interest rates to lower leverage may benefit savers at the expense of borrowers. Can't have that.
Between Bernanke claiming yesterday that it wasn't obvious to him that asset prices are in a bubble now, I think we can see what is really going on quite clearly: These guys want to find any reason to keep the punch flowing at the grand asset bubble party. No intervention on the way up, and massive intervention on the way down. The only unifying theme here is the desire to keep asset prices high. Only with high asset prices can the FIRE sector continue to extract disproportionately large rentier profits from real producers.
You know what they say: hell is when a pot is boiling over on a stove, and a woman is prohibited from doing anything about it, while a man is forced to do something about it...
If you can goose the employment level, that will automatically goose consumption which, in turn, will goose industrial production.
OK, let's suppose we arrange for house prices to go back most of the way to their ridiculous peak level (oh, wait, that's been done), and everyone is making money and being employed by buying and selling or holding RE. Is that good?
If we lowered taxes and removed the social safety net and subsidies to education and health care, we'd be doing just as well as that rich, industrialized free-market model country with the unlimited bonuses. The name escapes,,,Utopistan? Widgetland? Libertarianation?
nemo?
omen?
Interesting day. Not only is my host having problems, but for some reason I'm getting swamped with spam (mostly from Russia).
best to all
creditcriminalslovetarp, re: last thread,
On the subject of FICO, you think that might have some implications for online retailing? I agree with energyecon that online retailers will have to pay local sales taxes soon, even before marijuana prohibition is dropped, but maybe FICO -> credit card -> online shopping is an unexpected boundary, or is there way too much slack for that to show up?
The generation of 'spam' has been added into the industrial production metrics, gotta help goose the figures somehow !
~splat
CalculatedRisk wrote:
It's what I would do if I was a Federal Government wanting to reassert control of the news flow... just sayin'
So the dip for the current downturn is 70% greater than the average for the previous "severe recessions" (~117 to 100 vs ~110 to 100 peak-to-trough)? Yikes!
No. 50 degree days implies GREATER electricity usage for heating in October not less thus biasing the estimates assumed to go to production UPWARD.
re: the actual post
Might I suggest that the 'severe' / v-shaped recessions are demonstrative of economic cycle dominated by the changing context of inventory, and that 1980/1990/2000 ones are demonstrative of ones dominated by the changing context of credit growth? (those factors are not mutually exclusive, which is why I chose to say dominated)
Full marks to CR for some quality
, but surely we need another 6 months to call this chart reliably.
On the flip-side, if the chart does follow the low-path out, then that's your 'inclined L' right there.
Rob Dawg
I don't see any conflict of opinion. Lower temperature -> biases electricity demand upward
electricity demand relatively low -> should be biased even lower to offset low temperature
Are you measuring in dollars or kilowatts? The kilowatt is a reliable measure, although light/watt is still rising after all these years.
From some earlier discussion in the uptick in capacity utilization rate, that appears to be more a function of capacity destruction (if capacity falls at a faster rate than activity, the absolute level of activity could be falling and we would still see an uptick in the utilization rate)
energyecon: Industrial Production - Capacity and Utilization Rate
edit: that discussion ref is with you, Dawg
curious, yep - this was a super severe recession! So we'd expect the recovery to be super duper ... uh, not so far.
I understand why the V analysts think we will have a strong recovery, but I disagree.
If the 2007 recession had been caused by the Fed tightening rates to slow inflation (like most recessions), then when the Fed lowered rates, the economy would have come roaring back. But this one was caused by the bursting of the housing/credit bubble, and this type of recession is usually followed by a sluggish recovery.
A steep decline followed by a sluggish recovery ... hey, that is my forecast!
best to all
Jonathan, agreed. It is way too early to tell - the channel is so narrow in the early months. Six months from now this will be an interesting graph ...
best wishes
Reddi Watt for the Council of Economic Advisors!
("electricy costs less today you know, than it did even five years ago....")
Rob Dawg wrote:
Angry Bear is slightly left of center, so they're slightly fellating the current administration.
/snark
I'm with Rob...I think Spencer has the logic backwards, and we should expect a downward revision, not an upward one.
cd
I'll take the under - as in it will be below the dashed line...
(because inventory is counter-cyclical and credit is pro-cyclical, but there could be other dominant factors that could substitute for the counter/pro-cyclical nature. like a jump upward in oil prices could lead to CPI and PPI inflation that reduces the real change in credit. or the dropping of a regulatory barrier that unleashes a coherent wave of asset appreciation in a Minsky bubble which does ultimately end)
citizen allen, just got your message, are you looking at securities from this deal?
3B2 EDGAR HTML from 48194 1..2 ++
If so, it depends on what bonds are being offered.
You should know too that MBIA originally wrapped those deals, but is suing to get out of them.
http://www.mbia.com/investor/publications/RFCCOMPLAINT.PDF
The Angry Bear guy is saying the exact same thing as youse guys
That increased heating demand is likely responsible for overstating industrial production
chill
To even attempt to adduce correlation with monthly weather given all the factors affecting electricity usage seems a waste of time.
I have more questions than answers today, but here's another...
Any correlation between electricity usage and the extension of daylight savings time which used to end in early Oct but now extends to the end of Oct.?
1 currency now -yogi wrote:
no it isn't. Utilities use the weather forecast themselves to plan demand. They can even tell when there is a big TV event like the supebowl on because everyone opens the fridge at half-time and causes the compressor to turn on.
Am I missing something? Industrial production is measured by electric consumption??? I really thought they measured output or inputs or sales or something. Or like Larry Summers determined the recession was over because the number of google search's for "economic recession" was down. we're screwed
Twenty-five comments into this thread and I haven't seen a single snarky comment that Spencer's chart has the trough for the current recession in the wrong place (say, 8 months too soon).
Is the CR commentariat going
?
Upon my reading the post the first time, Spencer seemed to have it backward. After my having read the post two more times, Spencer still seems to have it backward. The bias in the figures is an upward, not downward, one.
EHP wrote:
Concur!
BBC NEWS | UK | England game drives power surge
EvilHenryPaulson wrote:
No he said "biased downward." He may mean what we are saying but he isn't saying it.
daylight savings time is stupid.
not the least of which because at best what it does is lower lighting needs of employers and increase them for individuals after working hours
either the workplace will be unaffected (not enough natural lighting, the landlord might like to show off their property by lighting the whole place up at night anyways), or will probably have less energy savings than a homeowner (easier for a workplace to optimize their energy efficiency, individual at home probably has half a dozen rooms lit up by incandescent bulbs. worse yet the individual may have electric baseboard heating and have to crank that up more instead of the natgas powered HVAC at worked)
Daylight Savings Time should be Abolished
Absolutely.
EvilHenryPaulson wrote:
wrong again. it's Standard time that increases lighting needs for individuals.
AGREE CUBED!
Not where I live, you go to work in the dark and you come home in the dark.
Rob Dawg wrote:
crud, you're right along with Circling the Drain and Charles Kiting upon a careful 3rd reading
using lower temperatures to argue lower electricity demand makes no sense, don't know what he was thinking
Daylight savings was supposed to reduce the need for children to go to or from school in the dark. Easier than changing class time.
EvilHenryPaulson wrote:
It's a tradition. Like Walter Cronkite. The last shared experience in Merica. Can we really live without: spring ahead, fall back?
That might work in the summer months, but not a whoooole lotta AC demand in October...though it has gotten an occasional workout here on the Third Coast even in November...
energyecon wrote:
Great stuff, ee. Is there any way to normalize one against the other in a chart?
I thought it was for after hours sports.
EvilHenryPaulson wrote:
Is he in Arizona or something? BTW, NOAA reports this as the 3rd coolest October on record. I blogged about it last week: Exurban Nation: Beach Weather
A handful of home buyers line up days before sale west of Boynton Beach
Just can't get enough.
http://news.yahoo.com/s/nm/20091117/bs_nm/us_citigroup_pay
How do you know a surge of powerful blogging didn't cause power usage to surge?
Maybe oil's price rise caused people to switch to electric heaters. I could go on...
Charles Kiting wrote:
That may be true, I'm on a roll. Winter afternoon sunlight is extended.
To answer the original question though, energy savings vary but generally are negligible (fractions of 1%)
/still think the sun's peak position in the sky should determine when noon is, why not just have different business hours for each season. we have the technology to cope
Nanoo-Nanoo wrote:
I'm used to leaving in the dark and coming home in the dark, but you are right and I was wrong
ditto for every other post that corrected me
EvilHenryPaulson wrote:
The word "noon" is a variant of "nine". The ninth hour of daylight is generally the highest temperature of the day (on days that have 12 or more hours of daylight).
EvilHenryPaulson wrote:
Excuse me, but once you become invested in an opinion, is yours to defend no matter how ridiculous it may seem in hindsight! Don't let it happen again-
EvilHenryPaulson wrote:
There are still people living, LIVING, everyday of the YEAR, in Sioux Falls SD, which is frozen, FROOOOZEN SOLID, for three straight month EVERY year, and the people won't leave. It's amazing.
Your cognitive dissonance stems from the fact that you think they're lining up to buy homes.
If you look at them as lining up to buy a 3.5%-down put option on a 30-year inflation hedge - with a more or less free walkaway - and, oh yeah, a place to build a new house thrown into the bargain, the behavior starts to make more sense.
Free money for everybody!
I must disagree with EHP on this one:
I hate Standard time. I want my light in the evening!!
And thanks for your comments.
BTW, someone probably already posted about this, but did you see the close on
?
$1140.60 (up 0.80)
The most interesting part about that was Kitco's breakdown:
-6.10 due to dollar strengthening
+6.90 due to predominant buying
Disconnect city.
NOTaREALmerican wrote:
Keeps the riff-raff out.
Daylight savings is like the US drinking age. A silly idea with lobbyist support that nobody cares to expend political capital to change.
No apology necessary, its a sore subject for some who live North of 40degrees.
Led by China, carbon pollution up despite economy - Yahoo! News
NOAA - National Oceanic and Atmospheric Administration - NOAA: Combined Global Surface Temperature Was Sixth Warmest for October
Nice try.
1 currency now -yogi wrote:
the first one is a trivial answer if you care to estimate it yourself
the second one could easily be determined by including the DoE's data on heating oil, but nevertheless I would expect that to be a gentle shift over time. On a side note if the house is equipped with oil, you need more than just a space heater to keep the pipes or doors from freezing. If you were upgrading a house on heating oil it would either be to wood pellets or natural gas if available because they are more cost efficient.
You can literally set your watch to electricity demand. You can very accurately estimate GDP from electricity usage. It could change in the future, but it has a proven record that is probably not matched by anything except tax and survey data.
lawyerliz wrote:
Then get up before sunrise. Clock changing is a waste.
It's global warming, folks.
/ducks and runs.
But I don't like to get up in the morning!!
1 currency now -yogi wrote:
Coldest on record for the 3 places the deniers could find...
SPLAT-gotcha anyway. lol. I'm a wicked good shot.
1 currency now -yogi wrote:
It's a pretty well known fact that when the ice cubes are melting in your refrigerator, the problem is that it's too cold. The earth's cooling coils have frozen over.
My ad is at least for mtges today!
Jeez, that's the last time I bring up daylight savings time with this group!
p.s.:
spot market just opened, up another $1.30.
lawyerliz
I was going to yell at you for whining about lack of sunlight down near the equator, but summer time in BC is just awesome because of extended daylight. Maybe take a cruise to Alaska next summer?
there is probably another website you can mutually convince each other about global warming on...
I think online retailing has issues with scores moving lower (losing sales on CC limit reductions and score destruction) but they are removed from the credit decision....
Well, the first one was a joke, and the second just a small example off the top of my head, but light bulbs in my head usually go on in the hours of darkness.
I still haven't heard whether usage is up or dollars.
Our light/dark changes are about a half hour different. Less light
in the summer, more in winter. half an hour, 40 minutes or so.
Goooooldddd. Must buy
cclt
thanks, was thinking about Amazon's (∞^2 + 1) : 1 P/E
" November 17, 2009
Iranian President Mahmoud Ahmadinejad reportedly sees a U.N.-written nuclear fuel proposal as “in line with Iran’s interests,” Reuters reported Nov. 17, citing a senior Iranian official speaking on condition of anonymity. The official reportedly told Reuters that Ahmadinejad “wants the deal to be sealed” and is boosting efforts to “defuse the nuclear dispute with the West.” A senior Western diplomat in the Persian Gulf region reportedly told Reuters the president faces “rhetorical red lines” and opposition from domestic rivals on the issue."
Daylight savings time--it's better than arguing which way the
toilet paper should hang . . .
EvilHenryPaulson wrote:
Were we not just discussing the cooling costs? Seems relevant. At least here in Texas. Of course Cap and Trade is a whole 'nother order of magnitude.
"I'm getting swamped with spam (mostly from Russia)."
I've been getting a lot of that the past few days, but it seems to be tapering off.
Does gold hold heat well? Its pitch dark, its 25 degrees, and the cute doggie is calling me.
lawyerliz wrote:
ARGH!!! Don't give'em any ideas, liz!
yogi
BEA surveys electricity demand in units of energy like kW•h
you can find some more similar info in the rail report CR had up in the last week
gold is a great conductor of heat and electricity. In fact if it were plentiful enought
it would have been used for wires, instead of copper. Don't know how it compares
to stuff like fiber optic.
Blackhalo wrote:
Ask them about the homogenized northern Russia data gaps.
Oxtail wrote:
Who are these lobbyists? Is it like MADD where having achieved their primary goals, they need to find some dubious ill to justify their existence?
Because it is a conductor it does not hold heat.
There isn't going to be any meaningful increase in industrial production until households start spending again.
And, as we know, that isn't going to be for a while.
They're broke.
And so we need
s
Climate is measured in very long waves. What it might have been in October of 2009 is not indicative of a trend. Meanwhile, global ocean temperature, from what I've read, continues to increase. That's as solid an indication of global warming as the thermometer on your porch re the weather in your neighborhood.
lawyerliz wrote:
Given how much CISCO charges for Fiber Channel switches, it's probably, cheaper...
EvilHenryPaulson wrote:
that is an interesting observation.
mp,
I think you may have missed this: PrudentBear
You have to pay for 'talent' like that.
~splat
Dropping
and 
s and 
and 
for
the hungry.
Which includes me, so I'm off to get some dindin.
The only reason we have daylight savings time is that Americans haven't figured out a way to get daylight on credit yet...
cd
lawyerliz wrote:
Not true- Aluminum is a decent conductor but can reflect heat well. Hence, it has low emissivity. Similarly, they used a gold foil on the Apollo missions to keep the LEM from absorbing too much heat. Thermal conductivity and emissivity do not necessarily correlate, thought thermal conductivity and electrical conductivity often do-
Just flashing back to the coeds discussion earlier...
Sex infections still growing in U.S., says CDC
| Reuters
Yikes!
They're kind of backing themselves into a corner, aren't they.
Frozen solid for 3 months, man that's a MILD winter up there !! I lived next door for a while
Remember that movie "The Day After Tomorrow". One of my friends laughed their head off at how stupid it was and predicted life in SD would carry on pretty much without interruption, he also predicted his old Grandad would say "IT WAS WAY COLDER WHEN I WAS A YOUNG FELLA".
~splat
mp wrote:
I think they are really going to regret blowing a gold bubble. Talk about debt destruction... If J6P starts pulling deposits out of banks to put in in
, it makes Shelia cry...
"One of my friends laughed their head off "
They share heads there?
pavel.chichikov wrote:
What it contains the language "and you can build as many atomic weapons, from the design China sold you, as you like." ?
~splat
You have MADD and all those groups who want to protect you from yourself, but police groups are also against it. And politicians don't like to take stands on the other side of the police groups. Who wants to be the guy who pushes the age to 18 the next time a 20 year old drunk driver dies and people go on TV to blame you personally for causing the death?
mp wrote:
And that is classic understatement.
mp wrote:
We're talking about production in China right ?
~splat
I think Spencer's point is that when it is hot people use air conditioning, which is almost always powered by electricity. When it's cold, some heat is electric, but an awful lot of it is natural gas or other nonelectric sources.
In addition, it takes more power to cool a house one degree than to raise it's temperature one degree. I can pull out some charts and do some physics for you if you would like.
Ive been thinking along these lines, but trying to be less simplistic. You see, there have been a lot of job losses, and yes, those folks are broke. But from what I see, the job losses are mostly younger, and uneducated, so largely, they are lower income to start with, and now they are half or zero income, aside extended UE bennies, etc. But what of the spending of those that havent lost their jobs, and what happened to their spending before and after? Yes, some before was boosted artificially by credit growth and "equity" extraction from homes, the former now in decline, the latter, probably mostly gone. But some of the pullback in spending was people who have jobs who just got scared. And then ends up in a higher saving rate. Bernankes objective, IMO, is to reinflate assets any way he can so as to bring down the saving rate. Screw the people who dont have jobs, they aint saving nothing from nothing. But the people that matter, the already relatively well off are BBs folks, and he wants them to feel rich again and spend like they feel they are getting richer. So, take the 10% decline in spending peak to trough, where we seem to have leveled off. 5% of that is the rise in UE from 5% to 10%. The other bit is largely a 4-5% increase in the savings rate from 0%, and a -1% in credit growth (not mortgage, but revolving, and non) We can argue about the home equity part, and I personally think it was a big part of the housing blowup and otherwise ridiculous mass luxury movement in spending, but that is not really relevant now since it is history for a while, given home price trajectory and credit conditions.
BB isnt going to do squat on the first 5%, since he isnt getting any real job growth any time soon. He's after the asset inflation so that he can claw back the savings rate. Which of course, makes NO sense in terms of actual policy, since we have to save more as a country. And the funny thing is, he professes to say (continually) that bubbles cant be defined, even though he has a policy that is implicity designed to blow them. I really think he believes we can go back to the status quo and cant see anythign else as a way to deal with this. But to say households are broke, well, it's not completely true. The only thing that is completely true is that Bernanke is a fool and should have stayed in academia.
"Hence the bubble will inexorably move to its denouement, at which point gold will probably be north of $3,000 an ounce and oil well north of $150 per barrel."
No question in my mind we will see those levels by the end of next year.
Lots of money printing for MBS yet to be done. As I've said before, no way Bernanke stops buying MBS in March, not with 10% of all mortgages delinquent by that time and unemployment at 12%.
He's too stupid to realize all his money printing and easy money policies are driving up unemployment, so he will keep at it.
This trough alignment is an interesting perspective. Looking at the peak to presumed trough provides a perspective of bouncing along the bottom.
TJ and The Bear wrote:
These guys are deflationistas. Y'all on board with that? 53% of the voting commentariat claims to be an inflationista-
At some point, probably before the end of 2010, the bubble will burst.
And that's before the moon explodes in 2012.
Ehp or Crazyv-maybe I'm not understanding the obversation....what would be the unexpected boundary you refer to EHP? taxes being applied...my apologies for disconnect....
fica is really in algorithm basket of all credit....
That's just stimulus for the telescope industry....green shoots!
Boomer Economy
Joel Kotkin, 11.17.09, 12:01 AM EST
I'm sorry, but I'm really weary of all the "inflationista," "deflationista" crap.
Going into this, it was obvious it was going to be deflationary. It's equally obvious that, coming out, it's going to be inflationary.
Everybody gets what they want. Right?
Oxtail wrote:
A DUI costs 10K in fees/legal costs alone. That's an impressive sin tax. Granted, it is pretty bad behavior, but there is a lot of evidence that the drinking age drives bad behavior among the youthful rebels amongst us.
OT: Goldman Sachs apologizes
We need some beautiful background music for Mr. Blankfein's announcement
Scientists develop most unwanted music
Here's why I am not a deflationist.
Speech, Bernanke --Deflation-- November 21, 2002
"no way Bernanke stops buying MBS in March"
Look at it this way. The govi is the mortgage market. What is going to change in the next five months leading to the private sector taking over? At a minimum, the govi has to explicitly guarantee FNM, FRE paper and the Fed has to support some percentage.
GDD9000 wrote:
No, I think the statement pretty much holds for the average upper-middle-class on down, and not more than a few used-to-be-rich types, too.
You simply cannot underestimate the lasting impact of the RRE bubble. Despite home prices rising on average greater than 100% during the bubble, homeowner's equity declined throughout. That means every dime of appreciation and more was spent, and when all is said and done the equity that forms the wealth foundation for most of America is gone.
There are many other aspects to this, but I expect they'll be well-covered in the upcoming (and highly anticipated) "Conjure Communique".
mp wrote:
Assuming we come out of it with a fiat money system, then yes; no need to get piss-y. It was just a question.....
Have you noticed that the talk of exit strategies (which was just talk, anyways) has suddenly evaporated? Even the Australians, who have raised interest rates twice, are "we could raise or we could lower; we have to see how the data goes." I think governments around the world are getting the message that a V recovery is off the table.
Well in northern Alaska the grandparents say winter was a month longer when they were young, making life a lot easier for subsistence ice-fishers and hunters.
My grandparents said they walked from Brooklyn to Manhattan several times, under the Bridge. I skied in Vermont on Columbus Day once, and in late June. Just anecdotes, nothing to see here.
Rajesh wrote:
Wasn't Lacker talking essentially about exit strategy earlier today. Didn't he say we couldn't or shouldn't let weakness in a few sectors from keeping us from raising rates?
Cinco-X, sorry, my comment wasn't directed at you.
It was just a general lament.
ghostfaceinvestah wrote:
My reason is that he can print all he wants... but he can't raise rates w/o exposing the TBTFs insolvency. It's a one way street, unless they decide to address the problems of TBTF.
well, if you mean broke in terms of their paper wealth imploding, well, yes, a lot were broke before the bubble, and many who thought they had saved are now broke. Without a doubt a lot of the paper wealth was turned into debt and spent. The question is, how much of income gets shoveled into filling that hole...right? And BB wants to reflate and make the hole go away, so the income gets spent and not saved. Im not disagreeing with people's hh balance sheets being totally mangled from this, and that spending that occured before for some time was artificially boosted...the issue is, can we really pretend that we'll get away with a reinflation without also destroying the economy through inflation in the things people buy, effectively whacking even further, and already diminished standard of living? I
cclt
I was talking about those who would be the marginal online purchasers losing CC accessibility, something that might show up on Amazon's internal data where they see what looks like a buyers hitting a brick wall because of cuts to their CC limit/credit rating. Unless there is some way for them to purchase conveniently without a CC that I'm unaware of (mailing checks, money orders, and cash ahead of sale... but that's a bit of a barrier in terms of convenience when possible)
The bringing sales tax on to internet sales was something else that I think can be expected later
they are already doing all they can do to fight the deflation which is in motion. They will continue to fight it until it blows up in their face, when they are one day forced to realize where all the liquidity has gushed out, and that this "deficits dont matter" mantra eventually comes back to bite you one day, especially when the demographics are totally against it. It worked before because we got bailed out for various reasons, this time...the tide is pushing in the other direction.
Ten years ago....
Gold - 255.30
DJI - 10769.32
Today ...
Gold - (as of this moment) 1141.90
DJI - 10437.42
GOLD BUGS!!!!
I'm in the inflation AND deflation camp, timing matters
ghostfaceinvestah wrote:
I had read that Bernanke speech before. It reminds me to look and see whether the Fed can buy municipal bonds.
Blackhalo wrote:
Unfortunately, little of what he's been printing has made it into the economy with any sort of velocity. As for printing, the debt we've accrued over the last 40 years, and in particular over the last few should be enough to sink the dollar were it all to be dumped at once. BB is having a hard time making anything happen on the inflation front, and if the worlds largest consumer economy bites it, my suspicion is that other economies will be hurt as bad as ours if not worse. We'll see how it goes.
You're right about the TBTF. RD and I discussed this a few weeks back, and I felt like it's a no win situation.
Blackhalo wrote:
He can't raise rates period.
The government couldn't afford it's own debt service, corporate america (which is addicted to cheap credit) would hemorrhage red ink, the RRE market would absolutely roll over and die (taking the GSEs, FHA, and all the MBS in the Fed's portfolio) down with them, etc.
Mauldin seems to think that Ben will someday stand up and tell Timmy and Co. "no", but I just don't see it.
"It reminds me to look and see whether the Fed can buy municipal bonds. "
Straight up munis? Probably not.
Build American Bonds? Most definitely.
GDD9000 wrote:
Some foreign countries are asserting US liquidity is popping up in their stock and real estate markets. There was a serious debate a few years ago about exporting inflation. Perhaps now we have also learned how to export bubbles and screw up other people's economies. Awesome economic weapon if you could do it intentionally against an enemy. A $%^&ing mess if it's unintentional and does damage to your allies.
Rob Dawg wrote:
Crickets.
EHP- That would be great data from Amazon....and it has to be happening....thanks for rehash....
I would not be surprised if the PTB haven't made a challenge to banks asking them to ease up on cc card limits/overdrafts for Xmas....hey we saved your ass, now save Santa and the xmas shopping season....or else....
They can't stop buying MBS, and they can't continue either..
By buying MBS, they are allowing Wall Street to continue to create Asset backed Securities. Wall Street can do that indefinitely as long as they can find borrowers (Tax Break, solved), and the government buys. In the process the banks can bail their equity capital positions out, and Wall Street can pay its bonuses.
The problem is, that when the government issues debt to pay for the ABS, that's a real claim on future taxes. So by buying the MBS, they have effectively linked tax income directly to bailing out the banks and paying the bonuses. Offset slightly by the income they're getting from the MBS, but that's imploding just as fast as people foreclose.
As soon as they stop buying, the excess credit issuance by the banks stops, goes into reverse, and we get a full on Fisher debt implosion, just like we were having last year, when they kicked off TARP to stop it. There's no effective way out of that now.
So, ceteris paribus, and frankly who knows what damnfoolthing Bernanke will try next - this doesn't stop now until the consequent growth in public debt becomes unsustainable.
If anyone was brave enough to try and fix it, they wouldn't be stupid enough to volunteer to be blamed for the outcome - so i guess we just have to hope they are working up their contingency plans.
-- warlock
GDD,
I mean J6P's balance sheet is either net red or not far above it.
Think about it... what are the sources of most people's wealth? Their equity, assets, investments and pensions. Equity? Gone. Assets? Fire sale value on EBay. Investments? Toast. Pensions? Sorry.
Only takes overnight to run up 10 G's on a credit card no matter what your income, but it can take a decade to pay it off. Try paying off that debt while simultaneously saving 10% more and I guarantee your PCE will be down big-time.
Hey, and that only applies to the 80%(????) of people still fully employed at their regular wages. The remaining 20% are either making due on UE, part-time or under-employment.
J6P is well and truly broke. [Of course as averages go, that means some people (like probably most of the commentariat) are in decent shape whereas others are far, far worse.]
ot- but seriously why do people dislike capital punishment when you have evil like this.....
Warrant: Mo. sex abuse case could include slayings - Yahoo! News
turning them into fish food is being too nice for this evil lair........
trolling them off the farallon islands with the back of knees sliced open could turn into a lucrative pay per view program for discovery channel....or the dontmesswithchildrennetwork.com hosted by the mutual omaha.....
There is no end to the Benfoolery in sight IMO. What exactly was he thinking when he chose March 2010 as the end of MBS buying? Did he think some magically recovery would be in place and that he could end such a thing? I mean, he cannot raise rates with the budget deficits financed all on short term rollover. So were stuck with that. But what was his stated logic of why it would be even possible for him to consider and end to buying MBS? Sure, he got away with paring back the Treasury buying, but this is a totally nastier ball of wax to extricate oneself from.
some investor guy wrote:
Latin America
Japan
Asia, Russia
Emerging Europe, Asia
No kidding eh? Most of the discontent in the world directed at America is not because of its military. It's getting beaten up with the financial system, and then raped by multinationals under the supervision of the IMF.
At first China devalued its currency just so it could build up reserves and protect itself from that kind of stuff. They didn't ease up enough in time. Now everyone goes down together.
Cinco-X wrote:
I suspect that can change with alarming speed. Right now
and the special interest beneficiaries of the stimulus, appear to be soaking it all up. But at some point they may feel less risk averse, and spend/invest some of it, somewhere unexpected.
Yeah, we definitely exported bubbles going a ways back.
You have to know that when yields for emerging market debt are within 100 basis points of Treasuries then there's something seriously wrong. Liquidity was the bubble, and we exported it worldwide.
Blackhalo wrote:
Got
?
Im realllly looking forward to the next edition of the Survey of Consumer Finances. The 2007 was the last of the illusion, came out just in time not to capture the "wealth" destruction. But when you disaggregate the data in there, it's pretty frightening. The vast majority of households, like you said, have little or no savings, and many are negative net worth..no assets, big debts. Now, for younger households, you arent expecting to see much in the way of net worth, but for older households, you can stratify by income, and you can see that there are many many hhs that never made enough income in their lifetime to squirrel any away, and are going to have to fend on SS. And somehow, we'll manage to not capture the true rise in the cost of living with our hopeless CPI numbers, and the SS increases wont be big enough to offset the ridiculous impact on real budget items. I mean, any one of us who runs a monthly/annual budget can tell you that the inflation in budget costs is not reflected in a basic CPI. But of course, that is by design.
Got
?
That is EXACTLY where I expect it to go.
Yes, exactly.
The only reasonable conclusion is that he doesn't understand the root cause of the problem, and actually believes all the silliness about it being liquidity.
My experience of economists is that they're very skewed towards the 'memorise and successfully regurgitate' the textbook academic population, so in this case, since the textbook is wrong, no matter how good an analyst he may be individually, he's screwed.
If anyone eventually wants to solve this mess - well, first, fire all the economists.
-- warlock
japan votes deflation....
Japan Deflation Concern Rises Even as Growth Quickens (Update1) - Bloomberg.com
TJ and The Bear wrote:
Excessive prices are caused by too much money chasing too few goods. Bubbles are simply the asset price form of this inflation: Savings supply the money, and assets are the goods. China is the major source of additional world savings in the last 10 years, in excess of their own investment. So, if any country can be blamed for exporting bubbles, it is China. We just creamed a few hundred billion off the flow, between Wall Street and overborrowed homeowners.
OT: local meetup in Portland, Oregon tonight.
6:30pm at The Lucky Lab brewpub, 915 SE Hawthorne Blvd.
We have six RSVPs so far but walk ins are welcome. I'll make a little place holder with a "CR" on it and let the staff know who I am also.
As TJ said, Joe Sixpack is broke, just treading water. If they want to get the economy moving again, they've got to create EMPLOYMENT.
"What exactly was he thinking when he chose March 2010 as the end of MBS buying?"
He pulled the $1.25T number out of his a** back in March, and then by Sept realized he couldn't spend it all by te end of the year (he is already buying multiples of new issuance - meaning he is buying seasoned product), so he extended it to March.
There was no more thinking beyond that. It's not like he has a plan.
EEngineer wrote:
Does that include the mole from the Treasury?
mp wrote:
No problem. Just keep sending trillions into the effort to keep asset prices high. That will keep bankers and other people who live off high asset prices rich and happy, and they will use some of the extra money to employ others.
GDD9000 wrote:
Just pure speculation, but can the Fed force primary dealers (behind closed doors) to start or increase their purchases of MBS?
patientrenter wrote:
That was part of it but far from all of it.
Think of the bubble dynamics in RRE. One house on the block rises in value $50K; suddenly all other 20 houses on that block are worth $50K more, and at least 10 of them go ahead and borrow that. That's $500K more money that just "appeared" and has to go somewhere.
Doug Noland (of PrudentBear) has extensively documented how the GSEs were the conduit for creating trillions in liquidity that was necessary to blow the bubble.
My FIL got grumpy because he found a portable tree stand on his property and a crossbow quarrel. That made me read an article in the Post about bowhunting. As an aside it mentioned that some of the local parks have a problem with poaching.
I know my BIL feeds his family on venison because he has too. Then I found out in No. VA. there are people who will buy venison - no questions asked.
Mr Slippery wrote:
The Fed doesn't have primary dealers, the Treasury does, and they don't sell MBS.
Now, the Fed is experimenting with reverse REPOs, which theoretically can be used to dump all that trash onto your pension funds, etc.
Pretty hard to create jobs in the private sector with all the uncertainty of taxes, regulations, banking and government control coming from Washington. Then what will sell besides minimal needs products when many are unemployed and expect to be for a long time. I still see BS and no positive help to move forward.
Isn't it interesting how it's mostly high-placed women in financial power that are making noise, while with their male counterparts are content to keep the status quo intact...
Sorry, brain lapse on the Fed-dealer relationship and I know the MBS in question are issued from Fannie, Freddie, and FHA. Still, can there not be some arm twisting by the Treasury and/or Fed. The Fed does have many alphabet soup programs that benefit some, if not all of the primary dealers it can use as leverage.
you go to work in the dark and you come home in the dark.
at least your not Geithner....
he goes to work in the dark, works in the dark, and comes home in the dark. that's just dark
"Yellen Says Unclear If Use of Rates Can Stem Leverage"
Yellen Says Unclear If Use of Rates Can Stem Leverage (Update1) - Bloomberg.com
Janet Yellen, another Fed insider (unlike Lacker, who is there to amuse the others), hints that reducing leverage ain't gonna happen. The excuse? Because raising interest rates to lower leverage may benefit savers at the expense of borrowers. Can't have that.
Between Bernanke claiming yesterday that it wasn't obvious to him that asset prices are in a bubble now, I think we can see what is really going on quite clearly: These guys want to find any reason to keep the punch flowing at the grand asset bubble party. No intervention on the way up, and massive intervention on the way down. The only unifying theme here is the desire to keep asset prices high. Only with high asset prices can the FIRE sector continue to extract disproportionately large rentier profits from real producers.
Oh, I think you'll find a lot of it is already there.
But yes, you're right about the bubble dynamics. The asset bubbles are loan driven, the savings surplus is a side effect.
-- w
Everyone is talking about V, U, W or L shaped economic path. But did it occur to anyone that it could be lightening shaped
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Best Black Swan wishes.
You know what they say: hell is when a pot is boiling over on a stove, and a woman is prohibited from doing anything about it, while a man is forced to do something about it...
If you can goose the employment level, that will automatically goose consumption which, in turn, will goose industrial production.
Otherwise, the economy continues to flounder.
LBD, lets put your comments in perspective. I'll let Martin Wolf do it:
From the Financial Times,
FT.com / Columnists / Martin Wolf - Grim truths Obama should have told Hu
mp wrote:
OK, let's suppose we arrange for house prices to go back most of the way to their ridiculous peak level (oh, wait, that's been done), and everyone is making money and being employed by buying and selling or holding RE. Is that good?
Forget about house prices.
mp wrote:
Tell that to Tim, Larry, Ben, Barney, and Chris. That's where they are sending all the money.
This is an interesting development: Fed to Cut Maximum Maturity of Discount Window Loans (Update2) - Bloomberg.com.
"Just pure speculation, but can the Fed force primary dealers (behind closed doors) to start or increase their purchases of MBS? "
He would literally need to hold guns to their heads. No one wants 10+ years of Fannie/Freddie counterparty exposure at today's prices.
The deregulation parrot chimes in.
If we lowered taxes and removed the social safety net and subsidies to education and health care, we'd be doing just as well as that rich, industrialized free-market model country with the unlimited bonuses. The name escapes,,,Utopistan? Widgetland? Libertarianation?