Financial Crisis

[MJP]

That was like 30 years ago and then some. Population explosion, development of Chindia . . . come on now, it's changed, consumption is huge now.

I still think all this, Gold's Up!, USD's collapsing!, Markets are going to tank on Monday! stuff, is just light entertainment . . . when clearly there is no ambition to change from the model of needless over-consumption, primarily to satisfy the imaginary numbers of a handful of evil men.

It's no more consequential than watching X-Factor.

I don't by the way. The fiat money value bit.

Your making an argument about the peak oil theory. That is a different subject, it has nothing to do with money and credit.

There is no possible way, 0% chance for the same amount of consumption to continue, it is all a function of low interest rates. All low interest rates and debt does is squeeze longer periods of production into shorter time frames. Excessive debt causes (X)amount years of economic activity to be squeezed into less years because all if the final payments on the activity was deferred by (X) amount of years. That is why a boom has to be followed by a bust, its as predictable as gravity. That is why during booms(low interest rates), there is unusually low amounts of unemployment and during busts there is unusually high amounts of unemployment.

Very good, actually the best ever explanation I've read about boom and bust. Shame you weren't the UK's Chancellor for the past decade or so.

I'm glad you mention it can never return to the old massive levels of consumption. Consumption equals production, and if you weren't a welfare state dependent slacker, although you thought you were making money before, you were being worked to death. To no real end, other than have no employment at all in the bust stage. I'm having this out on another forum right now.

The thing I'm getting at, is all this jiggery-pokery simply BS until the oil runs out? Is there any pressure to change? Any motivation, as long as the jiggery-pokery side show rolls on?

Can it change? Does it need to change? In what time frame? Is it already too late?

Maybe I'm not making any sense at all.

[MJP]

It's no more consequential than watching X-Factor.

It really is hard to believe there is anything more important than X-Factor although Brad and Angelina's relationship is obviously a cause for concern.

That made me chuckle.

Do you get it though? I mean am I right in saying this? All this relentless UP DOWN UP DOWN stuff . . . . it makes no odds in the long run as the whole shabang is based on something that's going to run out sooner or later.

I dunno . . . guess I'm just trying to reconcile what I think is the real big picture.

Branson warning about the 'oil crunch' the other day. Well, if so, it's over. All this FX, CDS, MBS, CDO, AAA, BBB, that's all it is . . . letters.

Nope, your totally wrong. Because of low interest rates all over the world, we probably burned 20 years worth of oil in 10 years so when the system busts, we will have way too much oil infrastructure and capacity then we need for the following bust years.

I guess you're right, it all depends on peak oil. It all depends on geology.

One thing is . . . I might have a few more refineries to knock down and dig up. Sadly.

[sokal]

That was like 30 years ago and then some. Population explosion, development of Chindia . . . come on now, it's changed, consumption is huge now.

I still think all this, Gold's Up!, USD's collapsing!, Markets are going to tank on Monday! stuff, is just light entertainment . . . when clearly there is no ambition to change from the model of needless over-consumption, primarily to satisfy the imaginary numbers of a handful of evil men.

It's no more consequential than watching X-Factor.

I don't by the way. The fiat money value bit.

Your making an argument about the peak oil theory. That is a different subject, it has nothing to do with money and credit.

There is no possible way, 0% chance for the same amount of consumption to continue, it is all a function of low interest rates. All low interest rates and debt does is squeeze longer periods of production into shorter time frames. Excessive debt causes (X)amount years of economic activity to be squeezed into less years because all if the final payments on the activity was deferred by (X) amount of years. That is why a boom has to be followed by a bust, its as predictable as gravity. That is why during booms(low interest rates), there is unusually low amounts of unemployment and during busts there is unusually high amounts of unemployment.

Very good, actually the best ever explanation I've read about boom and bust. Shame you weren't the UK's Chancellor for the past decade or so.

I'm glad you mention it can never return to the old massive levels of consumption. Consumption equals production, and if you weren't a welfare state dependent slacker, although you thought you were making money before, you were being worked to death. To no real end, other than have no employment at all in the bust stage. I'm having this out on another forum right now.

The thing I'm getting at, is all this jiggery-pokery simply BS until the oil runs out? Is there any pressure to change? Any motivation, as long as the jiggery-pokery side show rolls on?

Can it change? Does it need to change? In what time frame? Is it already too late?

Maybe I'm not making any sense at all.

The current cycle has run its course, its not the end of the world though, things will bust and reset just like they did during the Asian financial crisis in 1997. All the mumbo jumbo that you hear of is just people trying to figure out what the best way to profit from the bust is.

[MJP]

That was like 30 years ago and then some. Population explosion, development of Chindia . . . come on now, it's changed, consumption is huge now.

I still think all this, Gold's Up!, USD's collapsing!, Markets are going to tank on Monday! stuff, is just light entertainment . . . when clearly there is no ambition to change from the model of needless over-consumption, primarily to satisfy the imaginary numbers of a handful of evil men.

It's no more consequential than watching X-Factor.

I don't by the way. The fiat money value bit.

Your making an argument about the peak oil theory. That is a different subject, it has nothing to do with money and credit.

There is no possible way, 0% chance for the same amount of consumption to continue, it is all a function of low interest rates. All low interest rates and debt does is squeeze longer periods of production into shorter time frames. Excessive debt causes (X)amount years of economic activity to be squeezed into less years because all if the final payments on the activity was deferred by (X) amount of years. That is why a boom has to be followed by a bust, its as predictable as gravity. That is why during booms(low interest rates), there is unusually low amounts of unemployment and during busts there is unusually high amounts of unemployment.

Very good, actually the best ever explanation I've read about boom and bust. Shame you weren't the UK's Chancellor for the past decade or so.

I'm glad you mention it can never return to the old massive levels of consumption. Consumption equals production, and if you weren't a welfare state dependent slacker, although you thought you were making money before, you were being worked to death. To no real end, other than have no employment at all in the bust stage. I'm having this out on another forum right now.

The thing I'm getting at, is all this jiggery-pokery simply BS until the oil runs out? Is there any pressure to change? Any motivation, as long as the jiggery-pokery side show rolls on?

Can it change? Does it need to change? In what time frame? Is it already too late?

Maybe I'm not making any sense at all.

The current cycle has run its course, its not the end of the world though, things will bust and reset just like they did during the Asian financial crisis in 1997. All the mumbo jumbo that you hear of is just people trying to figure out what the best way to profit from the bust is.

I'm not so sure about 'profit' rather than 'protect', what they already have. Well, for most folks.

Naked shorts accepted.

Yes, what I find is people have no clue as to timescales. I find many think it will reset by this year, whereas I can see this rolling on for 5 years (?), minimum.

Who knows?

[flying]

Commercial Real Estate Collapse Bigger than Subprime Implosion – Why is the Market Ignoring the $3.5 Trillion Commercial Real Estate Market Implosion? Pricing in Another Bailout.

[Gambles]

Just in case anyone is interested in reading MBMG's Daily Updates I'll resume posting these. If there are complaints or total disinterest, I'll immediately desist.

Best regards,

Paul

2010 is the Chinese Year of the Tiger; it will arrive on the 14^th of February 2010. Many people must be eager to know, if you are this way inclined, how the global markets will perform in 2010. Here, we will try and use Chinese Astrology five elements (metal, water, wood, fire and earth) theory to foresee what will happen in the global markets in the year of the TIGER.

According to the Chinese five element astrology calendar, 2010 is the year of Metal Tiger. Gold is related to metal and money. People who like to talk about wealth will say that 2010 as a golden tiger. In the five elements theory, the colour representing metal is white. Therefore, we could also say that 2010 is the year of the White Tiger. The White Tiger is connected to the symbol of jinx in China history. Some people may consider that 2010 White Tiger is a bad year.

Yiannis G Mostrous of KCI Investing recently wrote in an article on seekingalpha.com, "In the upcoming year of the Tiger, investors should keep in mind that Tigers often live dangerously. The ancient Chinese admired the Tiger for its fighting qualities, as well as its power and graciousness, and the animal is lauded for its agility and ability to take advantage of tough situations"

Let's take a look at recent events, the Banking and Financial tsunami that started in 2008 could have been triggered by the absence of fire elements and the dominating water element which can generate fear.

Tigers can be volatile at the best of times and this years Yang influence means we could be in for an interesting 12 months. I wonder if Tiger Woods is reading this???!!!

Banking is Metal and it needs fire to melt it into useful tools. Finance and stockmarkets are related to fire which generates optimism. So you could say that the total absence of the fire element in 2008 and 2009 is responsible for the slow down of the economy and the banking crisis. However, the Tiger of 2010 is mother and seed of fire; therefore you could say that with the fixed element of Wood (tiger being a wood sign) could create a condition of steady improvement in optimism which could bring a more healthy economic growth in 2010... but Tigers can be volatile at the best of times and this years Yang influence means we could be in for an interesting 12 months. I wonder if Tiger Woods is reading this???!!!

Attributes of a Tiger – impatient, ruthless aggressive, powerful, passionate, daring, vigorous, stimulating, affectionate, generous and UNPREDICTABLE.

I believe our "stance" for 2010 is correct (expect the unexpected) as this year like a Tiger will be unpredictable, we will have to be tigerish in our choice of investments ensuring that we can re-align our portfolio at any moment, we must not have too much affection for any particular asset or commodity. Be vigorous in research and be ruthless in making the correct choices at the correct time while never being impatient. Be "quick and nimble" at all times. On this "Rocky" path you'll need to have the "eye of the Tiger".

There is an old Chinese saying which goes roughly like this – "Once on a Tigers back, it's hard to get off, but if you hang on it is certainly the safest place to be".

Gung hay fat choy!!!

Enjoy your day!

Once again, very best regards,

MBMG International

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG International cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG International. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

Edited February 15, 2010 by Gambles

[churchill]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

goldman faces special audit and possible ban in Europe

http://jessescrossroadscafe.blogspot.com/2...es-special.html

[LaoPo]

goldman faces special audit and possible ban in Europe

http://jessescrossroadscafe.blogspot.com/2...es-special.html

If Goldman Sachs, knowingly, helped Greece and possibly other Europeans countries to mask and hide their debts it's a bloody scandal....

February 14, 2010

Wall St. Helped to Mask Debt Fueling Europe’s Crisis

By LOUISE STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

From: The New York Times

http://www.nytimes.com/2010/02/14/business.../14debt.html?hp

LaoPo

[MJP]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

goldman faces special audit and possible ban in Europe

http://jessescrossroadscafe.blogspot.com/2...es-special.html

Last thing I heard was GS were 'doing God's work'.

Some cheek innit?

[Gambles]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

goldman faces special audit and possible ban in Europe

http://jessescrossroadscafe.blogspot.com/2...es-special.html

Last thing I heard was GS were 'doing God's work'.

Some cheek innit?

I thought that this was already quite widely known? It's good that this is becoming more widely known but for me the big questions are 1) what else is out there?2) how will "we, the people" react when the press continue to lift these lids (there are a lot of them!!) ?

[MJP]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

goldman faces special audit and possible ban in Europe

http://jessescrossroadscafe.blogspot.com/2...es-special.html

Last thing I heard was GS were 'doing God's work'.

Some cheek innit?

I thought that this was already quite widely known? It's good that this is becoming more widely known but for me the big questions are[/size] 1) what else is out there?2) how will "we, the people" react when the press continue to lift these lids (there are a lot of them!!) ?

Information fatigue.

Becomes like X-Factor.

I hate X-Factor.

A few people with half a brain will continue to compare notes on internet forums. The rest will be telephone voting for some fat woman that can almost sing.

It's only when, and if for that matter . . . people are sat there in the dark, no TV dinner and no power to turn the TV on to at least watch the fat bird sing . . . will chickens actually return to roosts.

Then the halfwits will simply turn on each other.

[GingerLing]

It's only when, and if for that matter . . . people are sat there in the dark, no TV dinner and no power to turn the TV on to at least watch the fat bird sing . . . will chickens actually return to roosts.

Then the halfwits will simply turn on each other.

That's if they can lift their fat ars-es off the sofa

Seriously, humanity has become a heard of cows, mindlessly consuming and multiplying for corporations/government to farm. Eventually the field will become barren of grass, our population will collapse and we will return to some semblance of subsistance living with the elite orbiting in space, whilst watching some fat bird sing for an extra bail of hay.

Edited February 15, 2010 by GingerLing

[12DrinkMore]

From: The New York Times

http://www.nytimes.com/2010/02/14/business.../14debt.html?hp

Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.

Apart from the obvious comment that the Greek economy should be consigned to mythology, surely the financier who came up with Aeolos was taking the piss??

"The Fart" would have been much more open and appropriate to any financing deal with the Greeks. And maybe we should now be "beware of Greeks farting", as the only gifts they bring seem to cause more financial stink.

:D

[Gambles]

Information fatigue.

Becomes like X-Factor.

I hate X-Factor.

A few people with half a brain will continue to compare notes on internet forums. The rest will be telephone voting for some fat woman that can almost sing.

It's only when, and if for that matter . . . people are sat there in the dark, no TV dinner and no power to turn the TV on to at least watch the fat bird sing . . . will chickens actually return to roosts.

Then the halfwits will simply turn on each other.

That's Susan Boyle, right?

I'm writing a piece tentatively called "Secrets of the credit crunch" about staggering facts that were slipped into the bottom of the news pile unnoticed during the GFC. Either there are brilliant spinners in authority who know how to cynically play the rest of us or we're all so dim that we don't see what's in front of our eyes. I suppose a 3rd possibility is that both contentions are right. That'd be really worrying,

Paul

[Gambles]

It's only when, and if for that matter . . . people are sat there in the dark, no TV dinner and no power to turn the TV on to at least watch the fat bird sing . . . will chickens actually return to roosts.

Then the halfwits will simply turn on each other.

That's if they can lift their fat ars-es off the sofa

Seriously, humanity has become a heard of cows, mindlessly consuming and multiplying for corporations/government to farm. Eventually the field will become barren of grass, our population will collapse and we will return to some semblance of subsistance living with the elite orbiting in space, whilst watching some fat bird sing for an extra bail of hay.

Ginger,

Tim Price recently summed this up very well -

There is a quote from author John Naisbitt that aptly addresses the problems facing the modern investor:

“We are drowning in information but starved for knowledge.”

Taking in information, whether about the global economy, or financial markets, or just the affairs and prospects of a single company‟s stock is, thanks to data and commentary provision like that available from the Internet, akin to drinking from a fire hose. Our cave brains, evolutionarily poorly adapted to process information about remote subjects, are bombarded with spurious inputs. Other modern media are also complicit in this permanent assault on the senses. Fund manager Tony Deden and financial analyst Barry Ritholtz both make reference to the following quote from a senior portfolio manager at UBS:

“Isn‟t it funny when you walk into an investment firm, and you see all of the financial advisers watching CNBC – that gives me the same feeling of confidence I would have if I walked into the Mayo clinic or Sloan-Kettering and all the medical doctors were watching General Hospital..”

The blizzard of data – and opinion – now available in real time to anyone with the interest, time or budget to subject themselves to the likes of Bloomberg or CNBC is not merely a distraction, but a constant invitation to overtrade or otherwise second-guess investment decisions made within a more objective and unassailed calm. This is just another example of how many supposed professionals in finance have allowed themselves to be become slaves to, rather than rulers over, technology.

[MJP]

It's only when, and if for that matter . . . people are sat there in the dark, no TV dinner and no power to turn the TV on to at least watch the fat bird sing . . . will chickens actually return to roosts.

Then the halfwits will simply turn on each other.

That's if they can lift their fat ars-es off the sofa

Seriously, humanity has become a heard of cows, mindlessly consuming and multiplying for corporations/government to farm. Eventually the field will become barren of grass, our population will collapse and we will return to some semblance of subsistance living with the elite orbiting in space, whilst watching some fat bird sing for an extra bail of hay.

Oh, that's so deeply cynical . . . yet disturbingly true.

[MJP]

Information fatigue.

Becomes like X-Factor.

I hate X-Factor.

A few people with half a brain will continue to compare notes on internet forums. The rest will be telephone voting for some fat woman that can almost sing.

It's only when, and if for that matter . . . people are sat there in the dark, no TV dinner and no power to turn the TV on to at least watch the fat bird sing . . . will chickens actually return to roosts.

Then the halfwits will simply turn on each other.

That's Susan Boyle, right?

I'm writing a piece tentatively called "Secrets of the credit crunch" about staggering facts that were slipped into the bottom of the news pile unnoticed during the GFC. Either there are brilliant spinners in authority who know how to cynically play the rest of us or we're all so dim that we don't see what's in front of our eyes. I suppose a 3rd possibility is that both contentions are right. That'd be really worrying,

Paul

I've no idea of the names, sorry.

The whole things such a complete fiasco, not even the 'experts' know, or really want to admit the whole thing has been a gigantic, catastrophic fiddle.

Fear not, life goes on.

[lannarebirth]

It's no more consequential than watching X-Factor.

It really is hard to believe there is anything more important than X-Factor although Brad and Angelina's relationship is obviously a cause for concern.

Mulder and Scully, no?

[lannarebirth]

How many other countries in Europe have been helped by Goldman & Co ?

Wall Street helped dig Europe's debt

"Wall Street tactics like the ones that fostered subprime mortgages in the U.S. have worsened the financial crisis shaking Greece by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street's help, the nation engaged in a decadelong effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the European Union budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning.

In early November – three months before Athens became the epicenter of global financial anxiety – a team from Goldman Sachs arrived in the city with a proposition for a government struggling to pay its bills, say two people who were briefed on the meeting.

The bankers, led by Goldman's president, Gary Cohn, held out a financing instrument that would have pushed debt from Greece's health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards."

http://www.dallasnews.com/sharedcontent/dw...n2.4c5ae02.html

goldman faces special audit and possible ban in Europe

http://jessescrossroadscafe.blogspot.com/2...es-special.html

This doesn't look like a scandal to me. It's what investment banks do in their regular activities. THAT od course is scandalous, but how else will next months pension check be funded?

[flying]

Seriously, humanity has become a heard of cows, mindlessly consuming and multiplying for corporations/government to farm.

Not just recently either

Here is a interesting clip if you have 16 minutes to spare.

[sokal]

bernanke has said recently that inflation appears to be contained and he must have been reassured with the recent negative CPI number. I am sure the Argentine central banker thought the same thing.

[MJP]

bernanke has said recently that inflation appears to be contained and he must have been reassured with the recent negative CPI number. I am sure the Argentine central banker thought the same thing.

Is this not what they really want? Recapitalize the banks sufficiently with printed money, then open the taps. QE cash hit the banks and stopped there for now, no money velocity, no inflation. How long before they open the sluice gates?

[sokal]

Seriously, humanity has become a heard of cows, mindlessly consuming and multiplying for corporations/government to farm.

Not just recently either

Here is a interesting clip if you have 16 minutes to spare.

It is kind of interesting to see what anarchists on LSD can come up with, some interesting points but it is not that simple.

[waza]

Seriously, humanity has become a heard of cows, mindlessly consuming and multiplying for corporations/government to farm.

Not just recently either

Here is a interesting clip if you have 16 minutes to spare.

It is kind of interesting to see what anarchists on LSD can come up with, some interesting points but it is not that simple.

Your right damm it, we should all abandom the farm and become hunter, gathers. Let utter kaos rule, the law of the jungle...."Imagine," Tyler said, "stalking elk past department store windows and stinking racks of beautiful rotting dresses and tuxedos on hangers; you'll wear leather clothes that will last you the rest of your life, and you'll climb the wrist-thick kudzu vines that wrap the Sears Tower. Jack and the beanstalk, you'll climb up through the dripping forest canopy and the air will be so clean you'll see tiny figures pounding corn and laying strips of venison to dry in the empty car pool lane of an abandoned superhighway stretching eight-lanes-wide and August-hot for a thousand miles." ~Chuck Palahniuk, Fight Club, Chapter 16

[Gambles]

The whole things such a complete fiasco, not even the 'experts' know, or really want to admit the whole thing has been a gigantic, catastrophic fiddle.

Fear not, life goes on.

I think that there are insiders who know a great deal - public anger is rising because culpability is becoming more apparent. Not just public anger either - we're pretty sure that the new administration was totally duped by Bernanke & Co. when it took over but recently has woken up and smelt the coffee. It's probably way too late but the last 2 months have produced more encouraging signs than the previous 10 years. That said, collapsing bad banks, spiking unemployment and unleashing the forces of a huge depression probably takes more courage than any politician has the will and guts for. Without fixing the problems, this will pervade for years and the vested interests will continue to do well.

Inflation is already rampant - forget about CPI, that's a very flawed indicator. While the excess money supply remains 93% constrained within bank reserves and excess reserves, inflation will manifest itself through inter-bank liquidity - namely financial assets; look at property, stocks, commodities and precious metals last year if you're looking for inflation. That's where it came out, not CPI.

Paul

[Naam]

welcome to the gloom&doom club Paul. watch out! the sky might be falling any day on you.

[Gambles]

bernanke has said recently that inflation appears to be contained and he must have been reassured with the recent negative CPI number. I am sure the Argentine central banker thought the same thing.

Is this not what they really want? Recapitalize the banks sufficiently with printed money, then open the taps. QE cash hit the banks and stopped there for now, no money velocity, no inflation. How long before they open the sluice gates?

Don't worry - this time it's different and they have it under total control ;-)

Seems like the Richebacher guys don't believe them though -

"The Federal Reserve’s reliance upon extraordinary maneuvers to keep the financial system intact over the past three years presents many questions for investors. Usually, the Fed targets the fed funds rate to accomplish policy objectives, and it hits the target in part through announcement effects (dealers simply change short rates at the Fed’s command), but also through the purchase or sale of assets for its balance sheet. These in turn influence the supply of reserves in the banking system — that is, the risk-free liquid assets traded in the fed funds market, most of which are usually held as required reserves against bank deposit accounts. However, the Fed’s various unconventional measures have left the banking system awash in excess reserves. This time around, the Fed’s signaling and tightening process is likely to be somewhat different.

Investors are usually taught a reserve multiplier story of money creation. The Fed creates reserves by purchasing assets from the private sector. Banks are required to hold only a fraction of their deposits aside as reserves, which are held at the Fed. Banks can then loan out a multiple of their reserves, leading to an increase in money and credit in the economy. Since bank loans offer purchasing power not immediately associated with an increase in the stock of produced goods or assets available for sale, higher consumer product and asset prices may result. In the extreme, accelerating inflation and asset bubbles can result.

The Fed is aware that investors hold this view of the world, even though there are many ways in which it is not a reliable description of the world we live in. Bill Dudley, resident of the New York Federal Reserve and former Goldman Sachs chief U.S. economist, noted this during a speech he gave on July 29, 2009:

The sharp rise in excess reserves has caused the monetary base, which is simply the sum of currency plus total reserves, to expand significantly. The increases in excess reserves and in the monetary base generated by the Fed’s balance-sheet growth have led some observers to worry that this expansion will ultimately prove inflationary. Proponents of this view say that the monetary base, the broad monetary aggregates, total credit outstanding and inflation have historically tended to move together, at least over longer time periods. Thus, if the monetary base is growing rapidly, as it has been over the past year, the view is that this growth will ultimately lead to inflation.

The degree of investor conviction in this more monetarist view has been openly displayed in the surge in commodities (especially precious metals), commodity currencies (Australian and Canadian dollar, Norwegian krone, South African rand, etc.) and basic material equities over the past 10 months or so. This is important, because it tells us something about what investors are likely to require in order to view any future Fed tightening as credible. Unless investors change their current views of how the world works, Fed tightening may be credible only if it involves reducing excess reserves on bank balance sheets.

Under normal circumstances, the Fed would initiate a tightening cycle by announcing a higher fed funds rate target and then selling assets from its portfolio to reduce the reserves held by banks. This time around, the sequence is likely to be very different:

1. First, allow various credit facilities to run down and lapse as private market credit channels revive.

2. End outright purchases of Treasury and mortgage-backed security (MBS) bonds from investors.

3. Reset the interest rate paid on excess reserves, using term deposits or reverse repos if necessary to raise the fed funds rate.

4. Remove reserves through outright sales to banks of Fed-held assets. On Oct. 8, 2008, the Fed announced it would henceforth pay interest on both those reserves that it required banks to hold as well as on reserves banks may choose to hold in excess of required reserves. Interest paid on reserves provides the Fed with a unique ability to decouple the interest rate (or price) it sets for short-term funds from the supply (or outstanding stock) of reserves. The interest rate on reserves becomes a floor that the Fed can raise at will without having to remove reserves from bank balance sheets (usually accomplished by selling assets held by the Fed to the banks, extinguishing reserves in the transaction). This was an important step at the time because the fed funds rate target was 1.5%, and the Fed was not yet prepared to go to a near-zero interest rate policy. The Fed knew it would not be able to maintain that target rate above zero while it was also flooding the system with liquidity through various emergency credit facilities and asset purchase programs following the Lehman/AIG debacle. Now the Fed can raise the short-term interest rate without having to reduce the liquidity cushion banks are holding in the form of excess reserves.

From the Fed’s perspective, this appears to solve one of its concerns about exit strategies. If banks maintain a high liquidity preference following financial shocks, as was the case in the 1930s, then moves by the Fed that reduce bank reserves can lead the commercial banks to sell more securities (dampening prices of the assets sold) or contract their loan books (reducing credit available to fuel economic growth) in order to try to rebuild their reserve cushions.

This can tip the economy back onto a debt deflation path, as was the case in 1937–8. Brian Sack noted the advantage the interest on excess reserves (IOER) offers in his December 2009 speech:

A key part of the framework is the ability to pay interest on excess reserves. This authority alone may allow the FOMC to control short-term interest rates to its satisfaction, even if the banking system is saturated with a large amount of excess reserves.

Both Sack and his boss, Bill Dudley, realize this approach may not fly with investors who see the pile of excess reserves sitting on bank balance sheets as dry tinder for future inflationary loan growth. Dudley in particular tried to put this issue to bed in his Oct. 5, 2009, speech when he noted (emphasis added):

This concern is not well founded because the Federal Reserve now has the ability to pay interest on excess reserves… and this tool allows us to prevent excess reserves from leading to excessive credit creation. It works as follows. Because the Federal Reserve is the safest of counterparties, the IOER rate effectively becomes the risk-free rate. By raising that rate, the Federal Reserve raises the cost of credit because banks will not lend at rates below the IOER when they can instead hold these excess reserves on deposit with the Fed. Because banks no longer seek to lend out their excess reserves, there is no increase in the amount of credit outstanding, no increase in economic activity and no risk that excessive credit creation will fuel an inflationary spiral.

Dudley is, in effect, insisting that in the event an inflationary spiral gets established, the Fed stands prepared to raise the IOER to a sufficiently high level, such that banks would prefer to lend the excess reserves to the Fed, rather than the private sector. Stop and think about what that might mean for banks that have been buying Treasury debt lately. As the Fed raises the IOER, and as other short-term interest rates follow, the cost of funds will rise for banks and the margin or spread between their cost of funds and the Treasury debt and other securities they acquired during the stretch of a near-zero fed funds rate will shrink. In a worst-case scenario, as they experienced in 1994, the banks would find themselves earning less on their security holdings than they pay for their funds. Banks would then be inclined to dump their Treasury, government-sponsored entities (GSE) and MBS holdings on the marketplace, creating a second round of interest rate effects.

So what, then, might be the Fed’s Plan B if it discovers it cannot simply tighten monetary policy without imperiling banks? Plan B involves a more direct route of dumping Treasury, GSE and MBS holdings onto the market, this time by the Fed itself. As Sack noted in his December speech (emphasis added):

An alternative approach would be to reverse a portion of the portfolio-balance effects through asset sales. Asset sales would put the portfolio risk back into the market at a faster pace than redemptions alone, forcing risk premiums to adjust more quickly in order to entice investors to hold that risk. The result would be to put upward pressure on Treasury yields and MBS rates independent of any changes in the expected path of short-term interest rates, so that less of the burden of financial tightening would fall on the short-term interest rate.

In other words, the Fed would have to be willing to risk taking actions that would raise mortgage rates, reduce the value of existing bank security holdings and possibly take the housing market back down with it. Again, all of this is predicated on the emergence of an inflationary spiral, so perhaps under those conditions, we should expect housing would already be booming again. Nevertheless, we cannot say we draw much comfort or confidence from these approaches — and ultimately, Sack admits near the end of his speech that the decision makers at the Fed are simply flying by the seat of their pants:

The size, likelihood and timing of the appropriate adjustments will only become apparent over time, as they will depend on the evolution of the economy and financial markets. They will also depend importantly on the effectiveness of interest on reserves for controlling short-term interest rates in a high reserve environment — a policy regime that has not been fully tested in U.S. markets and that will have to be evaluated in real time.

In the post-quantitative easing environment, when central banks have demonstrated a menu of policy responses few but the most paranoid among us dared imagine, it is no longer clear what constitutes the key target or instrument of monetary policy. The IOER has been set up (and is now being actively marketed, we believe) as a replacement for the fed funds rate. But by construction, it intentionally breaks the link between the short-term policy rate and the amount of reserves in the banking system. We have a funny feeling that investors who have been piling into gold, silver, emerging market debt, materials and energy stocks and other inflation hedges in response to quantitative easing and other unconventional measures by central banks are unlikely to be fooled by the Fed’s newfound ability to raise interest rates without reducing excess reserves in the banking system. We can only imagine the Fed must be praying that its output gap approach to inflation is dead right.

So, there you have it - wings and prayers all round!

[flying]

Germany growls as Greece balks at immolation

Germany's Bundestag has drafted an opinion deeming aid to Greece illegal. State bodies may not purchase the debt of another state, in whatever guise.

Full Article at Link Above

[Gambles]

welcome to the gloom&doom club Paul. watch out! the sky might be falling any day on you.

Thanks Naam

I've been sceptical since 1999, downright cynical since 2001, miserable since 2004 and just plain resigned for the lst 5 years.....

[Gambles]

Germany growls as Greece balks at immolation

Germany's Bundestag has drafted an opinion deeming aid to Greece illegal. State bodies may not purchase the debt of another state, in whatever guise.

Full Article at Link Above

More than one way to skin a pig!