Financial Crisis

[flying]

Guys I know this is a bit of topic but some advice would be appreciated..

I have no advice for your situation but this....You will probably get more answers by opening a topic rather than posting in the Financial Crisis thread.

Good Luck

[churchill]

If you don't get the answers here MBMG based in Bangkok will know ....Paul Gambles used to work for the UK tax office /

U.S. funding for future promises lags by trillions

http://www.usatoday.com/news/washington/2011-06-06-us-owes-62-trillion-in-debt_n.htm?loc=interstitialskip

[churchill]

German Schaeuble's letter on Greece to IMF, ECB, euro peers

http://www.reuters.com/article/2011/06/08/greece-germany-letter-idUSB4E7G900O20110608

[cloudhopper]

German Schaeuble's letter on Greece to IMF, ECB, euro peers

http://www.reuters.c...E7G900O20110608

Looks like default to me. Everyone is going to default sooner or later, one way or another. Promises that can't be kept, won't be.

[RedFxTrade]

If you don't get the answers here MBMG based in Bangkok will know ....Paul Gambles used to work for the UK tax office /

U.S. funding for future promises lags by trillions

http://www.usatoday....nterstitialskip

Cheers man...I ll check that out.

These are going to be interesting but awful times ahead for many who are happily going a long oblivious to the fiscal and credit train wreck that is upon us. We are seeing the results in Greece and increasingly in Spain when what has been promised is retrenched, or they are told they cannot have it. This flag was quite telling I saw yesterday of how sentiment is turning. I think that civil unrest just like sovereign debt crisis begin at the periphery and move to the center, think Tunisia was the catalyst. It was quite incredible how what started from a fruit seller in a small town in Tunisia burning himself to death in front of a government building in protest against corruption cascaded into Egypt, and then Libya, Yemen, Syria etc. Eventually in the US they will take to the streets, and throughout Europe. I quite like listening to Celente, he said when the money stops flowing to the man on the street, blood starts flowing in the streets. Looking into the Egypt case, it seems that they became a net oil importer last year, and the money that Mubharak was using to subsidise and appease the people ran out. With the inflationary policy of central banks driving up food prices in marginal income countries, it appears this was the catalyst in Egypt, as they are also a large wheat user. So a double whammy of changing to net oil importer, and higher wheat prices was the final straw.

Likewise, as in the US, the UK has massive unfunded liabilities. I wonder what will actually happen in the end? I try not to be too dogmatic on the side of the inflation/.deflation debate...however, from what I have read on hyperinflation, or at least high inflation it is a political process. The great Austrian Economist Murray Rothbard, one of the greatest economic historians to have lived IMO said it was a process that and did not happen overnight, but in decades. I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment, where all reason is thrown to the wind by government? This is anecdotal, but I joined twiiter a while back and I am constantly seeing growing support and anger and a growth in extremes from the center politics, to more anarchist on the right, to extreme nationalist socialist movements on the left...the age demographics appear to be young, as 18-40.

Hemingway...

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

[churchill]

If you don't get the answers here MBMG based in Bangkok will know ....Paul Gambles used to work for the UK tax office /

U.S. funding for future promises lags by trillions

http://www.usatoday....nterstitialskip

Cheers man...I ll check that out.

These are going to be interesting but awful times ahead for many who are happily going a long oblivious to the fiscal and credit train wreck that is upon us. We are seeing the results in Greece and increasingly in Spain when what has been promised is retrenched, or they are told they cannot have it. This flag was quite telling I saw yesterday of how sentiment is turning. I think that civil unrest just like sovereign debt crisis begin at the periphery and move to the center, think Tunisia was the catalyst. It was quite incredible how what started from a fruit seller in a small town in Tunisia burning himself to death in front of a government building in protest against corruption cascaded into Egypt, and then Libya, Yemen, Syria etc. Eventually in the US they will take to the streets, and throughout Europe. I quite like listening to Celente, he said when the money stops flowing to the man on the street, blood starts flowing in the streets. Looking into the Egypt case, it seems that they became a net oil importer last year, and the money that Mubharak was using to subsidise and appease the people ran out. With the inflationary policy of central banks driving up food prices in marginal income countries, it appears this was the catalyst in Egypt, as they are also a large wheat user. So a double whammy of changing to net oil importer, and higher wheat prices was the final straw.

Likewise, as in the US, the UK has massive unfunded liabilities. I wonder what will actually happen in the end? I try not to be too dogmatic on the side of the inflation/.deflation debate...however, from what I have read on hyperinflation, or at least high inflation it is a political process. The great Austrian Economist Murray Rothbard, one of the greatest economic historians to have lived IMO said it was a process that and did not happen overnight, but in decades. I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment, where all reason is thrown to the wind by government? This is anecdotal, but I joined twiiter a while back and I am constantly seeing growing support and anger and a growth in extremes from the center politics, to more anarchist on the right, to extreme nationalist socialist movements on the left...the age demographics appear to be young, as 18-40.

Hemingway...

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."

and markets are a c*** /When the majority realize and do the right thing to try to protect themselves - There will be a crash and they will loose out again - It is the Politicians Job to do the right things now and for the future ...... Apart from a few .. most are only interested in the short term / We need some strong ideas and leaders in Europe and the US and all I see is wishy washy .....kick the can - don't worry it will be alright in the end ...........

Edited June 8, 2011 by churchill

[RedFxTrade]

German Schaeuble's letter on Greece to IMF, ECB, euro peers

http://www.reuters.c...E7G900O20110608

Looks like default to me. Everyone is going to default sooner or later, one way or another. Promises that can't be kept, won't be.

It does indeed . However, with all eyes on Greece, it probably has escaped the Triokas attention and the markets for that matter that Spanish yields are moving higher once again today after the bounce of the resistance. Also today Portugal bond spreads have reached a record widening.

Bernanke last night ruled out more QE,yet we know thats not true. Interest rate expectations continue to fall Australia and now New Zealand, 12 month interest rate futures have slid to 18 bps over 12 months. Of course we know Bernanke will go onto some other scheme. however, now that he has said he will not the market will no doubt force his hand in the form of lower asset prices before tempting him back with more QE in some form. It is akin to the central banks threatening intervention in the currency markets like the SNB and BoJ did. The currency in the end forces their hand, leading to actual intervention rather than lip speak. USD, JPY up strongly today as a result.

[Naam]

I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment...

that is when you, me and a lot others will mint a lot fiat money which we will use to buy all available Gold, Silver, rare earths minerals, plutonium, trilithium, unobtainium, Wales and all its sheep, the northern part of New Zealand, Hong Kong Island and the Burj al-Arab where we will dwell happily ever after, eating once in a while some roosted roasted chicken after playing poker to determine who will be entitled to occupy the top story.

[BlackJack]

I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment...

that is when you, me and a lot others will mint a lot fiat money which we will use to buy all available Gold, Silver, rare earths minerals, plutonium, trilithium, unobtainium, Wales and all its sheep, the northern part of New Zealand, Hong Kong Island and the Burj al-Arab where we will dwell happily ever after, eating once in a while some roosted roasted chicken after playing poker to determine who will be entitled to occupy the top story.

Is the U.N. economic division incompetent? Are their opinions of little consequence?

The statement they made is huge. A collapse of the US dollar! Maybe the news is too much for the media and the world to cope? Maybe we're in denial. "So far, so good!" said the man who fell off the 50-storey building, as he passed the 12th floor...

[Naam]

German Schaeuble's letter on Greece to IMF, ECB, euro peers

http://www.reuters.c...E7G900O20110608

Looks like default to me. Everyone is going to default sooner or later, one way or another. Promises that can't be kept, won't be.

vhot it looks like doest not mutter. it is ze end rezult zat (allso cknown as der bottom lein) vhich kounts. my gut freund Herr Schäuble, hoo is paying indirektly all my ekspenzes in ze Lund off der Shmiles, has zometimes gut days und zometimes bad days (espeshully vhen ze bearings off his vheel tchair are not greased suffishuntly). vone has to take intoo konsiderashun zat he is a politishun und kannot shpeak freely vhot he really zinks.

i'm not kvite shure, boot i haff ze feeling zat ze Anglos left und rite off ze Atlantik Ozean vill be in for a surpreis, no mutter how zey keep on frozzing arounds zeir mouzs und use in effry ozzer sentenz der oogly vord "default".

p.s. yew vont evidenz for my klaim? hier yew go... look at EURGBP und EURUSD

Edited June 8, 2011 by Naam

[midas]

I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment...

that is when you, me and a lot others will mint a lot fiat money which we will use to buy all available Gold, Silver, rare earths minerals, plutonium, trilithium, unobtainium, Wales and all its sheep, the northern part of New Zealand, Hong Kong Island and the Burj al-Arab where we will dwell happily ever after, eating once in a while some roosted roasted chicken after playing poker to determine who will be entitled to occupy the top story.

Is the U.N. economic division incompetent? Are their opinions of little consequence?

The statement they made is huge. A collapse of the US dollar! Maybe the news is too much for the media and the world to cope? Maybe we're in denial. "So far, so good!" said the man who fell off the 50-storey building, as he passed the 12th floor...

no from the fact that the world seems so obsessed with photographs of Weiners

when we should be concerned about far more serious things I think we are at the

Duas tantum res anxius optat, Panem et circenses stage

[lannarebirth]

German Schaeuble's letter on Greece to IMF, ECB, euro peers

http://www.reuters.c...E7G900O20110608

Looks like default to me. Everyone is going to default sooner or later, one way or another. Promises that can't be kept, won't be.

vhot it looks like doest not mutter. it is ze end rezult zat (allso cknown as der bottom lein) vhich kounts. my gut freund Herr Schäuble, hoo is paying indirektly all my ekspenzes in ze Lund off der Shmiles, has zometimes gut days und zometimes bad days (espeshully vhen ze bearings off his vheel tchair are not greased suffishuntly). vone has to take intoo konsiderashun zat he is a politishun und kannot shpeak freely vhot he really zinks.

i'm not kvite shure, boot i haff ze feeling zat ze Anglos left und rite off ze Atlantik Ozean vill be in for a surpreis, no mutter how zey keep on frozzing arounds zeir mouzs und use in effry ozzer sentenz der oogly vord "default".

p.s. yew vont evidenz for my klaim? hier yew go... look at EURGBP und EURUSD

I'm not frothing at the mouth for default, nor am I particularly expecting it. I DO believe however it is the best course of action for the citizens of these grossly indebted countries. I don't speak lightly as I'm in the money lending business myself. If any of my loans ever rose to a LTV ratio of 35% I'd find it hard to sleep nights. That these carpetbagging non- collateralized debt pushers might get their comeuppance does give me a certain feeling that there may be justice in this world, but I am by no means expecting it.

[Naam]

I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment...

that is when you, me and a lot others will mint a lot fiat money which we will use to buy all available Gold, Silver, rare earths minerals, plutonium, trilithium, unobtainium, Wales and all its sheep, the northern part of New Zealand, Hong Kong Island and the Burj al-Arab where we will dwell happily ever after, eating once in a while some roosted roasted chicken after playing poker to determine who will be entitled to occupy the top story.

Is the U.N. economic division incompetent? Are their opinions of little consequence?

The statement they made is huge. A collapse of the US dollar! Maybe the news is too much for the media and the world to cope? Maybe we're in denial. "So far, so good!" said the man who fell off the 50-storey building, as he passed the 12th floor...

i have no idea whether they are incompetent, what their opinions are and whether their statements are huge or dwarf size. in real life the Yewnighted Nations, its Security Council, its resolutions, its associated and affiliated departments and the results achieved are most of the time ridiculous failures financed by Joe Average Taxpayer. as i do not contribute to the finances of the UN i care a flying fàrt whatever their actions may be. i might of course bitch about but without having the right to do so.

hearing about "the collapse of the US Dollar" since now 40 (FORTY) years makes me yawwwwnnnnn notwithstanding the fact that i would hear about it for another 40 years if my remaining statistical life span would suffice. unfortunately it will not.

it goes without saying that a prudent investor does not exclude the possibility of collapsing Dollars, YEWros, Thai Barts, Tchapanneese Jenns, Tchineese Juanitas, a bunch of Ayrabbian Deer-Hams, perfide Albion Kilograms and whatchamacallit other currencies or assets. that might have applied to a certain extent in the "pre-Bear Sterns/pre-Lehman" aera. since then the said prudent investor is aware that in theory anything can happen. but he is also aware that he can't factor in and be prepared to counteract all negative possibilities and he knows that he can't fertilise his vegetable garden with rare earths minerals nor will it be advisable to send the Old Lady with nuggets, golddust or parts of the silver cutlery to the markets in order to acquire what is served for breakfast, lunch, supper or dinner.

Edited June 8, 2011 by Naam

[Naam]

I wonder when the chickens come home to roost regarding the unfunded stuff, and people are told they cannot have what was promised will that be the political catalyst and back drop for a real inflationary environment...

that is when you, me and a lot others will mint a lot fiat money which we will use to buy all available Gold, Silver, rare earths minerals, plutonium, trilithium, unobtainium, Wales and all its sheep, the northern part of New Zealand, Hong Kong Island and the Burj al-Arab where we will dwell happily ever after, eating once in a while some roosted roasted chicken after playing poker to determine who will be entitled to occupy the top story.

Is the U.N. economic division incompetent? Are their opinions of little consequence?

The statement they made is huge. A collapse of the US dollar! Maybe the news is too much for the media and the world to cope? Maybe we're in denial. "So far, so good!" said the man who fell off the 50-storey building, as he passed the 12th floor...

no from the fact that the world seems so obsessed with photographs of Weiners

when we should be concerned about far more serious things I think we are at the

Duas tantum res anxius optat, Panem et circenses stage

such as the crusade against them badder and baddest ayrab dick-tators who have nothing else in mind than committing genocide. that's why no-fly zones have been sanctioned (sanctificetum nomen UNensis) and established over Libya and will soon (any time from now when the oilwells are pumped dry) be established over Saudi Arabia, Kuwait, Qatar, the Emirates, Oman *** and the pain in the ass the Republica Bolivariana de Venezuela and its paramount Amir 'por la gracia de Dios' Teniente Coronel Hugo Chavez de Frias.

***OOPS, i forgot to mention Bahrain :jap:

p.s. who might be interested in a photograph of my Wiener?

Edited June 8, 2011 by Naam

[Naam]

shalom:

http://www.cnbc.com/id/43321205?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo

[midas]

no from the fact that the world seems so obsessed with photographs of Weiners

when we should be concerned about far more serious things I think we are at the

Duas tantum res anxius optat, Panem et circenses stage

such as the crusade against them badder and baddest ayrab dick-tators who have nothing else in mind than committing genocide. that's why no-fly zones have been sanctioned (sanctificetum nomen UNensis) and established over Libya and will soon (any time from now when the oilwells are pumped dry) be established over Saudi Arabia, Kuwait, Qatar, the Emirates, Oman *** and the pain in the ass the Republica Bolivariana de Venezuela and its paramount Amir 'por la gracia de Dios' Teniente Coronel Hugo Chavez de Frias.

***OOPS, i forgot to mention Bahrain :jap:

p.s. who might be interested in a photograph of my Wiener? DON'go and get onT GO THERE !

it's an absolute farce.what a disgusting double standard Gaddafi gets bombed out of existence by the

international politicians in collusion with the banksters for saying he would implement gold trading for oil whereas regarding Syria where the violence

is clearly much worse than it ever was in Libya, this is all that happens

" David Cameron told the House of Commons that the two nations will be offering "a resolution at the Security Council condemning the repression and demanding accountability and humanitarian action." "If anyone votes against that resolution or tries to veto it, that should be on their conscience,[/b]" he said.

somehow I don't think anyone who refuses to vote is going to lose any sleep

http://www.guardian.co.uk/world/2011/jun/08/syria-assad-un-sanctions-resolution

Edited June 8, 2011 by midas

[cloudhopper]

I'm not frothing at the mouth for default, nor am I particularly expecting it. I DO believe however it is the best course of action for the citizens of these grossly indebted countries. I don't speak lightly as I'm in the money lending business myself. If any of my loans ever rose to a LTV ratio of 35% I'd find it hard to sleep nights. That these carpetbagging non- collateralized debt pushers might get their comeuppance does give me a certain feeling that there may be justice in this world, but I am by no means expecting it.

Which country is not grossly indebted? Check out this excellent post by one of the best IMO

http://www.chrismartenson.com/blog/death-debt/58941

Default is inevitable IMO. The central banks are hoping to default incrementally by devaluing their respective currencies however this will prove impossible IMO as the presses are buried in an overwhelming avalanche of un-repayable debt and un-payable pension and transfer payment obligations. They might try, but this star is going to end up as a dwarf, whether preceded by a hyper-inflationary super nova or not.

[flying]

Which country is not grossly indebted? Check out this excellent post by one of the best IMO

http://www.chrismartenson.com/blog/death-debt/58941

Default is inevitable IMO. The central banks are hoping to default incrementally by devaluing their respective currencies however this will prove impossible IMO as the presses are buried in an overwhelming avalanche of un-repayable debt and un-payable pension and transfer payment obligations. They might try, but this star is going to end up as a dwarf, whether preceded by a hyper-inflationary super nova or not.

I like CM & I am grateful I read his crash course years ago.

Default is inevitable & the only question remaining is the vehicle they will choose.

As you pointed out the incremental devaluation will not be able to keep pace.

[RedFxTrade]

Chris M is good. I must read more of his stuff as I have always enjoyed what I have read.

Bernanke In Denial

I think this is possibly my favourite blogger. His posts are long, but superbly written, and a very indepth analysis is made. Lots of effort is put into his posts. Pater Tenebruam of the ActingManblog, at the link.

Fighting A Rhetorical Rearguard Action

As a result of the ever more evident failure of his money printing exercise to produce anything beside overvalued stock prices and soaring commodity prices, Ben Bernanke is now forced to fight a rhetorical rearguard action. The speech he gave yesterday was basically a slightly extended and embroidered version of the past 20 or so FOMC statements. A summary of the salient points has been provided by Marketwatch.

As a slightly more expansive report on the speech notes in its preamble:

“Federal Reserve Board Chairman Ben Bernanke said Tuesday that he is not in the camp of economists worried about a double-dip recession as he defended the central bank from accusations it’s fueled a boom in commodity prices.”

In short, Bernanke is either as dense as a fence post, or he's pulling a JC Juncker on us. As we have previously noted, the Fed's quantitative easing program has done far more than just 'increase excess bank reserves at the Fed' as many defenders of the exercise would have it. The most commonly heard argument is that since these bank reserves remain for now sequestered on the Fed's balance sheet and it doesn't seem likely that private sector credit growth will spur the 'money multiplier' into action, the Fed's activities have been neutral with regard to money supply inflation. This is belied by the fact that the true money supply TMS-2 is currently up almost 43% since the beginning of 2008.

The broad US 'true money supply' TMS-2, as per Michael Pollaro (for a definition and detailed explanation see here). This measure stood at $5.3 trillion as at January 1 2008. Today it stands at $7.574 trillion, an increase of 42.9%. Since January of 2000, the true money supply has increased by 151%. It has been the biggest monetary inflation of the entire post WW2 era in such a short time period.

Evidently then, the Fed has done precisely what Ben Bernanke said it would do when he was first interviewed on the topic of 'QE' on '60 minutes'. It has printed plenty of money. If you wonder how this feat was accomplished in the face of private sector credit deleveraging, consider that the Fed buys securities not only from banks, but also from non-banks, which increases both deposit money (i.e., perfect money substitutes) and bank reserves concurrently. In addition, the banks are not as idle as is generally supposed. They are reinvesting the proceeds from 'QE' by buying more government securities. Thus, although the debt monetization by the Fed bypasses the treasury (it is not allowed to buy treasury debt directly from the government), it finances the government's spending excesses indirectly, via the detour of the commercial banking system and other market participants that receive checks from the Fed in the course of QE (for details on the mechanics of QE, we refer you to an earlier article). We mention all this mainly to make one point perfectly clear: there has been inflation, and lots of it. When Ben Bernanke references 'inflation', he talks about the rise in consumer prices, but that is not what inflation is. Inflation is the increase in the supply of money. Rising consumer prices are just one possible effect of inflation, and not the most important one.

The defenders of inflation as a viable method of combating recessions should therefore explain how it was possible that the decade that has brought us the worst economic performance since the Great Depression coincided with the biggest monetary inflation since WW2. If inflation worked as a panacea that 'fixes' the economy as they assert, then why has the exact opposite happened? Evidently their theory has a major flaw – and the same obviously goes for the defenders of deficit spending (more on those further below).

Hence the rhetorical 'rearguard battle' Ben Bernanke is forced to fight these days. He has inflated the money supply massively and has nothing to show for it. Hence his assertion that the current slide back into recession is of course only 'temporary'. As Marketwatch reports further:

“Although he acknowledged the economy has been surprisingly weak so far this year and there have been recent signs of a loss of momentum in the labor market, Bernanke was sanguine about the outlook, saying that both jobs and growth would pick up in the final six months of the year.

“I expect hiring to pick up from last month’s pace as growth strengthens in the second half of the year,” Bernanke said in a speech to international bankers meeting in Atlanta.”

Home prices have just slipped to a new low, employment is weakening again, the ISM diffusion indexes are plunging – but don't worry. Bernanke just knows that all his money printing must have worked somehow. Indeed, it has. It has distorted the economy's productive structure further and thus weakened the economy structurally, while creating an all too brief illusion of 'recovery'. How Bernanke knows that 'growth will pick up in the second half' he didn't say. Given his forecasting track record, we can take this assertion almost as a guarantee that a recession is all but imminent.

The report continues:

“Overall, the economic recovery appears to be continuing at a moderate pace”, Bernanke said, but it will continue to be uneven across sectors and “frustratingly slow” from the point of view of unemployed workers.”

Translation: there is no recovery.

“The highlight of the speech was an exchange during the question-and-answer session between Bernanke and J.P. Morgan Chase JPM -0.59% Chief Executive Jamie Dimon.

The JP Morgan chief presented Bernanke with an exhaustive list of the sea-changes in financial markets, from the vanished products to the forced regulatory changes and strongly suggested they were to blame for the sluggish U.S. outlook. Bernanke said no comprehensive study of the economic impact of the new rules on credit has been conducted.

“It’s been the most comprehensive financial reform since the 1930s, we don’t have quantitative tools to do that,” Bernanke said. “There is going to be some trade-off here,” he said, adding the rules could be tweaked later.”

(our emphasis)

As we have noted previously, the Frank-Dodd regulatory monstrosity is an attempt to close the barn door long after the horse has escaped. It will have far more unintended than intended consequences, as is always the case with such interventions. So they have imposed endless new regulations on top of the existing regulatory jungle without 'conducting a study on their economic consequences'? Instead the new rules will be 'tweaked' later (every time an intervention predictably fails, new interventions are heaped on top of it to 'repair' the failings of the previous ones, and so forth, ad infinitum).

“For his part, Bernanke blamed the sluggish outlook for the April-to-June quarter on the effects of the Japanese earthquake. This is likely to dissipate in coming months, he said. At the same time, there is some prospect of lower gasoline prices.

With these two factors in train, “growth seems likely to pick up somewhat in the second half of the year,” he said.”

This is too funny. The mainstream experts all assured us sotto voce back in March that the 'broken window' in Japan would have no adverse economic effects – see 'Japan disaster will have limited impact on global economy' as a pertinent example. Now all of a sudden it is to blame for the US slowdown? And of course the somewhat 'higher' gasoline prices that preceded the prospect of 'lower gasoline prices' in coming months had absolutely nothing to do with the Fed's policies. That goes without saying.

“The fact that Bernanke did not sound overly alarmed about a slowdown was taken as a sign that the Fed would be in no hurry to launch another asset buying program, or quantitative easing plan, once its current $600 billion program ends in June.

Stocks wilted after Bernanke’s speech, perhaps on disappointment the Fed was not planning to ride to the rescue with another asset-buying plan.

Bernanke signalled he was also in no hurry to exit, saying that the zero-interest rates and bond purchase plan are still needed.

“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” Bernanke said.”

The markets know of course that without a further acceleration in monetary pumping, the bubble activities that have held the prices of titles for capital aloft will come under pressure. We can start speculating now on how many SPX points will need to be lost before 'QE3' comes down the pike.

“The Fed chairman spent a large portion of the speech trying to calm market fears about inflation.

The latest data show that inflation “should moderate” assuming that commodity prices stabilize and inflation expectations remain stable, he said.

Bernanke also made a strong defense of the Fed’s bond buying programs, saying it was not the root cause of this year’s surge in commodity prices.

He said that fundamentals of global supply and demand played the “central role” in the recent swings in commodity prices.

Bernanke ended his remarks by stressing the central bank would remain alert for signs that inflation may flare up.

“Most FOMC members see the recent increase in inflation as transitory and expect inflation to remain subdued in the medium term,” he said.

“Should that forecast prove wrong, however, and particularly if signs were to emerge that inflation was becoming more broadly based or that longer-term inflation expectations were becoming less well anchored, the FOMC would respond as necessary,” he said”

(our emphasis)

The pace of monetary inflation should indeed 'moderate' once QE2 ends, but that is of course not what Bernanke is talking about. As regards commodity prices, it is clear the Fed is not the only central bank responsible for their sharp rise, as other CB's have been inflating copiously as well (especially the PBoC). However, when the money supply is pumped up, some prices, somewhere in the economy will always rise. That Bernanke is trying to take credit for pumping up stock prices while refusing to acknowledge the Fed's role in increasing commodity prices only shows how disingenuous he is. The central bank has absolutely no control over where the money it creates goes. It didn't go into houses, that much is clear. But it sure did go into financial assets and commodities.

The part we have highlighted above is testament to the bureaucracy's hubris. Listening to these guys one always gets the impression that without our vaunted 'policy makers' we would have been in a permanent financial and economic crisis since at least anno domini 1374, when the Venetian banking system crashed after an economic boom turned to bust (this particular bust was the result of the banks creating a boom by practicing fractional reserve banking, in the main to finance the extravagant expenditures of the government – sound familiar?).

Whether or not rising prices are a 'transitory' phenomenon depends not only on the increase in the supply of money, but also on the demand for money. The fact that inflationary effects on final goods prices have so far remained subdued owes much to the public's much greater demand for money (i.e. cash balances) in the wake of the bust. Should people alter their assessment of the likely future purchasing power of the money unit, the bureaucrats could be in for a surprise, given how much additional money they have already created since 2008. Meanwhile, as the recent example of the BoE shows (which keeps its administered short term interest rate at 0.50% in spite of 'CPI inflation' increasing to nine times as much, at the current level of 4.50%), the promise that the monetary bureaucracy will 'respond as necessary' is a hollow one. Similar to the BoE, we expect the Fed to eventually come up with all sorts of excuses as to why the 'necessary response' must be delayed.

Koo To Krugman: I'm The Better Keynesian

Richard Koo, the man who recommends massive government spending as the 'cure' for recessions, in spite of the fact that he resides in Japan, where the failure of this policy could be observed first hand for over 20 years running, has taken it upon himself to snipe at a fellow Keynesian, Paul Krugman. Allegedly, Krugman's recommendations are not favoring deficit spending enough.

This is of course incredibly funny, given that Krugman has yet to encounter a government deficit he thinks is big enough. His main failing, according to Koo, seems to be that he wanted a lot of money printing from the Fed as well, or that he expected it would 'work'.

As Businessinsider reports:

“Paul Krugman's belief that further monetary stimulus, specifically QE2, would be capable of supporting the U.S. economy misled the Obama administration and has put the U.S. in a difficult economic policy position, according to Nomura's Richard Koo.

Koo says that while U.S. officials and Paul Krugman read his book on balance sheet recessions, they refused to admit more fiscal stimulus, that is government spending, was the only means by which U.S. could grow. Instead, they convinced themselves that more monetary stimulus would be enough to jumpstart U.S. growth.”

(our emphasis)

Consider us rolling on the floor with laughter. The economy, according to Koo (and according to Krugman, for that matter) is apparently a stalled engine in need of 'jumpstarting'. Of course we all know how well Mr. Koo's recommendations on deficit spending have worked in Japan – where for some reason, said 'engine' still refuses to be 'jumpstarted', in spite of Japan's government amassing the by far biggest fiscal debt among industrialized nations.

The so-called 'balance sheet recession', which Koo and his fans insist is some kind of great new revelation is of course nothing but the Keynesian 'liquidity trap' concept warmed over. To accuse Krugman of relying solely on more money printing instead of more deficit spending of course laughable. Krugman himself keeps insisting that the government is not spending enough.

“The result of QE2 has not lived up to administration, or Krugman's expectations, according to Koo. Instead, we're left with only two policy choices: protectionism and dollar devaluation, or more fiscal stimulus.

It's important here, to note, WHY QE2 doesn't work, according to Koo… essentially all that happened is that by buying up Treasuries, investors were forced to look for returns elsewhere, in places like stocks and commodities. The latter, the commodity gains, ended up slowing down the economy. What's more, QE2 has had no positive impact on bank lending whatsoever.

Koo notes that, because of the current political situation, fiscal stimulus now seems unlikely. Consensus has formed around austerity, and that would need to change for more government spending to be put in place. Standing in the way is Republican opinion, Democrat acquiescence, and ratings agencies who seem prepared to downgrade the U.S.

The alternative, protectionism and dollar devaluation, could be disastrous if history is any example, according to Koo.”

It should be noted that Koo's critique of 'QE2' is entirely correct – it has had precisely the effects he mentions and bank lending to the private sector has certainly remained subdued. He is also correct that 'protectionism and dollar devaluation would be disastrous'.

However, he presents us with a set of false choices, under the erroneous assumption that the government must intervene in the economy to 'save it'. He says ' we're left with only two policy choices: protectionism and dollar devaluation, or more fiscal stimulus', but that is simply untrue. As Ludwig von Mises noted a long time ago already, the best thing the government can do when faced with an economic bust is absolutely nothing. The only way to bring the economy back to a sound footing is to allow market forces to correct the imbalances in as unhampered a fashion as possible. The problem of the economy is not a 'liquidity trap', even if it comes by another name, its problem is that the previous credit expansion has left it with a discoordinated productive structure and a grave imbalance between production and consumption.

No amount of government intervention can alter this fact in a positive manner – it can only lead to even more distortions. In what way any of the tree 'policy choices' we are now allegedly left with would improve this situation is a complete mystery. It should be obvious that neither protectionism nor dollar devaluation can possibly improve the economy's status. However, it should be just as obvious that deficit spending is likewise destined to fail. Every single cent the government spends must be taken from the private sector, since the government produces no wealth and possesses no hidden stash of resources it can draw on. So to the exact same extent as the government increases its spending, the private sector will be forced to reduce its spending and investment. Resources will then simply be commandeered by bureaucratic fiat instead of the voluntary decisions of market participants. How is that going to improve the economy? As a matter of fact, the past decade has not only seen the biggest bout of monetary inflation of the entire post WW2 era, it has also seen the biggest increase in deficit spending since WW2. Obviously, neither the former nor the latter have had any positive effect so far. We will never understand why people like Koo and Krugman do not for once stop to think about this and consider that their theories might simply be wrong.

Of course, we still find it eminently entertaining when these Keynesians begin sniping at each other and start arguing over who has the 'better plan'. Why not just abolish capitalism and be done with it? If these people were right, the Soviet Union's GOSPLAN agency would be the institution most worthy of emulation. A pure command economy provides after all the best conditions for statist intervention. According to people like Koo and Krugman nothing could be better, since that would enable all their plans to be implemented in full.

[midas]

Oh dear! Looks like novelty of Davos is wearing off

http://www.youtube.com/watch?v=AInXDzO1eZQ&feature=player_embedded

[cloudhopper]

Zerohedge is a hub for radicalising bed-wetters imvho,

note to self - change to rubber sheets and lay off the asparagus for awhile

http://www.zerohedge.com/article/credit-verge-oversaturation-perfect-storm-implosion

[RedFxTrade]

Oh dear! Looks like novelty of Davos is wearing off

http://www.youtube.c...player_embedded

It is cringe inducing, especially the party consisting of 85% males,pissed and being even bigger wanke_rs than they are sober...arrogant, conceited and self-obsessed bunch. I d much rather "rub shoulders" around some joints/clubs around Sukhumvit where the female ratio is closer to 85% than spend $20,000 to hang out with these parasitic blood sucking hounds....from Old Holborn...

You can stick your CCTV, Police State, wheelie bin Stasi, DNA, WMD, “Social Cohesion”, benefits for all, guilty until proved innocent, don’t do that it’s illegal now, can’t say that, ID cards for all, where are you going, what have you been saying/doing/reading, can’t photograph that, how very dare you, we know where you live, we’re watching you Soviet Utopia up your <deleted>. Sideways

[RedFxTrade]

And the tension and weight within the EU continues to mount. Trichet Inflames Berlin Dispute

Jean-Claude Trichet, European Central Bank president, has escalated his dispute with Berlin over a fresh international bail-out for Greece, after making clear he sees no scope for forcing a contribution from holders of Greek government bonds.

Eurozone governments had to avoid Greece being deemed in default or a “credit event”, Mr Trichet warned on Thursday. Any private sector involvement had to be voluntary and without any element of coercion.

His comments were a riposte to Wolfgang Schäuble, Germany’s finance minister, who has demanded a “quantified and substantial contribution” by bondholders as a condition of German support for a new aid programme. They threatened to intensify already acrimonious negotiations over the composition of the package, which could be as big as €170bn ($247bn) between now and 2014.

Spanish and Italian bond yields continue to move higher. The yields on Spanish 10 year have soared this morning. We are now near the top of the resistance channel, and a break out of the 5.50% area surely will spell trouble, as the moves from these large multimonth consolidations usually are large.

I watched the Trichet speech yesterday. As Mish pointed out he contradicted himself by saying they would contain inflation and be strongly vigilant and then he said we will provide unlimited liquidity. Euro sold off hard after his speech, so perhaps the market can see past his ramblings. How can these people have any credibility is beyond me. Plus the journalists that ask questions are right soft ball questions.

Anyway, lets see if by next week at some point these Spanish bond yields break higher, how things play out. Gold up in real terms I would imagine. As a note, gold was down against the USD a couple of days ago, but when measured against a basket of currencies was actually higher in real terms. A sign that safehaven flows are at work.

[12DrinkMore]

Banks, just fix the dam_n problem.

http://www.bloomberg.com/news/2011-06-10/how-much-money-does-a-big-bank-really-need-to-be-safe-view.html

Instead of bringing back Glass-Steagall they are fartarsing around with capital ratios. This pandering to the banks has to stop.

[12DrinkMore]

It is cringe inducing, especially the party consisting of 85% males,pissed and being even bigger wanke_rs than they are sober...arrogant, conceited and self-obsessed bunch. I d much rather "rub shoulders" around some joints/clubs around Sukhumvit where the female ratio is closer to 85% than spend $20,000 to hang out with these parasitic blood sucking hounds....from Old Holborn...

Maybe, and it is unfortunate that a lot of our leaders have risen well above their Peter level. But on the other hand financially you would probably be worse off spending the USD 20k around Sukumwit than gaining a few insights in Davos. They may be tosssers, but they also make the decisions.

You can stick your CCTV, Police State, wheelie bin Stasi, DNA, WMD, "Social Cohesion", benefits for all, guilty until proved innocent, don't do that it's illegal now, can't say that, ID cards for all, where are you going, what have you been saying/doing/reading, can't photograph that, how very dare you, we know where you live, we're watching you Soviet Utopia up your <deleted>. Sideways

Governments see it as their role to govern the sheeple. There are two main plans to achieve total governance,

1. Top down. As you describe.

2. Middle down. This is the plan to prevent upstarts by removing the middle class through debt and taxes and dumbing down 90% of the population through the education system and TV.

Edited June 10, 2011 by 12DrinkMore

[12DrinkMore]

Iceland's former Prime Minister Geir Haarde denied all charges against him at the opening of a trial that will decide whether he was criminally negligent during the island's financial crisis.

http://www.bloomberg...l-collapse.html

An interesting idea.

I wonder if Bruin could hold his hand up and swear

"During my long career as a Cabinet member I always endeavored to take decisions based on honesty and responsibility bearing in mind the best interests of the country."

Probably an unhesitating "yes", but would we believe him?

Edited June 10, 2011 by 12DrinkMore

[RedFxTrade]

It is cringe inducing, especially the party consisting of 85% males,pissed and being even bigger wanke_rs than they are sober...arrogant, conceited and self-obsessed bunch. I d much rather "rub shoulders" around some joints/clubs around Sukhumvit where the female ratio is closer to 85% than spend $20,000 to hang out with these parasitic blood sucking hounds....from Old Holborn...

Maybe, and it is unfortunate that a lot of our leaders have risen well above their Peter level. But on the other hand financially you would probably be worse off spending the USD 20k around Sukumwit than gaining a few insights in Davos. They may be tosssers, but they also make the decisions.

You can stick your CCTV, Police State, wheelie bin Stasi, DNA, WMD, "Social Cohesion", benefits for all, guilty until proved innocent, don't do that it's illegal now, can't say that, ID cards for all, where are you going, what have you been saying/doing/reading, can't photograph that, how very dare you, we know where you live, we're watching you Soviet Utopia up your <deleted>. Sideways

Governments see it as their role to govern the sheeple. There are two main plans to achieve total governance,

1. Top down. As you describe.

2. Middle down. This is the plan to prevent upstarts by removing the middle class through debt and taxes and dumbing down 90% of the population through the education system and TV.

Don't get me wrong...I m not advocating spending $20,000 on Sukhumvit Rd...but I would rather save my 20K and spend a normal night out in a club or bar with "normal" people...Yes they make decisions and the secret is to know what those decisions will be before they know it.

Things are changing, people are starting to stand up to the establishment, and I see a growing body and network of young people online becoming more politically pro-active.

The second part is from Old Holborn...he ran for a seat at the general election as anonymous and wears a Guy Fawkes mask the whole time...He is what the mainstream media would classify as polticially incorrect but a very amusing and funny blog with a serious point to it. BastardOldHoborn. Yes he actually does turn up at political events wearing a mask and a cloak his latest offering...

I was out with Guido today, attending the "Tea for Change" lobby which is demanding that even MORE than £16 billion a year of your tax money is handed over to all and sundry in the 3rd world so that they too, may own iPads and therefore reach "equality" with us filthy capitalists in the West.

I spoke with various delegates and all them had no answer to my simple question:

Why are you demanding people on minimum wage here fund a nation that has a £1 billion a year space program and more nuclear weapons than us?

All of them umm and ahh'ed. Really. Not one could answer. And then, they threw us out. And then they attacked the man, not the message.

The reason Old Holborn stays anonymous, despite offers of TV and newspaper columns is that anyone can be Old Holborn and Old Holborn could be anyone. I will not be attacked for anything but my message. Feel free to act in my name, all you need is a Guy Fawkes mask. Or a spacesuit.

If you are tired of politics, then it's up to you to change it. You have the internet, you have the vote and you have your voice. Use them. There really are only 650

of them. Edited June 10, 2011 by RedFxTrade

[midas]

Something happened in Prichard, Alabama ( and continues to do so) that in my opinion could develop into a trend not only in US but in Europe, Japan, Australia etc. I wonder about the fallout from this? Personally I think it is only a matter of time and just think about how this would impact many retirees in Thailand who are living here month-to-month solely on their pension cheques?

Alabama Town Defaults on Pensions, Files for Bankruptcy Protection

"This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full."

http://www.marketoracle.co.uk/Article25214.html

Edited June 11, 2011 by midas

[cloudhopper]

Something happened in Prichard, Alabama ( and continues to do so) that in my opinion could develop into a trend not only in US but in Europe, Japan, Australia etc. I wonder about the fallout from this? Personally I think it is only a matter of time and just think about how this would impact many retirees in Thailand who are living here month-to-month solely on their pension cheques?

You got that right Midas. As promises that mathematically simply cannot be kept will not be kept the negative feedback of a deflationary collapse will accelerate. Even pension plans that look solvent today will evaporate as their "assets" are marked to market. They might try to print but it will be too little too late IMO. And what does trickle down will have less purchasing power both domestically and abroad.

That's why world leaders are very afraid of deflation, but might well be powerless to stop it. Demographics and expensive energy will also be factors accelerating the Ponzi collapse..

Have a nice weekend.

[Naam]

Something happened in Prichard, Alabama ( and continues to do so) that in my opinion could develop into a trend not only in US but in Europe, Japan, Australia etc. I wonder about the fallout from this? Personally I think it is only a matter of time and just think about how this would impact many retirees in Thailand who are living here month-to-month solely on their pension cheques?

why focussing on the impact of retirees living abroad? would they be in a different position if they lived in their home countries? i am not referring to retirees/pensioners who rely on some corporate or municipality pensions (they'd be screwed royally²) but to pensioners in general who are entitled to some government pension or social insurance payments. on the other hand we all know that even those "big" pension schemes will fail. sad but true it is only a question "when".