The Stock Market

[midas]

Did you hear they are considering another new stimulus .....$ 5 Trillion this time.

Fed's Bullard Says Could Do More Quantitative Easing If US "Got Into Bad Downturn"

RBS economist Bob Janjuah expects the Fed to launch a new $5 trillion QE version by early 2011

Parvis.........is expecting another round of QE the reason why you are so bullish ?

Edited May 26, 2010 by midas

[Abrak]

Did you hear they are considering another new stimulus .....$ 5 Trillion this time.

Fed's Bullard Says Could Do More Quantitative Easing If US "Got Into Bad Downturn"

RBS economist Bob Janjuah expects the Fed to launch a new $5 trillion QE version by early 2011

Parvis.........is expecting another round of QE the reason why you are so bullish ?

So, why Midas, do you think it is a bad idea?

[midas]

Did you hear they are considering another new stimulus .....$ 5 Trillion this time.

Fed's Bullard Says Could Do More Quantitative Easing If US "Got Into Bad Downturn"

RBS economist Bob Janjuah expects the Fed to launch a new $5 trillion QE version by early 2011

Parvis.........is expecting another round of QE the reason why you are so bullish ?

So, why Midas, do you think it is a bad idea?

Yes Abrak i think it is a very bad idea because I can never see them solving the problem by trying to pay off debt by creating even more debt.

The next generation will eventually despise us for this.

There are those that believe the big picture is that the Marxists are winning on a global basis

[jcon]

Midas

"What is my agenda - that is the question"

Well - first of all - I have an "Audience" here - that does not hesitate to criticize. This criticism helps me to be more specific - without "needing to explain". If criticism increases - therefore obviously - I still have work to do.

One can "fall in love" with ones "squiggly lines" (especially if they tend to be "quite original") and therefore be removed from reality.

Will I ever be willing to sell? Hardly - not likely - absolutely not - no way - comes to my mind. But I may "disclose it all" in my "memoirs" - sooner or later.

Somebody let Tom Cruise play with the computer again....

I was "wondering" what "Parvis" was "talking" about - then it "dawned" on "me" and "I" "understood."

"Ersatz" "quotes" "makes" "everything" "so" "believable."

Apocalyptic Riders ("Ryders" for "cool people") be damned - it's Scientology's turn at the helm!

[Abrak]

Yes Abrak i think it is a very bad idea because I can never see them solving the problem by trying to pay off debt by creating even more debt.

The next generation will eventually despise us for this.

There are those that believe the big picture is that the Marxists are winning on a global basis

I think that the concept that QE creates debt is rather unimaginative. It assumes that QE will both be unwound and that the money is used to overpay for assets.

In reality you could actually use QE to buy overseas assets or repay overseas borrowings. Obviously that will end in domestic inflation but that is the whole point.

[Parvis]

Edited May 26, 2010 by Parvis

[lannarebirth]

So to me there was a 'greenshoots' debate even on this thread that went on forever. To me, a 'bounce' or 'recovery' was signed sealed and delivered at the end of November. We then went into 'what's next phase?', we are probably still there, the market made further gains because the 'rebound'/recovery exceeded expectations (but still the question was whether it was a 'sustained recovery' or a 'strong rebound'.

There are many lead economic indicators but often the stockmarket is the best one. I think the answer to what is next is that we are heading back down.

Now to be clear on this, most economic numbers in general, imply otherwise - we are still in the exceeding expectations rather than falling short . We still really see more momentum to recovery than a real downturn - particularly in the US and Japan.

For instance, the USA looks the most robust on numbers but car sales have bounced to 11.5m annualized, that is not growth, it needs a lot more to get to 15m-16m it was before. Whether the US ends up in the austerity camp I have no idea but deficits aint going up.

SE Asia is simply peaking. The numbers will deteriorate unless the US recovery continues to maintain its momentum.

But why does the MSM only seem to emphasise " green shoots ", " stock market movements " , " car sales " ?

An attempt to brainswash the sheeple .

Let us remember USA relied on consumers ( 70% of GDP ) and those consumers were only active before the Crisis

because they used their homes as piggy banks. They spent because they felt wealthy.

But if you read this excellent explanation with easy to understand statistics its clear why its IMPOSSIBLE for the US housing

market to recover quickly ( they say 10 years ) and so without stimulus this current activity cannot last.

And why doesnt the MSM ever talk about this ?

Anyone Who Is Still Bullish On Housing Clearly Isn't Paying Attention To The Real Numbers

http://www.businessinsider.com/anyone-whos...5#ixzz0p0qNw4qd

Because the guy writing the copy and the guy reading the news more tha likely works for one of a half dozen multi-national media organizations and a large part of the remuneration he receives will be in the stock or stock options of that corporation. In this era where "everbody's in", there is absolutely no taste or market for realistic financial journalism. The delusion of crowds and the creation of financial manias is the worlds most profitable business.

yes.... just keep the sheeple focusing on one small spot and TPTB can get away with murder

Did you hear they are considering another new stimulus .....$ 5 Trillion this time.

There has to be another bigger " agenda " because nothing else would explain this lunacy

5 Trillion would get me bullish, though not on the dollar. Hey, quite by accident I stumbled on Parvis' "model".

http://www.flip-coin.com/

[AlexLah]

Totally cool Lana, it works!

[midas]

Yes Abrak i think it is a very bad idea because I can never see them solving the problem by trying to pay off debt by creating even more debt.

The next generation will eventually despise us for this.

There are those that believe the big picture is that the Marxists are winning on a global basis

I think that the concept that QE creates debt is rather unimaginative. It assumes that QE will both be unwound and that the money is used to overpay for assets.

In reality you could actually use QE to buy overseas assets or repay overseas borrowings. Obviously that will end in domestic inflation but that is the whole point.

So you dont see anything disingenious with Barrack Obama bending the ears of the leaders of these European countries

as to how they must all make sacrifices while his own government will keep spending like there's no tomorrow?

[midas]

5 Trillion would get me bullish, though not on the dollar. Hey, quite by accident I stumbled on Parvis' "model".

http://www.flip-coin.com/

But for Parvis he must enter YES in both boxes

[Abrak]

Yes Abrak i think it is a very bad idea because I can never see them solving the problem by trying to pay off debt by creating even more debt.

The next generation will eventually despise us for this.

There are those that believe the big picture is that the Marxists are winning on a global basis

I think that the concept that QE creates debt is rather unimaginative. It assumes that QE will both be unwound and that the money is used to overpay for assets.

In reality you could actually use QE to buy overseas assets or repay overseas borrowings. Obviously that will end in domestic inflation but that is the whole point.

So you dont see anything disingenious with Barrack Obama bending the ears of the leaders of these European countries

as to how they must all make sacrifices while his own government will keep spending like there's no tomorrow?

I absolutely agree that Obama is being disingenious. I suspect he is a bit pissed off that he funds 40% of the IMF so he is helping the bailout here. More to the point I believe it is US policy to inflate, depreciate and borrow their way out of their problems. Bernanke must be furious that the Euro has depreciated so much against the US dollar. Theoretically deflation for Europe's bad boys is just what he needs. Everyone knows that if Greece, Spain, Portugal could deflate - the currency would actually be stronger. Actually the best way to hold together the Euro is for the EU Central bank to be massively irresponsible. To turn Germany into Greece rather than the other way round.

Essentially US policy is that to the extent countries are undervaluing their currencies in a peg to the dollar they feel perfectly entitled to take advantage through depreciating the currency. The Euro is not quite in the same position.

[Parvis]

Equilibrium.bmp

No use to withhold my information anymore - you discovered it anyhow.

And here is..........................

[AlexLah]

Nah, old one....

[midas]

and this guy is in charge ?

Treasury Secretary Tim Geithner yesterday in Beijing where he took part in the two-day U.S.-China Strategic and Economic Dialogue.

"European leaders face the difficult challenge of trying to restore sustainability to an unsustainable system."

[badge]

and this guy is in charge ?

Treasury Secretary Tim Geithner yesterday in Beijing where he took part in the two-day U.S.-China Strategic and Economic Dialogue.

"European leaders face the difficult challenge of trying to restore sustainability to an unsustainable system."

A rare moment of sincerity?

[Gambles]

I know that macro fundamentals are not really popular on this thread but here is how I perceive perception.

Back in say April or May (possibly even March for the smart guys) last year it became pretty clear that there was going to be a bounce in economic fundamentals. Remember those 'green shoots'. Now in the early days there was no evidence of 'green shoots' but it didnt worry the guy who believed in them. Although figures were getting worse he knew they would get better.

This was because (1) the destocking cycle must end (2) long downturns also delay demand rather than simply irradicate it and (3) well 'fiscal stimulus' at the very least had to stop things going down. When say US car sales get down to 9m annualized you can guarantee that they will eventually go up from that level at some point even if they go down first.

So to me there was a 'greenshoots' debate even on this thread that went on forever. To me, a 'bounce' or 'recovery' was signed sealed and delivered at the end of November. We then went into 'what's next phase?', we are probably still there, the market made further gains because the 'rebound'/recovery exceeded expectations (but still the question was whether it was a 'sustained recovery' or a 'strong rebound'.

There are many lead economic indicators but often the stockmarket is the best one. I think the answer to what is next is that we are heading back down.

Now to be clear on this, most economic numbers in general, imply otherwise - we are still in the exceeding expectations rather than falling short. We still really see more momentum to recovery than a real downturn - particularly in the US and Japan.

But if I look for brown shoots I can see them....

1) First of all the restocking cycle has peaked. Second the fiscal stimulus is more likely to be withdrawn than increased and after a long downturn repressed demand that appears to be simply that.

2) There really are no good medium term signs.

For instance, the USA looks the most robust on numbers but car sales have bounced to 11.5m annualized, that is not growth, it needs a lot more to get to 15m-16m it was before. Whether the US ends up in the austerity camp I have no idea but deficits aint going up.

China has certainly exceeded all my expectation but look at money supply figures the are falling. They like most of SE Asia have seen a huge rebound due to restocking. 12% yoy growth Q1 for Thailand is actually the equivalent of 4% total 2 year growth.

Europe seems on a deflation path. Unless Germany inflates (which it seems to hate as much as it loves the Euro) things are pretty much bound to go from bad to worse.

SE Asia is simply peaking. The numbers will deteriorate unless the US recovery continues to maintain its momentum.

And given the appreciating dollar the odds are against that.

Ultimately, I think that we all sort of realize that interest rates cannot go down and fiscal stimulus cannot be increased. If you look to next year it is very difficult to see where growth of any sort will come from.

The point being within three or four months economic numbers will trail off. By say 1Q next year there is every possibility of a return to recession. And if it isnt caused by real economics, some countries are calling themselves in that direction. Deflation is not the way to go.

Or maybe I am simply over complicating my argument. On Monday there was a 3% fall in the Thai stockmarket after announcing 12% growth (ahead of expectations). So good news is going nowhere and bad news is not taken well.

I'd buy most of that but I'd also bring ot down to my level and say

Q1 10 - easy - Y-o-Y figures against one of the worst quarters in history

Q-O-Q figures should come in above as well

Q2 10 harder but still low base comparisons

Q3 10 - everyone was always going to be nervous

This was always when the truth about the sustainability and depth of the recovery was going to come out

and as we edge closer to it everyone knows

We're opening a locked door and there could be something very nasty on the other side and we can't ignore it any more

and also we swept all those nasty corporate and banking problems under the sovereign mat and pretended that didn't matter

but that was always going to resurface about now too -

H2 10 and H1 11 always looked like the trickey year to us, apologies ofr posting this into 2 threads, but it's relevant here too:

Dear all,

Please find below the latest update from MBMG International.

In the best Hallmark traditions, today’s DU is part one of a gripping mini series:-

Economic historians know all about the tragic year. Back in 1932 everyone believed that the measures taken by Hoover’s administration had beaten the recession. Stock markets and optimism soared. Jeremy Grantham describes a similar situation in his latest newsletter;

“The market has had a near record rally, sprinting far past our estimated fair value of 875 for the S&P 500. Bernanke is, in fact, begging us to speculate, and is being mean only to conservative investors like pensioners who cannot make a penny on their cash.”

Just like in the early days after the Wall St Crash of 1929 the masters of the universe have taken change as the massive bailout program prevented the meltdown of the financial system and engineered at least a temporary economic recovery. The obvious cost of this bailout has been the unprecedented deterioration of the Federal balance sheet. Grantham recently focused on the less obvious costs incurred by taking away the rewards of caution by saving the reckless and incompetent:

“Weak enterprises, financial and other, were not gobbled up by the stronger, more prudent, and more competent natural survivors, and there is a long-term cost in that. So now, Bernanke begs us to speculate, and we are obedient. Despite being hammered down twice in 10 years and getting punished for speculating, we again pick ourselves up off of the canvas and get back into the good fight. Such persistence is unprecedented – 20 years for each really painful experience has been the normal recovery time – but Uncles Ben and Alan have treated us so well in these two disasters that, with hindsight, they don’t feel so bad after all. Yes, the market is still down a lot in over 10 years and on our data is likely to have a second consecutive very poor decade, but we have had two wonderful recoveries in which the more speculative you were, the more money you made. So why not break the historical rules and try a third time? Perhaps this time it will be lucky.”

He talks of the Fed helping us up and then leading us off the cliff again:

“To do it twice seems like sadism. And for us to play the game once more seems like lining up behind hot stoves and begging, “Please, can I burn my hand a third time?” Investors used to be more pain averse. It used to be “once bitten, twice shy.” This time, surely it should be “twice bitten, once bloody shy!” The key shift seems to be the confidence we now have in Bernanke’s soldiering on with low rates and moral hazard to the bitter end, if necessary, cliff or no cliff. The concept of moral hazard has changed. It used to be a vague expression of intent: ‘if anything goes wrong, I will help you if I can.’ It seems to have been transmuted into a cast-iron commitment. The Fed seems to be pledging that it will bail us out after every flood. All that is lacking is a rainbow…..This time, the recovery for the total market was 80% in one year, second only to 1932, and the really speculative stocks are almost double the market, as they also were in 1932.”

Grantham believes that conditions almost 80 years ago were more conducive to such a rally. It’s taken different conditions this time. “I’m convinced that this excessive market response has occurred because stocks are far more sensitive to both low rates and the Fed’s promises than is the economy. The economy is limping back into action, but faces some tough long-term headwinds that I collectively call “seven lean years.” Mortgage defaults in housing, steady repayments of consumer debt, and refinancings in commercial real estate and private equity, are all problems that linger, as do many others, on what is becoming a long, boring list. We may get very lucky and have a strong broad-based economic recovery. The economy’s durability and flexibility is usually undersold by the bears, and I have generally been leery of underestimating its potential. But we can probably agree that the economy is plagued by unusual problems this time. It is therefore perhaps more likely that the economy will recover in fits and starts, and that over several years it will underperform its historical record.”

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.

[Gambles]

By the way my investments thoughts are largely driven by this...

Cash is an incredibly unattractive investment because (1) interest rates will not go lower and (2) most Governments are trying their hardest to devalue it. In fact it is hard to think of any time that cash is such a pathetic thing to hold.

Still I have a lot of cash at the moment simply on that basis. If cash is such an underlying bad investment based on its very simple fundamentals then every other asset (which implies a degree of risk) must be maximum priced or overpriced.

I agree this is not a very sophisticated theory but it is not that inherently illogical. Of course there are better opportunities out there, I am sure, but 'unattractiveness' of cash I do not believe should be read as an indicator you should spend it.

Martin Gray's holding 30-40% cash right now

At these prices in this environment what's to buy?

Some bonds (Sovereign not corp at today's prices), some gold & precious, some alternatives,

most of the good stuff's gone up so much it's time to sell

Most of the bad stuff's still overpriced

Better to just wait than to lose money big time

Currency vol gives opportunities in managed cash

Strategic patience can be a virtue

[Gambles]

Yes Abrak i think it is a very bad idea because I can never see them solving the problem by trying to pay off debt by creating even more debt.

The next generation will eventually despise us for this.

There are those that believe the big picture is that the Marxists are winning on a global basis

I think that the concept that QE creates debt is rather unimaginative. It assumes that QE will both be unwound and that the money is used to overpay for assets.

In reality you could actually use QE to buy overseas assets or repay overseas borrowings. Obviously that will end in domestic inflation but that is the whole point.

So you dont see anything disingenious with Barrack Obama bending the ears of the leaders of these European countries

as to how they must all make sacrifices while his own government will keep spending like there's no tomorrow?

Not sure that it's disingenuous so much as right and left hands deliberately not communicating

Obama brought back Volcker because the Goldman boys were keeping him in the dark

The more bank for your Buck speech was a classic example of them making a fool out of him (or letting him make one out of himself)

Volcker doesn't want inflation but is being served half-baked fait accompli for breakfast, lucnh and dinner

Bernanke and The Goldman boys can't ever admit that their only plan is to inflate away the debt - they'd never be allowed to get away with it

but it looks increasingly like their only policy option whether POTUS knows or not

Edited May 27, 2010 by Gambles

[Abrak]

Not sure that it's disingenuous so much as right and left hands deliberately not communicating

Obama brought back Volcker because the Goldman boys were keeping him in the dark

The more bank for your Buck speech was a classic example of them making a fool out of him (or letting him make one out of himself)

Volcker doesn't want inflation but is being served half-baked fait accompli for breakfast, lucnh and dinner

Bernanke and The Goldman boys can't ever admit that their only plan is to inflate away the debt - they'd never be allowed to get away with it

but it looks increasingly like their only policy option whether POTUS knows or not

So Gambles what is the end game?

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

[flying]

Martin Gray's holding 30-40% cash right now

At these prices in this environment what's to buy?

Some bonds (Sovereign not corp at today's prices), some gold & precious, some alternatives,

most of the good stuff's gone up so much it's time to sell

Most of the bad stuff's still overpriced

Better to just wait than to lose money big time

Currency vol gives opportunities in managed cash

Strategic patience can be a virtue

Sounds about right.

Even land & homes are still as yet highly overpriced.

The banks will not be rescued a 2nd time. They know this & will/are tightening lending consumer/mortgage credit.

If ...or when there is a bank holiday in the States house prices will drop as more & more walk away.

This so called housing crisis/derivatives/mortgage bundles has not been nicked in any real repairing way. The commercial real estate is next & just about to get rolling but we are moving quickly beyond the housing markets...sovereign debt market will make this all look tiny in comparison & will affect all banks world wide. Euro may one to fall first but will not be alone or the last.

This whole deal has as much potential as the underwater gushing oil leak in the gulf.,,,,,unlimited

Edited May 28, 2010 by flying

[midas]

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

All i say is they have been trying to get things right in Japan for 20 years now and its still not working.

SAN FRANCISCO (MarketWatch) -- Japan's core consumer prices fell 1.5% in April from the same month a year ago, Ministry of Internal Affairs said Friday. The core CPI figure, which excludes volatile fresh-food prices, had been forecast to fall 1.4% according to separate surveys by Kyodo News and Dow Jones Newswires, and compares to a drop of 1.2% in March. Overall consumer prices in Japan fell 1.2%. Japan's unemployment rate for April rose to 5.1%, compared with a Dow Jones Newswires survey forecast it would remain unchanged at 5%.

[Gambles]

Not sure that it's disingenuous so much as right and left hands deliberately not communicating

Obama brought back Volcker because the Goldman boys were keeping him in the dark

The more bank for your Buck speech was a classic example of them making a fool out of him (or letting him make one out of himself)

Volcker doesn't want inflation but is being served half-baked fait accompli for breakfast, lucnh and dinner

Bernanke and The Goldman boys can't ever admit that their only plan is to inflate away the debt - they'd never be allowed to get away with it

but it looks increasingly like their only policy option whether POTUS knows or not

So Gambles what is the end game?

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

the only end game that would provide a lasting fix is an asset write down to realistic values

Mass bankruptcies, huge bank failures, extreme short term unemployment but at least a solid base from which to build

Anything else is a sticking plaster when surgery is needed

But the right thing will not happen because of

politicans

bankers

vested interests

The above 3 groups are from being mutually exclusive - you'd get huge areas of overlap if you drew these on a Venn diagram

[Gambles]

Martin Gray's holding 30-40% cash right now

At these prices in this environment what's to buy?

Some bonds (Sovereign not corp at today's prices), some gold & precious, some alternatives,

most of the good stuff's gone up so much it's time to sell

Most of the bad stuff's still overpriced

Better to just wait than to lose money big time

Currency vol gives opportunities in managed cash

Strategic patience can be a virtue

Sounds about right.

Even land & homes are still as yet highly overpriced.

The banks will not be rescued a 2nd time. They know this & will/are tightening lending consumer/mortgage credit.

If ...or when there is a bank holiday in the States house prices will drop as more & more walk away.

This so called housing crisis/derivatives/mortgage bundles has not been nicked in any real repairing way. The commercial real estate is next & just about to get rolling but we are moving quickly beyond the housing markets...sovereign debt market will make this all look tiny in comparison & will affect all banks world wide. Euro may one to fall first but will not be alone or the last.

This whole deal has as much potential as the underwater gushing oil leak in the gulf.,,,,,unlimited

agreed

an artificial floor supports many asset values

only when that's taken away will the real value become apparent. Monday's update starts to get onto this topic. How to measure the asset pric distortion of 2009? Maybe looking at 1930/31 is a good indicator.

[Gambles]

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

All i say is they have been trying to get things right in Japan for 20 years now and its still not working.

SAN FRANCISCO (MarketWatch) -- Japan's core consumer prices fell 1.5% in April from the same month a year ago, Ministry of Internal Affairs said Friday. The core CPI figure, which excludes volatile fresh-food prices, had been forecast to fall 1.4% according to separate surveys by Kyodo News and Dow Jones Newswires, and compares to a drop of 1.2% in March. Overall consumer prices in Japan fell 1.2%. Japan's unemployment rate for April rose to 5.1%, compared with a Dow Jones Newswires survey forecast it would remain unchanged at 5%.

tsk those pesky peasants again. Why do people keep being so naughty and not doing what the governments and central banks expect of them (cf financial crisis thread).

[zorro1]

as per my last post 10400 is next dow exit. According to T.A

[Abrak]

Not sure that it's disingenuous so much as right and left hands deliberately not communicating

Obama brought back Volcker because the Goldman boys were keeping him in the dark

The more bank for your Buck speech was a classic example of them making a fool out of him (or letting him make one out of himself)

Volcker doesn't want inflation but is being served half-baked fait accompli for breakfast, lucnh and dinner

Bernanke and The Goldman boys can't ever admit that their only plan is to inflate away the debt - they'd never be allowed to get away with it

but it looks increasingly like their only policy option whether POTUS knows or not

So Gambles what is the end game?

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

the only end game that would provide a lasting fix is an asset write down to realistic values

Mass bankruptcies, huge bank failures, extreme short term unemployment but at least a solid base from which to build

Anything else is a sticking plaster when surgery is needed

But the right thing will not happen because of

politicans

bankers

vested interests

The above 3 groups are from being mutually exclusive - you'd get huge areas of overlap if you drew these on a Venn diagram

A the end of the day, I agree with you entirely. The real end game is 'creative destruction'. But in reality we will see increasing 'moral hazard' as a solution. There are people out there that see the bankruptcy of say Lehmans as causing the extent of the crisis. Many people believe that saving Greece saved the Euro.

The reality is that is that while the Lehmans bankruptcy may have exacerbated the crisis that happened, non bankruptcy would have only increased and delayed the underlying problem. Bailing out Greece simply means that the you have temporarily delayed and increased the size of the underlying problem.

When I point to inflation solving the underlying problem I merely wish to point out that it is neither fair or a realistic long term solution. It is what will happen in all likelihood. Inflation, bailing out banks etc. is what will happen. In the long run it is delaying a fundamental problem by ever increasing moral hazard. To the extent there is a plaster people should realize that each time that plaster gets bigger as does the wound.

[Gambles]

Not sure that it's disingenuous so much as right and left hands deliberately not communicating

Obama brought back Volcker because the Goldman boys were keeping him in the dark

The more bank for your Buck speech was a classic example of them making a fool out of him (or letting him make one out of himself)

Volcker doesn't want inflation but is being served half-baked fait accompli for breakfast, lucnh and dinner

Bernanke and The Goldman boys can't ever admit that their only plan is to inflate away the debt - they'd never be allowed to get away with it

but it looks increasingly like their only policy option whether POTUS knows or not

So Gambles what is the end game?

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

the only end game that would provide a lasting fix is an asset write down to realistic values

Mass bankruptcies, huge bank failures, extreme short term unemployment but at least a solid base from which to build

Anything else is a sticking plaster when surgery is needed

But the right thing will not happen because of

politicans

bankers

vested interests

The above 3 groups are from being mutually exclusive - you'd get huge areas of overlap if you drew these on a Venn diagram

A the end of the day, I agree with you entirely. The real end game is 'creative destruction'. But in reality we will see increasing 'moral hazard' as a solution. There are people out there that see the bankruptcy of say Lehmans as causing the extent of the crisis. Many people believe that saving Greece saved the Euro.

The reality is that is that while the Lehmans bankruptcy may have exacerbated the crisis that happened, non bankruptcy would have only increased and delayed the underlying problem. Bailing out Greece simply means that the you have temporarily delayed and increased the size of the underlying problem.

When I point to inflation solving the underlying problem I merely wish to point out that it is neither fair or a realistic long term solution. It is what will happen in all likelihood. Inflation, bailing out banks etc. is what will happen. In the long run it is delaying a fundamental problem by ever increasing moral hazard. To the extent there is a plaster people should realize that each time that plaster gets bigger as does the wound.

I agree and find that as usual you have made the point much better than I did.....

[midas]

as per my last post 10400 is next dow exit. According to T.A

why wasnt the exit 10,230 ?

[Parvis]

as per my last post 10400 is next dow exit. According to T.A

why wasnt the exit 10,230 ?

Because Technical Resistance is indeed at 10400 and your "dead cat" hasn't bounced far enough yet.

[sokal]

Not sure that it's disingenuous so much as right and left hands deliberately not communicating

Obama brought back Volcker because the Goldman boys were keeping him in the dark

The more bank for your Buck speech was a classic example of them making a fool out of him (or letting him make one out of himself)

Volcker doesn't want inflation but is being served half-baked fait accompli for breakfast, lucnh and dinner

Bernanke and The Goldman boys can't ever admit that their only plan is to inflate away the debt - they'd never be allowed to get away with it

but it looks increasingly like their only policy option whether POTUS knows or not

So Gambles what is the end game?

I see it as inflation deflating debt. Now I admit that is the simplest solution but I cannot see any other.

To some extent even those who believe in deflation, like Midas, are talking about 'deflation' in real terms while they acknowledge monetary inflation.

And really especially as far as the US dollar is concerned, China and the US are currently involved in a screw me, screw you policy.

the only end game that would provide a lasting fix is an asset write down to realistic values

Mass bankruptcies, huge bank failures, extreme short term unemployment but at least a solid base from which to build

Anything else is a sticking plaster when surgery is needed

But the right thing will not happen because of

politicans

bankers

vested interests

The above 3 groups are from being mutually exclusive - you'd get huge areas of overlap if you drew these on a Venn diagram

The right thing will happen when priced in gold. Say another 25% drop in house prices in the western world coupled with another 25% increase in the price of gold. There is the 50% drop we need from here.

Edited May 29, 2010 by sokal