History and Economies

[Annie]

My op wasn't partisan, it went that way via replies.

 

[antagon]

This isn't about Obama. The GOP would do the exact same stuff if they were in charge right now. There is no real diff between the parties.

i dont think that's true. i would imagine republicans would be happier to preach austerity like brit conservatives. i think they wouldn't have extended UI benefits as long and might not have approached the fiscal stimulus the same way. i think they would have flexed their confidence in a deep tax cut agenda. i think republicans are generally monetarists, so i wouldn't think the fed would be much different. we would still be at it in iraq... different lobbies would have influenced the HC agenda; there would have been some sort of tort reform bit in there if anything would have been done at all.

i think there's a big difference between our parties. they are working in the interest of the same nation, but there are differences of opinion as to how.

 

[loosecannon]

We were talking about QEII. We would be entertaining the same monetization of the debt under any insane admin, no matter which of the two parties elected them.

I am convinced that the Fed is not acting for the sake of deflation, but to pay for the debt until the economy recovers and revenues increase.

I am not convinced that the repubs would do much to rein in spending either. They never have before.

 

[antagon]

i think the fed is trying to pressure china and to move the money supply back to healthy levels. debt service is not a problem. not even close. imagining the downward pressure on the dollar and the implications to the health of the economy, i don't see why they'd stand by with all the recourse to do something about it and all of the insulation from anyone else's opinions on the matter.

 

[antagon]

My op wasn't partisan, it went that way via replies.

your OP? that was a link to someone else's slides with no real commentary of your own.

at least you've resolved to admit your partisan-spun position. have you ever considered understanding issues for on a deeper level than talking points?

 

[Annie]

My op wasn't partisan, it went that way via replies.

your OP? that was a link to someone else's slides with no real commentary of your own.

at least you've resolved to admit your partisan-spun position. have you ever considered understanding issues for on a deeper level than talking points?

I've been known to post a thought or two of my own, though feel no compunction to prove anything to you or anyone else. In this case, I found the slide show interesting as did a few others. You of course just chimed in with an insult, which of course was extremely edifying.

I believe I made clear that I find the direction our country is moving on regarding economics both dangerous and foolhardy. To go deeper on economics? No, I'll leave that to Toro who knows far more than myself.

 

[antagon]

ignorant but opinionated. this could afford one substantial election financing nowadays. who am i to knock it?

 

[loosecannon]

i think the fed is trying to pressure china and to move the money supply back to healthy levels. debt service is not a problem. not even close. imagining the downward pressure on the dollar and the implications to the health of the economy, i don't see why they'd stand by with all the recourse to do something about it and all of the insulation from anyone else's opinions on the matter.

When I make a strategic move I try to have 3-4 solid reasons for doing it and make the leap when I feel I am serving so many advantages that I can't lose.

I think the fed is doing the same thing, but with such little chance that QEII will resolve the challenge of getting liquidity into the real economy I just can't buy deflation as the main driver.

But the debt on the other hand is a big deal to the Fed. The Fed owns at least twice as much of our debt as the Chinese and Japanese combined, and we can't afford to pay it while we try to stimulate the economy. And the fed is already stressed, it bought 70 gazzillion $ worth of toxic assets. But the individual banks were saved.....

So I figure that they made a decision that the Fed itself was disposable as an entity and to save everything else as best as possible. The same banks can always form a new Fed once this one dies of insolvency.

And as crazy as that may sound, what do you think the plan is? You know that the fed or the Federal Government is on a path to insolvency. No way out. Can't be done without almost a decade of double digit inflation at least.

And we are powerless to cause inflation.

You don't think anybody from any of the councils of advisers has thought this thru to it's logical conclusions? And fwiw everytime you hear anybody refer to QEII as "monetizing the debt" they are saying the same exact thing as I am.

 

[Toro]

Ferguson has been pretty right so far.

However, what he is saying isn't particularly new and unique. Guys like Marc Faber and Jim Rogers have been saying the same thing for a decade.

 

[jillian]

This isn't about Obama. The GOP would do the exact same stuff if they were in charge right now. There is no real diff between the parties.

Depends on the subject matter, I'd think.

 

[jillian]

food and gasoline are not figured into the CPI. Real estate is years from recovering, so the policies for 'this year' will have little or no impact.

To think other countries will not respond to this gambit is like the baby who drops their spoon, but doesn't realize it is still there, on the floor.

15 other nations including China were already trying to artificially weaken their own currencies.

We are hardly alone in this.

Which was my point, now that he's wrecked ours, he's intent on wrecking the global economy. Each path chosen, has been wrong.

I think you're two years too late in whining about the economy being wrecked.

But it's not like you're not objective or anything.

 

[antagon]

I think the fed is doing the same thing, but with such little chance that QEII will resolve the challenge of getting liquidity into the real economy I just can't buy deflation as the main driver.

could the impotence of the fed's policy be a blaring internal unintended consequence of their philosophy? i imagine the chicago scholar approach would see the ratio between the m2 and their secret m3 as being anomalous. then applying their cause = effect, effect = cause approach, they might conclude that at some point their expansion of the m2+ will illicit some kind of uptake in the m1/m2. i think that ratio is a characteristic of a sickly economy. there's not enough assets/opportunities to soak up the liquidity (more effectively than higher volume currencies/commodities work).

then again, they cant lend to consumers themselves, nor enact targeted fiscal solutions like the congress, so QE may be all they can do. without access to pharmaceuticals or advanced treatments, the best thing you could do for your hypoglycemic buddy who's experiencing an attack is to give him a few spoons full of sugar. even if his uptake is impaired by his condition, you might be able to keep him out of a coma or a pine box. not responding? a couple more spoons, then.

 

[loosecannon]

buying long term bonds? Is that even an attempt to target main street?

 

[antagon]

what other options do they have which would make a better impact?

 

[loosecannon]

buying distressed mortgages directly and refinancing them directly for one. They could buy distressed corporate bonds as well.

I realize their tool kit is small, but surely the Fed has the authority to prohibit it's member banks from borrowing without lending. If they don't, or won't use it then it seems high time to bypass the banks and lend directly.

 

[antagon]

that would be splendid, but i dont think any of those approaches are in their mandate. should the government get any closer to consumer-direct service? the government is not equipped to understand allocation, even of credit and debt, granted they print the money up themself. witness the other GSEs. you make a good argument in saying the fed is exhibiting suicidal behavior. this is the sort of behavior which banks need to learn is not advisable. i think most have taken that lesson off the streets and aren't prepared to put money back out here for that reason.

do you know where to find out the true extents of the fed's options?

 

[loosecannon]

The fed's options are not strictly limited. Legislation and executive power can extend it's authority.

As per direct lending this could have been done thru the branches of member banks with fed guarantee or simply brokering Fed products.

As an emergency this seems perfectly acceptable imo, far better than just pissing away money on bonds. I realize that buying near zero interest bonds from yourself is a net neutral effort. But it is inflationary and as willie points out kind of oozes new liquidity into all the wrong places. If those bonds are issued to cover today's deficits tho, that puts off tomorrow what you can't afford today.

 

[william the wie]

buying distressed mortgages directly and refinancing them directly for one. They could buy distressed corporate bonds as well.

I realize their tool kit is small, but surely the Fed has the authority to prohibit it's member banks from borrowing without lending. If they don't, or won't use it then it seems high time to bypass the banks and lend directly.

Taking out my old broken record again conventional banking whether commercial or investment is just a payments system for the shadow banking system. The banking system in its traditional form ain't never coming back. The radicalization of both majors (campaign finance reform assures this) and the increasing geographical separation of party strongholds is driving the end of empire.

 

[loosecannon]

So what do you see as the new format of banking over the next 4-6 years, Willie? By shadow bankers are you refering to the Fed or the commercial bohemoths like Citi, BoA and GS.

 

[antagon]

i must be missing something about the government not being able to service debt. is that real?