Here's my summary of the key news overnight in 90 seconds at 9 am, including news the US Federal Reserve has announced it will print US$40 billion a month and use it to buy mortgage bonds in an unlimited way until the US jobs market improves.
The Fed also announced an extension of its promise of near 0% interest rates to mid 2015 from its current promise of 'exceptionally low rates for an extended period' until late 2014.
The announcement is a promise of essentially open-ended money printing until the US economy improves enough to get unemployment substantially than its current level of around 8%.
It also announced it will extend its programme of reinvesting the principal from maturing mortgage bonds until the end of the year. This means the US Federal Reserve will inject a further US$255 billion into the US economy by the end of the year. It will then keep injecting up to another US$480 billion each year until unemployment drops.
This is on top of the US$2.6 trillion it has already printed to buy mortgage bonds in its first two rounds of money printing and bond buying known as Quantitative Easing. See more at Bloomberg on the latest Quantitative Easing measure and see the full Federal Reserve statement.
The idea is that this mortgage bond buying will further push down long term US mortgage rates, encouraging home buyers and businesses to borrow and invest and spend. The problem is interest rates are already at record lows, but borrowers are either too indebted to borrow more, already under water with their mortgages worth more than their houses, or banks are unwilling to lend to those that need the money. Those that can afford to borrow and have good credit ratings have little need to borrow. The verdict on the first two rounds of money printing is mixed, with many saying the first round was more effective than the second.
Hopes and fears this might stimulate more economic activity and inflation saw the gold price rise 2% to US$1,788/oz and oil prices rise around 1%. West Texas Intermediate oil prices rose to US$98 barrel.
The US stock market rallied a further 1.6% to its highest level since 2007. See more here at Bloomberg.
All this appetite for riskier assets and the devaluation of the US dollar saw the New Zealand dollar rise to a 6 month high of 83.2 USc this morning. See more here in BNZ's currencies report on our site.
Reserve Bank Governor Alan Bollard, who is retiring on September 25, again rejected suggestions yesterday the Reserve Bank should intervene to counteract the actions of foreign central banks to devalue their currencies.
He said such intervention was ineffective when attempting to offset bigger forces offshore.
No chart with that title exists.
126 Comments
Ummmmmm , unless I'm being remarkebly dumb again ( a genuine possibility , of course ) , but how can it be " unlimited money printing " , Bernard .... if it's limited to $US 40 billion per month , until such time as the US jobs market improves .....
....... those sound alike two limits to moi .......
Hence it is not " unlimited " as you say .. .. Very much inunlimited , methinks ...
....... unless you're suggesting that the US jobs market will never improve ? ..... Never !
Gummy
So persnickety....Editor's job still going .... :
I'm saying unlimited in the sense that there is no limit on the size of the programme. The previous two rounds had limits.
There's also no threshold for the unemployment rate given. We don't know how low they want to push it.
Here's what the FOMC statement says: "The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market condition"
What is sustained improvement?
Unlimited at the moment. It might stop eventually. Or it might not.
cheers
Bernard
Bernard is correct. Traditional (is there such a thing anymore ??) QE always emphasise a limited quantum and time for the monetary infusion into the markets.
This time it is unlimited because it is open ended...until umemployment goes down but the target is not announced....What is the ultimate target of unemployment that the Fed wishes ?? Currently in US the unemloyment figure (officially) is 9%, is the target 3%, 4% 5% ??
What about U6 unemployment ? is the Fed targetting the usual unemployment figure listed by BLS or the unemployment in U6 ??
This is just a guise by the Fed to help Obama win he election by a dose of Monetary Mophine (after all Romney has pledged to sack Ben if he wins the election).
Unfortunately the "Libya, Egypt, Yeman, Syria and God knows which other Arab country" Blowback is going to see all these efforts nutralised.....
No Kin...Bernard is wrong...perhaps not in the sense of word play, but GBH is right in that it is purely an installment process subject to changes in economy and employment environment.....in other words the use of infinity is just plain nonsense and Grandstanding Headline.
Firstly Bernard has presumed Bernake will be incontrol of the Fed post Election, now I'm no Romney fan ,but I can tell you unless the Obamaites come out in force with a chant of "well maybe we could" it's going to be close enough to give rRomney the edge....and that means bye bye Bernake...bye bye current month to month injection...for what I cannot say yet, but Romney's on record as wanting a strong USD the sooner the better.
Damn it, I'd love to GBH...but I think Notananeco's been eyeing that desk next to yours... Besides, what with my dyslexia n all ,I'd spend all day reraeding waht I juts wroet........still with you running the show , I'll get some slack , and look out ...whoohoo!
I would be able to swap yoga stories with Amanda though, as I'm fully up on the Crash Position......yeah that'd be nice.
...... if you say " yes " , Count ..... I'll bring forward my spring clean ...... I don't normally have a shower until mid November ......
I've heard about the Cash Position : Pay your Yoga fees now , or the instructor ties you up in knots constructed out of your own limbs .....
I don't normally have a shower until mid November ......
Wow ! taken all this time to find you and PDK do have something in common after all....see told ya....yes ,yes ,I know yours is in clean water not recycled swamp sludge, but all the same.,
hell I'd love to say "yes" but don't you have to know something about economics...? or something , the guys and gals around here would dewing me like a fly.....way scary..!
Unless you wan't to re-tool and present it on a new format....?
Today's Cheer up ,or be hung by the neck untill you are dead, Top Ten at Twelve-ish.
Hmmmm needs more zip... I gotta duck out again , Talk soon.
You're getting your own column , Count ... the " Friday Chuckle " ... only , to save internet ink & space , we're gonna simplify it down to " Fruckle " ....... catchy , huh ! ...
.... 'like , how much should we pay the governor of the reserve bank ? ... fruckle ! ... what good have Johnny & the Gnats done for NZ ?... fruckle !
..... unless you'd prefer to headline your column " Down for the Count " ......
I'm good with that , too !
..... I'll keep Amanda's seat warm until you get back ....... Ciao !
Hey did you just say I'm the new Editor as in I (GBH) am the new Editor....?
What about the Gloom...? What about misery and suffering...? What will happen to PFIZER with the sudden drop in prozac intake by economists that frequent these dim corridors...? what about all that good stuff...eh..?
GBH can you make happiness sell..?.or will you sell out and find the Sticky Mist entices you like a dose of Conjunctivitus....are you going the Dark side...GBH...?
I need a cup of strong tea or a Bear Gryllis bring your own pick me up...as I'm floored.
...... I've heard tell that is wot happens to politicians ..... they start out with good intentions & high ideals , but slowly the mists of public serpentry ensnare them ...... pulling them down , down , into the mechanics of toeing the party line ......
Gummy can't make " happiness sell " ....... no one can ...... it's hardwired into us to avoid sabre toothed tigers , tar pits , and economists ......
...... so I'll let Bernard continue with the 90 @ 9 ...... after all , how much gloom , misery & suffering can one hickeysterical fit into a mere minute and a half !
I'll tell you what , Kermie .......we'll do a " Fatal 3 - Way Elimination " contest between Muppet News Flash / Polar Beers / and the regular hickeystericalisationalysing 90 @ 9 ......
...... after a month of voting by the bloggers , the 2 losers are FIRED ...... and forced to watch Allan Bollard speeches for a solid 24 hours non-stop .......
And then you ------ ooooooops , sorry ....... I meant to say , the winner will get his own regular daily slot .......
Bernie , Bennie can print til the cows come home ....... inflation is not his concern , not at the moment ........ and Draghi will draggy the Germans to heel , to stimulate some growth in the Eurozone ..... everything is fine in the world ...... and gerbils have their hearing repaired , at long last , brilliant ..... all sorted ........
If only behooves us now to locate the missing Xi Jingping and our own Wolly .. ..... hmmmm , what are those two plotting ?
...... ummmmm ....... is the Editor's desk next to Amanda's , perchance ?
Economists at Capital Economics estimate that the new round of QE could see the Fed buy almost $1.5 trillion of debt,
It’s now all spiralling down to nothing !
We live in a stupid world with too many stupid people in charge : $ $ 130498578493002938477584903948873994847889930300039090000000009483092
804985869005998588059938277789102989487763 and 35 cents
plus $ $ 299488756648773920004983776661qqq0000000000988567647 in 60 seconds
The University of Sheffield ( England ...... not Darfield ! ) medical research department has released news of a possible cure to auditory neuropathy ! ....... 275 million people worldwide suffer from partial to total hearing loss from this cause ....
...... the team implanted human embryonic stem cells into the ears of deaf gerbils , and achieved a 45 % success rate in restoring hearing to the cute little critters ......
Not only does this give hope to the 275 deaf humans worldwide , but it has elevated gerbils to a cuteness factor way above that of chipmunks ...... expect a movie very soon , piss off Alvin , you're yesterday's hero ......
It's now all spiralling up to wonderfulness .... be happy , Walter !
...... what ? ........ ay ? ....... speak up , man !
This is on top of the US$2.6 trillion it has already printed to buy mortgage bonds in its first two rounds of money printing and bond buying known as Quantitative Easing.
Bernard, I am unsure where you sought the above purchase amount - but the current Fed balance sheet asset position can be viewed in section 2 of the FRB:H.4.1 release. If my precision is correct the outstanding amount is USD 843.730 billion.
Gross also chucked out USD 30 Billion Treasuries over August according to this zero hedge release - unwound the borrowing against the burgeoning MBS portion.
The employment trend is very worrying with so many clamouring to cherry pick others wealth.
ostrich,
Am intrigued.
A strengthening currency will encourage exporters to take on staff as their orders reduce?
Is that a typo, sarcastic, or is your understanding of the effect on employment of dropping export orders as a result of the the effect of a too high currency (which hardly seems temporary, given we alone are unwilling to do anything about it) completely the opposite of mine?
ostrich,
apologies, my irony sensor was on low after a long week.
Am pleased to see Bryan Gould championing the exchange rate cause in the Herald today. Parker of Labour is also on the Reserve Bank case; but could frankly be a little more aggressive in pursuing it. Seems bizarrely a little easily put off by people like Joyce.
While I agree with you that the NZD should fall the 5-10% and more, history suggests it won't unless we do something about it; and the Nats are actively resisting doing any such thing.
... and the banking establishment can take this 480billion of newly printed credit from the trough and leverage it up (say at 10:1) and create another 4-5 trillion of new credit per year.... thats if they wanted to lend it out of course...(which they probably dont) - much more fun going to Las Vegas opps meant to say 'Wall Street' - stocks up, great and as a leading indicator that's the 'green shoots of recovery' appearing once again, all is well in lala land, still, at least it's not the Euro...
very la la....but then it is a confidence trickster ponzi game. Even the Pollies like JK know that if they say the wrong words they could panic ppl into not spending and when that happens the economy tanks as ppl stop spending and the Govn's tax income collapses...and the "surplus" in 2014 would be gone as would be JK....not that the other side is any better.
To survive it is essential to lie in other words.
Which is very conspiracy theory....but I cant draw any other conclusion that to lie (or omit) is thier only valid option. Of course you can only do that short term, keep doing it and sooner or later you get caught out, its simply the odds.
regards
"When things get serious you have to lie" - Jean-Claude Juncker, PM of Luxembourg (claimed he was taken out of context)
"Who the hell wants a PM who's down in the mouth?....I'll be positive till the day they drag me out" - John Key, NZ Listener
“I knew I might be asked questions about exchange rates, foreign reserves, bank liquidity and a whole range of topics on which straight forward answers could upset the financial markets. The day before the hearing I rang the chairman and explained my concern. He readily understood the dangers and assured me that he would guide the Committee away from dangerous questions in public.” - Alan Bollard, Crisis
“…balance can be upset if customers lose confidence in the bank. In this event, little will be deposited with it and substantial amounts will be withdrawn, possibly resulting in the ultimate failure of the bank. Therefore, the role the banks play in providing the link between the needs of borrowers and the economy’s need for liquid transactions balances is, as with the payments system, primarily dependent on the public having confidence in the banks.” - NZ Bankers Association
“You have to be extraordinarily careful about trying to warn people. No you don’t want to forewarn people…all you do is give them an opportunity to run on the bank and then those who get the information first get the advantage and those who get the information second lose out. It’s so easy for people to say something the wrong way, have it misconstrued and create problems in the financial markets. It does run very much on confidence.” - David Tripe, Head of Massey University’s Banking Studies Department
Good links, thanks I'd missed the last 2. Which means clearly in the last one at least that a so called public equiry is clearly a hoodwink.
"down in the mouth" indeed Amanda and more than a few ppl have commented that they dont like realists but blindly ignorant positives. The landing I think is going to be very hard for some.
regards
I thought Bollard's admission that he colluded with the Chairman of the Parliamentary Select Committee on Finance to deceive both the other committee members but also the public was quite extraordinary and one would think constituted contempt of Parliament.
Guess the ongoing moral of the story is that financial markets are rarely more than a gigantic manipulated confidence trick. So much for fundementals.
....but then it is a confidence trickster ponzi game...
Yep...exactly. To date they have largely been still winning the game... but as long as gold and oil remain valued in USD (a 'floating standard' so to speak - you need USD to buy them) the game will probably continue - which I think is for some time yet.... in a sense oil backs the USD and gold is backing the oil... and there is no viable alternative yet to the USD, nor one in the near future it seems...
True they certainly do ctnz - the chinese aren't dumb. In part its called the Shanghai Economic Co-operation Agreement.
The chinese still want a peg of their own currency to the USD (like most currencies). They have more to loose than the US with QE, as most of the inflation will be 'exported'. The don't want the dollar destroyed. As long as oil and gold are denominated with USD, the USD will remain the reserve currency, there isn't much the chinese can do either way. Unless they give their currency gold backing, and they don't have the gold to do that at present, really only one major one does, if you believe its reporting and that it hasn't already sold it off - the US. So the new reserve currency maybe a new gold-backed USD. Its just to early to tell, it may take a few years yet...
Its not just the PIIGS who want a strong USD mistNZ its everyone - except uncle Ben, who is trying to devalue it. Now I ask you if 2/3rds of USD are held outside the US - who really pays the cost of the devaluation?
China, Japan, NZ, etc will not be dumping their USD reserves - held in treasuries - because it would destroy their own currencies (the BIS does not recognise other currencies as reserves - just really USD and gold). Sure they may talk about selling their US treasuries - they have talked about it for years - but they really only have 2 alternatives - buy USD or buy gold - asia has started to buy gold and take delivery - that's whats blowing up the paper gold market - which was created by central banks to keep a full supply of cheap oil to the west which is what drove their economic growth - but the bullion banking establishment ran away to extremes - now more paper gold has been issued than can ever be delivered on - more than what has been mined in western civilisation history.
How did the west get a full supply of cheap? A: By supressing the price of gold in USD.
How can Ben lower the value of the USD? A: By allowing the price of gold to rise.
Like I've said before - some smart people have already figured out the USD has and is crashing - against real money - gold, but it's very much a 'managed crash', and to a large extend its taking all paper currencies with it.... as all currencies are really just derivatives of the USD...
"and the banking establishment can take this 480billion of newly printed credit from the trough and leverage it up (say at 10:1) and create another 4-5 trillion of new credit per year.... thats if they wanted to lend it out of course...(which they probably dont) - much more fun going to Las Vegas opps meant to say 'Wall Street' - stocks up, great and as a leading indicator that's the 'green shoots of recovery' appearing once again, all is well in lala land, still, at least it's not the Euro.."
The banking system doesn't work like this. Access to reserves haven't been a constraint on monetary growth ever. Its just the product of a misconceived picture of how the banking system works, which still to this day permeates todays economics textbooks, though banking authorities are more and more coming out to disabuse this mistaken view.
"A practical example is perhaps the best way to illustrate how banks, acting as financial intermediaries, create deposit money and credit from a cash injection. in this example, Figure 5 shows how a $100 cash injection can, under the assumption that banks reserve 10% of deposits, create $1000 of deposit money, $900 of credit and $100 of bank reserves. in this traditional view, banks hold reserves (cash or liquid assets) so they can meet the day-to-day withdrawals of customers...in reality, although the process outlined in the previous sections could occur, cash balances in bank vaults no longer act as a constraint on bank lending in the way that they might have up until the latter part of the 20th century." http://www.nzba.org.nz/assets/Uploads/Banking-in-NZ-06-final.pdf
Even the Gold Standard never truly exerted any meaningful constraint on credit creation, because it only applied to cash which comprised only a small proportion of the "money supply" and really only affected interest rates, which worked out through the currency flows between countries, which influenced demand for credit.
It is interesting to note that on July 19, 1844, under the auspices of Peel, England [sic - should refer to the United Kingdom] had adopted the Bank Charter Act, which represented the triumph of Ricardo’s Currency School and prohibited the issuance of bills not backed 100 percent by gold. Nevertheless this provision was not established in relation to deposits and loans, the volume of which increased five-fold in only two years, which explains the spread of speculation and the severity of the crisis which erupted in 1846."
http://mises.org/books/desoto.pdf
Only the severely restrictive credit controls that prevailed in the wake of the Bretton Woods system, really had any meaningful power to temper credit flows and "monetary growth", but with the 1971 Competition and Credit Control Act, those began to be dismantled as the economic turmoil of the 1970s purportedly discredited Keynesian economics and permitted the tide of Austrian and Chicago school neoclassic economists sweeping through the halls of power providing intellectual legitamacy to rising belief in the effiacy of liberalized financial markets and lightly regulated market economies. After the manifest failure of monetarists approach to monetary management it became apparent that the goal of the new monetary policy arrangments was inspired by a political agenda rather than underpinned by sound economic principles.
Under this policy the bank sought to control money supply indirectly through open market operations, instead of through the direct lending ceilings imposed on individual banks used formerly. Reserve Asset Ratios were imposed on all financial institutions where formerly cash and liquidity rations had applied to major clearing banks only.[1] In practice, sterling money supply increased rapidly following introduction. At the end of 1973, the Supplementary Special Deposit Scheme re-established direct controls on lending.
‘Britain’s monetary regime was not built on the back of a stable equation or model of money, but on a conceit intended to shackle the state’s spending bureaucracies’. A.C. Hotson, ‘British monetary targets, 1976 to 1987: a view from the fourth floor of the Bank of England’, March 2010 • ‘If we can establish internally, with the Treasury, the principle of keeping the growth in money supply down and taking any necessary measures to that end, we will in due course get an extra lever on the Chancellor to attack public expenditure itself…if we could get a public statement of a target for the growth of money supply, we should have a tighter rope around the Chancellor’s neck’. C.W. McMahon, ‘Monetary policy’, Jul 75, EID4/200 http://winton.ashmus.ox.ac.uk/PastSeminars/Hilary%202011/needham.pdf
Because you were criticising the Federal Reserves Quantitive Easing, and QE is all about "reserves". Reserves aren't money. You can't pay anybody with them. They're just a financial asset. QE is just an activity which injects reserves into the banking system, which merely alters the composition of an individual bank's asset portfolio. They swap long term Treasuries and mortgage debt, in return for shorter duration securities. Its just an attempt to suppress asset yields and boost bond prices, in a bid to encourage the private sector to invest in higher yielding assets. Because of this misconceived "money multiply" their also under the presumption that added reserves will increase the money supply and enable further economic growth, but banks aren't limited by reserves, but rather by capital, demand by the public, and the prevailing economic environment which would determine the probablility of debt repayment.
Its been a dismal failure, because for one thing, banks aren't reserve constrained. The Bank of International Settlements say this, the Bank of England says this, the Federal Reserve of the United States says this, and even the Banking Association of New Zealand does, but it just hasn't filtered through to the "economics" profession who are largely armchair academics, who only observe and comment on economic activity from a distance.
If you are saying its not possible for the banking system to leverage reserves - I will read the links you posted. Thanks.
As to QE being a failure, in terms of the banks I dont think it has. When has a cartel ever acted in the best interests of its customers? They dont. They act in the best interests of the cartel members. I mean sure - the official reason maybe something else as it has to be 'marketed'.... I mean if Americans are worried about unemployment - then its QE to the rescue - but where exactly is the corelation between printing money and reducing long term unemploment?
If Americans are told we need QE to save our financial system and the economy - of course they will accept it. If they are told the economy is not performing to its potential - but dont worry, QE to the rescue.... When has the banana cartel, or the oil cartel or the drug cartel ever acted in the best interest of their customers? Why would it be any different for the banking cartel? Really its a centralising power grab and in that sense it has been wildly successful...
I mean if unemployment is really want they want to solve why doesnt the Fed stop paying interest on the deposits with the Fed for starters? That would encourage that money to get out and into the economy. Or perhaps the real reason for buying MBS is that the banking cartel still have not marketed to market and want to dump more toxic debt on the taxpayers doorstep... before Basel III is enforced?
No I'm not saying its impossible just technically irrelevant. Banks are Capital constrained, not Reserve constrained. Many countries including our own don't have actual reserve requirements and even those that do have developed private interbank settlement systems and have introduced "sweep" operations where banks use specialized software to analyze depositors behaviour to judge the liquidity needs of their customers and move their funds into money market deposit acounts which earn banks interest.
“. . . when newly designed computer software enabled a bank to analyze its depositors’ use of their transaction accounts, sweeps became one of the main tools used to minimize a bank’s required reserves: any funds deemed by the bank to be excess were automatically transferred into MMDAs. (As a result of these transfers, a bank’s required reserve ratio could go from 10 percent to zero). And in 1994, when the Federal Reserve Board authorized banks to use this software to reclassify any transaction-account, retail sweep programs developed as banks notified their customers when they opened an account that “your deposit may be reclassified for purposes of compliance with Federal Reserve Regulation D. . . .”
http://acheson.wordpress.com/2008/02/02/loopholes-swallow-bank-reserve-requirements/
Third, reserves with central banks are often held as a necessary means of settling interbank transactions. This gives the central bank leverage to affect total deposits by means of small operations. Yet the evolution of private clearing mechanisms like the US net settlement system CHIPS threatens to erode the central bank role even here.
http://www.samuelbrittan.co.uk/text14_p.html
An interesting insight by a forum poster on Warren Mosler's blog is the all too apparent confusion between the fnction of cash reserves and Bank Capital, but they're fundamentally different things. Bank capitali is equity which are financial assets owned by the bank, whilst cash reserves are merely a proportion of a bank's deposits and cash which are held at the Reserve Bank and used to settle end of day balance sheet operations between tjhe banks.
The textbooks teach the multiplier model as if reserves were capital.
So, reserve requirement is 10x, so 1 $ deposit equals $10 in loan.
http://moslereconomics.com/2010/09/28/seth-carpenter-paper/
Bank reserve ratios are central bank regulations that set the minimum reserves that a commercial bank must hold as a percentage of its deposits and notes. Often times, the bank reserve ratio is used as a monetary policy tool, since the regulations are capable of changing the amount of funds available for banks to make loans. Basically under the Basel Accords, a bank is able to pyramid a specified proportion of credit on top of its equity which varies in proportion depending upon its level of risk.
http://internationalinvest.about.com/od/glossary/a/What-Is-A-Bank-Reserve-Ratio.htm
In 1988, G10 countries reached a consensus on minimum capital standards for internationally active banks. The Accord can be summarised in a couple of pages. In essence, it states that for every $100 of loans, a bank should have at least $8 of capital, of which at least $4 must be permanent equity. Because loans secured over residential property were seen to be less risky than other loans, they only had to have 50% as much capital. Loans to banks from OECD countries were seen to be less risky still, so they only had to have 20% as much capital, and loans to governments denominated in their local currency 0%.
No I'm not saying its impossible just technically irrelevant. Banks are Capital constrained, not Reserve constrained.
Yes, they are because they exceeded certain reserve ratio requirements that were established to be effective over many decades. Prior to the GFC certain institutions had geared their capital @ 33:1, mainly with underperforming low credit rated securitised assets ie the shadow banking system. The Fed and BoE are not innocent.bystanders.
Some of these links are informative:
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
http://www.omo.co.nz/FED%20sweep%20ACs.pdf
http://www.federalreserve.gov/releases/h3/current/
http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/144…
Yes, the highly regulated stable financial environment in the West that prevailed prior to the 1970s was certainly a great degree more stable than today, but it was also far less profitable, which is what drove financial institutions to seek better prospects elsewhere where prospects weren't so constrained. The West traded domestic profitability for financial stability at the expense of stupendous debt burdens that still hobble Third World fiscal indepedance and growth prospects and extreme financial market volatility that prevails in the developing world. Third World debt was a convenient outlet for excess Western liquidity and the debt overhang is now used as a convenient lever to contain Third World geopolitical and economic ambitions. The Asian nations realized this in the wake of the 1997 Asian Crisis that it is necessary to acquire a prudential level of foreign exchange reserves in case of a repeat event where they experience a shortfall of US dollars and must therefore go cap in hand to the IMF who they know will impose a prescription of toxic economic medicine under the dictates of shock therapy.
"LANCE TAYLOR: Beginning in the seventies, there was an episode of loan pushing from the commercial banks to developing countries. The chief source of supply was the recycling of OPEC bank deposits after the oil shock in 1973. You began to get overheating of the economies and overborrowing. The loans were cut off drastically in 1982, which gave rise to the debt crisis."
http://www.multinationalmonitor.org/hyper/issues/1990/04/interview-taylor.html
A large foreign reserve on central bank’s balance sheet is a double-edged sword. On the one hand, the large foreign reserve is a precautionary holding for surplus countries, especially for Asian countries, which learned from the cases of Korea, Indonesia and Thailand in the 1997 East Asian Crisis that running out of FX reserves amid market turmoil could have catastrophical effects, possibly culiminating in international intervention and austerity.
http://ineteconomics.org/blog/china-seminar/foreign-exchange-reserves-double-edged-sword
This article in the Economist appears to corraborate my intuition, that without the generous cash reserve provisions, most assets of the world's major investment banks likely wouldn't have been particularly profitable. I suppose you would likely be in a better position to ascertain the truth in that claim.
"Reducing leverage might also reveal an uncomfortable truth, which is that much of what banks did before the crisis was not particularly profitable. During the boom many banks boosted earnings simply by levering up, masking poor returns on assets with the magic of debt. In America banks typically held about $30 in assets for each $1 of their equity, while some European banks stuffed their balance-sheets with up to 80 times more assets than equity. An unpublished study by Credit Suisse, an investment bank, found that with the exception of Goldman Sachs, none of its rivals would have consistently made returns much above the cost of their capital before the crisis had they been forced to limit their leverage to sane levels."
Mish's Global Economic Trend Analysis: Panic!
http://globaleconomicanalysis.blogspot.co.uk/2012/09/panic.html
He has an interesting comment,
"I'm long stocks, gold, short us dollars next 24-48 hours but ..on the anniversary for LEHMAN... tonight could be the day where FED did too much."
The problem is the global context....for instance, OK short USD....um where else do you go? arguably everywhere else is going to be worse off...relatively speaking USD might be indeed bad but ithers and most of them will be worse (Nicole Foss).
Long stocks, and long gold....if they can keep doing this without any adverse effects then buying gold at least makes sense, cant see it so picking the day you bail becomes the game.
By gold I mean physical gold....paper IOU is a scam.....stocks are rigged and can be sold off in mseconds, you cant compete only lose.
regards
Yes steven, as Greenspan has said - at the end of the day gold is the only place fiat can run to - its the only real money the world has ever known.
"The stars blink and fiat is no more".
Gold is money. Everything else is credit.
Gold is the most stable money there is.
As a student of the 30s you'll know that the stock market lost around 90% - and would have been more except for the gold mining stocks which on average went up around 40x and made up over 20% of the market capitalisation... now days all the gold miners in the world combined make up about 1/3 the size of Apple and relative to the current price of gold are trading at multi-decade lows.... in the last gold bull run 15% of Americans were in it, now its more like 1%, as its only just warming up.
They say in NZ there is nothing can be done...
Perhaps I am simple, but why can't everyone (except the banks) be given 100,000 to either clear debts (if they have any) or to spend how they like if they dont?
We are at war and NZ is losing as all the export jobs disspaear.
F&P are even heading offshore.
Barack Obama will be sending the champagne to Benny & the Boyz over at the Fedarort Reserve ..... done & dusted for Romney , back to your flock of Mormorons , buddy ......
...... and it is a radical plan by Bernanke , but what other choice did he have ..... given the path the Democrats have led the US nation down , the bail-outs of mega-banks , the growth of red-tape & bureaucracy ..........
Stimulate by debasing the currency is the only option available to Bernanke .
GBH, the path was set by Bush and Greenspan, Obama and Bernanke are trapped on that path by the political system that is the lobbyists and their funding.
Radical? only in size and pointlessness. Greenspan did the same thing by lowering the OCR every time the economy threatened to implode.
NB If he doesnt stimulate then the economy is going to collapse into a Greater Depression....and that is misery for 100s of millions....not that I think it will work, Steve Keen's work makes it clear it cant IMHO.
regards
Upon the opening of trade , the majority of the Australian Stock Exchange indices have leapt over 1 % .......
..... like him or loathe him , Bernanke's radical new plan will have shifted the psychology of investors , worldwide ......
You can continue to get near zero returns for much longer in cash , or take some risk on equities & property , and achieve a far higher income stream ......
This is bollocks.
Bernanke is doing what failed twice, but doing it this time for longer. So?
The problem with money is that it expects to buy bits of the planet. They being in shortening supply, all that will happen is that the dollars will be worth less. Hello inflation, but inflation without growth.
Hello the fools who buy it, and buy into it.
PDK, but it has to deflate when it comes out into the real world.
So sure pay $20million for a farm asset that on say $10million only pays 5% so $500k/annum. So OK now the return is 2.5%....then factor in removing the fossil fuels component on that $500k output....the output is now $125k...return is 0.625%
Come to sell who's going to pay you 20million on an asset only returning fractions of a %?
Now look at the PE ratio of shares of companies they are even more silly....so sure spend the $s buying companies whos value hasnt had fossil fuels withdrawl factored in....
They are simply going to collapse.......
and that is if we dont hit deflation and the Greatest Depression first....so I agree with Nicole Foss there will be a mega financial crisis and that is the short term and fast thing...
Which if there really is 9 trillion+ sitting in US bonds etc is I suspect what is being bet on. The only Q is is it investors money or Fed's money....or what %.
regards
PDK, while I agree on the nonsense part of it ... but please, you have to stop spreading the myth that it' s " for longer ".....the whole reason it's month to month is so that termination can take place for a myriad of reasons.
Bernard's headline was just that a headline, as in, if it had been given more though and less bias by Bernard , it would have read....
Bernake goes Postal with ..."your cheques in the mail "......
This does two important things without ,a cornered Bernake going out with his tail squarely between his legs.
1. Bernake relieves the pressure Market expectations put on him without finite boundary one way or the other...so they ( the Markets) keep thinking the cheques in the mail why worry...!
2.It allows a face saving built in outdoor for the Fed should Obama lose, and new policy simply stops the installment rather than having to overturn current directives....
He get's it his way for now ,but on the end of a short leash / lease..
No Christov. This is getting near the end-game, even with the inertia of a global system.
Bernanke has no other answer. Tried twice, no result. No other ideas, so we do it again.
Meantime Local Authorities are reflecting nothing more than ramping energy prices (reflecting competition/scarcity).
Everyone will now get more efficient (lower wages in the process) to export to each other, thus all 'growing' simultaneously.
It's flying-pig time.
Grant, Good point, although I believe only as fast as the Chinese are willing to accept. They will continue to print money, create internal credit, and or buy massive foreign reserves to keep the renminbi at a level they are content with.
It seems to me only New Zealand and Australia are ignoring the damaging effects of a too high currency
Trust me Stephen L...The RBA are having convulsions over it.....problem is they did it to themselves......
They are in a real bad place right now....and their new best friends helped them all the way there.
The RBNZ are still getting over the loss of an Icon.....but they will await , Big Brothers plan with intrepid anticipation.........
Grrrrrrrr
http://www.interest.co.nz/opinion/61133/fridays-top-10-nz-mint-why-chin…
Harumphhhh
Grrrrr
Bernard
It's Friday.....Let's Fruckle..! (tmGBH)....YaY...!
The pitfalls of being too literal Bernard.
An Irish farmer named Seamus had an accident with a lorry ,and was sueing the lorry company, In court their hot-shot solicitor was questioning Seamus.. Solicitor 'Now didn't you say to the Police at the scene of the accident, 'I'm fine?' . Seamus 'Well, I'll tell you what happened. I had just loaded my favorite cow, Bessie, into the...' Solicitor 'I didn't ask for any details','Just answer the question. Did you not tell the police officer, at the scene of the accident, 'I'm fine!'?' Seamus 'Well, I had just got Bessie into the sidecar and I was driving down the road....' The solicitor interrupted again and said, 'Your Honour, I am trying to establish the fact that, at the scene of the accident, this man told the police on the scene that he was fine. Now several weeks after the accident, he is trying to sue my client. I believe he is a fraud. Please tell him to simply answer the question.' By this time, the Judge was fairly interested in Seamus's answer and said to the solicitor: 'I'd like to hear what he has to say about his favourite cow, Bessie'. Seamus thanked the Judge and proceeded. 'Well as I was saying, I had just loaded Bessie, my favourite cow, into the sidecar and was driving her down the road when this huge lorry and trailer came through a stop sign and hit me right in the side. I was thrown into one ditch and Bessie was thrown into the other. I was hurt very bad like, and didn't want to move. However, I could hear old Bessie moaning and groaning. I knew she was in terrible pain just by her groans. Shortly after the accident, a policeman on a motorbike turned up. He could hear Bessie moaning and groaning so he went over to her. After he looked at her, and saw her condition, he took out his gun and shot her between the eyes. Then the policeman came charging across the road, gun still in hand, looked me up and down, and said, 'How badly are you hurt?' 'Now what the F**k would you have said'?
Meebee when they said " Top NZ'ers " they meant Kiwis who live up in Auckland , up top of the country .....
.... as differentiated from Kiwis who live down below that , " Bottom NZ'ers " ...... who live in the bigger bit that actually serves some useful purpose to the country as a whole .....
What gets overlooked in these "adjustments" is that the fundamentals of global trade is still problematic.
If we use the H1 figures coming out of China a substantial number of listed companies are experiencing significant profit adjustments, without adjusting output.Production is still goal orientated and not demand driven hence.
1) Chinese listed companies have aggregate (unsold inventories) of 302 billion( around 12 months production)
2) Input inventories such as iron ore is around 102mt at Chinese ports.
3) Chinese coal production lose around31-39 us per ton in Shanxi
4) Unpaid Debts to steelmakers have risen to 2.5BUS
Significant adjustments are still to come to the commodity currencies.
Heres the update version 3.0 keyboard for central bankers:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/09/CTRL%20p.png
They will be hiring immediately I presume, no prior keyboard skills necessary - all training given on the job.So I guess Ben was right - QE does reduce unemployment then...
Saw that economist. The article it was part of says a lot too.
The posters at ZH certainly don't hold back on their comments.
Hypertiger
Posted Today, 06:32 PM
It's becauase you all are ignorant of how the global trade system works.The net producers at the bottom of the absolute capitalist hierarchy take more than they give from the planet/Universe to supply the demand of the net consumers who take more than they give from the net producers.
The exponential function takes more than it gives...
The key problem is that the top has sucked the bottom dry and now the monetary authorities are expanding the money supply to make up the difference in loss of yields.
Prior to 2008 US consumer demand for commercial banks to inflate the supply of credit was an average of 7.9% a year.
40 Billion Dollars prior to 2008 worked out to just under 4 days of typical demand by US consumers...
Japan has been easing or inflating the supply of YEN for 20 years...Now England is inflating the supply of Pounds...The EU is inflating the supply of Euros and China is deficit spending like mad.
Because the end of the line has been reached.
It's a controlled collapse.
If what they are doing was not done...You all would not be reading this...There would not be enough excess money to blow on the support of the Internet.
The FED, EU central bank, Bank of England and Japan are pumping in way more than they are officially announcing.
The official announcements of QE are just cover for the unofficial or unconventional interventions.
It cracks me up how all you net consumers have been brainwashed into believing you are productive members of society
Because all you need to be a productive member of society is to have an income that appers to come from performing some kind of function which requires effort which you have been brainwased into calling work.
Which is now being subsidized/sustained by the coordinated actions of the central banks around the world.
All the QE is to create the green arrows or positive environment enjoyed by the top that hide the red arrows at the bottom or the negative environment that supports the positive.
Suckers?
You were all born suckers.
Yes eventually the whole system will collapse and be rebuilt...By the survivors who will be ignorant of what caused the effect which was the collapse they survived.
You all are powerless.
You all have about as much control over your destiny as leaves blowing around in a hurricane.
You all are along for the ride.
Bernanke is nothing but a puppet...A potential scapegoat if and when a scapegoat is required.
Bernanke is a servant just following the orders of his masters.
The owners of the global absolute capitalist enterprise which you all are nothing but employees of. http://forums.wallstreetexaminer.com/topic/1046338-fed-announces-qe3/pa…
Yes PDK a lot of people get .....it...., ta A.J., by the way, you stopped short of (nuts on the line )to say whether you supported the post or simply were intrested in the feedback..then PDK you have to think beyond that point...what do you see ...? a post apocalyptic world where you are prepared to what ...? help those who did not see it coming...? or rise to the top of the new heap to say I told you so...?... The Cassandra story cannot be rewritten........ to have new outcomes, because that is another story ...is it not...?
It is better you are poised to help, than wallow in sanctimonious piety.......
BTW.....above at no stage did I support QE111 nor condone Bernanke actions in ,the pretend and extend game, simply pointed out that the month to month was politically geared and market pacifying.....
Stay well...! and I suppose ready for anything really.
Folk like me are resigned to having to wait till TSHTF.
At that point, the uninformed (I pick 'em by the flat-screen TV and no books, these days - walk into the house and it takes about 2 secs...) will be bleating for answers. Judging by their ability to not think while being hoodwinked, and by the ability to deny even when informed, They'll need a simple blueprint.
Emphasis on the 'simple'. One side of one A4, big print, is my guess.
It's written.
And being demonstrated, as best one fellow - make that couple - can.
But I suspect we will see a major war(s) over what's left. It may be political suicide to announce the end of growth to the masses, but that doesn't mean the likes of Obama don't know, and the Chinese leadership certainly are aware. It may be that the official line blames something else.
Resignation has not been your position for the longest of time PDK.....I mean that in a complimentary way....no doubt, in my mind you are committed to....a cause..?......a need to inform ...? as in Cassandra....a state of readiness for what appears to draw itself out beyond the existence of the Bellringers...?
The s*#t hits the Fan on a continual basis PDK.....tipping point is ,when the masses notice the build up of layers becoming a burden to carry......then looking to the fan, willing it would just stop.
These things are in our nature , ......the ascent of Man...eh..?
Christov and PDK:
I think in terms of the powerful few and the powerless many. Divided and conquered. The powerful few dominate because they can prevail over the divided many.
Christov, in the case of Bernanke, he is the annointed one with the power PLUS the microphone. There is nothing the powerless can do other than cop it. That's the way the world works. Intentionally or un-intentionally he has mis-used that power. He's had 5 years and 4 previous shots at getting it right. The original $350 stimulus payments to all taxpayers and beneficiaries, then TARP, then QE1 and QE2. Now QE3 with no guarantee he will get it right this time. In the meantime, he still has the microphone.
The powerless many do have power. They just dont use it.
Japan will phase out nuclear power by 2040 marking a major policy shift and the first formal decision to retreat from atomic energy since the disaster at Fukushima 18 months ago.
http://www.ft.com/intl/cms/s/0/f9961e7c-fe3e-11e1-8228-00144feabdc0.htm…
great for Australia
>>
Japan’s decision will reverberate through the energy and commodities markets. The phase out of the world’s third-biggest nuclear generator, will mean lower demand for uranium, but higher consumption of commodities including crude oil, thermal coal and liquefied natural gas over the long term.
Japan is the world’s third-largest importer of crude oil, after the US and China. The country is the largest importer of thermal coal, on a par with China, and by far the biggest buyer of liquefied natural gas, a form of supercooled natural gas shipped in enormous vessels.
The power of nightmares
If you look at the "Red book" which is really telling us of peak uranium then by about 2040 there wont be enough raw uranium anyway. iIn terms of fission. Thorium sure if that works its a future tech. Throw in peak oil at 2006 and by 2040 there wont be much oil, so japan wont be importing that either.......
LNG is problematical to ship.....and what a juicy and easy terrorist target.
regards
I had a guy working for me one time that had been a ships captain in his younger years. He recounted to story to me of at the last minute pulling out of a job from the US to somewhere in south america, which was an LNG shipment. The ship suffered a fire on that voyage that spread via the air conditioning system and wiped out the entire crew.
He's firefighting while Congress pours deisel on it.
The Obama stimulus was 1/2 the size it needed to be plus Congress mis-directed it. I dont know if congress did it over direct greed and pork barrel politics or mainly wanted it to fail to discredit Obama...either way the outcome is now set in stone IMHO....its just a matter of time.
regards
Im sure they know, they are not dumb. Here we see Pollies giving money to develop materials in nz "as nz is at the end of a long supply chain and we cant get stuff". Given the over-capacity in manufacturing right now I dont believe that for a second.
Then we have the other side Parker wandering off looking for options/solutions to the no more growth problem...
Jerry Brownlee thinking we could mine deep sea methane.....no one in his right mind aims to do that unless there are no other choices...
They know IMHO.
In terms of major wars, for WW2 the US had oil on its soil, this time it doesnt......it has a long supply path past the world's two biggest "wanters" India and China....let alone the pesky natives who are in the way.....genocide maybe? sure carpet bomb say saudi, iran....that will just leave a hole....
regards
".....for WW2 the US had oil on its soil, this time it doesnt.....
Current US field oil production is 50% higher than when it entered WW2.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mcrfpus1&f=a
Yeah, facts are good, but it's even better if you understand them.
"the USA now produces more for it's own use than it imports" .
Have a wee think about that.
So it produces in-house something more than 50% of its consumption, ex having-a-war, and imports the rest. Cant do without imports, then.
You just proved Steven correct. In 1941, it was producing (kindly understand the difference between 'had' and 'produced') enough oil to fight a war without importing, this time it doesn't.
"Total net crude and product imports fell 11 percent from a year earlier to 8.436 million barrels a day, the lowest level since 1995, department data showed. "
So the USA imported 8mbpd on top of the,
"Domestic oil output rose 3.6 percent to 5.673 million barrels a day, an eight-year high."
Of course it exported finished products as well.
The "interesting pattern is who to and from....a lot of it for instance is cross trade with canada.
Be that as it may....
"The United States also exported 1.4 MMbd of crude oil and petroleum products during 2007, so our net imports (imports minus exports) equaled 12.0 MMbd."
http://www.consumerenergyreport.com/research/crude-oil/where-the-us-get…
regards
A meaningless point....I think the USA was a net exporter until 1954 (ish)
Lets look at the current US population, circa 400million, in 1945?
Oil and Natural gas (fertilizer) used in farming in 1945? v today?
"The United States also exported 1.4 MMbd of crude oil and petroleum products during 2007, so our net imports (imports minus exports) equaled 12.0 MMbd."
http://www.consumerenergyreport.com/research/crude-oil/where-the-us-get…
regards
The Dow Jones Index followed Thursday's 200 point gain with a 50 point rise on Friday ..... and across in Europe , British stocks rose 1.6 % across the board , 1.4 % up in Germany , and a 2.2 % leap on the CAC in France ....... and don't the French love to CAC on all & sundry ..
.... so it would seem that the markets are voting in favour of the ECB and the US Feds money printing plans ....
The merchants of doom are wrong again , as they have been every day since the GFC began ...... the catastrophic end of the world as we know it has not actually materialised ....
..... but will this , and the previous 200 years of being completely wrong , silence the Cassandras in our midst ? ........ Not bloody likely !!!
The Dow - and every stock market currently - is a collection of wide-eyed lemmings, closely following the shirt-tails of the one in front. If it represents anything, it represents fear and a desire to 'preserve wealth'.
The last 200 years have been fuelled by an ever-increasing extraction of stored fossil energy. Had to peak, no amount of history-pointing will change that fact, indeed to to so is to appear stupid to any reader with a vague grasp on reality.
http://www.energybulletin.net/stories/2012-09-10/repricing-oil
As has been pointed out here, coal has re-taken the No1 spot from oil - a reversal down the ladder. Next stop fracking, deep-water, lignite.........peat?
Good luck GBH.
Crikey Dick & Jane , third bite this morning ! ...... Gummie's chucking out the right bait today ...
www.myfunnyanimals.com/a-hairy-fish
Gotcha , you furry feck bag ! ...... where's the gaff , hon ?
At a function earlier this year a curmudgeonly fellow gravely informed me the DOW would crash to 3000 by years end. I enquired of him which of the components did he think would lead the way down. Turned out he couldn't name a single component company, or really have any clue what the DJIA actually was.
But he was absolutely certain that it would crash by Christmas.
Yeah , its kind of 'like all those protestors across the middle-east , slagging America for the anti-islamic movie .....
....... a BBC journalist discovered that none of the protestors had actually seen the " movie "
None knew that it was only 14 minutes long / only available on YouTube ( not in cinemas ) / and was produced by an avowed muslim hater , an Egyptian man , who has been imprisoned in his new home , America , for embezzling $US 800 000 from a bank ......
....... forget the facts , they're an inconvenient truth ..... we wanna riot !
VF - take the emotive stuff out of it - that's the mistake youre lightweight supporter makes.
The Dow is merely a measure of a whole lot of - uninformed, unless I miss my guess - lemmings who try to put their 'money' where it will either give them a return, or at least lose them as little as possible.
It is no measure of real activity, therefore, although a yoy tracking of actual cumulative returns might do better. (Still not good enough, though. Tracking total energy used, then applying an efficiency factor, would be the only real measure). Selling the shares for ever-increasing dollar numbers is no clue to anything, and without underwriting, has to be a bubble-in-waiting.
Why did you make the oil mistake in your reply to Steven? It was pretty basic. Presuming enough intelligence to know better, what drives your need to spin?
The share market etc is all based on a dead cat bounce/ponzi scheme the Fed has pumped up so its an external factor. In effect the Fed has made staying in safety (Treasuries/bonds) expensive as you get a neg net return, yet there is 9 Trillion hiding in there at least, so the Q is why?
The effect/impact on the markets will be external so what ever is first to drop doesnt matter....with micro and ultra fast selling its going to be fast I suspect....
Interesting that the DOW average drops badly performing companies for "better" ones....
http://www.businessweek.com/ap/2012-09-14/unitedhealth-to-replace-kraft…
Which of course in a way makes a mockery of it being an average.....so is the rising DOW is of cherry picked companies? and they drop ones that dont help to keep the momentum going. Interesting to watch.
regards
In effect the Fed has made staying in safety (Treasuries/bonds) expensive as you get a neg net return, yet there is 9 Trillion hiding in there at least, so the Q is why?
Think or at least read before you speak - it's your own fault you have no trading experience beyond that which you read close to hand.
Lessons 1-5 inclusive follow - you will have to piece it all together - the futures hedging of the long cash Treasury position is not discussed but by necessity implied.
http://www.newyorkfed.org/research/current_issues/ci9-6.pdf
http://www.dtcc.com/products/fi/gcfindex/
http://www.bloomberg.com/news/2012-07-16/nyse-liffe-u-s-begins-to-trade…
http://www.bloomberg.com/markets/rates-bonds/government-bonds/us
Yesterday's non- Treasury bond winners - http://www.bloomberg.com/news/2012-09-14/bernanke-s-stimulus-sends-debt…
Stephen these are really financial instruments of mass destruction....amongst lots of others, but they dont make anything in the real world.
Sure I dont trade in bond (or any) markets (I cashed up 2 years ago), they and the share market are all rigged.....unless you can play a differently timed or type of game outside what all the banks, gamblers and "professionals" are doing its really swimming with sharks with a nose bleed....Im not into that.
From your own last URL,
"Debt buyers are fueling a rally, signaling that U.S. and European government plans to repurchase bonds have alleviated concerns that a slowing global economy will eat into corporate profits."
they are in la la land IMHO.
"The Fed’s pledge yesterday to expand holdings of long- term securities has intensified investors’ search for alternatives to government debt paying record low yields, even with corporate debentures also offering the lowest rates ever.
“Investors need yield,” said Sharon Stark, chief market strategist at Sterne Agee & Leach Inc. in Birmingham, Alabama, said in a telephone interview. “They’re going to continue to pour into the highest-yielding asset class.”
Really there seems to be huge gambling going on....a game of musical chairs, Im sitting down already, you?
regards
PS. “I think the primary move here is that the Fed is increasing the market’s expectation for inflation.”
Total la la land....
..I cashed up 2 years ago
Into what?
..Im sitting down already, you?
In my opinion, where money is concerned, you can never sit down - it's always in play and at risk, even if someone else is doing it for you - which in most cases they are and lying about the risks they take with your money and never tell you about - until it's too late.
Stephen Hulme - you may have 'trading experience', but have you actually grasped what wealth is?
It's the stuff you can buy.
In simple terms, we can ignore the virtual tradiing, Sure, while the music plays, some folk (like Key) can get 'rich', but only at someone else's expense, ultimately. The expectation-to-buy can be shunted sideways (rather than buying bits of the planet, like flat-screens or ensuites) by increasing the 'value' of an existing item (a 50-year-old house, say) or by more 'trading', but both are ponzis.
The trading has to keep going upward, so derivatives of some kind were inevitable if the bubble burst late, and 'values' have to stop when the last sucker can't find the next sucker.
Regardless of the velocity of your trading, or the numerical accounting (the numbers will no doubt get satisfyingly bigger with QE), the reality is that physical resources - energy the key one - limit the underwrite. From here on in, irrespective of the $ numbers, purchasing power has to decrease.
Therefore the best place for your 'money' from here on, is in the sequential (actual) purchase of those items you think will be most needed in the future. A possibility is to first retire debt - but there are serious questions about whither debt goest, and most has to default (no possible underwrite) so some folk may gamble on holding the debt hoping it is forgiven/lost sight of.
This is an end game, far side of the gaussian plus increasing demand, so all up-side bets are off.
...... wealth is the stuff you can buy ? ........... oh dearie me , such a pile of steaming shite !
Wealth is good health & happiness
There it is , pure and simple . No " gaussian curves " , or any of the other stuff you endlessly berate us with ........ " end game " ..... dude , such lightweight stuff ......
...... good health and happiness , my friend ! ...... that's all that truely matters ...... that is wealth ...
Stephen Hulme
The problem - one which ain't going away - is that 'taking your chances' isn't good enough, in fact collectively, it is a one-way street to species depletion.
Ours.
Labour are irrelevant while they ignore this. As I've told several of them, several times. The global fallout is happening as folk like me have long predicted - nothing to do with optimism or pessimism - which means the likes of Clare Curran, urging immigration, as just plain wrong.
"cashed" as in cash.....
You are not following me or we are cross threaded....at some point its going to be a mass exit from the share markets and these "instruments of delusion" that risk means a huge loss for many.
So like the ppl hiding is US treasuries Im hiding......if its looking flaky then Im going to have to buy gold which I'd rather leave as late as possible and exit as early as possible....but we'll see.....
I do agree on the risks they dont tell you of, I learnt that 20 odd years ago....hence I did my own investing and will continue to do so. And in 2006 when I learned of Peak oil it was pretty obvious that the entire system was in over-shoot....
regards
The Martingale Bet - Michael West - BusinessDay - FairFax
THEY demanded the Fed ''deliver''. The consequences of ''failure'' were ''dire'', they cried. Don't let us down! It was the grandest ''Daddy, I want a pony'' act in history. And this week, Fed chairman Ben Bernanke obliged the denizens of Wall Street with ''the kitchen sink'', as one pundit dubbed it.
''QE3-plus'' is the ultimate money-printing bonanza. And they had the cheek to dress it up as a boon for the jobless. In reality, the banks get to shovel their lame mortgage debts plumb into the lap of the taxpayers at the rate of $US40 billion ($38.1 billion) a month.
This time the Fed is buying, not just government bonds, but the mortgage-backed securities (MBS) that are clogging up Wall Street balance sheets.
We have a situation in which the Fed is privately owned by the banks. The banks have bought off Washington with their ''donations''. Washington, in turn, has the Fed to buy the very debts it creates.
The buying forces interest rates down, and the government's cost of borrowing, to boot. And so they expand the supply of money.
Already, the Fed's balance sheet has tripled to $US2.8 trillion in four years. Now the plan is to spend almost another half-a-trillion a year, relieving the Fed's shareholders of their debts, even at a premium. Yes, the taxpayer is likely to pay par. Should all this lead to rampant inflation, as it probably should, the value of everybody's money will fritter away.
The greater risk is to food inflation and starvation in the developing world. Corn, wheat and soybean prices have already run up hard.
Meanwhile, 40 million MacMansions lie empty, there are 46 million Americans on food stamps, and real unemployment closer to 18 per cent than 8 per cent. The last two rounds of QE stimulus failed to solve the job crisis, and now the Fed has doubled up (martingale) on a losing bet, apparently while showing its hand at the same time.
What other cards does it now have to play? Surely rock bottom interest rates and a 24/7 printing press is the full deck. No matter. There's barely a murmur of discontent from Washington.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.