America: A Nation Named Desire 34 comments
Tony Daltorio
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Classic film buffs will be familiar with the 1951 film A Streetcar Named Desire, which starred Marlon Brando and Vivien Leigh. My favorite scene in the film involves Blanche DuBois (Vivien Leigh) and Stanley Kowalski (Marlon Brando).
Blanche DuBois is a fallen woman – her family fortune and estate are gone. In an absolutely classic line, Blanche says to Stanley Kowalski - “I have always depended on the kindness of strangers”.
I can think of no better analogy for the current condition of the United States than Blanche DuBois. Here stands the United States, her vast fortunes have been frittered away by a generation of people who followed a doomed economic model. An economy based mainly on consumption simply does not produce any real long-term wealth, only long-term debts.
Now the United States is reduced to, like Blanche DuBois, relying on the kindness of strangers. The US is nearly totally reliant on strangers (overseas investors) to buy trillions of dollars of US Treasury paper just to keep the lights on in the country. Yet most Americans don't even realize this.
Muddled Thinking from Wall Street
The ignorance of some Americans doesn't bother me nearly as much as the sheer arrogance and sense of entitlement of some people from Wall Street. I came across an article this week written by someone from the Point and Profit stock trading service.
In the article, he stated that foreign investors would gladly buy up any amount, no matter how large, of Treasuries the US would sell. Why? Because they “have” to do it to sustain their economies. I wonder if he has ever left the cozy confines of Manhattan?
Here is a direct quote: “They (meaning foreigners) have nothing, they build nothing, they sell nothing without OUR demand”. So he is basically saying that foreigners are nothing without the United States. The whole purpose in life of everyone else on the globe is to merely serve the needs of Americans and to make their Wall Street masters filthy rich.
I think I will send a copy of that article to every overseas institutional fund manager and central banker. I wonder what the arrogant author of that article would think when all of the “worthless, nothing” people around the globe do absolutely nothing at upcoming Treasury auctions?
Many of these countries that are filled with these “worthless, nothing” people such as China actually have plenty of money unlike the United States which, like Blanche DuBois, is reduced to relying on the “kindness of strangers”.
More Muddled Wall Street Thinking
I also came across a critical comment about an article written by my brilliant colleague at Bourbon & Bayonets, Nicholas Jones. In the comment, the person said that Nick's analysis on the Fed's money creation was worthless because Nick was ignoring the trillions of dollars lost by the banks.
That person went on to say that it didn't matter that the Fed had created all of this funny money. After all, the banks weren't lending any of it – a liquidity trap. Obviously, this person has swallowed the Wall Street deflation fairy tale hook, line and sinker.
This person should try to do something that Wall Street people rarely do – think outside the box. I don't care how many trillions of dollars the black hole called bank balance sheets has swallowed up. The Federal Reserve can create many more trillions of dollars than were lost in the blink of an eye. The Fed can literally create an infinite supply of funny money if they so wish.
There is also no law that says the Fed has to go through the banks to get the money to the public. They can easily use Ben's famous helicopter. I can picture it now – armies of uniformed government thugs wearing arm bands saying “US Federal Reserve”.
While black helicopters hover overhead, these armies will go into every American community. Street by street and house by house, the Fed armies will go, giving out freshly printed money to one and all. The only catch will be that the funny money they give out will have an expiration date on it. If you don't spend the money within a few weeks, the money will become worthless.
One consolation however - the money will be pleasant to the eye. The new money will come in the color of your choice and will have a picture of your favorite CNBC talking head on the front. On the back, there will be a picture of Ben Bernanke with the slogan In Ben We Trust in bold letters.
So much for Wall Street worries about a liquidity trap and deflation. It is inflation and the rapidly descending value of the US dollar that people should be worried about.
Even More Muddled Thinking
Here is another interesting tidbit I ran across this week. Michael Lewitt of Harch Capital Management said that the last thing Wall Street “investors” are thinking about when purchasing zero percent Treasuries is reselling them at a profit. Mr. Lewitt said that, in most cases, the Wall Street “investors” are expecting to resell the zero percent Treasuries at a loss.
I would argue that these Wall Street “investors” are NOT thinking at all. Why would anyone in their right mind deliberately make an investment into a security where you know you are guaranteed a loss? I thought the whole idea was to make money.
Oops – I forgot! The whole idea is to make money for Wall Street, not for their clients. These Wall Street “geniuses” are paid exorbitant fees and make millions of dollars a year in salary and bonuses for this type of investing acumen? Incredible!
Why would any individual investor give his or her hard-earned money to these Wall Street money managers? To lock in a guaranteed loss? A better solution for clients of Wall Street firms would be to put their money under the mattress. I think that is what Blanche DuBois would do.
Disclosure: No positions.
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This article has 34 comments:
Personally, I would be extremely reluctant to follow that financial advice!
1, Interest rates go up.
AND
2. You sell it before maturity.
Most people will not see a loss.
""In the article, he stated that foreign investors would gladly buy up any amount, no matter how large, of Treasuries the US would sell. Why? Because they “have” to do it to sustain their economies. I wonder if he has ever left the cozy confines of Manhattan?
Here is a direct quote: “They (meaning foreigners) have nothing, they build nothing, they sell nothing without OUR demand”. So he is basically saying that foreigners are nothing without the United States. The whole purpose in life of everyone else on the globe is to merely serve the needs of Americans and to make their Wall Street masters filthy rich.""
Humility died a long time ago in this country. And with it, our heritage.
".. the taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay, we might more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly, and from these taxes the commissioners cannot ease or deliver us by allowing an abatement"
And yes, US is the consumer of the last resort. Japan's policy of high savings has not been sustainable in the long run. Chinese won't be either. If country doesn't develop internal market, all export oriented growth is for nothing. If you don't believe me, look at this chart:
finance.yahoo.com/echa...=^N225#chart1:symbol=^...
US consumer can't carry the world anymore. Other countries have to pick up on credit and consumption.
On Jan 13 11:33 AM wpdragon wrote:
> You hit the nail right on the head, and there is ONE word to explain
> why we are in the position we are in, going hat in hand begging for
> an ever increasing supply of money from foreigners to keep us fat
> and dumb and puffed up with false pride while our empire dissolves
> and we stand there beating our chests in defiance and denial: ARROGANCE.
>
>
> ""In the article, he stated that foreign investors would gladly buy
> up any amount, no matter how large, of Treasuries the US would sell.
> Why? Because they “have” to do it to sustain their economies. I wonder
> if he has ever left the cozy confines of Manhattan?
>
> Here is a direct quote: “They (meaning foreigners) have nothing,
> they build nothing, they sell nothing without OUR demand”. So he
> is basically saying that foreigners are nothing without the United
> States. The whole purpose in life of everyone else on the globe is
> to merely serve the needs of Americans and to make their Wall Street
> masters filthy rich.""
>
> Humility died a long time ago in this country. And with it, our heritage.
For a long time bankers objective was to gamble on anything they could as long as it sat off balance sheet. After all, after the dot com blow up they learned, any loss allowed them to hide off balance sheet and expense it over infinite time. Any profit you were rewarded with millions in bonuses. What would you do if you weren't honest. That's what they did.
The problems with the financial blow ups were exactly the same as what ruins socialist countries. When cause and effect are seperated too far and when market signals are blunted to ineffectiveness you get mayhem, asset bubbles, shortages, and your economy goes into free fall.
Economists should not just be writing about the housing bubble. They should be writing about the destruction of the market economy in the USA and what it's doing to us now.
Since we are now in a completely illogical financial system I should go into superstition. My fortune du jour is this mantra, "In the house of Bush Jr. chaos prevails."
"Things take time to occur."
Patience my friends.
CNBC, the rest of the financial media, funds managers, etc, are doing everything they can to convince an unsuspecting public that the US is the only driver of global growth.
False.
As the coming years will show (remember, i said things take time to occur), the rest of the billions of people that inhabit the earth are going to realize "they" can be the consumers of their own products. The small 350 million people that inhabit the US, that make up less than 10% of the global population, are not going to be the necessary drivers of global growth.
That doesn't mean you have to give up on every investment strategy out there, but that does mean you have to plan accordingly, invest accordingly, and stop drinking the kool-aid that is forced down your throats by all the financial media, planners, who have their own agenda to keep separating you from your money.
On Jan 13 01:08 PM archman82011 wrote:
> My number one saying these days:
> "Things take time to occur."
>
> Patience my friends.
>
> CNBC, the rest of the financial media, funds managers, etc, are doing
> everything they can to convince an unsuspecting public that the US
> is the only driver of global growth.
>
> False.
>
> As the coming years will show (remember, i said things take time
> to occur), the rest of the billions of people that inhabit the earth
> are going to realize "they" can be the consumers of their own products.
> The small 350 million people that inhabit the US, that make up less
> than 10% of the global population, are not going to be the necessary
> drivers of global growth.
>
> That doesn't mean you have to give up on every investment strategy
> out there, but that does mean you have to plan accordingly, invest
> accordingly, and stop drinking the kool-aid that is forced down your
> throats by all the financial media, planners, who have their own
> agenda to keep separating you from your money.
On Jan 13 09:37 AM bosun.j wrote:
> Blanche was hot. America is as attractive Rosie O'Donnell. Then there
> are decades of American bullying of the kind personified in Bush's
> "if ya not with us ya aginst' us!"
On Jan 13 01:08 PM archman82011 wrote:
> As the coming years will show (remember, i said things take time
> to occur), the rest of the billions of people that inhabit the earth
> are going to realize "they" can be the consumers of their own products.
On Jan 13 11:33 AM wpdragon wrote:
> You hit the nail right on the head, and there is ONE word to explain
> why we are in the position we are in, going hat in hand begging for
> an ever increasing supply of money from foreigners to keep us fat
> and dumb and puffed up with false pride while our empire dissolves
> and we stand there beating our chests in defiance and denial: ARROGANCE.
>
>
> ""In the article, he stated that foreign investors would gladly buy
> up any amount, no matter how large, of Treasuries the US would sell.
> Why? Because they “have” to do it to sustain their economies. I wonder
> if he has ever left the cozy confines of Manhattan?
>
> Here is a direct quote: “They (meaning foreigners) have nothing,
> they build nothing, they sell nothing without OUR demand”. So he
> is basically saying that foreigners are nothing without the United
> States. The whole purpose in life of everyone else on the globe is
> to merely serve the needs of Americans and to make their Wall Street
> masters filthy rich.""
>
> Humility died a long time ago in this country. And with it, our heritage.
On Jan 13 02:00 PM Socialism cannot compete! wrote:
> So...um...you think the Arabs are with us? Or what? Why the Bush
> bash?
On Jan 13 12:33 PM Alex Filonov wrote:
> We owe Chinese government more than a trillion dollars. Remember:
> "if you owe bank $100, it's your problem. If you owe $100 million,
> it's bank's problem". China holds more than a trillion in Treasuries,
> it's China's problem. Any country with big reserves in Treasuries,
> i.e. China, Japan etc. will have their reserves evaporate if Treasuries
> fall. So they won't.
>
> And yes, US is the consumer of the last resort. Japan's policy of
> high savings has not been sustainable in the long run. Chinese won't
> be either. If country doesn't develop internal market, all export
> oriented growth is for nothing. If you don't believe me, look at
> this chart:
>
> finance.yahoo.com/echa...=^N225#chart1:symbol=^...
>
> US consumer can't carry the world anymore. Other countries have to
> pick up on credit and consumption.
>
FYI, I live in Bangkok and I'm married to a beautiful young woman 18 years younger than I am. She's laughing at your comment as I write this!
Chok dee!
On Jan 13 02:23 PM DaveW wrote:
> There once was a blogger named bosun.j,
> who obviously needed a roll in the hay.
> With Rosie beside him, they smoked if they had 'em,
> and began to blog in a more positive way!
On Jan 13 01:24 PM bosun.j wrote:
> Indeed. American'ts are 5% of the world population. There are more
> middle class Chinese than there are American'ts who work! America
> is going down hard very soon. Not a shot will be fired. YOU DID IT
> TO YOURSELVES!!! Congratulations!
(a thumb up for being a good sport)
On Jan 13 02:29 PM bosun.j wrote:
> You get an "A" and a thumbs up for originality.
>
> FYI, I
live
> in Bangkok and I'm married to a beautiful young woman 18 years
younger
> than I am. She's laughing at your comment as I write this!
>
> Chok dee!
The answer is....
The treasury bubble consists of 2 main parts: (1) a small base of pension plans, bank reserves, and conservative funds that because of the law or their charters have no choice but to buy treasuries and (2) foreign money escaping currency devaluation elsewhere. Both lack access to better yielding govt-guaranteed dollar assets such as the insured-to-$100k CD's I mentioned.
The arrival of the foreign money has crowded out even the vast US debt market and driven prices up. The only other option for the foreign money is to accept delivery of their dollars in physical bills, which would be too expensive. As soon as foreign currencies stabilize, expect a mass exodus from the treasury market, causing an unexpected pop in yields and a fast drop in the dollar. Nobody wants to be the last one out the door in the treasury bubble, and the foreign money has no incentive to "break even" by holding a 0% treasury to maturity when the dollar starts falling against their home currencies. Hold on tight!
We had better learn how to manufacture clothing, shoes, computers, and cheap dollar-store schlock in this country again soon because we'll have to make it ourselves lest we won't afford it.
On Jan 13 03:32 PM Whippet wrote:
> How we got away with hoodwinking the Chinese for several
> trillion is a feat that may never be repeated in human history.
> Unfortunately, we all know that these marriages never end well...
>
>
On Jan 13 03:43 PM User 101078 wrote:
> Actually I take that back bosun.j (tried to delete the comment but
> could not). That was uncalled for. I wish you and your 18 years younger
> wife a long a prosperous marriage...
On Jan 13 12:37 PM TomF75 wrote:
> Couldn't agree witi you more. Forget where I saw it, but something
> today from S&P basically stating the USA had to "work for its
> AAA rating just like everyone else". Oh well I guess Helicopter
> Ben will come to the rescue!!
>
>
> On Jan 13 11:33 AM wpdragon wrote:
Nice to know that Paulson and Bernanke are putting our taxes in a market that most of us want no part of. But, then again, it would make our system look bad.
I hear that Bernanke desires another bailout for his country club friends at our expense.
This country is not worth the paper our constitution is written on unless these clown in DC start following the will of the people. It's pathetic.
On Jan 13 03:57 PM curbs-in wrote:
> A trader told me that they see very unusal orders come across before
> the final bell.
>
> Nice to know that Paulson and Bernanke are putting our taxes in a
> market that most of us want no part of. But, then again, it would
> make our system look bad.
>
> I hear that Bernanke desires another bailout for his country club
> friends at our expense.
>
> This country is not worth the paper our constitution is written on
> unless these clown in DC start following the will of the people.
> It's pathetic.
"There are more middle class Chinese than there are American'ts who work!"
What's a middle class Chinese? Someone who makes $2000 a year?
Lot's of those people all over the world, so what?
On Jan 13 01:24 PM bosun.j wrote:
On Jan 13 09:39 AM bricki wrote:
> It's only a loss if:
>
> 1, Interest rates go up.
>
> AND
>
> 2. You sell it before maturity.
>
> Most people will not see a loss.
Ours was barely holding on at minimum replacement levels, but the stubborn refusal of the wealthy here to pay US workers enough to continue consumption put the hiatus on the whole world. Or maybe it's less "stubborn refusal" than their recognition that any sacrifice they make in wages and benefits goes to profit their foreign competitors as much as themselves (given our open borders to imports). And so, why do it? Thus the vicious cycle.
A minister from the Philippenes commented that the 'last man standing' in this game would be those with "strong internal markets." One can get a strong internal market two ways. Either the workers will be paid more, and consume more cell phones and telies and ipods and cars and houses, or they will reproduce, and their children will consume the necessities as they grow up and become full blown car buyers and home builders and cell phone addicts. The latter is the more secure route, since human beings WILL have something to drive and somewhere to live; it's much more predictable at least than whether all US workers will reach the standard of living that workers in the car industry, say, used to enjoy. We just knocked them down, in fact, all in the name of saving the economy. They earned a living wage. Now they don't.
But to take the safer road of "growing our own" makets, we have to renounce some cherished life-style issues. It's too simple. Marriage and kids have to become the norm again. And people have to be induced to do that--'marriage and kids' is not easy, is not convenient, is work, is even scary to the population most able to do it today, given the lack of European safety nets in the US. Our reproducing generation likes easy sex, in and out. They would have to be re-taught. We know they have to be retaught regarding exercise and nutrition, but we are horrified at the idea of re-teaching them basic human sexuality. That would mean giving up our new best friends, the 'liberated moms' and the bumping and grinding eight year olds and the media pimps who fuel the whole nasty bonfire of vanities. Abortion? Gay "marriage"? Birth control? All would have to be re-examined from a new perspective. Hard work. Way easier to go to hell in a handbasket, and take the economy with us.
Procreate away baby, there's more than enough food, clean water and air, energy, space, etc. for two or three times our presenr population. Go for it.
Even better, we need to learn to do with a lot less of everything that we can't afford without going into debt for.