Ok if the double dip is unfounded then let's see how happy anyone would be eliminating Federal Reserve lax money policy, backstops and federal government stimulus and extended unemployment benefits. And by the way remove Freddie Mac and Fannie Mae as well. The double dip isn't happening yet because the government is too busy squandering your money and devaluating your currency for temporary easy fixes without regards to the cost.
A double dip is much more rational than what we are getting now.
Although I agree with most of the author's conclusions I disagree with this premise, "...but for most Americans, it was a time of unexpected wealth and unearned prosperity."
By and large the middle class has been laid with the bill for the excesses of the few and has subsequently bore the brunt of the downturn with almost no benefits for this whole decade. It was a prosperous decade for the top 10% and that's about all.
The government's premise that a bailout saved us from a depression and double didget unemployment is wearing thin. For one thing, we are liable to experience statistical double digit unemployment anyways despite government's fiddling with the numbers to keep it low (we are already well past it in the real world). Likewise a lingering recession is worse than a short collapse no matter how deep. What killed the economy and dragged the US down into depression was more a factor due to its lingering nature than anything else. The longer we drag this on the closer we get to a great depression (one lasting years not a year).
Government intervention is playing with fire. A much hotter fire than we started out with. Rick Newman is right that we would have saved ourselves a lot of pain if we just let the brokerages eat crow. For one thing the survivors would have a lot of banking carcass to feed on which is better than asking the taxpayers to bleed themselves for the sake of the banking sector. If it wasn't for deficit spending and it came out of taxes both the Republicans and Democrats would be out of office today.
Confidence Games and Ponzi Schemes: No Way to Run the World's Largest Economy [View article]
You are correct in stating that the government is not managing their money (which is actually our money) in any sense of the word. If they were they would like the fact that the savings rate has returned to some sense of normalcy. They will need all that domestic saving soon when they can't float more debt overseas easily. The government can't see its fingers when infront of their face let alone know what's good for us in the long run.
I encourage people to keep saving because it is in their best interest in the long run. Anyone telling you otherwise do not have your best intentions in mind. Or as my grandparents would say, "They're just trying to sell you a bill of goods."
I am with iknotknot on the belief this rally is mostly money looking for a home in light of signals of future inflation. That means people who invested in long term bonds are looking for a way out.
I am skeptical that the economy is bolooming again. We all knows what a boost low interest rates were to preventing the economy from sliding down further. The reverse is a drag on the economy of an equal or greater magnitude when inflation and interest rates start rising.
If I was a holder of long term bonds, I'd be sweating profusely. Especially, if they were US Treasury bonds.
Thanks for the article. It is much more thought provoking than others I have read recently. I agree that the stock market can rise devoid of an economic recovery, either in expectation of one or simply because of money flows to it relative to other investment vehicles. After all, it's all about how much money is going into or leaving it and how many new shares are being added. Keep your eyes on supply and demand.
Recession Is Over; Depression Has Just Begun [View article]
Edward Harrison: Thanks for the complete historic diarama.
At best what we can hope for is a good 20 years of patient austerity and recovery. Most likely, the government will opt for a series of extreme measures which will pull us in and out of tighter and tighter business cycles which are actually carefully orchestrated monetary ploys.
AIG Goldman asked AIG to guarantee mortgage backed bonds so they can sell them. Then Goldman advised AIG on how to structurwe them. Then Goldman handled the offerings. Then they bought the mortgage backed securities. Then they bought more than their origional intent to buy enough to cover the bonds they issued. Then they asked the government to bail out AIG. Then they asked the government to make good on their bad derivative morgage backed securities that they advised AIG to sell to make a profit.
So you tell me? How is this honest, legal, ethical, or decent in any way, shape, or form? Sure buyers beware is a good mantra. But Goldman was the in on the buy, the sell, the valuation, the issuance, the middleman, the bailout, and the payoff. They knew more about how bad this deal was than anyone and obviously more than AIG.
In the end, the taxpayer was the buyer. Sure, as a taxpayer I would never buy aid help or bailout AIG. A lot of good that does us ehhh? As for other people they crooked out of money, I agree regulators should insure there is never such a blatant conflict of interest and the buyer should have known. But in retrospect, even today there are tons of strange relationships and conflicts of interest in many Wall Street deals. I guess people get overly acclimated to them.
Take for instance bid rigging US Treasuries with the Federal Reserve buying their own issuance. We take it for granted now. 10 years ago we would be galled at such a violation of basic monetary principles involved. What a world. It is not right. It is not honest. And it screws the buyers (many who are under contract to buy some of the offering no matter what anyway). If the Treasury were ay other agency they would be indited on bid rigging anmd fraud.
Sorry, Felix Salmon. I'm at odds with you on this call. Conflict of interest is conflict of interest. And selling crap as gold is a con no matter what shape or form it comes in.
We can look at the options. If Obama approves an extension to the buyers tax deduction we stay in the samer miserable condition but make the US even more broke threatening inflation and further declines in the dollar and higher mortgage rates. If he also approves using TARP to give people free holidays for not paying there will be a great incentive for even more defaults and the government will go even more broke but forclosures may be delayed for yet another year which is prolonging the pain and making us even more open to a W recession.
If he does nothing the housing market collapses as John points out and we get to face the grim realities. However, after the bottom we can look forward to eventually digging ourselfves out of this mess which is much better than digging an even deeper grave. If we dig too deep we won't be able to claw our way back out unless we becomes economic zombies too like the too big to fail banks. Except there will be no bailouts for us.
Busting Yet Another Market Indicator Myth [View article]
Tragically, the average investor doesn't really follow money flows like they should. And tragically mutual funds tend to all sell at the same time due to their customer's withdrawal patterns. I would nort expect them as a group to ever really pull out of the market in expectation of a downturn. Many are required to stay close to fully allocated if not by mandate then only to try to keep up with the averages they track.
It is hard for fund managers to justify their lofty salaries by keeping cash. After all you can do that yourself. However, after all, you can also invest in stock yourself. If you wanted an industry of statisticians that get paid to sit back and watch train wreck after train wreck with no power to do anything about it, the mutual fund industry would be a perfect example.
Shift in U.S. - China Dialogue Is Louder than Words [View article]
Oh, I thought the louder than words from China was the recent failure of the Treasury's 5 year notes auction. Can you hear the China protest (as well as the rest of the nations holding our bonds)? If everything is going so well over there Geithner why aren't they at your auctions anymore? Stop shoveling us garbage and be hnest for once?
When people won't even buy out 5 year notes, I guess that means pretty soon we will have a monthly $1 trillion dollar 1 year note auction. Folks China or no China, that is simply not healthy or sustainable. We should start worrying about them and start worrying about our own catastrophic mess.
Bernanke To Savers: We Don't Owe You A Living [View article]
Anyone with money is not just being denied a decent return on investment. They also face the prospect of massive inflation. This is most felt by retirees where government money is thrown at the healthcare industry even today fueling its continued massive inflationary trajectory. Certainly retirees may not deserve a living off their savings, but really... do they deserve to lose it all to dollar debasement and inflation?
The funny thing is Europe can stop the crash and reign in PIIGS. The fact that they don't is what causes jitters. Let the civil servants protest. The simple fact is there are a lot of people in a lot of governments that shouldn't have a job and they are dragging their whole country down with them.
You can not depend on housing to drive the economy. It is a lagger not a leader. Also, the assumption that overbuilding is not occurring is wrong. Although existing homes sales dropped new home sales increased by .5% and the rate of construction is still underway. Over-financed construction by banks which don't want them to go under are the bane of all existing homeowners.
I wouldn't count on a housing recovery for quite some time and only after the rest of the economy is firmly in recovery mode.
Goldman Sachs: Thoughts on the Developing Stolen Trade Secrets Scandal [View article]
"The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways" the same way it uses it every day. I personallly would like to see the code. I'm sure it would go a long way in explaining how GS gets market advantages that other traders don't get.
Most likely it involves 1) seeing the volume of its own trades before orders are actually placed 2) taking advantage of its high volume to push around prices and punish those going against it 3) working with others to squeeze out small players when markets get illiquid 4) and take advantage of less fortunate market participants who can't act in under 1 second when trading. Or you can put it another way:
Basically, the code is probably very good at helping GS use its trading platform to bully around everyone in markets it dominates. Whether it is technically illegal I don't think GS really cares about unless it gets out in the open (ergo the national security cloak). Whether the NYSE or others should prevent one company from dominating any form of trading or even dare to prevent such trading via antitrust is a question they should have considered long before such a scandal raised so many people's heads.
Right or wrong, conspiracy or not, bringing attention to what GS is doing is something that should have been be looked into long time ago. Personally, I think this attention on their proprietary trading methods is good.
Contemplating the Demise of Bank of America, Citi and JPMorgan [View article]
In all cases they will be the recipients of TARP. And in exchange for free cash the government has a full right to flush out every last exec from those banks. They are already currently nationalized. The only difference is someone is paying themselves fat salaries for destroying the bank and the strength of the American economy.
Banks are playing build Frakenbank so that they can hold the US economy hostage for free money and playing Where's Waldo with their CDS and bad mortgage debt. How is this good for the American public. Especially as they hoard cash and cut jobs.
BOA was already bailed out by the government once. I suppose we should have let it die then.
ECRI: Double-Dip Worries 'Unfounded' [View article]
A double dip is much more rational than what we are getting now.
Hardly a 'Decade from Hell' [View article]
By and large the middle class has been laid with the bill for the excesses of the few and has subsequently bore the brunt of the downturn with almost no benefits for this whole decade. It was a prosperous decade for the top 10% and that's about all.
The Five Worst Bailouts [View article]
Government intervention is playing with fire. A much hotter fire than we started out with. Rick Newman is right that we would have saved ourselves a lot of pain if we just let the brokerages eat crow. For one thing the survivors would have a lot of banking carcass to feed on which is better than asking the taxpayers to bleed themselves for the sake of the banking sector. If it wasn't for deficit spending and it came out of taxes both the Republicans and Democrats would be out of office today.
Confidence Games and Ponzi Schemes: No Way to Run the World's Largest Economy [View article]
I encourage people to keep saving because it is in their best interest in the long run. Anyone telling you otherwise do not have your best intentions in mind. Or as my grandparents would say, "They're just trying to sell you a bill of goods."
This Rally Is Sustainable [View article]
I am skeptical that the economy is bolooming again. We all knows what a boost low interest rates were to preventing the economy from sliding down further. The reverse is a drag on the economy of an equal or greater magnitude when inflation and interest rates start rising.
If I was a holder of long term bonds, I'd be sweating profusely. Especially, if they were US Treasury bonds.
Thanks for the article. It is much more thought provoking than others I have read recently. I agree that the stock market can rise devoid of an economic recovery, either in expectation of one or simply because of money flows to it relative to other investment vehicles. After all, it's all about how much money is going into or leaving it and how many new shares are being added. Keep your eyes on supply and demand.
Recession Is Over; Depression Has Just Begun [View article]
At best what we can hope for is a good 20 years of patient austerity and recovery. Most likely, the government will opt for a series of extreme measures which will pull us in and out of tighter and tighter business cycles which are actually carefully orchestrated monetary ploys.
Is There a Goldman CDO Scandal? [View article]
So you tell me? How is this honest, legal, ethical, or decent in any way, shape, or form? Sure buyers beware is a good mantra. But Goldman was the in on the buy, the sell, the valuation, the issuance, the middleman, the bailout, and the payoff. They knew more about how bad this deal was than anyone and obviously more than AIG.
In the end, the taxpayer was the buyer. Sure, as a taxpayer I would never buy aid help or bailout AIG. A lot of good that does us ehhh? As for other people they crooked out of money, I agree regulators should insure there is never such a blatant conflict of interest and the buyer should have known. But in retrospect, even today there are tons of strange relationships and conflicts of interest in many Wall Street deals. I guess people get overly acclimated to them.
Take for instance bid rigging US Treasuries with the Federal Reserve buying their own issuance. We take it for granted now. 10 years ago we would be galled at such a violation of basic monetary principles involved. What a world. It is not right. It is not honest. And it screws the buyers (many who are under contract to buy some of the offering no matter what anyway). If the Treasury were ay other agency they would be indited on bid rigging anmd fraud.
Sorry, Felix Salmon. I'm at odds with you on this call. Conflict of interest is conflict of interest. And selling crap as gold is a con no matter what shape or form it comes in.
Housing Is Moving Towards Disaster [View article]
If he does nothing the housing market collapses as John points out and we get to face the grim realities. However, after the bottom we can look forward to eventually digging ourselfves out of this mess which is much better than digging an even deeper grave. If we dig too deep we won't be able to claw our way back out unless we becomes economic zombies too like the too big to fail banks. Except there will be no bailouts for us.
Busting Yet Another Market Indicator Myth [View article]
It is hard for fund managers to justify their lofty salaries by keeping cash. After all you can do that yourself. However, after all, you can also invest in stock yourself. If you wanted an industry of statisticians that get paid to sit back and watch train wreck after train wreck with no power to do anything about it, the mutual fund industry would be a perfect example.
Shift in U.S. - China Dialogue Is Louder than Words [View article]
When people won't even buy out 5 year notes, I guess that means pretty soon we will have a monthly $1 trillion dollar 1 year note auction. Folks China or no China, that is simply not healthy or sustainable. We should start worrying about them and start worrying about our own catastrophic mess.
Bernanke To Savers: We Don't Owe You A Living [View article]
Rumors of Hedge Fund Liquidation [View article]
When Will Housing Come Back? [View article]
I wouldn't count on a housing recovery for quite some time and only after the rest of the economy is firmly in recovery mode.
Goldman Sachs: Thoughts on the Developing Stolen Trade Secrets Scandal [View article]
Most likely it involves 1) seeing the volume of its own trades before orders are actually placed 2) taking advantage of its high volume to push around prices and punish those going against it 3) working with others to squeeze out small players when markets get illiquid 4) and take advantage of less fortunate market participants who can't act in under 1 second when trading. Or you can put it another way:
Basically, the code is probably very good at helping GS use its trading platform to bully around everyone in markets it dominates. Whether it is technically illegal I don't think GS really cares about unless it gets out in the open (ergo the national security cloak). Whether the NYSE or others should prevent one company from dominating any form of trading or even dare to prevent such trading via antitrust is a question they should have considered long before such a scandal raised so many people's heads.
Right or wrong, conspiracy or not, bringing attention to what GS is doing is something that should have been be looked into long time ago. Personally, I think this attention on their proprietary trading methods is good.
Contemplating the Demise of Bank of America, Citi and JPMorgan [View article]
Banks are playing build Frakenbank so that they can hold the US economy hostage for free money and playing Where's Waldo with their CDS and bad mortgage debt. How is this good for the American public. Especially as they hoard cash and cut jobs.
BOA was already bailed out by the government once. I suppose we should have let it die then.