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  • Bulls Assume QE3 Will Happen [View article]
    If Bernanke were so prone to easing, he would have done so. What he is prone to doing is setting interest rates and stabilizing commercial bank balance sheets. He's done that, and relatively aggressively. In fact, he would have already implemented a nGDP target and supported rehypothecated debt assets to get back to the pre-crisis trend line.

    If he were truly debasing the dollar to inflate debt away and ruin it's reserve status, he could have done nGDP level targeting already. But, the truth is, he is adverse to such extreme policies to re-inflate crony capitalistic, overly leveraged private monetary system - who would love non of the regulation and all of the safety the Fed can provide.

    Such is the hunger for more easing, the Fed never even hinted at it and the markets still rally expecting it. You could almost see the market (not the economy) roll with Bernanke's every word during his testimony. Incredible.
    Jul 17, 2012. 09:48 PM | 6 Likes Like |Link to Comment
  • Spain And Italy's 'Suicide Pact' Achieve German Concessions [View article]
    "Great recap, thanks" That's what Spain said.
    Jun 29, 2012. 11:20 PM | 6 Likes Like |Link to Comment
  • LTRO: Savior Or Distraction? [View article]
    Labutes, if a bank owed me payment on reduced revenue, say through exposure to Greek write downs, I might be inclined to not roll over overnight lending to that bank. I'd want my reserves back in an act of self preservation. If that bank could not get funding, it's checks will start bouncing. That bank would collapse. When overnight lending collapses, so do banks dependent on it. No?

    The term of the refinancing operation is telling. Central banks are generally lenders of last resort over short term. That the Fed and ECB are engaged in long term liquidity is telling. A lot of debt must work it's way out of the system in such a short time.
    Feb 29, 2012. 06:55 AM | 6 Likes Like |Link to Comment
  • PIIGS To The Slaughter: After Greece, Portugal [View article]
    Like all monetary systems, there must be discipline. The US is no different in that regard, but it is very different fundamentally from the European system where much of what you say is still true. To understand how the US monetary system works take a lot of study, but here's the simple version. Remember, we are no longer on a gold standard and so much has changed as a result.

    Dollars are no more complicated than a bowling score. If you need to raise someone's score, just "spend" them onto the board. If you need to correct the score, just "tax" some points off. Dollars and bowling scores come from and return to the same place: nowhere. Government is the only agency that can create dollars. Government spending creates money, taxes destroy money, and bonds are savings accounts - not fiscal policy. (Oh, and helicopter drops are fiscal policy, not Fed policy.)

    Think of it this way. Say you have a "printing press" (like the Treasury) and feel the need to pay for someone's hospital stay. You ask you boss (congress) if you can print some money to help. He or she agrees and you crank out a few bills. The nice thing is, you never had to borrow them from anyone. You just spent them, creating them from thin air and paper. (Technically, it's done through computer and bank deposits, not really printing.)

    Maybe you realize too much currency is in circulation and folks are beginning to wonder if they are worth anything. So, you can do one of two things. You can tax folks to reduce the supply, or you could offer to pay interest to folks who want to save your currency and not spend it right away. So, you decide to tax or sell them a bond, or both. You do so without the need to tax or borrow from anyone to fund spending. When the bond matures they can roll it over or you can simply return their cash at interest. It's not unlike a bank offering you a CD.

    Obviously it's more complicated than that, but a government with a printing press can spend with the approval of congress, It cannot be bankrupt unless congress disapproves spending. Similarly, it cannot default unless it allows the money supply (and other forces) to spur hyperinflation ruining the currency. This is why the dollar is a safe haven and offers low yields (along with inflation expectations, risk premiums, and supply and demand.) "Nowhere" has never asked for it's money back, not like the Troika who actually lends money and needs to be repaid.

    The US is a self funding monetary system and not subject to the pressures faced in Europe where lending into risk of default is very real. But, again, the US system must exercise discipline (and there are budget constraints to help), or it will suffer a loss of confidence, too. But, this is also why the US is muddling through while Europe is very concerned over very real debt and leading it's PIIGS to slaughter.
    Feb 18, 2012. 06:04 AM | 6 Likes Like |Link to Comment
  • Is This Recovery? Part I [View article]
    Deep, the author does make some great points concerning organic capital and production in the real economy. That means jobs and wages and rising home prices. Your point, "extend and pretend" doesn't solve our problems is equally valid.

    But, I am not sure how extending and pretending is adding to, or worse than, the alternative of bank failures and deflating our way into a depression. That would be counter productive to organic capital creation, I think. It's hard to invest in a a depressed nation.

    This is just some deflation (liquidation) that has to be handled carefully for a soft landing. I wish it would go away tomorrow morning, economic activity would pick up around noon, and new liquidity and investment became profitable, performing assets (not reliant on Fed asset purchases) by early evening.

    While the dollar has lost ground, and it is probably due to QE at least lately, I think this is one of those unintended consequences. Improving exports is always a great idea, but it comprises a smaller fraction of GDP. Americans are (well, arguably not, I guess...but we're supposed to be) wealthy and wealthy nations consume. Low rates are supposed to stimulate consumption, take loans to buy homes, buy that TV set on your credit card, etc. But, the debt cycle must unwind and a good job would us consume, not export bananas with a third world currency.
    Feb 15, 2012. 09:49 AM | 6 Likes Like |Link to Comment
  • Europe Has Reached The Point Of No Return [View article]
    I envisioned a political cartoon with Merkel slipping into an abyss with a distressed look and outstretched arms. Draghi is standing on the edge pulling a cord trying to crank up his rusty, sputtering printing press as Merkel screams, "Print! For God's sake, Priiiiiinnnnntt!"
    Dec 8, 2011. 10:21 AM | 6 Likes Like |Link to Comment
  • Europe May Fail Due To Sovereignty Issues [View article]
    "There is no exercise of national sovereignty that is more profound than passage and implementation of national budgets. Indeed, without this ultimate power to tax and spend, the concept of national sovereignty is hollow."

    US states can tax and spend and fund their budgets in the market, so by this definition are sovereign (presumably with little federal scrutiny.) But, they are part of a political and monetary union with a common language and culture. They probably backstopped to some extent by a central funding facility where fixed (dollar) exchange rates work just fine.

    I cannot imagine a European nation becoming the proxy of a US state. Nor can I imagine any of them allowing Merkel to peek over their shoulder. The ECB (immediately), or ESM (as it gets up and running with investor confidence and funding), will have to take on a Treasury role as a first step toward fiscal union. This means a soft euro, like the dollar, initially to quell the sovereign funding crisis and maybe permanently. Unless, of course, the IMF steps into this central funding role. I mean, what the heck...they always get repaid unless a nation defaults. Right? Christ.

    With "central funding" from the ECB, EU sovereign debt will simply be priced too high with a premium too low for private investors to take that risk.
    Dec 4, 2011. 04:04 AM | 6 Likes Like |Link to Comment
  • Fixing Wall Street: Cutting The Gordian Knot [View article]
    Great article, every word. It appeals to my own heart. Every Protester should understand this thoroughly. Whether they understand how their homes, jobs, and equity were lost or not, this IS the agenda.
    Oct 17, 2011. 01:21 PM | 6 Likes Like |Link to Comment
  • Too Big To Fail: Fed Intervention And The Market [View article]
    The last time this happened, three years ago, the dollar index surged from 74 to 86 from September 08 to year's end...and beyond to about March 2009. At the same time, the euro plunged, as it is now, from about $1.45 to $1.25 over that same period. Banking crisis, swap lines, EURUSD reversal... history repeating itself under very similar circumstances? Even if Greece does not collapse, default, or is booted from the EU, it will still offer some haircuts and strain the banking system in much the same way Lehman did.
    Sep 16, 2011. 07:07 AM | 6 Likes Like |Link to Comment
  • It's Not 2008 All Over Again: Europe Edition [View article]
    In 2008, the banks froze due to the failure of Lehman. In response, the Fed exercised it's swap lines to inject dollar liquidity. This action saved (or helped) many European banks with their liquidity problems. Today, they are suffering those same liquidity problems in anticipation of another default, yes a Greek "Lehman like" event that has the same affect on bank liquidity.

    The ECB announced yesterday, to some surprise, it can call on US dollars through those same swap lines that are still in effect (with longer maturity.) The last time this happened, the dollar index surged from 74 to 86 from September to year's end...and beyond to about March 2009. At the same time, the euro plunged, as it is now, from about $1.45 to $1.25 over that same period and began a rally to $1.50 in March 2009 before it's low in Jun 2010. So, I do not agree with Moon this is another debasement move.

    Banking crisis, swap lines, EURUSD reversal... history repeating itself under very similar circumstances? Even if Greece does not collapse, default, or is booted from the EU, it will still offer some haircuts and strain the banking system in much the same way Lehman did.
    Sep 16, 2011. 07:02 AM | 6 Likes Like |Link to Comment
  • Investment Outlook: Focusing on Fundamentals vs. the QE II Distraction [View article]
    Frosty, exactly. If you understand banking, you understand what they're doing and why. It can be tough, but it's pretty straight forward unless you subscribe to the "lies." Sometimes that's hard to weed through them, too, because they have an element of truth. Is QE direct debasement of the dollar to pay off debt or is it something more? I think it's something more.

    I'm am a Bernanke supporter, too, in that we have a reserve banking's the system we are stuck with. The administration should pass consistent legislation to help things along. Obama's deficit panel proposed some cuts, what a surprise there. They may actually not tax us out of our sovereign debt crisis. God help us if they do unto us which exacerbates the EU problems.

    Actually, I am a bit bullish, but longer term. Once QE2 plays out, we may just pull through this thing if the global shift plays out in our favor. It just might. Now, that seems to be a minority opinion and one could claim we just subscribe to the lie. How does one retort that accusation? You can't.
    Nov 17, 2010. 09:27 AM | 6 Likes Like |Link to Comment
  • 8 More Reasons Why a Double Dip Is Coming [View article]
    We miss him already.
    Jul 30, 2010. 10:09 AM | 6 Likes Like |Link to Comment
  • The One Economic Chart That Really Matters [View article]
    "Thank Mr. Bush for the loss of liberty."

    This predates Mr Bush and universal health care by a long shot. The story is too long to tell here.
    Jul 23, 2010. 09:28 AM | 6 Likes Like |Link to Comment
  • Is a U.S.- China Economic War on Its Way? [View article]
    Agreed. Opening China was a good thing, despite their form of government. Doing so, however, meant we had to look the other way while they built a middle class capable of buying GM cars and traveling in Boeing aircraft. It just seems, over the decades, we took our eye off the idea of exporting to China. We sent our jobs over there and turned our focus to debt instruments.
    Jul 5, 2010. 12:19 PM | 6 Likes Like |Link to Comment
  • So Much for the Sovereignty of Our Nation [View article]
    "There was an obvious and extreme push that the banks needed to make loans to the underprivileged." Yes, get everyone into deep debt then control them. It's an all too common tactic against people and governments. China will be pulling the strings, soon, because we are so heavily indebted to them.

    " The bottom line is wealth is created by those who make, build and produce goods." Exactly right, and who do you think is getting wealthy these days? Americans? Wrong. You said it yourself. "So much wealth has gone out of those sectors, they have little real support behind them."

    "Things would be worse at this time had they not acted." True, but they have not acted to heal wounds. They acted to save the system and those who run it, not grass root jobs, production, or retirement plans...or anything else to ensure the wealth of Americans. Oh, maybe the hope someday we can get a loan...

    "The entitlement attitude exists because people think they deserve what they expect." The entitlement attitude exists because of too much reliance on corporations and small business to provide jobs. When we lose a job we turn to the government, not our own entrepreneurial spirit. You should witness first hand the entrepreneurial spirit in third world nations where government entitlements are truly meager. It's alive and well, folks are self reliant. Yes, most are poor, but they own homes and have self made jobs that cannot be outsourced.
    Jan 27, 2010. 11:20 AM | 6 Likes Like |Link to Comment