Asbytec

Sensing a Market Turning Point

Yes, stocks are cheap and there are some good buys out there. And the other things the author says are pretty much true, except for that "due for a rally" thing. Not sure what "due" means, the Fed is done with interest rate cuts.

Unless he credit markets start moving, home prices settle, and unemployment begins to ease, I wouldn't bet on a turning point just yet. More likely we'll see continued volatility well into 2009.

The Irony of Defense Economics

President Bush is dyslexic, some folks confuse that with stupid. And the war in Iraq would prove them right. President Bush did nothing more or less than any other president during the housing bubble. They all turned the other cheek while Americans enjoyed he wealth affect.

Bush probably should have mulled over the economy when Greenspan retired. In retrospect, that was a clue something was afoot. He missed it, I missed it, we all missed it. It just happened to crash on his watch, not Obama's.

But, most importantly, congress missed it. They even missed it when Bernanke told them a year ago to shore up mortgages and the GSE's. I suspect they're still missing it.

Yes, the US dollar is being printed in mass, but that's offset somewhat, if not entirely, by the frozen credit markets and the winding down of derivative money. I assert this and demand on risk aversion is propping up the dollar, and will for some time to come.

I agree we are entering a new era, but Russia? No way. Russia is a paper tiger. It's currency is near worthless and it has no real industry outside of energy.

The era I envision is still US dominated, but with slower more sustainable global growth. US consumers will be less indebted and China will settle into single digit growth and be happy to have it.

I also see a stronger dollar resulting....don't everyone throw vegetables at once...that is if the twin deficits can be brought under control. besides, the Fed is likely to tighten on clear signs of a recovery in an attempt to regain control over the money supply. If not, congress better...they're constitutionally charged with it.

I suspect it will be a long time before risk appetite can chew on MSB's or the like, again. One would hope a fresh set of regulations will see to that. And money will be tighter in the decades following a recovery from this current mess.

Any takers?

Can Central Bankers Prevent a Great Depression?

As for the Chinese stimulus, we should be doing the same thing. We could use some bridge repair and jobs.

As for falling home prices, I guess the solution to that is full employment and flowing credit markets. But, we wont see flowing credit markets until home prices settle. I don't see an end to this catch 22 anytime soon.

It's semantics, but the financial system, in my view, is not so much broken as it is abused. When times were good and American were feeling richer through rising home values, well, regulators just turned the other cheek. But, who can blame them, really. We can wish they had tempered the bubble, in retrospect.

And, as the author stated, it should be not only telling, but a warning, when a simple US housing market down turn brings the global economy to it's knees. It really is almost criminal.

China has been hit by a couple of whammies. First, as noted, reduced trade resulting from the crisis. But, also, from lost confidence in it's exports, tainted milk being only the most recent. Furthermore, despite the decoupling arguments, China does not have sufficient domestic demand to ride out a global recession. I believe they will falter along with the rest of us. They have just ended a period of tightening and, as mentioned in the article, appear to be poised to ease as needed. That's interesting.

While we're on the subject, apparently Obama is next in line to persuade China to let it's currency float. I hope he's successful, but am pessimistic. China is a command economy with a free trade interface. I do not believe they will play by free market rules, regardless. They accumulated around $2trn, I believe is the latest figure, in reserves and have become a major player in the lending game. I am sure that suites them just fine.

The US consumer is certainly in trouble, but some deleveraging is a good thing for us...in the end, anyway. If the big 3 go belly up, well, does anyone see a recovery by June? I suspect unemployment will increase through most of 2009.

As for Greenspan, right on. He knew this crisis was approaching, too. He bailed (pun intended) at the peak of his popularity. I hear a lot of folks blaming the Fed and, by extension, Ben and crew. Well, forgive Ben while he opened his proverbial bag of .... left to him. He's been very aggressive and creative since. He's had to be, until recently he's been the lone dog in this fight.

Anyway, it's a very informative article, thank you. I find I'm simply repeating myself and the author without adding much. So time to call it a night and check the dollar index.

Can Central Bankers Prevent a Great Depression?

Anyone seen Adam Smith's invisible hand?

I suspect it's been chopped off at the elbow and held captive in a damp wall street cellar. It's been replaced with a robotic hand that does as it's told.

Some brandy sniffing Harvard types are sitting around their exclusive lounge while immersing their cardigan sweaters with cigar smoke and hitting the "chop the little guy" button.

Oh, what a laugh that's gotta be...

Can Central Bankers Prevent a Great Depression?

Axel, on the money (pun intended.)

Can Central Bankers Prevent a Great Depression?

Well, can they? It depends on the remaining asset Price to Earnings values. If those go, no way to stop a depression. "Abandon all hope, those who enter here."

And the potential is real. A simple housing market downturn has already caused a global recession, and we are just entering the resulting recessionary period. Recessions can lower other asset values. That'll be the key.

I have been calling for a 'new deal' style bail out for some months now. But, of course, what hubris of me to think we'll ever surf the wave instead of watching it pass and crash on the shore.

China has already taken 'new deal' style steps and they are still around 9% growth. And they're a command economy, for crying out loud. What are we? Chopped liver?

Look, we need some fresh infrastructure. Instead we're giving our tax dollars to wall street so they can free up the credit markets...and loan our own tax money back to us! With interest!

Now, if we can employ some folks to build some infrastructure, and let the financials fail, the banks that survive can then compete to hold our money and pay us interest. DUH!

But, I guess we'll be paying migrant workers, not out of work SUV owners who wouldn't be caught dead with a shovel. And, we are fighting hard to get back to business as usual, a credit driven global economy.

So, yes, a depression is very likely. The revival of credit markets can prevent it, and so can main street, if given the chance...with it's own money.

Treasuries and the U.S. Dollar: Twin Bubbles

The printing presses are smoking red hot trying to keep up. I don't think they can keep up, not in the short or medium term.

Money is apparently disappearing faster than it's being created. I suspect that is a driver supporting the dollar.

When this crisis is over, in the long term, I hope the burn bins are smoking and red hot, too. We need to get the money supply back under control and not expanded on risky debt.

I suspect we'll settle into a period of slower global growth and less credit. Whether we do it through a prolonged recession or depression is the $65,000,000,000,000,00... question.

Treasuries and the U.S. Dollar: Twin Bubbles

I think we can use a little debt destruction and a strong dollar. Screw business as usual and the bail out plan designed to get us there.

Besides, neither of these bubbles are anywhere near as dangerous as the credit bubble.