JasonC

The Dogma of Low Interest Rates Is Wrong

ETFs are not the United States. They are preferred vehicles for speculators who play fads and momentum.

There is a giant flow of capital to the US. It is called the trade deficit. It is less giant than it was a year ago, but real capital continues to leave Asia and land in the US.

People who simultaneously want to run up currency balances and attract and use real capital do not understand basic accounting, and want to eat cake and have it.

Whether it makes economic sense for Americans to run trade deficits depends entirely on whether the future return from holding dollar bonds at near zero interest rates will be greater or less than the returns from investing real capital in the US. Those simultaneously moaning that the dollar is certain to implode while real everything must soar, and that the trade deficit is ruinous, do not understand basic accounting either. Foreign savers are the ones going long the dollar by accumulating our bonds; we are the ones going long real assets by buying things for issued debt.

As usual, the doom mongering press and pundit set looks at one half of each transaction and predicts horrors from a selected side of it, while pretending the other side does not exist.

The reality is there is no inflation in the US, it is a deflation, and the world has yet to get used to Americans saving for their own capital needs instead of outsourcing it. Interest rates at zero reflect the complete lack of bargaining power of our foreign creditors, who simply do not see how or where to invest their own savings.

If they learn to, fine, we save to fund our own investments and the trade deficit disappears. They've got a giant pile of dollar claims, we've got tons of real stuff already delivered and worth every cent paid for it, to a free consumer.

Everyone is trying to tell other men what to do with their own wealth...

Great Depression Not Imminent, But Inevitable

Simply dumb. What covers real risks is spreads, spreads are at epic levels, ergo even epic levels of risk can be objectively handled now. The silly and dangerous bit was the low spread world we just exited --- exiting it has destroyed so much capital taking credit risk for a living (which used to be known as "banking", duh) that spreads have reacted to the opposite, silly extreme. Someone will realize these epic spreads are buys when the narrow ones were sells, and be profitable as a banker again. Those who believed that it was possible to be a banker at spreads of zero were wrong, those who now believe it is impossible to be a banker at spreads of 10% over risk free rates are just as wrong.

Both are trend following idiots and not bankers.

Can Central Bankers Prevent a Great Depression?

A long winded contentless article that ends only with a concern whether his gold will go up in nominal terms in a deflation. Answer, no, nothing will go up in a deflation.

Next idiot, please be less long-winded.

Wednesday Outlook: Commodities, Emerging Markets

No, inflation does not "no doubt" follow.
Everyone piled into the same bubble bet on inflation and got killed, and will continue to get killed.
All the inflationary bubbles go smash. Real estate, oil, BRICs, submerging markets, gold, all of them.

At these spreads, investment grade debt in the first world and especially in dollars is the best asset on the planet. Nominal claims, in the dollars you-lot have pretended are mere monopoly money, will trounce all your bubble blowing headline chasing scaremonger slander-games.

Watch.

Bailout Cost, per Taxpayer, by Income

No, we will grow 6-7% per year long term average after all the noise.

The market dropped 777 points on Monday. But the same index was *worth* 777 points at the 1982 low, 26 years ago. In 26 years, a day's hard fluctuation is the size the whole market was then.

The permabears will be screaming "doom, doom" when the market drops 10,000 points in one day, 26 years from now. All the way down to 175,000.

Perhaps it won't be quite that good, and perhaps it will meander around for 5 years before taking off again. Or perhaps it will take off within 6 months after a bailout bill passes. Nobody knows, and I for one don't much care. As long as we don't deliberately nuke the golden goose that is our financial system, a generation from now every doom mongering short today, will look as dumb as the doom mongering shorts of 1982. Who all said that recession was Hoover all over again and Reagan was a dunce, etc, etc.

Bailout Cost, per Taxpayer, by Income

The UST collects 20% of national income regardless of policies, tax, spending, funding, investment, any of it. That is the econometric reality.

Therefore, the only question and I mean the only question on the cost of this policy is whether it will raise or lower future GDP. If it will raise it, it will pay for itself many times over. If not, it will cost something.

But a very modest something. Our actual collective wealth is not the money lying around, or the inventories, or even all assets at their current prices, let alone the prices they would fetch in a general deflationary smash. Instead, it is our entire future income stream, also known as the economy. Which is $14.3 trillion a year and rising 6-7% a year forever.

Nobody debating the subject is remotely sane or thinking like an economist, and it show. One entry accounting and tendentious spin is all you see.

The Nuttiness of This Market

Foobah - because you are simply caught up in the latest idiotic bubble and fad. Commodities are not protection against financial shenanigans, they are a financial shenanigan of their own.

Fiat money stuffed in a mattress does not hold real value. Fiat money lent out at interest to your average corporation (or muni for high bracket people) holds its real value but doesn't earn anything else, real.

Capitalism isn't a ponzi scheme and it isn't broken. There are any number of bubbles in history and we've seen several, the one currently unwinding is called "commodities" and was led by oil running up 25% per year for 5-6 years. Real estate slightly led it, but wasn't any different in principle. In both cases, the inflationary brainstorm that just piling into something "hard" or "real" would effortlessly make money at the expense of everyone else, proves decidedly unsound as soon as too many people have that same brainstorm, and send prices to barking moonbat levels.