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Machiavelli999

Machiavelli999
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  • Fed Open Market Committee: No big news of asset buys, but Fed will reinvest principal from agency debt and agency MBS in longer-term Treasurys. Near-zero rates for an "extended period." Even the policy tools statement wasn't strengthened. KC Fed's Hoenig again the lone dissenter.  [View news story]
    And yet, the other countries are piling in (see latest Treasury auction).
    Aug 10, 2010. 02:41 PM | Likes Like |Link to Comment
  • Monetary Cards on the Table [View article]
    "In countries which have decided that further government economic stimulation will produce more harm than good, the story is markedly different."
    ----------------------...

    Tell me which country that put in place austerity, has come off better for it? See Ireland as an example of austerity leading to utter disaster.
    Aug 9, 2010. 11:27 PM | Likes Like |Link to Comment
  • Contrarian Peter Schiff sees inflation, not deflation, as the big threat. "The real evidence of inflation is that the Fed is creating too much money," he says, and the result will be higher prices ahead for food, clothing, energy, health care and electronic items.  [View news story]
    Yep, that's exactly what happened to Japan. Their interest rates definitely skyrocketed all the way to....umm...wait...nev...

    Seriously people, try to read and really understand what a liquidity trap is.
    Jul 23, 2010. 03:19 PM | Likes Like |Link to Comment
  • The slowing economy isn't anything that a fresh bout of inflation couldn't cure, David Blanchflower says - in fact, it's the only game left in town. He says the Fed should engineer, or at least tolerate, a big jump in price pressures relative to recent years. Then the Fed could tighten policy, damping inflation while also allowing it to get rates back toward a more traditional stance.  [View news story]
    I could not agree more with your comment here. The Fed should commit itself to 4% inflation. As for the problem of overshooting, well first of all I think it's a problem we'd like to have, because producing 4% inflation in this economy is going to be VERY, VERY, VERY HARD! Simply printing money won't do it.

    And if inflation does overshoot, then just raise rates until it comes back down to 4%. Inflation is much easier to clamp down than deflation.
    Jul 17, 2010. 11:56 AM | Likes Like |Link to Comment
  • The slowing economy isn't anything that a fresh bout of inflation couldn't cure, David Blanchflower says - in fact, it's the only game left in town. He says the Fed should engineer, or at least tolerate, a big jump in price pressures relative to recent years. Then the Fed could tighten policy, damping inflation while also allowing it to get rates back toward a more traditional stance.  [View news story]
    Here is a quick summary: falling prices produces the wrong incentives.

    People put off purchases in anticipation of further falling prices. People's real debt load gets larger. All in all people's spending falls.
    Companies see profits fall. They begin to fire people. This leads to more cuts in spending and more firing. It's a slow and grinding death spiral. Japan has been in it for 20+ years. This is our future. We are staring at it and instead of running away from it, we are going all in on the Japan scenario with our austerity measures.

    By the way, this is not an endorsement of hyper-inflation. But right now we have the Fed committed to 2% inflation, but perfectly fine and sitting on its hands as inflation gets closer and closer to 0% and will soon turn negative.
    Jul 16, 2010. 06:30 PM | Likes Like |Link to Comment
  • The slowing economy isn't anything that a fresh bout of inflation couldn't cure, David Blanchflower says - in fact, it's the only game left in town. He says the Fed should engineer, or at least tolerate, a big jump in price pressures relative to recent years. Then the Fed could tighten policy, damping inflation while also allowing it to get rates back toward a more traditional stance.  [View news story]
    Seriously Poor Texan read this article and try to do it without any preconceived notions:

    seekingalpha.com/artic...

    If you want further discussion, pick up Friedman & Schwartz's Monetary History of US here

    www.amazon.com/Monetar...
    Jul 16, 2010. 06:26 PM | Likes Like |Link to Comment
  • "Media fools" are trying to spin Goldman's (GS) settlement as a victory, Barry Ritholtz writes, but it is really a "painful loss" with expensive repercussions likely to last far into the future. For starters, it opens the firm to future liability from all clients who bought money-losing derivatives, which could leave Goldman - and its rivals - constantly under attack. But the biggest question now: Who will the SEC come after next?  [View news story]
    I just want to respond to the FDIC argument because it's the argument I hear ALL THE TIME. I always find myself being the only one who supports the bailouts (for obvious reasons). But here is how all the arguments go.

    Regular person: The government should have just let all the banks go bankrupt!

    Me: You do realize how banks are structured don't you? You do realize that you, as a depositor at a bank, are in effect its creditor. (That's why banks count deposits as liabilities on their balance sheet). So, if a bank goes bankrupt, just like any other company that goes bankrupt, the creditors are wiped out or at the very least take a big haircut. Meaning basically you lose your checking account and everything you had in it.

    Regular person: You don't know what you are talking about. What about the FDIC??

    Me: OK, first of all the FDIC is a bailout. The 'F' stands for Federal and its not like you, yourself, pay any premiums for this insurance. It's just a blanket guarantee on deposits below $250k.

    Second of all, the FDIC doesn't have the money to handle the synchronized collapse of (for example) Citigroup, Bank of America and Wells Fargo. Washington Mutual was the biggest bank failure in American history and it was a fraction of the size of Citigroup and Bank of America. So, in effect, if you had to guarantee the deposits under $250k of all the checking accounts at Citi and BoA, I would guess it would be >$700billion which was TARP.

    On top of that, just the mayhem that would be caused by the collapse of Citi and BoA would lead to irrational behavior that would plunge us further into depression. Nobody would believe the claims of even responsible banks and there would be runs on them too.

    So, in the end, yes bankruptcy doesn't work for big banks.
    Jul 16, 2010. 05:06 PM | Likes Like |Link to Comment
  • "Media fools" are trying to spin Goldman's (GS) settlement as a victory, Barry Ritholtz writes, but it is really a "painful loss" with expensive repercussions likely to last far into the future. For starters, it opens the firm to future liability from all clients who bought money-losing derivatives, which could leave Goldman - and its rivals - constantly under attack. But the biggest question now: Who will the SEC come after next?  [View news story]
    OK, let me respond

    1.) It's the biggest fine the SEC have ever levied in its history. And to your corollary of "If the SEC thought it could get a guilty verdit wouldn't it have pursued the case farther?", I can say if Goldman thought it was innocent wouldn't it do the same thing.

    3.) Bankruptcy doesn't work for banks because banks are like no other industry. If Burger King goes bankrupt, there is no run on McDonald's bonds. But if Citibank goes bankrupt and all of their depositors are wiped out (and by depositors, I mean the Joe Schmo with the simple checking account), then yes there will be a run on other banks. It has happened throughout history.

    4.) If you are going to bring the "Tea Party" mentality to any government agency then of course you are going to be against it. But just for a second stop and think about the government agencies that have done their jobs well. They never make the news but, as just one example of many, the Clean Air Act and Clean Water Act produced clean air and clean water without destroying the economy (like Republicans at the time said that it would). With your attitude, you should be against all of our institutions. Police departments have a long and storied history of corruption. Lets get rid of them too. Why not?

    5. Yes, let's blame everything on Barney Frank. Here is a video of George W. Bush on housing:

    georgewbush-whitehouse...

    Here is the article from his own archives:

    georgewbush-whitehouse...

    No one was pushing home ownership more than Republicans and their "ownership society" idea. Because, as one of them put it, "mortgage holders don't go on strike".
    Jul 16, 2010. 03:31 PM | Likes Like |Link to Comment
  • "Media fools" are trying to spin Goldman's (GS) settlement as a victory, Barry Ritholtz writes, but it is really a "painful loss" with expensive repercussions likely to last far into the future. For starters, it opens the firm to future liability from all clients who bought money-losing derivatives, which could leave Goldman - and its rivals - constantly under attack. But the biggest question now: Who will the SEC come after next?  [View news story]
    Well, it's all about setting future incentives. $500 million is not small change even for Goldman and it sets a new precedent. I think it puts the fear of God into the compliance departments of all these financial firms. Suddenly, they are important.

    As for the FinReg bill. Well, the point Barry was making was that this settlement by the SEC was more important for future regulation than the new law. Would we have liked to see Lloyd Blankfein being carried away in an orange jumpsuit? Of course. But for all intents and purposes the message has been sent with this ruling.

    Also, the FinReg bill, for all its flaws, does one thing right. The resolution authority. No more Sunday night announcements before Japan market opens. We all know what will happen now when a big firm is in trouble. The system will be saved (depositors will be bailed out) while the firm will face the consequences of its bad decisions (shareholders wiped out, executives fired). And the new Consumer Protection Agency will hopefully do what is necessary to ensure proper lending standards. I am not sure what exactly you wanted to be done about that. Even I, a liberal, don't think the government should just write a law allowing only 20% down mortgages.

    So, obviously there are negatives. Obviously certain special interests got carve outs. But comeon. We live on Planet Earth and we are humans. This stuff has always happened. On net though, it's a positive.
    Jul 16, 2010. 02:20 PM | Likes Like |Link to Comment
  • "Media fools" are trying to spin Goldman's (GS) settlement as a victory, Barry Ritholtz writes, but it is really a "painful loss" with expensive repercussions likely to last far into the future. For starters, it opens the firm to future liability from all clients who bought money-losing derivatives, which could leave Goldman - and its rivals - constantly under attack. But the biggest question now: Who will the SEC come after next?  [View news story]
    joro,

    Your attack on Barry seemed to be more than just about the GS case. So, I wanted to point out his track record.

    As for the case, I am not a securities lawyer so I am not going to pretend to pass my own judgment on it. All I will say is that if you don't think any fraud occured during the real estate "boom", I have a bridge to sell you.
    Jul 16, 2010. 01:33 PM | Likes Like |Link to Comment
  • "Media fools" are trying to spin Goldman's (GS) settlement as a victory, Barry Ritholtz writes, but it is really a "painful loss" with expensive repercussions likely to last far into the future. For starters, it opens the firm to future liability from all clients who bought money-losing derivatives, which could leave Goldman - and its rivals - constantly under attack. But the biggest question now: Who will the SEC come after next?  [View news story]
    To add to this, I'd also like to live in a world where track records matter. Where if you are conservative, right wing hack of an economist like Donald Luskin or some other Club for Growth moron and you have been on TV between 2006-2007 and said any of the following phrases: "goldilocks economy", "soft landing", "subprime is not that big a deal", etc, etc. you are no longer allowed to speak without some disclaimer being put by your name every time you appear on TV.

    And if on top of that, you said any of the following in March 2009, "OMG! OBAMA is about to destroy the economy! Sell, sell, sell!" We just take you out and tar and feather you.

    Yes, that would be a nice world where whether or not you were correct on your predictions actually mattered. But instead, I live in a world where people need their facts to fit to their political ideology and their narrative and not the other way around.
    Jul 16, 2010. 12:48 PM | Likes Like |Link to Comment
  • "Media fools" are trying to spin Goldman's (GS) settlement as a victory, Barry Ritholtz writes, but it is really a "painful loss" with expensive repercussions likely to last far into the future. For starters, it opens the firm to future liability from all clients who bought money-losing derivatives, which could leave Goldman - and its rivals - constantly under attack. But the biggest question now: Who will the SEC come after next?  [View news story]
    Umm....I am not going to say Barry Ritholz is God...but....

    Well, let's just say he is been right much more than he has been wrong. He was bearish all through 2006-2008 (and not bearish like the perma-bears who have been bearish since they were born). He then went all in in March 2009. And then recently went all cash in March 2010.

    In a business where it is very hard to be more right than wrong, he has been spot on.
    Jul 16, 2010. 12:44 PM | Likes Like |Link to Comment
  • States cry for aid but Erskine Bowles and Alan Simpson, co-chairs of Obama's debt commission, say states can’t count on the federal government for more budget bailouts. But Illinois Gov. Pat Quinn says comparing her state to Greece is "ridiculous... We have provisions in our constitution that are very protective of those who purchase bonds."  [View news story]
    Those are long-term fiscal concerns. I completelly agree. But they are unfunded obligations in the FUTURE. They will undoubtedly need to be dealt with. But these are not problems now.

    Honestly, how can you live in today's world and not realize that teachers, firemen and police officers are being fired every day. Don't make me post dozens of links. Just do a google search.
    Jul 13, 2010. 01:46 AM | Likes Like |Link to Comment
  • How much truth is behind the claims that fears about taxes and regulations are holding down business spending? None, Paul Krugman says. It's all about widespread overcapacity. We need to give businesses a reason to spend, and to do that, he says, the government needs to start doing more, not less, to promote economic recovery.  [View news story]
    "So you live in government contract la-la land."

    It is amazing how the Tea Partiers believe that the government spending has some sort of a different effect on jobs as compared to private spending. It is as if, if we get a job from the government, magic gnomes will come and do the work. No people get hired. No jobs get created or saved. Gnomes and fairy land creatures do the work.
    Jul 9, 2010. 07:37 PM | Likes Like |Link to Comment
  • How much truth is behind the claims that fears about taxes and regulations are holding down business spending? None, Paul Krugman says. It's all about widespread overcapacity. We need to give businesses a reason to spend, and to do that, he says, the government needs to start doing more, not less, to promote economic recovery.  [View news story]
    I am sorry, I have to pile on. Just had a thought. As I said, I work for an engineering firm. As most firms, we are going through hard times and have cut our staff. Obviously, this was because all work dryed up not because of any new regulations or taxes.

    Anyway, if tomorrow we were to get a multi-million dollar contract, no amount of "uncertainty", "regulations", or possible future taxes would change the following equation:

    "Yeaay, we got work. --> Hmm, we don't have enough people to finish this work on the client's timeline. --> We need to hire more people."

    And I know the following equation holds for ANY business.
    Jul 9, 2010. 07:13 PM | Likes Like |Link to Comment
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