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  • Junk Bonds Under Pressure [View article]
    Take a look at PFF vs. JNK. Preferred have been essentially flat since 2009.
    Nov 19, 2015. 03:32 PM | Likes Like |Link to Comment
  • Junk Bonds Under Pressure [View article]
    "Not to dismiss the valid concerns, but outside of commodities, is there a problem?"

    I made the same assumption in 2007-2008, just substituting "real estate and homebuilding" for "commodities". Unless you know how globally interconnected all the debt and leverage are, you don't know the extent of problem. Who understood what was going on with Mortgage Backed Securities and Credit Default Swaps before the crash?
    Nov 18, 2015. 04:41 PM | 4 Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]
    Once again, the first paragraph is a quote from the article's author Cullen Roche. Those are not my words, they are his. I was pointing out his mistake, which was in my second paragraph.

    "The availability of credit has more impact on the economy than M1 or M2 money supply."

    The fed controls the availability of credit. Current the availability of credit is limitless to the banks, provided the banks find creditworthy borrowers. The banks will turn down applicants based on both interest rates not sufficient to cover credit risk, and insufficient assets/income streams.

    "The reason for the slow economy and low inflation with all the QE's and Fiat money being printed, is that the banks aren't lending. They are sitting on the QE money because the low interest rates and the impact of Dodd/Frank regulations do not motivate them to take risks."

    That's only half of the problem. The other half is that many small businesses, and consumers in general, have reached their credit limits. Banks can lower lending standards, but that puts us right back at 2007.
    Nov 15, 2015. 07:32 PM | Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]
    "Unless there is industrial use, it is very wasteful as a global society to spend so much effort digging up pieces of shiny rock from the earth which has no use whatsoever. Fiat money, is actually a huge system of IOU's ... So I don't see any problem with the fiat system."

    You don't know what you're talking about. Do you actually think that those IOUs that you use called "dollars" are free? I guarantee you that the cost of using of those IOUs is far higher for the global society than those shiny yellow rocks.
    Nov 14, 2015. 03:54 PM | Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]
    There is no such thong as "free credit". The government's IOU's, which include both bonds and currency, are backed by 1) the government's ability to tax and, 2) the governments ability to issue currency if it wished.
    Nov 13, 2015. 11:28 PM | Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]

    ..."The reason long-term interest rates have been falling is largely because the demand for debt has fallen."

    Those aren't my words, they're Cullen's.
    Yes, you're right about the inverse relationship. However, supply and demand (free market forces) no longer apply to the money supply. The Fed controls the money supply and uses it's control to target interest rates.
    Nov 13, 2015. 11:12 PM | Likes Like |Link to Comment
  • The Conspicuous Temperature Gradient Of Finicky U.S. Consumers [View article]
    Lighten up Benni. Life is too short.
    Nov 13, 2015. 10:58 PM | Likes Like |Link to Comment
  • Why No One Should Support The Gold Standard [View article]

    "The price of money is set by the market based on demand for debt. Bankers don't just set it at whatever they want. The reason long-term interest rates have been falling is largely because the demand for debt has fallen. This is a market based system. What do "free market" people not like about that?"

    Not quite. You forgot the market supply of credit. Remember? The price is set by demand AND supply. The Federal reserve has vastly increased the availability of credit, so they actually do control the price of credit. All the Fed needs to do to raise interest rates is sufficiently tighten bank reserve requirements. This is not a free market system because the banks have a monopoly on money creation under the direction of the Fed.

    There are disadvantages to a gold-backed money supply, namely the inability to match the money supply to economic demands, and the transfer of gold required by international trade. The others things you mentioned are non-issues. Having deflationary recessions in a non-inflationary environment is not quantatively worse than non-deflationary recessions in an inflationary environment. No one has made the definitive case that overall GDP growth was better during the time of the credit-backed money economy than during the time of the gold-backed money economy.

    The current system however is not one immune to deflation. Having money creation tied to credit creation presents its own serious problems. A credit backed money seems great until you reach credit saturation. At that point you run out of willing creditworthy borrowers and no additional credit can be created. All the existing debt will create an "economic drag". You might call this Keynes' liquidity trap, but in reality, fiscal stimulus funded by further credit expansion will not solve the problem. Historically, the only proven way to exit such a situation is through the extinguishing of debt. This means either repayment and/or default (deflationary), or repayment with printed fiat (inflationary). So what we appear to have done with the current system is to trade short inflation/deflation cycles for a 50+ year inflation period followed by a huge deflationary bust, unless we change the system.
    Nov 13, 2015. 04:29 PM | Likes Like |Link to Comment
  • The Conspicuous Temperature Gradient Of Finicky U.S. Consumers [View article]
    Maybe you should do a list like comedian Jeff Foxworthy: you know you're a redneck if ...

    You know you're a Fedbud if ...

    ... You're borrowing money in preparation for the big economic expansion which will begin next year.

    Etc., etc., ...
    Nov 13, 2015. 02:23 PM | Likes Like |Link to Comment
  • U.S. Economy - Not Getting Better [View article]
    No, laws define what is allowed and not allowed. Right and wrong are a different issue, and laws often don't always reflect that. Misleading someone may be wrong, but not against the law. If it was against the law, half the population would be in jail. False illusions? If that was against the law every religious group could indict every other and all politicians would be guilty.
    Nov 13, 2015. 12:04 PM | Likes Like |Link to Comment
  • No Country For Old Dogma [View article]
    "I see this as more of a warning, a red flag that there's something going on here that isn't in the models, that we maybe don't understand as well as we think, and we should dig down deep deeper and try to figure this out better," he [SF Fed President John Williams] said during a panel discussion at the Brookings Institute in Washington."

    The reason that this questioning has been occurring since 1979 without finding an answer is that it cannot be adequately answered without undermining the existing dogma. The slight additions and "patches" applied to the existing dogma cannot solve the problem.
    Nov 11, 2015. 01:32 PM | 1 Like Like |Link to Comment
  • U.S. Economy - Not Getting Better [View article]
    HAgreed 205427,
    There is a difference between selling risky paper and selling worthless paper. Were the bond rating agencies in on the conspiracy too? I'm sure that a certain amount of fraud occurred as it always does, but I don't think that a conspiracy to defraud the American public occurred on a grand scale. You'd have to silence too many people who might talk. People will often follow faulty logic en masse that ends up causing disasters - Communism for example. In hindsight it's often easy to confuse following faulty logic with conspiracy. This is the essence of economic bubbles and busts, along with the desire to find the evil actors who supposedly caused them.
    Nov 11, 2015. 12:43 PM | Likes Like |Link to Comment
  • QE's Creeping Communism [View article]
    The Bank of Japan is correctly targeting money supply rather than interest rates, however I also said that central banks need to look at excess reserve levels and market interest rates to determine if they have reached the credit saturation limit, i.e., the point at which adding additional credit availability to the banking system has no more beneficial effects, or what others call "pushing on a string". At this point trying to add more credit money to the system is actually economically detrimental. So to summarize:
    1) Stop targeting interest rates or a narrow interest rate range.
    2) Stop trying to add to the money supply when credit demand is approaching saturation.
    Nov 9, 2015. 05:30 PM | 1 Like Like |Link to Comment
  • QE's Creeping Communism [View article]
    AC, thanks for the link.
    I know all about the Mandrake Mechanism, and I estimate that the dollar economy (everyone in the world who uses dollars) pays several trillion a year to "rent" our money from the banks. It's causing tremendous financial drag on the worlds economies.
    Nov 9, 2015. 05:13 PM | 1 Like Like |Link to Comment
  • QE's Creeping Communism [View article]
    Wrong. The Fed targeted an interest rate range, then increased the money supply through QE until rates fell to within the target. It uses repos and reverse repos to keep rates within the range. The Fed for at least the last decade has always targeted short term interest rates. To say otherwise is to deny history. The narrow band between 0.00% and 0.25% is to deal with fluctuations that the market might throw at the Fed.
    Nov 8, 2015. 02:41 PM | 1 Like Like |Link to Comment