lbsterling

Citigroup to Increase Common Stock, Government to Reduce Spending - Are They Serious?

You'd lose 10 percent of your net worth on that bet, because Hoenig is right: rates are going to have to rise or else there will be no buyers for U.S. treasuries.

So yes, they will raise, and yes, "Splat" for housing and the markets.

The only other option is the Fed as sole buyer for treasuries, and that would mean mega-inflation and dollar collapse.

More likely is that they'll try to walk the line: slight rate increases AND heavier Fed buying of treasuries etc, leading to some inflation (who knows how much) AND more recession (who knows how much).

Stagflation is the best case scenario.

It's a wing and a prayer right now and the Fed has no good options.

Remind Me Again, What's a Bubble?

I'm all in favor of thinking about things in a new light, so I like the opening section of your article:
That the problem was mispriced debt rather than too much debt has the ring of truth.

But top to bottom I'd say your further analysis has too many flaws to be useful.

"Under this analysis, it would simply cost more as investors demand higher interest. And if so, what does that say about corporate earnings? Answer? Well, there is none. If consumers have to spend more on interest, maybe they borrow less and buy fewer things."

Higher interest rates during a downturn will be crushing, that's the "checkmate" scenario. Corporations will have trouble financing investments, and consumers, as you yourself suggest in the quote, won't be able to consume until deleveraging has run its course.

Hence the Fed's efforts to keep rates low.

Further, I think it's say that the relationship between yields and the S&P in the past 10 years is not going to be very useful for what happens in the next 10 years.

Finally, someone else above pointed out, a lot of the money IS gone _ and the Fed is working hard to re-create it, with results that are as yet unknown.

So thanks again for the article _ I will be curious to see how your thinking develops.

Fall in U.S. Credit Costs Is Most Significant Economic Development

I'm going to go with "going up" for question one and "going down" for question two.

I was paying attention, but I'm still not sure I got it right...

What Will the Winds of Change Bring?

"His background with Goldman Sachs (GS) and in the U.S. civil service has made him a slave to the system, and his perspective and understanding of the global financial crises is either extremely limited, in which case his intentions remain noble and just, yet shortsighted and underpowered, or complete and comprehensive, and thus imperialistic and oligarchic."

Flowery prose doesn't strengthen your case.

Jim Welsh on the Economy: Past the Point of No Return

Excellent commentary.

Sell in May and Buy in May

Reasonably prudent advice.

Bernanke Desperate, Fed Out of Ammo

You say the Fed buying long bonds "has only ever been done in third world countries before the US did it this week, and the UK did it last week."

Of course the U.S. did it in the 1940s and you yourself say one paragraph later :
"Japan tried this in 1991, and their economy has never recovered."

Why should we listen to anything else you say when you are ignorant of history and self-contradictory?

Ambrose Evans-Pritchard, Are We Really Nearing a Bottom?

Actually, I think Investfarm makes a valid point.

Somewhere around subparagraph 47...