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Michael Clark

Michael Clark
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  • In a speech defending the Fed's rock-bottom interest rates in the early 2000s - which many believe fueled a runaway housing boom that ended with the collapse of the credit markets - Ben Bernanke said today regulatory and supervisory actions, not rate hikes, would have been more effective ways to deflate the bubble.  [View news story]
    Let's not forget that Greenspan publicly encouraged homeowners holding AAA mortgages to refinance into sub-prime mortgages as a way of saving money over time.
    Jan 3, 2010. 02:57 PM | 2 Likes Like |Link to Comment
  • Economic Double-Dip? Try a Triple [View article]
    The end of the boom and bust cycle simply means no more boom for another decade.
    Jan 3, 2010. 02:50 PM | 21 Likes Like |Link to Comment
  • Economic Double-Dip? Try a Triple [View article]
    My view of a depression is that it is a series of clustered recessions lasting over a period of nearly two decades. The Great Depression had clustered recessions of 1929-1933, 1935-37, 1941-45 if you count the war as being a recession, and 1946-47.

    The recessions clustered between 1965-1983 were also part of the same root structure.

    This depression began in 2001 and will run through 2019, with a series of recessions and a series of weak recoveries, but no real expansion for another decade.
    Jan 3, 2010. 02:47 PM | 6 Likes Like |Link to Comment
  • Economic Double-Dip? Try a Triple [View article]
    Donald:

    I wonder what those numbers would look like from 1983-the present? We've really been through a staggering period of inflation if you disregard salaries, which have been flat and declining since the 1970's.
    Jan 3, 2010. 02:43 PM | 4 Likes Like |Link to Comment
  • In a separate speech, Donald Kohn said the Fed "has no shortage of tools" to firm its policy stance, and promised the Fed would not allow the ballooning deficit to deter it from boosting interest rates when needed. "The alternative of letting inflation rise would be inconsistent with our mandate and would only cause greater volatility, uncertainty, and inefficiencies that would reduce the growth of our economy over time."  [View news story]
    OK: we are monetizing our debt by creating inflation, killing the dollar, avoiding bankruptcy by keeping rates low. But, as we do this, we are also taking on a staggering federal deficit. How can we ever raise interest rates, since higher rates would make our staggering debt even more staggering, leading to a national default?
    Jan 3, 2010. 02:28 PM | 6 Likes Like |Link to Comment
  • In a speech defending the Fed's rock-bottom interest rates in the early 2000s - which many believe fueled a runaway housing boom that ended with the collapse of the credit markets - Ben Bernanke said today regulatory and supervisory actions, not rate hikes, would have been more effective ways to deflate the bubble.  [View news story]
    Donald: He's a politician. Note I didn't say a lying politician as that would be redundant.

    His innocence is really rather appalling considering he is the most powerful man in the world at the moment -- and he is helping to re-fund the masters of corruption by giving them all free money taken from the tax-money of US citizens.

    My hope is that eventually he will be investigated and put in jail.
    Jan 3, 2010. 02:23 PM | 3 Likes Like |Link to Comment
  • In a speech defending the Fed's rock-bottom interest rates in the early 2000s - which many believe fueled a runaway housing boom that ended with the collapse of the credit markets - Ben Bernanke said today regulatory and supervisory actions, not rate hikes, would have been more effective ways to deflate the bubble.  [View news story]
    GD: He didn't inhale? I think I heard that one before.
    Jan 3, 2010. 02:19 PM | 2 Likes Like |Link to Comment
  • In a Q&A after his speech, Bernanke said he wasn't "particularly concerned" about a possible loss of investor confidence in the U.S. financial system. The dollar is still the dominant world reserve currency, he said, and when financial conditions become worrisome, investors will still view the dollar as a safe haven.  [View news story]
    I WISH Benny was doing stand-up comedy. He MIGHT have a better chance to be successful than by flooding an insolvent economy (global economy) with more debt.
    Jan 3, 2010. 02:09 PM | 5 Likes Like |Link to Comment
  • Conspiracy Theories: Great for Entertainment, Not a Source of Investment Advice [View article]
    "As far as the manipulation of the stock market during the current rally, I agree that this would be hard for the Fed to hide, with or without an audit. But that doesn't mean that the Fed and the government have not had a role in the rally. Part of the rally is a natural rebound from a draconian sell-off. The rest is liquidity driven. The Fed and the government have provided the liquidity that the trading departments of the largest banks have used to generate huge trading profits with large, rapid fire trading in a low volume market. With so much gain occurring after normal trading hours when volumes are even lower, the ability of a few traders to drive the market is increased.

    There is no evidence that the Fed or the government has directly manipulated the stock market. They didn't have to. They have enabled the large banks to do that. The Fed and the government are accessories before the fact."

    Thank you, John.
    Jan 3, 2010. 02:06 PM | 5 Likes Like |Link to Comment
  • Conspiracy Theories: Great for Entertainment, Not a Source of Investment Advice [View article]
    It seems to me that the 'liquidity feeding' -- holding interest rates at historically low levels for an eternity, feeding the world with easy money -- was a 'conspiracy' to create asset bubbles AND a conspiracy to create a stock market bubble this year. Was it not?

    It seems to me that the backstopping of TBonds by the Fed was also a 'conspiracy' to fuel both a bubble in the TBond market and in the housing market.

    The 'conspiracy' is to create bubbles. That's what the Fed has been all about for the last 20 years. They have been committed to 'inflation' as a creed, thinking that inflation is good for Americans and the world (and the rich rulers of the world of course), without admitting that inflation is the transfer of wealth on a large scale from those who do not own the world's assets to those who do.

    The 'conspiracy' is to use government funds to rescue the ruling class from the chaos of the insolvency that the inflation creed has brought upon the world. The government and the ruling class of Wall Street have joined forces out of a desire for self-protection. Both are afraid for their own survival -- and they've crawled into bed together because of this fear.

    Call it an alliance, a conspiracy, a black marriage, a betrayal...call it what you want. But most of us see it as a perversion of the expected relationship between business and government -- the creation of State Capitalism, whereby the ruling class and the government act to preserve their own interests without regard for America's future indebtedness.

    Protecting their own asses: that's what Wall Street and Washington are very good at.
    Jan 3, 2010. 02:02 PM | 14 Likes Like |Link to Comment
  • In a speech defending the Fed's rock-bottom interest rates in the early 2000s - which many believe fueled a runaway housing boom that ended with the collapse of the credit markets - Ben Bernanke said today regulatory and supervisory actions, not rate hikes, would have been more effective ways to deflate the bubble.  [View news story]
    I hope Bernie is just lying -- and that he doesn't really mean what he says, which would call into question his intelligence for the job instead of just his heart.

    The FED is supposed to be the leader on monetary policy. And when the FED feeds the beast, the beast roars. We saw in the 80's how Volcker put the beast on a leash.

    Bernanke is saying that he doesn't want the Fed to have TOO MUCH responsibility. He wants someone else to make the hard decision. He wants the FED to have the power to feed bubbles but NOT the responsibility to break them. This proves what I have said about him: he doesn't have the stomach (or the brain) for the job. He doesn't want to rain on anyone's parade. He doesn't want to be the bad father who had to shut the liquor cabinet and send the teenagers home for the night.
    Jan 3, 2010. 01:24 PM | 6 Likes Like |Link to Comment
  • U.S. Debt Scheme: Is It All Just a Ponzi Scheme? [View article]
    Interesting to see how the blame is being shifted away from the government and businesses on to the citizens who demand an end to the corruption. There will be more of this.
    Jan 3, 2010. 12:28 PM | Likes Like |Link to Comment
  • Richard Koo, an expert on Japan's lost decade, explains why flooding the economy with money didn't work for Tokyo, and won't work for Washington: "When people are minimizing debt because of their balance-sheet problems, monetary policy is largely useless. If your balance sheet is under water, in negative equity, you are not going to borrow money at any interest rate, and no one will lend you money, either."  [View news story]
    "Koo: I’m explaining to the Americans that the disease you’ve got, is the disease we got 15 years earlier. Most Americans are flabbergasted by the fact that the Federal Reserve has lowered interest rates to zero, flooded the market with liquidity — and the economy is still going absolutely nowhere. Unemployment is still increasing, people are still retrenching, deleveraging. When the central bank brings rates down to zero, a lot of things are supposed to happen, but there’s nothing happening. But that’s what we experienced in Japan. The Bank of Japan brought the rates down to zero, did massive quantitative easing, with no result whatsoever. This happens because of a balance-sheet recession.

    What is that?

    This happens because the private-sector companies are no longer maximizing profits; they are minimizing debt. They are minimizing debt because all the assets they bought with borrowed money collapsed in value, but the debt is still on their books, so their balance sheets are all under water. If your balance sheet is under water, you have to repair it. So everybody is in balance-sheet-repair mode. This type of recession isn’t in any economic textbook yet, and there’s no name for it. I call it the balance-sheet recession.'

    ___

    Day-Cycle: private realm expands; public realm shrinks.
    Night-Cycle: public realm expands; private realm shrinks.

    Day-Cycle: The Sun has its glory and the physical world (in all its aspects) grows; wealth increases; civilization spreads; science dominates, individual desire and destiny are triumphant.

    Night-Cycle: The Moon has its glory and the spiritual world (in all its aspects) grows; wealth decreases (when a man is rich he believes he is god; and when he is poor he searches for God); civilization shrinks and Nature is 'rediscovered' -- 'going back to nature' -- metaphysics dominates, and group desire and destiny replace the quest of the (Sun Hero) the Individual. Such ‘group’ dynamics often includes protectionism and war.

    Day-Cycle: Causal, dominated by Empiricism (and by the idea of Empire, of “I” as God), linear thought, "Real World" exclusion, temporal sequence, Science. Masculine perspective.

    Night-Cycle: Metaphorical, dominated by Poetic Understanding (by the Idea of God as Cosmos), cyclical structure of time/space, the circle, spatial imminence and visual orientation, "Dream World", Religion. Feminine perspective.

    A graphic metaphor is the circle with a diameter cutting the circle in half. The Sun rises in the East (and the light is born) and moves along the diameter line, reaching the West in 18 years, the other side of the circle; and when it does reach the other side of the circle, the bubble bursts and the Sun, the Ego, the separated atom, is re-absorbed back into the Circle, the Night -- that is, the Sun sinks back in to the body of Darkness. The Light goes out like a candle flame that enters the water.

    Nature has a 'growth' cycle, followed by a 'rest' cycle – a Fire Cycle (Sun and Reason) followed by a Water Cycle (Moon and Emotion). So does everything in Nature.

    Many of the great works of literature are maps of this process: Dante's 'Divine Comedy', Joyce's 'Finnegans Wake', Milton's 'Paradise Lost and Regained', to name a few. All religious writing is about passing through the 'valley of the shadow of death' and getting back to the Light, the Day, through a rebirth or a resurrection process.

    18 years of Day, followed by 18 years of Night.

    Koo: "It took us [in Japan] a decade to figure out. People said, “Ah, just run the printing presses, ah, structural reform, ah, just privatize the post office, this and that, and everything will be fine.” Nothing worked. This is pneumonia, not the common cold. When people are minimizing debt because of their balance-sheet problems, monetary policy is largely useless. If your balance sheet is under water, in negative equity, you are not going to borrow money at any interest rate, and no one will lend you money, either.

    In an ordinary, garden-variety recession, as we learned in school, the private sector uses money more efficiently, and a budget deficit is considered bad. But when the private sector is completely absent and paying down debt at zero interest rates, and the government doesn’t borrow this money, what happens? Even a child would understand the whole thing could collapse. The only way the government can turn this economy around is to do the opposite of the private sector — borrow the money the private sector saved and spend it, which means fiscal stimulus. That’s what saved Japan from entering a Great Depression."

    I'm not sure Japan has been saved from entering a Great Depression however. If the Japanese banks are still hiding real estate debt on their books hoping it will all go away, magically, over time. Debt doesn't go away because you want it to, or would like it to -- you have to admit you are bankrupt, confront the truth, and go bankrupt. Then pick up the pieces.

    The jury is still out on this method, in fact. Taking on debt to fund debt seems to be an irrational act. Somewhere along the way, one has to clear the books of the toxic assets that are poisoning one. In fact, unwinding debt, and hiding them with accounting tricks, are NOT the same thing.
    Jan 3, 2010. 12:21 PM | 3 Likes Like |Link to Comment
  • 2010 Market Could Be Greatest Bull of Modern Age [View article]
    18-Year Cycles of Expansion followed by 18-Year Cycles of Contraction. We'll have to wait for 'greatness' again to slowly begin in 2019. Golden Age of expansion will happen 2028-2037. Top in 2037...then another collapse. Watch for banker corruption 2037; and begin to raise interest rates steadily 2036 - 2054.

    2001-2019: contraction.
    Stock market: To Be Determined.

    1983 - 2001: expansion.
    Stock market: Positive 915% in 18 years: +51% per year

    1965-2003: contraction.
    Stock market: Positive 22% in 18 years: +1% per year.

    1947-1965: expansion.
    Stock market: Positive 386% in 18 years : +22% per year.

    1929-1947: contraction.
    Stock market: Negative 47% in 18 years: -3% per year.

    1923-1929: expansion.*
    Stock market: Positive 400% in 6 years; +67% per year.

    *Could not find stock prices for full (1911-1929) 18 years.
    Jan 3, 2010. 05:36 AM | 4 Likes Like |Link to Comment
  • Paul Krugman, like Michael Pettis, believes China's heading into uncharted territory with its unwillingness to acknowledge the damage its mercantilist policy is doing to the global economy. Krugman predicts 2010 will be the year of China - and not in a good way.  [View news story]
    It's not just Krugman who is saying this. So are the Europeans, the Japanese, the Koreans and the Taiwanese: the peg is an unfair advantage for Chinese exports AND it is a procedural form of protectionism.

    What a concept: 'protectionism'. As if nations aren't supposed to put their own interests first -- and haven't always done so. Let's have another drink of the pretty pink koolaide. Thank you, Ben -- it tastes better every time I drink it.
    Jan 3, 2010. 04:48 AM | 4 Likes Like |Link to Comment
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