The mindset of the private sector is not in "expansion mode". The private sector is playing defense right now. They are stockpiling cash and focusing on improving productivity of existing workers and processes rather than investing in growth and expanding the workforce.
They are playing defense because they have no idea what changes will take place in the next few years: Will there be tax increases? Will healthcare cost money or save money? Will there be import tariffs? What sectors will have new regulations or changed regulations? Will there be cap and trade? ...
Nobody knows the answers to these questions. However, businesses do know that politicians want to make a lot of these changes, they just don't know what will actually happen.
If you were running a businesses with your own money at stake, would you be playing offense (expanding and growing) or defense (saving cash and looking to be as efficient as possible)?
Fed Avoids Finding an Exit Strategy [View article]
While this latest move does not seem large in notional dollar amount I actually expect it to result in the most inflationary outcome from the Fed so far (in this crisis).
While the existing expansion of the Fed balance sheet has resulted in an equal offset in excess reserves, I think this ~200-300 billion in annual Treasury purchases will be done in the open market and thus lead to a direct injection of cash into the economy rather than leading to an equivalent offset in excess reserves.
The holders of MBS were banks which is why those Fed purchases simply remained in excess reserves. However, there are many many many holders of Treasuries. The cash that the Fed spends to purchases these Treasuries will end up in the system and will be the inflation spark everyone has been worried about. Once there is a little bit of inflation, we'll start to see the big banks chase it in an effort to earn more than their 25bp on excess reserves, and then it will become a game of cat and mouse.
Orient Paper's Top Supplier: An Empty Shell Owned by ONP's CEO [View article]
I hate to state the obvious, my_own_way, but if you "don't care about anything this guy writes", then simply don't read it.
Everyone writing here has some bias and to think otherwords is extremely ignorant.
If you disagree with the author so strongly, why not respond with some points and evidence that makes your case. As a reader, I'd appreciate logical refutations much more than comments like "you suck because you're biased".
This Liquidity Trap Is the Real Deal [View article]
To extend the analogy, the Fed has actually helped manufacture the string that it is now pushing on -- It has the tool to unleash all of those excess reserves into the economy if it wanted to.
All the Fed needs to do is revert back to the pre-TARP regulations, and eliminate (or at least reduce) the rate of interest they pay on the excess reserves. Sure some banks may still keep excess reserves at the Fed, but I'm sure some are only keeping them there to earn that risk free money.
Ender's Game has remained my favorite book for the last decade or so. It is a good read on so many different levels. Not only is it simply an entertaining read from the plot and character building perspective, but it also brings to light some of the fundamental/philosophical questions of life and has some frighteningly accurate sci-fi forecasting!
It is true that the long talked about convergence of information and money is rapidly approaching in large part due major advancements in technology.
The major barrier to efficient markets (perfect, instantaneous information) is exponentially decreasing.
Those with real-time access to information can effectively engage in information arbitrage during this time of transition.
Looking for the 'Next Greece' Once Again [View article]
I am sorry if I offended you Quinn. I merely thought you may have missed the fact that John Mason was not promoting the idea that nations should load up on debt, but was instead saying that they did so because they had an economic incentive to do so (the way he phrased things made it easy to come to the wrong conclusion if you were skimming the article).
Again, I'm sorry for mistakenly thinking you didn't get Mr. Mason's point of view.
As far as investment advice goes, I actually own no stocks right now because I don't like where the US economy is headed. The little I have left that I don't spend on travel, I put in gold.
Now, I'm no fan of the fed's zero interest rate policy myself. I think it will have massive unintended consequences down the road. But your argument that it punishes savers is really not a sound one.
As a saver, you're entitled to put your savings in whatever currency you choose. Pick a currency that you feel rewards savers adequately.
That said, pretty much all of the policy actions taken over the last few years have benefited those who made dumb decisions at the expense of people who acted as good citizens (both banks who took on a ton of risk, and people who lived beyond their means are now getting free money and amazing subsidies while the people who pay their taxes on time, and have no debt will now be the ones paying the bill).
Looking for the 'Next Greece' Once Again [View article]
"Quinn Ronin", I think you completely misinterpreted John's post. Try reading it again from top to bottom with no preconceived ideas about where he is coming from.
The Treasury's Latest Maneuver With the Fed [View article]
I think the Treasury is just being smart and preparing for the case that demand for treasuries dries up later in 2010. There's what, something like 700 billion in debt maturing this year? Combine that with the known government spending, that's a lot of refinancing and new issues to do. By setting up this account now, the treasury has a backstop for cheap emergency cash if the need arises....things would be perceived much worse if the Treasury moved to do this as yields were rising.
To me this is essentially an emergency revolving credit line with newly printed money.
Is It Really a Recovery if Households Are Still Suffering? [View article]
@kd2010 I travel a lot, and for whatever my anecdotal evidence is worth, I've seen airplanes a lot emptier (~15%) and seen more flights than usual canceled. Routes I've taken for a few years that used to full flights on a regular basis now always have empty seats.
You couldn't be more on point. The inconsistency between the Fed and the government is not only creating inefficiencies in the flow of funds, but like you point out, is adding uncertainty to an already chaotic and unpredictable business environment.
Would you want to start a new business without knowing what the corporate tax rate will be in 3 years? whether you'll have to pay for health insurance or not? whether you'll be able to access capital markets? Whether there will be a specific punitive tax on your specific industry? Whether the government will subsidize the losses of your competitors?
The Fed's Hail Mary [View article]
They are playing defense because they have no idea what changes will take place in the next few years: Will there be tax increases? Will healthcare cost money or save money? Will there be import tariffs? What sectors will have new regulations or changed regulations? Will there be cap and trade? ...
Nobody knows the answers to these questions. However, businesses do know that politicians want to make a lot of these changes, they just don't know what will actually happen.
If you were running a businesses with your own money at stake, would you be playing offense (expanding and growing) or defense (saving cash and looking to be as efficient as possible)?
Fed Avoids Finding an Exit Strategy [View article]
While the existing expansion of the Fed balance sheet has resulted in an equal offset in excess reserves, I think this ~200-300 billion in annual Treasury purchases will be done in the open market and thus lead to a direct injection of cash into the economy rather than leading to an equivalent offset in excess reserves.
The holders of MBS were banks which is why those Fed purchases simply remained in excess reserves. However, there are many many many holders of Treasuries. The cash that the Fed spends to purchases these Treasuries will end up in the system and will be the inflation spark everyone has been worried about. Once there is a little bit of inflation, we'll start to see the big banks chase it in an effort to earn more than their 25bp on excess reserves, and then it will become a game of cat and mouse.
Orient Paper's Top Supplier: An Empty Shell Owned by ONP's CEO [View article]
Everyone writing here has some bias and to think otherwords is extremely ignorant.
If you disagree with the author so strongly, why not respond with some points and evidence that makes your case. As a reader, I'd appreciate logical refutations much more than comments like "you suck because you're biased".
This Liquidity Trap Is the Real Deal [View article]
All the Fed needs to do is revert back to the pre-TARP regulations, and eliminate (or at least reduce) the rate of interest they pay on the excess reserves. Sure some banks may still keep excess reserves at the Fed, but I'm sure some are only keeping them there to earn that risk free money.
Banking at the Speed of Light [View article]
It is true that the long talked about convergence of information and money is rapidly approaching in large part due major advancements in technology.
The major barrier to efficient markets (perfect, instantaneous information) is exponentially decreasing.
Those with real-time access to information can effectively engage in information arbitrage during this time of transition.
Information == Money
Looking for the 'Next Greece' Once Again [View article]
Again, I'm sorry for mistakenly thinking you didn't get Mr. Mason's point of view.
As far as investment advice goes, I actually own no stocks right now because I don't like where the US economy is headed. The little I have left that I don't spend on travel, I put in gold.
Federal Reserve Exit Watch: Part 8 [View article]
Now, I'm no fan of the fed's zero interest rate policy myself. I think it will have massive unintended consequences down the road. But your argument that it punishes savers is really not a sound one.
As a saver, you're entitled to put your savings in whatever currency you choose. Pick a currency that you feel rewards savers adequately.
That said, pretty much all of the policy actions taken over the last few years have benefited those who made dumb decisions at the expense of people who acted as good citizens (both banks who took on a ton of risk, and people who lived beyond their means are now getting free money and amazing subsidies while the people who pay their taxes on time, and have no debt will now be the ones paying the bill).
Looking for the 'Next Greece' Once Again [View article]
Where Is the Next Greece? [View article]
It seems like all of our traditional "risk-free" assets now have some element of risk in them.
The Treasury's Latest Maneuver With the Fed [View article]
To me this is essentially an emergency revolving credit line with newly printed money.
Is It Really a Recovery if Households Are Still Suffering? [View article]
I travel a lot, and for whatever my anecdotal evidence is worth, I've seen airplanes a lot emptier (~15%) and seen more flights than usual canceled. Routes I've taken for a few years that used to full flights on a regular basis now always have empty seats.
Federal Reserve Exit Watch: Part 6 [View article]
If you're interested, I have some like-minded thoughts noted here: www.opensourceecon.com...
Would you want to start a new business without knowing what the corporate tax rate will be in 3 years? whether you'll have to pay for health insurance or not? whether you'll be able to access capital markets? Whether there will be a specific punitive tax on your specific industry? Whether the government will subsidize the losses of your competitors?