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  • Said The Fed: "Damn The Accountants...Full Speed Ahead!" [View article]
    The Fed is only a part of the overall problem of tyranny. Its not so much what has happened, but also what has not happened.

    "than saving the world from "The Great Recession"?"

    This is specious reasoning. The only way to make such a statement is to go back in time and see what would have happened had we not had gov interventionists policies from the beginning. Of course we can't do that, so to say that the Fed saved is is not an empirical statement but a religious one. There is nothing wrong with religion, but religion without reason is blind fanaticism.

    So it is just your belief that the Fed saved us from "The Great Recession", and my position would then be that logic suggests that is was interventionists policies, like a CB, that created "The Great Recession". As such, the wealth we could have had has never been created, and we all have a lower stanard of living as a result. Had we never used gov in ways that it is impossible to use it, then capital creation may have been 10X what it has been, and any recessionary periods we may have had would only be short lived and then followed by periods of even greater prosperity.

    Thus, I reject peasant thinking such as,

    "Interest rates go up a bit, gas costs a bit more, taxes go up, our dollar goes down a bit...."

    Because I want a world where I constantly can work less and have more (the opposite of austerity) for a world where I am told to, "shut up and just take it. Its not so bad, so stop complaining." There is so much we are denying ourselves by thinking like this. There is wealth and prosperity untold that we haven't barely even tapped. Medical cures, an end to poverty, and even a 10 hr work week. All such things are possible via a sensitivity to nature's pricing mechanism, to which gov is completely blind. Thus gov can make mistakes for a very long time that waste labor and resources, and the great sin of wasting labor, is that once its wasted, it can never be recovered.

    Thus my aversion to a CB is one of logic and reason from the perspective of what is required for me and the rest of us to raise our standard of living, and a price blind CB is one of those hurdles to being able for everyone to raise their standard of living. You should only favor a CB if you favor austerity.
    Mar 26 12:36 PM | 1 Like Like |Link to Comment
  • Said The Fed: "Damn The Accountants...Full Speed Ahead!" [View article]
    But couldn't this be deflationary and then inflationary? In other words, all the things you listed will hurt earnings, not just for business but also for individuals. So business has less and people have less. People stop buying and business lays off more people. Unemployment goes up, earnings go down, and we are right back to our flight to safety scenario wherein it is risk off (equities down and bond prices up[yields down]).

    And I wouldn't think that it really becomes inflationary until these CB notes really start getting into the hands of the average populace and they start spending even though they aren't working or their wages aren't going up. In other words the CB notes get into circulation where people do start buying consumables because some how they finally have access to these CB notes. The question is how will this "some how" occur? Could the Fed let individual citizens start pledging assets at the Fed so they could get an advance just like a bank?
    Mar 26 12:18 PM | 2 Likes Like |Link to Comment
  • Said The Fed: "Damn The Accountants...Full Speed Ahead!" [View article]
    I guess I am more interested in what they actually wind up doing instead of the sales pitch that is used to get a populace to accept them.

    Think about it, if a CB winds up purchasing safe assets along with everyone else, and the yields are successfully pushed down to a point that people that planned on living off those safe assets can't take the hit to their income anymore, they are going to stop buying safe assets are start looking for yield, and they are going to have to look for risk.

    I realize we have this concept of what we think a CB is SUPPOSED to do, but when times are really stressed and people panic (PHDs or not) the pressure is going to be on these policies makers and they are going to start thinking about their survival or at least the survival of those that have their ears. So instead of the reasoned, cool approach we are told policy makers are going to take, they are going to react to political pressures to "do something".

    "but ONLY during limited periods of EXTREME financial distress"

    So what has caused this? The financial distress could have been caused by the CB itself, or it could have been caused by fiscal action, or it could have been caused by both monetary and fiscal action. This means gov policy that is blind to prices, induced consumption in the economy that was not justified by capital creation (income). As a result, we have debt that can't be supported by income, we have to take losses, so we dr capital and cr assets for our writedowns, and our balance sheets recede, and collectively we have a recession. This means we have to curtail our consumption (like the unemployed) until our consumption finally matches our income abilities.

    The only way for a gov to avoid this would be for the gov (including the CB) to have some secret store of capital creation abilities it could release in the market that would then justify our consumption levels. Of course, if govs could create capital, then they wouldn't need a populace to tax and they wouldn't need guns. So all they can do is transfer wealth, which is another way of saying taxes. They influence purchasing preferences, thus at times of "financial stress", the Fed purchases things the public wouldn't by purchasing the very things they are purchasing (safe assets) to lower the prices on safe assets to get them to purchase risk instead.

    So while we have been told that the Fed is only to be used as a last resort, logically, it can't even be used for that, and I see this line as a bit of a fraud from these guys. The Fed (or any CB) is in reality a subsidy for risk assets, regardless of the semantics to the contrary. BB has talked on many occasions about the "wealth effect". He wants equity prices up to entice people into risk, because he believes this will get them to spend and thus shift aggregate demand.

    Listen to the rhetoric from the MMTers and Keynesians. They use phrases like "hoarding" with regards to safe assets, and they make statements that "inflation" is good because if we get people spending then that will be good for business. In their mind the earnings will then justify the inflated risk asset prices, and then all will be well.

    The problem with that line of reasoning is that these subsidies are subsidies for old technology, and thus a barrier for innovation. Without real innovation, the only way to make more and work less at current tech levels is to raise prices (inflation that the Fed tracks). When that finally comes, people will stop buying from the "wealth effect", sales will go down, then earnings will go down, and the inflated risk price levels won't be justified, and then the bubble will pop.

    There is a difference between what we are told a CB is supposed to do, and what it actually can do.

    "and begin corrupting the marketplace"

    This is what they have always done, regardless of intentions or rhetoric to the contrary. Starting to recognize this is how we are going to protect ourselves. We have to start recognizing that there is a difference between what we want gov to do, and what it actually can do.
    Mar 26 11:43 AM | 2 Likes Like |Link to Comment
  • Long-term Treasury yields remain higher as Bernanke hints at additional Fed ease - saying faster growth will be necessary to lock in and add to recent labor market improvements. The long bond +4 bps to 3.35%, the 10-year +3 bps to 2.26%.  [View news story]
    Eventually you will be right, but maybe not yet. We lost a net of 5 million jobs, thus the amount of money printing that is necessary to really set off the inflation and yield fires might be quite a bit more than BB is currently engaged in. We could create a Japan style malaise for 5 to 10 years before the fires really got going.
    Mar 26 11:05 AM | Likes Like |Link to Comment
  • Said The Fed: "Damn The Accountants...Full Speed Ahead!" [View article]
    " it has failed to keep a lid on interest rates, leaving yields higher, now @ 2.29%."

    What may be happening here is a QE "risk-on" effect from LTRO. There is some better US econ news, but it is still pretty weak. We still have a net loss of over 5 million jobs, thus the chances for the type of inflation the Fed worries about is still muted.

    The job of central banks is to create buyers for riskier financial assets. So when people choose to purchase safety with their CB notes, the CB's job is to make those purchases unattractive. Thus, people will purchase safety of gov debt for yield, the CB will also purchase safety to lower the yield even further.

    This will make the safety yield so unattractive so as to get more and more people to give up purchasing safety and start purchasing risk again, as they can't take the income hit. This starts to bid up the prices of risk assets and draws in even more buyers. The end result is the QE risk-on effect. Equities will rise, and safety yields will increase due to a lack of purchasers. This will continue as long as the CB continues to purchase the safe assets and pushes people to risk away from safety. So if QE is $500 billion there is a nudge to risk. If the QE is $2 trillion you have a huge shuv to risk.

    The problem will be in the earnings for the equities. If earnings don't justify the prices after the QE action is over, people will sell to take profits, and move back to safety. Now imagine if during this period of pushing people into risk (equities), fiscal regulatory action makes it harder and harder for those companies to compete and earnings start to take hits. When the QE event stops purchasing, and earnings are really weak, there will be an extremely strong flight to quality as the equity prices won't be justified based on earnings.

    We have seen a similar event after each QE. In fact we saw this writ large at the end of the housing stimulus, which is just a fiscal type of QE. Now Europe is doing QE via LTRO. Treas may in a new range of 2.10 to 2.40 for the next 3 years (the life of LTRO). All it will take is for something to damage earnings. Don't forget Obamacare is going to increase health care costs and Dodd Frank (Dodd Frank is the same thing as the Fed raising rates) is going to increase financing costs. These regulatory events could harm earnings barring some major tech innovation that could offset these costs.

    Europe still has a lot of refinancing to do in Europe, so this could create a flight to safety, but then more LTRO or Fed QE, would start the risk trade again.
    Mar 26 10:51 AM | 1 Like Like |Link to Comment
  • Marc Faber: Continuing Financial Crisis Must Be Endured [View article]
    "Central bank action to cut interest rates, whilst intended to boost consumption and hence economic growth"

    This is like saying your ability to grow more crops will depend on how fast you can get hungry people to consume what you already know how to grow. Now add to this a gov rule that creates a liability for certain people growing crops that is so expensive that it makes sense for them to stop growing crops. You still have the same amount of hungry people for whom it is easy to consume what is currently grown, but the gov rule has just eliminated a portion of what is currently grown. Demand is still high, supply has dropped, but there is nothing on the demand side that will change the fact that people are still hungry, but now they have less to eat.
    Mar 26 10:22 AM | 2 Likes Like |Link to Comment
  • So Go Treasuires, So Go Bunds [View article]
    We may just be seeing a QE effect via LTRO. Not that better economic data is involved, but the data is still pretty unimpressive given the size of the problem gov policy has created. Thus, without the LTRO, the "risk on" trade (equities prices up, bond prices down), may not be as pronounced as it is.
    Mar 26 08:33 AM | 1 Like Like |Link to Comment
  • Evaluating Risk: Why I Sleep Better With 50% Of My Money In Precious Metals [View article]
    Mar 25 12:30 PM | 3 Likes Like |Link to Comment
  • Austerity + Gold Standard = Greece [View article]

    I would suggest to you that less regulation is not possible. The question is what regulations and by whom are best for given circumstances. Gov can regulate with regards to force and fraud, but then gov itself must be regulated by limiting it with process (courts, divided power-federalism, evidence, presumed innonce, etc). Free markets (that is markets free of force and fraud) will regulate based on things that require price sensitivity, which gov cannot do because its force makes it blind to prices.

    Thus gov which has force regulates things that pertain to force, and markets which are sensitive to prices regulate things that are dependent on prices. As such, a business doesn't regulate itself, but its customers and other businesses regulate it. A private citizen doesn't regulate himself with regards to force, gov regulates that, and different levels of gov regulate gov via divided powers and process.

    This whole system is based on observations about human nature. In side each person is a producer and a looter. These are basic instincts designed for survival. As such all economies exist between two extremes. A looter extreme, and a producer extreme. A looter extreme would not need gov, as there would be no people. A producer extreme would also not need gov, as there would be no force and fraud in transactions. Thus the only logical use of gov is as a tool to make force and fraud expensive by giving gov a grant of force. Force therefore can only be used for stealing or as a deterence against stealing. Gov has no tools for capital creation, as such gov cannot regulate things that have to do with capital creation. It can only make force and fraud expensive, and to prevent gov from becoming the source of force and fraud, we divide its power. Without force and fraud, all that is left is voluntary cooperation. As such, the only transactions that can exist are those that make both parties richer. This is the basis for an exponential prosperity economy. The end result is people having more and working less.

    To use gov in the wrong fashion (ie regulating capital creation) will result in working more and having less. Such as people getting to retirement only to find the purchasing power of their savings cut by 2/3, and as such they can't retire at 65, they have to work until they are 75 or longer. The misuse of gov to regulate things it absolutely cannot regulate will guarantee austerity.
    Mar 23 08:44 PM | Likes Like |Link to Comment
  • Austerity + Gold Standard = Greece [View article]
    Then when the laws are broken, lets just send the business to jail and not the people.

    Anarchy is about disorder. You can have so many laws that everyone is in violation of something and disorder can begin because the process that protects people is gone and all that is left is arbitrary rule by men over men. One man controlling another man is tyranny.

    Regulating commerce was to "make commerce regular", not to give the Fed gov power to tell people what is a good product and what is a bad product. It was meant to create a free trade zone, not control what trade people engaged in. You can win a lawsuit against a regulator and still go out of business because it cost so much to defend the suit. Its like saying threatening someone with a gun doesn't take away their choices, because they still had the choice of death. Again, if regulators could run businesses better than the people actually running the businesses, the logical course of action would be for the investors to fire management and hire the regulators. All gov should "regulate" is force and fraud between people, and gov is "regulated" by process to prevent the gov from being captured so that it doesn't become the source of force and fraud.

    Who regulates gov?
    Mar 23 03:58 PM | Likes Like |Link to Comment
  • 'Risk Off Trade' - Not Much Risk And Not Far Off [View article]
    OK, fair enough, but I would also argue that inflation (at least how the Fed looks at inflation) is also part of credit risk. In other words, people people view the value of the CB notes as becoming worth less and less as the ratio of their existence to a populace's productive capacities grows. As such, their demand for them begins to wane. The question is demand, and one way to create demand for US CB notes is for their to be worse alternatives around the world or for demand for equity notes (stocks) to decrease because of fear. One way to control the inflation that the Fed worries about is to kill your economy. Damage earnings via bad gov policy and the flight to perceived safety starts.

    I agree with everything you are saying, but I am not convinced yet that we are through damaging our economy and that Europe is not through damaging their economy. When this occurs, and the economy can be left alone to grow and CB note creation is left where it is or increases, then its off to the races.
    Mar 23 03:30 PM | Likes Like |Link to Comment
  • Said The Fed: "Damn The Accountants...Full Speed Ahead!" [View article]
    "a reduction of the money supply. "

    Exactly. Which is what all expropriation taxes are. Ultimately the real level of taxation is how much purchasing power (i.e. a reduction in the standard of living) gov consumption creates. The gov's expropriation taxes which it calls "revenue" is the populace's "expense". Upon consolidation the "revenue" and "expenses" eliminate, and what is left is the productive capacity of the populace (its income), and its consumption (including gov consumption on behalf of the populace).
    Mar 23 02:58 PM | 1 Like Like |Link to Comment
  • 'Risk Off Trade' - Not Much Risk And Not Far Off [View article]
    "but it just may take several more years or longer for such to play out. "

    Indeed. There are two basic reasons for interest rates to go up. How fast they go up depends on the severity of the two reason.

    1. Vibrant economy - demand for capital is greater than supply
    2. Credit risk

    The numbers might be slightly more positive, but not enough so to indicate the net 5 million jobs we've lost will be coming back very fast. We need GDP to be +5% and nonfarms to be over 500k each month, to make me think that we have a vibrant economy.

    As far as credit risk goes. Granted the US is doing some stupid things, but I can't really think of anyone that has the markets that we do that is doing anything so much smarter than us that they can attract away enough capital to make us seem like a less worthy credit risk.

    This makes me think a sustained 10 yr treasury note at 3% is not going to happen. The other reason I think this, is that it such a situation would be really good for me.
    Mar 23 02:41 PM | 1 Like Like |Link to Comment
  • Said The Fed: "Damn The Accountants...Full Speed Ahead!" [View article]
    "That's certainly a long way from a tidy "profit" of $77 billion."

    I've always disagreed with the term profit. Profit is wages for owners who voluntarily rent out their capital in an endeavor for a mutually beneficial relationship based on the ability to create even more capital than what has been lent out.

    The Fed came into existence via gov's guns. We actually had to pass a law to create the Fed. As such, the Fed is part of the gov, and I think the claims that they are private is just semantics that tantamount to fraud. As a gov agency anything the Fed remits to the Treas is a tax, just as my income tax that is remitted to the Treas is a tax. A CB is better understood as a taxing mechanism, and better yet, as a stealth taxing mechanism. As such, it is not adding value to the economy, it is only transferring what wealth that does exist from those that created it to those that did not.
    Mar 23 01:26 PM | 3 Likes Like |Link to Comment
  • Hindenburg Omen Blog - Heading Into The New Year [View instapost]
    Doesn't OT end in June? They've also seemed to float a trial balloon for more OT, but this time they are calling it sterilization (we're starting to sound more and more like an autocracy every day with terms like this).
    Mar 23 01:08 PM | 4 Likes Like |Link to Comment