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  • Chekhov's Gun [View article]
    "In Canada, if a down payment is less than 20% of the value of a home, the mortgage holder must purchase mortgage insurance."

    During the bank runs of the 30s, Canada had very few bank failures. Canada also didn't have unit banking laws. During the recent downturn, TD Bank (a Canadian bank) bought the South Financial Group (in which was the only time, that I know of, that gov preferreds (TARP) were actually forgiven to get the deal done.
    Nov 18, 2014. 02:01 PM | Likes Like |Link to Comment
  • Chekhov's Gun [View article]
    "It's a bargain."

    A bargain implies two voluntary parties. When 51% vote to enslave the other 49%, the whole point of that is because the 49% would not voluntarily go along with that. There is nothing subtle about that. The 51% want to call it subtle, because they want to rationalize their slavery of the 49%.
    Nov 18, 2014. 01:56 PM | Likes Like |Link to Comment
  • Chekhov's Gun [View article]
    "Right, because people never cheat. Or disagree on what rules mean. Because it's all binary to you. "

    Absolutely, and its all binary to you, its just that you refuse to admit it.

    And people do cheat and they do steal, which is why they are so desparate to capture gov and create central banks, because then they can have the imprimatur of law and order under which to institutionalize their cheating and theft. That's what slavery is all about. The Fugitive Slave Act was passed in a by a majority in a democratic legislature, is objecting to those sort of laws now making someone deemed to oppose all laws?

    Gov is the tool in the market to make stealing and cheating expensive. However conflating the fact that the gov can deter forced associations with the notion that it should also force associations is illogical.

    Cheating and stealing is about forcing associations. Disagreeing on rules is dealt with by ending associations. However, if you use gov to force the association even when one of the parties disagrees about the rules, you have crossed the line into theft and slavery.

    So, this notion that gov brings order is true only when the role of gov as a rights protector is understood. If not, then gov is the biggest bringer of anarchy the world has ever seen. When one man rules another man by taking away his right to associate, then the second man is ruled by the first man's whims, which will change from moment to moment. The idea that gov just by virture of calling something gov (when really it is theft) brings order and thereby a high standard of living is the real cheat and the real disagreement of the rules.

    Gov only brings order when it is used in the role nature demands of it. Anything else is just lies and cheating and stealing, all hiding behind the rhetoric of binary people pretending (there's that word again) not to be binary.
    Nov 18, 2014. 01:37 PM | Likes Like |Link to Comment
  • Chekhov's Gun [View article]
    "I now realize that you are an anarchist, as you view any rules passed and accepted by democratic societies as coercion under threat of force."

    Just the opposite. I believe in perpetual democracy and the peace and stability that comes with it. How democratic is it, when 51% vote to take away the vote of the 49%? What I don't believe in, is statism and tyranny hiding behind the platitudes of democracy and the greater good.

    So, just because a majority passes a rule that controls everybody (which of course gets rid of democracy) that doesn't mean that rule is right for improving everyone's standard of living. It may improve some people's standard of living at the expense of others, but that's not my goal.

    And its interesting to note that you have now fallen into a classic pattern, first you denied the coercion exists, but now you admit it exists, its just that now you are trying to rationalize the coercion that is used as legal plunder.
    Nov 18, 2014. 01:24 PM | Likes Like |Link to Comment
  • QuickChat #275, November 3, 2014 [View instapost]
    No more than you or Robert or jpau. Its just that what I have to say exposes so many false theories and rationalizations, that it bothers people who don't want their beliefs challenged, to hear them. However, my advice to you is that you need to be open to listening to new ideas.

    Of course, if you don't want to read it, you don't have to. Confirmation bias is like a warm blanket. You can hide from alot of things buried beneath its folds.

    However, my goal is to alert people to the macro affects of voodoo economics. The idea that gov policy can just create wealth out of pure rhetoric is pure voodoo. Those ideas are what lead people to enact policies that lead to consumption binges, which is what creates the booms and busts we see in markets.

    Understanding this reality is how people can have a better understanding of why the markets take the occasional nose dive, and why they are then subsequently reinflated.

    Armed with this knowledge, you will be able to avoid the panic created by the doom and gloom rhetoric, and see the down turns as buying opportunities. In this way, you will be one of the people the gov interventionist and regulatory policies are making richer, instead of one of the people those policies are making poorer. You will benefit from the principles that made JB Colbert so rich.

    Ironically, I am the best friend you will ever have.
    Nov 18, 2014. 12:49 PM | 2 Likes Like |Link to Comment
  • The Fed Between A Rock And A Hard Place [View article]
    Based on how I view things, I've always thought Salmo was onto something.

    Take a look at this comment.

    "Nobody here knows what will happen"

    Why do so many people put their foot in their mouth? Roc's in MVt approximate roc's in nominal-gDp (proxy for all transactions in Irving Fisher's "equation of exchange").

    In 2 weeks stocks will fall (as bonds rise):

    1/1/2014 ,,,,, 0.158 ,,,,, 0.344 ,,,,, 0.417
    2/1/2014 ,,,,, 0.126 ,,,,, 0.381 ,,,,, 0.410
    3/1/2014 ,,,,, 0.139 ,,,,, 0.315 ,,,,, 0.407
    4/1/2014 ,,,,, 0.154 ,,,,, 0.333 ,,,,, 0.402
    5/1/2014 ,,,,, 0.146 ,,,,, 0.390 ,,,,, 0.397
    6/1/2014 ,,,,, 0.128 ,,,,, 0.344 ,,,,, 0.395
    7/1/2014 ,,,,, 0.168 ,,,,, 0.337 ,,,,, 0.387
    8/1/2014 ,,,,, 0.141 ,,,,, 0.315 ,,,,, 0.379
    9/1/2014 ,,,,, 0.107 ,,,,, 0.288 ,,,,, 0.368
    10/1/2014 ,,,,, 0.030 ,,,,, 0.247 ,,,,, 0.356 stocks fall
    11/1/2014 ,,,,, 0.035 ,,,,, 0.238 ,,,,, 0.346
    12/1/2014 ,,,,, 0.046 ,,,,, 0.176 ,,,,, 0.336

    parse, dt, real-output, inflation, bonds


    I've got a model I call the "Subsidy Mix", that evaluates the interplay between monetary and fiscal policy, not just for the US but for the other major players like Japan and Europer. Its just a 30 thousand foot strategic analysis, nothing technical or really mathmatical (though I do monitor the size of the CB's balance sheets) I've wondered if some mathematical model could be developed that would look at things in terms in what I call "Net Central Bank Note Creation" vs "Net Central Bank Note Destruction" that would be a signal as to the direction of asset prices and interest rates in what I call the risk-on and risk-off scenarios.

    Salmo seems to be pretty close to doing this. If I had his brains and my theory, I bet I could come up with something.
    Nov 18, 2014. 12:40 PM | 2 Likes Like |Link to Comment
  • QuickChat #275, November 3, 2014 [View instapost]
    "IMO, the reason for low velocity is that when 1% of the people accumulate so much wealth at the expense of the rest, they just don't spend "

    Depends on what you mean by spending. All money is spent, its just a question of where. Money spent on TVs or car stereos, shows up in earnings of corporations, and thus increases the value of stocks. If not on TVs and stereos (readily consumables), it is spent on savings assets (like stocks and bonds). When either of these happens, what ultimately happens is people leave bonds for the increased yield of stocks, and as a result, yields go up. Its the classic risk-on scenario. QE produces the same results.

    If the so called "rich" get the money, and a regulatory environment exists that makes new business or expansion dangerous, what happens is they chase existing savings assets (like stocks) rather than consumption assets. The rally in stocks lures people away from bonds. The result is stocks go up and yields go up. Its the classic risk-on scenario. QE produces the same results.

    Then what will happen is prices will adjust to a new equilibrium commensurate with the new bank notes in the system, people will see that there is no new real productivity (because printing produces no new real productive knowledge, which is the key to real economic growth) and the result will be the fear trade. When it is learned that the earnings aren't what they were during the inflationary boom, the new cash flows don't justify the PVs, people expect stocks to fall, so they sell, which then leads to others selling, they chase safety, which means bond yields will fall, and you get the classic risk-off (equities down and yields down). Ending QE produces the same result.

    This pattern is known as the consumption binge. War is a classic example. You have an expansionary inflationary period during the war, but when all the producing for killing ends and the result is no new productive knowledge (except how to kill, which is not productive), you get a contractionary bust after the war. The late 18 teens is such an example and the late 19 teens after WWI is another.

    So, the way to play these consumption binges, whether the money is given to the "rich" or the "poor" is to realize that it is a wealth transfer scheme to those that know how to play it. In theory, you buy equities before the boom, let the fiscal and monetary policy inflate the equities, then look for an end of the fiscal and monetary inflationary principles, move to bonds, wait for the risk-off as the consumption binge ends, then keep your bonds and their superior yields, until you get wind of another consumption binge plan coming along (like say a free $70,000 per household giveaway), then you sell your bonds, take the gains, buy the equities at lower values, and wait for the cycle to repeat itself.

    This is exactly the pattern you see during the QE consumption binges. Its wealth transfer, and by understanding it you can avoid having your wealth transferred away, and possibly have some new wealth transferred your way.
    Nov 18, 2014. 12:25 PM | 2 Likes Like |Link to Comment
  • QuickChat #275, November 3, 2014 [View instapost]
    "The point is The Indians still would have lost their lands with Capitalists or not-bet the Casino on that one."

    No, the Indians would have been respected just as any other person. In Capitalism, gov is used to protect everyone's property. No rationalizations are allowed that say, "we must violate these people's property for the greater good". In other words, there are no subsidies.

    Indians were moved out of the way because the US gov was being used to subsidize railroads, and a subsidy means violating one person's property for the benefit of another. That's not Capitalism, that's a gov regulated economy based on coercion. In other words, a legal plunder system. After all, we can't have property rights, because that's Capitalism, right? So, you shouldn't have any problem with what was done to the Indians, because letting them keep their property was property rights. We also couldn't let them keep their property, because the gov has invested so much in the railroad infrastructure, and that's good for the economy, right?
    Nov 18, 2014. 12:03 PM | 4 Likes Like |Link to Comment
  • Chekhov's Gun [View article]
    "It is also used to coordinate plus-sum games under rules to which the players have consented. "

    Only when you pretend that is true. If people have consented, then there would be no need for force, now would there? The presence of the force shows that people HAVEN'T consented. That's why you have to pretend that they did.

    Life is only complicated to those that don't understand it.
    Nov 18, 2014. 11:53 AM | Likes Like |Link to Comment
  • Predictions For November - Part I [View article]
    "treat "capitalism" religiously pretty much as you describe."

    Capitalism is math. The people that deny it, are the ones that do so based on religious convictions.

    Assets = Capital

    Capital is the ownership rights in assets. There are always ownership rights, the question is whether we use our reason to protect nature's laws about what leads to productivity via ownership rights, or will we rationalize away physics by calling it religion, thus leading to our suffering.

    Gov is the tool to protect property, but gov is typically used as the agent to violate property.

    The "left" is pretty cavalier in approving nearly everything gov does, because nearly everything gov does is theft, and people always have to rationalize theft as good or deserved. Such thinking is a barbous relic from primitive times, and I can't belive they actually stop to think about it. Clearly they can't, because thinking would lead people to the enlightment of Capitalism and the peace and prosperity that the nonagression principle brings.
    Nov 18, 2014. 11:51 AM | Likes Like |Link to Comment
  • Chekhov's Gun [View article]
    "OK. Let's pretend you're right. I claim that now."

    Pretending is all you have.
    Nov 18, 2014. 11:45 AM | 1 Like Like |Link to Comment
  • Chekhov's Gun [View article]
    "You honestly believe the citizenry of this country makes financial decisions because of its fear of the Government's "guns," "

    Do you pay your taxes? Or better yet, do you pay more taxes than you have to? And better yet, why is there a "have to" involved?

    One more question. What would happen to you if you started a holding company or a bank without the Fed's or FDIC's permission?

    Let's see what is fantasy coercion and what is not?
    Nov 18, 2014. 11:45 AM | 1 Like Like |Link to Comment
  • Chekhov's Gun [View article]
    "Every time I see the word "theft," when applied to the Fed or the monetary system, my eyeballs roll."

    Because you don't know the history of how CBs come to be, and that you are also making a false assumption of what "under utilized or unutilized is".

    These are the sorts of things I roll my eyeballs about. A Fed is created by gov. A gov gets its power from force. Force is either used to steal or protect from stealing. So, when a gov creates a CB, the ultimate capital to support the CB is the collective capital of the people. That pledge of capital is used to protect banks, when people don't want those banks protected. Its a subsidy, plain and simple, just like welfare is a subsidy for people that don't want to be responsible for their actions.
    Nov 18, 2014. 11:43 AM | Likes Like |Link to Comment
  • The Fed Between A Rock And A Hard Place [View article]
    Not probably directed at me, but here are my two cents.

    "I think we can agree that the Fed did not get the result from the economy that it had expected."

    Agreed, but that is always true. Remember, we were orginally told by the people that created the Fed, that it would eliminate ALL economic downturns. Has that turned out to be true?

    "The point of the article is that the Fed has painted itself into a corner, so to speak, and had a difficult and most likely precarious road ahead. Do you disagree with that?"

    I just have a different perspective. My view is that the Fed is always painted into a corner. From its birth, the Fed has had an impossible mission. It has to mimic what a free market monetary system would deliver, but it has had to do that without the price sensitivity tools of a free market. Without those tools, it will therefore, always be inflating and deflating asset prices without regard to real productivity. The Fed is just another example of the failure of central planning. Central planning leads to wealth transfer, and that's just what the Fed does. The way to protect ourselves from that threat is to figure out where the wealth is going to be transferred to, and be there when it gets there.

    So, based on what I said above, we can move on to this.

    "Do you think that the Fed was right and saved us?"

    Again, I have a different perspective. The Fed caused the asset deflation from 2007 to 2009, and then it reinflated assets from that point to now. People who panicked in 2009 because they don't know how the Fed causes these booms and busts cycles (to be fair, fiscal policy can do it too), had their wealth transferred from then when the sold at the bottom and are now buying back in at the top. My goals is to get people to understand, the Fed in general is wrong. It is not a force that comes in and rescues the free market from itself. It is a force that has polluted the free market, and thus the Fed is what is causing these boom and bust periods in conjunction with fiscal policy. The boom and bust period are waves of wealth transfer, and I want to help people so they won't have their wealth transferred from them. So, I don't see a yes or no answer to your question, because I think it is formulated on the wrong premise. What has happened is what has always happened, and it will be better for people to undertand that reality than to think of the Fed as a savior. The Fed is the guy who shoots you, and then takes you to the hospital.

    "me to be cautious in the current environment with ones investments. Do you disagree with that, too? "

    Well, when would someone not ever be cautious? You always have to protect yourself, but my view of doing that just doesn't jibe with the conventional wisdom. However, how good was the conventional wisdom in the last few years? The regulators were totally useless in avoiding the downturn, after it was promised to us that they would stop downturns. How many people were saying from 2004 to 2007, "Uh oh, the Fed is drying up Fed notes by raising the DR. You know, whenever the Fed raises the DR, it generally precedes a recession. Thus, I should sell my equities, move to bonds, wait for equity prices to fall, then sell my bonds for gains when I hear the Fed is going to lower the DR again and engage in QE, then I can buy equities again near the bottom, and wait for the Fed to reinflate equity prices. By doing so, I will have wealth transferred to me from all the people that believe in the conventional wisdom."

    "Our interpretations of history may not align"

    Which is curious, because the facts are the facts. The data is what it is. There isn't any interpretation as to what the course of the Discount Rate was over a certain period and the yield on the 10 yr over that same time period. Its also not up to interpretation as to what the dates of the QE programs were either. That's all empirical data. The fact is, the 10 yr yield is lower before a QE program than it is during the middle of the QE program.

    So, here is what I say. Now that we have QE from Japan, QE talk from the ECB, the Fed balance sheet still growing (through Nov it's grown roughly $2.1 billion), mediocre economic data, but with some risks, I can see the S&P slowly clawing its way towards 2100 and the 10yr slowly creeping towards 2.50. Maybe not exactly those numbers, but in that general direction. We won't get a nosedive until the Fed or fiscal policy causes it.

    Here's what would cause a real nose dive. The BOJ, ECB, and Fed all start to let their balance sheets shrink and they all raise their discount window rate 100bps. That would dry up CB notes that are currently being used to bid up asset prices and are producing what little risk-on we currently have. If that happened, the S&P would plunged into the 1500s or 1600s (depending on how much the CB balance sheets shrank) and the US 10 yr yield would wind up being in the 1.50s. Now, that's an extreme example, but its a good extreme by which to judge any CB action in that direction.

    So, look out for talk about shrinking balance sheets or raising the DR rates. That sort of talk hearlds risk-off. Of course, if they do, it just means at some point they will reverse that policy (as they have always done so in the past), and that will reinflate asset prices (and bring back the risk-on).

    The other thing to watch out for, are the growing regulations of Dodd Frank and Ocare. Regulations are taxes, and taxes destroy Fed notes. So, regulations and taxes have the same affect on asset prices that raising the DR does or shrinking the size of a CB's balance sheet does. Its just that regulations and taxes have a slower impact than the Fed (regulations even more so).

    So, that's where we are for now. We won't have a recession until the Fed causes another one, by drying up Fed notes via a DR increase or shrinking the balance sheet in a major way, or unless the regulatory changes were all put into place tomorrow, or we got a massive tax increase in the next few months. Otherwise, the S&P will slowly work to claw its way up, with the occasional dip on some piece of bad news.

    Anyway, that's how I see it. This approach has worked pretty well for me since 2008, and I think it does because it relies on what is really happening rather than what the conventional wisdom would like me to believe is happening.
    Nov 18, 2014. 11:38 AM | 2 Likes Like |Link to Comment
  • Chekhov's Gun [View article]
    "but since I was only claiming that there are SOME non-absolutes "

    You might claim that now, but this is what you said.

    "We don't live in a yes/no world"

    There is no SOME in that statement. You absolutely claimed "no" to a "yes/no" world.

    The world is full of truth. Just because we don't know all the truths, doesn't mean we don't know any truth. We use price to find tuths, and since truth is so critical to improving our standard of living, we want price as sensitive as it can be. While we may not know what a price should be, what we do know is that we need to have price.

    Nov 17, 2014. 05:25 PM | Likes Like |Link to Comment