What If Stimulus Is Self-Defeating?
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It's sort of funny to see a wider – though still faint – recognition developing in the financial world that perhaps it's true that the more st
[See the full post at: What If Stimulus Is Self-Defeating?]As we at The Automatic Earth have said since this crisis started, there’s only one possible outcome to the beggar thy neighbor to the bottom race that is now taking shape: the US must and will lose it. The prettiest horse in the glue factory will receive so much capital in flight, it’s going to wish it had played down that recovery story by a substantial margin.
Not defending their insane policy by any means, merely trying to anticipate their next move.
Perhaps this particular problem will be addressed by a return back to fixed exchange rates, with the bringing out of Gold from the closet to stabilize the currency trading madness that is harming everyone at his juncture?
Necessity is the Mother of Invention and there are many, myself included, waiting for the Genie to be let out of the bottle.
Ilargi said “So when this plays out, what should Bernanke do, taper or go full throttle forward?”
It is rumored that Bernanke is leaving this year. I think he will want to keep his legacy intact and will leave sooner rather than later. So it most likely that his replacement will have to decide what to do. Either option won’t matter, it will all collapse anyway.
And we’re off!
SOCGEN: This Week’s Jobs Report Is Going To Be Strong, And The 10-Year Treasury Is Heading To 2.75%
Stimulus makes the economy grow, and we’ll see an avalanche of selling US 10-year. Bernanke slows down stimulus, and we’ll see more selling. Just another naked emperor.
Same story (as mine today), different tack: “The Bank for International Settlements said central banks’ policies of record low interest rates and monetary stimulus had helped investors “tune out” bad news — every time an economic indicator disappointed, traders simply took that as confirmation that central banks would continue to provide stimulus.”
Easy money policy from leading central banks boost markets, but investors ignore warning signs.
BIS records startling collapse of eurozone interbank loans
Cross-border lending is falling drastically across the western world as banks slash exposure to Europe and bend to tougher capital rules, according to data from the Bank for International Settlements. [..]
The Basel III rules demand higher capital ratios, fewer risky assets, and less reliance on wholesale borrowing. “Pressure to make banks safe is paradoxically causing a contraction of their risk assets and therefore of the money supply, perpetuating feeble demand and high unemployment,” he said. Mr Congdon said quantitative easing in the US and the UK had helped to offset the tougher rules but the European Central Bank is constrained by the lack of a genuine fiscal union
So QE is used simply to offset plans to give banks healthier balance sheets. Question is: are they still healthier afterwards? Or does QE defeat Basel III?
After reading the SOCGEN headline, I think the 10 year UST will be at 1.80% in a month or sooner. Deflation wins the battle.
Hi Illarghi,
Even the UK blows another real estate bubble. Have you looked at your numbers at all recently, guys? Really, a housing recovery?
Its all ‘funny money’ buying in London, with retiring boomers selling out big time to buy in the ‘counties and shires. Otherwise its Poundland:
in Liverpool, Stoke-On-Trent and Kensington (sorry had to tease you there its Liverpool – again, not London.)
Run down Briton, coming to an ex-industrial city near you – cue Coronation Street titles:
https://www.youtube.com/watch?NR=1&v=b299-MuAWO4&feature=endscreen
Of course we Brits never do anything by halves, having a psychotic obsession with house prices helped with government [strike]debt slave[/strike] loan schemes. Just wait till interest rates wobble… :dry:
Still, somewhere to put your pension pot I suppose:
More workers approaching retirement are considering a buy-to-let property to supplement their income.
The number of buy-to-let mortgages has increased by nearly 50% since 2007, with rental yields consistently beating inflation.
Meanwhile, annuity rates have dropped to record lows and savings pay a pittance.
…The arguments against
What people frequently forget when they look at buy-to-let property is the scale of the risks.
Buy-to-let isn’t about buying somewhere you want to live, it’s about making the most cash from your money. And it’s an expensive way to do it.
Think of it this way: You’re taking out a very large loan that accrues interest to buy something that then requires more money every year to maintain (either in letting agency fees, insurance, maintenance costs or advertising for tenants), with an uncertain income stream (it might not be let the whole time, after all) with no diversification.
etc. Yeah, like that’s going to stop the grandlords…
Update:
Ha, talk about synchronicity. Last night on News Night the veritable Jeremy Paxman grilled his guests who were variously a representative of the building industry, an MP and a worried person (investment consultant). Apparently the new government loan scheme to help [strike]boost the house builders pockets[/strike] the housing shortage will be available to foreign investors. So that’s right, to keep ‘ole blighty afloat they are handing our ‘tax payers money’ (JP’s words) to anyone including ‘foreigners’. building rep man has smug grin as JP says this money goes to him, while he says people need to focus on housing to live in and not to speculate on. Meanwhile worried person mentioned first time buyers saddled with both private and gov’t debt sitting in (sharp intake of breath) negative equity! MP was obviously covering for the fact that they know if the housing market crashes so do the banks and with it what remains of the economy – negative equity works both ways apparently. The government ‘loan’ for 20% has a clause saying you cannot sublet – like that’s going to stop them. :unsure:Next up was a discussion on benefits with a new threesome for JP to grill, especially the ballooning housing benefits (tax payers money) for rocketing rent going to private landlords (same people buying the houses in the ring a ring a roses – sneeze and yer dead housing ‘market’). Amongst the banter the term ‘rent cap’ was heard. Along with ‘rent controls’ and other coded words for ‘well what do you expect when you ‘privatise’ the ‘housing market’ leaving it open to ‘unbridled capitalism’… 😆 (remember the UK has always had trouble housing the serfs) 🙁
Rent controls? Still want that London penthouse to let now Mr Global Investor? :dry:
L,
Sid.I’ve had enough of the avarice of political economy, they can go misallocate themselves.
Representative government has failed to seize monetary policy and take it away from the malicious mismanagement of banking technocrats, therefore guaranteeing financial, commercial and political collapse in swift succesion.
Its no longer profitable to pretend that megabanks and political parties are opposing power parasites, both are now reduced to feeding off the host society by similar mechanisms; inextinguishable debt and structural poverty as means of violent coercion. The average credithead political party is not trying to fix the problem, its more profitable for bloated bureaucracy to perpetuate the dying system to the point of toxic debt-shock. Even if politicians understood the monetary disease, they’re themselves ideologically insolvent, products of multigenerational misallocation.The dutch senate recently gave the central bank here a multi-billion euro bailout, explicitly guaranteeing future losses by maximising moral hazard. The cartels trashy investments in southern europe might expose their precious profits to systemic risk, our representative cowards couldn’t help but collaborate in funding the private exploitation of the money supply with public funds.
Afterwards, the central bank’s analysts managed to argue that the banking sector does not contribute to the rising public debt.
Bless their insolvent souls!Financial oligarchy is everywhere reverting to its natural adaptive state of criminal oligarchy to optimise extraction of the dying host’s vital fluids before coagulation and rigor mortis sets in.
Mediawise psychological warfare brutalises the population into pliant submission, while financial feudalism and corporate fascism works through the legislative to rob them blind. Technotronic tyranny is being compiled to enforce paralytic poverty and murder democracy during the collapse the money malice has accidentally precipitated, so enabling criminal overrule by the most guilty and facilitating any means of orderly killoff of the unpacifiable citzenry lest wrathflation overtake them.Some day, publicly advocating the very idea of central banking will be considered incitement to genocide.
I heard Bernanke is writing his autobiography entitled ‘Obsolete Assumptions’, including a chapter on ‘Monetary Megadeath’.
Ben did teach me the meaning of charity, though. Go figure.Amusing. At the bottom of this page, I found a “Greenlight Mortgage” Loan offer of 2.75 apr 10 year fixed. Ha!
That aside;
What the Fed is doing here is nothing new. It’s simply decided to destroy the currency involved.
‘Quoting the great Austrian economist, Ludwig von Mises,
” There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
In other words, the Bernanke bust is coming, sooner or later, one way or another.’ Michael Pollaro
No, it didn’t come “sooner,” been years now, so it inevitably must come “later.”
No other way. Central Banks just don’t do Deflation for any longer than it takes to clear cut the woods and create paper blizzards.
Watch October! New C-Notes introduced, most likely a new QE that
could just purchase not only Securities, but Stocks, Charge Card Paper, Junk Auto Paper, Student Loans, and a tax credit of, oh, say $25,000 per household? Or, if necessary in the convoluted logic of these idiots, $50,000 coupled with a raise in the Minimum Wage to $25 an hour? $50?Think it impossible? Of course it isn’t, it’s the stuff of Crackup Booms!
All here https://mises.org/
Yup. Dishonest Money Corrupts. US Treasury/Federal Reserve Bank/US Congress/Coroporatocracy…all in it together. It would be no different if the Fed vanished and Con-gress issued Fiat. Every election year would be Shangri La. Every inauguration the beginning of misery.
Centralized Representative Government is not representative at all. It becomes a power source to be manipulated.
After the Euro is gone, it might be a good idea for the US States to look into a little more exertion of sovereign rights.
Local control is better for…well, the locals.
Its a strange time but more and more I believe people might be getting it. Another site I follow has the same theme as here TIPPING POINTS
https://m.podshow.com/media/13207/episodes/329708/randompodshowcom-329708-06-05-2013.mp3
Anyway I think people are misdirected into thinking something else can happen here. NO we are not going to buy are way out of this mess (code word buy American) we will not pay down the debt we will not work our way out this mess. What is going down is a historical species drive collapse and possible extinction.
I don’t consider anything short of many dieing part of the solution. Further the cogs are slowly turning in a very predictable method. Stimulus will continue with less effectiveness. The next cog will be the cheap food policy failing. Finally institutions to big to fail will fail and cause so much violent government policy and warfare.
I predict a hyper inflation / deflating. Savings and consumer hard assets will fall dramatically in value. Taxes will inflate to deafening heights. In Manitoba the government has taken all assets out of the local hydro forcing them to take on debt. The debt level of this utility can never be paid off. So the province now collects taxes through electric bills, gas bills, auto insurance, sales tax, income tax, water bills, and even municipal school tax. Increasingly we are taxed past 75% when everything is taken into consideration.
So why would one think gold will drop to $1000 if it is a hedge against governments printing and loaning to much? Well it is not that simple. Although a hedge it also depends on available people ready to purchase. Now speculators can purchase but in the end they are only short term. Real manufacturing matters more in this case. If a real manufacture can not sell the product at the mark up, they slow down and eventually stop until inventory shrinks. You will notice oil does this and that is why gold will too. Silver does not follow gold as well as it has in the past because it is vital to manufacturing.
So when things fail some things will rise excessively and somethings will fail. My father purchased a Jag because during the depression things like that had no value. A loaf of bread on the other hand had much higher value. So don’t expect fair devaluing and learn how to make your own quick foods from scratch.
The trick to doing well is perspective. If you knew how bad it is going to be – lets say you went on a time machine and saw, then when you don’t experience the same level of pain as others, THEN … then things aren’t so bad.
Its about the bear thats attacking you. You are not out running the bear just your friend … nice knowing you
Under global hyperbolic marketing,
price functions are composed of two value gradients; equity and novelty.
The principles of equity and novelty govern all value in the universe,
integrating analytic and dialectic utility of all possible ontological mutables in the eternal cycle of revaluation.
All utility functions are bounded by value gradients of equity and novelty. Equity is compiled from fairness/justice, all equity is fair, otherwise its plunder.Relativity of equity predicts price dilation and utility contraction at sufficiently accelerated velocity of money, yet price curvature of a monetary surface allows no ideal free market to exist at sub-infinite monetary velocity.
In an actual market-fluid, a single penny in circulation produces hyper-inflation at infinite velocity, yet infinite money causes no inflation at zero velocity. Price curvature is relative to velocity, delineating supply/demand ratios. Money becomes unmoveable at sufficiently high equity, unmarketable waste at sufficiently low equity, money has zero novelty value inherently, except in pricing power.Due to the relativity of equity, death can only be a marketable product if assigned a constant value of sufficient novelty, thus completing the set of marketable mutables as countably infinite, yielding universal fair value.
Assume a spiral rotating in a circular motion,
with the centre everywhere and the parameter everywhere on average, especially intersecting the centre.You are feeling very recursive.
When you awaken, you’re a mortal living algorithm.Hi Folks,
For those interested in giving feedback on how the site ‘looks and feels’ please go to this thread:
TAE 3.0: What do you want to see?
Thanks,
L,
Sid.
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