Wackonomics

[dude1394]

Originally Posted by alexamenos

...too funny...



All sides =

a)those who think the government should pump nearly 13 trillion freshly printed federal reserve notes into various corporations and micro-manage the entire economy at an unprecedented level; and
b) those who criticize the the government for not doing a whole lot more.

thank god Obamanation is seeking out a diverse array of opinions. I mean...what can go wrong so long as the obamunists are listening to Krugman in order to inject a great deal more common sense into the discussion?

Great observation. So dubya wasn't listening to anyone because he wasn't listening to oh....Stephen Moore??

[alexamenos]

Who said this?

"....I would say there were three types of broad errors of policy and policy both here and around the world. One was that monetary policy around the world was too loose too long. And that created this just huge boom in asset prices, money chasing risk. People trying to get a higher return. That was just overwhelmingly powerful."

a) Ron Paul explaining to Ben Bernanke that sustained low interest rates cause asset price bubbles;

b) Ludwig V. Mises rising from the grave to give a little lesson in Austrian Business Cycle Theory;

c) Peter Schiff warning his clients about house prices; or

D) US Treasury Secretary Timothy Geithner acknowleding that the asset price bubbles of the 2000's were inspired by the Fed.

link....

well I'll be damned....some of the slow kids are starting to figure out that the Fed's actions actually have an impact on the economy. I bet if we give them enough time it'll occur to them that it's possible for the Fed to do things which have negative consequences.

[alexamenos]

I think this article is fascinating.

Long story short --

The reporter who covers the Federal Reserve for the New York Times, a guy that covered the asian fiasco of the early 1990's, the russian financial meltdown, the dot.com bust, etc., etc... lept into the middle of the mortgage fiasco and now finds himself bankrupt. He and his wife had a combined take home pay of about $5k/ month (he was shelling out big bucks to the ex and kids). Realistically, they could afford a 150-$200k home at the most, so naturally they bought a half a million dollar home. The money quote, from an austrian perspective at least, is this one:

I had just come up with almost a half-million dollars, and I had barely lifted a finger. It had been so easy and fast. Almost fun. I couldn’t help feeling like a high roller, a sophisticated player who could lay his hands on big money at a moment’s notice...I had whipped through the pile of loan documents in less than 45 minutes.

Take away from this story how easy, fast and fun it was for this guy to come up with a half million dollars and there is no story--it's as simple as that. This story (and so many more like it) absolutely depend up on the ability of people to easily borrow amounts of money which are beyond their means.

It is not possible to have any kind of grasp on the present financial meltdown without first pondering this question -- 'how'd a 50ish year old dude that's bringing home $60k a year borrow $500 grand?' (note, the monthly payment on a 500k, 15 year loan probably runs more than 4k per month -- the family Andrews would have been living on $12k per year -- poverty level practically -- after house payments).

The problem lies not in lax lending standards, poor analysis, greed on the part of lenders or credulity on the part of the buyer, but instead it's something more basic and more fundamentally economic -- it was easy fast and fun for the family Andrews to come up with half a million federal reserve notes because the supply of federal reserve notes was abundant....or perhaps I should say infinite.

Economic laws, like the law supply and demand, are just that -- laws. The law of supply and demand can no more be repealed by fiat than the law of gravity.

It's an important first point to understand, and one worth repeating.

When it comes to Federal Reserve Notes, there is no scarcity for all intents and purposes. Hence, when the Federal Reserve pushes their notes into the market, those notes are fast, easy and fun to pick up. No amount of regulation or income redistribution can counter this economic law.

Once this is clearly understood, the rest of the fiasco becomes comprehensible.

[Mavdog]

how in the world can you possibly write with a straight face "The problem lies not in lax lending standards, poor analysis, greed on the part of lenders or credulity on the part of the buyer"???

if not for "lax lending standards, poor analysis, greed on the part of lenders or credulity on the part of the buyer" the fed could print trillions and trillions of greenbacks, and it would make no affect on the ability of this (and other) borrowers to get the loans they never should have been given.

good gawd it's these players role, their very reason for being involved, and the abdication of their responsibilty that led us to where we are at.

it's like you blame the poppy plant or the coca plant for the addict's plight....totally misdirected in assigning culpability. the fact that these sources exist (like the fed's loose money policy) does not relieve the pusher and the user from shouldering the blame.

[alexamenos]

if not for "lax lending standards, poor analysis, greed on the part of lenders or credulity on the part of the buyer" the fed could print trillions and trillions of greenbacks, and it would make no affect on the ability of this (and other) borrowers to get the loans they never should have been given.

you don't understand mavdog.

[Mavdog]

no alex, you do not understand.

[Underdog]

Looks like we got ourselves a Mexican standoff...


[anxiously awaiting to see who shoots first]

[alexamenos]

Originally Posted by Mavdog

no alex, you do not understand.

no, i'm pretty sure it's you. the US Treasury Secretary has even acknowledged that the problem was easy money, but you still deny it.

What you don't understand is that so long as the fed prints a trillion new greenbacks, that money is going to get lent to someone for something. You can try to regulate one thing, but the money is just going to go to something else. You can try to regulate everything, but then the money just goes to the regulators.

You can't repeal economic laws by fiat -- this is what you don't understand.

[Mavdog]

theory is great, reality is even more telling.

case in point: today, we have ridiculously low interest rates, the federal government has provided plenty of capital to lenders to make loans, printed plenty of money, and yet loans for commercial property are not being made.

why would there not be liquidity in the capital lending market for a borrower who is looking to finance/refinance performing commercial properties?

because the lenders have instituted strong (some borrowers are calling them "draconian") standards that require the borrower to a) have at least 30% equity (70% LTV) and b) agree to full or partial recourse.

are these really "strong" or "draconian" lending standards?

no. they are the very type of standards that existed in the past, as recently as a decade ago when banks and insurance cos made these loans, it's just that borrowers became addicted to the loose standards that became prevalent in the last 5-6 years as the cmbs industry reared its ugly head.

so reality is proving the availibility of capital isn't going to provide and supply stupid loans, stupid lenders and idiot borrowers (read the entire article that was linked above)are the key and necessary component.

the government IS printing trillions of dollars, and the fact is the loans are NOT being made.

[alexamenos]

theory v. reality...hmmm....

if I throw a rock up in the air, I say it's going to come back down. Is that theory or reality?

Originally Posted by Mavdog

case in point: today, we have ridiculously low interest rates, the federal government has provided plenty of capital to lenders to make loans, printed plenty of money, and yet loans for commercial property are not being made.

the bubble isn't happening in the one place you're looking, so you think there is no bubble?

me a few months ago:

At precisely a time when fed is trying to push cash through a system despite the fact that a lot of people aren't borrowing and a lot people aren't lending, there's a huge build up of cash looking for a place to go. The negative returns on t-bills are just the next fed reserve created bubble (when this one pops, it's gonna be real ugly).

me a couple of weeks ago:

beware the bear market rally

you're worried about regulating the last bubble -- it's the next one that I'm worried about.

[Mavdog]

you can pat your own back all you want alex, yet so far your prediction is not validated nor invalidated...the jury is still out.

the fact is that if the lender sets the right loan criteria, borrowers will be correctly vetted, stupid loans won't be made, and the level of defaults will be at acceptable amounts which do not place lenders in harms way.

this is irregardless of the policies of the fed...

[alexamenos]

It's tough running a government without a giant printing press....even for the Governator--

"This is the harsh reality and the reality that we face. Sacramento is not Washington – we cannot print our own money. We can only spend what we have."

[alexamenos]

'the traditional laws of supply and demand don't always apply to oil prices.'

seriously, not only is somebody writing this shite but they're getting paid to write it. This person has to be a high school teacher, or a liberal arts economics major, or a chick, or maybe all three to be this muddle headed.

Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up?

She's got her facts basically right -- supply is quite abundant and (as the article notes), tank space to store surplus produced oil is at a premium these days.

What she doesn't understand is...well.....she doesn't understand economics. The traditional laws of supply and demand can no more be suspended for the price of a given commodity than the law of gravity can be suspended for baseballs and frisbees.

First...instead of looking at dollar denominated price of oil, let's look at the barrel denominated price of 1 federal reserve note over the last few months --

January '09 -- 1 federal reserve note = 1/36th of a barrel
Late May '09 -- 1 federal reserve note = 1/65th of a barrel


That's a huge decrease in the price of the F.R.N. in the last couple of months -- and this is entirely consistent with the decrease in demand for bernanke-bucks (the chinese ain't buyin' bonds these days) coupled with the increase in supply as bernanke keeps the printing presses whizzing and whirling.

So....

Over the past two months, investors have plowed billions of dollars into oil futures.

and the reason they're doing this is because they're moving their assets out of federal reserve note and into a highly liquid (literally and financially) tangible asset that will retain a great deal of value should the bernanke bucks go zimbabwe.

In other words...

Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up? Because oil is priced in federal reserve notes, dipshit.

[mary]

The Chinese are still buying bonds - lots of them.

But I don't disagree with you about the falling dollar's effect on oil prices.

[Mavdog]

...but the dollar has risen in value over the last year vs other currencies save for the yuan.

second, there is an affect on the price of gas due to the price of a bbl of oil, but they are two seperately priced commodities. if there is constriction on gas refining production, the price will rise irrespective of the price of oil.

[dude1394]

http://deanesmay.com/2009/05/28/obam...ut-since-1981/

Obama Delivers Largest Tax Cut Since 1981

by Dave Price on May 28, 2009
in Politics

Bravo. Well done, Barack. The government really is shrinking.
Well, half of it, anyway. The collections half. The spending half…
Frighteningly, we may be looking at a $4T deficit this year, or about ten times what Bush was criticized for, and roughly what the entire Bush deficit adds up to for all eight years. If you’d asked a few years ago, most people would have scoffed that a deficit in the trillions was even possible. The entire U.S. debt, for the two centuries and change the republic has been around, was less than four trillion just half a decade ago.
Fun trivia exit question: how long can a national government run at 40% of GDP deficit before hyperinflation sets in?

[alexamenos]

Treasury Secretary credibility fail

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience....

[dude1394]

Originally Posted by alexamenos

Treasury Secretary credibility fail

Quote:
"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience....

The chinese can spot when stuff is being shoveled...

[Mavdog]

Originally Posted by dude1394

Quote:
"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience....
The chinese can spot when stuff is being shoveled...

speaking of "stuff being shoveled"...

reading the rest of the sentence sheds a bit of light on the nature of the comment, which isn't laughter about the safety of us debt...

""Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

[DirkFTW]

Hummer is now a Chinese asset. Should make their action movies more awesome now that they can recreate the scene from the "Rock" with ease.

[Mavdog]

looks like some of those dollars are coming back from china.

"hey mr. li, can we interest you in buying one of our brands?" (without telling him that it's one that has pretty much run its course and isn't really a product people want to buy...)

[DirkFTW]

Originally Posted by Mavdog

looks like some of those dollars are coming back from china.

"hey mr. li, can we interest you in buying one of our brands?" (without telling him that it's one that has pretty much run its course and isn't really a product people want to buy...)

Why didn't we just sell both Chrysler and GM to China instead of dumping in billions and then watching them go bankrupt? That'd be a whole lot of money back.

[92bDad]

Does Hummer still supply the military with the military version of HUM-V?

If so, What happens should we get into a conflict/war that has U.S. interest fighting against Chinese interest?

[Underdog]

Originally Posted by 92bDad

Does Hummer still supply the military with the military version of HUM-V?

If so, What happens should we get into a conflict/war that has U.S. interest fighting against Chinese interest?

Actually, AM General is (and always has been) the manufacturer of the Humvee, but you can't learn that because you put me on your IGNORE list...

Have fun wallowing in your ignorance!

[DirkFTW]

Originally Posted by Underdog

Actually, AM General is (and always has been) the manufacturer of the Humvee, but you can't learn that because you put me on your IGNORE list...

Have fun wallowing in your ignorance!

Ignoring Underdog deprives one of the best in life.

[Flacolaco]

I wallow in my own ignorance daily.

I've gotta tell ya....it's a little overrated. (the wallowing, not my ignorance)

[92bDad]

Hummer® Vehicles
Producing a civilian version of the battle-tested military Humvee® was a natural progression for AM General. In 1992, when the HUMMER was introduced as a civilian truck, it had become apparent that the public understood its unique off-road capabilities.

For nearly a decade, the HUMMER caught the country's eye and it became a highly sought after, one-of-a-kind vehicle. It's an icon of strength, durability and individualism.

In late 1999, AM General and General Motors Corporation finalized an agreement to jointly pursue product, marketing and distribution opportunities for HUMMER. Under the final agreement, GM acquired the exclusive ownership of the HUMMER brand name worldwide and the original HUMMER was renamed the HUMMER H1.

In 2002, AM General opened its new HUMMER H2® Assembly Plant in Mishawaka, Ind. next to the plant that produces the military Humvee. There it assembles the exciting SUV and SUT variants of the HUMMER H2, designed and brought to market by GM.

In 2006, AM General and General Motors jointly decided to cease production of the larger HUMMER H1. AM General continues to provide parts and service for the HUMMER H1.

Although GM acquired the HUMMER brand, they do not own any part of AM Genneral LLC.

For product information, HUMMER dealers and other HUMMER specific information, please visit HUMMER.com.

[Underdog]

You're welcome for the link!

(you can learn a lot more from people if you're not ignoring them...)

[alexamenos]

This story might be interesting.

Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.

It might be interesting because the mainstream media has yet to report anything on the story, which means either a) the biggest smuggling bust in the history of ever isn't as sensational as a tit for tat between the G.I.L.F. and David Letterman; or b) it doesn't neatly fit the mainstream narrative.

[DirkFTW]

Originally Posted by alexamenos

This story might be interesting.



It might be interesting because the mainstream media has yet to report anything on the story, which means either a) the biggest smuggling bust in the history of ever isn't as sensational as a tit for tat between the G.I.L.F. and David Letterman; or b) it doesn't neatly fit the mainstream narrative.

I saw this a couple days ago along with a couple scary questions: (1) were these counterfeits? if so, how easy is it to make? how flooded is the market with these fakes? (2) were these legitimate bills that were somehow sold off? if so, who sold because the denominations are supposed to be available only to governments.

[alexamenos]

Originally Posted by DirkFTW

I saw this a couple days ago along with a couple scary questions: (1) were these counterfeits? if so, how easy is it to make? how flooded is the market with these fakes? (2) were these legitimate bills that were somehow sold off? if so, who sold because the denominations are supposed to be available only to governments.

I don't have any answers, but there are a lot more intriguing angles to this than mundane.

[alexamenos]

a little more context...

If the notes are genuine, the pair would be the U.S. government's fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.

wow.....

....I've been kind of conditioned to think of $134,500,000,000 as chump change .... what with a trillion being the new billion ... but geez, this is kinda significant. The fact that the nation's 4th largest creditor (or faux-creditor) was just caught smuggling his stash in a briefcase on a train seems newsworthy to me.

I mean...the top five countries (and/or smugglers) we as nation owe huge chunks of money to:

1. China
2. Japan
3. Russia
4. Two Japanese guys who were just caught smuggling $134.5 billion in bonds into one of those places you go if you want to make a very significant transaction in great anonymity
5. The UK

One of these five doesn't belong here.

[alexamenos]

weird and uncertain

At least the Japanese press is sitll interested in story of the two Japanese men caugh withs ome $134.5 billion in (presumably fake) US bearer bonds.

We can't read Japanese, and Google Translate isn't particularly helpful, but a reader informs us that the gist of this story is that a newspaper sent a reporter to Como, Italy and found that the men had been released, with their whereabouts unknown.

Now, the easiest, most-benign explanation for this whole thing is that it's just a counterfeiting scheme. Fine, but then why do you let them go without tracking their whereabouts.

[FreshJive]

On CNN they interviewed a guy that said the equipment required to counterfeit these is outrageously expensive and hard to get, and would be something only a country would have.

[bernardos70]

So it is on CNN? I do not see it there.

[DirkFTW]

Bonds declared counterfeit by US.

I actually was thinking that it'd be clever if the bonds were legitimate and we declared them counterfeit to wipe out that debt.

The men are now gone, so maybe we'll be able to rope in another $135 billion to eliminate?

[dalmations202]

Originally Posted by DirkFTW

Bonds declared counterfeit by US.

I actually was thinking that it'd be clever if the bonds were legitimate and we declared them counterfeit to wipe out that debt.

The men are now gone, so maybe we'll be able to rope in another $135 billion to eliminate?

The truth on this story will be very very hard to ever find out.

[FreshJive]

Originally Posted by bernardos70

So it is on CNN? I do not see it there.

Sorry, it was on TV yesterday. Sanchez interviewed him I think.

[alexamenos]

I can't understand the 'men are now gone' angle. WTF?! if they just up and walked out after getting caught with $135 b in fake bonds???

These guys were arrested, not for counterfeiting federal reserve notes, but for making coins which might be mistaken by someone as 'money' (as defined by the Federal Reserve). It's a joke that someone might mistake something made of silver or gold for the plastic coins put out by the Fed Res, but the larger point is that infringing upon the government/fed res money printing monopoly generally results in quite harsh treatment.

How on earth do these two dudes in italy just walk away? That can't be the end of the story.

[dalmations202]

Originally Posted by alexamenos

I can't understand the 'men are now gone' angle. WTF?! if they just up and walked out after getting caught with $135 b in fake bonds???

These guys were arrested, not for counterfeiting federal reserve notes, but for making coins which might be mistaken by someone as 'money' (as defined by the Federal Reserve). It's a joke that someone might mistake something made of silver or gold for the plastic coins put out by the Fed Res, but the larger point is that infringing upon the government/fed res money printing monopoly generally results in quite harsh treatment.

How on earth do these two dudes in italy just walk away? That can't be the end of the story.

Which government really wanted them?