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Proof The Federal Reserve Was Responsible for the Housing Bubble and Crash.

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 This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/proof-the-federal-reserve-was-responsible-for-the-housing-bubble-and-crash?post=89477&uid=4798

I hate to continue beating a dead horse (except this horse is a Trojan Horse and will come to life again), but clearly the Fed knew it was putting the financial system at unacceptable risk in the housing bubble.  I offer the three charts again, together this time, showing that the Fed saw all this coming.

I have said that I think it was a conspiracy, others may argue that the Fed was incompetent. But these are the brightest financial minds on the planet and I hardly think that incompetency was the issue! Besides the charts, there is more research provided here in trying to get to the bottom of this Commercial Paper fiasco, the real cause of financial instability, that regulators helped make happen!

These charts show what happened in late 2007. It was all happening at once, too obvious to ign…

Edward Lambert's Recession Equation Warning

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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/education/edward-lamberts-recession-equation-warning?post=113119&uid=4798

Edward Lambert, who has contributed to the study of effective demand, has produced an equation that indicates recession. The Cobra Equation predicts recession, as profits fall in relation to wage increases. It will be displayed at the end of this article. It results in the chart below, with the red line showing profit rate based on capacity utilization and the yellow chart showing profit rate based on unemployment. They are remarkably similar.

Utilization of capital reached its peak at the end of 2014 as you look at the chart below. The significance of this chart is that the Fed should have attempted to normalize rates while the business cycle was on the upswing, showing the yellow line descending on the chart. By the time the peak of the profit cycle hit in late 2014, the Fed should have normalized rates. Dr. Lambert …

Trump Yellen Gunfight at the Not So O.K. Corral

This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/trump-yellen-gunfight-at-the-not-so-ok-corral?post=113017&uid=4798


In the real gunfight at the O.K. Corral, which took place in Tombstone, Arizona in 1881, a long time feud between the Earp brothers and a group called the cowboys came to and end. The Earps were the sheriffs and the cowboys had threatened them over illegal activities they were engaged in. The Earps, though some were wounded, survived and the cowboys were routed.

We hope that the new gunfight is more civil, with weapons being used confined to words and economic ideas. The end remains to be seen. The gunfight has not yet occurred. I believe it will.

The first shot that will be fired is Yellen's fast draw on interest rates. They will likely be raised in December. Getting ahead of inflation is important if Trump attempts to gain a massive stimulus package. The issues that lead to this gunfight boil down to full employme…

Trumponomic and Great Recession Nuggets from Market Monetarists

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This article was first published by me at Talkmarkets: http://www.talkmarkets.com/content/bonds/trumponomic-and-great-recession-nuggets-from-market-monetarists?post=112788&uid=4798


With the advent of Trumponomics, I try to glean information from market monetarists. I will point out important nuggets that have come across recently.

I embrace some monetarism, like the concept of real helicopter money. I like the way market monetarists track the real growth in the economy. I don't know how NGDP targeting would work out but a futures market could help.  But clearly the Fed has done and could do more to help stabilize the economy, and it has done some things to destabilize it, like mispricing risk in the MBSs last decade.

But there are a few nuggets from the MM boys to share. For example, Lars Christensen pointed this out in a tweet:
Republicans are Austrians when they are in opposition and Keynesian when they are in power. They are never monetarists.Scott Sumner has a few very im…

My Gedmatch Jewish Roots Force AntiIsrael Stance: Palestinian DNA

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My Gedmatch Jewish roots are verified. It wasn't like I didn't already know. But when you are adopted, you want something concrete to back you up. I will list some charts below, but first, I want to tell you two things about Israel.

First, the African 9 test towards the end of this article shows that I am Yemeni Jewish and Ethiopian Jewish. Both of these groups made their way in recent times to Israel. Turns out they were mistreated. The Ethiopian Jews were mistreated by the racism they faced and still face in Israel. The Yemeni Jews had their babies stolen by a cruel nation.

Second, Israel, a colonial power, took away Palestinian land. But as you get into DNA, you realize that the Zionists stole the land from their biological brothers. Many Palestinians have ancient Hebrew DNA. It is true that they are not practicing Judaism, but neither do I. I am a New Covenant Christian.

And did you know that the Zionists who founded Israel were self avowed atheists? They didn't practic…

Trumponomics: Increase Exports, Slow Imports, Bludgeon the New Normal

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This was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/trumponomics-increase-exports-slow-imports-bludgeon-the-new-normal?post=112404&uid=4798

Trumponomics is further explained by a paper issued by the Donald's economic advisers. While I leave it to others to hammer out the nuts and bolts of the VAT tax debate, a simple analysis of the trade deficit based on common sense is in order. Targeted nations in this Trumpean effort to reduce the trade include Canada, China, Germany, Japan, Mexico and South Korea, accounting for 1/2 the trade deficit.

In a nutshell, these advisers appear to have no real understanding of the New Normal at all. They want well over 3 percent growth per year (with the inflation that accompanies that), when the Fed is seemingly powerless to raise interest rates 1/4 point! In spite of the new normal and the structured finance that drives it, Trump wants to increase exports and limit imports from the targeted nations. Those t…

Bizarre Collateral in Securities Lending Exposed by Bank of Mellon

This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/bizarre-collateral-in-securities-lending-exposed-by-bank-of-mellon?post=112318&uid=4798

There is a bizarre use of collateral these days, and it is exposed by Bank of Mellon. First of, the banks are being advised by certain bankers to hoard bonds.  And counterparties are encouraged to bolster their stock and securities positions by using stocks as collateral! The securities lending market often is used for short positions in the stock market.

Here is a definition of securities lending from Investopedia:


Securities lending is the act of loaning a stock, derivative or other security to an investor or firm. Securities lending requires the borrower to put up collateral, whether cash, security or a letter of credit. When a security is loaned, the title and the ownership are also transferred to the borrower.

Peter Venkman once said in Ghostbusters something to the effect that we have dogs and …

Reflation Cannot Save Tantrum Trump from a Painful Recession

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This article was first published by me on Talkmarkets: http://www.talkmarkets.com/content/bonds/reflation-cannot-save-trump-from-a-painful-recession?post=112162&uid=4798

Donald Trump is a real estate guy. He knows American real estate skates on thin ice. His contract with Wall Street is to try to supply more bonds through deficit spending to Wall Street. But the senate will likely not be behind this deficit spending as it relates to infrastructure. Trump has indicated that he wants to cut corporate taxes from 35 to 15 percent, and spend more on military and infrastructure.

The reflation trade that we are seeing is a tantrum against the bond market. Long bond yields are up to over 2 percent. But what is the reflation trade and what can it accomplish? Investopedia has a precise definition of reflation as government sponsored business expansion:
Although almost every government tries in some form or another to avoid the collapse of an economy after a recent boom, none have ever succ…