Showing posts from March, 2016

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

 This article was first published by me on Talkmarkets: 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

El Erian Has It Right. The Failure of Monetarism and Asset Purchasing

 This article was first published by me on Talkmarkets: Mohamed El-Erian, former PIMCO guru and current Allianz economic adviser warns that corporate cash, now being hoarded, must be unlocked for growth to take place. Otherwise he fears political collapse and economic demise. He rejects the concept that people's QE (helicopter money) should be attempted, because of the unknown political ramifications. I don't know that I agree with him. Everyone else has benefited from QE except the people! But he may be right. But nevertheless, I know he is right that monetary policy has limitations. He is right that the monetarists and market monetarists have failed to get money to filter down to the real economy, even though assets like fine art and high end houses and stocks appreciated. Asset inflation also has a dark mispricing of asse

The Fed Did One Thing Right in the Great Recession. But It Wasn't Enough

 This article was first published by me on Talkmarkets: The Fed actually did something right during the Great Recession. It created the Commercial Paper Funding Facility. The CPFF contributed to liquidity in the commercial paper markets.  The facility was closed in 2010. Commercial paper funded real estate loans, and with the stricter guidelines implemented after the real estate crash, commercial paper actually has slowed down significantly as a means of funding consumer debt. So, as a result, household debt has been drastically reduced: As Stephen Williamson, St Louis Fed VP, has pointed out, the decrease in consumer debt has been mainly mortgage debt reduction. Fewer people qualify for loans. Yet, as the chart below shows, banks continue to lend robustly to somebody, but not necessarily to the American consu

My Response to An Interesting Article on Talkmarkets by Libertarian Steven Saville The article link above makes for interesting reading. This is a Libertarian view as opposed to the Keynesians. But I responded with two comments: Author says: "The fact is that the Fed does cause severe economic downturns, but not by tightening monetary policy. In the real world, every boom that occurs on the back of money-pumping and interest-rate suppression contains the seeds of its own destruction. The reason is that the falsification of prices resulting from the central bank’s efforts to stimulate economic activity leads to widespread malinvestment." I agree with that, because risk was mispriced. But we know that the Fed failed to make up for the destruction of the commercial paper market and for the pulling of Heloc credit by failing to increase the money supply. So, the Fed probably made the recession much worse by not taking a

Will Millennials Be the Greatest Generation? Frugality, Trump and Foreign Policy Ethics

 This was published by me on my personal blog at Talkmarkets: The Millennials are not held in high regard as a generation by the pundits and bankers. They don't buy big ticket items. They live at home. They rent. They are frugal. But it may be up to them to restore the Peace of Westphalia . [There is always disputes about the ages of the generations, but the Millennials are generally thought to comprise a time of birth from 1982 to 2002. These dates are not set in stone.] The Greatest Generation , crowned with the title by Tom Brokaw, suprisingly had traits in common with the Millennials and some that were not as redeeming as those held by Millennials. The Greatest Generation (born 1901-1924) was labeled as such because they experienced the difficult economic times of the Great Depr

Deflation Is the End of Capitalism? A Look At Monetary Stimulus and a Real Solution

 This article was first published by me on Talkmarkets: a real solution offered at the end of this article, I have been trying to get a handle on what deflation will look like with negative interest rates. Certainly, we are familiar with disinflation, a slowing of inflation. Yet disinflation is not deflation. Deflation is a different animal we have not experienced. Deflation could include a serious reduction of production, a serious slowing of credit, but must include a serious contraction of the money supply and a serious reduction in prices for consumer goods across the board. Imagine a housing crash with all other prices falling at the very same time. That is deflation. Since commodities have crashed, it makes no sense for houses, made out of commodities, to remain priced as if they cannot be replac

Merrick Garland Could Be a Zionist. It Isn't About Being Jewish

Merrick Garland could be a Zionist. Since he is a SCOTUS nominee, that presents a problem for Americans. It has nothing to do with being Jewish. I don't care if Jews are on the Supreme Court, except most have been Zionists by design. That is the problem, Zionism, not being Jewish.  There are many non Jewish Zionists and many Jewish Zionists, and some Jews who hate everything Zionism stands for from a religious and ethical perspective. But Merrick's wife's grandfather was Samuel I Rosenman, who was an adviser to Roosevelt and Truman. Merrick's wife is Lynn Rosenman Merrick. Zionism is definitely in the family dating way back. Clearly, President Truman was a Christian Zionist , who believed that Zionism had a right to settle Palestine, even though the Torah prophets never gave that authority for a New Zion to men, only to the Messiah. So, Christian Zionism is suspect as a legitimate religious doctrine as is Zionism, as to any religious verification. And certainl

Asher Edelman endorses Bernie Sanders - Business Insider

Asher Edelman endorses Bernie Sanders - Business Insider The real Gordon Gekko supports Bernie Sanders for one simple reason, the velocity of money is comatose because most of the profits go to the 1 percent. That is killing the economy. He said: "Well, I think it's quite simple again. If you look at something called velocity of money, you guys know what that is I presume, that means how much gets spent and turns around. When you have the top 1% getting money, they spend 5-10% of what they earn. When you have the lower end of the economy getting money, they spend 100-110% of what they earn. As you've had a transfer of wealth to the top and a transfer of income to the top, you have a shrinking consumer base basically, and you have a shrinking velocity of money . Bernie is the only person out there who I think is talking at all about both fiscal stimulation and banking rules that will get the banks to begin to generate lending again as opposed to spe

Forget Keynesianism and Market Monetarism. New Monetarism Rules the Federal Reserve

This article was first published by me on Talkmarkets: You can just forget the noise from the New Keynesians and Market Monetarists . New Monetarism is the economic school that rules the Fed. And you should know more about how that works out. [There is a chart below that shows the big banks are lending like crazy while inflation is practically non existent. That makes no sense, but these are not normal times.] New Monetarists are Austrians like Greenspan was an Austrian economist. Greenspan thought that the invisible hand of self interest and deregulation would not allow the housing bubble and crash of the last decade. Of course if you believe like I do that the Fed mispriced risk and that the housing bubble was inevitable, you wonder if the New Monetarists will be any more honest than Greenspan wasn't. A

Dr Ben Carson Supports All Eight Donald Trumps!

Dr Ben Carson, an unusual character to be sure, has been drawn to Donald Trump and has decided to support all eight versions of Trump. It is true that opposites attract so it is no surprise that quiet Ben is attracted to loudmouthed Trump. It is a match made in....oh wait, can't be made in heaven. After all, Trump compared Carson's temper to one of a pedophile back in November of 2015. So, Carson has decided to support all these Trumps: 1. The entertainment Trump. 2. The intellectual Trump. 3. The businessman Trump. 4. The religious bigoted Trump. 5. The racist white supremacist Trump. 6. The asshole of all assholes Trump. 7. The punch out thug Trump. 8. The psycho Trump. Yes, Carson said Trump could exhibit psychotic episodes and even kill people in mass murder fashion, and Carson would still support the Donald. The Donald was right about all that after all. Creepy, indeed. Of course, Carson would be confident that Trump would only kill as a hoax, to m

Miles Kimball's Sneaky Way of Destroying Cash. The Importance of Zero.

This article was first published by me on Talkmarkets: Before I get into the importance of zero at the end of this article, I have to talk about Miles Kimball. Miles Kimball has a really sneaky way of destroying cash. The economics professor at University of Michigan has called for paper money to be valued at a discount to digital money. Of course, that will drive paper money out of existence, as people will do as many transactions as they can digitally, as unwitting pawns in the central banks' movement towards totalitarianism. Miles is somewhat important in economic and central banking circles. He has written many articles on Quartz, and couches his quest for a digital money standard in moral terms. He says this debasing of physical cash will create honest money, and be a moral way to do things. It just proves that you cannot trust an eco

Here Are the Pieces of the Republican Party When It Splits Up

The pieces of the Republican Party when it splits up will focus on narrow issues, such as: 1: Business 2. Intellectual 3. Fox News 4. Libertarian 5. Trump and Sub Trump Parties Even the Washington Post is capable of good satire once in a blue moon.

Negative Rates Bad, Negative IOR Good Says Scott Sumner. The IOR Debate

This article was first published by me on Talkmarkets: I will try to simplify some basic concepts regarding market monetarism and the velocity of money and negative interest rates and negative Interest on reserves (IOR). The basics are not complex and I have done my best to sort it out. But the conclusions are for the reader to determine. The nuts and bolts of determining the effects of payment on reserves by the Fed make for interesting reading, so I will give Cullen Roche's opposing opinions regarding the debate over IOR at the end of the article. As Scott Sumner has said regarding the MMers' stand against negative interest rates: In a monetarist model, lower market interest rates are contractionary for any given monetary base, because they reduce velocity.  It’s the Keynesians who are likely to claim that lower rates a

Larry Summers 100 Dollar Bill Ban and Westfalia Lost

This article was first published by me on Talkmarkets: Much has already been written about Larry Summers seeking a ban on the hundred dollar bill. Perhaps the strongest push back came from Tyler Durden. It is recommended reading for sure. But there is more to know about this process that must be understood by real patriots. Here are the three most important and alarming facts that must be understood from Larry Summers' words. 1. The announcement from Larry Summers was allowed to be published to all local TV stations. I about fell out of my chair when I saw the announcement on channel 13 in Las Vegas. The Los Angeles CBS local station carried the story as did many others.  Monetary matters just don't make it down to the average man in the street very often. This clearly means that the people who control American media want or have been order