Financial topics

[Matt1989]

Matt1989 wrote:

Only because you hold capitalism up as the ultimate ideal.

1) Inaccurate. I hold individual liberty as the ultimate ideal. Capitalism is a vehicle to exercise individual liberties.

But it's a specific form of capitalism that is analytically respectful of individual liberty. That's fine -- what I object to is the notion that capitalism denotes a very specific thing when there have been a wide range of definitions for describing capitalism. I don't even see it as a particularly good propaganda piece; I think radical libertarians would actually be better off calling their economic ideas socialism.

2) What do you have against ideals? Or are you just trying to be "in character" as a nihilistic GenXer?

Can't say I'm a fan of the characterization of Gen-X as nihilistic. Nearly every Gen-Xer I've met has been more than happy to pass judgment and promote (and live in accordance with) their own moral beliefs. I certainly don't have a problem with ideals; in fact, I think they are necessary to even have a meaningful political discussion in the first place (assuming one isn't quibbling over definitions).

[freddyv]

I thought this was an interesting article that summed up our current economic situation quite well:

By ballooning the deficit and tying the credit of the United States to the balance sheet of the banking system, the Fed has avoided panic, but has crippled the economy for the long term. There is no way to finance the deficit except by suppressing financing for everyone else. The massive amount of liquidity created by the Fed has no inflationary effect as long as the market does not want to hold real assets — and it will not as long as the federal government sucks up the available savings. The most likely scenario is a paralytic, zombie-like stasis

Read more at http://seekingalpha.com/article/136463- ... ry-auction

On a related topic, my new, number one data point is one that has not changed for awhile but now becomes much more pertinent to the average stock market investor: Interest rates are at ZERO; the stock market is unlikey to go up for any length of time while interest rates are rising and at some point they will have to rise.

--Fred

[John]

Dear Matt,

> Can't say I'm a fan of the characterization of Gen-X as
> nihilistic. Nearly every Gen-Xer I've met has been more than happy
> to pass judgment and promote (and live in accordance with) their
> own moral beliefs. I certainly don't have a problem with ideals;
> in fact, I think they are necessary to even have a meaningful
> political discussion in the first place (assuming one isn't
> quibbling over definitions).

No sane person wakes up one morning and decides to wreak random
destruction. The whole point of nihilism is that it's total
destruction backed by "moral beliefs" and "ideals." Nihilism is not
just destruction; it's destruction with a purpose.

The Nomads of Nazi Germany created the Holocaust based on "moral
beliefs" and "ideals."

Later, when people in this Nomad generation were tried for war
crimes, they relied on what has been called the "Nuremberg defense."
They blamed it on the Prophet generation of the time, people who, like
our Boomers, were totally incompetent at everything except arguing
and complaining.

Today's Nomads, Generation-X, have completely destroyed the world
financial system, always based on their own set of "moral beliefs"
and "ideals."

** Stories of massive generational fraud and corruption continue to pour out
** http://www.generationaldynamics.com/cgi ... 14#e090414

Most Gen-Xers I communicate with generally agree with what I'm
saying, and usually do not attempt to defend the crimes of the Xers
and the complicity of the Boomers.

Those who do disagree with me blame it all on the Boomers. For these
people, "moral beliefs" and "ideals" are made up of the same
Nuremberg defense that the Nazis who ran the concentration camps
used.

The worst nihilism is nihilism that's backed by moral beliefs and
ideals.

Sincerely,

John

[Matt1989]

No sane person wakes up one morning and decides to wreak random
destruction. The whole point of nihilism is that it's total
destruction backed by "moral beliefs" and "ideals." Nihilism is not
just destruction; it's destruction with a purpose.

The Nomads of Nazi Germany created the Holocaust based on "moral
beliefs" and "ideals."

Hah! I thought you were using nihilism all this time to mean the view that all values are merely false inventions. If it's the inclination to destroy institutions, then I could see Gen-X, as a whole, possessing that trait. But what about Boomers, or any Prophet Generation, during their youth? Would they not be temporarily nihilistic?

[aedens]

Volcker praised its analysis of the critical role of Bank Board Chairman Gray’s leadership in reregulating and resupervising the industry:
Bill Black has detailed an alarming story about financial - and political - corruption. The specifics go back twenty years, but the lessons are as fresh as the morning newspaper. One of those lessons really sticks out: one brave man with a conscience could stand up for us all.
Don't you believe it, says William Black, an Associate Professor of Economics and Law at the University of Missouri - Kansas City.
The professor and former financial regulator foresees another wave of foreclosures and future bank losses of more than $2.5 trillion vs. the government's $599 billion estimate.
• Fannie and Freddie: In July 2008, Treasury Secretary Paulson testified that Fannie and Freddie were "adequately capitalized" under the test. In August 2008: "even in [Freddie's] most severe stress tests, [show] losses ... less than $5 billion." Actual losses: 20 to 40 times greater.
• AIG: "It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those [CDS] transactions." AIG claimed in 2008 "Using a severe stress test ... losses could go as high as $900 million."
 Actual losses: 200 times greater.


• IndyMac: Sold over $200 billion of "liar's loans." Actual losses: 160 times greater than its tests.
http://fms.treas.gov/webservices/show/? ... 042800.txt
Department of the Treasury
Financial Management Service
STATUS REPORT OF U.S. TREASURY-OWNED GOLD
April 30, 2009

Total - Federal Reserve Bank-Held Gold 13,452,783.620 568,006,120.59

Total - Treasury-Owned Gold fine troy oz. 261,498,899.316 $11,041,058,821.09

Deep Storage: Deep-Storage gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint secures in sealed vaults, which are examined annually by the Department of Treasury's Office of the Inspector General. Deep-Storage gold comprises the vast majority of the Reserve and consists primarily of gold bars. This portion was formerly called "Bullion Reserve" or "Custodial Gold Bullion Reserve."

Working Stock: Working-Stock gold is the portion of the U.S. government-owned Gold Bullion Reserve that the U.S. Mint uses as the raw material for minting congressionally authorized coins. Working-Stock gold comprises only about 1 percent of the Reserve and consists of bars, blanks, unsold coins, and condemned coins. This portion was formerly listed as individual coins and blanks or called "PEF Gold."
====================================================
April 2009 Bureau of the Public Debt Debt Accounting Branch Congressional Budget Report
Monthly Interest on the Public Debt
$24,846,792,476.82
Government is the problem.
====================================================

U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 10 May 2009 at 12:32:00 AM GMT is:
The Debt to the Penny and Who Holds It
( Debt Held by the Public vs. Intragovernmental Holdings )
Current Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
05/07/2009 6,955,434,473,527.65 4,300,832,166,522.55 11,256,266,640,050.20

Debt to Gold price value
11,041,058,821.09 : 11,256,266,640,050.20

asset to future labor claims curio
======================================================================
http://zerohedge.blogspot.com/2009/05/w ... lease.html
======================================================================
http://www.wethepeoplefoundation.org/PR ... 5-8-09.pdf
======================================================================
"The point is you will not break protocol. It was conveyed off the record if you drive it in the ditch keep walking since you
no longer work here. The old performance metric do not apply.
As conveyed we had a instance and friday he was walked out...
Be carefull out there...
Closures of plants are also being considered--and in some cases, like that of bankrupt petrochemical behemoth LyondellBassel, have been implemented--but these can be difficult to execute given the integration of many petrochemical complexes with refineries. In Europe, companies are faced with the additional challenge of labor laws that make reducing their workforces nearly impossible.

[malleni]

...

It is interesting that the US government has so far failed to take action to curb these kinds of frauds.
If they do, a lot of "bad money" is going to get wiped out. According to the article, about 20% of the Treasuries cleared in this market have been failures. Therefore, there is up to $1 trillion in fraudulent "money" out there floating around in the form of Treasuries.
If any crackdown on this fraud isn't highly deflationary, then I don't know what is. That's probably why the US government is avoiding that for now.

To me, this seems typical of what to expect when a deflationary episode hasn't run its course. But failure to act could at some point collapse the entire system. For now, investors can still run to short term bills purchased directly, cash, or gold. If the public loses faith in short term bills and cash and moves to gold, then I suppose the game is over. For now, that will be difficult in my estimation. It's hard to imagine seeing Wal-Mart hauling precious metal to Bentonville. Wal-Mart, etc., are still going to want payment in US dollars and so that is what people will bring to the stores. It will take a lot of time to set up the physical alternatives that would cause a rush out of dollars. It seems to me that it is more than a psychological process, but psychology does enter into it.

Higgenbotham
I think that you are quite near the final answer.
Agreed also that it is shockingly that US government did nothing against this widespread fraud in Treasuries, but also "imaginary" stocks and gold derivates too.
And it is obviously deflationary... but Debt (credit) deflationary.
Somebody here (John perhaps) put a very good link from Wikipedia about history of money (and deflation too) and it explains quite much.
Here it is again:
http://en.wikipedia.org/wiki/History_of ... th_bankers
Obviously - deflation can happen in all sort of assets, but since credit is not direct an asset (just "looks" as one) deflation in credit has other implications.

John also got the right question:

...
For an international reserve currency like the US dollar, how do you
distinguish debt deflation from monetary deflation?
...

Just for start to simplify:
In Monetary Deflation - the paper money (with PEG to gold (commodities) or "real money") - increase in value.
In Monetary Inflation - the paper money which has NO connection to "real money" - loosing value in comparison to gold (commodities). In extreme fall - it leads to "Hyperinflation" i.e. money destruction.

Lets imagine now 2 extreme situation:

1. the US government did not bail out any of banks!
Since the credit balloon is about (at least) 100 times bigger that then "real money" and this phenomena is obvious everywhere on the Planet but US has (at least) 80% of the balloon - it is not difficult to predict the consequence:
- sudden and irreversibly collapse of the present financial system based on the USD!

If you believe that in this kind of collapse the "USD would be stronger" - please check again the short story from Wikipedia link.
Namely, the only thing which permit the fiat money system to function is - "confidence".

I am sorry, but I can not believe that rest of the world will keep this kind of "confidence" in the USD if financial system which "producing" this currency - collapsing... Even worse - its collapse is based on the fraud of very members and leading forces of this system (FED, Treasury, Wall Street,....)
I can find only one description for it - "currency destruction".

2. the US government bail out every bank!
It is obviously that US government, with all institutions even try to do it now:
http://www.bloomberg.com/apps/news?pid= ... q2B3XeGKok

In this very moment when the US government "succeed to close gap" of (at least) 100 times to the "real money" - the "confidence" in the produced paper of US government will be - zero (0) %!
With other words - currency destruction even in this case.

Even if I try to think a model which John mentioned i.e. "international reserve currency" - AND even if I forget the question of "confidence"...
... I can not see a possibility for Monetary "Deflation" in US.
Namely, if we (just as example!) forget US debt to the other countries on the Planet - and take JUST US debt to China situation is - clear.
Additionally - take trade deficit to China and enormous USD reserves of China.

Now you can try to imagine that "everything we need" (except houses, US financial shares, cars ......) are starting to decrease in price because of - monetary deflation.
In this very moment China will start to buy HUGE those kinds of things - energy, food,.... and "everything we need" but what is not "connected" to US.
This will:
1. stop declination of prices for those articles in US
2. destroy "confidence" in USD since it will be obvious that China would like to get rid of those fetters.

Even in this case - the final results is very clear:
Total destruction of currency i.e. - USD.


You can call it what ever you like ("deflation or inflation") - but what I see now it looks only (unfortunately) as - hyperinflation, i.e. "money destruction".
That is final count down.
The hyperinflation - can easily come to the anarchy... especially in a over-armed country as US.

"Unfortunately" - because the destruction of USD would imply destruction of the "world monetary system".
Not because this system is good - but because of bad consequences of it.
I still hope that this explosion will be damped just on the US and countries very strong connected to US financial institutions, but even it will be bad enough.
Finally USA is the biggest military power on the World which massive nuclear capabilities.
One anarchy like situation in US - can have a bad consequence on the entire World.

[John]

Dear Matt,

> Hah! I thought you were using nihilism all this time to mean the
> view that all values are merely false inventions. If it's the
> inclination to destroy institutions, then I could see
> Gen-X, as a whole, possessing that trait. But what about Boomers,
> or any Prophet Generation, during their youth? Would they not be
> temporarily nihilistic?

I would never claim that Generation-Xers are not driven by moral
beliefs and ideals.

It's Boomers who are driven by political arguments, not by moral
beliefs.

Generation-Xers have very strong moral beliefs. But they're
reactive. A typical moral belief is, "X is a value of the Boomer and
Silent generations, and so 'not X' is my value." This is what leads
to the "principled" nihilism.

You can see this by contrasting President Bush with President Obama.

President Bush frequently said that prior to 9/11, he really didn't
know what he was supposed to do as President. After 9/11, he knew
that God wanted him to devote his Presidency to responding to 9/11.
That ended up being the only major objective of his Administration.

President Obama was quite different. He frequently said that the
world would change on January 21. His goal was to heal the world
with his mere presence -- cure global warming, provide universal
health care, close Guantanamo, leave Iraq in peace, beat the Taliban
in Afghanistan, restore the stock market bubble, and dismantle
President Bush's war against terror. Nothing was beyond his reach.

It's the utter absurdity of this program that shows how nihilistic it
is. We're watching a tv drama, "The Education of Barack Obama," on a
daily basis.

It's hard to predict what the first really big, disastrous lesson
will be in this educational drama, but if I had to guess, my guess is
that it would be that spending $11 trillion in bailout and stimulus
programs does nothing to prevent financial disaster.

Sincerely,

John

[aedens]

...

It is interesting that the US government has so far failed to take action to curb these kinds of frauds.
If they do, a lot of "bad money" is going to get wiped out. According to the article, about 20% of the Treasuries cleared in this market have been failures. Therefore, there is up to $1 trillion in fraudulent "money" out there floating around in the form of Treasuries.
If any crackdown on this fraud isn't highly deflationary, then I don't know what is. That's probably why the US government is avoiding that for now.

To me, this seems typical of what to expect when a deflationary episode hasn't run its course. But failure to act could at some point collapse the entire system. For now, investors can still run to short term bills purchased directly, cash, or gold. If the public loses faith in short term bills and cash and moves to gold, then I suppose the game is over. For now, that will be difficult in my estimation. It's hard to imagine seeing Wal-Mart hauling precious metal to Bentonville. Wal-Mart, etc., are still going to want payment in US dollars and so that is what people will bring to the stores. It will take a lot of time to set up the physical alternatives that would cause a rush out of dollars. It seems to me that it is more than a psychological process, but psychology does enter into it.

Higgenbotham
I think that you are quite near the final answer.
Agreed also that it is shockingly that US government did nothing against this widespread fraud in Treasuries, but also "imaginary" stocks and gold derivates too.
And it is obviously deflationary... but Debt (credit) deflationary.
Somebody here (John perhaps) put a very good link from Wikipedia about history of money (and deflation too) and it explains quite much.
Here it is again:
http://en.wikipedia.org/wiki/History_of ... th_bankers
Obviously - deflation can happen in all sort of assets, but since credit is not direct an asset (just "looks" as one) deflation in credit has other implications.

John also got the right question:

...
For an international reserve currency like the US dollar, how do you
distinguish debt deflation from monetary deflation?
...

Just for start to simplify:
In Monetary Deflation - the paper money (with PEG to gold (commodities) or "real money") - increase in value.
In Monetary Inflation - the paper money which has NO connection to "real money" - loosing value in comparison to gold (commodities). In extreme fall - it leads to "Hyperinflation" i.e. money destruction.

Lets imagine now 2 extreme situation:

1. the US government did not bail out any of banks!
Since the credit balloon is about (at least) 100 times bigger that then "real money" and this phenomena is obvious everywhere on the Planet but US has (at least) 80% of the balloon - it is not difficult to predict the consequence:
- sudden and irreversibly collapse of the present financial system based on the USD!

If you believe that in this kind of collapse the "USD would be stronger" - please check again the short story from Wikipedia link.
Namely, the only thing which permit the fiat money system to function is - "confidence".

I am sorry, but I can not believe that rest of the world will keep this kind of "confidence" in the USD if financial system which "producing" this currency - collapsing... Even worse - its collapse is based on the fraud of very members and leading forces of this system (FED, Treasury, Wall Street,....)
I can find only one description for it - "currency destruction".

2. the US government bail out every bank!
It is obviously that US government, with all institutions even try to do it now:
http://www.bloomberg.com/apps/news?pid= ... q2B3XeGKok

In this very moment when the US government "succeed to close gap" of (at least) 100 times to the "real money" - the "confidence" in the produced paper of US government will be - zero (0) %!
With other words - currency destruction even in this case.

Even if I try to think a model which John mentioned i.e. "international reserve currency" - AND even if I forget the question of "confidence"...
... I can not see a possibility for Monetary "Deflation" in US.
Namely, if we (just as example!) forget US debt to the other countries on the Planet - and take JUST US debt to China situation is - clear.
Additionally - take trade deficit to China and enormous USD reserves of China.

Now you can try to imagine that "everything we need" (except houses, US financial shares, cars ......) are starting to decrease in price because of - monetary deflation.
In this very moment China will start to buy HUGE those kinds of things - energy, food,.... and "everything we need" but what is not "connected" to US.
This will:
1. stop declination of prices for those articles in US
2. destroy "confidence" in USD since it will be obvious that China would like to get rid of those fetters.

Even in this case - the final results is very clear:
Total destruction of currency i.e. - USD.


You can call it what ever you like ("deflation or inflation") - but what I see now it looks only (unfortunately) as - hyperinflation, i.e. "money destruction".
That is final count down.
The hyperinflation - can easily come to the anarchy... especially in a over-armed country as US.

"Unfortunately" - because the destruction of USD would imply destruction of the "world monetary system".
Not because this system is good - but because of bad consequences of it.
I still hope that this explosion will be damped just on the US and countries very strong connected to US financial institutions, but even it will be bad enough.
Finally USA is the biggest military power on the World which massive nuclear capabilities.
One anarchy like situation in US - can have a bad consequence on the entire World.

http://www.measuringworth.com/calculato ... /index.php

http://www.bea.gov/industry/gpotables/gpo_action.cfm

http://www.treasurydirect.gov/govt/char ... govpub.htm

Given output which can be measured, and yes a few inept people can be replaced when
the office of the president gets out his 2 x 4 and does his duty. "Key word was office and who is in it
in context to time " Overall with the links provided we have a better chance portrayed than your assesment.
I do not want to line item your postion to critical examination since we have enough support with the
excellent dialog here and links posted to awareness in a free society to date. America can tough it out
if the world likes it or not. The world will decouple and there is plenty of movement to that direction.

http://mises.org/books/TRTS/

[malleni]

...
Given output which can be measured...

aedens,
Thank you for the links. Unfortunately, the "measuring" is the problem too.
The phantom values of GDP, CPI... and other "formal" things do not saying much (even if those can be used with care)...
Problem is simple.
Your "measurement rule" is - elastic...
(This "elasticity" coming from the fiat money system controlled by government institutions and/or FED)

So - now, in situation when you have to measure something (some "length") - your "measurement rule" can show many different values.
What is the - real one?

And finally - how you can measure the "confidence" on which is everything based in one fiat money system?


PS
I love your last link.

[aedens]

...
Given output which can be measured...

aedens,
Thank you for the links. Unfortunately, the "measuring" is the problem too.
The phantom values of GDP, CPI... and other "formal" things do not saying much (even if those can be used with care)...
Problem is simple.
Your "measurement rule" is - elastic...
(This "elasticity" coming from the fiat money system controlled by government institutions and/or FED)

So - now, in situation when you have to measure something (some "length") - your "measurement rule" can show many different values.
What is the - real one?

And finally - how you can measure the "confidence" on which is everything based in one fiat money system?


PS
I love your last link.

Here is some real time management information.

http://www.newyorkfed.org/research/staf ... /sr352.pdf

We know a test is coming in relationship to some Debt markets auctions which pressed for time
I cannot link tonight . I think we can put some some bookends on it given the discussion
in time. I can see your arrow of inertia. Remember that we already understand the customer
is the final arbiter.