Financial topics

[OLD1953]

What kills me about the state and city pension deals is simply this, the cities/states wanted to run those pension plans because it would "save money on fees".

Vanguard sells a product that's a near match for those state pensions in Wisconsin. (State workers paid 100% of contributions to that pension fund, BTW, there's been much obfuscation about that. The state workers union has put their contract on their website to prove that it says the state simply manages their money.)

http://www.kiplinger.com/columns/value/ ... nuity.html

Vanguard does not get to reduce that payout sans bankruptcy. They don't get to change the rules in midstream. Governments get to demonize the state workers and then cut payments after changing the rules. Thus, they claim to not be bankrupt. Even though under business rules, they are bankrupt. And bankrupt under moral rules as well.

If the last few years have taught the public anything, it's simply this, you cannot trust anyone with money. Funds have stolen money, commodity brokers have stolen money, governments have stolen or mismanaged money, it's pandemic across the board, if there's money involved then somebody is mismanaging or stealing it. This lesson is getting hammered home every day, and the net result has been that the public has bailed out of nearly every investment that doesn't involve mattresses. And that means they've started scaling down to living within their means, and that means this economy isn't going to "take off" in the bubble sense for quite a while.

***
Got to thinking, and thought that perhaps folks weren't seeing how the Democrats could turn conservative while the Republicans suddenly turn left. Ok, here's a reasonable scenario that would make that happen.
Assume the Democrats take House, Senate and White House - unlikely but possible at this time. There are billions going into this race by wealthy who want to keep paying low capital gains taxes and are afraid they'll get increased. Moderate Republicans see what's happened to their party because of the no compromise policy, and enough vote with the Democrats to raise capital gains taxes by a sizeable percentage.
FACT:You put billions into a race to buy access to the politicians after the race. The wealthy get access, but the access doesn't mean much. For a billion dollars, you want more than speeches.
To prevent a repeat of this fiasco, with much of the country calling for even higher taxes on the wealthy, the billionaires switch to supporting Democrats with an understood quid pro pro of no further tax increases short of national emergency on the order of WWII. The Democrats see advantages to moving right.
FACT:There are a certain percentage of the voters who are party aligned, not policy aligned. If the party wanted a Satanic empire with Lucifer as the leader, they'd still vote for the party. This group is about evenly divided on both sides, though not evenly divided between the states. Neither party can possibly lose all its voters.
Democratic Party leaders, seeing the money and thinking that's where the advantage lies, move the party further to the right, leaving an even bigger gap on the left, filled only by the Greens and Nader and the Socialists and a few other groups that have little real meaning. This starts to separate the Democrats from much of their base, but still keeps the party voters. Since they seem to be riding the storm just fine, they go with it over the cries of the base, just as they have been doing, and the base keeps on voting for them.
Republican Party leaders REACH OVER the Democrats to cut a deal with the leaders on the left who want some kind of alternative energy program, and see no chance of a carbon tax being passed under current conditions as exist under this scenario. The Republicans offer a program whereby TVA will be mandated to install both solar energy farms amounting to say, 25% of current US electricity usage over the next 10 years AND fund electric vehicle charging stations at all filling stations within ten miles of any interstate highway - which they can sell to their current voters as "American Security through true Energy Independance". (Hell, I'd get the bill signed on the fourth, set up barbq's in major cities declaring the modern independance day, fireworks and etc. I swear, politicians are LAZY since TV was invented.) The Democrats would be utterly taken off base, the Republicans would make a largish slice into the left of center voters who have voted Democrat by default, and the party move to the left would be well under way. A different kind of left, true, but still a move to the left.

This would probably result in Republicans being more popular in the far West and NorthEast, while Democrats would become more popular in the South. The wheel just keeps turning.

[aedens]

I would convey we are the Independant Voter. As we discussed some years ago here the Blue Dogs took a beating as they should of. The level of FUD is the issue weilded as a weapon. We voted Democrat once and it was a issue specific call since Ford was a issue with us. When we got into the nuts and bolts of facts it was beyond a doubt both sides are the same debased coin.
http://stlouis.cbslocal.com/2012/09/26/ ... -st-louis/

[aedens]

HUDSON: QE3 was basically a program for the Federal Reserve to give money to the banks until Beethoven writes his 10th Symphony. There is no connection to employment whatsoever.
The QE2 was $800 billion, and all of QE2 was used by the banks to speculate on foreign currencies and interest rate arbitrage. Most was used—lent to the BRIC countries—Brazil, Russia, India, and China. You could—the banks borrowed 0.25 percent and lent money to Brazil at 11 percent and pocketed the interest rate arbitrage. All this $800 billion, so much went out that it pushed up the value of Brazil’s cruzeiro, so that banks made a foreign exchange profit on top of the interest rate arbitrage. None of this money went into the U.S. economy.

http://michael-hudson.com/2012/09/qe3-jobs-for-wall-st/

[aedens]

http://finance.yahoo.com/news/first-dro ... 25z;_ylv=3

As we noted but found interesting.

[OLD1953]

We constantly see the idea of voters somehow taking fire on FED policy and voting for "something" related to the FED or control of the FED or some such idea. Is there any group of persons or bill that's gotten out of committee that would actually do anything to change the FED? Apart from Ron Paul, the elections are silent on the FED, and will continue to be silent on the FED. The matter is simply too esoteric for most voters, and Congress fears touching the FED because after that, anything whatsoever that happens in the economy is Congress' fault, they'll own it. It would take a national emergency far beyond anything we've see yet for Congress to take over the FED. Taking over the FED is like gold for money, popular among a small group but neither politicians nor the public has much interest in it.

[OLD1953]

When every indicator says people are saving more and spending less, I tend to believe people don't want to spend more and they do want to save, or to pay down debt. Paying down debt should be counted as savings IMHO, just as anything fungible with money should be counted as money, if you can base a loan on it, it stands in the place of money. Very few of us will ever achieve actual zero debt in the most real sense, if you have an electric bill you have a debt you own the electric company that grows every day. That this debt is paid once a month is a convienence, but it is a debt. It is possible to eliminate most debt from your life, but nearly impossible to eliminate it all. We are all tied together with economic chains.

As I've said before, all the modern schools of economics are right part of the time. They concentrate on the conditions of the era in which they were conceived, usually as a reaction to something. Mises was against socialism so he focusses on being anti socialist. There are times when a "socialist" economic move is correct for the conditions. There are other times when it is wildly inappropriate. I've actually had people who derided me for being a Nazi when I was younger deride me for being a Socialist or Communist now, and my ideas have changed very little if at all. The economy has changed, and the country has changed, and the politics have changed, but there are times when money injections are a good thing and a time when they are bad. There's a time help business and a time to tax it - a time to sow and a time to reap as the Bible would put it. Economics schools of every stripe tend to have a robotic response to every problem, and that works about as well as a robotic response to the market, not well over a long time period

Buy and hold doesn't work if you apply it over a long enough period. Funds to bonds works vis a vis the M3 most of the time, but not well at all now, or I don't think so - haven't played with that for a long time. It did very well in the 70's and 80's though. (rising M3 - funds. dropping M3 - A class bonds. MUST be M3, not M1 or M2.) The day is coming when flash trades will not work. The economy is a force of nature, and trying to block the flow just means you'll be broken by it eventually.

[John]

> As I've said before, all the modern schools of economics are right
> part of the time.

I totally disagree that this is true in any meaningful way.

If mainstream economists get anything right, it's only in the same
sense that a stopped clock is right twice a day. The poster child for
economist incompetence and stupidity is Nobel Prize in Economics
Winner Paul Krugman.

As I've frequently pointed out, economists did not predict and cannot
explain the 1990s tech bubble, did not predict and can't explain the
real estate/credit bubble of the mid-2000s decade, didn't predict and
can't explain the credit crunch that began in 2007, or why conditions
are different today, and don't have vaguest clue what's going on
today, let alone what's going to happen next year. Even Alan
Greenspan has pointed out that ALL econometric models have failed
since 2008.

And I haven't even mentioned that they lie constantly on CNBC and
elsewhere, especially about stock valuations.

Saying that "all the modern schools of economics are right part of the
time" is giving these fools and jackasses way too much credit.

[Higgenbotham]

Yesterday I heard from someone who had talked to their accountant, who brought up the student loan bubble and its bursting. The accountant's observations were that the the local area (New York State) has seen a huge wave of student loan defaults and bankruptcies that will spread across the country. The opinion is that this is a lost generation that will never be productive, that this will be far worse than the mortgage problem, and the devastation will be like nothing we can ever imagine. I was also told this person is not prone to exaggeration.

It wasn't too long after that Zero Hedge posted an article entitled "The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default" where they discuss some reasons why this problem is as big as subprime but worse in many ways, one being that there is collateral with value attached to a subprime loan but only a person attached to a student loan.
http://www.zerohedge.com/news/2012-09-2 ... ns-default

[Higgenbotham]

> As I've said before, all the modern schools of economics are right
> part of the time.

I totally disagree that this is true in any meaningful way.

I just want to mention something I saw the other week. Bernake was testifying that the current economic malaise can't be nearly as bad as that of the 1930s because we have "safety nets" like unemployment compensation and food stamps. Reminded me of his earlier statements that "subprime is contained". As far as being right part of the time, "subprime (wa)s contained" for a while and we still have "safety nets", for now. The real action will start if those "safety nets" break.

This has gone viral with over 2 million hits; it had 26,000 hits when I first saw it 2 days ago.
http://www.youtube.com/watch?feature=pl ... pAOwJvTOio

[Reality Check]

> As I've said before, all the modern schools of economics are right
> part of the time.

I totally disagree that this is true in any meaningful way.

If mainstream economists get anything right, it's only in the same
sense that a stopped clock is right twice a day. The poster child for
economist incompetence and stupidity is Nobel Prize in Economics
Winner Paul Krugman.

If Krugman claims to believe in one school of economics, and that school of economics says the government should run a deficit during recessions, and that a government should run a surplus during recoveries; Then Krugman claims that today's feeble recovery is only a problem because the record government deficits being run during a recovery are not large enough, what does that prove about the mainstream theory Krugman claims to believe in?

John, I believe there is a simpler explanation here. Krugman is simply corrupt and/or immensely incompetent. He does not follow the rules he claims to believe in.

It appears to me Krugman's statements and actions prove little about main stream economic theory, but your theories about the actions of Generation X and the Baby Boomers are supported by Krugman's actions.

First, you must assume Krugman is faithful to some mainstream theory of economics, then his actions mean something about mainstream economics.

The last sentence sums up the problem with evaluating all schools of economics. The real world is complex, and the mainstream theories of economics all assume a much simpler world.