The debt fueled bubble and the recession that followed

As we had often come back to discussing economic benefits/impact of sports I thought it was about time for an economic discussion forum.
Peter
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Re: The debt fueled bubble and the recession that followed

Postby Peter » Tue May 01, 2012 2:45 am

Outstanding speech at the Fed by Robert Wenzel. MSM completely ignored this, but thankfully the influential blogs are covering it.


I ask, is the Chairman using the United States economy as a lab with Americans as the lab rats to test his intellectual curiosity about such things as Operation Twist?
...
In conclusion, it is my belief that from start to finish the Fed is a failure. I believe faulty methodology is used, I believe that the justification for the Fed, to bring price and economic stability, has never been a success. I repeat, prices since the start of the Fed have climbed by 2,241% and there have been over the same period 18 recessions. No one seems to care at the Fed about the gold supposedly backing up the gold certificates on the Fed balance sheet. The emperor has no clothes. Austrian Business cycle theorists are regularly ignored by the Fed, yet they have the best records with regard to spotting overall downturns, and further they specifically recognized the developing housing bubble.
...
The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out.

Again, thank you for inviting me. You have prepared food, so I will not be rude, I will stay and eat.

Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats.


The complete speech transcription is here.

Also, Fed speech, the details.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Tue May 01, 2012 3:33 am

Inflation gone wild. Look how much cheaper everything used to be.

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Re: The debt fueled bubble and the recession that followed

Postby PKBasu » Wed May 02, 2012 10:40 am

Things were cheaper, and we all earned much less income. The world has got a lot more prosperous over time (as indeed have most Americans). Thankfully, the "Austrians" weren't in charge in any economy since about 1896. Only in the financial markets do people believe these weird theories about hyperinflation and the supposed glories of the gold standard. See Martin Wolf's sensible article in the opinion page of the Financial Times today. Hyper-ventilating like this fellow Wenzel (and our dear friend Peter) is really a waste of time.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Thu May 03, 2012 2:17 pm

PKBasu wrote: The world has got a lot more prosperous over time (as indeed have most Americans).


PK, This must be the drivel you discuss on your whirlwind tours with the hedge fund managers. You are clueless about what is going on in mainstream America. Here are some hints. Land of paranoia. Land of debt. Extend and pretend.

Am well prepared for what is coming. So not hyper-ventilating, just presenting the facts. Here is another comment that describes the world of high finance you live in.

Modern day commodity trading strategy: Borrow from Fed at 0% ... leverage the hell out of everything ... when that fails, develop an exotic hair brained derivative strategy to bet the farm ... then when you lose everything, steal your customer's funds ... go before Congress and say things were chaotic and you have no idea where the money is ... then thumb your nose at the entire world and say "**** all ya's"

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Re: The debt fueled bubble and the recession that followed

Postby jayakris » Thu May 03, 2012 2:28 pm

Ok, cool it, friends. PKB got under Peter's collar with the "hyperventilating dear friend" comment, and Peter is back with a "cluless" comment. Both were unwarranted, and perhaps Peter went a little too far too. But I will consider you both even for now, and will leave the two posts in, rather than editing or deleting (we moderators hate censoring) --- but the transgressions of our usual civil discussion boundaries have been noticed by this moderator on behalf of the many readers here who I believe respect the comments from both of you on such matters, though without getting at each other. So, any further personal attacks on each other will be mercilessly edited out. Again, to quote the great Rodney King, "can we all get along?" ... Fair warning from the moderator, Jay

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Thu May 03, 2012 3:48 pm

Fair enough, Jay. i don't take any of these comments personally (took a long time to learn that) and don't insult anyone purposely. Feathers will be ruffled. That is the nature of discussion. A message board also misses all the hand waving.

Back on topic. From a book review on the decline of America. i managed to finish this book in one sitting (~3 hours).

In a tradition stretching back to de Tocqueville, sympathetic foreigners are often the keenest observers of American life.

Wages for most people are stagnant or declining and economic insecurity has soared as more and more risk (retirement, health care, etc) is transferred from employers to individuals.

This has become the age of the 'disposable worker' - lawyers, accountants, and engineers included. Annual incomes of the bottom 90% of families have risen only 10% in real terms since 1973, while incomes of the top 1% have tripled. Between 2002 - 2007, 2/3 of income growth went to the top 1%, while the top 0.1% gained 1/3 of the growth..

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Wed May 09, 2012 4:19 am

Central bankers under siege by Raghu Rajan

But it is also important to recognize that the path to a sustainable recovery does not lie in restoring irresponsible and unaffordable pre-crisis spending, which had the collateral effect of creating unsustainable jobs in construction and finance.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Sat Jul 21, 2012 9:51 pm

The Bernank is cornered. Couldn't happen to a nicer guy. A comment from Zerohedge today elucidates the current situation very well.

Food crop commods are exploding and refined gasoline prices at the pump are causing pain at present level. If Bernank does QE3 in any significant way, it'll literally be the spark that sets fire to food and gasoline prices, and at a time when moribund economy is least able to filter it without it causing even faster and more widespread consumer deleveraging, especially in anything discretionary.

I'm not saying The Bernank will or won't further break all markets (equities, bonds, commods, etc.) by engaging in more significant asset purchases. it's getting dicey when the costs of doings so are higher than ever and any alleged benefits of doing so are rapidly shrinking. There can be no additional utility to consumption by driving interest rates any lower.

All QE3 would do is doom Obama as gas, utility and food prices would soar, soaking the already feeble consumer, who is already quite pissed.

Bernanke literally can't do anything remotely resembling QE3 in any form (LSAP, tnote purchases) without causing a spike in gas, food and utility prices.

This is what happens when fractional reserve banking charlatans intervene in radical ways with the clearing function of markets by implementing idiotic, counter-productive monetary policy, and then break the markets.

Fiat games.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Fri Sep 07, 2012 5:29 pm

Bernanke as a kid (circulated on WS today after the Jobs report)
Image

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Re: The debt fueled bubble and the recession that followed

Postby kujo » Fri Sep 07, 2012 6:22 pm

Well, as long as they burn all of that paper money as soon as it hits the ground - we are okay in terms of inflation or other related concerns!

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Re: The debt fueled bubble and the recession that followed

Postby kujo » Thu Sep 13, 2012 8:55 pm

here we go. and this time it is not QE3, more like QE forever!!

http://www.cnbc.com/id/49022934

What the Fed did today was announce that its policy was not based on a forecast of things getting worse—but on a desire for things to improve faster. In short, it announced that the central bank intended to change the pace of recovery.
This is a bold new world for Fed policy.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Thu Nov 22, 2012 8:32 pm

Michael Burry's UCLA Economics Commencement address

..When the entitled elect themselves, the party accelerates, and the brutal hangover is inevitable.

..Life is not that short. Life is well and long enough for you to come to regret any activity or habit involving exchange of long-term risk for short term gain... Of course when you encounter the opposite-- short term risk exchanged for long-term benefit-- consider hitting that button again and again and again.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Fri Feb 15, 2013 12:47 pm

Has anyone noticed an uptick in inflation lately? Also the disconnect between the capital markets and the real economy. For folks who actually live in the US, that is (not the armchair economists).

Insightful comment on deflation from Popo on ZH this morning.

The reason deflation is intentionally portrayed as the greatest evil (and the reason governments always prevent it from happening) is that deflation destroys those with leverage. "Leverage" is a double edged sword. Leverage makes the rich richer under an inflationary regime, but tears them a new asshole under deflation.

Deflation would actually help all salaried workers enormously, but it absolutely obliterates banks which use large amounts of leverage to maximize profits.

So once again the banking system wins. The policy of all governments to inflate rather than deflate is largely a bid towards the true overlords of government: Banks and the wealthy.

Inflation is the primary means by which the poor can be robbed and the rich (who not only own assets whose value grows with inflation, but use large amounts of leverage) grow much richer. Inflation is at the very core of the great scam.

Deflation would represent a loss for the ruling classes. They will fight it tooth and nail -- and use whatever propaganda is necessary to convince this public that deflation is 'bad'.

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Re: The debt fueled bubble and the recession that followed

Postby Peter » Fri Mar 01, 2013 12:50 pm

Study: Upper class behavior and selfishness

While this study is about driving etiquette, the most natural correlation is really the thieves on Wall Street.


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