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TranceAddict Investors Club @ Marketocracy (pg. 162)
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| Capitalizt |
| Was it a male topless pic? If so WTF? If not, who cares? I didn't know bas was such a bible thumper. |
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| Communist |
| A pic of the Jerry Springer show. Pretty obvious I was banned just for the hell of it. No rules are posted in the cor, and people post boob pics all the time. |
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| Krypton |
| Why should our currency be beholden to their needs. If we need to increase the money supply because we'r in a recession, then that's what we need to do. They are exactly right. They need a new reserve currency. Our government should now realize the world is no longer going to finance our debt willynilly by holding our bank notes.. |
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| Shakka |
| quote: | Originally posted by Krypton
Why should our currency be beholden to their needs. If we need to increase the money supply because we'r in a recession, then that's what we need to do. They are exactly right. They need a new reserve currency. Our government should now realize the world is no longer going to finance our debt willynilly by holding our bank notes.. |
Are you supportive of trying to defy the business cycle? Are you in favor of punishing the prudent savers by debauching the currency and reducing their purchasing power? It's one thing to spend your rainy-day surpluses, it's entirely another to dig a hole so deep that you might not ever find your way back out. Solving a long-term secular problem with a short-term cyclical solution is likely to have many a negative ramification in the future, imho.
Don't get me wrong, I support what Bernanke has done because the alternative is obviously much worse and is politically untenable. However, I do not wish to be in this situation and believe it will bring on a whole new set of problems at some point. We're masters of kicking the can down the road. |
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| Krypton |
| quote: | Originally posted by Shakka
Are you supportive of trying to defy the business cycle? |
No.
| quote: | | Are you in favor of punishing the prudent savers by debauching the currency and reducing their purchasing power? |
No.
| quote: | | It's one thing to spend your rainy-day surpluses, it's entirely another to dig a hole so deep that you might not ever find your way back out. Solving a long-term secular problem with a short-term cyclical solution is likely to have many a negative ramification in the future, imho. |
So what's your solution when the money supply is falling precipitously to the point where the financial system is on the verge of complete and total meltdown?
| quote: | | Don't get me wrong, I support what Bernanke has done because the alternative is obviously much worse and is politically untenable. However, I do not wish to be in this situation and believe it will bring on a whole new set of problems at some point. We're masters of kicking the can down the road. |
We need a new regulatory paradigm to prevent huge institutions from holding those prudent savers you'r talking about hostage into bailing them out. |
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| Shakka |
| quote: | Originally posted by Krypton
So what's your solution when the money supply is falling precipitously to the point where the financial system is on the verge of complete and total meltdown?
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When was the money supply ever falling, let alone "precipitously?" I'm pretty sure you can go back and look at MZM, M1, M2, etc. and you'll see that it has increased pretty much every month of every year since it has been tracked. In fact, only within the last couple of months has it even stalled (not fallen) as the Fed has ended/ratcheted down some of their liquidity programs.
Methinks you're confusing asset deflation with changes in the money supply. Perhaps if those assets weren't so over-inflated to begin with we wouldn't be in such a quandary.
Financial institutions were on the verge of collapse because they paid no attention to their balance sheets. Firms massively built up the asset side of their balance sheets on a sliver of equity and a mountain of debt. When the value of those assets had to be written down only a small amount it wiped out huge portions of those "venerable" institutions' capital cushions. The money supply had nothing to do with that. If anything, easy money is a major ingredient in what facilitated that whole mess to begin with. And here we are once again, with the Fed with their foot on the gas, throwing gobs and gobs of money at the problem, hoping to staunch the bleeding. That may work in the short-term, but it is not fixing the long-term secular problems of an over-leveraged economy. Hence, we will still have major problems to deal with at some point...we are basically kicking the can down the road. We need a significant pickup in GDP and a significant paying down of our debt burdens if we're ever going to get back to a normalized environment. |
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| Krypton |
| quote: | Originally posted by Shakka
When was the money supply ever falling, let alone "precipitously?" I'm pretty sure you can go back and look at MZM, M1, M2, etc. and you'll see that it has increased pretty much every month of every year since it has been tracked. In fact, only within the last couple of months has it even stalled (not fallen) as the Fed has ended/ratcheted down some of their liquidity programs. |
2007 when Bear Sterns and Lehman Brothers went down. Credit froze, deflation set in.
| quote: | | Methinks you're confusing asset deflation with changes in the money supply. Perhaps if those assets weren't so over-inflated to begin with we wouldn't be in such a quandary. |
The two kind of go hand in hand don't they. Prices go down, deflation, less money floating around?
| quote: | | Financial institutions were on the verge of collapse because they paid no attention to their balance sheets. Firms massively built up the asset side of their balance sheets on a sliver of equity and a mountain of debt. When the value of those assets had to be written down only a small amount it wiped out huge portions of those "venerable" institutions' capital cushions. The money supply had nothing to do with that. If anything, easy money is a major ingredient in what facilitated that whole mess to begin with. And here we are once again, with the Fed with their foot on the gas, throwing gobs and gobs of money at the problem, hoping to staunch the bleeding. That may work in the short-term, but it is not fixing the long-term secular problems of an over-leveraged economy. Hence, we will still have major problems to deal with at some point...we are basically kicking the can down the road. We need a significant pickup in GDP and a significant paying down of our debt burdens if we're ever going to get back to a normalized environment. |
A new regulatory paradigm is needed so too big to fail institutions are split up and leverage ratios brought to a safe level. The sad fact about the government's debt level is that to pay it off, the economy will have to suffer. |
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| Shakka |
| quote: | Originally posted by Krypton
2007 when Bear Sterns and Lehman Brothers went down. Credit froze, deflation set in. |
A source of funding froze up, but there was no change in the money supply.
| quote: | | The two kind of go hand in hand don't they. Prices go down, deflation, less money floating around? |
I think that's an overly simplified definition.
I defer to Jim Grant who in a 2003 piece noted:
| quote: | Contemporary authorities agree on the wrong definition: "A sustained fall in the general price level" )The MIT Dictionary of Modern Economics, 1992); "a sustained reduction in the general level of prices" (The Economosmist Books Dictionary of Econmics, 1998); "a fall in the general price level associated with a contraction of the supply of money and credit" (The McGraw-Hill Dictionary of Modern Economics, 1983).
Only the third of these usages even hints at the definition that comes down from the masters. Von Mises, in "Theory of Money and Credit" (1953), defined deflation as a fall in the supply of money not offset by a fall in the demand for money...
We side with the great Keynes and the very great von Mises. To them and to us, deflation is not "a sustained fall in the price level," but rather a contraction in money or credit. Falling prices are the fruits, or an effect, of deflation |
So while you are correct about deflation, your attribution to money supply is not entirely accurate, imo. Withdrawal of credit from the market didn't result in a contraction in the money supply, though we did see a stark collapse in the velocity of money when credit froze. Maybe it's being a bit overly technical, but M2 has never gone down. |
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| occrider |
| quote: | Originally posted by Shakka
A source of funding froze up, but there was no change in the money supply. |
Methinks you are ameliorating the gravity of the situation at the time. The commercial paper market is not simply one source of funding. It is one of the MAJOR sources of credit in the overall economy ... what's the purpose of the entire concept of money supply if it's not to grant credit? Having a large money supply is useless unless institutions are willing to lend it hence we had a real rate of money supply contraction versus a supposed nominal rate until the fed adopted the role that private markets abandoned. I don't know about you, but back in 2008 I had A LOT of late night meetings with our treasury group. I can't tell you how much cash we had on hand to fund day to day operations then vs. now, but it's SIGNIFICANT even though we were never in any kind of trouble to begin with.
Point being, this isn't merely an issue of "toxic" assets on the balance sheets bringing down shady banking firms. This was an instance of healthy firms almost being brought down because of a collapse of the system as a whole. That's what a lot of crazy libertarians don't realise which is what the fed was trying to counter. If anything, rampant DEREGULATION contributed to the entire cluster. |
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| Shakka |
| quote: | Originally posted by occrider
Methinks you are ameliorating the gravity of the situation at the time. The commercial paper market is not simply one source of funding. It is one of the MAJOR sources of credit in the overall economy ... what's the purpose of the entire concept of money supply if it's not to grant credit? Having a large money supply is useless unless institutions are willing to lend it hence we had a real rate of money supply contraction versus a supposed nominal rate until the fed adopted the role that private markets abandoned. I don't know about you, but back in 2008 I had A LOT of late night meetings with our treasury group. I can't tell you how much cash we had on hand to fund day to day operations then vs. now, but it's SIGNIFICANT even though we were never in any kind of trouble to begin with.
Point being, this isn't merely an issue of "toxic" assets on the balance sheets bringing down shady banking firms. This was an instance of healthy firms almost being brought down because of a collapse of the system as a whole. That's what a lot of crazy libertarians don't realise which is what the fed was trying to counter. If anything, rampant DEREGULATION contributed to the entire cluster. |
Perhaps to clarify, there is nothing that the Fed did during the entire crisis that physically reduced the money supply in any way, shape or form. The sources of credit that froze were not traditional sources of credit. The "Shadow Banking System" essentially disappeared. So while I readily acknowledge that vast amounts of credit have been pulled, I think we can all agree that it was not a traditional tightening of money supply which would result in a traditional disinflation/deflation that I (perhaps incorrectly) interpreted Krypton to be inferring. The money supply that the Fed controls was not lowered. Yes, they stepped in and provided credit where credit disappeared, but we never saw a decrease in the money supply, rather we saw a massive increase in the adjusted monetary base reflected by the Fed's balance sheet.
I don't know if we're even having a constructive dialogue or if we're just arguing minutiae.
As much as I hate to say it, I even take some issue with the statement that "rampant deregulation" was a major contributor to the whole thing as I would argue it's more of a case where there were plenty of regulations in place, rather the regulators were not doing their jobs. It's amazing how lax people and institutions can become when everyone is living high on the hog and feeling euphoric. |
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| Capitalizt |
http://www.washingtontimes.com/news...ington-is-nuts/
| quote: | Washington is nuts
Don't increase entitlements; cut costs
By Tony Blankley
Want to hear a real laugher? Despite the current disharmony in politics, there's one policy on which all of Washington agrees. Republicans and Democrats, House and Senate, president and Congress all agree that after last fall's financial crisis, the federal government has to more closely regulate the financial industry to protect our economy from risk of systemic financial collapse.
Here's the joke. As boom- and bust-prone as high finance always has been and remains, the greatest systemic risk to our economy is not Wall Street. It's the growing federal debt (and weakening dollar) being enacted by those Washington politicians - the ones who want to protect us from Wall Street.
It soon may be not a risk but a certainty of generations-long economic stagnation and hard times as a direct result of "unsustainable" and ever-growing national debt, driven by a federal budget almost half of which is to be paid for each year by borrowing money - primarily from China - and already weakening the dollar such that foreigners are trying to get rid of them any way they can.
Don't take my word for it. In June, the Congressional Budget Office published "The Long-Term Budget Outlook," its first paragraph reading in part: "... the federal budget is on an unsustainable path - meaning the federal debt will continue to grow much faster than the economy over the long run ... rising costs for health care and the aging of the U.S. population will cause federal spending to increase rapidly. ..."
"... Large budget deficits would reduce national savings, leading to more borrowing from abroad and less domestic investments, which in turn would depress income growth ... the accumulation of debt would seriously harm the economy. Alternatively, if spending grew as projected and taxes were raised in tandem, tax rates would have to reach levels never seen in the United States [highest marginal income tax rate so far - 94 percent in 1944-45]. High tax rates would slow the growth of the economy, making the spending burden harder to bear."
And yet, the same Congress and president who want to stop the banks from taking too much risk cannot stop themselves from ever more deficits. Indeed, so intoxicated - nay, hypnotized! - by debt is the current government that it is not even proposing to try to cut back.
Last week saw, at the same time: 1) the world shuddering about the debt-driven, weakening dollar ("The biggest story in the world economy is the continuing fall of the U.S. dollar, or at least it is everywhere outside of Washington, D.C., the place most responsible for its declining value," Wall Street Journal) and, 2) Washington cheering Sen. Max Baucus' health bill spending levels ("Health Care Bill Gets Green Light in Cost Analysis," New York Times)
That's right. The federal government is "giving the green light" for the country to drive to the poorhouse. And drive there, I would argue, by way of the lunatic asylum. Are they nuts? Consider a few details.
Before the Baucus health bill is enacted, $9.3 trillion of newly created deficit already has been added to the national debt. The Baucus bill is considered a triumph of careful budgeting because it may cost just $829 billion - and will not add to that unsustainable deficit because it is to be paid for by cutting Medicare and other programs about $400 billion and raising taxes primarily on health care insurance by about $400 billion.
Now, forget for the moment that even the CBO doesn't believe its own numbers. (Last week, CBO Director Douglas W. Elmendorf wrote to Mr. Baucus warning "... long-term budgetary impact could be quite different if those provisions were ultimately changed." That is, CBO must score the cuts called for by the bill. However, Congress invariably fails to actually implement the painful cuts, but it does keep or increase the benefits. That is why entitlement programs always cost much more than is predicted.)
But let's assume the numbers are real. This is still insane. Remember, until a few months ago, President Obama insisted on passing health care legislation this year (during the economic crisis we are still suffering) because it would lower overall costs - a necessary step for a return to a healthy economy.
But neither he nor Congress could design a bill that saved money. So they are settling for not adding to the "unsustainable" current deficit.
Here's a thought: As shrinking the unsustainable deficit is a critical pre-requisite for a healthy economy, why not just enact the $400 billion of Medicare cuts and $400 billion of health insurance tax increases - thereby reducing the 10-year deficit by about $1 trillion (when you count reduced interest payments) - but don't provide the new entitlement benefits that were the purpose of the bill.
Helping the uninsured might be a nice notion some day, but the first priority now is to avoid permanently destroying our economic capacity - as we are rapidly doing - by the insanity of adding to entitlement programs while the dollar begins to fail and the CBO predicts we will never recover from the current debt and deficit level. So cut the 10-year deficit by that almost $1 trillion.
Then incrementally move the eligibility age for Medicare and Social Security to 70 by 2030. That would reduce their costs by about 3 percent of gross domestic product - which is about what it will take to keep them functioning without bankrupting America. It's a start.
Stop the madness. Don't increase benefits; cut costs. Now. It's doable - except for the fact that Washington is nuts. |
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