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The American Empire Is Bankrupt (pg. 4)
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| atbell |
That's a speach from May 2008, before Lehman Bro., before Fanny / Freddie, before AIG, before TARP and TALF, etc. etc. etc.
Why is it still relevant?
I find it interesting that you read the dallas fed releases. Is there any particular reason for that? I've concentrated on the Board of governours releases for the sake of trying to limit my reading. |
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| jerZ07002 |
| quote: | Originally posted by atbell
The US is not able to raise unlimited amounts of dollars, there is a breaking point at which the damages to the economy based on the continued printing of money will be assesed to be higher than the damages to the economy of defaulting on debt. At that point there will be a default on US treasury bills. |
you've said this numerous times, but i can't conjure a situation in which it would be more beneficial to the US to WILLFULLY default than it would be to print money to pay off the debts. Here are the consequences as I see them:
1) Paying off debt by printing money - causes inflation, causes increase in interest rates to compensate for loss of value due to inflation.
2) willfully defaulting - causes increase in interest rate due to default risk (much harder to quantify than inflationary risk, and has a longer term impact); causes firesale of treasuries resulting in significant decrease in value, including those treasuries held by nations that are complaining about the inflationary risk (clearly this is a huge obstacle to overcome for your theory to hold true); firesale causes an increase in money supply as holders are monetizing their treasuries, and fed is purchasing treasuries to prop up the value in a feeble attempt to manage interest rates, and the US government is purchasing the treasuries to decrease its overall borrowing costs. The combination of interest rate increase and sale of treasuries will result in inflation in this situation, but the risks seem much greater.
| quote: | Originally posted by atbell
I must remind you that US treasury secretary Tim Geithner was laughed at by a room full of Chinese students, in the same way Iran's president was laughed at by US students, when he told them that investments in the US were safe. |
I'm not sure whether you have ever studied with chinese students, but 1) the stereotype about asians is not true (i.e., they aren't any smarter than any other demographic, in fact, FOB asian students at my school were actually nowhere near the top), and 2) even the best chinese student had a meager grasp of english (or if geitner was speaking chinese, i'm sure his chinese had a significant potential to be confused in translation). |
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| culorut |
Just ing WOW!
Is the United States Bankrupt?
Laurence J. Kotlikoff
Is the United States bankrupt? Many would scoff at this notion. Others would argue that financial implosion is just around the corner. This paper explores these views from both partial and general equilibrium perspectives. It concludes that countries can go broke, that the United States is going broke, that remaining open to foreign investment can help stave off bankruptcy, but that radical reform of U.S. fiscal institutions is essential to secure the nation’s economic future. The paper offers three policies to eliminate the nation’s enormous fiscal gap and avert bankruptcy: a retail sales tax, personalized Social Security, and a globally budgeted universal healthcare system.
Federal Reserve Bank of St. Louis Review, July/August 2006, 88(4), pp. 235-49.
http://research.stlouisfed.org/publ...7/Kotlikoff.pdf |
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| jerZ07002 |
The fed is beginning to reduce access to credit
| quote: |
Fed Trims Emergency Lending Programs as Crisis Wanes (Update2)
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By Michael McKee
June 25 (Bloomberg) -- The Federal Reserve will let one of its emergency programs expire and trim two others in a sign that improving financial markets allow a first step toward ending its unprecedented interventions.
The three programs provide cash or Treasuries to securities brokers and money-market funds and were authorized under a provision allowing special loans under “unusual and exigent circumstances.” Five programs, including currency swaps with other central banks, were extended by three months to Feb. 1, the Fed said in a statement in Washington.
Today’s announcement comes a day after Chairman Ben S. Bernanke and his colleagues doused speculation they would pump more money into the economy to hold down interest rates. Officials expect to wind down the emergency-credit facilities as long as stresses “moderate as expected,” the Fed said today.
“They backed away pretty gingerly but still are backing away,” said Michael Feroli, a former Fed official who’s now an economist at JPMorgan Chase & Co. in New York. “The crisis is abating and the worst is behind them. In some areas, market functioning remains impaired. Things are better. Better doesn’t mean normal but better. They don’t want to back away too abruptly.”
TALF Decision
The Fed postponed a decision on one of its effort to restart the market for securities backed by consumer and commercial property loans. The Term Asset-Backed Securities Loan Facility, which forms part of a broader effort with the Treasury to address as much as $1 trillion of distressed assets on banks’ balance sheets, currently is scheduled to end Dec. 31.
“Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time,” the Fed said in its statement today. Officials will continue to “monitor closely” the need for their facilities, the central bank said.
The Fed didn’t announce today’s steps in tandem with its Federal Open Market Committee statement on monetary policy yesterday because it needed to coordinate the extension of the swap lines with other central banks, a Fed official told reporters on a conference call.
Reflecting easing funding pressures among the nation’s banks, the Fed will cut the size of credit auctioned under the Term Auction Facility, which was set up in 2007 and designed to provide cash to commercial lenders. “Credit extended under that facility has been well below the offered amount,” the Fed said.
Cash for Banks
Biweekly TAF auctions will be reduced to $125 billion from $150 billion, effective July 13. If market conditions continue to improve, “TAF funding will be reduced gradually further,” the Fed said. The TAF doesn’t have an expiration date.
Auctions under the Term Security Lending Facility, which makes securities available to primary bond dealers, will also be scaled back to a maximum of $500 billion from the previous $600 billion.
So-called Schedule 1 TSLF auctions will be suspended effective July 1. That part of the program loaned out Treasuries in return for collateral including federal agency debt and agency-guaranteed mortgage-backed securities.
TSLF Schedule 2 auctions, where collateral accepted also includes investment-grade corporate, municipal, mortgage-backed debt and asset-backed securities, will be conducted every four weeks, instead of every two weeks, and the total amount offered will be reduced to $75 billion.
TSLF Fades
The TSLF Options Program will be suspended effective with the maturity of outstanding June TOP options, the Fed said. Again, the Fed is prepared to scale back the program further as market conditions improve, the statement said.
While there are no outstanding loans under the Primary Dealer Credit Facility, the Fed extended that resource through Feb. 1. The PDCF was set up in March last year at the time of the collapse of Bear Stearns Cos. to provide direct loans to securities dealers.
The PDCF will remain “in the near term, while financial market conditions remain somewhat fragile,” the Fed said. The central bank official told reporters that one concern is possible funding strains that can typically arise at the end of the calendar year.
Meantime, the Fed put off the expiration of currency-swap programs with other central banks to February. The amount outstanding under the swaps agreements has dropped to less than $150 billion from a peak of more than $580 billion in December.
Dollars for Europe
The Fed first entered into the agreements in December 2007 to increase the supply of dollars available to banks overseas as the liquidity crunch rippled across the globe.
Swap-lines exist with the central banks of Australia, Brazil, Canada, Denmark, Japan, the U.K., euro region, South Korea, Mexico, New Zealand, Norway, Singapore, Sweden and Switzerland. The Bank of Japan will consider an extension of its dollar liquidity swap and the foreign-currency liquidity swap arrangements with the Fed at its next Monetary Policy Meeting.
The cost of borrowing privately in dollars fell today to the lowest in at least 23 years. The London interbank offered rate, or Libor, that banks say they charge each other for three- month loans, was 0.60125 percent today, the lowest since the British Bankers’ Association began publishing Libor fixings in 1986.
Commercial Paper
Two Fed programs offering liquidity to the commercial paper market are being scaled back.
The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) will have a redemption threshold before a fund can sell asset-backed commercial paper (ABCP) that would be eligible collateral for AMLF loans to depository institutions and bank holding companies.
A money-market fund would have to experience outflows of at least 5 percent of net assets in a single day or at least 10 percent in five days to benefit from the program.
Another initiative to help money-market funds was never used and will be allowed to expire. The Money Market Investor Funding Facility was established after the Reserve Money Market Fund fell below a net asset value of $1 following the bankruptcy of Lehman Brothers Holdings Inc. in September.
While the separate Commercial Paper Funding Facility will be extended to Feb. 1, “interest rates posted on the CPFF are at levels that are increasingly unattractive for many borrowers as market conditions improve, and accordingly usage of the CPFF is declining fairly steadily,” the statement said.
“These are steps - modest steps and not unexpected - towards normalization,” said Ciaran O’Hagan, a fixed-income strategist at Societe Generale. “The measures will reduce, a little, fears that the Fed’s generosity is excessive.”
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http://www.bloomberg.com/apps/news?...d=acr1J5.mPdNw# |
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| Capitalizt |
Pshh...That's sorta like extending a bucket to stop a broken dam. ;) |
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| jerZ07002 |
| quote: | Originally posted by Capitalizt
Pshh...That's sorta like extending a bucket to stop a broken dam. ;) |
it has to start somewhere. when that damn was being built it didn't just magically appear. small steps were taken in the beginning to build the foundations, etc... |
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| culorut |
| quote: | Originally posted by Capitalizt
Pshh...That's sorta like extending a bucket to stop a broken dam. ;) |
:stongue: :stongue: |
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| culorut |
After they have now raped the USA out of Trillions of dollars since 1913?
Got to start hiding what they were really doing at some point......
:stongue: :stongue: :stongue: :stongue: :stongue: |
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| Krypton |
Hmm, sounds pretty bullish. After all this is said and done, Bernanke will be solidified as probably the best Fed chairman ever. Give it 5-10 years. He'll be reappointed. Check this out.
http://en.wikipedia.org/wiki/Bernanke_Doctrine |
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| DOOMBOT |
| quote: | Originally posted by atbell
That's a speach from May 2008, before Lehman Bro., before Fanny / Freddie, before AIG, before TARP and TALF, etc. etc. etc.
Why is it still relevant?
I find it interesting that you read the dallas fed releases. Is there any particular reason for that? I've concentrated on the Board of governours releases for the sake of trying to limit my reading. |
I thought it was a good speech and wanted to share it for the good of the group. I also do not believe that our country will ever pay back its debts and the numbers that Fisher talks about, in regards to Social Security and Medicare for example, help put things into perspective. How our politicians think that they can ever repay their debts and also continue to try and pay for these types of programs here at home is just mind boggling.
To answer your second question, I like to read from many different sources. |
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| culorut |
The latest on the honest Federal Reserve. They just keep getting better and better with their bull.
Grilled on Merrill, Bernanke defends Fed 'Integrity'
Thursday June 25, 2009
Federal Reserve chief Ben Bernanke faced a grilling in Congress Wednesday over the rescue of investment giant Merrill Lynch but argued that the Fed acted "with the highest integrity" on the matter.
Bernanke was summoned to a House of Representatives hearing to explain the Fed's actions in the Bank of America purchase of the Wall Street group, a deal that nearly collapsed when the extent of Merrill's losses were revealed.
Some lawmakers have said the Fed kept other regulators in the dark about key issues, while others said the central bank and Treasury pressured Bank of America to finalize the deal after it wanted to walk away.
Bernanke told the panel that the Federal Reserve "acted with the highest integrity throughout its discussions with Bank of America regarding that company's acquisition of Merrill Lynch."
Bernanke acknowledged that the deal, announced last September, ran into trouble on December 17, when Bank of America learned of "significant losses" at Merrill Lynch for the fourth quarter and threatened to walk away, citing a "material adverse" clause or MAC.
Bernanke said he "expressed concern that invoking the MAC would entail significant risks, not only for the financial system as a whole but also for Bank of America itself."
In the face of a barrage of questions from lawmakers, Bernanke denied that he had threatened to oust Bank of America chief executive Kenneth Lewis and pressured the banking giant along with then-Treasury secretary Henry Paulson.
Representative Jim Jordan asked: "Do you see how a reasonable person could reach ... the conclusion that there, in fact, was this pattern of pressure from the government?"
Bernanke replied: "No, not if you're sufficiently informed. As I said, I did not tell Mr. Paulson to convey any threats."
Asked later about the Fed's aid of 20 billion dollars for the deal, Bernanke said, "I did not promise any specific amount of money."
He added that the amount of funds pledged "was the commitment of the government to work in good faith with Bank of America to develop a contingency plan that would assure the viability of the company in case of financial crisis."
As part of another exchange, Representative Dan Burton asked: "Why did you keep the SEC (Securities and Exchange Commission) in the dark?" on the Merrill problems.
The Fed "did not keep the SEC in the dark," Bernanke replied. "We were working carefully and closely with our other regulatory agencies."
But some lawmakers expressed concern about the way the matter way handled, particularly the last-minute deal for 20 billion dollars from the US government to help Bank of America absorb Merrill Lynch.
"In short, Bank of America's acquisition of Merrill Lynch began in September 2008 as a private business deal, and was completed in January 2009 with a 20 billion dollar taxpayer bailout," said House Oversight Committee chairman Edolphus Towns in his opening statement.
Representative Dennis Kucinich lamented that "the Fed's leadership orchestrated an aid package that attached no meaningful conditions to the money."
Kucinich added: "The Fed required no changes whatsoever in Bank of America's deficient corporate leadership. The Fed even gave Bank of America more money than Ken Lewis had originally asked for."
Kucinich said the case is important in view of the proposal by the Obama administration to boost the power of the Fed in helping avert failures of companies that pose a "systemic risk" to the financial system.
"The Fed's decision-making process in the Bank of America-Merrill merger makes the case for a significant increase in accountability at the Fed," he said.
"We can't afford to make the Fed a super-regulator, as some have proposed, without also increasing its transparency."
Congress opened the inquiry after documents released by New York state Attorney General Andrew Cuomo indicated that top US Treasury and Federal Reserve officials threatened to push out bank management and board members if the takeover were not completed.
The documents also showed regulators cautioned Lewis not to disclose the extent of Merrill's troubles because of fears of a "disaster in the financial markets."
http://rawstory.com/news/afp/Grille...s_06252009.html |
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