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Central Bank Policy is thinly disguised fiscal policy

9/30/2012

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"In both cases (the Fed and ECB), the central bank avoids the charge of deficit funding by simply using a middleman for its primary market purchases. For the Fed, the middleman is banks, for the ECB it is the rescue vehicles. As Pater Tenebrarum notes   however, this is just a semantic trick:
 
"Some people have accused Ben Bernanke of lying when he denied that the Fed  will monetize the government's deficit' in testimony. The chairman may actually  be relying on a technicality here. As mentioned above, the Fed buys already existing bonds, so technically it is merely buying assets that  represent deficits of the past, not current ones."(emphasis  mine)

In practice, there is very little effort expended to hide what is going on.  Consider that on June 13, the Fed bought nearly $5 billion in 10-year Treasury  bonds at 11 AM. Just two hours later, the Treasury auctioned 10-year  notes. The very next day, the Fed bought $2 billion in 30-year Treasuries two hours before  the Treasury auctioned $13 billion in comparable securities. As ZeroHedge dryly noted at the time, the 10-year auction:

"...priced at terrific terms as there was a $4 billion hole created  courtesy of  the Fed if only for 2 hours"

.....
In the mean time, the Treasury bubble is growing larger and larger with each  passing month. A 'correspondent' quoted by Charles Hugh Smith in the above cited  piece notes that
 
"Fed monetizing makes it so that Treasury borrowing doesn't negatively impact  treasury markets and so Treasury rates don't increase."


In other words, the artificial demand created by the Fed is the only thing keeping the Treasury market afloat. If you believe that the Fed will  eventually be forced to wind down its balance sheet (i.e. if you believe that  the central bank's holdings will not simply pile up to the sky), then you can  see how the Fed's actions and balance sheet actually pose the biggest systemic  risk of all."

That's what I said. We are going to end the mother of all bond bubbles with quite the crash. Having moved the entire word to the short end ledge we will all fall off once rates start backing up.
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I finally made it to Youtube

9/28/2012

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I did my first "shared experience" with my class as we danced for 1 minute to Gangnam Style. I am not as good as Ellen but I am out of practice. My thanks to the student who posted it!
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Mish on today's poor US economic numbers

9/27/2012

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Follow the links at the bottom for more discussion. If the US Economy is stable - why did Bernake announce QE Infinity? Are they trying to generate inflation? I still think we are headed for a massive deflationary event as per Hugh Hendry's point that the central bank will not over do things until we have a massive level of deflation.
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Thoreau expresses my view on the latest generation of cell phones

9/27/2012

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"Our inventions are wont to be pretty toys, which distract our attention from  serious things. They are but improved means to an unimproved end. We are in  great haste to construct a magnetic telegraph from Maine to Texas; but Maine and Texas, it may be, have nothing important to communicate.”
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Economists As Marketeers for the Monied Interests

9/27/2012

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Robert Johnson critiques economists and economics much the way I would.
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I echo a quote made by Ronald Reagan

9/26/2012

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Who once said: “I didn’t leave the Democratic Party.  It left me.”
I feel the same way about having once been a conservative.
FT articulates my feelings on the matter
"Conservatives  on both sides of the Atlantic are narrowing opportunity,  concentrating wealth and protecting monopoly interests. The centre right has  almost ceased to do majority politics. It defines national interest in terms of  the already powerful and increasingly abandons the middle and lower classes to  their fate. They are persuaded by past fictions that what is in the interest of  the winners percolates to those below them. In short, conservatives are  unknowingly creating an oligarchy, one which will make us all plebs. By  following the interests of a vested minority, conservatives may not win a  general election  for years. Of course, this is not conservative intention or  wish but the rhetoric should not conceal the reality."

In contrast, it seems liberal flamethrower, Bill Maher, who I frequently disagree with  - but always enjoy, is much more moderate and reasonable than the right.
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FRB Dallas President Sums Up his Opinion of Fed Modelling

9/25/2012

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"FRB Dallas President Richard Fisher, an outspoken critic of the Fed’s  unconventional monetary policy easing programs, is not a voting member of  the  FOMC this year. However, he undoubtedly lashed out at QE3 Forever during  the  latest meeting of the Fed’s policy-setting committee. He shared his  dissident's  views with the public on last Wednesday, September 19, in a
speech before the Harvard  Club of NYC.

His most sarcastic punch line: “We are blessed at the Fed  with sophisticated econometric models and superb analysts. … The truth, however,  is  that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy. Nobody really knows  what will work to get the economy back on course.” It was a not-too-subtle dig  at Fed Chairman Ben Bernanke’s recent Jackson Hole speech, in which he claimed  that the Fed’s econometric models confirmed that the Fed’s previous  unconventional policy measures had worked to boost economic growth and  lower the  unemployment rate, though the jobless situation remained “grave” by  his own  admission. "
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Financial lobbyists are going to gut Dodd-Frank brick by boring brick

9/25/2012

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Matt Taibbi from Rolling Stone.
"To deal with this problem, the Dodd-Frank Act among other things  included a  simple reform. It required the financial advisors of municipalities  to do two  things: register with the SEC, and accept a fiduciary duty to respect  the best  interests of the taxpayers they are advising.


Sounds simple, right? But Wall Street couldn’t have that. After all, if   companies are required to have a fiduciary responsibility to cities and towns,   how in the world can they screw cities and towns? The idea was a  veritable axe-blow to the banks’ municipal advisory businesses."

Seems like the only responsibility the elites are concerned with pertains to the poor for their lot in life. The concept of ethics and responsibility does not extend to the rich and powerful. Just make the unethical legal - and there you have it- our hands are clean. Mr,. Policeman go concern yourself with arresting minorities on petty drug charges -our hands are clean. Mitt -tell us again how the unemployed in the US should borrow $20,000 from their parents and start a business. It is such an inspiriing tale of individualistic entrepreneurship - like your personal story.

Unfortunately, Obama-Geitner-Dems are not any better wrt to FIs.



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I am Here to Throw Cold Water on the Beggar Thy Neighbor Policies of CBs

9/25/2012

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Housing up for 6th month in a row and consumer sentiment up more than expected. But I am the Grinch that stole Christmas.

From Zerohedge:
"The main reason for the surge in consumer "confidence" in September was the near  record surge in sentiment for those aking $15,000-$25,000, which soared from 43.5 to 62.4 in the month, the most since April 2009. And whether this was due  to their forecast of the future, and expectation that things will get much  better, or not, we don't know, what we do know is that half all of
those  people
whose sentiment defined the market tone today, and who may be  quite instrumental in the outcome of the coming election (per Mitt  Romney), have less than $100 in cash savings."

From the Winnipeg Free Press (hat tip Mish):
"Did you smile or cheer when U.S. Federal Reserve Chairman Ben Bernanke  announced Quantitative Easing III (and the markets went up)?

 He just declared war on your job, and the whole Canadian economy. Of course, so did the European Central Bank, the central bank of the Peoples'  Republic of China and others. All of them are engaged in the same practice. They're printing money. Gobs of  it, in programs that have no end point.

Some are doing it to apply stimulus to revive their economies. Some are doing  it to play extend-and-pretend games to hold their banks together. For a country like Canada, with an economy in reasonably good shape, a  government that's not out of control, banks that are healthy and dependent on  exports, it's a declaration of war."

Finally, what about yesterday's news that Germany looks like it is going into recession? How's France doing? How about Japan?

 On corrupt, eliteist wealth from the Book Of Mormon (Take that Mitt Romney)
"In calling the Nephites to repentance, Samuel the Lamanite warned that "the time  cometh that [the Lord] curseth your riches, that they become slippery, that ye  cannot hold them; and in the days of your poverty ye cannot retain them"  (Helaman 13:31). In that day the Nephites would lament, "We have hid up our  treasures and they have slipped away from us, because of the curse of the land.  O that we had repented in the day that the word of the Lord came unto us; for  behold the land is cursed, and all things are become slippery, and we cannot  hold them" (vv. 35-36)."

Enjoy your day.




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Cheap Robotic Workers: The Acceleration of Technology Continues

9/25/2012

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The march of progress seems to be speeding up. (My Thanks to Brent for these and many other links). This won't be good for structural unemployment and inequality. Routine jobs continue to be automated or outsourced. Will increasing trade sanctions be effective given technological changes?
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