Joe's Investo-Blog

http://pragcap.com/those-who-ignore-history

by The Pragmatic Capitalist (pragcap.com)

My position over the last 2 years has been as follows: this is a Main Street debt crisis. I have been highly critical of the government’s incessant interventionist policies over the last few years largely because they ignore the actual problems at hand. First it was Mr. Bernanke saving the banks because he believed the credit crisis started with the banking sector. The great monetarist gaffe ensued. Tim Geithner piled on with the PPIP. FASB jumped on board the bank rescue plan by altering the accounting rules. And then the icing on the cake was the Recovery Act, which, in my opinion, just shoveled money into the hole that had become the output gap, without actually trying to target the real cause of the crisis – those burdened by the debt. In essence, the various bailouts primarily targeted everyone except the people who really needed it.
Read more…

Asset Allocation, Banks, Economics, Financial Crises, Growth Asset Allocation, debt, deleveraging, Economics, economy, EU, fiscal policy, history, strategy, The Administration, US treasury

The Fed is Prepared to Launch Most Radical Intervention in History

By Mike Whitney

www.globalresearch.ca/index.php?context=va&aid=20801

August 28, 2010

The equities markets are in disarray while the bond markets continue to surge. The avalanche of bad news has started to take its toll on investor sentiment. Barry Ritholtz’s “The Big Picture” reports that the bears have taken the high-ground and bullishness has dropped to its lowest level since March ‘09 when the market did a quick about-face and began a year-long rally. Could it happen again? No one knows, but the mood has definitely darkened along with the data. There’s no talk of green shoots any more, and even the deficit hawks have gone into hibernation. It feels like the calm before the storm, which is why all eyes were on Jackson Hole this morning where Fed chairman Ben Bernanke delivered his verdict on the state of the economy on Friday.

Wall Street was hoping the Fed would “go big” and promise another hefty dose of quantitative easing to push down long-term interest rates and jolt consumers out of their lethargy. But Bernanke provided few details choosing instead this vague commitment:

“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

Check. There’s no doubt that Helicopter Ben would be in mid-flight right now tossing bundles of $100 bills into the jet-stream like confetti if he had the option. But Bernanke is Read more…

Bonds, Currencies, Economics, Financial Crises, Inflation/Deflation Banks, congress, Currencies, debt, deflation, economy, fiscal policy, inflation, liquidity trap, monetary policy, quantitative easing, strategy, The Fed, US treasury

…Especially for Currency Issuing Soveriegn States

Escaping the Sovereign Debt Trap: The Remarkable Model of the Commonwealth Bank of Australia

http://www.globalresearch.ca/PrintArticle.php?articleId=20473

by Ellen Brown

The current credit crisis is basically a capital crisis: at a time when banks are already short of the capital needed to back their loans, capital requirements are being raised. Nearly a century ago, the Commonwealth Bank of Australia demonstrated that banks do not actually need capital to make loans – so long as their credit is backed by the government. Denison Miller, the Bank’s first Governor, was fond of saying that the Bank did not need capital because “it is backed by the entire wealth and credit of the whole of Australia.” With nothing but this national credit power, the Commonwealth Bank funded both massive infrastructure projects and the country’s participation in World War I.

President John Adams is quoted as saying, “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” The major conquests today are on the battlefield of debt, a war that is raging globally. Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation Banks, collapse, Currencies, debt, deflation, Economics, exchange rates, history, IMF, inflation, The Fed, trade, US treasury

Money Supply Confuses Deflation’s Confused Proponents
By John Tamny

http://www.realclearmarkets.com/articles/2010/07/27/money_supply_confuses_deflations_confused_proponents_98592.html

The great British political economist John Stuart Mill long ago noted that “the whole of goods in the market” composes “the demand for money.” To put it more simply, money is just the measuring rod that facilitates the real exchange of actual goods and labor.

As such, when production and labor increases, so does the supply of money. Conversely, when both decrease the supply of money declines. To make basic what is basic, money supply’s expansion and decline is a function of production.

This is important in light of all the handwringing among deflation’s confused proponents at present, Ambrose Evans-Pritchard of the Daily Telegraph the most notable in this regard. Watching the “Ms” in decline, Evans-Pritchard notes that they did much the same in the 1930s, and naturally suggests we’re headed for a 1930s style Great Depression.

Assuming we are, it can’t be stressed enough that a decline in the monetary aggregates would be and is a symptom of reduced economic activity, not a driver of same as Evans-Pritchard supposes.

Considering deflation itself, the total perversion of its meaning continues to reach staggering heights. That deflation is always and everywhere a symptom of rising currency values doesn’t seem to concern its true believers despite the fact that the world’s currencies are mostly in decline. That Japan’s deflation was a function of the yen tripling in value against gold (the opposite direction of the world’s currencies today) is wholly ignored by a deflation cult convinced that Japan’s sufferance of an overly strong yen mirrors a period of broad currency weakness. That prices fall all the time thanks to productivity enhancements doesn’t concern its religionists either. That there’s little interest in accessing credit during periods of deflation (borrowers aren’t eager to take out loans that will rise in cost) hasn’t shaken the beliefs of an economic sect that mistakes an inflationary lack of credit for deflation.
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Banks, Currencies, Economics, Inflation/Deflation Asset Allocation, Banks, Currencies, debt, deflation, Economics, exchange rates, fiscal policy, history, inflation, liquidity trap, monetary policy, monetary velocity, quantitative easing, The Fed, US treasury

http://comstockfunds.com/default.aspx?act=Newsletter.aspx&category=SpecialReport&newsletterid=1534&menugroup=Home&AspxAutoDetectCookieSupport=1

We understand that we have discussed the debt problem in this country for what seems to be forever, but we can’t stop talking about it now that the debt is clearly the catalyst for the latest stock market downturn. Debt is discussed by the pundits on financial TV also, but in almost every case the discussion revolves around government deficits relative to GDP or government debt relative to GDP. They are constantly comparing the U.S. government debt to every other country in the world (especially Portugal, Italy, Ireland, Greece, and Spain-PIIGS). We believe that the government debt should be taking a back seat to the private debt which is much larger and must eventually be deleveraged.
Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation, uncategorized Banks, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, history, inflation, liquidity trap, monetary policy, monetary velocity, quantitative easing, The Fed, US treasury

by James Galbraith
May 12, 2010

source: http://voices.washingtonpost.com/ezra-klein/2010/05/galbraith_the_danger_posed_by.html

James Galbraith is an economist and the Lloyd M. Bentsen Jr. chair in government and business relations at the University of Texas at Austin. He’s also a skeptic of the prevailing concern over America’s long-term deficit. With many people now comparing America’s fiscal condition to Greece, I spoke with Galbraith to get the other side of the argument. An edited transcript of our conversation follows.

EK: You think the danger posed by the long-term deficit is overstated by most economists and economic commentators.

JG: No, I think the danger is zero. It’s not overstated. It’s completely misstated.

EK: Why?

JG: What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn’t be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis.

So there are two possibilities here. One is the theory is wrong. The other is that the market isn’t rational. And if the market isn’t rational, there’s no point in designing policy to accommodate the markets because you can’t accommodate an irrational entity.
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Banks, Bonds, Currencies, Economics, Inflation/Deflation Banks, Bonds, congress, Currencies, debt, deflation, Economics, EU, exchange rates, fiscal policy, IMF, inflation, monetary policy, Politics, The Administration, US treasury

http://www.bloomberg.com/apps/news?pid=20601103&sid=aqpASviGyLQc

April 26 (Bloomberg) — The bond vigilantes who punished governments for profligate spending in past years have gone into hiding.

Sovereign bonds yield an average 2.385 percent, about the same as a year ago and below the average of 3.08 percent in 2008 when the credit market seizure led investors to seek the safety of government debt, according to Bank of America Merrill Lynch index data. The cost to borrow is steady even though the amount of bonds in the index that includes nations from the U.S. to Germany and Japan has grown to $17.4 trillion from $13.4 trillion two years ago.

While the debt helped the global economy recover from its first recession since World War II, yields show bond investors aren’t troubled that the growth will spur inflation. Consumer prices excluding food and energy costs rose 1.5 percent in February from a year earlier in the 30 countries that form the Organization for Economic Cooperation and Development, the smallest gain on record.

“The fact that inflation is very well behaved, that provides the cover for central banks to remain on the sidelines and continue to pursue accommodative policies to help the economy,” said Thomas Girard, a senior money manager who helps oversee $115 billion in fixed-income assets with New York Life Investment Management in New York.
Read more…

Asset Allocation, Bonds, Economics, Inflation/Deflation, Markets Asset Allocation, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, inflation, monetary policy, Politics, Regulators, strategy, The Fed, US treasury

Read the entire article here: http://baselinescenario.com/2010/03/04/why-exactly-are-big-banks-bad/#more-6656

Big banks cannot be reined in through some clever tweaking of the rules. The issue before us is intensely political – just as it was in the first decade of the twentieth century (and in Jackson’s era). There is again a confrontation between concentrated financial power and our democracy. One side will win and the other side will lose.

The banks start with a definite edge. The public relations machines of today’s bankers may be even more effective than those of Morgan and Rockefeller – although the campaign contributions and control of the Senate exercised by those titans was immense.

But it is still early days – the Senate legislation expected this week or next will achieve nothing, except make the stakes clearer and motivations more transparent. If the banks win this round, as seems likely, they will become even larger – and more dangerous. At current scale, our megabanks bring no social benefits and great social risks.

Just as a hundred years ago, the consensus on big banks has to change. In this instance, either we break them up or they will soon break us all.

Banks, Financial Crises, Politics Banks, collapse, history, Politics, Regulators, The Fed, US treasury

Recently Sally Hutchins commented on a recent post as follows:

Please continue. So printing more money is creating more debt? Educate me. Love, Sally

Love? Yep. She’s my adorable sister.

Hi Sally:

Let me try to answer your question as succinctly as I can.

“Printing money” is a term used today that nobody really knows what it means. Historically it meant the government physically printed little pieces of paper which were then spent into circulation by buying goods and services the government needed. For example, in the Revolutionary War, the government printed continentals to pay the troops. Allegedly, British counterfieting rendered the currency eventually worthless. Again, when New York Bankers refused Abraham Lincoln additional financing during the Civil War, Lincoln then decided simply to print “greenbacks” to pay the troops. It worked. Merchants accepted greenbacks because Lincoln decreed that greenbacks would be accepted by the government for the payment of taxes. “Greenbacks” remained in circulation for decades and largely contributed to massive subsequent economic growth.

Today, 99 percent of all money in circulation isn’t currency at all, but mere electronic blips or signals recorded on the computerized ledgers of the banking system. Obviously actual printing of money doesn’t really happen anymore in any meaningful way. However, “money creation” is probably a more appropriate term. Money is created when a bank makes a loan. Presto. That’s it. I already know that you’re going to ask Read more…

Banks, Economics, Financial Crises, Inflation/Deflation, Politics Banks, collapse, Currencies, debt, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury, war

Harsh lessons we may need to learn again
By Joseph E. Stiglitz (China Daily)

http://www.chinadaily.com.cn/opinion/2009-12/31/content_9249981.htm

Joseph Stiglitz recounts five “harsh lessons” from 2009:

1. Markets are not self-correcting.
2. Recent Markets failed because too-big-to-fail financial institutions had perverse incentives.
3. Keynesian policies do work.
4. There is more to monetary policy than just fighting inflation.
5. Not all innovation leads to a more efficient and productive economy – let alone a better society.

The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.

The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.

Under the threat of a collapse of the entire system, the safety net – intended to help unfortunate individuals meet the exigencies of life – was generously extended to commercial banks, then to investment banks, insurance firms, auto companies, even car-loan companies. Never has so much money been transferred from so many to so few.
Read more…

Banks, Economics, Financial Crises, Inflation/Deflation, Markets, Politics Banks, collapse, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury

In today’s Senate hearings to confirm the re-appointment of Federal Reserve Chairman Ben Bernanke, Senator Bunning succinctly lays out the greivous mistakes of the Fed in the years leading up to, during, and in the aftermath of the recent financial meltdown. It is hard to refute his argument that the privately owned Fed did nothing for the taxpayers and everything for it’s stockholders, the member banks of the Federal Reserve System.

Statement of Senator Bunning

Four years ago when you came before the Senate for confirmation to be Chairman of the Federal Reserve, I was the only Senator to vote against you. In fact, I was the only Senator to even raise serious concerns about you. I opposed you because I knew you would continue the legacy of Alan Greenspan, and I was right. But I did not know how right I would be and could not begin to imagine how wrong you would be in the following four years.
Read more…

Banks, Economics, Financial Crises, Markets, Politics Banks, collapse, debt, deflation, economy, history, monetary policy, Politics, The Fed, US treasury

This is a transcript of Prof. Joseph Peden’s 50-minute lecture “Inflation and the Fall of the Roman Empire” given at the Mises Institute Seminar on Money and Government in Houston, Texas on October 27, 1984. The original audio recording is available courtesy of the Mises Institute.

Two centuries ago, in 1776, there were two books published in England, both of which are read avidly today. One of them was Adam Smith’s The Wealth of Nations and the other was Edward Gibbon’s Decline and Fall of the Roman Empire. Gibbon’s multi-volume work is the tale of a state that survived for twelve centuries in the west and for another thousand years in the east, at Constantinople.

Yet Gibbon in looking at this phenomenon commented that the wonder was not that the Roman Empire had fallen, but rather that it had lasted so long. And scholars since Gibbon have devoted great deal of energy to examining that problem: how was it that the Roman Empire lasted so long,   Read more…

Banks, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation Banks, collapse, Currencies, debt, Economics, economy, exchange rates, fiscal policy, Gold, history, inflation, monetary policy, taxes, The Fed, US treasury, war

The Secrets of China’s Growth: The Government Owns the Banks rather than the Reverse

By Ellen Brown

“The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. They frankly own the place.” — U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009

While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:  Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation, Markets Banks, collapse, Currencies, debt, Economics, economy, exchange rates, Gold, inflation, monetary policy, strategy, The Fed, US treasury

June 21, 2009
by Gary North

Back in 1973, gold standard advocate John Exter made a phrase famous in hard-money circles: “Pushing on a string.” Exter argued that prices of all assets except gold (he ignored silver) would someday collapse because of the pyramiding of debt. Banks would eventually cease to lend, out of fear of default. That would cause the default.

The FED would inflate the monetary base, he said, but this would not reverse the price decline. The commercial banks would not lend. The FED would therefore push on a string. Its attempt to inflate would fail.

Read more…

Banks, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, deflation, Economics, economy, fiscal policy, Gold, inflation, monetary policy, strategy, The Fed, US treasury

Goldman Sachs in Talks to Acquire Treasury Department
Sister Entities to Share Employees, Money

From The Borowitz Report

In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to Goldman spokesperson Jonathan Hestron, the merger between Goldman and the Treasury Department is “a good fit” because “they’re in the business of printing money and so are we.”

The Goldman spokesman said that the merger would create efficiencies for both entities: “We already have so many employees and so much money flowing back and forth, this would just streamline things.”

Mr. Hestron said the only challenge facing Goldman in completing the merger “is trying to figure out which parts of the Treasury Dept. we don’t already own.”

Goldman recently celebrated record earnings by roasting a suckling pig over a bonfire of hundred-dollar bills.

Elsewhere, conspiracy theorists celebrated the 40th anniversary of NASA faking the moon landing.

And in South Carolina, Gov. Mark Sanford gave his wife a new diamond ring, while his wife gave him an electronic ankle bracelet.

Banks, Humor Banks, fraud, US treasury

To My Clients:

Our accounts are up  5.7 % Y-T-D.
The Dow Jones Average is down 3.75 % 

Very briefly, the administration is soon to engage in massive stimulus fiscal spending while the Federal Reserve continues its massive monetary stimulus activities. While these endeavors always take time to filter into the economy, the stock market and the bond market have recently been somewhat buoyant, not necessarily because an economic recovery is imminent, but possibly because of the monetary stimulus taking place. The U.S. Treasury is making enormous demands on the bond market with the huge amounts of debt it needs to sell to finance the fiscal spending and the Federal Reserve is accommodating the Treasury by purchasing large portions of the U.S. Debt.  Read more…

Economics, Financial Crises, Markets, Portfolio Management Asset Allocation, economy, fiscal policy, monetary policy, performance, Portfolio Management, stock market, Stocks, strategy, The Fed, US treasury

The Treasury’s new website, financialstability.gov is actually not a bad website for getting some actual information about the administration’s efforts to address the financial crises. It gives us some idea, state by state, about where the money is going and where it went. For example, if you click on Utah, you will find that we got an ample share with most of it going to Zions Bank. And going to the transactions page, we find out that our very own local Zions Bank was, after the 9 largest banks, third in line for the next tier of payouts getting $1.4 BILLION. But even that kind of money still didn’t stop its stock price from plummeting from over $32 bucks a share on the day of the award to less than $7 bucks a share within a few weeks.

Hopefully the website won’t devolve into a propaganda tool, but will get better with more and better content.

Very Best Regards,

Joe

Banks, Economics, Financial Crises Banks, collapse, economy, fiscal policy, US treasury