So you're telling me a state run by the prison guard union, a union of mostly high school dropouts, is in favor of building prisons but against education? Shocking.
I think there are better ways to put it. For example in CA they have built 23 new prisons in the last 30 years but only 1 research university. They spend about a billion more housing inmates than they do on higher education. That is the kind of perspective that really tells a story and not buying unnecessary things like aircraft carriers and terrible dams.
So you're telling me a state run by the prison guard union, a union of mostly high school dropouts, is in favor of building prisons but against education? Shocking.
I'm already betting against America.
NASDAQ-100 inverse ETF. I have a 10% buy order trailing stop on that one.
That word. I do not think it means what you think it means.
What is the real inflation rate?
Of course, Americans already know this. All you need to do is go to McDonalds
I'm already betting against America.
NASDAQ-100 inverse ETF. I have a 10% buy order trailing stop on that one.
That word. I do not think it means what you think it means.
What is the real inflation rate?
Of course, Americans already know this. All you need to do is go to McDonalds
This is the type of shit that pisses me off. I know I have corrected you, at least once, on this Texashiker. The FRB does *NOT* buy subprime mortgages, regular RMBS from banks, reperforming RMBS, liquidating trust RMBS. What does the FRB buy? Plain-old agency conforming RMBS, as stated here.
The arguments that CPI does not accurately reflect inflation are not credible. As has been discussed on here numerous times, older calculations heavily utilized home value instead of rent equivalence, etc, and using old measures assumes that American buying habits have remained identical over three decades when just common sense knows that isn't true.
What’s fascinating about QE is that it has no transmission mechanism to the real economy except as a weak can-kicking exercise - and even then only by creating enormous distortions in pursuit of minute "wealth effects." The risk premiums of risky securities have become unsustainably compressed in the process, and the Fed's balance sheet has metastasized to $3.5 trillion - a level that would currently require a nearly $800 billion contraction just to normalize short-term interest rates by a quarter of one percent.
The central effect of QE is not on the real economy, but on financial speculation. The Fed purchases Treasury and mortgage securities, and creates new base money (currency and bank reserves) as payment. This results in a huge pool of zero-interest assets that someone in the economy has to hold at any given point in time. This zero-interest money is a “hot potato” that creates discomfort and encourages a tendency to “reach for yield” in more speculative assets. Undoubtedly, the universal attention to Fed actions has already created a mob psychology where, to use Kindleberger’s words, “virtually each of the participants in the market changes his or her views at the same time and moves as a herd.”
It’s worth observing that the 10-year Treasury yield is also well above the weighted average interest rate since 2010 (weighting by the quantity of Fed purchases), which means that the Fed is underwater on its holdings. Bernanke himself noted at his recent Humphrey-Hawkins testimony that the recent rise in interest rates had wiped out all of the Fed’s unrealized gains, though he feigned ignorance about how much the Fed would lose if interest rates increased by 100 basis points. The math is easy enough, so let’s do it for him. At $3.5 trillion in assets having an estimated duration of about 8 years, against only $55 billion in capital, a 100 point increase in interest rates would wipe out the Fed’s capital five times over. The Fed would probably show an insolvent balance sheet today if its holdings were actually marked-to-market.
The boom of the Minsky model is fueled by the expansion of credit. Minsky noted that ‘euphoria’ might develop at this stage. Investors buy goods and securities to profit from the capital gains associated with the anticipated increases in their prices. The authorities recognize that something exceptional is happening and while they are mindful of earlier manias, ‘this time it’s different,’ and they have extensive explanations for the difference.
“The continuation of the process leads to what Adam Smith and his contemporaries called ‘overtrading.’ This term is not precise and includes speculation about increase in the prices of assets or commodities, an overestimate of prospective returns, and ‘excessive leverage.’ Speculation involves buying assets for resale at higher prices rather than for their investment income. The euphoria leads to an increase in optimism about economic growth and about the increase in corporate profits.
“A follow-the-leader process develops as firms and households see that speculators are making a lot of money. ‘There is nothing as disturbing to one’s well-being and judgment as to see a friend get rich.’ Unless it is to see a non-friend get rich.
“Investors rush to get on the train even as it accelerates. As long as the outsiders are more eager to buy than the insiders are to sell the prices of the assets or securities increase. As the buyers become less eager and the sellers become more eager, an uneasy period of ‘financial distress’ follows. Other words used to describe the interval between the end of euphoria and the onset of what classic writers called revulsion and discredit (or crash and panic) are uneasiness, apprehension, tension, stringency, pressure, uncertainty, ominous conditions, fragility.
We’ve learned all too well that each round of QE has at least enough impact to kick the can down the road for a couple of quarters at a time, at the cost of greater distortions. As thoughtful economists like Lakshman Achuthan and value investors like Jeremy Grantham and Seth Klarman know, this has temporarily made fools out of geniuses and geniuses out of fools. So refraining from any forecast of what will happen in the near term, it’s sufficient to observe that the economic data is not nearly as strong as widely perceived, and the impact of QE on stock prices does nothing to improve the underlying cash flows. The advance of recent months has only made the prospect for dismal long-term equity returns even worse. QE has no ability to improve that situation. At this point, it can only elevate the distortion and thereby worsen the outcome. It’s doubtful that investors who are enjoying the thrill of recent highs will actually realize the benefit of these prices.
It's rather that common sense indicates that CPI does not accurately reflect inflation. History makes clear that skepticism of government numbers (and everything else) is prudent, not aloof or unwarranted.
Manipulated weightings, hedonic quality adjustments, and substation have all put downward pressure on CPI vs the real world price equivalents of what folks encounter in an equivalent basket of goods over the years.
Shadow Stats is a good starting point for anyone interested in the other side of government fudged numbers regarding inflation.
Regarding real world effects of the unprecedented money printing the Fed is engaged in, commonly refereed to as bond buying or "stimulus" this article should get your gears working no matter where you stand.
The arguments that CPI does not accurately reflect inflation are not credible. As has been discussed on here numerous times, older calculations heavily utilized home value instead of rent equivalence, etc, and using old measures assumes that American buying habits have remained identical over three decades when just common sense knows that isn't true.
Correction: the major difference between then and now is that old inflation metrics included food and energy. The modern ways of measuring inflation do not include food and energy because those two things are strongly affected by inflation. Refer to the Big Mac index. A Big Mac is not a house, so why is the price of it going up 3x faster than the official inflation rate?
It's to hurt regular Americans, as usual. Pretty much everything associated with the government is designed to hurt the middle class. The war on the middle class is the only war being won at this time.Why is fed buying MBS to start with? To shore up the market? To promote bad lending? To keep house prices up?
Why is fed buying MBS to start with? To shore up the market? To promote bad lending? To keep house prices up?
What I see going on is banks dumping their MBS to the feds because nobody else will buy them. Either that, or the banks are afraid to sell the MBS to investors.
If the fed losses money so what, just print some more.
If investors lose money, they sue.
But either way, with as much money as the fed is dumping into the market, if something goes wrong, it is going to be wrong in a very bad sort of way.
We are talking enough money to rebuild our entire infrastructure type of money.
It appears to me the fed is betting the family farm on something they hope works. Because if this goes bad, who is going to pay for it?
I got the impression that you were stating that if a carrier or two was cut; there would be no problem then with the budget.
My POV was that the money spent on building the carrier gets recycled multiple times back within the local(s) economy.
I think that's the point he's trying to make.
He'd rather the QE money be spent directly on goods by the government, rather than lent to banks who use it to buy shit from other banks in and endless circle of padding their balance sheets with phony assets that don't exist other than in some ridiculously complex financial transaction.
To some extent, I agree. I'd prefer the government engage in direct stimulus. Lending money (at near 0 interest) to banks to keep the stock market inflated is a really bad idea that makes a few people a lot of money, but does absolutely nothing for 99.9% of people in the US.
The banks aren't lending out the money though. Which is why inflation is pretty tepid despite the printing. JPM has massive reserves. It does reflect the direction of the banking sector as a whole though.
http://www.bloomberg.com/news/2013-...nks-lending-least-of-deposits-in-5-years.html
You get the idea.
Did you see how low mortgage rates were pre-tapering discussion and how much wider they went before? Do you see how low auto loan rates are, or equipment lease rates? Fleet lease rates or construction equipment lease rates?
All of those things are due to QE. Saying it has no effect is utterly silly. That's like saying that because GDP hasn't skyrocketed QE is a failure. However, you don't have the luxury of seeing what would happen if there was no QE. Personally, I think we'd be in much more trouble b/c the financial markets would still be trying to heal.
No, again the complaints against CPI are largely baseless.
As mentioned in many other threads (including ones that I believe involved you), the CPI is adjusted in a transparent manner to more accurately measure inflation. These changes were made after a great deal of economics research indicated that they were superior. The CPI also agrees quite closely with other independent measures of inflation , such as the billion prices index. That's no coincidence, and if you compare the BPI to those older measures of inflation you end up with wildly discordant numbers.
While skepticism of what anyone tells you is important, transparently calculated, independently verified measures are high quality instruments.
I strongly suggest you apply this skepticism to sites such as Shadow Stats and Zerohedge. You will find that their credibility collapses almost immediately when subject to scrutiny.
If you would like to read a detailed rebuttal of the more common attacks on CPI, here you go:
http://www.bls.gov/opub/mlr/2008/08/art1full.pdf
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
Yea, that's well said. Thanks for linkage.
From my perspective CPI has slight of hand in how it measures what is widely believed it measures. Yes, it might be more accurate of something, but it's not of what people believe regarding inflation. A few examples are if a steak goes from 4 per pound to 8 per pound and folks buy chicken instead, CPI would not calculate the rise in steak prices as inflationary in it's final calculation of what's occurring to a shopper because of it's substitution method. Yea the shopper is *not* spending more for dinner, but they aren't eating steak for an inflationary reason (even if that reason is transient, or not transient). If the push to chicken then rises chicken prices and people buy something cheaper, then the inflationary affect on those meats is not calculated due to substitution behaviors. In the end I get how current CPI can be argued as accurate, it's just not measuring what a lot of folks believe it is.
An iPad or computer that costs 600 bux today and 600 bux tomorrow (a year, years later) would be considered deflationary under the current CPI calculation methods due to hedonics. If a new iPad has improvements that are deemed worthy by the calculators of this stuff an actual price increase (say 600 to 650) can be measured as deflationary, even if the old model is no longer available to purchase for 600. I get how this can be argued as an accurate store of a more true inflation, i'm not convinced some of the methods are appropriate.
I see how these adjustments can be argued, its just that they are no longer measuring what is widely believed to be inflationary forces by many people. I'm not sure the wide misunderstanding (i'll grant as a misunderstanding to the idea the current read is more accurate than past reads) is the fault of people who substitute or buy nicer specced but more expensive stuff whose habits are being tracked as non inflationary. The arbitrary nature of some of these adjustments leaves it open to manipulation. There is also a need for government to keep inflation in check, so having some of the adjustments at hand is a red flag for me. This I'm sure you know about my take on these things
Good video regarding the banking sector,... our monetary system mainly for which the Fed is instrumental. Some overly dramatic dressings can be tuned out, the core of money creation and it's flow is there. Yea, the money gets spent, it always gets spent, but along the way a lot of folks take helpings and there is a price to pay for those greedy hands.
Here
It explains the function of our current banking system and the translation of our money through it. Immediately reminded of the famous quote from Henry Ford,
Plenty of intelligent people can tie some of whats presented in the vid to obvious reasons for the current Feds actions and maybe figure out some of the non obvious ones. I'll admit that deflation in our monetary system is very bad for a number of reasons, but the reason for that is tied to a system that clearly serves a small class of people very very well at the expense of everybody else. Whether we are getting the balance in this existing system right and in the end achieving somewhat fair/prudent balance for everyone in the end is an endless and worthwhile debate. We do have concrete evidence that the very rich are doing quite nicely since QE began, and everybody else,... not so much. The argument as I understand it for the current solution of endless QE,.. is that under our current monetary system that everybody else would be worse off than they are without QE. It's a nice move to keep a juicy status quo for the well off. QE is also absolutely essential to keeping the ultra wealthy (50Mil+) to keeping their fortunes intact. These are the people who don't necessarily work so much for a living as they own stuff for a living.
A lot of that has to do with the prime rate. QE might have something to do with it, but the prime rate is the main factor in interest rates.
Regardless of all of that, QE is spending enough money year to just about rebuild our entire infrastructure.
And we are still in a recession?
Just one month of QE is enough to create over 120,000 jobs for 9 years building super dams. Where has the other 12+ months gone? Not that we ned to build dams, I am just using that as an example.
Legend as usual gives good information but I can't help but remember "Take sub-prime mortgages bundle into MBS voila AAA rated credit security- 2007"
"Take sub-prime mortgages bundle into MBS everyone defaults! -2008"