Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

[jk]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

This is the crux. However as negative real rates are eroding the real capital base, and (in the UK) a lot of govt liabilities are effectively inflation linked, I don't see that growth in tax receipts can outrun growth in expenditure. I don't think you can print to get ahead of your expenditure. Continuing to try is the feedback loop I am concerned about.

Further, as I alluded to, QE is inflating asset prices, not wages. This is not reducing the private debt burden since those suffering the debt burden are not those with large stock portfolios or houses. The wealthy's marginal propensity to spend is low. Thus I don't think QE will reduce the read private debt burden either, or raise the tax base usefully.

i agree that qe alone is not likely to be successful. fiscal policy must be used, not just monetary policy. right now the oecd gov'ts are still stuck foucused on deficits, and thus "austerity." unfortunately, i think it will take another recession and even worse economic conditions before the gov'ts of the u.s., eu, uk give up on the austerity idea and start spending in earnest. well-targeted expenditures on infrastructure - not just the usual roads and highways here in the u.s., but electric grid, public transit, communications - can be beneficial by both providing immediate employment and laying the foundation for future growth. whether fiscal stimulus will in fact be well-targeted or just the usual piles of pork remains to be seen, but one can hope.... either way, however, this kind of spending puts money into the real economy, and into the pockets of people who will spend it, not just into excess reserves held at the fed and into the financial markets.

===

ps re indexed liabilities- the key here will be continued manipulation of the official indices, so that they don't in fact fully reflect the inflation in the economy. thus all else equal, these liabilities will grow more slowly than nominal gdp. the demographics work against the "all else equal", of course, but the manipulated indices will still mitigate the growth of the entitlement liabilities. in the u.s, the biggest issue will be getting control of medical expenditures. i think obamacare will just accelerate the medical spending crisis, and it remains a major issue in our not-too-distant future.

[c1ue]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

I don't see how we would get there. Weimar Germany was ruined by war and then what remaining industries it had were occupied by foreign powers so they could ensure they got paid in value. Zimbabwe completely broke down economically as a result of a mad man at top wildly destroying industries through redistribution programs. Never mind it was not particularly stable or in good shape before that.

Actually your characterization of Weimar is incorrect. Weimar wasn't ruined by war directly, it was ruined by a massive debt forced upon it as reparations for a war.

The occupation was much later - and was one of the creditor nations ensuring that they got paid in 'good' currency.

The proximate issue with Weimar was massive debt - but it was different because said debt was in other nation's currency/gold.

As for Zimbabwe - what exactly is different about TARP, TBTF, asset inflation and tax policies favoring the 1%, etc etc vs. what Mugabe did? Seems to me mostly a question of targeting.

And to be fair, I do agree with EJ/iTulip that hyperinflation is not guaranteed or even likely. On the other hand, my view of human nature is far less optimistic and has been correct thus far.

Hyperinflation if it comes will be due to a long series of policy errors and political shortsightedness - neither streak of which has any glimmer of being broken to date.

[Chris Coles]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

i agree that qe alone is not likely to be successful. fiscal policy must be used, not just monetary policy. right now the oecd gov'ts are still stuck foucused on deficits, and thus "austerity." unfortunately, i think it will take another recession and even worse economic conditions before the gov'ts of the u.s., eu, uk give up on the austerity idea and start spending in earnest. well-targeted expenditures on infrastructure - not just the usual roads and highways here in the u.s., but electric grid, public transit, communications - can be beneficial by both providing immediate employment and laying the foundation for future growth. whether fiscal stimulus will in fact be well-targeted or just the usual piles of pork remains to be seen, but one can hope.... either way, however, this kind of spending puts money into the real economy, and into the pockets of people who will spend it, not just into excess reserves held at the fed and into the financial markets.

Once again, I keep coming back to my own viewpoint; that there is ample money available, it is simply in the wrong place. That decades of attempts to use either fiscal or monetary policy have only widened the gap between what one might describe as the economics of the stratosphere and the reality down at the grass roots.

The underlying problem is a grossly under-capitalised general economy. That now, by far the majority of what one might once have described as the hidden prosperity of the nation, (any nation), that in turn, was the underlying source of equity capital investment into new very small businesses, and thus new job creation; has now been drained out into the bond markets to fund the long term borrowing needs of central governments.

This entire debate is about the needs of government. Even to the point, as here with jk, (not a criticism), that fiscal policy will determine the entire function of what is NOT a government function; the creation of general prosperity of the general population; by the general population.

What seems to have happened, very slowly, almost imperceptibly, has been the destruction of the capability of the general population to adequately capitalise new job creation.

The answer being proposed instead of QE is to borrow even more money and spend it on government inspired infrastructure to generate prosperity. What I will keep pressing for is to take a major proportion of the money ALREADY in circulation within the external monetary system, junk, and there will be no argument that there is a lot of it about, and convert that junk into a vanishing bond to be used entirely for new very small business creation.

In effect, to transfer a substantial proportion of the value drained OUT of the grass roots economy; and place it back where it came from.

That does not require; any new tax income; any further government borrowing; plus ALL the investment is immediately placed into new small business bank account deposits into the main street, (High Street here in the UK), banking system.

Neither fiscal, nor monetary policy has achieved any long term stability, generally increased prosperity, within the general population, for decades. It is surely time to try something new?

[Slimprofits]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Monday is a Bernanke Speech Day:

Bernanke aims to recapture Fed debate

September 30, 2012|Greg Robb, MarketWatch

Federal Reserve Chief Ben Bernanke is likely to use a speech Monday to try to focus the market’s attention back on the central bank’s aggressive easing policy and away from the doubts about the policy, Fed watchers say...

[ProdigyofZen]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Edited for accuracy.

But it is beginning to occur in Iran. http://www.zerohedge.com/news/2012-1...ency-real-time

Due to the sanctions put on Iran by the US on NYEs. Starve the Iranian regime of US dollars and trade partners and watch it implode. The US knows exactly what it is doing by pushing the country of Iran outside of the IMS system.

[Chris Coles]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

But it is beginning to occur in Iran. http://www.zerohedge.com/news/2012-1...ency-real-time

Due to the sanctions put on Iran by the US on NYEs. Starve the Iranian regime of US dollars and trade partners and watch it implode. The US knows exactly what it is doing by pushing the country of Iran outside of the IMS system.

Please correct me if I am wrong; but surely history has taught us that pushing a nation to the brink financially has consequences. We all need to remember that we all did that to Germany after WW1 ........

[Polish_Silver]

Iran and IMS

Please correct me if I am wrong; but surely history has taught us that pushing a nation to the brink financially has consequences. We all need to remember that we all did that to Germany after WW1 ........

I'm not sure Iran will lose this one. There are more dollars than oil in todays world.
Aren't piplines being built which will circumvent Europes sanction of Iranian oil?

Haven't Russia and China already started transactions using thier own currencies?

I think Iran has "friends".

[Chris Coles]

Re: Iran and IMS

I'm not sure Iran will lose this one. There are more dollars than oil in todays world.
Aren't piplines being built which will circumvent Europes sanction of Iranian oil?

Haven't Russia and China already started transactions using thier own currencies?

I think Iran has "friends".

And is that last point exactly the issue? What I see from the whole shebang is exactly that point. We make friends by trade; not war or threats of war.

At the end of the day, if we threaten every time, sooner or later the recipient makes friends with someone else and they all walk away. A VERY good example today is the people of Syria being bombed into oblivion and threats are meaningless.

By constantly threatening; the supposedly free world has instead lost the friendship of nations that now consider they are all friends together; against the supposedly free world; that freedom stems from trade between friends; rather than from being threatened.

The long term consequence of the now clearly failed foreign policy of the United States is that those constantly "threatened" gather friends that only need to offer trade to gain influence. Sooner or later; friends stand up together as friends and act to protect each other from further "threats".

Without any shadow of doubt in my mind; the foreign policy of the United States is a shambles; an insult to anyone with any real understanding of how ordinary people interact between each other.

Do not believe me; OK, go out of your house and start to threaten your neighbour. Go on, try it....... Go on; start waving your fist at them and calling them names.....

[Mn_Mark]

Re: Iran and IMS

And is that last point exactly the issue? What I see from the whole shebang is exactly that point. We make friends by trade; not war or threats of war.


Do not believe me; OK, go out of your house and start to threaten your neighbour. Go on, try it....... Go on; start waving your fist at them and calling them names.....

Yes, it's better not to threaten people or countries. But you are assuming that the problem is occurring because our side started things off by issuing threats and that the other side were just innocent bystanders minding their own business. That's the example you give when you say "Go on; start waving your fist at them and calling them names."

But if the reason for the threats is something aggressive THEY'VE done, and you are responding to it, threats can make a great deal of sense. Remember Neville Chamberlain and Adolf Hitler? Neville didn't like making threats. He thought that being friendly with Mr. Hitler was the way to make friends with him. But Hitler didn't want friends; he wanted conquests. It makes no sense to be "friendly" to someone whose goal is conquest.

The goal of fundamentalist Islam is conquest of the world for Allah. Iran is run by fundamentalist muslims. They have openly talked about wiping Israel off the face of the earth. The kinds of things they say are the kinds of things Hitler said in "Mein Kampf". Now they are developing nuclear weapons (and please don't tell me you seriously believe they are only interested in nuclear power for energy purposes). We're talking about people whose religious beliefs tell them that they will go to heaven and have 72 virgins if they die killing infidels for Allah.

I think we need to learn from the Chamberlain/Hitler experience and not make the same mistake again with the fanatics running Iran. All this blaming the U.S. for "threatening" people is, in my opinion, naive. The U.S. and the West in general are huge muslim ass-kissers. We fall over ourselves to excuse their hostility, we send billions in free money to try to help them be peaceful and democratic. The West is run by liberals like Obama who want nothing more than to be "liked" by muslims. So this idea that somehow we are to blame for the hostility of muslims towards the West -- which has been a constant since the 7th century -- is just not true.

[Chris Coles]

Re: Iran and IMS

Some of the points you make are perfectly valid, but there is another side to the debate that seems to be missed. Here in the UK some years ago we had a TV series that spent some hours telling us about how "our" relationship developed with Iran; from its beginnings to today. What I came away with is an entirely different viewpoint; that by far the majority of the people in Iran are NOT any threat to anyone.

Having already done so before, I again return to a recent movie, Offside, http://www.sonyclassics.com/offside/ created by a group of young people describing their frustration at a very simple fact, no woman can attend a soccer match in Iran. You only need to sit down and watch that movie to see the reality. The young people of Iran desperately yearn for exactly the same things we all take for granted.

Some people do not like our BBC, but they have in the recent past done many of us a very great favour by highlighting the history of our relationship with Iran. An example that really sticks in my mind is that the CIA once quite literally threw a Prime Minister of Iran out of his home with his possessions thrown into the street. We Brits have not been much better. http://www.youtube.com/watch?v=xJ3bZF0-IN8 This is a small part of a major BBC TV series, Iran and Britain. VERY thought provoking....

Again another BBC series, three one hour programs; Iran and the West
http://www.bbc.co.uk/programmes/b00htnkq/episodes/guide

Again another BBC program Regeh inside Iran
http://www.youtube.com/watch?v=bC0lE-GFNHg

With the very greatest of respects, your viewpoint is distinctly distorted from the underlying reality. We need to make friends with the real, underlying nation. Please, everyone, take the time and trouble to watch all these. THEN come back and tell me what you think.

[ProdigyofZen]

Re: Iran and IMS

Yes, it's better not to threaten people or countries. But you are assuming that the problem is occurring because our side started things off by issuing threats and that the other side were just innocent bystanders minding their own business. That's the example you give when you say "Go on; start waving your fist at them and calling them names."

But if the reason for the threats is something aggressive THEY'VE done, and you are responding to it, threats can make a great deal of sense. Remember Neville Chamberlain and Adolf Hitler? Neville didn't like making threats. He thought that being friendly with Mr. Hitler was the way to make friends with him. But Hitler didn't want friends; he wanted conquests. It makes no sense to be "friendly" to someone whose goal is conquest.

The goal of fundamentalist Islam is conquest of the world for Allah. Iran is run by fundamentalist muslims. They have openly talked about wiping Israel off the face of the earth. The kinds of things they say are the kinds of things Hitler said in "Mein Kampf". Now they are developing nuclear weapons (and please don't tell me you seriously believe they are only interested in nuclear power for energy purposes). We're talking about people whose religious beliefs tell them that they will go to heaven and have 72 virgins if they die killing infidels for Allah.

I think we need to learn from the Chamberlain/Hitler experience and not make the same mistake again with the fanatics running Iran. All this blaming the U.S. for "threatening" people is, in my opinion, naive. The U.S. and the West in general are huge muslim ass-kissers. We fall over ourselves to excuse their hostility, we send billions in free money to try to help them be peaceful and democratic. The West is run by liberals like Obama who want nothing more than to be "liked" by muslims. So this idea that somehow we are to blame for the hostility of muslims towards the West -- which has been a constant since the 7th century -- is just not true.

Mark, there is much much more at play than what you write here.

Iran has no intentions whatsoever IMO to "wipe Israel off the face of the earth." They would never drop a bomb on the second holiest site in all of Islam. Do muslims want to own and control Jerusalem? Yes, of course, but do they want to destroy it? not a chance and to think otherwise is naive.

The battle between Christianity, Judaism and Islam has waged for centuries. The Muslims lost it due to the Renassaince and Europe's technological/ risk taking and mathematical advances starting from 1250 onward (coincidentally taken from the Arab mathematicians of Fibonacci's day, al jabr and al khorazaimi "where we get the words in english Algebra and Algorithim") We also took the concept of Arab numerals and the concept of Zero (who the Arabs took from the Aryan northern Indians) from the Arabs.

Could you imagine doing advanced quantum mathematics using roman numerals? Absurd. Or any mathematics beyond adding and subtracting without zero and negative numbers? Europe was backwards and it took Arab ingenuity to spark the eventual Renaissance from the 14th to 17th centuries.

In a way the Arab conquests of the near east, north africa, Iberian peninsula and Byzantium lead the way for the cultural revolution in Europe.

Since then the Arabs have subsisted on their religion and did not care much to move out of their mindset from the early 1500's.

With that being said, you should consider the unequal International Monetary System with the US at the center as one of the main reasons why "they hate us." When the US can bankrupt a nation simply by excluding them from the system and starving them of dollars, well I would be pretty ticked off as well.

Mahmoud Ahmadinejad is not a lunatic nor a fanatic, in other words he is not Hitler. The Aryann Persians have no intent on trying to reconquer the land they once conquered from 558 BC to 330 BC when Islam didnt even exist but Zoroastianism was the religion of the land and most likely the basis for all Abrahamic religions for that matter.

The Persian empire died long ago and they care not to mix their Aryan blood with semitic Arab blood. They have been subservient and subjugated to other powers since Alexander the Great.

The Pakistanis and Indians have nuclear weapons and they are much larger muslim countries with hostilities toward each other yet no one says a word about their "ambitions."

[shiny!]

Re: Iran and IMS

We need to make friends with the real, underlying nation.

A friend of mine's stepfamily is of Iranian origins; she periodically goes over there to visit. She happened to be visiting Iran after Bush's "axis of evil" statement and talked to a lot of young people her age. They were all upset about being described as evil enemies of the U.S. They liked the United States and wanted to be our friends.

I hope we haven't destroyed that goodwill with our determination to paint them as our enemy.

[BadJuju]

Re: Iran and IMS

A friend of mine's stepfamily is of Iranian origins; she periodically goes over there to visit. She happened to be visiting Iran after Bush's "axis of evil" statement and talked to a lot of young people her age. They were all upset about being described as evil enemies of the U.S. They liked the United States and wanted to be our friends.

I hope we haven't destroyed that goodwill with our determination to paint them as our enemy.

It is all very unfortunate how these bastards have arrayed us against each other when the central fact that we are all humans should unite us.

[ProdigyofZen]

Re: Iran and IMS

It is all very unfortunate how these bastards have arrayed us against each other when the central fact that we are all humans should unite us.

Unite us agaisnt what? It is human nature to form groups and divisions agaisnt something (some outside force foreign to them). This is how tribes, ethnicities and nations are born.

The only thing I could see uniting the "human race" is the discovery of an Alien race or an attack by one. Until then we will continue to divide along whatever line you wish to insert and form groups agaisnt some external force.

[BadJuju]

Re: Iran and IMS

Unite us agaisnt what? It is human nature to form groups and divisions agaisnt something (some outside force foreign to them). This is how tribes, ethnicities and nations are born.

The only thing I could see uniting the "human race" is the discovery of an Alien race or an attack by one. Until then we will continue to divide along whatever line you wish to insert and form groups agaisnt some external force.

With any luck, ET will phone home soon! :P