The Fed: Dishonest or Incompetent?

[bart]

Re: The Fed: Dishonest or Incompetent?

Given that the money will all be in the hands of the guys running the Pump and Dump, it's not unreasonable to expect that they alone will have the means to control the crowd, much as they have convinced working class families to send their kids to Iraq and Afghanistan to fight for freedom while their kids attend Harvard and Yale. Presumably if the families of the kids attending Harvard and Yale really felt that the nation was in a fierce battle for its survival, they'd be lined up outside the local armed services recruitement office along with everyone else. You may have noticed that, overt expressions of patriotism and nationalism is now largely related to class; the more likely you or your kids are to be a called up to fight in war, the more likely you are to have a flag across the back of your pickup truck. How often do you see an American flag across the back of a Mercedes-Benz GL450?

The successful suppression of even a nascent class-based political movement in the US is a stunning achievement by The Boys and one you can expect to continue if not intensify following the Dump. I'm not sure Fitt's agenda has a prayer.

In an odd way, this thread has added some hope for me even though the subjects and outlooks are quite dark (and realistic too in my opinion).

In another odd way, it will be interesting to see the machinations and spin to come - who and what will be targeted for the blame? The GSEs like Fannie are a large probability, and the Fed "overshoot" is also likely even though by my calculations real interest rates are still negative due to all the CPI fiddling & lies.

I do agree that the Fitts approach is not exactly a high probability short term scenario... but it sure has more sanity than most. Great link, and thanks!

The more I study the history of the economic track along with the various anti-social elements and their effects, the more I see the ebb & flow between the "good guys" and the "bad guys", and that the cycles do eventually turn... and that helps during my inevitable darker moments. Frameworks like the ka-poom theory also help to keep things in perspective as we ride the idiocy of Fed and other central bank created waves.

And to actually answer the thread question - the Fed is primarily dishonest, and incompetent too - as well as unethical.


On a lighter and perhaps excessively cynical note, I wish I knew a Photoshop maven - it would be a hoot to see a Mercedes 450 with a flag showing and a gun rack in the rear window.

[EJ]

Re: The Fed: Dishonest or Incompetent?

My best guess - yes, its a SHTF fall back position primarily and an investment secondarily. And either Costa Rica or Panama.

I've been to Costa Rica. Lovely place. But if you use a Driver Fatality Index vs the Solari Popsicle Index to measure personal safety, you're not going to come out ahead. Here's a recent story...

Tico Times
San José, Costa Rica, August 25 - August 31, 2006
Roadway Safety
Plan Announced

Alarmed by an escalating death toll on the nation's perilous roads, the Arias administration jump-started a campaign this week to overhaul the nation's traffic system by improving law enforcement and refurbishing roadway infrastructure.

So far this year, the number of deaths from traffic accidents has surpassed 180, including three in a four-vehicle collision Monday on the Inter-American Highway near the Pacific port town of Puntarenas.

Public Works and Transport Minister Karla González said the “barbarity” on the nation's highways, coupled with a growing number of cars and people using a road network run thin, is a “time bomb.”

Traffic accidents are the leading cause of violent deaths in Costa Rica, claiming on average more than 600 lives a year for the past five years and driving up costs for the nation's public health system. After a couple years of coasting then slowing down, the death toll and number of traffic accidents are speeding up again, according to statistics from the Roadway Safety Council (COSEVI).

I recall reading similar stories there 20 years ago. Don't hold your breath waiting for a solution. You are four times more likely to die in a car crash in Costa Rica as in the US (1:925 Costa Rica vs 1:4080 US annually).



We can complain here in the Boston area about the corruption that led to the problems with The Big Dig, but it beats driving in a tunnel in Russia, no matter how well built. The problem? Same as in Costa Rica, lousy drivers and law enforcement.

There are certain things about the US that we take for granted, such as a relatively well educated and civil society and a professional police force. The culture and institutions that make these possible take generations to build.

To me, the whole "drop off the grid, move to Central America" idea is a romantic and impractical solution to the problem. I'm more sympathetic with Catherine's asset allocation approaches, and many seem simply prudent from a diversification of risk point of view. She'd probably be surprised at the extent of alignment she'd see between her allocation model and that recommended by a lot of high net worth money managers these days.


Going over the Solari forums this morning, I noted a thread that one of the forum members describes as "probably the most important one on this whole board."



When I read the thread I get the impression that Solaris are not exactly catching on like wildfire, although it appears that many groups have tried and there is a lot of interest in the idea. My sense is that the Solari concept is too complex to be practical, requiring a level of understanding of finance, corporate structure and governance, and organizational skills and experience that few possess. In short, the Solari concept appears grandiose.

[Jeff]

Re: The Fed: Dishonest or Incompetent?

Thank goddess and Eric- I sold my last US equity in June 2000, and just unloaded the majority of my residential real estate in July 2006. The unwinding of the US housing market will be so devastating to so many people, finally opening their eyes to the income and opportunity disparities in this country that I imagine we could have nearly revolutionary political upheaval.

Rather than how to benefit personally and financial, how can an individual act to better the situation? Prosper.com is a start, but how else?

[tree]

Re: The Fed: Dishonest or Incompetent?

Jeff asks: What can we do?

1) Continue thinking out loud on iTulip, read and respected by mainstream media employees. Tell friends and family about www.itulip.com.

2) Defeat--with $$, signing petitions, calling elected representatives, etc.--congressional attempts to hike Internet-related consumer fees.

3) Make common cause with consumer activists and critical observers of influential government contractors/advisers such as universities and foundations.

[bart]

Re: The Fed: Dishonest or Incompetent?

There are certain things about the US that we take for granted, such as a relatively well educated and civil society and a professional police force. The culture and institutions that make these possible take generations to build.

To me, the whole "drop off the grid, move to Central America" idea is a romantic and impractical solution to the problem. I'm more sympathetic with Catherine's asset allocation approaches, and many seem simply prudent from a diversification of risk point of view. She'd probably be surprised at the extent of alignment she'd see between her allocation model and that recommended by a lot of high net worth money managers these days.

Indeed - I did a personal analysis last year regarding going the expat route and although there were many plusses, on balance it didn't seem all that workable and also seemed like a cop out. Both Costa Rica and Panama were considered but the #1 country for me was Chile.

Her allocation approach looks pretty sane to me too, but mine has some testosterone poisoning since I trade futures.

Going over the Solari forums this morning, I noted a thread that one of the forum members describes as "probably the most important one on this whole board."



When I read the thread I get the impression that Solaris are not exactly catching on like wildfire, although it appears that many groups have tried and there is a lot of interest in the idea. My sense is that the Solari concept is too complex to be practical, requiring a level of understanding of finance, corporate structure and governance, and organizational skills and experience that few possess. In short, the Solari concept appears grandiose.
[/LEFT]

I'll be very interested to see the "how to" she's working on and that's supposed to be available later this year. There's little question that she has good understanding of the very formidable issues involved... and that the Pollyanna set can blow it too.

I do have hopes - and there weren't many who were really involved in the 1770s... and that many of the wealthiest folk in the colonies were involved too. The plot thickens...

[Finster]

Re: The Fed: Dishonest or Incompetent?

I already have my tinfoil hat on so it didn't take much.

Why am I not surprised … ;)

Seriously, this is a topic right down your alley. I don’t know quite what is going on inside central bankers’ gray matter, but if you just look at the objective results you sure have to wonder. Just for starters, what about the 35,000 foot view? Has the economic progress of the United States been better since the advent of the Fed in 1913?

Not hardly. Virtually every advance that has really materially enhanced our standards of living can be traced to roots before that, whether its railroads, electricity, telecommunications, data recording and storage, etceteras. The US went from a ragtag group of colonies to world power without the "benefits" of a central bank.

There has been progress since then, of course, but by comparison, the improvement in living standards has been pathetic, and now seems like to spend some time in reverse, as the weakness stimulated by the Fed’s policy of production-free consumption becomes increasingly evident.

[bart]

Re: The Fed: Dishonest or Incompetent?

Why am I not surprised … ;)

Seriously, this is a topic right down your alley. I don’t know quite what is going on inside central bankers’ gray matter, but if you just look at the objective results you sure have to wonder. Just for starters, what about the 35,000 foot view? Has the economic progress of the United States been better since the advent of the Fed in 1913?

Does this mean that we can look forward to an FDI based economic progress chart? ;)

We have indeed had amazing progress since 1913 and before too - but the economic side of it has been loaded with so much spin and Kool Aid (invented in 1927 by the way, an interesting "commentary") that focus has been diverted from where progress actually comes from.

And as far as Fed and central banker gray matter, methinks its closer to dark matter or anti-matter... and :mad:

[Charles Mackay]

Re: The Fed: Dishonest or Incompetent?

Jeff asks: What can we do?

1) Continue thinking out loud on iTulip, read and respected by mainstream media employees. Tell friends and family about www.itulip.com.

2) Defeat--with $$, signing petitions, calling elected representatives, etc.--congressional attempts to hike Internet-related consumer fees.

3) Make common cause with consumer activists and critical observers of influential government contractors/advisers such as universities and foundations.

Catherine Fitts hinted at a solution in her introduction. By the time she got to the middle of her essay it was obvious that she was struggling with her own topic as much as we are...


If we want clean water, fresh food, sustainable infrastructure, sound banks, lawful companies and healthy communities, we are going to have to finance and govern these resources ourselves. We cannot invest in the stocks and bonds of large corporations and governments that are harming our food, water, environment and all living things and then expect these resources to be available when we need them. Nor can we deposit and do business with the banks that are bankrupting our government and economy.


Surviving and thriving as a free people depends on creating and transacting with currencies and investments other than those printed and manipulated by Wall Street and Washington to the eventual end of our rights and assets.
What I found in Montana, however, was what I have found in communities all across America. We are so financially entangled in the federal government and large corporations that we cannot see our complicity in everything we say we abhor. Our social networks are so interwoven with the institutional leadership — government officials, bankers, lawyers, professors, foundation heads, corporate executives, investors, fellow alumni — that we dare not hold our own families, friends, colleagues and neighbors accountable for our very real financial and operational complicity. While we hate "the system," we keep honoring and supporting the people and institutions that are implementing the system when we interact and transact with them in our day-to-day lives. Enjoying the financial benefits and other perks that come from that intimate support ensures our continued complicity and contribution to fueling that which we say we hate.
Sitting in the rich dirt among the beautiful vegetables and flowers, I was facing the futility of trying to craft solutions without some basic consensus about the economic tapeworm that is killing us and all living things — while we blindly feed the worm. In a world of economic warfare, we have to see the strategy behind each play in the game. We have to see the economic tapeworm and how it works parasitically in our lives. A tapeworm injects chemicals into a host that causes the host to crave what is good for the tapeworm. In America, we despair over our deterioration, but we crave the next injection of chemicals from the tapeworm.

[Jim Nickerson]

Re: The Fed: Dishonest or Incompetent?

Below is a link to Shadow Government Statistics that I had not prevdiously noted.

http://www.shadowstats.com/cgi-bin/sgs/datao

Who do you believe?

If you believe John Williams, M3 growth is at 9.1%. Consumer inflation is at 11% (which is worse than Finster's 10%). GDP is less than 0%

[jk]

Re: The Fed: Dishonest or Incompetent?

If we want clean water, fresh food, sustainable infrastructure, sound banks, lawful companies and healthy communities, we are going to have to finance and govern these resources ourselves. We cannot invest in the stocks and bonds of large corporations and governments that are harming our food, water, environment and all living things and then expect these resources to be available when we need them. Nor can we deposit and do business with the banks that are bankrupting our government and economy.

if this means founding small communities of the like-minded, it doesn't seem a likely solution. it reminds me of the people who dropped out to live on communes in the late '60s-early '70s.

an alternative interpretation is finding enough people to affect the political process which is currently misgoverning the country. that's the most hopeful interpretation i can come up with.

there's a book, "what's the matter with kansas?" which speaks to the problem [i believe it's a problem, anyway] of people voting on the basis of abortion or gun ownership while ignoring the economic issues. this takes us back to eric's assertion that it will take a financial crisis to get any significant changes in the current system.

since everyone around "here" is pretty convinced that we're going to get that crisis, it might be worth discussing how we imagine the politics will play out. also, how we would like the politics to play out, and whether any current politicians are saying things consistant with our hopes. this discussion will then segue into what we as individuals can do to foster a good outcome, or at least avoid some of the worst outcomes to which we have alluded in these discussions.

[bart]

Re: The Fed: Dishonest or Incompetent?

Below is a link to Shadow Government Statistics that I had not prevdiously noted.

http://www.shadowstats.com/cgi-bin/sgs/data

Who do you believe?

If you believe John Williams, M3 growth is at 9.1%. Consumer inflation is at 11% (which is worse than Finster's 10%). GDP is less than 0%

I submit its doesn't matter very much since all of them are closer to reality.


My M3 is running at an average of 8.8% lately and is weekly:




My inflation stat is running at about 9% without assets and 12% when including an asset inflation estimate:



I'd probably trust John Williams GDP a bit more than mine since mine is just a single adjustment and his goes deeply into other GDP fiddling. My main one also has a different intention behind it and doesn't show rate of change:



But here's my alternate GDP showing rate of change which is close to his:

[WDCRob]

Re: The Fed: Dishonest or Incompetent?

Cheap Money Didn't Fuel Housing Boom, Chicago Fed Says

A couple of economists at the Chicago Fed have this to say in a new research report ... basically, don't blame us:

"It appears that the housing boom has not been driven by unusually loose monetary policy. This is not to say the monetary policy has not been unusually loose, but that to the extent it has been loose, this is not what has been driving spending on housing.

"Second, the current levels of spending on new housing are largely explained by technology-driven wealth creation over the previous decade.

"Third, changes in the demographic, income, educational, and regional structure of the population account for about one-half of the increase in homeownership. That is, without any other developments, the homeownership rate is likely to have gone up anyway, but not by as much as it has done. The last finding is that substitution away from rental housing made possible by developments in the mortgage market, such as subprime lending, could account for a significant fraction of the increase in residential investment and homeownership. We view our findings as supporting the view that the current housing boom may be a temporary transition toward an era with higher homeownership rates in which spending is temporarily higher than historical norms but will eventually return to such norms.

"While we have so far mostly avoided discussing housing prices, our findings do suggest that to the extent that house prices have grown considerably in recent years, this is not due to unusually excessive speculation in the housing market, such as would occur in a bubble. Instead, our findings point toward the high prices being driven by fundamentals."

[bart]

Re: The Fed: Dishonest or Incompetent?

Cheap Money Didn't Fuel Housing Boom, Chicago Fed Says

A couple of economists at the Chicago Fed have this to say in a new research report ... basically, don't blame us:

...

Indeed - and I wonder why I thought of Dicken's Artful Dodger when I read this...and right after that had this tune come to mind:
Kool Aid

Perhaps its time to re-read Twain's A Pen Warmed in Hell so I can tune up my commentary...

[WDCRob]

Re: The Fed: Dishonest or Incompetent?

Wouldn't the 'significant fraction' here...

"The last finding is that ... developments in the mortgage market, such as subprime lending, could account for a significant fraction of the increase in residential investment and homeownership."

...be due to the Fed's loose money?

[bart]

Re: The Fed: Dishonest or Incompetent?

Wouldn't the 'significant fraction' here...

"The last finding is that ... developments in the mortgage market, such as subprime lending, could account for a significant fraction of the increase in residential investment and homeownership."

...be due to the Fed's loose money?

Very much so.

That paper, in my opinion, is simply designed to divert attention away from what the Fed actually did in their over reaction in 2001-2... and what they have been doing for decades (applying positive feedback and causing inflation and rewarding "finance games").


1. They lowered interest rates to 1% and mortage rates went way down,
2. They did not loudly decry the continuing lowering of credit standards (Greenspan actually encouraged ARMs - but that wasn't mentioned),
3. They printed money like at a very high rate during that period after having dropped it in 1999-2001

4. They always come in and "clean up" problems by printing more money (the "Greenspan put")
5. They don't publicly acknowledge any bubbles of their own creation (except with references in FOMC meeting that are only available 5 years after the fact)



Then they disclaim responsibility... wow...