Fed cuts rates quarter point to zero percent, is open for more

[D-Mack]

Re: Fed cuts rates quarter point to zero percent, is open for more

I hope Bill will forgive me for posting this link to a find of his from out of the select forums. There seems a reflexive conclusion that in a national implosion the unrelenting expansion of government debt and it's intrusion into the national economy is a self evident horror.

Tak 45 minutes out of your lives and listen carefully to this Japanese American Fed economist analyse the Japanese experiment - if nothing else, it should notably complicate our reflexive and too easy nostrums about how the "Banana Republicization of America in this emerging national depression will be ensured" by a growing government attempt at stimulus.

Dr, Koo seems a smart man with an inquiring and agnostic spirit, and makes a fascinating analysis. The conclusion? Many of our reflexively libertarian instincts in a national depression are just plain wrong according to a real life case-study - Japan. View it and decide for yourselves. For myself, the constant vituperation against government forays into stimulus and propping efforts are anything but a black and white case of right or wrong.

____________

Apologies to Bill for the repost without his express permission (t was a public archive). And thanks to him also for this great find.

Bill: Japan USA comparison, I posted before and highly recommend a listen.
http://www.csis.org/component/option...,view/id,1828/

He says Bernanke has no clue about the Great Depression and I think he is right. But what were the causes of this balance sheet problems in Japan compared to the US ? He mentions the rating agencies, but what about derivatives in general?

[lurker]

Re: Fed cuts rates quarter point to zero percent, is open for more

I hope Bill will forgive me for posting this link to a find of his from out of the select forums. There seems a reflexive conclusion that in a national implosion the unrelenting expansion of government debt and it's intrusion into the national economy is a self evident horror.

Tak 45 minutes out of your lives and listen carefully to this Japanese American Fed economist analyse the Japanese experiment - if nothing else, it should notably complicate our reflexive and too easy nostrums about how the "Banana Republicization of America in this emerging national depression will be ensured" by a growing government attempt at stimulus.

Dr, Koo seems a smart man with an inquiring and agnostic spirit, and makes a fascinating analysis. The conclusion? Many of our reflexively libertarian instincts in a national depression are just plain wrong according to a real life case-study - Japan. View it and decide for yourselves. For myself, the constant vituperation against government forays into stimulus and propping efforts are anything but a black and white case of right or wrong.

____________

Apologies to Bill for the repost without his express permission (t was a public archive). And thanks to him also for this great find.

Bill: Japan USA comparison, I posted before and highly recommend a listen.
http://www.csis.org/component/option...,view/id,1828/

I took a look at the PDF and the thrust of it seemed to be reinforce something that John Mauldin previously argued:

"What would you rather, currency debasement or 40% unemployment (with all the attendant problems of societal collapse) ?"

Given this choice only the most hardened libertarian would choose the latter.

I, for one, would rather have some of my savings stolen by inflation, than be cowering in a bunker with a stash of food and an automatic weapon. Perhaps I don't have enough fighting spirit

Of course I would like to see a few high profile financial types sent to prison for a long long time to make me feel a bit better for the plundering of my savings.

[FRED]

Re: Fed cuts rates quarter point to zero percent, is open for more

I took a look at the PDF and the thrust of it seemed to be reinforce something that John Mauldin previously argued:

"What would you rather, currency debasement or 40% unemployment (with all the attendant problems of societal collapse) ?"

Given this choice only the most hardened libertarian would choose the latter.

I, for one, would rather have some of my savings stolen by inflation, than be cowering in a bunker with a stash of food and an automatic weapon. Perhaps I don't have enough fighting spirit

Of course I would like to see a few high profile financial types sent to prison for a long long time to make me feel a bit better for the plundering of my savings.

That's been the iTulip position since 1999: governments always choose currency depreciation and inflation over unemployment for the simple reason that the unemployed vote.

[sishya]

Re: Fed cuts rates quarter point to zero percent, is open for more

I hope Bill will forgive me for posting this link to a find of his from out of the select forums. There seems a reflexive conclusion that in a national implosion the unrelenting expansion of government debt and it's intrusion into the national economy is a self evident horror.

Tak 45 minutes out of your lives and listen carefully to this Japanese American Fed economist analyse the Japanese experiment - if nothing else, it should notably complicate our reflexive and too easy nostrums about how the "Banana Republicization of America in this emerging national depression will be ensured" by a growing government attempt at stimulus.

Dr, Koo seems a smart man with an inquiring and agnostic spirit, and makes a fascinating analysis. The conclusion? Many of our reflexively libertarian instincts in a national depression are just plain wrong according to a real life case-study - Japan. View it and decide for yourselves. For myself, the constant vituperation against government forays into stimulus and propping efforts are anything but a black and white case of right or wrong.

____________

Apologies to Bill for the repost without his express permission (t was a public archive). And thanks to him also for this great find.

Bill: Japan USA comparison, I posted before and highly recommend a listen.
http://www.csis.org/component/option...,view/id,1828/

Very Nice video form CSIS. I think everyone should look at this and see how events have matched. I think that is how the Treasury is going to do. Force our savings to US Bonds(or foreigners running to US Bonds), which will be used for public works. Now since all Governments will be doing the same and cannot depreciate their currency and export their way out of this individually, US Dollar may not fall much but little. This way the GDP may be near Zero but unemployment will not grow exponentially but only moderately if executed properly.

Anyway I think this is good to look at the events unfolding from all angles.
It is a good exercise to go through Dr.Koo's Video.

[Andreuccio]

Re: Fed cuts rates quarter point to zero percent, is open for more

governments always choose currency depreciation and inflation over unemployment for the simple reason that the unemployed vote.

...or riot.

[EasternBelle]

Re: Fed cuts rates quarter point to zero percent, is open for more

As far as I can see this famous economist has come to the iTulip conclusions.

1. Monetary policy is ineffective in balance sheet recessions
2. Options for government are - investments, preferably throughout the recession and dollar depreciation, with associated risks of inducing dollar run and higher interest rates and importing inflation. You have seen it at itulip first.

I find it telling though, that in all his great charts he does not refer to the different starting point in regards to household savings and budget deficits. If I understand correctly Japan had a Corporate Balance Sheet problem only. The US now has a consumer balance sheet problem, a growing government balance sheet problem and a banking balance sheet problem.

What I find amazing is though that the case is presented as if Japan has now basically come out of the dolldrums and is doing well. With their debt to GDP levels the highest in the world, their saving grace has indeed been relentless depreciation of the yen and in fact they did externalise a lot of their problems via the convenient carry trade.

Eastern Belle

[rj1]

Re: Fed cuts rates quarter point to zero percent, is open for more

I personally think it is likely we will reach "effective ZIRP", but the official interest rate will never go down to 0%, so the less-financially astute among the population don't know what's going on.

It was pretty much what we were doing when the interest rate was 1.5% and the effective rate was something like 0.67%. What's the effective rate nowadays?

[metalman]

Re: Fed cuts rates quarter point to zero percent, is open for more

I personally think it is likely we will reach "effective ZIRP", but the official interest rate will never go down to 0%, so the less-financially astute among the population don't know what's going on.

It was pretty much what we were doing when the interest rate was 1.5% and the effective rate was something like 0.67%. What's the effective rate nowadays?

.23% here...

[The Outback Oracle]

Re: Fed cuts rates quarter point to zero percent, is open for more

I took a look at the PDF and the thrust of it seemed to be reinforce something that John Mauldin previously argued:

"What would you rather, currency debasement or 40% unemployment (with all the attendant problems of societal collapse) ?"

Given this choice only the most hardened libertarian would choose the latter.

I, for one, would rather have some of my savings stolen by inflation, than be cowering in a bunker with a stash of food and an automatic weapon. Perhaps I don't have enough fighting spirit

Of course I would like to see a few high profile financial types sent to prison for a long long time to make me feel a bit better for the plundering of my savings.

I don't quite figure how anyone thinks there is a choice between deflation (or zero inflation) and it's accompanying problems and high inflation and it's problems. The end result is the same.
Note i'm not arguling with EJ about what WILL happen.

[FRED]

Re: Fed cuts rates quarter point to zero percent, is open for more

I don't quite figure how anyone thinks there is a choice between deflation (or zero inflation) and it's accompanying problems and high inflation and it's problems. The end result is the same.
Note i'm not arguling with EJ about what WILL happen.

This might be worth a re-read.

Ka-Poom Theory is a Rhyme not a Repeat of History

[rj1]

Re: Fed cuts rates quarter point to zero percent, is open for more

.23% here...

So in other words, we are Japan.

I think we need to start ignoring the official rate. What's the official rate matter if it's not true to what's actually going on on the street?

The United States does not have its interest rates set at 1%, its interest rates are set at 0.23%. So we've essentially reached the "pushing on a string" point.

[bart]

Re: Fed cuts rates quarter point to zero percent, is open for more

So in other words, we are Japan.

I think we need to start ignoring the official rate. What's the official rate matter if it's not true to what's actually going on on the street?

The United States does not have its interest rates set at 1%, its interest rates are set at 0.23%. So we've essentially reached the "pushing on a string" point.

I suggest waiting a few more days to make that conclusion. Its fairly normal lately for the effective rate to be quite different that the official rate for a while after an official rate change.

[sirbrian82]

Re: Fed cuts rates quarter point to zero percent, is open for more

I tried to find the powerpoint presentation he was referencing to no avail. Any suggestions on where to find it?