New Jobless #s .. yikes. Inflation?

[GRG55]

Re: New Jobless #s .. yikes. Inflation?

At the end of the day the 30 year long term bonds are globally at historically low rates and the Bond Vigilantes are buying.

You're a smart guy c1ue, but you're not a 100B bond fund manager.

$100B bond fund managers buy bonds using other people's money no matter what. That's what they get paid to do. And if their clients suffer losses they still make money as long as they can show they lost less than their benchmark.

Bill Gross has called the end of the secular bull market in bonds at least twice in the past two years [the first time he wrote about the end of the "salad days" in the bond market]. I doubt any of these so called smart bond fund managers has any conviction in the long term durability of this blow off phase at the end of a three decade secular bull.

Every great secular bull market ends in a blow off, a time when everyone thinks it will never change. And it always does.

[c1ue]

Re: New Jobless #s .. yikes. Inflation?

At the end of the day the 30 year long term bonds are globally at historically low rates and the Bond Vigilantes are buying.

What Bond Vigilantes?

Do you mean the Pimco 'bond vigilantes'?

Or the TBTF 'bond vigilantes'?

This term was always a load of crap. There are no such thing - doubly so if in reality the money used to buy the bonds is all coming from the Fed.

[Kcim67]

Re: New Jobless #s .. yikes. Inflation?

Unions had pricing power in the 1970s and could force wages up to keep the price spiral spinning. Unions, with the possible exception of public safety workers, have very little pricing power now.

When we entered this crisis, inflation was low. When we entered the 1970s crisis, inflation was high. Minsky spent a bit of time discussing this -- initial conditions make a difference.

Those are two differences between now and the 1970s that make the likely outcome different.

Exactly the sort of event that could organize labor and rebuild unionization!

[blazespinnaker]

Re: New Jobless #s .. yikes. Inflation?

I appreciate your perspective, but all I gotta ask, is why aren't you running massive bond funds then if you know so much more than Bill Gross?

Could it be a bubble? Sure. But your over confidence does not make you look particularly smart.

[c1ue]

Re: New Jobless #s .. yikes. Inflation?

I appreciate your perspective, but all I gotta ask, is why aren't you running massive bond funds then if you know so much more than Bill Gross?

Could it be a bubble? Sure. But your over confidence does not make you look particularly smart.

Circular argument.

Your statement supposes the following:

1) smarts and money are equated.

False. There are numerous examples where intelligence has nothing to do with making money - merely either being outrageous, lucky, connected, or all three: Bill Miller is a fine example as are pretty much all of the large hedge fund managers.

2) successful money management is about results.

False. The majority of the entire money manager industry is a fine example where success is irrelevant.

3) running a bond fund means you mean anything.

False. Bill had to be bailed out just like every other bankster.

To his credit, he correctly called that it would happen - but that isn't the same thing as doing the right thing. After all, the Pimco bailout was no different than the Goldman bailout, the AIG bailout, the JP Morgan bailout, etc etc.

This is all excluding the direct push part on both Bill Gross/Pimco and the general banksters - contributing millions of dollars to politicians and hiring Greenspan as a 'consultant' is hardly the role of a disinterested observer/company.

http://www.scribd.com/doc/24899789/PIMCO-Donations

So again, what is your point?

Perhaps your vast wisdom can cough up some quantifiable and verifiable predictions.

[FRED]

Re: New Jobless #s .. yikes. Inflation?

Inflation Fallacy #1: When unemployment rises, inflation falls

We’ve locked horns for years with analysts who can’t imagine how inflation can rise when jobs are scarce. Where is the competition for goods going to come from to drive up prices if consumers are cutting back on their spending to conserve savings, either because they are unemployed or are afraid they will be soon? That is certainly the environment that we see ourselves in today.

This sounds reasonable until you consider the case of India today where both unemployment and inflation are rising together.

How is rising inflation and rising unemployment possible? Because inflation is not only a factor of the supply and demand for goods but also of the supply and demand for the money used to buy the goods. Demand is determined not only by the level of desire of consumers to purchase goods but also their means to do so, the purchasing power of their income and savings. This leads us to the second fallacy of inflation. Also, producers may cut goods supply even more quickly than consumers reduce demand, resulting in a goods supply/demand imbalance albeit at a lower level than before the recession.

Inflation is a process, not an event - Part I: Three inflation fallacies - Eric Janszen

[GRG55]

Re: New Jobless #s .. yikes. Inflation?

Circular argument.

Your statement supposes the following:

1) smarts and money are equated.

False. There are numerous examples where intelligence has nothing to do with making money - merely either being outrageous, lucky, connected, or all three: Bill Miller is a fine example as are pretty much all of the large hedge fund managers.

2) successful money management is about results.

False. The majority of the entire money manager industry is a fine example where success is irrelevant.

3) running a bond fund means you mean anything.

False. Bill had to be bailed out just like every other bankster.

To his credit, he correctly called that it would happen - but that isn't the same thing as doing the right thing. After all, the Pimco bailout was no different than the Goldman bailout, the AIG bailout, the JP Morgan bailout, etc etc.

This is all excluding the direct push part on both Bill Gross/Pimco and the general banksters - contributing millions of dollars to politicians and hiring Greenspan as a 'consultant' is hardly the role of a disinterested observer/company.

http://www.scribd.com/doc/24899789/PIMCO-Donations

...

+1

"Never confuse a bull market with brains..."

[we_are_toast]

Re: New Jobless #s .. yikes. Inflation?

Inflation Fallacy #1: When unemployment rises, inflation falls

We’ve locked horns for years with analysts who can’t imagine how inflation can rise when jobs are scarce. Where is the competition for goods going to come from to drive up prices if consumers are cutting back on their spending to conserve savings, either because they are unemployed or are afraid they will be soon? That is certainly the environment that we see ourselves in today.

This sounds reasonable until you consider the case of India today where both unemployment and inflation are rising together.

How is rising inflation and rising unemployment possible? Because inflation is not only a factor of the supply and demand for goods but also of the supply and demand for the money used to buy the goods. Demand is determined not only by the level of desire of consumers to purchase goods but also their means to do so, the purchasing power of their income and savings. This leads us to the second fallacy of inflation. Also, producers may cut goods supply even more quickly than consumers reduce demand, resulting in a goods supply/demand imbalance albeit at a lower level than before the recession.

Inflation is a process, not an event - Part I: Three inflation fallacies - Eric Janszen

Our M3 growth < 10% in 3 years;
No inflation here.



India's M3 > 19% in the last year!
Inflation here.

M3 MONEY SUPPLY GROWTH

(versus year ago, in pct)

July 16, 2010 July 2, 2010 July 17, 2009

15.2 15.3 19.8

Money supply was 57,505.60 billion rupees on July 16,

http://www.xe.com/news/2010-07-30%20....htm?c=1&t=106

Consumer spending on goods, still not back to pre-recession levels;



Capacity Utilization rebounding rapidly;



How are we like India? And where is this inflation going to come from?

[jk]

Re: New Jobless #s .. yikes. Inflation?

And where is this inflation going to come from?

abroad. global demand for commodities as oecd stimulus continues to leak to developing markets. in a global economy, perhaps we need to focus on global employment, not just national numbers.

[we_are_toast]

Re: New Jobless #s .. yikes. Inflation?

abroad. global demand for commodities as oecd stimulus continues to leak to developing markets. in a global economy, perhaps we need to focus on global employment, not just national numbers.

I agree, we need to think more globally. I think the implication that the demand for money, or supply destruction will be the spark for Poom, may be a bit over exaggerated. In a world entering an extended period of raw material shortages, and a period where financial resources are being diverted to nearly 1/2 the worlds population (China, India, 3rd world) that couldn't create demand in the past, basic demand/supply will be the basis for raw material inflation for a long time to come.

[fjweaver]

Re: New Jobless #s .. yikes. Inflation?

Interesting read from hussman on Quantitative easing, falling dollar and inflation as a consequence. Essentially Kapoom - He seems a bit late to the realization political economics will have the Fed printing indefinately.

http://www.hussmanfunds.com/wmc/wmc100823.htm

[we_are_toast]

Re: New Jobless #s .. yikes. Inflation?

Interesting read from hussman on Quantitative easing, falling dollar and inflation as a consequence. Essentially Kapoom - He seems a bit late to the realization political economics will have the Fed printing indefinately.

http://www.hussmanfunds.com/wmc/wmc100823.htm

I think he's over reacting here. What the FED announced is very minimal QE that will only replace money taken out of circulation through the pay down of their MBS' with money put back in circulation with the purchase of treasuries. This may increase velocity a bit, but the amounts are so minimal I can't see it having much impact. Maybe Hussman should have saved the article for if and when the FED starts talking trillions of QE rather than 10's of billions.

[GRG55]

Re: New Jobless #s .. yikes. Inflation?

Interesting that one observer thinks Hussman is late with this commentary...

Interesting read from hussman on Quantitative easing, falling dollar and inflation as a consequence. Essentially Kapoom - He seems a bit late to the realization political economics will have the Fed printing indefinately.

http://www.hussmanfunds.com/wmc/wmc100823.htm

...while another appears to think he's early...

I think he's over reacting here. What the FED announced is very minimal QE that will only replace money taken out of circulation through the pay down of their MBS' with money put back in circulation with the purchase of treasuries. This may increase velocity a bit, but the amounts are so minimal I can't see it having much impact. Maybe Hussman should have saved the article for if and when the FED starts talking trillions of QE rather than 10's of billions.

My sense from reading the article is that Hussman doesn't think there is any "if or when" about what the Fed is going to do...now and into the indefinite future. Policy makers in Washington, whether Republican or Democrat, appear not to have any differences in the prescription to be applied to "fix" an ailing economy. This is the consequence of the government having worked itself into what I have previously referred to as a "zero degrees of freedom" policy environment through the cumulative effect of previous decisions and actions. The inflation that the deflationistas can't [yet] see is baked in the cake.

In November of 2002, Dr. Bernanke vowed that what happened in Japan would not be allowed to happen in the USA. It seems ironic [to me] that it is on his watch that the Fed initiated a very Japan-like ZIRP, the most prominent and consistent of the BoJ's anti-deflation policies, which now looks like it is settling in for a very long stay at the corner of 20th Street and Constitution Avenue N.W. in D.C.

It is possible that the Fed's modest and timid re-initiation of QE was the only way to achieve a consensus at the last FOMC meeting. But I don't see any reason not to expect the Fed and the Treasury Dept. to respond ever more aggressively to the political pressure to "do something" as the US economy continues to perform well below expectations. Bernanke does not want to go down in history as the Chairman that allowed the Fed's "independence" to be compromised...and that means he will keep throwing bones every time the Congressional dog growls...

[Rajiv]

Re: New Jobless #s .. yikes. Inflation?

In November of 2002, Dr. Bernanke vowed that what happened in Japan would not be allowed to happen in the USA. It seems ironic [to me] that it is on his watch that the Fed initiated a very Japan-like ZIRP, the most prominent and consistent of the BoJ's anti-deflation policies, which now looks like it is settling in for a very long stay at the corner of 20th Street and Constitution Avenue N.W. in D.C.

From MoonCliff

As I have posted before, living in Tokyo for the last 20 years has made it very clear to me that GDP is not a good indicator of the important things that matter in life. I would say that while GDP has remained nominally about the same, the standard of living has doubled.

[GRG55]

Re: New Jobless #s .. yikes. Inflation?

From MoonCliff

The standard of living has doubled for those that have a job perhaps.

I experienced something quite similar in the severe recessionary bust of the 1980s here in Western Canada. I was only a couple of years out of school when Volcker killed the "old economy" and set the stage for FIRE v.2.

As the '70's resource boom went bust those who lost their jobs saw their standard of living fall, and fall, and fall some more. Those of us, like me, who were fortunate enough to stay employed enjoyed a bonanza. Housing prices fell by 25% over 4 or 5 years and then stayed pretty flat for several more years. Great time to buy a house for a young graduate just starting out...the foolish Provincial Government even gave me a "first time home buyer grant" [sound familiar?] as part of their efforts to halt the decline in the housing market. Everything, and I mean everything, became cheaper as there was too much capacity for everything and the competition to survive become cutthroat.

It was my first, and very revealing, experience of a "bifurcated" economic outcome. Sound familiar?