US Japan households, Bernanke "nuclear option"

[mooncliff]

I think I know what "the nuclear option" means in the last line, but anyone have possible alternative interpretations?


For all intents and purposes, Japan, even during its two-decade long deflationary process is far better equipped to handle the economic collapse that is unravelling for an entire generation of Japanese consumers. Which is why the Fed is now actively pumping $5 billion in the market every other day to stimulate inflation, and the stock market, as this is now the Keynesian system's Maginot line. The Fed can not allow mass perception of the the double dip to become entrneched as that would be the proverbial game over. What has worked in Japan for 20 years will fail miserably when applied in the US, simply because US consumers are in a far, far worse shape than their Japanese counterparts. This is further exacerbated by the massive difference in net worth distribution: Japanese society is far more homogeneous, and thus far better represented, than the US, which is extremely skewed toward high wage earners, and their specific interests (think Wall Street). If that means a POMO every day, every hour, every minute, so it shall be done. This is Bernanke's last attempt to reflate the economy by traditional means before he uses the nuclear option. Which he will have to do shortly anyway.

http://www.zerohedge.com/article/bis...nese-household

[ThePythonicCow]

Re: US Japan households, Bernanke "nuclear option"

I think I know what "the nuclear option" means in the last line, but anyone have possible alternative interpretations?

I 'm not sure what your guess is.

My guess is that this nuclear option would be a startlingly large monetization of more dubious FIRE assets onto the Fed's balance sheet.

P.S. -- In particular, I'd look for the Fed's nuclear bomb to be dropped on the U.S. mortgage market, monetizing a few trillion mortgage backed securities or some such.

[thunderdownunder]

Re: US Japan households, Bernanke "nuclear option"

Give the Cow a big bell - You are correct sir.
But it it is of no use. the wheels are coming off as we speak. A wise man said once look with your eyes and not your ears.
America is not the country it was, dare I say, like Rome, it's influence has waned the further its borders have expanded.
it consumes more than it makes, so it borrows the difference until its credit is exhausted.The limit is always set by the lender.

[ThePythonicCow]

Re: US Japan households, Bernanke "nuclear option"

But it it is of no use. the wheels are coming off as we speak.

Whether it is of no use or not depends on the purpose.

Perhaps having the wheels come off is the purpose, in order to subordinate the United States to more global economic, monetary, political and ideological structures.

it consumes more than it makes, so it borrows the difference until its credit is exhausted.The limit is always set by the lender.

Perhaps the limits are not financial debt, but credibility debt.

If enough people take the red pill, then the grand frauds fail.

(Caveat lector: The above comes from the sinister half of my mind. More often than not, the doom & gloom it portends does not materialize.)

[mooncliff]

Re: US Japan households, Bernanke "nuclear option"

OK, thank you Cow. I didn't want to say at first because I didn't want to influence what people might say.

My guess about what "the nuclear option" means is this.
Since the debts cannot be paid in real terms, but they can be paid nominally, they will be paid nominally. Something that cuts the value of the dollar about in half would I guess ignite about 20% a year inflation, so after a few years of no COLA or a pretend few percent COLA, etc., the pension funds can pretend to pay what was contracted, etc.

My rule of thumb has been "about half".

The only way we might weasel out of this is huge improvements in efficiency, and since I expect that we will hit the really amazing part of the exponential technological improvement curve over the next decade, we may just barely pull out of this in fairly good shape.

[sunskyfan]

Re: US Japan households, Bernanke "nuclear option"

I think there is assumption made by itulip that the FED has infinite ability to reflate the economy has one problem. I don't think it does. Not because of the numerical nature of the situation but because of the cultural demographic factors of the situation and the nature of modern media.

1. You can't have lower middle class homeless people with empty houses and condos strewn across the landscape and not have revolt. It is starting to happen. Eventually, the sheep look up.

2. With modern media you can't give 60 year old paul his house and undeserved (economically) retirement with health care when 30 year old paul doesn't have a job to pay off his student loan, no health care, and can't start his own family let alone think about retirement.

3. As the Veterans come home from Iraq and Afghanistan and can't find a life fat boomers whining about the market won't set well.

4. The Tea Party is an indication of a culture one step away from violence.

5. Any further action by the Fed will be so obviously a give away to those who failed that the social contract badly damaged by the '08 bailouts will rupture. The problem with creating money is that you have to give it to somebody. People are aware of what is going on now. Unless you give to everybody you now will have problems. That would be like flooding a room with gas to start a fire in the fire place and it won't happen.

The Fed is acting like it has options but it doesn't. It is like the lizard trying to look bigger than it really is but it is dancing around circles trying to intimidate the economy to life.

[Jay]

Re: US Japan households, Bernanke "nuclear option"

The problem with creating money is that you have to give it to somebody. People are aware of what is going on now. Unless you give to everybody you now will have problems. That would be like flooding a room with gas to start a fire in the fire place and it won't happen.

There is a tried and true way to do this when all else fails; war.

[mooncliff]

Re: US Japan households, Bernanke "nuclear option"

More opinions, please! Everyone chime in!

[GRG55]

Re: US Japan households, Bernanke "nuclear option"

More opinions, please! Everyone chime in!

So far on this thread the usual list of options has been raised:

a) Inflate it away;
b) Default it away;
c) War.

I imagine the answer is d) All of the above...[in some combination over time].

[sishya]

Re: US Japan households, Bernanke "nuclear option"

I am going with "mooncliff" - inflate it away. Adding a poll will help.

[sunskyfan]

Re: US Japan households, Bernanke "nuclear option"

I hear you but we have been at war for 9 years. Did not work.

I am pretty syre it is really going down this time. Whatever down means.

[Jay]

Re: US Japan households, Bernanke "nuclear option"

I hear you but we have been at war for 9 years. Did not work.

I am pretty syre it is really going down this time. Whatever down means.

You might argue that we wouldn't have gotten this far without it. As crazy and disgusting as that might be!

[krakknisse]

Re: US Japan households, Bernanke "nuclear option"

So far on this thread the usual list of options has been raised:

a) Inflate it away;
b) Default it away;
c) War.

I imagine the answer is d) All of the above...[in some combination over time].

Well, I'd correct the correction:
a) Inflate it away even more
b) Default it away even more
c) Even more war

YMWV. Somebody is not getting paid, and that is the bottom line.

[mooncliff]

Re: US Japan households, Bernanke "nuclear option"

Today Zerohedge has a guest post by Albert Edwards that gives a definition of "the nuclear option":

the nuclear option: ceaseless FX devaluation, but one coupled with an endless increase in the money supply

http://www.zerohedge.com/article/alb...licies-may-sta

[tsetsefly]

Re: US Japan households, Bernanke "nuclear option"

There is a tried and true way to do this when all else fails; war.

North Korea would be my bet...