is two trillion enough?

[grapejelly]

http://www.prudentbear.com/index.php...n?art_id=10125

Here at home, our maladjusted economic system will only be sustained by somewhere in the neighborhood of $2.0 TN of new Credit. [bold added] It’s simply not going to happen. The $700bn from Washington would seem like an enormous amount of support. In reality, it’s nowhere even close to the amount necessary for systemic stabilization. To the $2.0 TN or so of new Credit required this year (and next) add perhaps as much as several Trillion more necessary to accommodate speculative de-leveraging (liquidations forced by huge losses). Importantly, the Bust in Wall Street Finance has ensured that insufficient liquidity will be forthcoming to maintain inflated asset prices and sustain the Bubble economy – creating catastrophe for the leveraged speculating community.

The “Freidmanites” thought they understood the (post-crash) policy mistakes that led to The Great Depression. They believed the “Roaring Twenties” was the “Golden Age of Capitalism.” The great bust could have been avoided with a simple ($5bn or so) banking system recapitalization. As we are witnessing today, the issue is not some manageable amount of new “capital” to replenish banking system losses. Instead, the predicament is the massive and unmanageable amount of new Credit necessary to, on the one hand, sustain a mal-adjusted Bubble Economy and, on the other, the Trillions more required to accommodate a gigantic speculative de-leveraging. I have a very difficult time seeing a way out of this terrible mess.

[Guest]

Re: is two trillion enough?

Grapejelly - I read that last night. Doug Noland is not one to casually dismiss. Are you now also endorsing it's conclusion? This would seem to be an argument for the most vigorous reflation efforts to be undertaken here, mooting many of the principled preoccupations we've heard in the past few days because massive reflating if only due to time constraints, cannot afford to be too discriminate. I note that Finster in his FDI thread this morning refers to the deflationary result as the "less preferable", and I agree with that - because the runaway deflationary one will be likely much harder in any severely debt rdden country. Pick your lesser poison. Seems therefore that for debt ridden America, a genuine deflationary implosion is inarguably worse (EJ argues this outcome cannot occur due to capital flight and dollar repudiation, and makes strong arguments, but is that cast in stone)? Your "enlightened laissez faire" strategy in this case would improve the odds of an outcome where deflating debt denominated assets risk engulfing all the rest to become the sole real broadest trend within this country (other currencies also collapse vs. the USD, forestalling flight from the USD which is required to create POOM). If the debt denominated assets deflation overwhelms the conflicting trends existing debt weight increases rapidly creating the momentum driven "big swirl down the toilet bowl".

At that point I would be very interested to see a detailed thread delving into the "inevitability" of Poom as rates approach ther zero bound (run, or flight from the dollar as being baked into the cake in that scenario - just how inevitable is it?).

Not something I'd prefer to occur, as the job market would wither far faster then.

[photoncounter]

Re: is two trillion enough?

An interesting video - Charlie Rose's interview with Sir Warren Buffet. I am posting it here since he does hint towards injecting more $$ ASAP, which is in line with this thread.

Warren Buffett: "I Haven't Seen As Much Economic Fear In My Adult Lifetime"

http://www.charlierose.com/shows/200...warren-buffett

I am his huge fan and was a little dissapointed with his views in the movie I.O.U.S.A, but, the views in this video seem quite in sync with what most of us think here at itulip.

FYI, the video contains no information that most of regular itulip readers would not be aware of.

[Rajiv]

Re: is two trillion enough?

I am embedding it

[phirang]

Re: is two trillion enough?

An interesting video - Charlie Rose's interview with Sir Warren Buffet. I am posting it here since he does hint towards injecting more $$ ASAP, which is in line with this thread.

Warren Buffett: "I Haven't Seen As Much Economic Fear In My Adult Lifetime"

http://www.charlierose.com/shows/200...warren-buffett

I am his huge fan and was a little dissapointed with his views in the movie I.O.U.S.A, but, the views in this video seem quite in sync with what most of us think here at itulip.

FYI, the video contains no information that most of regular itulip readers would not be aware of.

IOU USA is a paen from the Oligarchs in an effort to make the US a proper third-world country...

[grapejelly]

Re: is two trillion enough?

I noticed that PIMCO et al are being tapped for managing the Treasury Department's problem of handing out 700 billion clams.

Buffet is One Of Them...giving "a little advice". He is a Statist through and through.

[phirang]

Re: is two trillion enough?

I noticed that PIMCO et al are being tapped for managing the Treasury Department's problem of handing out 700 billion clams.

Buffet is One Of Them...giving "a little advice". He is a Statist through and through.

Bill Gross was long agencies into FNM/FRE bailout, long LEH paper(blownup), i think long some aig shit(blownup), and DEFINITELY long junk mortgages(got paid yo!!!).

Conflict of interest? Rules only apply to small people, tovarish.

[Supercilious]

Re: is two trillion enough?

IMHO after the Bailout there are about $4 trillion extra needed. How much of this will be flooded in the open and show much will be sneaked under the cover of some TARP is hard to say.

[phirang]

Re: is two trillion enough?

IMHO after the Bailout there are about $4 trillion extra needed. How much of this will be flooded in the open and show much will be sneaked under the cover of some TARP is hard to say.

That's why the infrastructure bubble is such a great cover: launder SWF money in bridges and tunnels and turbines.

They could also start a bunch of strip-clubs, but the consumer is tapped-out!

[Supercilious]

Re: is two trillion enough?

That's why the infrastructure bubble is such a great cover: launder SWF money in bridges and tunnels and turbines.

They could also start a bunch of strip-clubs, but the consumer is tapped-out!

I believe you are correct. Plus it will look very New Dealish

[phirang]

Re: is two trillion enough?

I believe you are correct. Plus it will look very New Dealish

It'll also unplug that god-damn liquidity trap!

http://economix.blogs.nytimes.com/20...iquidity-trap/

That said, we could also stimulate growth through another war...

[c1ue]

Re: is two trillion enough?

Notes from the interview:

Warren Buffet: This economy doesn’t work well without the lubrication of credit

Charlie Rose: Is a depression a possibility?


WB: Yes


CR: Did people game the system? Did people get away with murder?


WB: Yes, but (insert spin) human nature is to blame blah blah


WB: Recession is going to get worse. 6 month is best case. 5 years is worst case.


WB: $2B/day in import consumption.


WB: Inflation is a likely consequence to what is going on now. (context of CAD)
WB: I’m paying the lowest tax rate I’ve ever paid in my life. Payroll taxes are 1/3 of government tax receipts, the 25% of taxes paid by the 'rich' does not include this.