Is the Bond Market going to revolt ?

[marvenger]

Re: Is the Bond Market going to revolt ?

I'm having trouble with the consistency here. Are peoples debts being forgiven and creditors given printed cash, this will stop trade won't it?, or is the government printing cash to pay for public investment and spending and people' wages rising to pay back debt, or both. I feel like I'm missing an overall framework here.

[phirang]

Re: Is the Bond Market going to revolt ?

There are some resources we can provide you to help you better understand how our monetary and money system works.

The best government data resource is still the Fed's Flow of Funds. We look forward to the next release December 11, 2008. It will end a lot of speculation.

That flow-chart can be very misleading... but yes, I await the FFF, too.

[metalman]

Re: Is the Bond Market going to revolt ?

That flow-chart can be very misleading... but yes, I await the FFF, too.

your post is short, critical, and uninformative. what is misleading about the diagram?

fff... porno for finance & econ geeks. i can hardly wait.

[Supercilious]

Re: Is the Bond Market going to revolt ?

You guys are going to be a riot to listen to after the coordinated, global debt monetization.

We are talking about different time horizons here. Right now the inflationistas have been, are being and will be (for a while) crushed . After the Fed is done with inflationistas, next the deflationistas will be crushed probably with a coordinated CB move.

I said "coordinated" as in all central banks do it at once.

I'm not sure that all CB will participate in this move. So far it seems the Fed is engineering a "financial coalition of the willing". Those who "are not with us" (and conversely "are against us") will be left to pay for this whole mess. Someone has to take the fall... Plus how can the Fed start the new reidustrialization bull (with bubbly balls) if EM's have their Ponzi manufacturing sector up and running? ;)

This is The New (Financial) World Order ...

http://www.reuters.com/article/topNe...4A900K20081110

UK's Brown: Now is the time to build global society



LONDON (Reuters) - The international financial crisis has given world leaders a unique opportunity to create a truly global society, Britain's Prime Minister Gordon Brown will say in a keynote foreign policy speech on Monday.
In his annual speech at the Lord Mayor's Banquet, Brown -- who has spearheaded calls for the reform of international financial institutions -- will say Britain, the United States and Europe are key to forging a new world order.
"The alliance between Britain and the U.S. -- and more broadly between Europe and the U.S. -- can and must provide leadership, not in order to make the rules ourselves, but to lead the global effort to build a stronger and more just international order," an excerpt from the speech says.
Brown and other leaders meet in Washington next weekend to discuss longer term solutions for dealing with economic issues following a series of coordinated moves on interest rates and to recapitalize banks in the wake of the financial crisis.
"Uniquely in this global age, it is now in our power to come together so that 2008 is remembered not just for the failure of a financial crash that engulfed the world but for the resilience and optimism with which we faced the storm, endured it and prevailed," Brown will say in his speech on Monday evening.
"...And if we learn from our experience of turning unity of purpose into unity of action, we can together seize this moment of change in our world to create a truly global society."
According to a summary of the speech released by his office, Brown will set out five great challenges the world faces.
These are: terrorism and extremism and the need to reassert faith in democracy; the global economy; climate change; conflict and mechanisms for rebuilding states after conflict; and meeting goals on tackling poverty and disease.
Brown will also identify five stages for tackling the economy, starting with recapitalizing banks so they can resume lending to families and businesses, and better international co-ordination of fiscal and monetary policy.
He also wants immediate action to stop the spread of the financial crisis to middle-income countries, with a new facility for the International Monetary Fund, and agreement on a global trade deal, as well as reform of the global financial system.
"My message is that we must be: internationalist not protectionist; interventionist not neutral; progressive not reactive; and forward looking not frozen by events. We can seize the moment and in doing so build a truly global society."

[c1ue]

Re: Is the Bond Market going to revolt ?

I'd like to see a coherent explanation for the ongoing rounds of 'beggar thy neighbor' interest rate cuts, as well as the converging stimulus packages around the world - in the context of a supposed US government/Fed control of the world's money supply.

How does China, the UK, and Europe spending their money internally on crap US debt security relief and infrastructure buildup help the US?

How do ongoing European talks on how to achieve a stable international currency regime help the US?

How do falling foreign currencies vs. the dollar help the US?

Besides the 'crowding out' of investment into US securities - including Treasuries - it seems that just the reduction of US$ assets in order to pay for these various programs itself is a threat to the continuing ability of the US government/Fed to create more dollar credit in the form of Treasuries.

The fall in recent oil/gasoline prices is nice, but the rest of the price baskets are holding strong.

Unless a major miracle occurs, we're going to see a catastrophic fall in Xmas spending.

Q4 exports are already likely in the dumps.

Trade deficit is likely to fall due to falling oil, but at the same time China still reported a record trade surplus. A relative change in annual trade deficit run rate from $700B to $400B is nice, but not if it is a waypoint to a $200B trade surplus - and doubly not so if it is due to a complete collapse of the American economy due to credit problems.

[Starving Steve]

Re: Is the Bond Market going to revolt ?

I don't really understand any of this, but I do know what is happening around me: Oil is at $56 per barrel. Gasoline is 98.9 cents per litre in Victoria, and then they fall all over themselves to give you a discount on groceries of another 4.5 cents per litre. Chickens cooked and ready to eat are $7, and they feed a family for two days. Houses are going down in price, and deals are appearing in the Vancouver market--- of all places! My neighbour just bought a factory new, fuel efficient small Nissan for $4,500 off the dealer price, right here in Victoria. No income is coming in, and my energy stoxx are down the toilet. My bank won't even pay me a penny in interest.

No-one has money. No-one has work..... What is there to know? It stinks like the Depression of years ago. DE-flation.

[tsetsefly]

Re: Is the Bond Market going to revolt ?

I don't really understand any of this, but I do know what is happening around me: Oil is at $56 per barrel. Gasoline is 98.9 cents per litre in Victoria, and then they fall all over themselves to give you a discount on groceries of another 4.5 cents per litre. Chickens cooked and ready to eat are $7, and they feed a family for two days. Houses are going down in price, and deals are appearing in the Vancouver market--- of all places! My neighbour just bought a factory new, fuel efficient small Nissan for $4,500 off the dealer price, right here in Victoria. No income is coming in, and my energy stoxx are down the toilet. My bank won't even pay me a penny in interest.

No-one has money. No-one has work..... What is there to know? It stinks like the Depression of years ago. DE-flation.

This will only be temporary, as companies get rid of excess inventory at a loss or lower profit margin they will get lower amount of inventory next time and will sell it at higher prices...

[phirang]

Re: Is the Bond Market going to revolt ?

This will only be temporary, as companies get rid of excess inventory at a loss or lower profit margin they will get lower amount of inventory next time and will sell it at higher prices...

to all those unempoyed people with no savings and no access to credit, right?

that works!

[a warren]

Re: Is the Bond Market going to revolt ?

Phirang, I cant stand the suspense. Please tell me what the final solution is. Oh, and also kindly define the two kinds of debt if you have time. Its like reading a novel with the last chapter missing.

[tsetsefly]

Re: Is the Bond Market going to revolt ?

to all those unempoyed people with no savings and no access to credit, right?

that works!

yeah, that's how it works, these companies wont be able to sell products at lower or no profit so they will have to adjust prices and supply, naturally more consumers wont be able to afford buying the amount of products that they could before. The company also will have fewer sales.

I glanced through an article today that said "tough economic times brings new buying opportunities for shoppers." Describing how shoppers are able to find good sales at retailers that are overstocked with inventory. It also said how some stores cant sell at these prices, so how do you think they will adjust?

[FRED]

Re: Is the Bond Market going to revolt ?

yeah, that's how it works, these companies wont be able to sell products at lower or no profit so they will have to adjust prices and supply, naturally more consumers wont be able to afford buying the amount of products that they could before. The company also will have fewer sales.

I glanced through an article today that said "tough economic times brings new buying opportunities for shoppers." Describing how shoppers are able to find good sales at retailers that are overstocked with inventory. It also said how some stores cant sell at these prices, so how do you think they will adjust?

Correct!

Dec. 2008 Pre-bust: 10,000 consumers with 9,350 jobs (6.5% unemployment) have access to 10 electronics stores within ten miles.

Dec. 2009 Post-bust: 10,000 consumers with 8,500 jobs (15% unemployment) have access to 3 electronics stores within ten miles.

Anyone who thinks that's deflationary is encouraged to visit this site.

So get out there and buy all the discounted inventory early next year after the Christmas bust! Fire sale for new stuff ends Q2 2009. Sale of used durables will go on for years and years.

[phirang]

Re: Is the Bond Market going to revolt ?

Correct!

Dec. 2008 Pre-bust: 10,000 consumers with 9,350 jobs (6.5% unemployment) have access to 10 electronics stores within ten miles.

Dec. 2009 Post-bust: 10,000 consumers with 8,500 jobs (15% unemployment) have access to 3 electronics stores within ten miles.

Anyone who thinks that's deflationary is encouraged to visit this site.

So get out there and buy all the discounted inventory early next year after the Christmas bust! Fire sale for new stuff ends Q2 2009. Sale of used durables will go on for years and years.

How will prices magically rise when there is no organized labor and wages suck? That and massive unemployment would give you 0 electronics stores because everyone is homeless!

The inflation argument also depends on Obama increasing minimum wage... "outlook seems doubtful"

[grizam303]

Re: Is the Bond Market going to revolt ?

Anyone who thinks that's deflationary is encouraged to visit this site.

It's deflationary alright, but instead of telling you why, I'm going to make a vague cryptic statement on something irrelevant.

Watch the next rate cut and UST curves...

[FRED]

Re: Is the Bond Market going to revolt ?

How will prices magically rise when there is no organized labor and wages suck? That and massive unemployment would give you 0 electronics stores because everyone is homeless!

The inflation argument also depends on Obama increasing minimum wage... "outlook seems doubtful"

You are trying very hard to not understand.

15% unemployment will not give you zero stores. The hyperbole detracts from your credibility.

There are plenty of other ways to create wage inflation besides the minimum wage. Suggest you get on a plane and go to Europe to learn how it's done. Labor supply is constrained by specialization, certification and licensing backed with a system of fees and penalties. Consider how plumbing and electrician labor costs are managed in the US today and apply it to a broader range of activities.

Let me give you an example. Let's say in a few years you want to paint your own basement to save money. You will be able to but first you need a permit from the town. You go to the store and find that the paint has two prices, one for licensed painters who have a contractor's account and a much higher price for the do it yourself painter. The permit plus the paint costs, lo and behold, the same as the cost of hiring a certified painter! The fine for hiring a non-certified painter is more than twice the cost of hiring the certified painter. A small army of painting violation police are running round following the trail of receipts from the local store where paint is purchased.

You get the idea. This is not an endorsement. This is how countries cope with high unemployment. What, did you think you'd get taxed the old fashioned way?

[phirang]

Re: Is the Bond Market going to revolt ?

You are trying very hard to not understand.

15% unemployment will not give you zero stores. The hyperbole detracts from your credibility.

There are plenty of other ways to create wage inflation besides the minimum wage. Suggest you get on a plane and go to Europe to learn how it's done. Labor supply is constrained by specialization, certification and licensing backed with a system of fees and penalties. Consider how plumbing and electrician labor costs are managed in the US today and apply it to a broader range of activities.

Let me give you an example. Let's say in a few years you want to paint your own basement to save money. You will be able to but first you need a permit from the town. You go to the store and find that the paint has two prices, one for licensed painters who have a contractor's account and a much higher price for the do it yourself painter. The permit plus the paint costs, lo and behold, the same as the cost of hiring a certified painter! The fine for hiring a non-certified painter is more than twice the cost of hiring the certified painter. A small army of painting violation police are running round following the trail of receipts from the local store where paint is purchased.

You get the idea. This is not an endorsement. This is how countries cope with high unemployment. What, did you think you'd get taxed the old fashioned way?

Getting sold Obama makes even more sense now.

Unfortunately, there are no savings, and so how would you shock the demand to finance these high prices?