2009-Year of the fall of the West

[Mega]

http://cynicuseconomicus.blogspot.co...l-of-west.html

Powerful stuff, Metalman/Fred..........Worth your reading time i think.
Mike

[FRED]

Re: 2009-Year of the fall of the West

http://cynicuseconomicus.blogspot.co...l-of-west.html

Powerful stuff, Metalman/Fred..........Worth your reading time i think.
Mike

Sorry, don't see anything new or original here. Can you point me to something that hasn't been said years ago?

[Mega]

Re: 2009-Year of the fall of the West

O, we are a bit bitchy tonight!

"In other words, the banks return to (apparent) solvency, and the government manages to continue borrowing, and does not default on the loans. In the meantime an Act of 1844 that required the Bank of England to publish the amount of currency issued is abolished, such that the Ponzi scheme can be hidden."

Its the 1ST i head of how the BOE will attempt to pull a fast one on the market..............although the market might have already "Sussed".
Mike

[sunskyfan]

Re: 2009-Year of the fall of the West

No. Nothing really "new".

He does get it right in that debt has hidden the fact that there is just too much capacity in the world economy compared to the player's in it.

He does make the mistake that I also think itulip is making. There is much more money destruction happening than money creation. Still. I understand. Who would have thought this was possible at this magnitude?

http://en.wikipedia.org/wiki/Money_creation


The US dollar is not in collapse simply because there is more dollar destruction going on than any other currency. Sure, quantitative easing has caused a small correction but not a collapse. Gold and other comodities are not exploding because there are no buyers. There are no buyers because no-one has liquid assets to trade for gold or oil or anything else. The run on treasuries is not a matress effect but a simple a roll-over of TARP distributions into something that may have value some day. Only the government is buying this crap. Would you trade cash for anything from anyone touched by TARP including GM?

Paper money is King because it is the only thing real and liquid with any velocity in the economy.

[Scott4139]

Re: 2009-Year of the fall of the West

are you saying the banks getting the tarp money are the ones buying all the treasuries, driving the yields lower? Basically, funneling the money back to the government?

[jtabeb]

Re: 2009-Year of the fall of the West

are you saying the banks getting the tarp money are the ones buying all the treasuries, driving the yields lower? Basically, funneling the money back to the government?

Umm, Yeah?!? Where you been?

[phirang]

Re: 2009-Year of the fall of the West

The West isn't falling: it's just exhausted after beating the crap out of China and Russia. ;)

[GRG55]

Re: 2009-Year of the fall of the West

The West isn't falling: it's just exhausted after beating the crap out of China and Russia. ;)

...and Japan.

[Jay]

Re: 2009-Year of the fall of the West

Umm, Yeah?!? Where you been?

Which begs the question: when the next 350 billion is released will it go into treasuries too? Is the dollar run really over? Or does it have another leg?

[sunskyfan]

Re: 2009-Year of the fall of the West

Yes. The next 350 billion will go to treasuries. The 30 year will go to 1.5 or lower. The only way to save the US is to drive mortgage rates down low enough that AMERICANS are buying homes and other types of real estate otherwise the Chinese and others will and that is politically unacceptable. Bizare as it seems cash in a safety deposit box is worth more than any other commodity including CDs, money market accounts, gold, and even regular savings accounts.

[Chris Coles]

Re: 2009-Year of the fall of the West

Yes. The next 350 billion will go to treasuries. The 30 year will go to 1.5 or lower. The only way to save the US is to drive mortgage rates down low enough that AMERICANS are buying homes and other types of real estate otherwise the Chinese and others will and that is politically unacceptable. Bizare as it seems cash in a safety deposit box is worth more than any other commodity including CDs, money market accounts, gold, and even regular savings accounts.

The primary lesson is that all the loans to pay for the FIRE economy were financed by GB and the US handing over, guess what, CASH. So the strongest economies are those holding the cash and the weakest hold the loan notes. Nothing new here at all.

I was much more interested in hearing Professor Niall Ferguson suggesting, at the end of his TV series, The Ascent of Money, that perhaps we should recognise that China has decoupled from America and then he ended the entire series with this comment:

"A Chinese American conflict may sound implausible, but one of the key points of this series, is that the really big crises come just seldom enough, to be beyond the living memory, of the people who run today's companies, banks and funds.

Just because all the Swans you've ever seen are white doesn't mean there are no black Swans."

http://www.channel4.com/history/micr.../episodes.html

[c1ue]

Re: 2009-Year of the fall of the West

Yes. The next 350 billion will go to treasuries.

I can see that.

The 30 year will go to 1.5 or lower.

This is possible, but not probable. If Japan after 14 years of deflation still only saw 30 year bonds bottom out at 2%, 1.5% seems over much over-reaction.

Sure, the difference is only 15% or so on the input, but then again the real delta is vs. the long term 'normal' rate.

The only way to save the US is to drive mortgage rates down low enough that AMERICANS are buying homes and other types of real estate otherwise the Chinese and others will and that is politically unacceptable.

Unfortunately this premise doesn't seem to be working. As I noted in a different post - Doctor Housing Bubble put up an example showing how the monthly payment for a $200K home with a 1% interest rate was identical with a $105K home with a 6% interest rate.

Given that our national median home price is still falling, it is clear that 5% or 6% interest rates are not working at the present median price. While a 1% mortgage is never going to happen (even in Japan, the lowest subsidized mortgages bottomed out around 2.x%), a 1% or negative real rate of interest mortgage is possible.

Cue the helicopters.

Bizare as it seems cash in a safety deposit box is worth more than any other commodity including CDs, money market accounts, gold, and even regular savings accounts.

To paraphrase EJ: deleveraging is a process, not an event.

I do note with great amusement how the NWO financial conspiracy types are now getting hung by their own petards: if indeed everything we see was a big plan by the Bilderbergers or whatever, then how exactly will the fall in Japan's and China's exports (due to or due from American consumption falling) lead to these nations continuing to pour credit into the American firestorm?

Without incoming trade dollars, which foreign nation needs to buy Treasuries?

No matter how you slice it, the US is heading for a cold turkey credit fast. And as many forced dieters know, a fast is often followed by a gorge - and we're already seeing self produced credit to the tune of $8.5T thus far.

So enjoy the d****flation while it lasts.

[LargoWinch]

Re: 2009-Year of the fall of the West

Bizare as it seems cash in a safety deposit box is worth more than any other commodity including CDs, money market accounts, gold, and even regular savings accounts.

I was unaware that CDs, MM accounts, gold and savings accounts are considered commodities.

3 are fiat holdings (hopefully) generating interests and one is a currency (gold).

Also, who would want cash in a safety deposit box outside of a small emergency allocation?

[GRG55]

Re: 2009-Year of the fall of the West

...The only way to save the US is to drive mortgage rates down low enough that AMERICANS are buying homes and other types of real estate...

Even if it could be done [and I very much doubt it's possible], reflating real estate isn't going to save the US. The government could buy up all the surplus housing stock and give it away to citizens and that still wouldn't be enough to stop the contraction in those parts of the economy where capital was grossly mis-allocated [real estate being the poster child example] and rising unemployment.

As with every recession those parts of the economy where production capacity exceeds demand need to contract, and resources re-allocated to where capacity is insufficient. The only difference this time is the capacity-demand mismatch is global, not national...and hence the recession is also global.

About the only "good" thing one can say about the US variation of the world-wide housing bubble is that the USA ended up with a large stock of modern housing [albeit some is poorly crafted] and much of it was paid for by foreign lenders, who are rapidly coming to the realization that many of those loans will never be repaid.

[LargoWinch]

Re: 2009-Year of the fall of the West

foreign lenders, who are rapidly coming to the realization that many of those loans will never be repaid.

GRG55; to clarify, I am assuming you mean "repaid in devaluated dollars".