A view from the other side: Kasriel @ Northern Trust

[c1ue]

Paul Kasriel - to me - is the best of the 'mainstream' economists.

His commentary is the most lucid extrapolation of mainstream thought - for all his purported contrarianism.

The information presented is always worth looking at, but more importantly is Kasriel's presentation of the link between quantitative easing/monetization and economic growth:

http://www.northerntrust.com/popups/...ent/us0209.pdf

What is the basis of this fourth-quarter recovery? The effects of increased federal government spending and tax rebates from the fiscal stimulus program largely financed by the banking system and/or the Federal Reserve. If the Fed and the banking system do not "print" the money to fund the increased federal government spending and tax rebates contained in the fiscal stimulus package, aggregate demand will not be "stimulated." Rather, the composition of aggregate demand will change, but not the total.

The Fed will be induced to purchase some assets – Treasury securities or something else – in order to satisfy the increased demand for reserves. Otherwise, the fed funds rate would start to drift up, something the Fed has implicitly pledged to prevent in the foreseeable future.

In sum, we believe that the nadir of this recession is occurring now. Moreover, we believe that the combination of the $1 trillion TALF program and the $787 billion fiscal stimulus program, assuming it is financed by the banking system and the Fed, will have a salutary effect on aggregate real activity, perhaps inducing an economic recovery by the fourth quarter of this year.

Note the timing of this article: February 19

Another article:

http://www.northerntrust.com/popups/...t/ec020909.pdf

In sum, we believe that the nadir of this recession is occurring now. Moreover, we believe that the combination of the $1 trillion TALF program and the $787 billion fiscal stimulus program, assuming it is financed by the banking system and the Fed, will have a salutary effect on aggregate real activity, perhaps inducing an economic recovery by the fourth quarter of this year.

Now - does this sound like Bernanke or not? Econtrarian title notwithstanding...

[FRED]

Re: A view from the other side: Kasriel @ Northern Trust

Paul Kasriel - to me - is the best of the 'mainstream' economists.

His commentary is the most lucid extrapolation of mainstream thought - for all his purported contrarianism.

The information presented is always worth looking at, but more importantly is Kasriel's presentation of the link between quantitative easing/monetization and economic growth:

http://www.northerntrust.com/popups/...ent/us0209.pdf







Note the timing of this article: February 19

Another article:

http://www.northerntrust.com/popups/...t/ec020909.pdf



Now - does this sound like Bernanke or not? Econtrarian title notwithstanding...

Appears Kasriel operates from the premise that the FIRE Economy can be restarted. What happens to Northern Trust if it is not?

We look at these forecasts from the perspective that a commentator who forecasts X such that "If X occurs, my employer is out of business and I am out of a job" is not motivated to forecast X. That may or may not be the case with Kasriel but is a possible explanation why he does not take the data to its logical conclusion, that the FIRE Economy era is over. This is why we remain financial product neutral so that the motive for a forecast is not in doubt.

[Jim Nickerson]

Re: A view from the other side: Kasriel @ Northern Trust

Appears Kasriel operates from the premise that the FIRE Economy can be restarted. What happens to Northern Trust if it is not?

We look at these forecasts from the perspective that a commentator who forecasts X such that "If X occurs, my employer is out of business and I am out of a job" is not motivated to forecast X. That may or may not be the case with Kasriel but is a possible explanation why he does not take the data to its logical conclusion, that the FIRE Economy era is over. This is why we remain financial product neutral so that the motive for a forecast is not in doubt.

It seems to me all efforts are directed toward restarting the FIRE economy. What if Kasriel's premise is correct, and yours isn't correct?

The FIRE may be something that cannot be extinguished depite a lot of opinions it should be. The jaybirds that run this country--big political contributors both above and perhaps below board are not going down without kicking, screaming, fighting tooth and nail, and FOMC and Treasury seem to be in the control of the funders of our political and economic process.

[Spartacus]

Re: A view from the other side: Kasriel @ Northern Trust

It seems to me all efforts are directed toward restarting the FIRE economy. What if Kasriels premise is correct, and yours isn't correct?

I'm not FRED, but I'll take a shot at this

suppose FIRE is restarted - when will it end?

soon, very soon - If there is no episode of high inflation wiping out the debt burden, the FIRE will get put out a year from now. or 2.

IMHO the debt burden is the most important thing - what's the number as a multiple of GDP - 3 times? What will "success" at restarting FIRE mean ? 5 times GPD? 10 times?

tall order to get people to borrow that much, when they've voluntarily stopped at 3x

[petertribo]

Re: A view from the other side: Kasriel @ Northern Trust

Northern Trust got $1.6BILLION in TARP money. They were supposedly going to return it:

For both banks, returning the money would naturally mean they would no longer have to worry about constant criticism from politicians and taxpayers, who have been very vocal, deriding corporate strategies of some banks that received TARP money that include spending on bonuses or making recent M&A deals. Such restrictions may encourage other banks to follow Northern Trust's and U.S. Bancorp's leads.

http://www.thedeal.com/dealscape/200...orp.php#bottom

Whether Northern Trust ever released the details of their TARP negotiations I do not know. I doubt they did. I think being in receipt of $!.6BILLION put them in a better position than their competitors, particularly smaller banks.

Possibly Kasriel has denounced his employer. I have not seen that either.

When I see Kasriel's articles now, I give them a pass. Likewise with ex "good guys", Stephen Roach of Morgan Stanley and Bill Gross of PIMPCO. Sorry guys, you are the Problem.

I suppose in here there is a Good Person Working For Bad Corporation argument but no thanks.

[FRED]

Re: A view from the other side: Kasriel @ Northern Trust

I'm not FRED, but I'll take a shot at this

suppose FIRE is restarted - when will it end?

soon, very soon - If there is no episode of high inflation wiping out the debt burden, the FIRE will get put out a year from now. or 2.

IMHO the debt burden is the most important thing - what's the number as a multiple of GDP - 3 times? What will "success" at restarting FIRE mean ? 5 times GPD? 10 times?

tall order to get people to borrow that much, when they've voluntarily stopped at 3x

The answer to the question of the fate of the FIRE Economy is in the Fed Flow of Funds file Z.1 table d.2 for anyone to see.

Since it started in the early 1980s, every time the FIRE Economy ran into trouble (1987 post stock market crash, 1989 post LBO bubble collapse, and 2000 post tech stock collapse) it was bailed out by central banks either directly or indirectly. In 1991, debt levels declined in every category except financial, which virtually doubled, accounting for the growth shown. After the tech stock bubble collapse, foreign central bank borrowing restarted the FIRE Economy. But in 2008, all avenues failed. Non-financial, finaicial sector, and even local and state government debt growth declined, all except for Federal government debt.

See: Flow of Funds Q4 2008: Debt Deflation confirmation - Eric Janszen

[jtabeb]

Re: A view from the other side: Kasriel @ Northern Trust

Appears Kasriel operates from the premise that the FIRE Economy can be restarted. What happens to Northern Trust if it is not?

We look at these forecasts from the perspective that a commentator who forecasts X such that "If X occurs, my employer is out of business and I am out of a job" is not motivated to forecast X. That may or may not be the case with Kasriel but is a possible explanation why he does not take the data to its logical conclusion, that the FIRE Economy era is over. This is why we remain financial product neutral so that the motive for a forecast is not in doubt.

Jim Jubak thinks FIRE (or in reality the MASTERS of FIRE, are alive and well and hard at work).


http://articles.moneycentral.msn.com...s-a-heist.aspx


I have yet to see the fat lady sing on FIRE. I think a "reformed and retooled" FIRE is a more accurate prediction than the simple "Death of the industry".

If FIRE is STILL MANAGING to steal during the drawdown of this credit bubble, you think they may just have the funds to play the next bubble game?

I sure do, wait till carbon tax trading is insitutionalized, IMHO you ain't seen nothing yet from FIRE, wait till you can by and sell the control of energy consumption, THAT WILL BE SOMETHING TO WATCH.

I'll bet you that the carbon bubble will be as big (or bigger) as EJ predicted in his origional KA-POOM asset bubble graphic. Guess what, most of that value is going to be ficticious, just as is was in the housing and tech bubbles, and who do you think is going to be there and play it long on the way up and profit from the crash, if three serial bubbles are any clue, it's just going to be the same folks cleaning up (again!)

The energy bubble we are ABOUT to have is going to be as ripe as the tech bubble about 3 years or so from now, count on it.

[Supercilious]

Re: A view from the other side: Kasriel @ Northern Trust

I sure do, wait till carbon tax trading is insitutionalized, IMHO you ain't seen nothing yet from FIRE, wait till you can by and sell the control of energy consumption, THAT WILL BE SOMETHING TO WATCH.

I'll bet you that the carbon bubble will be as big (or bigger) as EJ predicted in his origional KA-POOM asset bubble graphic. Guess what, most of that value is going to be ficticious, just as is was in the housing and tech bubbles, and who do you think is going to be there and play it long on the way up and profit from the crash, if three serial bubbles are any clue, it's just going to be the same folks cleaning up (again!)

The energy bubble we are ABOUT to have is going to be as ripe as the tech bubble about 3 years or so from now, count on it.

You are right on the spot. The private energy tax will be the next big thing. Banking scam is so yesterday ....and today ...

[metalman]

Re: A view from the other side: Kasriel @ Northern Trust

You are right on the spot. The private energy tax will be the next big thing. Banking scam is so yesterday ....and today ...

and a way to impose tariffs on china without a nasty smoot hawley association.