Econo-babble

Greetings good citizen,

I focus mostly on the ‘economics’ of our civilization so I can gauge our social viability although this has become an exercise in futility considering all ‘money’ is funny.

That’s right good citizen. Even the ‘intangible’ stuff you earn under A Simple Plan will be nothing more than part of an accounting system designed to facilitate resource usage planning…otherwise we’d do away with it completely.

Failure to plan is planning to fail.

Um, in that respect my posts have routinely been going further and further ‘off the reservation’ as the >One Percent uses their ability to ‘fabricate’ money on an ‘as needed’ basis, further widening the gulf between them and those compelled to ‘earn’ their meager sustenance.

It is circumstances like we face today that provide the strongest argument against counterfeiting.

It is also the reason you should hustle down to the nearest Kinko’s and start running off sheets of twenties, pronto.

You’re getting ‘left in the dust’ by the, er, ‘legitimate criminals.’

Again we take a closer look at the headlines from today’s NY Times business section:

On Wall Street, the Rising Cost of Faster Trades
By NATHANIEL POPPER

The advantages of the nation’s increasingly high-speed stock market are under the microscope after a number of recent trading malfunctions underscored the risks that have come with rapid changes.

Geez, do you think they’re referring to all of that expensive electronic equipment or is it the software’s inability to compensate for the ‘front-running effect’ these systems create?

That’s what happened with Knights…their computer set off a ‘chain reaction’ by fucking up the trading algorithms used by other trading software.

Now the equipment cost a few bucks, no doubt…but the avalanche of bad trades cost a bunch more!

However, don’t be cozened into thinking this is the end of ‘front-running’ good citizen. It isn’t.

Worse, it will ultimately result in the end of trading.

Besides having to be a real chump to buy equities these days, being forced to pay more only adds insult to injury.

When a game runs out of suckers that game ‘ends’. Which is going to put one hell of a ‘dent’ in all of those 401k’s.

What are the boomers going to retire on when the NYSE goes ‘poof’?

If Romney/Ryan is elected, you won’t even have you SSI to fall back on!

And then (unsurprisingly) you’ll FIGHT!

But I digress, let us continue with more examples of ‘Capitalism at its finest!’

Giant Hospital Chain Creates a Windfall for Private Equity
By JULIE CRESWELL and REED ABELSON 8 minutes ago

Under private equity ownership, HCA made an aggressive push for more revenue that sometimes led to conflicts with doctors and nurses over concerns about patient care.

Same old, same old. We are saddled with the most expensive, poorest quality healthcare on the planet and the Republicans block every attempt to improve it, not that Romneycare is a true ‘improvement’…it has loopholes a mile wide!

But isn’t ‘Profits before people’ the new Republican campaign slogan?

German Small Businesses Reflect Country's Strength
By JACK EWING

The small and midsize companies of the Mittelstand will play a key role in determining to what extent the German economy will continue to provide a counterweight to the recession in southern Europe.

Um, why do you suppose small businesses in Germany are more successful than their European counterparts?

Could it be because the Germans are taught from a young age that German products are the best, putting an added emphasis on the basic fact that ALL ECONOMIES ARE LOCAL!

Failure to emphasize this fact has put the leaders of other Western nations, er, ‘behind the eight-ball.’

Euro Zone Economy Declines, Putting Pressure on Leaders
By JACK EWING 10:07 AM ET

Growth in Germany in the second quarter was not strong enough to compensate for persistent recession in Spain and Italy, data released on Tuesday showed.

Once again I direct your attention to the crystal clear concept that it is IMPOSSIBLE to maintain an economy centered on the wealthiest One Percent (because all of your workers die or revolt and die!)

The idea behind Exile is to give the hopelessly stupid a practical example of what their lack of appreciation for those who actually DO things results in…by removing them from the environment they so cavalierly take for granted.

Retail Sales Gain for First Time in 4 Months
By THE ASSOCIATED PRESS 9:58 AM ET

All major retail categories showed increases, a sign that consumers may be gaining confidence.

Consumers ‘regaining confidence’? What does THAT have to do with the irrational rising of energy prices which are included in the retail sales figures despite their being excluded from inflation calculations!

Can you say ‘Back to School’?

Municipal Bond Rule Mired in Legislative Limbo
By MARY WILLIAMS WALSH

The Dodd-Frank provision would require municipal bond advisers to put residents’ interests first but a House bill would eliminate the measure.

And, amazingly, the Republicans believe they are going to win in November? The question, good citizen, is will you be shocked enough to get off your dead ass and do something if the One Percent forces their will upon us (again)?

Factory closings by the Detroit automakers have lowered Canada’s vehicle production from three million cars and trucks a year in 1999 to 2.1 million last year.

Canadian Dollar’s Strength a Factor in Autoworkers’ Talks
By IAN AUSTEN

Talks begin this week on a new Canadian Auto Workers contract as the three Detroit automakers have been scaling back their operations in Canada.

Um, people can’t afford ‘new’ cars, they are already ‘debt saturated’ and most of them are a single paycheck away from insolvency.

This ‘throttling’ of our civilization is untenable and will drive us to the brink of extinction.

Our (self-professed) ‘betters’ are fools and incompetents, both blind and deaf.

But I’ve rambled on long enough already,

Peace, good citizen.

Thanks for letting me inside your head,

Gegner

The Former number 2...

Greetings good citizen,

Markets are once again ‘cliff-diving’ as jaw-boning a global recovery becomes less and less effective…a tactic that continues to be proven wrong at every juncture and by every measure.

When ‘improvement’ is seen it has proven to be both miniscule and massaged…which is to say it is ‘statistically indistinguishable’ from the margin of error in the reported data.

Which usually turns out to have been ‘wildly optimistic’ when it is examined again later.

But hey, what’s happening doesn’t matter, it’s what YOU BELIEVE that matters.

Well, every once in a while things pop up to remind us that the world’s second largest economy tanked over two decades ago (due to globalization) and has yet to recover.

The preliminary estimate for the three months through June is sharply lower than the revised 5.5 percent annual rate of gross domestic product growth in the first quarter. The second-quarter figure fell short of the median forecast of 2.3 percent among 24 economists surveyed by Bloomberg News, and it signaled that the recovery after the earthquake and tsunami of last year might be stalling.

The slowdown has also highlighted economic worries just days after Prime Minister Yoshihiko Noda won his bid to double the Japanese sales tax to tackle swelling public debt, with the upper house of Parliament passing the increase Friday. The last sales tax increase, in 1997, snuffed out any hope of a strong recovery from the Japanese banking crisis of the 1990s, and opponents of Mr. Noda have warned that the latest increase in the tax could lead to a similar slowdown.

At a board meeting last week, the Bank of Japan held back from easing monetary policy, saying that reconstruction demand in the wake of the tsunami was continuing to drive economic growth. But the central bank cut its outlook for exports and output, citing global economic risks, and it signaled that it was ready to expand stimulus again if needed.

Do we really need to play ‘Mirror, mirror’ here? Aren’t we headed down the very same ‘primrose path’ Japan was forced down more than twenty years ago?

Which begs the question of, ‘was Japan the ‘dry run’ for what the oligarchs eventually DID to the US?’

National ‘economic suicide’ through financial fraud.

Ironically, Japan’s banking sector problems are being blamed on ‘Organized Crime’.

Worse good citizen, take a drive down any US highway and what do you see? Toyota’s and Hondas, all being driven by unemployed Americans!

What does this tell you good citizen?

That SOMEBODY in Japan is still raking in the big bucks…but all of those ‘profits’ are going into the pockets of a decidedly corrupt banking sector.

I know you were thinking something different and you’re right, but that’s not the point I am attempting to make.

The ‘focus’ here is on the ‘global’ > One Percent.

Which I’d like to think I’ve made it pretty clear the problems our civilization is faced with are ‘global’ in nature…meaning the perps are operating on a global basis.

So when I comment that ‘the destruction of our civilization proceeds apace, I’m not just talking about the USA, I’m talking EVERYWHERE!

You might want to ‘test drive’ the idea of a ‘global monarchy’ in your head (as reprehensible as that idea is) for a while so you aren’t totally blind-sided when they, er, ‘coronate’ the new King and Queen of the planet!

(It’s either that or we go ALL ‘Orwell’ and find ourselves divided into perpetually warring factions with the ‘third’ party alternating between the role of ally and enemy, meaning you can never completely trust them.)

For the second time I emphasize the point: Reality doesn’t matter, it’s what you BELIEVE that counts!

And the bought and paid for corporate owned media regularly fill YOUR noggin with shit pudding, occasionally swapping the cherry on top with a different variety of turd.

Worse, good citizen…the media keeps on (subtly) blaming YOU for not acting when you actually never had the opportunity to act!

After convincing you that 20% is somehow 50%, it is the ‘unknown’ whackos out there who keep voting against what’s ‘good for the country’.

This is how they’re going to sell the Romney/Ryan ticket to you…that there are more whacko Tea Partiers out there than you know!

Mind you they could only account for 30,000 of ‘em at the peak of their popularity but you’re gonna be told that they ‘carried’ the election for a >One Percent ‘underdog’…

And it’s a meaningless question to ask ‘how stupid do they think we are’ if you continue to do nothing about it?

Look at everything they’ve gotten away with to date:

They have effectively ‘ended’ welfare.

The have exported our manufacturing sector.

They have provided aid and material comfort to our enemies (and profited mightily in the exchange.)

The have cheated tens of millions out of their retirement funds. They literally bankrupted the global financial network…and nobody has been prosecuted.

So maybe it’s time to step back for a moment and look at what happened to the world’s ‘second largest economy’ and think about ‘why’ it happened?

You don’t suppose there was a little ‘criminal element’ involved, do you?

Just keep standing there, the boys will be along in a little while to fit you with your new cement overshoes.

Thanks for letting me inside your head,

Gegner

Interesting New Year!

Greetings good citizen,

Well, here we are again, another year older and not a single wit wiser (not to mention that most of us are a good deal poorer…)

The NY Times tells us that Wall Street finished the year pretty much in the same place it started yet Mr. Williams of Shadow stats fame provides us with this indisputable data

No. 410: Special Commentary, GAAP-Based 2011 U.S. Financial Data 
December 28th, 2011

Actual 2011 Federal Deficit Topped $5.0 Trillion

U.S. Government Debt and Obligations Top $80 Trillion

Long-Term U.S. Insolvency/Hyperinflation Remain Virtual Certainty

As usual, the, er, ‘disturbing’ portion of the commentary has been served up last.

Yes good citizen, despite strident claims to the contrary, the very real threat of ‘Hyper-inflation’ continues to haunts us.

Libertarians like Mish Shedlock still point to ‘deflation’ as the devil haunting our tracks yet there has NEVER, (like not even once) been an instance where prices dropped so low that commerce ceased to function.

But that’s a ‘misleading’ description of deflation…

What these ‘serious people’ are warning us of is the ‘drying up’ of credit!

The thinking here is you simply won’t have the money to purchase staples AT ANY PRICE.

This decidedly twisted way of viewing things ignores the same factor ‘gold bugs’ routinely ignore.

The ONLY reason people pay the ‘asking price’ for anything is because it is cheaper than the price of simply taking it.

Right now, as in at this very second, the blunted and stubby ‘arm of the law’ is likely to reach out and slap you should you decide to take the more ‘economical route’ while shopping.

But in the not too distant future you will become the law…more disturbingly, EVERYBODY will become their own personal ‘law enforcement’ unit.

And there will be no, er, ‘arbiters’ of right and wrong…the winners of these disputes will be the quickest on the draw (as well as the most ruthless in ‘target selection’.)

Did I mention ‘Happy New Year’ yet?

I didn’t think so, despite it already being declared that 2011 was a ‘bad year’…

Funny we are only hearing this now, at the end of the first year where they stopped claiming there was an (imaginary) recovery underway!

Oh, and that it was not merely ‘billions’ pumped into the fraudulent banking system but trillions!

Conservatives were upset enough over the 700 billion that their last sitting president tossed at the banks. Where is their outrage at this figure mushrooming by a factor of 35?

More disturbingly, this was done by a conservative central bank head!

(But, naturally, that has nothing to do with anything…)

Which draws us back to our original topic…which was the inevitable collapse of the global financial system.

What? You didn’t get that out of Mr. Williams brief commentary?

Like my humble self, Mr. Williams is unable to provide us with the ‘exact date’ (although I’ll stick my neck out and predict it will happen before next summer! A ‘prediction’ that has absolutely nothing to so with the Mayan long count calendar.)

Those bold enough to click through the ‘adult content’ firewall should hold few illusions about how the world operates and who is in charge of it.

But I’m ‘projecting’ again, am I not?

What I admire the most about you, gentle reader, is that you are no fool!

Thanks for keeping it real!

I’d like to take this opportunity to wish you an ‘interesting’ New Year…and it’s always interesting if you know what you’re looking at!

Thanks for letting me inside your head,

Gegner

Sleight of hand

Those of you who avoid/don’t bother with the markets are missing one, er, ‘miraculous’ rally…although there’s nothing ‘incredible’ going on, Wall Street ‘pretzel logic’ tells us that every time the market dives it’s ‘time to buy’…

And buy ‘they’ have…at an incredible clip too, I might add!

But what I marvel at is ‘where are these assholes getting the money?’ Because any ‘ordinary’ person went broke over a year ago. So we must wonder just who is holding a seemingly bottomless sack of cash…could it be Goldman Sachs?

Is the ‘unending’ supply of cash coming from the US Treasury? The crooked as all get out Wall Street banks may have paid back the TARP but they haven’t given up their access to zero interest rate money, courtesy of the US taxpayers.

Which is to ask, good citizen, is YOUR money being used to LINE THE POCKETS of Wall Street Thieves?

More importantly, considering the ‘austerity measures’ being forced upon the civilian population of Greece (to appease ‘demanding’ bankers.) What will you do when the same thing happens here?

Don’t look now good citizen but the whole situation is taking a turn for the worse and you won’t find a single mention of this outrage in any US based media!

Confetti Shredder Rally Time
May 10th, 2010

UPDATE: FEDERAL RESERVE OPENS EMERGENCY CREDIT LINE TO EUROPE

Via: AP:

The Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent.


ECB to Buy Bonds In Secondary Market to 'Address Severe Tensions In Certain Market Segments'

But there’s no conspiracy here! No ‘complicity’ amongst global banksters who are frantically engaging in a game of ‘idiots delight’…the practice of turning money into power then back into money again. Not that this exercise has no purpose, it does! The problem is that usually that purpose is to subtract from the general welfare/common good. Like secrecy, only thieves and scoundrels NEED to engage in ‘Idiots delight’, where they use a portion of what they stole to protect the rest from being ‘demonetized’.

Ever wonder why Bankers ‘invest heavily’ in ‘politics’? Now you know!

Worse, what do you suppose happens when bankers become legislator’s ‘primary source’ of income? Would those charged with upholding and enforcing the law toss the keys to the vault to their benefactors while purposefully looking the other way?

Which brings us to our next piece of evidence

[Purloined from: Jesse’s Crossroads Café]

The limit to the ability of a central bank to create money is the acceptability of the underlying bonds and currency.

When a central bank turns to buying the bonds in order to support their price, or more properly the interest rate paid, this is the beginning of the end, the point at which the national currency becomes little more than a Ponzi scheme, creating more money to pay the interest on the old money.

Now both the US Federal Reserve, the Bank of England, and the ECB have fallen into this. We are seeing the controlled demolition of the fiat currencies of the developed world.

[Followed by this article ]


Europe Offers $957 Billion in Hope of Appeasing the Banks

The US SP futures are soaring almost 30 points, along with world equity markets, as the Europeans join the Americans in agreeing to monetize their debts by expanding their currencies. Make no mistake, no matter how they wrap this package and call it debt, it is the expansion of the money supply to prevent insolvency. [Yet the fucking liars in the MSM are still crowing about how ‘robust’ the ‘invisible recovery’ is!]

This does not cure the problems that remain, but rather provides time and latitude for the politicians to act. Discussion should begin at the IMF meeting on May 11, although this is unlikely to render any practical discussion of financial reforms, other than further debauching of the savings of the nations and their peoples.

These are dark days indeed that bring a false dawn that will quickly prove to be simply insubstantial. {I concur…with the caveat that this darkness won’t descend with the swiftness of curtains being drawn but with the gradualness of an eclipse…]

The bribe has been given. Now there is the real work of reform and justice yet to be done. But will it be deferred and diluted in Europe as has been done in America.

And if your interested in some ‘satire’ look here

So, are you starting to feel like a mushroom good citizen?

Or are you getting tired of being kept in the dark and fed bullshit?

Like the parable of the frozen songbird, not everyone who shits on your beliefs is your enemy while not everyone who pulls you out of shit is your friend!

Although the conservative ‘moral’ to this tale is ‘if you’re warm and happy in a pile of shit, keep your mouth shut!’ While we’ve all seen for ourselves just how well THAT works.

The ‘devastation’ detailed above is what you get by keeping silent WHILE YOUR FUTURE IS STOLEN FROM YOU!

Worse, how ‘happy’ would anyone be, up to their ears in shit?

It’s only ‘warm’ for a few minutes…so you’d better squawk real loud! Preferably before the shit gets cold and hard!

Thanks for letting me inside your head,

Gegner

Complexity and Doom...

Greetings good citizen,

Even the simplest of things can be 'complicated' if you mess around with them enough...which is to point out that much of what is complicated started off as a simple, straight-forward idea.

The 'complications' arise when it is to someone's benefit to 'add' 'conditionalities' to an otherwise simple concept. He problem with adding these 'exceptions' is that sometimes it destabilizes an otherwise sound construct.

And we soon find ourselves faced with the circumstances explored in tonight's offering

[Purloined from: Some Assembly Required]

Complexity and doom
Apr 4, 2010 18:59 EDT
banking | economics | eschatology


Clay Shirky is talking about media, but might as well be talking about finance:

Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn’t these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn’t because they don’t want to, it’s because they can’t.

In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn’t regard the sudden decoherence of these societies as either a tragedy or a mistake.

—”[U]nder a situation of declining marginal returns collapse may be the most appropriate response”, to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites. [The changes that made the whole edifice unstable were originally put there to benefit the elite...just saying.]

Meanwhile, Steve Waldman makes the case that banks are far too complex, these days, for notions of “capital” to mean anything any more. What we need, he says, is to get simpler: “we are doomed,” he says, “unless and until we simplify the structure of the banks.” [How unfortunate is it that 'old fashioned' methods of producing profits no longer suffice for our modern day rentiers?]

Which, if true, is to say that we are doomed. We have reached a level of institutional complexity which renders radical simplification impossible, short of outright collapse. We can see this even in relatively simple structures like that of U.S. financial regulators: such things are much easier to create than to abolish, and so they tend to multiply. But it’s even more true of finance more generally. The world’s biggest banks must become much simpler; the world’s biggest banks won’t become much simpler. The conclusion is not a pretty one.

Perhaps more interesting than this conundrum of 'unsimplifiable' complexity is the horrifying reality behind 'why' this is so.

Do you know 'why' banks can't revert to their old business model, good citizen?

Perhaps I should ask if you 'think' you know why? (no irony should be lost on the fact that the answer to this question is heavily tainted by the respondent's 'political leanings'.)

The 'simplified' answer (because it explains most of, but not all, of the problem) is there is too much money chasing too little 'return'.

When 'Financial Engineering' overtook the true Productive Economy, the time bomb started ticking towards the inevitable 'meltdown'.

What do we see repeated here good citizen? The, er, 'unwillingness' of the, er, 'investors' to settle for more realistic returns...SO, since nobody is interested in being, er, 'practical' there is only one option remaining...'ka-boom!'.

And he's right, there won't be any 'simplifying' so the 'end result' is pre-ordained to be 'destruction'.

Happy Happy, Joy Joy!

You still don't look Happy, Do it again!

Um, there's plenty here to chew on good citizen but I won't 'beat you over the head with it.

Thanks for letting me inside your head,

Gegner

Mystery Buyer!

Greetings good citizen,

I’m an hour ahead of market close and at last glance the US markets are, er, ‘out-performing’ our Western Hemisphere, er, ‘peers’.

I once again ditched a MSM story for ‘more reliable’ source to use as tonight’s offering

By way of comparison, the title of tonight’s article isn’t even ‘newsworthy’ as far as the MSM is concerned. They want you to keep believing that our creditors are tripping over themselves to buy up our, er, ‘recycled’ debt.

Um, there should be no irony lost on the fact that there are news stories which directly contradict that particular meme. China is buying up commodities like there was no tomorrow AND they just slammed the brakes down on their internal ‘stimulus spending program’.

In another ‘interesting development’ it seems retailers ‘overbought’…but the fucktards on Wall Street choose to view this as ‘confidence’ in the consumer rather than what it really is… an expensive fuck up that somebody’s bound to get canned for!

Without further adieu, let us proceed with tonight’s offering:

[Purloined from: Jesse’s Crossroads Café]

Who Is the ‘One Big Bidder’ For US Treasuries?

There are a number of possibilities for the identity of the non-primary dealer domestic source of enormous purchases at the longer end of the yield curve in recent US Treasury auctions.

It could be a misclassification, a branch of a bank representing a foreign power. The problem with this theory is that they have a particular reluctance to buy the long end of the curve.

It also could be a legitimate domestic purchaser like a pension fund compelled to match duration of obligations, as is required by a little noted ruling of the US government a couple of years ago. They might be shifting out of other long term instruments with similar durations but more risk.

And of course, it might very well be the Federal Reserve Bank, or the Treasury via the Exchange Stabilization Fund.

It could also be the one big bidder who comes in with some regularity and smashes down the price of precious metals with the obvious intent of manipulating the market like clockwork just after the PM fix in London.

It might even be the big bidder who stands ready to buy the SP futures market at every turn, maintaining a floor on the market and a steady drift higher in prices with no change in fundamental underpinnings. Their hand in the market is apparent.

It is less probable, given the state of market manipulation by a few big proprietary trading desks riding another wave of cheap Fed money, but it might even be the party that entered the US equity market yesterday at 12:03 PM with a HUGE order (228,000 contracts) to buy the SP futures. As Larry Levin noted, "As of now I don't have a firm answer, but whether it was HFT activity, the "Helicopter," or a massive cross trade, it sure set the bottom in for the afternoon. Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid." And so the market rallied once again into its current peak.

As the article from the Financial Times indicates, it might never be possible to find out who this is, unless there is an audit of the market that is made public. As Edmund Burke noted, "Fraud is the Minister of Injustice" and it is my experience that opacity is the accomplice of fraud.

If this is price manipulation, no matter the intentions or beneficiaries, it is likely that it is mispricing risk in a big way, and will eventually will fail, and that its failure will cause a great deal of pain in the real economy for innocent bystanders, and will end in tears. And when that time comes, expect those who created the crisis to make you another offer that they think you cannot refuse.

You decide what is most likely, and what needs to be done about it, if anything. More than a few people are wondering at the lack of response from the people in various nations, particularly in the UK and the US.

Here is some old knowledge that might prove illuminating.

National Madness
Gilbert Keith Chesterton 1910

"This slow and awful self-hypnotism of error is a process that can occur not only with individuals, but also with whole societies. It is hard to pick out and prove; that is why it is hard to cure. But this mental degeneration may be brought to one test, which I truly believe to be a real test.

A nation is not going mad when it does extravagant things, so long as it does them in an extravagant spirit. But whenever we see things done wildly, but taken tamely, then the State is growing insane...

For madness is a passive as well as an active state: it is a paralysis, a refusal of the nerves to respond to the normal stimuli, as well as an unnatural stimulation. There are commonwealths, plainly to be distinguished here and there in history, which pass from prosperity to squalor or from glory to insignificance, or from freedom to slavery, not only in silence, but with serenity."


And in this slow descent into madness, the worst is yet to come.

Gegner here: I’m sure most of you will draw the correct meaning from the above passage, but paranoid types like myself fear you’ll miss the deeper message. Those who fail to realize that nobody is waiting to rescue us will be caught ‘unprepared’ for what will prove to be a very, er, ‘violent collapse’.

Which is to say that the people who are supposed to ‘warn us’ are in on the crime…that’s where the ‘surprise’ will come from.

Back to our article:

Financial Times
Direct bids for US Treasury notes lead to speculation over buyer
By Michael Mackenzie in New York
January 14 2010 02:00

Auctions of US Treasury notes this week have attracted extremely strong buying from domestic institutional investors, fuelling speculation that "one big bidder" has decided to defy the conventional wisdom on Wall Street that US government debt is due for a fall.

Yesterday, direct bids accounted for 17 per cent of the sales of $21bn in 10-year Treasury notes, far higher than the recent average of 7.4 per cent. It was the highest percentage of direct bids in a 10-year Treasury auction since May 2005.

On Tuesday, direct bids accounted for a record 23.4 per cent of the bidding for $40bn in three-year notes, up from an average direct bid of 6 per cent.

Market participants say the unusually high level of direct bidding suggests that a large investor is looking to accumulate Treasuries without alerting the primary dealers on Wall Street to its intentions.

"It appears to us that someone is trying to hide their apparent interest in owning these auctions from the rest of the market," said David Ader, strategist at CRT Capital.

Rick Klingman, managing director at BNP Paribas, said: "It is unusual to see such a spike in the direct bid and I would imagine it is one big bidder. There is no way we will find out who it is, not now, or ever." [How convenient…]

The surge in direct bidding is particularly notable because it comes after predictions that the record levels of Treasury debt issuance would exhaust investor demand, driving yields higher.

Among the most high-profile warnings came from Pimco, manager of the largest bond fund, which raised concerns about the escalating supply of US Treasury debt.

Attention will now focus on whether there is similar direct demand for today's $13bn 30-year bond sale.

The 10-year notes were sold at a yield of 3.754 per cent yesterday, the highest rate awarded for a note sale since June, when they were issued at 3.99 per cent. At the start of the year the yield on 10-year notes briefly traded at 3.90 per cent, as many investors talked down the prospects for Treasuries. The note traded at about 3.70 per cent earlier this week and was at 3.70 per cent late yesterday.

Under the three main classifications of buyers in Treasury debt sales, direct bidders are generally domestic non-primary dealer banks and large institutional investors. Normally their presence at Treasury auctions is small, as they usually buy debt through the primary dealer network, which currently numbers 18 banks and broker/dealers.

Posted by Jesse at 10:02 AM

What do you think good citizen? Who do you suppose our ‘mystery buyer’ of US debt is if it isn’t the Chinese? Understand that even the wealthiest individuals wouldn’t risk putting that much of their personal wealth in one basket. Government debt may be the safest but history is full of governments that no longer exist.

And given the actions of what passes for our current government, I’d say their days are numbered too.

Which brings us to the most disturbing aspect of our times…has our government AND the media been captured by the few who control the multi-national corporations?

You can’t believe the news and those poor slobs have to do what they’re told if they want to see their next paycheck, so how ‘free’ are they to report the truth?

There’s your answer, they aren’t…and neither are you.

Leaves you without any decent options, doesn’t it? You either listen to nutjobs like myself who are, er, guessing at what’s going down or you listen to bought and paid for shills who can’t tell you the truth because their superiors don’t want you to know.

How’s that for a fine kettle of fish?

Thanks for letting me inside your head,

Gegner

Mythical Money

Greetings good citizen,

Today’s markets closed ‘mixed’, The Dow and the S&P were ‘up but the darned Nasdaq was down…unlike last Monday, no exchange was up (or down) very much.

For a while there good citizen, if it was Monday that meant it was time for another installment of the Credit Bubble Bulletin But there was a while there that Mr. Noland stopped providing commentary to accompany his weekly reports…and the reports themselves were a bit dense to comment upon independently.

While it is always an interesting read, this week’s installment raises some important points about the global monetary regime that I think you all need to be aware of.

So without further adieu:

CREDIT BUBBLE BULLETIN
Issues 2010
Commentary and weekly watch by Doug Noland

Let's start by setting the backdrop. The world is operating without a stable monetary regime. There is no gold standard. There is no functioning Bretton Woods currency stability regime. There is no longer even an ad hoc dollar reserve "system" that tended - at least on occasion - to discipline foreign credit systems and restrain excesses.

Like never before, credit systems around the world operate unrestrained. It is my long-held view that pricing mechanisms - and capitalism generally - function poorly in a backdrop of unrestrained (inherently mis-priced) credit. [Can you say, ‘Stick ‘em up’?]

Most importantly, there is today no common understanding that stable international finance is wholly dependent upon individual credit systems being operated with discipline and restraint. Quite the contrary, as the universal policymaking view these days is that aggressive stimulus and monetary looseness are essential for supporting financial and economic recoveries. The world is devoid of a monetary anchor and operating in a unique monetary environment that foments speculation, financial excess, imbalances, economic maladjustment, and potent bubble dynamics. As we begin 2010, inflationism is still seen as the solution instead of the problem.

The year 2008 marked the collapse of the Wall Street/mortgage finance bubble. It specifically did not mark the end of the Chinese bubble, the global credit bubble, or even the greater US credit bubble. Last year saw the emergence of the global government finance bubble - quite possibly a monumental development. Accordingly, 2010 should be viewed as a bubble year. This implies a bipolar perspective when contemplating probable outcomes: on one end, the bubble expands and makes it through the year, or, on the other, the bubble bursts and financial systems and economies sink right back into crisis. As a long-time analyst of bubbles, I caution against predicting the timing of their demise.

Last year saw intense speculation reemerge in US and global financial markets. It is the nature of speculation to intensify as long as it is accommodated by loose financial conditions. Similarly, it is the nature of bubbles to expand and become more robust unless inflation dynamics are quashed through some type of monetary tightening. Excess begets excess ... and the more protracted - hence powerful - the bubble the greater the degree of tightening necessary to eventually rein it in. The more heated and expansive the bubble, the greater the dislocation associated with its bursting. I see no appetite anywhere in the world this year to aggressively suppress bubbles.

The unfolding bubble in China is historic, and their policymakers appear poised to tinker. Tinkering doesn't quell bubbles - certainly not seasoned ones. I have espoused the view that the Chinese credit bubble has entered the dangerous "terminal phase" of excess. How this dynamic and the course of policymaking play out is a major issue (in) 2010. I expect Chinese authorities to work diligently in an effort to ration the amount of credit available for real estate speculation. At the same time, the stated goal of stimulating domestic consumption implies huge growth in Chinese household debt.

I am generally skeptical in the efficacy of credit rationing. This was a focal point of a great debate in the US back in the late-1920s. One (dovish) camp believed that the focus should be on limiting the flow of credit financing stock market speculation, while at the same time working to maintain ample credit to fuel the booming economy. The problem is generally that years of expanding credit create a (financial and economic) system with both a huge credit appetite and a potent propensity for inflating the quantity of new credit. [Um, for some pretty smart people it doesn’t cease to amaze me that no one points to the ‘interest avalanche’ an unrestrained credit market produces. They have to keep lending to ‘cover’ the interest the principal keeps demanding.]

Attempts to limit speculative credit - or even lending to certain sectors - is generally ineffective in itself and fails to address the major issue of runaway total system credit growth. Indeed, after bubble dynamics have taken firm hold, attempts to restrict credit by the nature of its use will tend to distract policymakers and delay efforts to contain systemic excesses. From my point of view, determined, decisive and independent monetary management provides the only hope for reining in "terminal phase" credit bubble excess. Such an approach seems in very short supply these days, and I'll be surprised if much of it emerges in China in 2010. [He’s right, it won’t.]

Here at home, Federal Reserve chairman Ben Bernanke apparently doesn't discern bubble risk. Incredibly, in his Sunday morning speech he even argued that Fed rate policy was about right during the 2002-2006 period - and that a low Fed funds rate wasn't the cause of the US housing bubble. We can also assume the he believes his speeches (including his November 2002 - "Helicopter Ben" - "Deflation: Making Sure 'It' Doesn't Happen Here") did not create a major moral hazard issue. [I hope nobody misses what Mr. Noland means, that Mr. Bernanke’s actions did indeed create a HUGE moral hazard problem, we’re talking trillions here!]

The markets have no fear that the Fed will tighten in response to financial speculation. I believe the Fed examines today's real estate markets and fears "deflation". I would imagine they see a stock market still 25% below all-time highs and worry of "disinflation". They see stagnant (at best) household debt growth, declining bank credit, and still impaired securitization markets and see no credible inflation threat. [That’s because the jack asses aren’t looking in the right place, the place we’re most vulnerable…energy! If energy goes through the roof, life as we have come to know it, ‘vanishes’.] Looking in the rear-view mirror, they just don't see problematic financial leveraging and lending excesses. They would surely view the reemergence of asset inflation as confirmation of their adept policymaking. [Instead of what it really is, ‘wealth preservation’, where the rest of us get ‘stiffed’.]

The Fed's overriding focus is stimulating sustainable recovery. [Bullshit! The focus is on sustaining the ‘unsustainable!’] They will err on the side of caution when it comes to removing crisis-period liquidity measures. I will assume that they will not be raising rates meaningfully until they are confident that the markets and economy have first adjusted well to ending quantitative easing operations. [Which will be ‘never’] Meaningful financial tightening is nowhere in sight. The Bernanke Fed still believes that monetary policy is a "blunt tool" and, as such, is inappropriate for dealing with bubbles. They prefer stronger "regulation". So, who is responsible for regulating Washington credit excesses? [You can believe it when pundits like Elliot Spitzer say we already have all of the laws needed to end the crisis, it is the failure of our elected officials to prosecute that keeps the theft underway!]

The Fed's analytical framework and rear-view approach will not serve them well. Today's domestic credit excesses are concentrated in the Treasury and agency markets. In a replay of mortgage finance bubble dynamics, Federal Reserve policies today accommodate the government finance bubble. Bernanke's talk of helicopter money and the government printing press was fundamental to creating an environment where the markets operated confidently knowing the Fed was there to provide a market liquidity backstop. The Fed's fingerprints were all over the historic mispricing and over-extension of mortgage credit. Today, "quantitative ease" and the perception of potentially unlimited Federal Reserve monetization (balance sheet growth) have greatly distorted the pricing mechanisms for government borrowings and debt instruments generally.

Because of the Fed's words and deeds, the marketplace is dysfunctional when it comes to pricing risk. These days the price of government credit has no relationship to the interaction of its supply and demand. If Washington seeks to borrow a couple hundred billion - or a few trillion - it really has little impact on yields. In an ominous replay of the mortgage finance bubble, government intervention has severely distorted the capacity of the marketplace to properly price risk, allocate resources, and discipline market participants (borrowers and speculators). [Which sort of proves another point I’ve been trying to make, that money and the rules governing it’s use/value are largely ‘meaningless’.]

The Fed should have "leaned in the wind" in response to double-digit mortgage credit growth in years 2002 to 2006. Instead, the Fed did the exact opposite, believing at least for awhile that the expansion of mortgage credit was a mechanism to ameliorate deflationary pressures. Furthermore, it had convinced the marketplace that it was there to protect against any potential credit bust. And then, once the housing/mortgage bubble really gained a foothold, the Fed was unwilling to rein in the monster it had unleashed. The marketplace had become so dysfunctional that the best "trade" to profit from the inevitable bust was to load up (and further feed the mortgage bubble) on government-sponsored enterprise (GSE) obligations.

Similar dynamics now promote the government finance bubble. In a more orthodox financial world, our central bank would be expected to "lean against the wind" as our federal government sets course on destroying its (our) creditworthiness. Not these days, as the Fed holds short-term rates steadfastly at near zero, balloons its balance sheet with GSE mortgage-backed securities (MBS), and again convinces the marketplace that its balance sheet will always be there as a liquidity backstop. [Ironically, they always ‘will’ have the ‘liquidity’ to backstop the mortgage market…the problem is IF THEY ACTUALLY DO IT, they will turn our currency into ‘confetti’…then the only ‘way out’ will be to ‘devalue’ the currency…we’re talking ‘scam-a-rama’ trade-in time where you gotta give them a thousand old dollars for one new one sort of shit…and it’s still a ‘mind fuck’!]

Despite the prospect of the Fed ending its MBS purchase program in March, GSE MBS spreads to Treasuries ended last week near 17-year lows. The marketplace must expect that Fannie and Freddie are to resume their balance sheet growth (and market liquidity-backstop function!); that the Fed will state its intention to provide future support for the MBS market; or a combination of both. There is no end in sight when it comes to the nationalization of mortgage finance. Clearly, the MBS marketplace is rife with government intervention and price distortions. It has, once again, succumbed to dangerous bubble dynamics and how it functions through the year is a major issue for 2010.

As I mentioned again last week, combined Treasury and GSE MBS debt expanded US$2.8 trillion in the 15 months ended September 30, 2009. The emergence of the global government finance bubble was crucial for the stabilization of the US and global economy. US recovery is dependent upon the continuation of this bubble, and this bubble is dependent upon massive government fiscal and monetary stimulus. [It CAN’T work; not without bankrupting 80% of the population!] Optimism is now running high. Such a dynamic can be self-fulfilling for awhile, and the US economy could make the bulls look smart in 2010. But this is very unlikely to change the very bearish secular thesis. [We all know the stock markets didn’t return to 10,000 based on ‘fundamentals’. What we have observed, so far, is pure ‘Ponzi Dynamics’ pulled off with ‘free’ money that doesn’t really exist!]

The nature of the unfolding economic recovery is another issue for 2010. Will private-sector credit creation begin to expand sufficiently and, in the process, allocate ample credit for sound investment and meaningful non-government job growth? Will a self-reinforcing credit cycle commence, or is the system now trapped in government debt bubble dynamics?

A respectable December for the retailers has optimism for consumer rejuvenation running high. The S&P Homebuilding Index was up 14.6% last week, as the marketplace positions for a traditional economic rebound. But major questions for 2010 remain: how vulnerable is the housing market to higher mortgage yields? How long will the marketplace finance massive deficit spending and GSE debt issuance before demanding significantly higher yields? [Understand that this past December’s ‘respectable performance’ is due to under measurement of inflation coupled with an expanding consumer base…they may have thrown a ton of people out of work but they haven’t started killing them yet!]

My thesis that the unfolding reflation will be altogether different than past reflations may be tested in 2010. So far, massive government stimulus has stabilized both asset markets and national incomes, and some pent up demand throughout the economy is expected. At the same time, savers are receiving about nothing on their savings, while energy and many other [commodity] prices continue their ascent. Surging financial asset prices have boosted household confidence and net worth.[?] Yet a meaningful rise in market yields could easily pressure bond, stock and home prices. To what extent mortgage credit growth can recover and foster a self-reinforcing housing recovery is a key financial and economic issue for the year ahead. [Um, with a badly depleted ‘customer base’ for real estate and other ‘big ticket’ consumer goods, it is difficult to imagine how these markets will ever ‘come back’ without some major changes in economic policy/methodology. You can’t have 80% of your customer base ‘priced out of the market’ it simply doesn’t work.]

Unprecedented market interventions by the government played a decisive role in stabilizing mortgage finance, housing markets, and household spending. It played a similar role in stabilizing the municipal debt market. That cash-strapped state and local government regained access to inexpensive borrowings was instrumental to financial and economic stabilization. If a traditional recovery ensues, perhaps state and local governments can grow out of their debt problems. A more reasonable bet is that municipal finance faces serious and festering structural debt issues. California is an absolute fiscal mess. Do loose financial conditions continue to accommodate what will be enormous 2010 state and local borrowing requirements?

Today, the markets are infatuated with risk assets. From the perspective of bubble analysis, this is not all too difficult to explain. The first week of the year saw about $45 billion of corporate debt issues. Despite enormous new supply, investment grade debt spreads are at pre-Lehman crisis levels. The same can be said for junk bond and emerging debt spreads. Credit conditions are loose for most creditworthy borrowers, which feeds market demand for these debt instruments - which translates into even greater credit availability. In such an environment, even commercial real estate doesn't look so bad. But is such an accommodating financial landscape sustainable? [Because we come full circle once again to a ‘too small’ customer base…]

It is always impossible to know what developments will surface to upset the applecart: there are any number of festering financial, economic, political, and geopolitical issues that might impede the unfolding bubble. At the same time, it is not unreasonable to suspect that policymakers might tend to delay dealing with tough issues. The federal deficit is out of control, and monetary policy is outrageously loose. There is an "exit strategy" with assorted doors. There is the looming issue of Fannie Mae and Freddie Mac. The Federal Housing Administration and Ginnie Mae need to be reigned in.

Looking back, policymakers of all stripes missed their opportunities to make tough but necessary decisions in 2009. And now 2010 just doesn't have the feel of a year that will witness a lot of decisive policymaking. In Washington, the focus will turn to the 2010 elections. The Fed will worry about its reputation and independence. Fearing for their jobs and fearful of mistakes, timid will win over bold. Bubbles treasure timid.

Until proven otherwise, I'll project 2010 as a year of escalating monetary disorder - disorder globally across a broad spectrum of markets. A global bubble would seem to ensure unsettled currency markets. Dollar optimism runs surprisingly high to begin the New Year. Yet the scenario of a dollar problem leading to a jump in US borrowing costs still doesn't seem all that nutty to me. Another spike in energy and commodities wouldn't surprise me, but the best bet is numbing volatility. The emerging markets are poised for a wild year. And, of course, all eyes on interest rates.

As I mentioned above, a bubble year suggests the likelihood of bipolar outcomes. I'll conclude by admitting that I get that uneasy feeling that our central bank is quite determined to avoid learning lessons.

The principal reason I stopped using Mr. Noland’s commentary is because his ‘conservatism’ stated shining through his otherwise detached and impartial commentary. You can see traces in this article as well but it is otherwise a ‘solid’ piece of work.

Were I to be distressed by anything in this article it would be that Mr. Noland is, in my humble opinion, ‘too optimistic’.

We are far from ‘out’ of energy but the urge to start ‘charging through the nose’ for what’s left puts society itself at a very dangerous crossroads.

This is a crisis that threatens the very survival of our species. The coming ‘energy wars’ will not be fought by the white skinned peoples against the brown skinned peoples, but between the ‘haves’ and the ‘have nots’.

For all of the rhetoric to the contrary, ‘class ties’ are far stronger than racial or national loyalties.

Ironically, one’s ‘wealth’ makes them useful…regardless of where they stole it.

Thanks for letting me inside your head,

Gegner

Free Lunch?

Greetings good citizen,

The markets are enjoying another ‘big’ up day, this time because month-over-month home sales have increased. Citing a combination of depressed prices, government incentives and loosely defined ‘first time buyers’, not only have sales picked up but so have housing ‘starts’.

Naturally, a single month of data does not a ‘recovery’ make, especially in light of the looming problems in the auto industry.

The housing markets are nowhere near the bottom (price wise) and building more homes when there is so much unsold inventory on the market is ‘speculative’ at best, nothing to get excited about.

Sadly, ‘good news’ is where you find it…even if you have to ‘spin’ it yourself.

With that said there is a rather ‘diverse’ set of offerings on tap tonight. We begin with commentary from someone we haven’t heard from in a while…

The greatest cost
Commentary and weekly watch by Doug Noland


An astute analyst posed the following question last week: "The current debate is centered on whether the US Federal Reserve can take back the liquidity in time in order to prevent inflation. Suppose it can. Suppose they execute this perfectly. But if the Fed is able to flood the system with the liquidity (thus reducing the severity of the downturn) and take it back before it causes inflation, it seems there is a free lunch. We get something for nothing. So, assuming a perfectly executed game plan by the Fed, is there a cost? Do they keep rates low for a time, only to raise them a lot a year down the road - is that the cost? Or is there another cost?"

I'm short on time today, so I'll attempt a brief response.

First of all, while it often appears otherwise, finance provides no free lunch. The mis-pricing of credit and misperceptions of risk in the marketplace have deleterious effects, although their true impact may remain unexposed for years. Indeed, the more immediate (and always seductive) consequences of loosened financial conditions tend to be reduced risk premiums, higher asset prices, and a boost to economic "output". Conventional analysis of monetary policymaking still focuses on "inflation" and "deflation" risks. I would strongly argue that our contemporary world has already validated the analysis that acute financial and economic fragility are major costs associated with market pricing distortions.

When the Federal Reserve collapsed interest rates following the bursting of the technology bubble, the results seemed constructive. Stock and real estate prices inflated; a robust economic recovery ensued. [But only or traders, the ‘real’ economy continued to languish.] There was at the time some recognition of the potential for real estate excesses. But this was seen as such a small price to pay in the fight against the scourge of deflation. It was not until 2007 that the nature of the true costs of a massive "reflation" began to come to light. [I would add that this was due to the failure to incite a ‘corresponding’ economic expansion in the ‘real’ economy.]

Many would today argue that it was simply a case of the Fed's failure to take the punchbowl away in time. Such analysis misses a key facet of bubble dynamics. Once the mortgage finance bubble gained a foothold, there was absolutely no way policymakers were going to be willing to risk bursting such a consequential bubble.

I see ample support for my view that bubble dynamics have taken root throughout government finance. This unprecedented inflation includes Federal Reserve Credit, Treasury borrowings, agency debt, mortgage-backed securities issued by government-sponsored enterprises (GSEs) such as home-loan guarantors Fannie Mae and Freddie Mac, Federal Housing Administration and Federal Deposit Insurance Corporation insurance, massive pension and healthcare obligations, the myriad new market support programs, and so forth. This government finance bubble is domestic as well as global. Amazingly, the scope of the unfolding bubble dwarfs even the mortgage finance bubble. And, importantly, it is reasonable to presume that the Federal Reserve will find itself in the familiar position of being trapped by the risk of bursting a historic bubble.

So I see the probabilities as very low that the Fed will reverse course and impose tightened liquidity conditions upon the marketplace. Actually, reflationary pressures may force the Fed to increase its Treasury holdings in an effort to maintain artificially low interest rates. At the same time, I don't see higher inflation as the greatest cost associated with this predicament. Much greater risk lies with the acute systemic fragility that I believe is inherent to major bubbles. [What he’s saying here is the global financial system will still be in danger of collapsing…and when it does, hyperinflation will be the least of our problems.]

Similar to mortgage finance 2002-2007, the marketplace is significantly mispricing the cost - and failing to recognize the risks - of a massive inflation of government finance. And while every bubble has its own dynamics and nuances, the unfolding government finance bubble has even more precarious Ponzi finance dynamics than the mortgage bubble.

The markets are on track to accommodate US$2 trillion or so of Treasury issuance this year. This incredible amount of debt creation is in the range I would expect necessary to temporarily stabilize the US ("services") bubble economy. Importantly, this amount of new finance both plugs financial holes and works to stabilize inflated income levels. From last week's income data, one can see that personal income was up 0.3% year on year to $12.04 trillion. And while 0.3% is very meager growth, without massive government fiscal and monetary expansion (inflation) the economy would have suffered a destabilizing income contraction. Keep in mind that personal income has inflated 65% since 1998 and 33% from 2003. [So, while overall income is ‘growing’ on paper, it is the failure of this income to be distributed where it is needed that will result in ‘systemic collapse’.]

I'll try to explain my belief that dangerous Ponzi finance dynamics are in play with the current course of policymaking. First, I view panicked policymakers as seeing no alternative than to try to sustain the current (deeply maladjusted) economic structure. A more natural course of economic adjustment - from finance and consumption-driven bubble economy to a more balanced system - was going to be much too painful to endure. So a massive government inflation was commenced in desperation - with the grandiose objective of revitalizing securities markets, housing prices, and the overall US economy. I just don't see how this reflation goes much beyond stoking a susceptible artificial recovery. [Which is shorthand for saying we will once again experience another ‘recovery’ that is ‘transparent’ to the ‘real’ economy.]

First and foremost, with government finance now completely dominating the credit system, I can't even begin to contemplate how this process might nurture an effective allocation of financial and real resources. [Read: jobs and wealth creation.] Indeed, I see today's manifestations of credit bubble dynamics as an extension of similar mispricing, misperceptions, and over-issuance that led to last autumn's near financial collapse.

Admittedly, the massive extension of government credit and obligations works wonders in stabilizing a devastatingly impaired system. Inflationism is always seductive; trillions of dollars worth is absurdly seductive. Yet this extra layer of debt does little to effect change to the underlying economic structure. Actually, a strong case can be made that it only delays and sidetracks the necessary adjustment process. And, importantly, this enormous additional layer of system debt exacerbates system vulnerability. [We’re talking ‘wringing moisture from dry towels’ here good citizen…and guess who gets to be the ‘towel’?]

At the end of the day, a system is made or lost on the soundness of its underlying economic structure. I posit that a sound economic structure is reliant upon only moderate credit growth and risk intermediation. Our system requires massive credit expansion and intensive risk intermediation. I would also posit that there are no benefits - only escalating costs - to throwing massive credit inflation upon an unhealthy economic structure. And, returning to Ponzi dynamics, one of the major costs to such inflationism is a massive expansion of non-productive credit – obligations that are created without a corresponding increase in real economic wealth producing capacity. The debt can only be serviced by the creation of more debt obligations.

The danger is that markets too easily and for too long accommodate massive credit expansion during the boom. Federal Reserve policies are fundamental to this dynamic. But at some point and out of the Fed's control, as Wall Street learned, greed inevitably turns to fear and a reversal of speculative flows marks the onset of the bust. And it's the massive inflation of non-productive credit that ensures the unavoidable crisis of confidence. Can the underlying economic structure service the mounting debt load or, instead, is it the massively inflating debt load that is sustaining a vulnerable economy? And it is in this vein that I fear the government finance bubble is on track to destroy the creditworthiness of the entire economy. And this Ponzi dynamic is the greatest cost to what I fear is a continuation of unsound policymaking.

In keeping with the theme of my past few posts, no nation ever succeeded in inflating its way to prosperity. If we keep waiting for the adults to finally show up and put their foot down, we’re going to be waiting a long time.

Someone has to step up to the plate, say ‘no’ and mean it! The debacle that is playing out on the global stage right now is due to the bad kids getting in one another’s face and screaming ‘fuck you, pay me!’

Instead of saying ‘no’ and giving these kids the spanking they richly deserve, the ‘government mommy’ has retired to the kitchen to try make enough brownies to keep these brats ‘happy’, while the little kids are stuck out in the backyard in the pouring rain…because nobody is watching out for them.

One need not be a genius to see that this won’t end well.

I’m not a ‘goldbug’, I’m more a Whiskey and gunpowder type, however here we have another disturbing development courtesy of The Mogambo guru

I also highly recommend that you take the time to consider the implications of this piece.

Logically, our collective fortunes are based on the overall prosperity of the society we belong to, simply put, there is no way for the individual to ‘escape’ times of financial reckoning .

If everyone does well, so will you. If only the connected prosper, everyone else suffers, something that will inevitably be visited upon the temporarily prosperous…

Thanks for letting me inside your head,

Gegner