Of course, the United States faces many growth challenges. Our population is aging, like those of many other advanced economies, and our society will have to adapt over time to an older workforce. Our K-12 educational system, despite considerable strengths, poorly serves a substantial portion of our population. The costs of health care in the United States are the highest in the world, without fully commensurate results in terms of health outcomes. But all of these long-term issues were well known before the crisis; efforts to address these problems have been ongoing, and these efforts will continue and, I hope, intensify.
The schools suck. They spend money like drunken sailors and produce illiterate graduates who are essentially unemployable.
The health care system sucks as badly as the schools. It spends money like a drunken sailor, and we're less, nor more, healthy at the end of the day.
'Tain't telling yew nothin' new, but dem politicians gotta git-er-dun' or weez doomed!
Normally, monetary or fiscal policies aimed primarily at promoting a faster pace
of economic recovery in the near term would not be expected to significantly affect the longer-term performance of the economy. However, current circumstances may be an
exception to that standard view--the exception to which I alluded earlier. Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.
If'n President Teleprompter and his homeboyz don't git off their asses and stop doing things that crush job creation, like shutting down the entire oil industry in the Gulf, and attempting to kill the coal industry, NLRB blackmail of Boeing (neeeed we continue?), then weze all screwed. People who don't work, and live off gubbermint cheese, fergit what it feels like to work, ya'll.
Notwithstanding this observation, which adds urgency to the need to achieve a
cyclical recovery in employment, most of the economic policies that support robust
economic growth in the long run are outside the province of the central bank.
We cain't fix this stuff. We're here to help, but you-all GOTS to git yer act together. Don't matter how many helicopters we send up with how much cash, it don't matter. We needs us some grown-ups in charge, and we ain't seen none in years!
Finally, and perhaps most challenging, the country would be well served by a
better process for making fiscal decisions. The negotiations that took place over thesummer disrupted financial markets and probably the economy as well, and similar
events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals. Of course, formal budget goals and mechanisms do not replace the need for fiscal policymakers to make the difficult choices that are needed to put the country’sfiscal house in order, which means that public understanding of and support for the goals of fiscal policy are crucial.
Likes I said beferr--we gots to git us some sober grownups runnin' things, and not let meth-head Cousin Cody anywhere near anybody's money.
Now, git going. I'm tarehd of dealing wif you peepulz. Call me up when yew want to act responsible-like,
Showing posts with label Helicopter Ben. Show all posts
Showing posts with label Helicopter Ben. Show all posts
Friday, August 26, 2011
Saturday, September 4, 2010
Ladeeezzzz And Gendlemun! Drum-Roll, Pleeze, For The Chart Of The Week!
Doug Ross shares it with us--a chart of the balance sheet of The Federal Reserve.
It states its figures in millions, so that means it holds about 1.2 trillion dollars in mortgage-backed securities. What could possibly go wrong?
OS drove through a very posh neighborhood of Nashville this afternoon on an errand. He's driven through that part of town for about forty years now. The 'for sale' signs are beginning to blossom, and one huge house, as yet unoccupied, goes to auction on September 10.
This in conservative Nashville, in the staidest neighborhood of the city.
Holy shit! Houses at auction? On Tyne Boulevard? This sort of event makes 1.2 trillion of residential real estate securities look like a really bad bet. Betcha the neighbors are crossing their fingers that bidders show up and bid it up to the five million the auctioneer is trying to flog it for.
Betcha he won't come close.
Ross links to a most erudite article, with its own series of sobering charts, well worth reading.
Hussman, the author, makes a cogent summation:
Good policy is not rocket science. It begins with the refusal to make people pay for mistakes that are not their own. This economy continues to struggle with a fundamental problem, which is that debt obligations exceed the ability to service them. While policy makers have done everything to preserve the patterns of spending and consumption that created the problem in the first place, we have done nothing to restructure those obligations.
It states its figures in millions, so that means it holds about 1.2 trillion dollars in mortgage-backed securities. What could possibly go wrong?
OS drove through a very posh neighborhood of Nashville this afternoon on an errand. He's driven through that part of town for about forty years now. The 'for sale' signs are beginning to blossom, and one huge house, as yet unoccupied, goes to auction on September 10.
This in conservative Nashville, in the staidest neighborhood of the city.
Holy shit! Houses at auction? On Tyne Boulevard? This sort of event makes 1.2 trillion of residential real estate securities look like a really bad bet. Betcha the neighbors are crossing their fingers that bidders show up and bid it up to the five million the auctioneer is trying to flog it for.
Betcha he won't come close.
Ross links to a most erudite article, with its own series of sobering charts, well worth reading.
Hussman, the author, makes a cogent summation:
Good policy is not rocket science. It begins with the refusal to make people pay for mistakes that are not their own. This economy continues to struggle with a fundamental problem, which is that debt obligations exceed the ability to service them. While policy makers have done everything to preserve the patterns of spending and consumption that created the problem in the first place, we have done nothing to restructure those obligations.
Monday, August 30, 2010
Hmm...University Of Texas Begins To Hedge Its Portfolio With Gold
This peeks above the radar from Inside Higher Ed.
News that the investment arm of the University of Texas has started buying up gold is validating the concerns of some analysts who fear high inflation and increasing U.S. debt will wreak havoc on other more commonly held endowment securities, such as bonds.
The University of Texas Investment Management Company (UTIMCO) announced last month that it would move $500 million into gold. While that constitutes just 3 percent of the $22.3 billion in assets UTIMCO controls, it’s a marked shift in strategy for a management company that had no gold in its portfolio a year ago.
(and later in the article)
Given the fact that a gold investment strategy is predicated on the idea that the dollar is declining and the nation is too deep in debt, some have described the gaga for gold trend gripping the conservative movement – see Glenn Beck – as ideologically driven.
But you don’t have to be a conservative talk show host to see the merits of UTIMCO’s position, said Sandy Leeds, a senior lecturer of finance at the University of Texas at Austin’s McCombs School of Business. Leeds was so fired up by the news of UTIMCO’s strategy that he wrote an op-ed on the subject for The Houston Chronicle, which originally reported on a public meeting where the investments were discussed.
“While unstated by UTIMCO, we should consider the possibility that they are hedging against a U.S. meltdown,” Leeds wrote.
Leed's op-ed is well worth reading.
The financial problems we face are immense. In addition to our trillion-dollar deficit, our total debt is approaching 85 percent of gross domestic product. A recent academic study by Carmen Reinhart and Ken Rogoff suggested that a debt level above 90 percent of GDP is a tipping point that results in slower growth.
In reality, I would be ecstatic if our debt level was only 90 percent of GDP. The real issue is that we have approximately $50 trillion of unfunded liabilities - Social Security, Medicare and Medicaid. This is a daunting liability. Public investors such as mutual funds, pension funds, endowments, hedge funds, foreign governments and individuals have all combined to loan the United States approximately $8.5 trillion to fund our accumulated deficits. If we wanted to be fully funded in today's dollars, we would need to issue another $50 trillion of debt.
Now, if OS may break into the local patios:
Ya'll, these are grownups who have to be in charge of the endowments of major universities, unlike the clown circus who run the White House and Congress. University of Texas existed long before this crew ever got together, and intends to be in business long after they have left to write their mutually-incriminating biographies.
These people ain't no AstroTurf, or TeaParty TeaBaggers, or Glenn Beck devotees, or secessionists, or Klan members, or any of that stuff. These are serious, sober, boring respectable people who have to make sure the alma mater is still in business for their grandchildren.
They are voting with their investment decisions, and they ain't endorsing The One, TurboTax Timmy, and Helicopter Ben, Miz Nancy and Mr. Harry, and Rahmbo. They are distancing themselves from this crowd, and trying to keep their corner of the world intact when things begin to come unwound.
News that the investment arm of the University of Texas has started buying up gold is validating the concerns of some analysts who fear high inflation and increasing U.S. debt will wreak havoc on other more commonly held endowment securities, such as bonds.
The University of Texas Investment Management Company (UTIMCO) announced last month that it would move $500 million into gold. While that constitutes just 3 percent of the $22.3 billion in assets UTIMCO controls, it’s a marked shift in strategy for a management company that had no gold in its portfolio a year ago.
(and later in the article)
Given the fact that a gold investment strategy is predicated on the idea that the dollar is declining and the nation is too deep in debt, some have described the gaga for gold trend gripping the conservative movement – see Glenn Beck – as ideologically driven.
But you don’t have to be a conservative talk show host to see the merits of UTIMCO’s position, said Sandy Leeds, a senior lecturer of finance at the University of Texas at Austin’s McCombs School of Business. Leeds was so fired up by the news of UTIMCO’s strategy that he wrote an op-ed on the subject for The Houston Chronicle, which originally reported on a public meeting where the investments were discussed.
“While unstated by UTIMCO, we should consider the possibility that they are hedging against a U.S. meltdown,” Leeds wrote.
Leed's op-ed is well worth reading.
The financial problems we face are immense. In addition to our trillion-dollar deficit, our total debt is approaching 85 percent of gross domestic product. A recent academic study by Carmen Reinhart and Ken Rogoff suggested that a debt level above 90 percent of GDP is a tipping point that results in slower growth.
In reality, I would be ecstatic if our debt level was only 90 percent of GDP. The real issue is that we have approximately $50 trillion of unfunded liabilities - Social Security, Medicare and Medicaid. This is a daunting liability. Public investors such as mutual funds, pension funds, endowments, hedge funds, foreign governments and individuals have all combined to loan the United States approximately $8.5 trillion to fund our accumulated deficits. If we wanted to be fully funded in today's dollars, we would need to issue another $50 trillion of debt.
Now, if OS may break into the local patios:
Ya'll, these are grownups who have to be in charge of the endowments of major universities, unlike the clown circus who run the White House and Congress. University of Texas existed long before this crew ever got together, and intends to be in business long after they have left to write their mutually-incriminating biographies.
These people ain't no AstroTurf, or TeaParty TeaBaggers, or Glenn Beck devotees, or secessionists, or Klan members, or any of that stuff. These are serious, sober, boring respectable people who have to make sure the alma mater is still in business for their grandchildren.
They are voting with their investment decisions, and they ain't endorsing The One, TurboTax Timmy, and Helicopter Ben, Miz Nancy and Mr. Harry, and Rahmbo. They are distancing themselves from this crowd, and trying to keep their corner of the world intact when things begin to come unwound.
Friday, April 2, 2010
The Punch Bowl Is About To Be Taken Away: The Fed Meets Monday To Talk About Interest Rates
Denninger shares the news.
It was a former head of the Fed who said the crux of his job was 'knowing when to take away the punch bowl'--i.e. tighten down the money supply before inflation has a chance to take hold, or bubbles are created. One main means of doing this is to raise interest rates they charge to the banks they serve.
With a DJIA touching 11,000 with almost zero, zippo, nada in the real economy that normal humans live in justifying it, and ObamaCare about to suck up any spare dollar that isn't nailed down, it may be time to pack that sucker up, and send the partiers home to sober up. Is that black coffee we smell brewing?
It was a former head of the Fed who said the crux of his job was 'knowing when to take away the punch bowl'--i.e. tighten down the money supply before inflation has a chance to take hold, or bubbles are created. One main means of doing this is to raise interest rates they charge to the banks they serve.
With a DJIA touching 11,000 with almost zero, zippo, nada in the real economy that normal humans live in justifying it, and ObamaCare about to suck up any spare dollar that isn't nailed down, it may be time to pack that sucker up, and send the partiers home to sober up. Is that black coffee we smell brewing?
| Government in the Sunshine Meeting Notice |  |
| Advance Notice of a Meeting under Expedited Procedures | ||||
| It is anticipated that a closed meeting of the Board of Governors of the Federal Reserve System at 11:30 a.m. on Monday, April 5, 2010, will be held under expedited procedures, as set forth in section 26lb.7 of the Board's Rules Regarding Public Observation of Meetings, at the Board's offices at 20th Street and C Streets, N.W., Washington, D.C. The following items of official Board business are tentatively scheduled to be considered at that meeting. Meeting date: April 5, 2010 <!-----------This is the bordered table------------------------->
| ||||
Wednesday, March 3, 2010
Our Situation, Illustrated
A big OS Hat-Tip to Jesse, the ever-droll Jesse, who informs us that the Bank of England will be floating a big debt issue.
No big deal.
In dollars.
Hmmm...
Now, my friends in England's Green and Pleasant Land, if the pound drops significantly against the dollar, the price of that paying off that debt goes up dramatically, out of your pockets.
Now, of course, they'll be buying credit insurance from AIG, the zombie corporation owned by the US Treasury. Whatever AIG loses, we pay for. Sort of like having a cocaine-addicted child and giving him keys to the Ferrari. What could go wrong?
In the end, all those dollars are carried on the backs of the households of the US. It's up to us, in the end, to make good on them.
Ergo, the BofE, with a Wall Street bank, have figured out a way to lay the ultimate risk of this debt issuance off on us, after they are through with you.
Of course, this behavior always comes with a price. Do you guys really want Bernanke, Geithner, and Obama to grasp your good country by the short hairs?
These guys will throw you under the bus, just because they can.
Friday, February 5, 2010
The Charge Of The Light Brigade: Or How Uncle Ben Helps Big Fish Eat Little Fish While Passing The Risk On To Us
OS kept noticing what looked like an arcane bit of news from last Friday. Karl Denninger noted it, and was howling about it, with this link to footnoted.org.
As we monitored filings on Friday afternoon, we wondered why EDGAR seemed unusually sluggish. But it wasn’t until late Friday that we realized why: Blackrock (BLK) had done a massive document dump on Friday afternoon of 13G filings related to its acquisition of Barclay’s Global Investors.
We counted over 1,800 13Gs that Blackrock dumped on Friday, which explains why EDGAR might have been a tad bit pokey. The stream started at just after 2 p.m. est and didn’t let up until just after 4:30, when the last one, which reported a 6.5% stake in Vodafone came in. For those less familiar with the 13G, since we don’t often write about these filings, it’s a requirement when ownership exceeds 5% of the outstanding shares. With few rare exceptions, these filings represented new positions for Blackrock since we only counted 11 amended 13Gs, which in itself seems very surprising, given the long list of stocks.
At least a 5% stake in 1,800 publicly listed firms in the US. That's a big ole' hunk of the US economy, especially to consume at essentially one gulp, even for a big outfit like a Blackrock.
Where/how do they get that much cash?
.
Robert Peston, of the BBC, is as urbane as Denninger is passionate. Peston picks up the story for us.
In rescuing the global economy, the western central banks have rescued the traditional mega takeover.
I'm not sure whether King and Bernanke would describe this as collateral damage or just one of those things. But they have accelerated the corporate Darwinian process of reinforcing the market clout of the world's biggest and strongest businesses.
Because huge companies are currently able to raise record-breaking sums at very low interest rates by selling bonds to investors.
Kraft, for example, yesterday raised $9.5bn to finance its takeover of Cadbury.
And Berkshire Hathaway sold $8bn of notes to fund its acquisition of the railway group, Burlington Northern Santa Fe.
These are both among the 15 biggest corporate bond deals ever.
Kraft and BH may be paying a smidgeon more for this money than would have been the case if there hadn't mean a minor global tremor caused by the collapse in confidence in the ability of Greece to service its debt.
But with the interest payable on the different tranches at low to middling single-digit interest rates, this is cheap debt - cheap enough to finance the purchase of substantial companies like Cadbury with stable profits.
Here's a fascinating statistic: Bloomberg has calculated that US companies are spending the highest portion of bond-sale proceeds in more than a decade - or around 70 per cent - on takeovers and expansion.
Long story short, the money for all this is being ponied up by Zimbabwe Ben. And, we the US taxpayers (and our children and grandchildren) stand behind it all, with our money, our assets, our lives and labors, our hopes and dreams for the future. Because, if the wheels come off at Burlington Northern, for instance, the Fed and Treasury will ride to the rescue.
On our backs.
Is it any mystery that Warren Buffett showed up in Washington in late January to cheer-lead for Uncle Ben Bernanke?
Now, look again at the final lines of Peston's quote. All that corporate debt is being floated to finance takeovers and expansion. Not expansion of manufacturing facilities or the like, but expansion of portfolios by firms like Blackrock. And all that debt will have to be serviced, and/or at some point paid off or rolled over. And interest rates are fluid things. They are at historic lows. Which way do you think they'll go?
Takeovers, also, almost invariably initiate the process of 'rationalization', or 'down-sizing', or 'right-sizing'.
In other words, jobs are shed, often at a prodigious rate, in the wake of a corporate merger. It's not immediate, rather takes place a year or two later. The press has moved on to the next headline, and most people, even the folks who lose their jobs and livelihoods, don't ever connect the dots on how/why that humming plant in that small town is now shuttered, why the deer, geese and turkey have taken over the property, and why the town and its people look so much shabbier. The cause and effect are too far removed, both in time and geographical distance. (Demagogues thrive in this sort of scenario, as the anger builds, but has no target upon which to focus.)
But, all the same, almost all that capital is consumed in transactions, not in creation of new businesses or products. You know, the activities that create jobs and careers for families, and allow families to be formed, and communities to function.
And Ben Bernanke has the enthusiastic support of Barack Obama, and garnered seventy votes in the Senate. Next time TheWan begins yammering about 'jobs', head back and read Robert Peston's essay again.
Friends and neighbors, OS fears we, and our descendants, are the 'six hundred', unless Heaven intervenes on our behalf (and he prays daily for this), and/or we show up again and again at the ballot box, at every level of government.
As we monitored filings on Friday afternoon, we wondered why EDGAR seemed unusually sluggish. But it wasn’t until late Friday that we realized why: Blackrock (BLK) had done a massive document dump on Friday afternoon of 13G filings related to its acquisition of Barclay’s Global Investors.
We counted over 1,800 13Gs that Blackrock dumped on Friday, which explains why EDGAR might have been a tad bit pokey. The stream started at just after 2 p.m. est and didn’t let up until just after 4:30, when the last one, which reported a 6.5% stake in Vodafone came in. For those less familiar with the 13G, since we don’t often write about these filings, it’s a requirement when ownership exceeds 5% of the outstanding shares. With few rare exceptions, these filings represented new positions for Blackrock since we only counted 11 amended 13Gs, which in itself seems very surprising, given the long list of stocks.
At least a 5% stake in 1,800 publicly listed firms in the US. That's a big ole' hunk of the US economy, especially to consume at essentially one gulp, even for a big outfit like a Blackrock.
Where/how do they get that much cash?
.
Robert Peston, of the BBC, is as urbane as Denninger is passionate. Peston picks up the story for us.
In rescuing the global economy, the western central banks have rescued the traditional mega takeover.
I'm not sure whether King and Bernanke would describe this as collateral damage or just one of those things. But they have accelerated the corporate Darwinian process of reinforcing the market clout of the world's biggest and strongest businesses.
Because huge companies are currently able to raise record-breaking sums at very low interest rates by selling bonds to investors.
Kraft, for example, yesterday raised $9.5bn to finance its takeover of Cadbury.
And Berkshire Hathaway sold $8bn of notes to fund its acquisition of the railway group, Burlington Northern Santa Fe.
These are both among the 15 biggest corporate bond deals ever.
Kraft and BH may be paying a smidgeon more for this money than would have been the case if there hadn't mean a minor global tremor caused by the collapse in confidence in the ability of Greece to service its debt.
But with the interest payable on the different tranches at low to middling single-digit interest rates, this is cheap debt - cheap enough to finance the purchase of substantial companies like Cadbury with stable profits.
Here's a fascinating statistic: Bloomberg has calculated that US companies are spending the highest portion of bond-sale proceeds in more than a decade - or around 70 per cent - on takeovers and expansion.
Long story short, the money for all this is being ponied up by Zimbabwe Ben. And, we the US taxpayers (and our children and grandchildren) stand behind it all, with our money, our assets, our lives and labors, our hopes and dreams for the future. Because, if the wheels come off at Burlington Northern, for instance, the Fed and Treasury will ride to the rescue.
On our backs.
Is it any mystery that Warren Buffett showed up in Washington in late January to cheer-lead for Uncle Ben Bernanke?
Now, look again at the final lines of Peston's quote. All that corporate debt is being floated to finance takeovers and expansion. Not expansion of manufacturing facilities or the like, but expansion of portfolios by firms like Blackrock. And all that debt will have to be serviced, and/or at some point paid off or rolled over. And interest rates are fluid things. They are at historic lows. Which way do you think they'll go?
Takeovers, also, almost invariably initiate the process of 'rationalization', or 'down-sizing', or 'right-sizing'.
In other words, jobs are shed, often at a prodigious rate, in the wake of a corporate merger. It's not immediate, rather takes place a year or two later. The press has moved on to the next headline, and most people, even the folks who lose their jobs and livelihoods, don't ever connect the dots on how/why that humming plant in that small town is now shuttered, why the deer, geese and turkey have taken over the property, and why the town and its people look so much shabbier. The cause and effect are too far removed, both in time and geographical distance. (Demagogues thrive in this sort of scenario, as the anger builds, but has no target upon which to focus.)
But, all the same, almost all that capital is consumed in transactions, not in creation of new businesses or products. You know, the activities that create jobs and careers for families, and allow families to be formed, and communities to function.
And Ben Bernanke has the enthusiastic support of Barack Obama, and garnered seventy votes in the Senate. Next time TheWan begins yammering about 'jobs', head back and read Robert Peston's essay again.
Alfred, Lord Tennyson describes the situation aptly, in the opening stanzas of Charge of the Light Brigade:
Half a league half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred:
'Forward, the Light Brigade!
Charge for the guns' he said:
Into the valley of Death
Rode the six hundred.
'Forward, the Light Brigade!'
Was there a man dismay'd ?
Not tho' the soldier knew
Some one had blunder'd:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do & die,
Into the valley of Death
Rode the six hundred.
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volley'd & thunder'd;
Storm'd at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
Rode the six hundred.
Half a league onward,
All in the valley of Death
Rode the six hundred:
'Forward, the Light Brigade!
Charge for the guns' he said:
Into the valley of Death
Rode the six hundred.
'Forward, the Light Brigade!'
Was there a man dismay'd ?
Not tho' the soldier knew
Some one had blunder'd:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to do & die,
Into the valley of Death
Rode the six hundred.
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volley'd & thunder'd;
Storm'd at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
Rode the six hundred.
Friday, January 15, 2010
Time For Sheila To Pay A Visit To Ben?
Let's say I've got me a bank, and I decide to leverage up 43-to-1 on residential mortgages of uncertain quality. Let's also say I've decided to diversify, and have me a printing press in the garage out back, churning out perfect $100 bills every day.
Betcha' Sheila Bair's crew from FDIC will pay me a visit some Friday afternoon, and tell me to hand over the keys and go home, 'cuz my bank has been seized by the guv'mint. And, by the way call my lawyer, 'cuz I'll be needing him.
Jesse Felder points out that this is what the Fed has done, by purchasing nearly a trillion dollars of mortgaged-back securities, bought with freshly minted money.
Hmm...
Here's his chart, just for grins.
Betcha' Sheila Bair's crew from FDIC will pay me a visit some Friday afternoon, and tell me to hand over the keys and go home, 'cuz my bank has been seized by the guv'mint. And, by the way call my lawyer, 'cuz I'll be needing him.
Jesse Felder points out that this is what the Fed has done, by purchasing nearly a trillion dollars of mortgaged-back securities, bought with freshly minted money.
Hmm...
Here's his chart, just for grins.
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