Although I kind of knew this but I hope you can write a blog post analyzing just how much this is going to affect the US economically would be good. (I can't get to it, on other issues). People fiddle while Rome burns.
Reported by Calculated Risk this morning. The Fed is now underwriting everything, it seems. I see that midtowng has a blog up about Countrywide.
Let me just put it this way. If you were a Big Insider on the Street, wouldn't you be thinking of unloading as much toxic junk on the Fed as possible? If we can see that, why don't we think Wall Street sees that -- and can execute the plan 1000 times better (for lining their own pockets) than we ever could?
there is something very fraudulent going on here and frankly overall with the Fed itself playing, but on country wide, I have had them going to bankruptcy for a long time, so my response is why is this implosion taking so long?
I know what you are worried about but I think it's unfounded for the reality is we are a series of countries, in competition. I think the "US-vs-Them" would be much less so when the philosophy is more "US first, then them".
So in other words a more mutually benefical equilibrium than is going on right now.
Agreed but I think there are two additional elements to consider
1. The appeal to nationalism. I think risks of conflict grow when governments allow an US vs THEM attitude to percolate. This is one of my fears with China, involved or not in the international economy, as its nationalistic fervor can be scary at times and can override good sense. Nationalism blinds.
2. Competition for resources: We are rapidly reaching the extent of "undiscovered" resources. In the future to get access means displacing someone else. China has rapidly been out securing "long term access" to resources (a bit like putting armies on Territories in RISK, before the game has even started). When we say need copper and find that we can't get it because China has bought the mines and the copper is not even available on the market, well who knows what will happen.
and frankly good bitch slap which this guy needs. I find it frightening how easily they can rewrite history per whatever corporate agenda they have and it doesn't get called to the mat. I often wonder if the reduction of history classes in K12 is part of the cause.
One feature of the risk economy is the Federal Reserve's new willingness to absorb any sort of crap collateral in exchange for massive cheap loans to insolvent companies and institutions. The Fed has, in effect, made itself the world's largest financial shit-magnet. It has already taken in a few hundred billion in securities based on non-performing real estate loans, and has now opened the window to securities based on non-performing credit card debt, car loans, and other miscellaneous IOUs still drifting un-hedged in the banking ether.
It's a mark of our collective desperation to avoid the consequences of so much reckless behavior that no credible authorities have stepped up to denounce this racket
In the financial world the problem has been temporarily solved, but in the real world ... the Fed can not solve the problem and this will be the slow constriction we are only starting to witness with inflation, unemployment, slumping car sales, rising gas prices, and unsaleable houses.
The way out is a decline in standard of living that, because no one will accept it as an option, will have to slowly work its way through the system on its own.
The counter to the shrinkage of commercial paper, it seems to me, is that the Fed is now backstopping the entire financial system. And boy is Wall Street a fast learner. First we heard that brokerages were putting together the cr*ppiest CDOs they could that would still specifically comply with the Fed's guidelines for accepting paper. Then we found out the Fed was also backstopping student loans. Now we see Bank of America backing out of its purchase of Countrywide, no doubt reckoning that Countrywide is also "too big to fail" and the Fed will be forced to backstop its purchase as well.
I long ago learned to trust the numbers, no matter how compelling the logical story was. And the numbers say to me that Buffett is right, at least for now.
What a great analogy! Buffet yesterday thinks the worse is over and we'll go through more of a shallow recession but I question that. The underlying financials have looked like a ticking time bomb for so long.
The story concerns a mentally unstable US Air Force general who orders a first strike nuclear attack on the Soviet Union, and follows the President of the United States, his advisors, the Joint Chiefs of Staff and a Royal Air Force officer as they try to recall the bombers to prevent a nuclear apocalypse, as well as the crew of one B-52 as they attempt to deliver their payload.
It typically only exceeds cpi late in an expansion and into a recession. By the end of a recession, it is typically significantly lower than cpi:
Not sure about Bruce McFadden's point about GDP deflator. I won't claim to know the answer, but if Stirling Newberry's assertion is correct, than the same thing -- home prices -- are counted differently for gdp than cpi. I don't know why that should be the case.
P.S. Thanks Bob Oak for fighting to keep the site up.
So if you found a happy medium between the CPI and PPI then you would still have a GDP deflator that is far higher than what is being used.
As for an accurate measure of inflation, then I would look at the MZM, which is higher yet. After all, rising prices are a symptom of inflation, not the actual thing.
Anonymous comments are allowed for those drive by commenter's but you all are having a conversation. I strongly suggest either logging in and/or creating an account if you have not.
That way you can track your comments and see when someone has replied and most of all, automatically post. You won't have to deal with the security letter box!
.....keep it up. I am of the firm opinion that 'economics blogging' is gonna be a big growth sector in the 'sphere. For all the obvious reasons and because the political bloggers have pretty much gone nuts over ID politics....
There is no such thing as a precise inflation rate. The whole idea of an inflation rate is a single approximate number to measure something that can only be measured precisely by a list of all price increased on all goods and services sold in the economy.
So the inflation rate is always relative to the question. If the question is the overall rate of price increase, a GDP deflator is the best rate to use. If the question is the rate of increase of cost of production, then a producer price index is the best rate to use. If the question is the rate of increase of the cost of living, then a consumer price index is the best rate to use.
the series that includes "Peak Everything?!?" and "China's out of control Inflationary Boom", dealing with the causes and historical precedent for today's commodity inflation and food and energy crises.
Good point re why the GDP shouldn't incorporate the CPI. If headline CPI is really accurate, then it ought to be used for GDP, for consistency's sake at least.
At some point (and it may be by the end of this year), food and energy inflation are going to reverse, and if the housing collapse is still going on, Tim Iacono's number is going to go negative (and perhaps so will the GDP deflator) and then it is going to get very interesting.
I just got off the phone with bluehost and supposedly they should resolve this by tomorrow. Some of the site RSS feeds are not working properly because of this problem.
Although I kind of knew this but I hope you can write a blog post analyzing just how much this is going to affect the US economically would be good. (I can't get to it, on other issues). People fiddle while Rome burns.
Reported by Calculated Risk this morning. The Fed is now underwriting everything, it seems. I see that midtowng has a blog up about Countrywide.
Let me just put it this way. If you were a Big Insider on the Street, wouldn't you be thinking of unloading as much toxic junk on the Fed as possible? If we can see that, why don't we think Wall Street sees that -- and can execute the plan 1000 times better (for lining their own pockets) than we ever could?
there is something very fraudulent going on here and frankly overall with the Fed itself playing, but on country wide, I have had them going to bankruptcy for a long time, so my response is why is this implosion taking so long?
I know what you are worried about but I think it's unfounded for the reality is we are a series of countries, in competition. I think the "US-vs-Them" would be much less so when the philosophy is more "US first, then them".
So in other words a more mutually benefical equilibrium than is going on right now.
Agreed but I think there are two additional elements to consider
1. The appeal to nationalism. I think risks of conflict grow when governments allow an US vs THEM attitude to percolate. This is one of my fears with China, involved or not in the international economy, as its nationalistic fervor can be scary at times and can override good sense. Nationalism blinds.
2. Competition for resources: We are rapidly reaching the extent of "undiscovered" resources. In the future to get access means displacing someone else. China has rapidly been out securing "long term access" to resources (a bit like putting armies on Territories in RISK, before the game has even started). When we say need copper and find that we can't get it because China has bought the mines and the copper is not even available on the market, well who knows what will happen.
and frankly good bitch slap which this guy needs. I find it frightening how easily they can rewrite history per whatever corporate agenda they have and it doesn't get called to the mat. I often wonder if the reduction of history classes in K12 is part of the cause.
I like Kunstler's take. His comment this week is quite good.
http://www.kunstler.com/
In the financial world the problem has been temporarily solved, but in the real world ... the Fed can not solve the problem and this will be the slow constriction we are only starting to witness with inflation, unemployment, slumping car sales, rising gas prices, and unsaleable houses.
The way out is a decline in standard of living that, because no one will accept it as an option, will have to slowly work its way through the system on its own.
politely of course.
The counter to the shrinkage of commercial paper, it seems to me, is that the Fed is now backstopping the entire financial system. And boy is Wall Street a fast learner. First we heard that brokerages were putting together the cr*ppiest CDOs they could that would still specifically comply with the Fed's guidelines for accepting paper. Then we found out the Fed was also backstopping student loans. Now we see Bank of America backing out of its purchase of Countrywide, no doubt reckoning that Countrywide is also "too big to fail" and the Fed will be forced to backstop its purchase as well.
I long ago learned to trust the numbers, no matter how compelling the logical story was. And the numbers say to me that Buffett is right, at least for now.
What a great analogy! Buffet yesterday thinks the worse is over and we'll go through more of a shallow recession but I question that. The underlying financials have looked like a ticking time bomb for so long.
The story concerns a mentally unstable US Air Force general who orders a first strike nuclear attack on the Soviet Union, and follows the President of the United States, his advisors, the Joint Chiefs of Staff and a Royal Air Force officer as they try to recall the bombers to prevent a nuclear apocalypse, as well as the crew of one B-52 as they attempt to deliver their payload.
It typically only exceeds cpi late in an expansion and into a recession. By the end of a recession, it is typically significantly lower than cpi:
Not sure about Bruce McFadden's point about GDP deflator. I won't claim to know the answer, but if Stirling Newberry's assertion is correct, than the same thing -- home prices -- are counted differently for gdp than cpi. I don't know why that should be the case.
P.S. Thanks Bob Oak for fighting to keep the site up.
Well, now the server has been restored so hopefully things are now stable.
You might cross link your posts because I hate to tell you this but the site crash did affect the number of people reading your posts.
I'm reactivating the RSS feeds to make sure your stuff is out there on the Internets, trying to get the readers back right now.
So if you found a happy medium between the CPI and PPI then you would still have a GDP deflator that is far higher than what is being used.
As for an accurate measure of inflation, then I would look at the MZM, which is higher yet. After all, rising prices are a symptom of inflation, not the actual thing.
Anonymous comments are allowed for those drive by commenter's but you all are having a conversation. I strongly suggest either logging in and/or creating an account if you have not.
That way you can track your comments and see when someone has replied and most of all, automatically post. You won't have to deal with the security letter box!
.....keep it up. I am of the firm opinion that 'economics blogging' is gonna be a big growth sector in the 'sphere. For all the obvious reasons and because the political bloggers have pretty much gone nuts over ID politics....
Which tells us zip about what's coming next.
There is no such thing as a precise inflation rate. The whole idea of an inflation rate is a single approximate number to measure something that can only be measured precisely by a list of all price increased on all goods and services sold in the economy.
So the inflation rate is always relative to the question. If the question is the overall rate of price increase, a GDP deflator is the best rate to use. If the question is the rate of increase of cost of production, then a producer price index is the best rate to use. If the question is the rate of increase of the cost of living, then a consumer price index is the best rate to use.
This is day 4 and I'm not happy. We may have to change webhosts because 4 days of a site down is just unacceptable.
@#*)@.
the series that includes "Peak Everything?!?" and "China's out of control Inflationary Boom", dealing with the causes and historical precedent for today's commodity inflation and food and energy crises.
Good point re why the GDP shouldn't incorporate the CPI. If headline CPI is really accurate, then it ought to be used for GDP, for consistency's sake at least.
At some point (and it may be by the end of this year), food and energy inflation are going to reverse, and if the housing collapse is still going on, Tim Iacono's number is going to go negative (and perhaps so will the GDP deflator) and then it is going to get very interesting.
I just got off the phone with bluehost and supposedly they should resolve this by tomorrow. Some of the site RSS feeds are not working properly because of this problem.
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