They got away, completely away with murder by rating AAA worthless derivatives and why this is so sarcastic, beyond the fact the major press covered the story is they are clearly implying a political philosophy of austerity as solution. I find that bunk, when it's the swaps, derivatives themselves which all need to be cancelled, haircuts, regulated. I don't think sovereign debt should be turned into yet another financial with no real production gambling casino. S&P, by their timing, is clearly using their status as a credit rating agency for political purposes, IMHO.
The Federal Reserve is claiming they did not provide a "subsidy" where banks made $13 billion in profits from Fed loans and claims there was a penalty. The letter is here.
The Fed also argues Bloomberg "double counted" on loans oustanding and the actual amount was only a mere $1.5 trillion instead of $7.7 trillion.
Poof, bottom line people are still very pissed the banks were not allowed to plain fail, the derivatives cleaned up.
I don't see how the Fed can claim Bloomberg's story is "wildly inaccurate", it was well documented the big banks were making money, as I recall, via the carry trade in part, via the 2008 "emergency" loans.
Felix Simon's graphs are clearly "loans outstanding at any moment in time", that's not a double counting of loans.
Truth of fiction TBD for it involves cranking through 29,000 pages of transactions, which I originally assumed Bloomberg did accurately.
Keywords "secret" versus "not disclosed" oh come on, nit pickin'.
"I think the Wikipedia article is a good explanation." -- Robert Oak
EP is an educational experience, at least for me. (Never too old to learn!)
Thanks to Robert Oak for the link to Wiki's Quantitative_easing, particularly at the heading '5.1 Qualitative easing' (and entire section '5. Comparison with other instruments').
I think that most commentators confuse the five instruments -- quantitative easing, qualitative easing, credit easing, monetizing government debt ("printing") and altering debt maturity structure ("the twist"). It appears that there is no universally accepted taxonomy, and many lump them together and call it all "QE."
To most gold bugs, all of it is "printing" or monetization. For example, most gold bugs see euro bonds as a form of "printing." However, the euro bond proposal could be to shift shorter-term national debt over to long-term euro bonds. In other words, although complex in details, euro bonds could be largely a kind of twist, rather than a form of monetization. (I don't think that it necessarily comes down simplistically to shifting debt from the PIGS to Germany and ultimately monetizing that debt.)
When Fed purchases MBS (as with QE2), that could be seen as 'qualitative easing' or as 'credit easing'. It appears that QE2 purchase of MBS was seen by Bernanke as 'credit easing', although QE2 was seen internationally as 'competitive devaluation'. (See, Global Post article by David Case, November 2010.)
In introducing the Federal Reserve's response to the 2008–9 financial crisis, Fed Chairman Ben Bernanke distinguished the new programme, which he termed "credit easing" from Japanese-style quantitative easing. In his speech, he announced:
"Our approach —- which could be described as 'credit easing' -— resembles quantitative easing in one respect: It involves an expansion of the central bank's balance sheet. However, in a pure QE regime, the focus of policy is the quantity of bank reserves, which are liabilities of the central bank; the composition of loans and securities on the asset side of the central bank's balance sheet is incidental. Indeed, although the Bank of Japan's policy approach during the QE period was quite multifaceted, the overall stance of its policy was gauged primarily in terms of its target for bank reserves. In contrast, the Federal Reserve's credit easing approach focuses on the mix of loans and securities that it holds and on how this composition of assets affects credit conditions for households and businesses."
Credit easing involves increasing the money supply by the purchase not of government bonds, but of private sector assets such as corporate bonds and residential mortgage-backed securities. When undertaking credit easing, the Federal Reserve increases the money supply not by buying government debt, but instead by buying private sector assets including residential mortgage-backed securities. In 2010, the Federal Reserve purchased $1.25 trillion of mortgage-backed securities (MBS) in order to support the sagging mortgage market. These purchases increased the monetary base in a way similar to a purchase of government securities.
Qualitative easing
Professor Willem Buiter, of the London School of Economics, has proposed a terminology to distinguish quantitative easing, or an expansion of a central bank's balance sheet, from what he terms qualitative easing, or the process of a central bank adding riskier assets onto its balance sheet:
"Quantitative easing is an increase in the size of the balance sheet of the central bank through an increase [in its] monetary liabilities (base money), holding constant the composition of its assets. Asset composition can be defined as the proportional shares of the different financial instruments held by the central bank in the total value of its assets. An almost equivalent definition would be that quantitative easing is an increase in the size of the balance sheet of the central bank through an increase in its monetary liabilities that holds constant the (average) liquidity and riskiness of its asset portfolio. Qualitative easing is a shift in the composition of the assets of the central bank towards less liquid and riskier assets, holding constant the size of the balance sheet (and the official policy rate and the rest of the list of usual suspects). The less liquid and more risky assets can be private securities as well as sovereign or sovereign-guaranteed instruments. All forms of risk, including credit risk (default risk) are included."
I like approach of Willen Buiter (formerly at London School of Economics, now economist for CitiGroup in London). See, Willem Buiter (2008-12-09), "Quantitative easing and qualitative easing: a terminological and taxonomic proposal". (Archived at Financial Times, blog.ft.com, although Buiter's FT blog has been discontinued.)
Given experience since 2010, it doesn't appear that Fed monetary actions are capable of accomplishing credit easing in the current structural context -- so to 'target' credit easing is almost fraudulent. Of course, in defense of Bernanke, if I had a dollar for every time he has indicated or been quoted as saying that solutions lie with Congress, I'd be rich.
BTW: On fundamentals, I agree that nationalizing failed banks would make sense in Europe. For the USA, I stick with systemic solution proposed by American Monetary Institute, which avoids nationalization of banks as a policy while proposing an end to fractional reserve banking.
In one of the greatest signs yet that the 99 Percenters are having an impact, Rep. Ted Deutch (D-FL), a member of the House Judiciary Committee, today introduced an amendment that would ban corporate money in politics and end corporate personhood once and for all.
Deutch’s amendment, called the Outlawing Corporate Cash Undermining the Public Interest in our Elections and Democracy (OCCUPIED) Amendment, would overturn the Citizens United decision, re-establishing the right of Congress and the states to regulate campaign finance laws, and to effectively outlaw the ability of for-profit corporations to contribute to campaign spending.
The Banksters universally fail the anti-fraud tests of SARBOX and SEC/1933-34.
The Enforcement Chief for the U.S. Department of Justice is using a legal standard of fraud not based upon the SEC Acts of 1933-34 and SARBOX. SARBOX enhances the anti-fraud provisions of original SEC law. The standard the Justice Department wants to apply is intentional falsity. The actual standard includes both willful misrepresentation and gross negilgence. Citibank, GS, AIG, BoA and many others fail the gross negligence test in valuation of securities in terms of Internal Controls.
Internal Controls are part of audit procedures since the 30's. The auditors must now certify under SARBOX. Essentially every financial, accounting , IT policy and procedure must be designed and implemented in a way which assures the integrity of the financial statements, the integrity of management's control of the business (under the 1933-34 SEC/FASB test) and now must include all IT processes and procedures. Relevant to the Crisis is the failure to value mortgages, mortgage backed debt, and derivatives.
Why would Justice and the SEC apply a more rigorous legal test to the behavior of management based upon intentional deception, so difficult to prove? Think of the IRS and Al Capone. The Feds got Capone on a tax rap because murder was so hard to prove. This is the reverse. If you want put the fix in and let your campaign contributors get buy, then you prosecute on a standard which will be difficult to prove and so the prosecutors will lose. In other words, the fix is in.
The Banksters universally fail the anti-fraud tests of SARBOX and SEC/1933-34.
The Enforcement Chief for the U.S. Department of Justice is using a legal standard of fraud not based upon the SEC Acts of 1933-34 and SARBOX. SARBOX enhances the anti-fraud provisions of original SEC law. The standard the Justice Department wants to apply is intentional falsity. The actual standard includes both willful misrepresentation and gross negilgence. Citibank, GS, AIG, BoA and many others fail the gross negligence test in valuation of securities in terms of Internal Controls.
Internal Controls are part of audit procedures since the 30's. The auditors must now certify under SARBOX. Essentially every financial, accounting and IT policy
and procedure must be designed and implemented in a way which assures the integrity of the financial statements, the integrity of managements control of the business (under the 1933-34 SEC/FASB test) and now must include all IT processes and procedures. Relevant to the Crisis is the failure to value mortgages, mortgage backed debt, and derivatives.
Why would Justice and the SEC apply a more rigorous legal test to the behavior
of management based upon intentional deception, so difficult to prove? Think of the IRS and Al Capone. The Feds got Capone on a tax rap because murder was so hard to prove. This is the reverse. If you want put the fix in and let your campaign contributors get buy, then you prosecute on a standard which will be difficult to prove and so the proecutors will lose. In other words, the fix is in.
Many blame the rise in commodities on the Fed. It raises inflation but deflation is also a problem and also a method to "lower" interest rates than "zero".
I think the Wikipedia article is a good explanation.
"I've seen the rumors flying on QE3, but housing data and such is not a QE3 annoucment. ... Seems so far the FED can buy up all of the MBS they want and few blink an eye. QE involves Treasuries though." -- Robert Oak
Oooops! Maybe 'QE' isn't the right term, and maybe it's all outside the province of the FOMC. Whatever it is, it's often referred to as 'QE'. Here's an example, from article by Charlie Zhou as published at seekingalpha.com (23 October 2011), 3 REITs Which Should Benefit From The Next QE ... Note use of phrase 'The Next QE' in Zhou's headline!
On Thursday, Fed Gov. Daniel Tarullo made a case for the Fed to re-start purchasing large quantities of residential backed securities. He argues that such a move could push down mortgage rate and kick start refinancing. His argument would work if the mortgage rates were high, but with 30 year at 4%, it’s not the mortgage rate that’s preventing people from buying. It’s the tightening of credit standards by banks, the decreasing real income of Americans, and the 25% of people with underwater mortgages, all the hangovers from the our housing boom.
On the other hand, the Fed can’t be seen as doing nothing, so some decrease in interest rates is better than nothing from a political point of view. Pimco’s Bill Gross has already bet the farm on the Fed buying more mortgage-backed securities. In his latest Total Return Fund report, he has increased his holdings of RMBS up to 40%!
In pursuing this line of thought, I've been working off news reports back in October about published views of Daniel Tarullo (Obama-appointed public member of the Board of Governors).
It's difficult to make sense of this whole RMBS argument for QE3, whether it's coming from Charlie Zhou, Tyler Durden, ConvergEx or Governor Tarullo himself. ConvergEx makes an explicit comparison with the 1930s, pointing out that the tools that were put into place by the New Deal back then do not now exist. Charlie Zhou notes that the problem isn't the interest rate, it's that almost no buyers are eligible for it.
" ... but with 30 year at 4%, it’s not the mortgage rate that’s preventing people from buying. It’s the tightening of credit standards by banks, the decreasing real income of Americans, and the 25% of people with underwater mortgages, all the hangovers from the our housing boom." (Zhou).
As for the connection to the Euro and to gold, my point is that anything like QE by the Fed seems to be immediately reflected in increasing effective rates on long-term Treasuries and rising gold prices. So how does this stuff add up? How would or could any Fed action result in making more funds available to home buyers, absent a major act of Congress?
I can't give an exact account of my reasoning, and maybe it's more my prejudice, but I'm sticking with my story until I am proven wrong --
"Here's the thing -- to do a QE3 focusing on MBS, the Fed would have to consider likely serious political blowback, in an election year, from a public that is almost certain to see the action as another bank bailout. (And isn't that what the QE3 [by any name] would actually amount to?) The risk to the Fed's "world as we know it" would be substantial. IMO, the least of the worries of members of the FOMC [or Board of Governors] is the re-election, or not, of President Obama!" (quoting my original comment, with a little more thrown in).
IMHO, there's no QE in the cards during the next 12 months. Of course, I could be wrong about that. My prediction back at the beginning of the last week of November when it looked like a long march had not yet begun -- before the € was rescued by the $ -- was that gold could still end the year securely in the $1900s range ... and it now looks more like goldbugs will be lucky if gold ends the year above $1800. So much for predictions! (Oh well, gold did regain $1750, probably.)
No, they don't; they have your resume scanned into a system that looks for keywords that they determine are indicative of qualification, and boot out all of the resumes that don't contain a certain (high or total) percentage of them.
It's best to have as many buzzes as possible; job search now is a lot like SEO. Unless you get the page/resume views, all your efforts are worthless.
Economists since Adam Smith, classical and neo-classical, have understood that credit stimulus,or money aggregate expansion is inflationary when there is no offset in the services, goods of GDP.
Famously, Adam Smith analyzed the Sieglo de Oro (1700 Spain) to show how importation of gold, yes gold caused inflation, The reason was that Spain was importing vast amounts of gold from the New World without expanding the productive base of the economy, goods and services. The result was inflation. The reason so many have pleaded for manufacturing expansion has core of stimulus is the fear of inflation.
If QE3 is just a an expansion of money without production, it will create inflation.
which is why I went through this top level calculation to show, once again, more people have dropped out of the count. I saw the most ridiculous manipulation by Forbes as well, so bad, not even going to link to it, but Paul Krugman breaks down the employment to population ratios by ages 25-54 to show, nope, this is not just people aging as the reason they are falling off of the count, these are prime workers falling into the not in the labor force black hole.
Dispelling headline buzz is the main reason I started overviewing these government reports in such detail. The spin is overwhelming!
But some are claiming these ratios are bound to fall and I don't buy it. i.e. participation rates and employment to population ratios. I'll wait until February when the 2010 Census data is incorporated and then we'll see what's going on.
LPR + Visas + Illegal Immigration is immigration. The point about LPR is the Honorable Guttierez has proposed allowing 700K Visas holders to become citizens and proposal is backed by usual suspects.
NYT:
In a rare show of bipartisan comity on the angrily contested issue of immigration, the House of Representatives on Tuesday passed a bill that tweaks the visa system to allow more highly skilled immigrants from India and China to become legal permanent residents.
J. Scott Applewhite/Associated Press
Representative Jason Chaffetz, Republican of Utah, helped introduce an immigration bill.
Related
The bill, originally offered by Representatives Jason Chaffetz, a conservative Republican from Utah, and Lamar Smith, a Texas Republican and chairman of the House Judiciary Committee, sailed through by a vote of 389 to 15. Joining as sponsors were several Democrats who are outspoken liberals on immigration, including Representatives Luis V. Gutierrez of Illinois and Zoe Lofgren of California.
I've seen the rumors flying on QE3, but housing data and such is not a QE3 annoucment. I have a tendency to read Zerohedge but not cite them that much. The reason is he often gets it wrong. They kind of fly on rumor, often they will be on the only ones finding a story before it officially breaks, but on the other hand, they also get it wrong too.
Seems so far the FED can buy up all of the MBS they want and few blink an eye. QE involves Treasuries though.
If you look at the top post and the side post, you will see how much the population increases every month and those from where the workforce comes. LPR is not all immigration, it's just green cards.
If you message is to say this country is not deeming work a right and providing jobs, that's true, along with the "permanently temporary" attitudes as if all are disposable workers, that's true too.
From the LPR stats in the graph, (2980K in the 2007-2009 column). Monthly immigration is over 83K per month for the last 3 years. There are 4 million live births in the U.S. annually and 2 million deaths leaving a net of 2 million annually net births. On a monthly basis that number is 167K. 83K monthly immigration (last 3 years) plus 167K = 250K monthly demand from demographics. The net births figure is constant over 30 years. So in regards to the cumulative number you cite
"Roughly 3 million LPR came during 20o7-2009. The real number of people needing a job is about 25-30 million".No doubt that is U6 plus failed business plus others wanting full time work.
The 250K (Demand) = 83K (LPR) + 167K (Net Births). This formula has excluded illegal immigration, so the both sides of the Demand/Supply equation increase by the illegal factor.
(Again 250k=3M / 12, 83k = 2980k / 36 months,)
Regarding slave and prison labor, and child labor,all are real and significant in the slave
economy of today. 2 million net births today will work its way into employment demand in 18 to 20 years. They become either proletariat, sub-proletariat or the 25-30 million industrial reserve army.The sub-proletariat (non-working) are the part of the labor force which the ruling class has put in the non-working category. Every one born and living has an economic place.
For the last 40 years, it is believed that only the select have the right to work. One day, not so very long ago, there was Humphrey-Hawkins, mandating no more than 4 Percent Unemployment.
The mantra of this age would be - INFERIOR PEOPLE MUST NOT BE EMPLOYED.
The larger picture is also about technology and what role it plays in job creation and destruction. Some tech is still domestic. Job losses from technology are offset by job gains in tech if the tech stays on shore. IEEE did preliminary studies on this. Really hard analysis is wanting.
So when the numbers are knocked around in Big Media, what makes up the raw numbers?
A current ZeroHedge article by Tyler Durden reports research by ConvergEx (Nick Colas' team) that is cited by ZeroHedge to make out an arguable case for QE3 to come as soon as January. Durden's article, How President Obama Is Rapidly Becoming A Gold Bug's Best Friend, opines that we can "expect to see massive monetary easing resume as soon as January when Obama realizes he needs something to go right or else he can kiss that second term good bye."
This prediction, as developed by Durden, is based on analysis of views about and quotes of Ben Bernanke, as developed by ConvergEx, which indicate that the Fed may be totally sold on the theory that rising home prices, and only rising home prices, stand in a causative relation to economic recovery in 2012. ZeroHedge quotes ConvergEx --
"In order for unemployment to reach 8.7% in the Composite-10 next year (2012), home prices will have to rise by an average of 3.5%. To reach 8.2% in 2013, they will have to climb 9.4% from their current prices. For a 7.7% unemployment rate in 2014, the necessary rate of increase is 15.4%" (ConvergEx quoted in ZeroHedge).
The home price increase numbers are then considered as predictably manipulable by means of a QE3 action by the Fed (and beyond that QE4, etc.).
In summary, ConvergEx is quoted as follows --
"If it costs a QE III to get the 3.5% bump in real estate prices, or even a QE IV, then markets should not doubt that the current Federal Reserve will seriously consider it" (ConvergEx quoted with emphasis by ZeroHedge).
Underlying assumptions as to causality are contributed by ZeroHedge, and amount to (A) that President Obama will do anything to get reelected in 2012, and, (B) that Obama practically controls the Fed. Or, the assumption may be that a majority of the FOMC desperately want to see Obama re-elected, and, believe they can attain that goal through massive QE3. As with everything 'Gold Bug', there's CT premises woven into the fabric of the narrative tapestry. (And, what do I know? - the CT may all be true!)
ZeroHedge presents the entire note from ConvergEx, complete with a pretty good report on the regression analysis methodology. IMHO, we would do well to put some emphasis on the final sentence in the ConvergEx note --
"Correlation and causation look the same when viewed in a historical context" (ConergEx).
Yes, members of the FOMC have been seriously considering a QE3 move that would focus on MBS (mortgage-backed securities). This may or may not be something that Obama personally supports, but even if it is, it's doubtful that the FOMC is anxious or in any way willing to do Obama's bidding. I think that what is much more important to the Fed is preserving their institution, which is currently subject to popular and political attacks beyond anything seen for at least 75 years. At least, there's a lot of evidence out there for the idea that institutions like the Fed strive mightily at all times for self-preservation above all other goals.
Here's the thing -- to do a QE3 focusing on MBS, the Fed would have to consider likely serious political blowback, in an election year, from a public that is almost certain to see the action as another bank bailout. (And isn't that what the QE3 would actually amount to?) The risk to the Fed's "world as we know it" would be substantial. IMO, the least of the worries of members of the FOMC is the re-election, or not, of President Obama!
"There has been a good amount of backlash directed towards Bernanke and the Fed for choosing to influence the housing market rather than focusing on the letter of the institution’s famous 'Dual mandate': maximum employment in the context of stable prices" (ConvergEx, underline added).
According to Durden, "if rising home prices means diluting a few hundred billion more dollars, so be it."
I would respectfully suggest another way of seeing this issue: "If the price of preserving the USD's pre-eminence as the world's reserve currency means the defeat of Obama next November, so be it."
But what do I know?
Maybe the Fed really does believe that any problem can be solved by throwing money at it.
Maybe Ben Bernanke has never seen a regression analysis he didn't like.
Maybe the Fed is determined to turn the tide rather than trust the tide to turn when it's ready -- which may be some time in 2012, with or without Fed action.
I agree with this article but one thing I would add, depending on your location will depend
on when you might see signs of recovery. For instance, the Sacramento is very close to the bottom abd more than likely 2012 will be the last year of turmoil.
We've discussed this question before and not long ago, here at EP. But there's been a request for more comments at this paricular blog. So here goes!
The Mess That Greenspan Made (Tim Iacono) reports that Ann Barnhardt (Financial Sense Online) is joining the goldbuggers.
Barnhardt notes that we are no longer a nation of laws, but rather, a nation of men, namely a group of “criminal oligarchs” like former MF Global chief Jon Corzine who, for all intents and purposes, are above the law.
That particular idea looks like it will be put to the test in short order as the House Agriculture Committee sent a subpoena his way earlier today.
A total systemic collapse is in our not-too-distant future according to Barnhardt and the purchase of precious metals and shotgun shells are recommended over stocks and bonds.
This is one of very few growth industries in the USA today -- advising people how to gracefully transition into disaster and the end-of-civilization-as-we-know-it. What it really comes down to is that the US is devolving into a third world country, maybe complete with the military dictatorship. There's a great two-part summary of this by Ron Hera of Hera Research, posted at ZeroHedge (Tyler Durden).
Personally, I first heard about the 3rd World coming to America from Peter DeFazio (D-4th Dist. Oregon), when he pointed out, way back in the mid-1990s, that the reality of NAFTA was that the entire so-called "free" trade agenda was all about reducing wages in the US to 3rd World levels. DeFazio had actually read the entire NAFTA document (in both English and Spanish), and he has fought long and hard against it ... and against the Clinton administration's and all subsequent administrations' trade policies for that reason.
So, maybe because of my own history, I tend to react to continuing horrendous economic trends not so much as a call to hoard gold and ammo, but more as a call to the American people to rally together and restore protectionism to the American Way. Not that there's anything wrong with survivalism -- it's just that, to my ear, 'protectionism' sounds better.
Returning to the growing interest in goldbug polical-cultural-economic thinking, goldbugs generally have a spirit of piratical adventure wrapped around their tightly held bundles of fear, greed and (yes) plain old common sense. If you just call it what it is, namely "devolution into a 3rd world country," that's not very romantic. Indeed, that's pretty boring and humdrum.
After all, anytime you yearn for a 3rd world country (complete with shooting wars), all you have to do is cross our southern border! Or, if it's adventure and romance you're after, then you may as well take your gold bullion and head out for the Philippines. Jump right into it, before your US government pension dollars become complete junk!
By contrast, our goldbugs tend to picture themselves as preparing for a great adventure into uncharted country -- without ever leaving home! I think that's a characteristically American way of looking at things. It's like Pioneer Days or the Old West all over again. Like The Little House on the Prairie or some other department of Disney Land.
IMO, the "3rd world country" meme is really where it's at -- not the return to the Gold Rush. Of course, it's true that gold is very important in countries like India and China. Nonetheless, the mindset that we may need is simply a drab 3rd World mindset.
The main thing that I know about the 3rd World is that everyone in it wants out. I've heard lately that the big dream of Chinese industrialists is to get enough USDs together to retire in California!
They got away, completely away with murder by rating AAA worthless derivatives and why this is so sarcastic, beyond the fact the major press covered the story is they are clearly implying a political philosophy of austerity as solution. I find that bunk, when it's the swaps, derivatives themselves which all need to be cancelled, haircuts, regulated. I don't think sovereign debt should be turned into yet another financial with no real production gambling casino. S&P, by their timing, is clearly using their status as a credit rating agency for political purposes, IMHO.
The Federal Reserve is claiming they did not provide a "subsidy" where banks made $13 billion in profits from Fed loans and claims there was a penalty. The letter is here.
The Fed also argues Bloomberg "double counted" on loans oustanding and the actual amount was only a mere $1.5 trillion instead of $7.7 trillion.
Poof, bottom line people are still very pissed the banks were not allowed to plain fail, the derivatives cleaned up.
I don't see how the Fed can claim Bloomberg's story is "wildly inaccurate", it was well documented the big banks were making money, as I recall, via the carry trade in part, via the 2008 "emergency" loans.
Felix Simon's graphs are clearly "loans outstanding at any moment in time", that's not a double counting of loans.
Truth of fiction TBD for it involves cranking through 29,000 pages of transactions, which I originally assumed Bloomberg did accurately.
Keywords "secret" versus "not disclosed" oh come on, nit pickin'.
"I think the Wikipedia article is a good explanation." -- Robert Oak
EP is an educational experience, at least for me. (Never too old to learn!)
Thanks to Robert Oak for the link to Wiki's Quantitative_easing, particularly at the heading '5.1 Qualitative easing' (and entire section '5. Comparison with other instruments').
I think that most commentators confuse the five instruments -- quantitative easing, qualitative easing, credit easing, monetizing government debt ("printing") and altering debt maturity structure ("the twist"). It appears that there is no universally accepted taxonomy, and many lump them together and call it all "QE."
To most gold bugs, all of it is "printing" or monetization. For example, most gold bugs see euro bonds as a form of "printing." However, the euro bond proposal could be to shift shorter-term national debt over to long-term euro bonds. In other words, although complex in details, euro bonds could be largely a kind of twist, rather than a form of monetization. (I don't think that it necessarily comes down simplistically to shifting debt from the PIGS to Germany and ultimately monetizing that debt.)
When Fed purchases MBS (as with QE2), that could be seen as 'qualitative easing' or as 'credit easing'. It appears that QE2 purchase of MBS was seen by Bernanke as 'credit easing', although QE2 was seen internationally as 'competitive devaluation'. (See, Global Post article by David Case, November 2010.)
Here's from Wiki --
I like approach of Willen Buiter (formerly at London School of Economics, now economist for CitiGroup in London). See, Willem Buiter (2008-12-09), "Quantitative easing and qualitative easing: a terminological and taxonomic proposal". (Archived at Financial Times, blog.ft.com, although Buiter's FT blog has been discontinued.)
Given experience since 2010, it doesn't appear that Fed monetary actions are capable of accomplishing credit easing in the current structural context -- so to 'target' credit easing is almost fraudulent. Of course, in defense of Bernanke, if I had a dollar for every time he has indicated or been quoted as saying that solutions lie with Congress, I'd be rich.
BTW: On fundamentals, I agree that nationalizing failed banks would make sense in Europe. For the USA, I stick with systemic solution proposed by American Monetary Institute, which avoids nationalization of banks as a policy while proposing an end to fractional reserve banking.
I don't know if it's an intentional or a fortuitous typo, but it's great and to the point --
"If you want put the fix in and let your campaign contributors get buy"
The country needs the Occupy Amendment
See also, for example, ThinkProgress article, 18 November 2011 --
Also see, Robert Oak blog (7 November 2011), Everybody Hates Jack Abramoff
The Banksters universally fail the anti-fraud tests of SARBOX and SEC/1933-34.
The Enforcement Chief for the U.S. Department of Justice is using a legal standard of fraud not based upon the SEC Acts of 1933-34 and SARBOX. SARBOX enhances the anti-fraud provisions of original SEC law. The standard the Justice Department wants to apply is intentional falsity. The actual standard includes both willful misrepresentation and gross negilgence. Citibank, GS, AIG, BoA and many others fail the gross negligence test in valuation of securities in terms of Internal Controls.
Internal Controls are part of audit procedures since the 30's. The auditors must now certify under SARBOX. Essentially every financial, accounting , IT policy and procedure must be designed and implemented in a way which assures the integrity of the financial statements, the integrity of management's control of the business (under the 1933-34 SEC/FASB test) and now must include all IT processes and procedures. Relevant to the Crisis is the failure to value mortgages, mortgage backed debt, and derivatives.
Why would Justice and the SEC apply a more rigorous legal test to the behavior of management based upon intentional deception, so difficult to prove? Think of the IRS and Al Capone. The Feds got Capone on a tax rap because murder was so hard to prove. This is the reverse. If you want put the fix in and let your campaign contributors get buy, then you prosecute on a standard which will be difficult to prove and so the prosecutors will lose. In other words, the fix is in.
The Banksters universally fail the anti-fraud tests of SARBOX and SEC/1933-34.
The Enforcement Chief for the U.S. Department of Justice is using a legal standard of fraud not based upon the SEC Acts of 1933-34 and SARBOX. SARBOX enhances the anti-fraud provisions of original SEC law. The standard the Justice Department wants to apply is intentional falsity. The actual standard includes both willful misrepresentation and gross negilgence. Citibank, GS, AIG, BoA and many others fail the gross negligence test in valuation of securities in terms of Internal Controls.
Internal Controls are part of audit procedures since the 30's. The auditors must now certify under SARBOX. Essentially every financial, accounting and IT policy
and procedure must be designed and implemented in a way which assures the integrity of the financial statements, the integrity of managements control of the business (under the 1933-34 SEC/FASB test) and now must include all IT processes and procedures. Relevant to the Crisis is the failure to value mortgages, mortgage backed debt, and derivatives.
Why would Justice and the SEC apply a more rigorous legal test to the behavior
of management based upon intentional deception, so difficult to prove? Think of the IRS and Al Capone. The Feds got Capone on a tax rap because murder was so hard to prove. This is the reverse. If you want put the fix in and let your campaign contributors get buy, then you prosecute on a standard which will be difficult to prove and so the proecutors will lose. In other words, the fix is in.
They are the ones who vote on it. But it's basically buying up treasuries, at least QE1, QE2.
They did swaps recently, operation twist.
Many blame the rise in commodities on the Fed. It raises inflation but deflation is also a problem and also a method to "lower" interest rates than "zero".
I think the Wikipedia article is a good explanation.
"I've seen the rumors flying on QE3, but housing data and such is not a QE3 annoucment. ... Seems so far the FED can buy up all of the MBS they want and few blink an eye. QE involves Treasuries though." -- Robert Oak
Oooops! Maybe 'QE' isn't the right term, and maybe it's all outside the province of the FOMC. Whatever it is, it's often referred to as 'QE'. Here's an example, from article by Charlie Zhou as published at seekingalpha.com (23 October 2011), 3 REITs Which Should Benefit From The Next QE ... Note use of phrase 'The Next QE' in Zhou's headline!
In pursuing this line of thought, I've been working off news reports back in October about published views of Daniel Tarullo (Obama-appointed public member of the Board of Governors).
It's difficult to make sense of this whole RMBS argument for QE3, whether it's coming from Charlie Zhou, Tyler Durden, ConvergEx or Governor Tarullo himself. ConvergEx makes an explicit comparison with the 1930s, pointing out that the tools that were put into place by the New Deal back then do not now exist. Charlie Zhou notes that the problem isn't the interest rate, it's that almost no buyers are eligible for it.
As for the connection to the Euro and to gold, my point is that anything like QE by the Fed seems to be immediately reflected in increasing effective rates on long-term Treasuries and rising gold prices. So how does this stuff add up? How would or could any Fed action result in making more funds available to home buyers, absent a major act of Congress?
I can't give an exact account of my reasoning, and maybe it's more my prejudice, but I'm sticking with my story until I am proven wrong --
IMHO, there's no QE in the cards during the next 12 months. Of course, I could be wrong about that. My prediction back at the beginning of the last week of November when it looked like a long march had not yet begun -- before the € was rescued by the $ -- was that gold could still end the year securely in the $1900s range ... and it now looks more like goldbugs will be lucky if gold ends the year above $1800. So much for predictions! (Oh well, gold did regain $1750, probably.)
No, they don't; they have your resume scanned into a system that looks for keywords that they determine are indicative of qualification, and boot out all of the resumes that don't contain a certain (high or total) percentage of them.
It's best to have as many buzzes as possible; job search now is a lot like SEO. Unless you get the page/resume views, all your efforts are worthless.
Economists since Adam Smith, classical and neo-classical, have understood that credit stimulus,or money aggregate expansion is inflationary when there is no offset in the services, goods of GDP.
Famously, Adam Smith analyzed the Sieglo de Oro (1700 Spain) to show how importation of gold, yes gold caused inflation, The reason was that Spain was importing vast amounts of gold from the New World without expanding the productive base of the economy, goods and services. The result was inflation. The reason so many have pleaded for manufacturing expansion has core of stimulus is the fear of inflation.
If QE3 is just a an expansion of money without production, it will create inflation.
which is why I went through this top level calculation to show, once again, more people have dropped out of the count. I saw the most ridiculous manipulation by Forbes as well, so bad, not even going to link to it, but Paul Krugman breaks down the employment to population ratios by ages 25-54 to show, nope, this is not just people aging as the reason they are falling off of the count, these are prime workers falling into the not in the labor force black hole.
Dispelling headline buzz is the main reason I started overviewing these government reports in such detail. The spin is overwhelming!
But some are claiming these ratios are bound to fall and I don't buy it. i.e. participation rates and employment to population ratios. I'll wait until February when the 2010 Census data is incorporated and then we'll see what's going on.
LPR + Visas + Illegal Immigration is immigration. The point about LPR is the Honorable Guttierez has proposed allowing 700K Visas holders to become citizens and proposal is backed by usual suspects.
NYT:
In a rare show of bipartisan comity on the angrily contested issue of immigration, the House of Representatives on Tuesday passed a bill that tweaks the visa system to allow more highly skilled immigrants from India and China to become legal permanent residents.
J. Scott Applewhite/Associated Press
Representative Jason Chaffetz, Republican of Utah, helped introduce an immigration bill.
Related
The bill, originally offered by Representatives Jason Chaffetz, a conservative Republican from Utah, and Lamar Smith, a Texas Republican and chairman of the House Judiciary Committee, sailed through by a vote of 389 to 15. Joining as sponsors were several Democrats who are outspoken liberals on immigration, including Representatives Luis V. Gutierrez of Illinois and Zoe Lofgren of California.
I've seen the rumors flying on QE3, but housing data and such is not a QE3 annoucment. I have a tendency to read Zerohedge but not cite them that much. The reason is he often gets it wrong. They kind of fly on rumor, often they will be on the only ones finding a story before it officially breaks, but on the other hand, they also get it wrong too.
Seems so far the FED can buy up all of the MBS they want and few blink an eye. QE involves Treasuries though.
If you look at the top post and the side post, you will see how much the population increases every month and those from where the workforce comes. LPR is not all immigration, it's just green cards.
If you message is to say this country is not deeming work a right and providing jobs, that's true, along with the "permanently temporary" attitudes as if all are disposable workers, that's true too.
From the LPR stats in the graph, (2980K in the 2007-2009 column). Monthly immigration is over 83K per month for the last 3 years. There are 4 million live births in the U.S. annually and 2 million deaths leaving a net of 2 million annually net births. On a monthly basis that number is 167K. 83K monthly immigration (last 3 years) plus 167K = 250K monthly demand from demographics. The net births figure is constant over 30 years. So in regards to the cumulative number you cite
"Roughly 3 million LPR came during 20o7-2009. The real number of people needing a job is about 25-30 million".No doubt that is U6 plus failed business plus others wanting full time work.
The 250K (Demand) = 83K (LPR) + 167K (Net Births). This formula has excluded illegal immigration, so the both sides of the Demand/Supply equation increase by the illegal factor.
(Again 250k=3M / 12, 83k = 2980k / 36 months,)
Regarding slave and prison labor, and child labor,all are real and significant in the slave
economy of today. 2 million net births today will work its way into employment demand in 18 to 20 years. They become either proletariat, sub-proletariat or the 25-30 million industrial reserve army.The sub-proletariat (non-working) are the part of the labor force which the ruling class has put in the non-working category. Every one born and living has an economic place.
For the last 40 years, it is believed that only the select have the right to work. One day, not so very long ago, there was Humphrey-Hawkins, mandating no more than 4 Percent Unemployment.
The mantra of this age would be - INFERIOR PEOPLE MUST NOT BE EMPLOYED.
The larger picture is also about technology and what role it plays in job creation and destruction. Some tech is still domestic. Job losses from technology are offset by job gains in tech if the tech stays on shore. IEEE did preliminary studies on this. Really hard analysis is wanting.
So when the numbers are knocked around in Big Media, what makes up the raw numbers?
Thanks to 'Johnny Brooks' for comment, Housing market bottom in 2012, pulling my thoughts off the Euro stuff and back home to the question of the housing market in 2012! But, of course, the two -- Euro stuff and the USA housing market -- are not unrelated. See, my comment, QE3 in January? -- which I posted at Robert Oak's more recent blog, Case-Shiller Home Prices Decline -3.9% from a year ago for September 2011
'Johnny Brooks' posted at Robert Oak's blog from last may, Zillow Says Housing Market Won't Bottom Until 2012
A current ZeroHedge article by Tyler Durden reports research by ConvergEx (Nick Colas' team) that is cited by ZeroHedge to make out an arguable case for QE3 to come as soon as January. Durden's article, How President Obama Is Rapidly Becoming A Gold Bug's Best Friend, opines that we can "expect to see massive monetary easing resume as soon as January when Obama realizes he needs something to go right or else he can kiss that second term good bye."
This prediction, as developed by Durden, is based on analysis of views about and quotes of Ben Bernanke, as developed by ConvergEx, which indicate that the Fed may be totally sold on the theory that rising home prices, and only rising home prices, stand in a causative relation to economic recovery in 2012. ZeroHedge quotes ConvergEx --
The home price increase numbers are then considered as predictably manipulable by means of a QE3 action by the Fed (and beyond that QE4, etc.).
In summary, ConvergEx is quoted as follows --
Underlying assumptions as to causality are contributed by ZeroHedge, and amount to (A) that President Obama will do anything to get reelected in 2012, and, (B) that Obama practically controls the Fed. Or, the assumption may be that a majority of the FOMC desperately want to see Obama re-elected, and, believe they can attain that goal through massive QE3. As with everything 'Gold Bug', there's CT premises woven into the fabric of the narrative tapestry. (And, what do I know? - the CT may all be true!)
ZeroHedge presents the entire note from ConvergEx, complete with a pretty good report on the regression analysis methodology. IMHO, we would do well to put some emphasis on the final sentence in the ConvergEx note --
Yes, members of the FOMC have been seriously considering a QE3 move that would focus on MBS (mortgage-backed securities). This may or may not be something that Obama personally supports, but even if it is, it's doubtful that the FOMC is anxious or in any way willing to do Obama's bidding. I think that what is much more important to the Fed is preserving their institution, which is currently subject to popular and political attacks beyond anything seen for at least 75 years. At least, there's a lot of evidence out there for the idea that institutions like the Fed strive mightily at all times for self-preservation above all other goals.
Here's the thing -- to do a QE3 focusing on MBS, the Fed would have to consider likely serious political blowback, in an election year, from a public that is almost certain to see the action as another bank bailout. (And isn't that what the QE3 would actually amount to?) The risk to the Fed's "world as we know it" would be substantial. IMO, the least of the worries of members of the FOMC is the re-election, or not, of President Obama!
According to Durden, "if rising home prices means diluting a few hundred billion more dollars, so be it."
I would respectfully suggest another way of seeing this issue: "If the price of preserving the USD's pre-eminence as the world's reserve currency means the defeat of Obama next November, so be it."
But what do I know?
Maybe the Fed really does believe that any problem can be solved by throwing money at it.
Maybe Ben Bernanke has never seen a regression analysis he didn't like.
Maybe the Fed is determined to turn the tide rather than trust the tide to turn when it's ready -- which may be some time in 2012, with or without Fed action.
See, Robert Oak's blog from last May, Zillow Says Housing Market Won't Bottom Until 2012
Also, recent comment there by 'Johnny Brooks' -- Housing market bottom in 2012
I agree with this article but one thing I would add, depending on your location will depend
on when you might see signs of recovery. For instance, the Sacramento is very close to the bottom abd more than likely 2012 will be the last year of turmoil.
We've discussed this question before and not long ago, here at EP. But there's been a request for more comments at this paricular blog. So here goes!
The Mess That Greenspan Made (Tim Iacono) reports that Ann Barnhardt (Financial Sense Online) is joining the goldbuggers.
This is one of very few growth industries in the USA today -- advising people how to gracefully transition into disaster and the end-of-civilization-as-we-know-it. What it really comes down to is that the US is devolving into a third world country, maybe complete with the military dictatorship. There's a great two-part summary of this by Ron Hera of Hera Research, posted at ZeroHedge (Tyler Durden).
ZeroHedge Part 1
ZeroHedge Part 2
Personally, I first heard about the 3rd World coming to America from Peter DeFazio (D-4th Dist. Oregon), when he pointed out, way back in the mid-1990s, that the reality of NAFTA was that the entire so-called "free" trade agenda was all about reducing wages in the US to 3rd World levels. DeFazio had actually read the entire NAFTA document (in both English and Spanish), and he has fought long and hard against it ... and against the Clinton administration's and all subsequent administrations' trade policies for that reason.
So, maybe because of my own history, I tend to react to continuing horrendous economic trends not so much as a call to hoard gold and ammo, but more as a call to the American people to rally together and restore protectionism to the American Way. Not that there's anything wrong with survivalism -- it's just that, to my ear, 'protectionism' sounds better.
Returning to the growing interest in goldbug polical-cultural-economic thinking, goldbugs generally have a spirit of piratical adventure wrapped around their tightly held bundles of fear, greed and (yes) plain old common sense. If you just call it what it is, namely "devolution into a 3rd world country," that's not very romantic. Indeed, that's pretty boring and humdrum.
After all, anytime you yearn for a 3rd world country (complete with shooting wars), all you have to do is cross our southern border! Or, if it's adventure and romance you're after, then you may as well take your gold bullion and head out for the Philippines. Jump right into it, before your US government pension dollars become complete junk!
By contrast, our goldbugs tend to picture themselves as preparing for a great adventure into uncharted country -- without ever leaving home! I think that's a characteristically American way of looking at things. It's like Pioneer Days or the Old West all over again. Like The Little House on the Prairie or some other department of Disney Land.
IMO, the "3rd world country" meme is really where it's at -- not the return to the Gold Rush. Of course, it's true that gold is very important in countries like India and China. Nonetheless, the mindset that we may need is simply a drab 3rd World mindset.
The main thing that I know about the 3rd World is that everyone in it wants out. I've heard lately that the big dream of Chinese industrialists is to get enough USDs together to retire in California!
Ah, the irony of it!
No S$%#. I want to puke.
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