Financial topics

[aedens]

http://www.zerohedge.com/news/zee-stabi ... two-charts
Covers Minsky that was relinked

[Higgenbotham]

This means that banks can go back to issuing crappy mortgages and there can be another mortgage bubble which can lead to another housing bubble, so the idea in this instance is to give a boost to housing prices.

For example, Bernake may not control some of the mortgage issuance rules that would need to change to go back to making crap mortgage loans.

Here's perhaps a better idea. It seems reasonable to think the Fed is going to buy the mortgages from inventory that Fannie and Freddie already have on their books. In other words, the Fed probably has no intention of buying new originations. In buying the existing mortgages they can get the payment history, rather than new mortgages for which there is no payment history. When Fannie and Freddie get the cash for the mortages, that cash may somehow wind up in the banking system. It seems likely anyway. At that point, the Fed's thinking may go something like this. If these actions are lowering mortgage rates and boosting housing prices, some existing homeowners may refinance and there may be some banks willing to do some refinances if the housing market improves. The Fed's thinking might be that the refinances at lower rates would put some cash into consumer's pockets based on lower monthly payments and put some immediate cash into the bank's coffers based on fees.

[vincecate]

Here's perhaps a better idea. It seems reasonable to think the Fed is going to buy the mortgages from inventory that Fannie and Freddie already have on their books. In other words, the Fed probably has no intention of buying new originations. In buying the existing mortgages they can get the payment history, rather than new mortgages for which there is no payment history.

Bernanke does not care if the mortgages are making payments. He has a printing press, so profits are not an issue. He just believes that the more money he gets into the economy the better it will be. It does not bother him or the Fed at all if the mortgages don't pay. The Fed owns a substantial fraction of the longer term bonds at this point. There is no way out, no exit strategy, no way to unwind this position. The US is so far removed from market forces at this point that things are just bound to end badly.

fedbondsbymaturity.jpg (45.87 KiB) Viewed 3369 times

[Higgenbotham]

Here's perhaps a better idea. It seems reasonable to think the Fed is going to buy the mortgages from inventory that Fannie and Freddie already have on their books. In other words, the Fed probably has no intention of buying new originations. In buying the existing mortgages they can get the payment history, rather than new mortgages for which there is no payment history.

Bernanke does not care if the mortgages are making payments. He has a printing press, so profits are not an issue. He just believes that the more money he gets into the economy the better it will be. It does not bother him or the Fed at all if the mortgages don't pay. The Fed owns a substantial fraction of the longer term bonds at this point. There is no way out, no exit strategy, no way to unwind this position. The US is so far removed from market forces at this point that things are just bound to end badly.

I would look at each step Bernake takes now as like a decision tree with one question: Does this decision put off the day of reckoning? If buying mortgages with a payment history puts off the day of reckoning versus buying mortgages with no payment history, he will buy mortgages with a payment history. Buying mortages with a payment history probably puts off the day of reckoning a little bit longer.

If he believed what you say he does, he would buy $4 trillion worth of mortgages now. The decision to buy $40 billion per month was probably also made with an eye toward that being the optimal number to put off the day of reckoning longest.

[Higgenbotham]

Tue Sep 18, 2007 7:21pm EDT
WASHINGTON (Reuters) - The Federal Reserve on Tuesday slashed U.S. interest rates by a hefty half-percentage point in a bold bid to shield the economy from a housing slump and financial turbulence, sparking a big rally on Wall Street.

Note this is a 2007 article. This was 3 weeks before the all time high in the stock market.

Financial markets had widely expected the Fed to lower overnight borrowing costs, but were surprised by the aggressive half-point move, the first rate cut since Ben Bernanke took over as chairman of the central bank in February last year.

I draw attention to this article because the markets were similarly surprised by the aggressiveness of last week's move by Bernake this mid September, nearly 5 years later. The first cut in interest rates led to a long series of cuts down to "zero". Last week, the Fed said they would buy mortages to "infinity".

A Reuters poll of 18 top bond firms that trade directly with the Fed in the markets showed a median forecast for a 4.5 percent federal funds rate by the time the central bank's easing cycle ends -- just a quarter-point below where the Fed left rates on Tuesday.

Notice how the primary dealers, who are the world's experts in these matters, thought in 2007 that interest rates would bottom at 4.50 percent. It was unthinkable at that time that interest rates could drop to zero and stay there for years.

"Back to civilizational collapse. My take has been when a civilization goes into that mode for whatever reason, the unthinkable becomes thinkable. We hear some of the previously unthinkable nonsense coming from Bernake's lips recently...for example, who would have thought 5 years ago that he would hold a "press conference" and babble inane nonsense about how savers won't get any interest until 2015."

[jcsok]

As Vince said, this appears that it will end badly, and this is already ending. Interest rates are zero for savers, who primarily are the elderly; those with 401k's are savers to some extent, but their money is at risk on the craps table.

I have to believe that the TBTF banks are in worse shape than realized. The Bernank is probably buying MBS from Morgan Stanley or Citi or BOA to alleviate balance sheet problems; those MBS that have been bounced back to BOA from Freddie and Fannie will be swept under the rug by the FED. Morgan Stanley may have a problem with a silver margin call, if so, they'll just transfer client funds to JP Morgan alla MF Global theft, and the money will "evaporate".

[aedens]

http://slopeofhope.com/2012/09/there-sh ... .html#more

As of this September 6th, China and Russia have decided to trade oil in non-petro dollars. Also, Iran can sell their oil to them without worrying about US sanctions. This is a huge development which has not fully sunk in to the general public yet.

http://www.ageofdeceit.com/thefilm/ Great site for reference material.
Since we trade our Capital here we have no others to blame but regard what we do.

Faber said this latest round of QE would not help the "man on the street".
"QE helps rich people whose asset prices go up and whose net worth then increases but it doesn't flow to the man on the street who is faced with higher costs of living with price rises. This is a cancer that is taking away people's freedom. You just have a small economy that is booming but the majority of the economy is damaged by QE," he said.

Everything posted from the 1958 video clip is ongoing. http://www.youtube.com/watch?v=MVb59TS6 ... re=related
Hard rain will be the least of our problems more are conveying. I will be blunt that I am not a JB devotee and you must admit
how many people are not even watching the gradualism of effects.
As we linked before from 1963 http://www.uhuh.com/nwo/communism/comgoals.htm they do not even pretend anymore
the Letter exists. Early in the week we laid Ella to rest and words cannot ever explain Her life and care. She had one view
on who is Trust. As we care for for my Wifes Mother time is worth more than words and Trust is eternal.

http://www.zerohedge.com/news/richard-k ... scal-cliff

http://imgur.com/a/Y7oIp h/t az
http://www.reuters.com/article/2012/09/ ... 4C20120916

I do not know about you guys but im going fishing. The village are usefull idiots have the news for a few more days I see.

[aedens]

http://www.youtube.com/watch?v=pD8viQ_DhS4&hl=en&fs=1
SSDD We do not think the Government is acting properly. Bring our kids home.
We understand what and who you are. http://www.youtube.com/watch?v=YBbwb6Sv ... re=related

http://financialserv.edgeboss.net/wmedi ... 092408.wvx
Forward to the 1 hour, 50 minute and 48 second mark. This is archived footage from the September 24 House Financial Services hearing
at which both Paulson and Bernanke are present.

I find it a good time to be reminded who and what is important and as I was reminded war and revolution will have already caused a high deathtoll, and Communism will be victorious, but all this will be as nothing compared with the deathtoll caused by the Three Days. Indeed we live in interesting times.
Peace....

[OLD1953]

Aedens, I'm sorry for your loss. I've lost too many over the years.

Higgs, I'm sure there's some thinking along those lines, but I think at bottom the reasoning goes that if the public sees the financial economy as a liability and not a benefit, the public might demand drastic solutions. There are a LOT of ways to manage things without going to an 18th century mode of banking.

The "not radical" solutions would include:

1. Strict limit to size of banks, no more interstate banking, no investment banks at all.
2. Do away with the FED, only the Treasury can approve/recommend banking regulations.
3. No single purchaser or representatives of said purchaser can own more than .5% of a single commodity futures derivative.
4. All communications, interoffice and external must be made available to the regulators by COB each day.
5. Allow each branch of the FED to implement different policies for their part of the country.

None of that is radical, it's either been done before or it's done in other areas already. And those alone are enough to give Bernake ulcers. (Buy stock in pepto bismol?) Radical solutions involve huge modifications to the economic structure, not just rules changes. Now those have no limits, still, we can imagine a few that might get floated:

1. Forced consumption, the opposite of rationing. You WILL consume to keep the economy growing. We've taken a few steps down that road already.
2. Subsidized dropout that expands to everyone. For an extra bite on the individuals taxes (5%?) forever the government will set up applicants in a house/apartment or whatever that uses solar for power, small green niches for growing food, the new water condensation gimmicks for water supply, etc., as if you were in a space station and totally independant of the outside. This is quite possible, and if they were made as units, could be fairly cheap as well if mass produced. This would maintain a sort of "middle class" that didn't have to have much support at all. I can imagine a number of variations on this theme.
3. A government service draft. Minimum wage, pick up all the high school and college students without jobs, organize them into a corps of whatever, and do stuff. Forced draft for anything but military would be new. The usual problem with any draft is "who gets deferred?".
4. Put all unemployed in jail - a variant on #3. The jail system would have to be modified pretty extensively to make this work.
5. Variable money worth what some official body says it is. This would be immediate, at the end of a quarter or a year or whatever, instant adjustment to stimulate or deflate. Easy to implement, hard to imagine.
6. Forced investment - everyone has to put XXX into the market, no choice about it. Doubtless, there'd be some kind of guaranteed income from this, but the details are unimaginable to me.

And that pretty well covers the wild stuff I've heard, and that's what Bernake fears, that one of these ideas will catch on in Congress or with the public, and he'll be living in a world that doesn't have the current emphasis on the second economy.

[aedens]

Thanks O, She was a awesome Gal, beyond words.

Chinese banks and companies looking to seize steel pledged as collateral by firms that have defaulted on loans are making an uncomfortable discovery: the metal was never in the warehouses in the first place. We noted back a few pages the rate implosion to India and the Aussy's.
GE trying to sell Thai Interest in Bank.
I was reading 5 things earlier that erode civilization. We are pushing hard on level 4 and 5.
I cannot toss stones and as posted before since the solution is not in the marbled halls.
Top to bottum the rot is increasing and I guess peaking.

http://duckduckgo.com/?q=Thomas+Andrews+Drake
Hire Thomas to repair the NSA coruption. Troops Home Now, and pity the asshole who attacks us then.
Senate unpaid until budjet balanced. A Republic if we can keep it. The reason I sold the ISP in 1996 is the things we see today.
Old I found http://www.miorganizingproject.org enough to keep them honest. We did have some gray testimony from coaching
and the panel black lined that idiot and the group dynamics behind it. Nobody will be happy but I refuse to follow idiots
anywhere at any time, and indeed we have a entitled society to a percentage. In 2006 we had some local issues and the Deputy
Manager came since his Boss was unable to attend since thats what deputy's are for. We were polite to the Deputy. We made His Boss a project
after that. I will check back in with them because I refuse to let the State sit on there ass and draw a check. Part of the Global plan I forsee as many also
is the 10 zone construct painfully developing and what comes with that.
Everything posted from the 1958 video clip is ongoing.

Marxian Socialism must always remain a portent to the historians of Opinion — how a doctrine so illogical and so dull can have exercised so powerful and enduring an influence over the minds of men, and, through them, the events of history. Keynes http://www.panarchy.org/keynes/laissezfaire.1926.html