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Brown Brothers Musings On The "Broken Cash Register" And Why Economic Prosperity May Never Again Return
Some essayistic views from Brown Brothers Harriman on the current regime: in what is an elegent symmetry, BBH notes that the current collapse is merely the denouement of the earlier period of success, what the author dubs the Reagan-Thatcher model. "The current crisis is the breakdown of the Reagan-Thatcher cash register. Its own success seems to be the main culprit. It reached some logical conclusion. The leveraging and deregulation, and perhaps the sheer size of the capital stock, overwhelmed the US’s ability to absorb it and, in some quarters, raised Triffin Dilemma-like problems: the magnitude and persistence of the current account itself began undermining the cash register." Where the narrative is less elegant is the policy recommendation that China, which is perceived as the last great hope for the developed world should adopt the same failed Bismarkian model that is now in its death rattles across the entire developed world: "Ultimately the world economy must generate less surplus capital. The surplus countries need to reduce their savings by boosting consumption. One way China could reduce its incredible savings rate would be for the Chinese government to provide some of the basic public goods that most other countries provide their citizens, such as greater social security, unemployment compensation, and, yes, even national health care." In a sense, BBH suggests the US should export communism so that the oligarchy can enjoy a few more years of excess returns, after which, the flood. Yet even they realize it is likely too late to set off on such a course: "It is possible that the Reagan-Thatcher cash register cannot be salvaged. That would suggest a rather foreboding future. Yet, just as in 1971, it was impossible to have anticipated the features of the Reagan-Thatcher cash register, so too we may not be able to envisage a new one. Just like China would still have to confront its massive reserves even if they were to shift of out dollars, so too does the challenge of absorbing the vast world savings transcend national or regional focus of the more common dramatic narratives. While some semblance of recovery is possible, without a solution to this problem, economic prosperity may not return -- no matter the configuration of geopolitics." And this will be precisely the final outcome, no matter how hard the Krugmanites push for just another dance with the rotting corpse of John M Keynes.
The Broken Cash Register (pdf)
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One last dance with Mary Jane,
One last time to kill the pain....
Crank it...
http://www.youtube.com/watch?v=bUOQIjQoiA4
Yank it...
Reagan-Thatcher cash register? BBH is a Bush controlled entity. Calling out Reagan-Thatcher? That made me laugh.
Yeah, Bush and Reagan had so much in common.
I'll take "Wipe my ass with gilded toilet paper" for $1000.
Yes, that was a jab at he real goldbugs.
More correctly the Bush family power came from BBH, which is a Bonesmen entity. The Bushes are merely capos.
dupe
laughable the "success" of the cash register somehow ignored the externalities that kept the tapeball from blowing apart decades ago. Inconvenient facts obviously. And then to invoke the converse of the savings glut merely affirms this is recycled Fed agitprop with some red hot whorey lipstick. And the conclusion is of course it is "our dollar your problem." Maybe
and what's going on now just bowls me over...
Have a real dance party and quit fucking Off !
Come-on Take it up a notch !
http://www.liveleak.com/view?i=ff1_1287414638
Isn't it amazing how Wall Street thinks the Chinese gov't should supply benefits to it's people, when for decades it has felt compelled to remove those benefits from the most productive works in the world, Americans.
God knows how much money was spent on their education and they couldn't comprehend this day. When if you had walked into any dinner in middle American and asked if sending jobs and technology to the far east was a good idea you would have gotten the answer for free.
I wonder when the bill is tallied up for this how much farther ahead we all would be if we just treated others Americans as we want to be treated.
Time photo's
Ordos~China: A Modern Ghost Town
Meant as a home for 1 million people, the Kangbashi district remains nearly empty 5 years after construction started....
http://www.time.com/time/photogallery/0,29307,1975397,00.html
I AM SO FUCKING SICK AND TIRED OF THIS FUCKING REAGAN BULLSHIT!!!
****FUCK REAGAN****
THIS WHOLE FUCKING MESS **STARTED** WITH THE REAGAN"OMICS" BULLSHIT! WHAT THE FUCK DO YOU THINK THAT SUPPLY SIDE SHIT IS? HE'S THE ONE THAT ********STARTED******** THE FUCKING CREDIT BUBBLE! YOU FUCKING MORONS! It's just that through his supply side "model" they sterlized credit expansion & money printing. But he STARTED all this bullshit! ... ps, this isn't about politics. Fuck Obama and fuck Clinton too. Don't start that retarded shit. Sorry for the tone, but NOT the content
...you are allowed to get angry. i understand. i'm very depressed about the state of affairs & my children & grandchildren's future. no matter how much i try to save or how frugal & prudent i behave, i'm just not seeing any results. ..........i understand your anger & feel for all of us, i have a lot of empathy for people of all ages, we will all lose something in this mess, be it a home, a job, a pension; i just pray we don't lose each other.
Reagan also was the creator of the PPT
The creator? If you think abstractly, meaning and entity that supports price models, aka a shill.
I think Regan just invented a bigger wheel if you catch my drift.
Did you read those facts on the Daily Kos site?
Reagan was a puppet, specially after being shot by B@sh family friend Hinckley. B*sh and his fascist buddies on Wall St. were the real power and still are.
http://www.youtube.com/watch?v=QTcL6Xc_eMM
my only regret is that i cannot junk this 1000x. Michael Moore?
We may have a very, very corrupt system of government, which includes aspects of the former Reagan administration, but Ronald Reagan was a hero.
...and I don't care if you junk me.
Kennedy was the last heroic president and not the first president to be shot because of Central Banks
Fuckin' Kennedy.
HOW do you get your PT boat hit by a destroyer?
And what kind of hero gets the glory for rescuing folks who wouldn't need rescuing if you hadn't screwed up in the first place?
I don't go in much for hero worship of any Preznit, but I'll say this for sure:
Nixon was the last CONSERVATIVE.
@ themosmitsos AAA++++++++++++
Absolutely Correct. He was, like many, just another puppet who did what the power elite asked.
And he did it all. Was he a good person, most likely. Was he a good president. Fuken No.
He robbed from the poor and gave to the rich. The only thing he did right was in Beirut. When we lost all those
troops (241) by dam terrorist on a bloody morning. He had enough sense to get the hell out. And said.
Fight your own dam war. We be out of here. Today he would be called a coward by the hard core Neoconservatives.
Some would say the first puppet and the model for all subsequent puppets.
Dude is right, Reagan was only conservative in his rhetoric. I don't know why he's suddenly being remembered as such a great president.
Greater than everyone that came after him sure but that's like ranking turds by fragrance.
I sometimes wonder how much of the 80s-90s growth was due to the 1980 invention of the PC and the tech and productivity that sprung from that. Reagan and Thatcher (and Clinton) lucked out on timing.
The 80s-90s growth was due to the massive population bulge of the Boomers moving into their prime spending years. And a dollop of "have it all, have it now" narcissism, which is the common characteristic of that generation, didn't hurt.
Unfortunately, we now have the ass end of the population dynamics - the unwinding of the Boomer spending spree and the search for yield to finance retirement. The low interest and excesive money growth policies of the Keynesian Klown Posse and their Monetarist brethren have fueled the asset bubbles of the late90s-00s.
In an effort to realize "the unreachable dream" of 8% annual returns for institutional pension fund managers, leverage was piled on leverage and more and more exotic and obtuse financial instruments created. Unfortunately the investing dog has now actually caught his tail... and doesn't like the results.
You are right. Thatcher and Reagan happened along at the beginning of the growth phase of the population bubble. Would Walter Mondale now be celebrated for near miraculous economic results? Probably. But, we'd also probably still be wrapped up in the Cold War, although gratefully near the exhaustion phase.
Thank god "capital" is an amorphous blob. I love generalizations that create a narrative. Also confusing money supply with capital stock is a great one too. I mean, when you don't bother to define either, it's simple to slip between them.
Krugman would definitely approve of this essay. I think he'd just add "Also, Reagan stole babies and ate them. True story."
so let's kick some ass and take some names then mofo.
Simple solution ... send some union reps to China .
You forgot to add Lawyers.
It was implied .
+1
I thought this was of interest ... it will never bring back all the jobs lost because robotics is the future, but it's a start.
Refrigerators made in the USA ?
GE to Add 500 U.S. Appliance Jobs, Spend $432 Millionhttp://www.bloomberg.com/news/2010-10-18/ge-to-add-500-u-s-appliance-posts-as-immelt-brings-jobs-back-from-abroad.html
That's pretty nice of GE, if they now created about 100,00 more, they can get close to even for all the jobs they've sent overseas.
awful nice of 'em to cut and run in upstate NY. shall we call it inevitible that their equity price will rise as a consequence?
They couldn't get any volunteers to manage the plant in Mexico. Kidnappings, beheadings, etc.
And this will be precisely the final outcome, no matter how hard the Krugmanites push for just another dance with the rotting corpse of John M Keynes.
Ooooooh heh heh heh!!
Is there a cartoonist in the house?
------------------------------------------
The 70's and Thatcher-Reagan 80's did see the decline of organized labor in private industries but also a boom in public sector unions which are well on their way toward getting the last laugh.
I am starting to get angry. I walked into a pizza place with all kinds of magnets on the stoves and I said, you should have a "Dont tread On Me" magnet that the local Sunoco sells. He said - Never heard of it. WTF! all
America is lost.... We need a revolution now. So many panzies. They will
all die in the shit storm. Get the word out...
Found on Amazon
http://www.amazon.com/3-pack-Gadsden-5-625-Vehicle-Magnet/dp/B0042QZ5WG/ref=sr_1_10?ie=UTF8&qid=1286285579&sr=8-10
did it all start with the shot heard round the world?
nope.
...it was a refrigerator magnet.
Here is the way I see it and the author of the paper is a moron by the way.
Over the last week there have been numerous links about foreclosure fraud, MER’s, REMIC’s, incompetent judges, Banks getting all the toxic sludge back on their books etc etc.
Right now there is a quiet protest going on around the country encouraged by foreclosure reprieves for a month, “show me the note” argument etc.
Whether you agree or disagree with people looking or hoping for a free home by twisting the spirit of the law is immaterial. People are traveling that road either through necessity because they are broke or they are opportunistic. The fact remains it’s happening.
My opinion is people may be just delaying the inevitable by putting stumbling blocks up. In my opinion the banks will use the politicians to create an end run around due process.
However, I talked to a Lawyer friend today who is arguing three cases using three different tactics for clients trying to keep their homes. He is the only guy I know who understands the legal mumbo jumbo and the Wall St derivatives and Securities game.
He believes under the letter of the law he can win. He also mentioned he recently got a call from a large securities firm about what he is doing and being a very open guy who loves to talk about this sort of stuff he told them exactly what they asked about without charge. They advised him to take his money out of the bank and out of the markets.
He also mentioned that most of his clients are not penniless people but people who have mortgages in the 500K plus range. In other words the upper middle class and everyone below that line typically just gives up and caves into the pressure from the banks.
My belief is all the REMIC’s, Pension funds etc. are going to use the clause in their contracts to divest themselves of their mortgage portfolios and are doing that right now.
The guys who insure these mortgages for the pension funds etc are suing the banks right now to recover their money as they are bleeding money every month paying money to cover the mortgages that they understood to be AAA.
It might be considered a backdoor digital bits and bytes run on the banks. There isn’t enough US Dollars in circulation to cover all these digital bits and bytes.
Basically it is my opinion we are very close to a meltdown and unless a legal end run is put in place to allow speedy foreclosures as well as creating the biggest bailout in history is put in place we are already in meltdown.
I am starting to think Jim Willie might be right about that overnight devaluation of the USD or as has already been posted a transaction tax. Whatever is coming down the pike is not going to be pretty and it’s going to be soon.
Just my certified curmudgeon opinion. As always do your own curmudgeonry.
So someone tell me I'm wrong and what is it I am wrong about specifically.
darn smart curmudgeon. it's a very prophetic scenario clever ZHer. as they say "most won't make it" if what you say is born out. QE 2 is a necessity as it always is with government business but is it done "to protect the center" or "protect it's interests"? should the governors decide a "stay in your home" moment is in order things could get real dicey real quick.
"Surplus capital." Heh.
That's not really a problem. It's not the capital that's suplus--it's the speculation. Capital COULD be invested into infrastructure which improves quality of life for everyone in the area, rather than being shipped to emerging markets in an effort to generate a financial return on someone else's labor.
The USA controls sufficient wealth to build Star Trek cities and infrastructure, but it can't be done because there's no return on investment. ROI is determined solely by the columns in the spreadsheets--there's no "return" that comes from living in a high-tech, high-efficiency, low-crime, low-pollution environment.
Those are externalities and irrelevant to any discussion of how to deal with surplus capital. The guy holding the purse-strings has no interest at all in living in a better society. Nothing in it for him.
Um. Yeah.
GEAB N°48. Global systemic crisis - LEAP/E2020’s analysis of 39 countries’ risks 2010-2014: A collective but contrasting dive into the phase of world geopolitical dislocation
http://www.leap2020.eu/GEAB-N-48-is-available-Global-systemic-crisis-LEAP-E2020-s-analysis-of-39-countries-risks-2010-2014-A-collective-but_a5295.html
Basically, what they're trying to say is that we have reached the limits of economic complexity. We are nearing or have already reached the end of the "conservation" phase, in which the system becomes rigid, independent possibilities rapidly decrease, innovation stagnates, fragility becomes systemic and relatively small events easily propagate through the system. This is the "logical conclusion" they write of.
http://peakcomplexity.blogspot.com/2010/09/limits-to-complexity.html
As goes the economy, so goes the social fabric:
http://peakcomplexity.blogspot.com/2010/10/fear-loathing-in-united-states.html
http://www.leap2020.eu/The-five-steps-of-the-global-geopolitical-dislocation-phase-T4-2009-T4-2013_a5268.html 0. Beginning of the phase of global geopolitical dislocation
1. Step 1: Monetary disputes and financial shocks
2. Step 2: Trade disputes
3. Step 3: State crises
4. Step 4: Socio-political crises
5. Step 5: Strategic crises
I am truly surprised by Brown brothers Harriman- I was always under the impression that they were behind the assassination of JFK because of their embrace of capital depreciation for temporary profit and Kennedys understanding of their stealth tax.
Have the finally renounced their demons and become true capitalists again - I very much doubt it.
All bankers can only make a decent living by running down capital and nothing else.
I get the feeling that they are covering their arse before the final collapse.
My message to you fuckers - if the serfs are going to drown this time you are coming with us.
Reformations suck for Papists brothers.
P.s. you need to give up on the notion of capital markets as a mechanism for profit - it is so passe now in a century with declining BTUs which are a proxy for capital markets that refuse to increase profit.
Payback time bitches.
My message to you fuckers - if the serfs are going to drown this time you are coming with us.
Maybe you are right Atomiser - I am drunk and full of spleen.
These fuckers operate in the twilight and never appear on the battlefield - it is so frustrating to fight shadows.
as someone who was brought out of the shadows you will be surprised at the brightness of the light. BLINDING when it arrives.
"Boost Consumption" Sounds like KrugaKeynesianomics 101. Actually, its more like 5th grade social studies. Idiots.
I don't recall Reagan or Thatcher advocating low underwriting standards, below-market financing or massive accumulation of public and private debt. Clinton, Greenspan and GW stoked those flames. The Fed is still fanning them. I find it hard to believe someone from BBH would publish this. Is this a hoax?
What people say and what they do are two entirely different things - the fact of the matter is that the monetarists revolution has been characterised by a massive accumulation of private debt via resourse extraction with not even token efforts towards capital accumulation.
This has been punctuated by various more leftist forces that accumulated extra public debt on top of the underlining private debt.
At least under keynesian experiments big applied science has achieved some breakthroughs but under Friedmans tutelage there has been nothing but empty philosophizing about the nature of nature.
you should change your name then. perhaps even use your real one.
Well, the Reagan administration was instrumental in creation of *massive* Federal deficits. He really got the "cut taxes, increase spending" ball rolling. Big time.
It wasn't finance back then, it was "high tech" they were inflating. Good thing, too, because now we're safe from Russian nukes with our impenetrable Star Wars missile defense system.
Clinton also was predominantly a technology guy--digital switching in the '90s, huge public infrastructure sold off to private cartels, and a very rapid escalation of off-shoring manufacturing with China's MFN status and NAFTA.
It was pretty late in the Clinton days that the whole financial bubble took off, and quite effectively stoked through the Dubya years.
But Reagan was the one who proved deficits didn't matter, there's no getting around that bit. He was charming, though. Good speeches.
Organic Act of 1871
http://www.teamlaw.org/DCOA-1871.pdf
care to explain, Atomizer?
We are broke, while China is rich and up and coming. We are surrendering unilaterally by foregong cheap available energy.
The East will leap frog us in a few years and we are doomed to stagnation and devolving into a 2nd world nation because our political leaders are really playing for the other team.
China is not rich ...To think some people think they can just drop the dollar peg (would crush their banks), and most the people have no money. The emerging markets are full of hot money ... cheap dollars *bubblicious*
Take the most obvious example, the PBoC itself. The central bank officially has about $2.5 trillion in reserves. This by the way almost certainly understates its true position but let’s ignore that for a moment. The PBoC has funded this position with an equivalent amount of RMB liabilities, which makes it very vulnerable to changes in the value of the currency.
Rate addiction
In fact there were strong rumors last year that the PBoC was technically insolvent as a consequence of the 20% increase in the value of the RMB against the dollar during the 2005-08 period of currency appreciation. Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses (although I notice that Sovereign Trends’ Terrence Keeley, in an OpEd in the Financial Times Tuesday, seems also to have done the numbers).
Let’s assume, for example, that over the next two years we see a combined appreciation and interest rate increase of 10% (let’s say a 2% increase in interest rates and a 4% annual appreciation), which is, in my opinion, the absolute minimum that China must do to slow down the worsening domestic imbalances. Assuming no change in the rate earned on reserve assets, which in fact may decline, this means that the PBoC’s net indebtedness would rise by over $250 billion, or roughly 5% of the country’s GDP.
These kinds of number quickly add up. And of course it is not just the PBoC that has this addiction to repressed interest rates. Many years of very low cost borrowing has created a huge dependency on low interest rates among SOEs, local governments, and other creditors of the bond markets and the banks (not to mention the banks themselves), all of whom are directly or indirectly funded by long-suffering households.
Mike Pettis finance professor at Peking University’s
BBH ...Please... 4 guys sitting around 1 terminal talking about all the big deals they use to do... place is non-existent presence in FX and has been for the last 20 years.
Alan Greenspan's "conundrum" was in his head. He was no student of history though he sure became one. inverting the yield curve for YEARS was a mistake. Period. Without a doubt Ben Bernanke was a hero for his activities leading into the crisis. Interest rates were falling well before "the shoot out on the street" and the actions taken by that crew preventing this systemic failure from turning into a genuine crisis should be recognized as such. Period. What happens in dealing with the "Bezerkistanism" we have now is anyone's guess. Clearly "the opportunity for profit" never left. Is that all publc policy is now? The opportunity for profit? As this site has so clearly and with great effort prognosticated "there is an opportunity for loss in that space, too." Should what be spoken of in certain places here, this evening, be truth then the impact for these same policy heroes could become a real nightmare of the likes they never imagined. Interestingly with the exception of Hillary Clinton "these heroes are the only one's left."
This article is either disingenuous or naive. Surplus "capital" is just surplus paper currency which was printed up fast and furious while America still had dollar hegemony and the political clout to enforce it. Once that goes, once the dollar loses reserve currency status, the surplus "capital" shrivels to a pile of Monopoly money. The "Reagan Cash Register" (had to laugh at that one) was just a printing press of deficit spending which hit a peak as a percentage of GDP during his 2 terms.
So now that there was only exploitation of the moment through greed and no real long term planning, the economy will crumble and with a few bright spots in between. That surplus capital will vanish as fast as it materialized.
yes these are the same brown brother harriman which were a conduit to nazi germany from prescott bush and the other powers of wall street who financed both sides of the war. standard oil of new jersey, ge, westinghouse, ig farben and a host of others were saving german industry from allied bombing through massive intelligence leaks and threatened fdr with withholding of finances if he dared prosecute bbh....
the same crooks run the bbh and the finance world today....that is why it is melting down on cue.
painfully true.
Eugenicist scrotewankery.
Politics?
Please, this is all human nature.
Reagan-Thatcher, Carter-Andropov, etc., etc., etc.
They are just playing pin-pong with the human propensity to live in the moment, to take what was given to you that you didn't make or earn and take it for granted.
The natural cycle that generations cannot rebuild or maintain what the struggling generations strove for. There are oscillations back and forth, and hope and death, re-shuffling and war, but the long term picture is collapse.
Just think of the pyramids, the Mayan temples, the palaces and old buildings of Europe and America that no longer have the craftsman to fix them or build them.
Human nature, long cycles, the petri dish is getting very full.
Politics is the distraction.
good points.
...and start all over again.
no "good" people, or "bad" people, more likely: Just "people".
Airline and Shoe busting union dog, Drug money collecting for political purposes in Latin America, "Let the free market steal pusher" -Mr. Reagan, export jobs, devalue America.
He was against big govt so they named the biggest govt building in the world after this front man. Russia failed because of Russia not Mr. R.
Mr R. pushed the american family back into the 1900's robber barron era, ty you for that Mr. R. and your legislative chronnies.
When the stored up money enters back into the economy, the non vital businesses and gagdets will come crumbling down. Only the REAL CORE VALUE businesses will survive. When this happens you will see how much AAPL is really worth.
I believe the financial services industry is another fluffed up paper pushing asset shuffling sector that will get trimmed.
We will see.
the irony: One way China could reduce its incredible savings rate would be for the Chinese government to provide some of the basic public goods that most other countries provide their citizens, such as greater social security, unemployment compensation, and, yes, even national health care?
you've got to be kidding, right?--- so the Chinese government spends $2,291.66 per citizen (one month only) for "benefits" and the cash is gone? that's the math when you take $2.7 trillion in reserves and divide it by 1.2 billion people. nutty I'd say.......except that by USA standards we'd pay this cash monthly for people who aren't working. by this "standard" China would be around $20 Trillion in the hole by August of next year with unemployment compensation plus healthcare expenses, etc...
that's the problem with most people's views vs China. they fail to understand the challenges of managing so many people. they're not going to go broke and then heavily into debt just to make a few Westerners happy.
20 years ago China was, on balance, 500% debt-to-equity and they're still young enough to remember. they're not going to go back there for anybody.
consider the perspective.
shawn a. mesaros pamria, llc
much better. good points.
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Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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