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Glimmers Of Rational Thought From Kansas Fed's Hoenig
HOENIG: ACTING NOW TO CUT DEBT MOST RESPONSIBLE COURSE
HOENIG: WLD BE MISTAKE TO DO NOTHING ABOUT MOUNTING DEBT
HOENIG: INFLATION IN ARGENTINA WILL ALMOST CERTAINLY INCREASE
HOENIG: CAN'T AVOID SHORT-TRM PAIN IN FIXING ECON FUNDAMENTALS
HOENIG: IF FISCAL DEBT GOES UNADDRESSED,CURRENCY WEAKENS
HOENIG: HIGH PRIVATE DEBT TO CONTRIBUTE POL PRESSURE ON FED
HOENIG: FISCAL OUTLOOK ALSO THREAT TO FED INDEPENDENCE
HOENIG: US GOVT MUST ADJUST SPENDING, TAX PROGRAMS
HOENIG: PRIVATE INDEBTEDNESS ADDS TO ECON PROSPECT CONCERNS
HOENIG: DEFICIT OF IMMEDIATE CONCERN;L-TRM OUTLK DISCONCERTING
HOENIG: FISCAL OUTLOOK THREAT TO FED PRICE/GROWTH OBJECTIVES
HOENIG: US FISCAL POLICY MUST FOCUS ON CUTTING DEBT BUILDUP
HOENIG: NEED PRE-EMPTIVE CORRECTIVE FISCAL ACTN TO AVOID CRISIS
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Gosh y'all mean that the ball of fiery gas in the sky is actually the sun?
Hoocoodanode?
Question is whether this round of jawboning with result in any meaningful change in direction....probably not.
Nothing matters except the NY Fed. I think the NY Fed listens to the other branches about as much as they listen to ZH.
Come on Tyler,
This is nonsense.
There is no debt problem and Hoenig knows it. It is theatre to stymie another stimulus package and further support in the form of EUC benefits. If the deficit was such a problem, why is the US burning through 3 gallons per mile of diesel in the Afghanistan wasteland? And, why pay bondholders to recycle their savings into federal debt. Those two line items alone would balance the budget.
The role of the deficit hype is not to limit federal government spending, but to limit the spending of everyone else but Washington.
Hey! I recognize you from that stint I did in Bellevue!
How the hell are you Charley!
I never did learn how to play 21 right, but thanks for trying to teach me.
Also, I promise to vote for you for President soon as you run like you said you was going to.
-MobBarley
PAUL CRAIG ROBERTS: AMERICA—A COUNTRY OF SERFS RULED BY OLIGARCHS
The media has headlined good economic news: fourth quarter GDP growth of 5.7 percent ("the recession is over"), Jan. retail sales up, productivity up in 4th quarter, the dollar is gaining strength. Is any of it true? What does it mean?
The 5.7 percent growth figure is a guesstimate made in advance of the release of the U.S. trade deficit statistic. It assumed that the U.S. trade deficit would show an improvement. When the trade deficit was released a few days later, it showed a deterioration, knocking the 5.7 percent growth figure down to 4.6 percent. Much of the remaining GDP growth consists of inventory accumulation.
More than a fourth of the reported gain in Jan. retail sales is due to higher gasoline and food prices. Questionable seasonal adjustments account for the rest.
Productivity was up, because labor costs fell 4.4 percent in the fourth quarter, the fourth successive decline. Initial claims for jobless benefits rose. Productivity increases that do not translate into wage gains cannot drive the consumer economy.
Housing is still under pressure, and commercial real estate is about to become a big problem.
The dollar’s gains are not due to inherent strengths. The dollar is gaining because government deficits in Greece and other EU countries are causing the dollar carry trade to unwind. America’s low interest rates made it profitable for investors and speculators to borrow dollars and use them to buy overseas bonds paying higher interest, such as Greek, Spanish and Portuguese bonds denominated in euros. The deficit troubles in these countries have caused investors and speculators to sell the bonds and convert the euros back into dollars in order to pay off their dollar loans. This unwinding temporarily raises the demand for dollars and boosts the dollar’s exchange value.
The problems of the American economy are too great to be reached by traditional policies. Large numbers of middle class American jobs have been moved offshore: manufacturing, industrial and professional service jobs. When the jobs are moved offshore, consumer incomes and U.S. GDP go with them. So many jobs have been moved abroad that there has been no growth in U.S. real incomes in the 21st century, except for the incomes of the super rich who collect multi-million dollar bonuses for moving U.S. jobs offshore.
Without growth in consumer incomes, the economy can go nowhere. Washington policymakers substituted debt growth for income growth. Instead of growing richer, consumers grew more indebted. Federal Reserve chairman Alan Greenspan accomplished this with his low interest rate policy, which drove up housing prices, producing home equity that consumers could tap and spend by refinancing their homes.
Unable to maintain their accustomed living standards with income alone, Americans spent their equity in their homes and ran up credit card debts, maxing out credit cards in anticipation that rising asset prices would cover the debts. When the bubble burst, the debts strangled consumer demand, and the economy died.
As I write about the economic hardships created for Americans by Wall Street and corporate greed and by indifferent and bribed political representatives, I get many letters from former middle class families who are being driven into penury. Here is one recently arrived:
"Thank you for your continued truthful commentary on the 'New Economy.' My husband and I could be its poster children. Nine years ago when we married, we were both working good paying, secure jobs in the semiconductor manufacturing sector. Our combined income topped $100,000 a year. We were living the dream. Then the nightmare began. I lost my job in the great tech bubble of 2003, and decided to leave the labor force to care for our infant son. Fine, we tightened the belt. Then we started getting squeezed. Expenses rose, we downsized, yet my husband's job stagnated. After several years of no pay raises, he finally lost his job a year and a half ago. But he didn't just lose a job, he lost a career. The semiconductor industry is virtually gone here in Arizona. Three months later, my husband, with a technical degree and 20-plus years of solid work experience, received one job offer for an entry level corrections officer. He had to take it, at an almost 40 percent reduction in pay. Bankruptcy followed when our savings were depleted. We lost our house, a car, and any assets we had left. His salary last year, less than $40,000, to support a family of four. A year and a half later, we are still struggling to get by. I can't find a job that would cover the cost of daycare. We are stuck. Every jump in gas and food prices hits us hard. Without help from my family, we wouldn't have made it. So, I could tell you just how that 'New Economy' has worked for us, but I'd really rather not use that kind of language."
Policymakers who are banking on stimulus programs are thinking in terms of an economy that no longer exists. Post-war U.S. recessions and recoveries followed Federal Reserve policy. When the economy heated up and inflation became a problem, the Federal Reserve would raise interest rates and reduce the growth of money and credit. Sales would fall. Inventories would build up. Companies would lay off workers.
Inflation cooled, and unemployment became the problem. Then the Federal Reserve would reverse course. Interest rates would fall, and money and credit would expand. As the jobs were still there, the work force would be called back, and the process would continue.
It is a different situation today. Layoffs result from the jobs being moved offshore and from corporations replacing their domestic work forces with foreigners brought in on H-1B, L-1 and other work visas. The U.S. labor force is being separated from the incomes associated with the goods and services that it consumes. With the rise of offshoring, layoffs are not only due to restrictive monetary policy and inventory buildup. They are also the result of the substitution of cheaper foreign labor for U.S. labor by American corporations. Americans cannot be called back to work to jobs that have been moved abroad. In the New Economy, layoffs can continue despite low interest rates and government stimulus programs.
To the extent that monetary and fiscal policy can stimulate U.S. consumer demand, much of the demand flows to the goods and services that are produced offshore for U.S. markets. China, for example, benefits from the stimulation of U.S. consumer demand. The rise in China’s GDP is financed by a rise in the U.S. public debt burden.
Another barrier to the success of stimulus programs is the high debt levels of Americans. The banks are being criticized for a failure to lend, but much of the problem is that there are no consumers to whom to lend. Most Americans already have more debt than they can handle.
Hapless Americans, unrepresented and betrayed, are in store for a greater crisis to come. President Bush’s war deficits were financed by America’s trade deficit. China, Japan, and OPEC, with whom the U.S. runs trade deficits, used their trade surpluses to purchase U.S. Treasury debt, thus financing the U.S. government budget deficit.
The problem now is that the U.S. budget deficits have suddenly grown immensely from wars, bankster bailouts, jobs stimulus programs, and lower tax revenues as a result of the serious recession. Budget deficits are now three times the size of the trade deficit. Thus, the surpluses of China, Japan, and OPEC are insufficient to take the newly issued U.S. government debt off the market.
If the Treasury’s bonds can’t be sold to investors, pension funds, banks, and foreign governments, the Federal Reserve will have to purchase them by creating new money. When the rest of the world realizes the inflationary implications, the US dollar will lose its reserve currency role. When that happens Americans will experience a large economic shock as their living standards take another big hit.
America is on its way to becoming a country of serfs ruled by oligarchs. -- February 15, 2010
Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal.
Let me see - we weren't serfs before? When was that?
We were not serfs when this country was established. We are serfs now even though most people are just now discovering it.
The Founders established America’s government principally to protect their freedoms and their property. The protection of property has now been extinguished by the State. Just think, if you own an automobile, you have to ask the government’s permission not only to drive it, but to have it in your driveway. If you are renting a house, of course, it is not your property; but if you are paying the mortgage the bank owns the property; if you have paid off your mortgage, the government makes you pay rent in the form of property taxes as long as you hold it. That is hardly property ownership.
A number of levels of government can remove your property from you based on the government’s own description of some alleged violation. Not many people realize it, but the Internal Revenue Service can take away your property any time it wants WITIHOUT DUE PROCESS OF LAW.
If you have a savings account or if your money is in a mattress—it actually belongs to the Federal Reserve. That’s whose name is on that money. The Fed decides the “value” of that currency—day by day, year by year; if you have a savings account, the Fed will decide what interest rate you will be paid or not paid regardless of Fed-induced inflation. And, then, the Fed will control the message, it will tell you what inflation is, and the rest of the statistics it uses to confiscate your wealth.
If you think you own your business, how about those pieces of paper from the state and local government, anyone of which if, it doesn’t satisfy their created criteria, can result in the loss of your property?
And should you make a profit? Congress and its supporters and the IRS will decide on whim how much they will take… and leave for you. And, God forbid, should you die with a bit of property, the State will decide its share, and then your beneficiaries’ share, if any.
In short, we don’t own anything. “Own” a farm? The government will tell you how those acres can be used. Oh, but the government can’t take the people's property without just compensation you say. The misuse and abuse of regulation is State control.
And if this is not serfdom, then I don’t know what is.
JR,
I don't disagree with the things as you state at present. But, this nation was founded on slavery, and has always relied on the enslavement of the largest portion of the population. Things are as normal, but the scales are falling from those who previously believed it only applied to others.
'We were not serfs when this country was started.'
Apparently you are excluding slavery from your romantically-deluded diatribe.
Are we really 'all' serfs now? Or is that just a little dramatic - just rent, right?
HOEING: JUST GOT FIRED
+1. Only ignorant minions remain in power.
hoeing? freudian slip for sure ;)...
HIGH PRIVATE DEBT TO CONTRIBUTE POL PRESSURE ON FED
FISCAL OUTLOOK ALSO THREAT TO FED INDEPENDENCE
Are they going to fly the coup before 'merica finds out that they stole ALL THE WEALTH?! They know they will have to do something....Holy moly.
I heard a rumor that the international space station is being expanded and upgraded, with all the accoutrements of the fabulously wealthy.
Interestingly the dimwitted oligarchs probably think they can live in a space station for a long period. I hope no one tells them about muscle atrophy.
Not necessarily. This is my inner nerd speaking but a properly built facility and it could simulate real gravity by spinning and the oligarchs could dominate us from space at their leisure, maybe toss a few nukes up there to to make sure they have something other then the financial stick :)
Stop giving them ideas...
Seriously, you do realize that the Bush family and many others own land in non-extradition countries. Also ask yourself about why the laws are a bit different between England and the City Of London. They are not stupid.
Note to the braniacs running the PPT: On a day that JPM's card chargeoffs goes from single digits to double digits in one month and new manufacturing orders plunges, the market should be down 300 points. To people that understand your operations like me and the legendary market analyst, Charles Biderman, you look like absolute fools. Once the dim-witted market players such as Barry Ritholz realize that the only thing holding the market up is your illegal actions, there's going to be a massive crash.
+1.
But it sure is hard to be patient, awaiting the mother of all market corrections/resets.
This Hoenig guy's got balls, tellin' the truth and all. The FED is all in at this point, he needs to be a team player and stay on message.
He's just trying to start channeling the blame for a future collapse towards congress and the president, instead of towards the Fed. Funny how congress puts up with all the nonsense from the Fed, when they have the power to snuff them out. They fear what they do not understand: economics.
First CNBC is reputable and now this... O.o
Dude. You completely fail at picking up irony.
I can only surmise that you are completely unfamiliar with this website and not a regular reader ... if you were, you'd realize that anytime Tyler uses "reputable" and "CNBC" in the same sentence, he's being ironic in the extreme.
Uh, I do get it--which is why I left the (ironic smart-ass) comments I did.
Guess I should use that whole [/sarcasm] tag next time.
Hoenig's been on top of this from Day 1 when he was essentially the only one calling for the end of TBTF. There is a growing rift in the Fed between the districts that are dominated by community banks and those that work for the money centers [NY, RICH, SF]. Hoenig seems to be the voice of the community bankers at the moment.
There is no way those in power are going to allow the adjustment process to take place on their watch. That's not the way you create your place in history.
This is such a joke. In our financial system, debt is wealth. Where would the money the government has borrowed all these years been invested otherwise? It really wouldn't be difficult to have a governmental budgeting system that actually budgeted, but ours is designed to spend as much as possible, by having to buy enough votes to get anything passed, which the president can only veto, not amend. The result is the government spends as much as possible and the resulting borrowing pays interest to investors. Now that the investors have drained the entire economy of value and we are just printing it. This scares those with wealth because it dilutes what they have made off with, so they just want everyone else to tighten their belts. This system is history and we need to start designing a new one. If the public is required to guarantee the value of the currency, than money is a form of public utility.
i agree with some of the other posts, the Fed speak is code for disingenuous. Their purpose now is to convince everyone to take a portion of this debt, to spread the risk around, to give some to every baby being born, through deficit expansion, so that the debt matches the number of dollars they have printed. They are so far behind the curve, that making this all a zero sum game would be a great (and a pyrrhic victory) at this point.
This is Greeces problem isn't it, backwater in the EU suddenly saddled with their share of the debt, like those poor US fixed income buyers trying to save money for a rainy day, and live off their interest, while BB and company try to shove debt down their throat, impoverish and imprison them in the debtors prison they have created.
they don't want to cut debt, they just want to spread their moral hazard around.
Ahhhh, America’s voiceless: “those poor US fixed income buyers trying to save money for a rainy day, and live off their interest, while BB and company try to shove debt down their throat, impoverish and imprison them in the debtors prison they have created.” Well said, grateful un.
And as the old French proverb goes: Whoever profits by the crime is guilty of it.
This deserves a repost: PAUL CRAIG ROBERTS: AMERICA—A COUNTRY OF SERFS RULED BY OLIGARCHS
The media has headlined good economic news: fourth quarter GDP growth of 5.7 percent ("the recession is over"), Jan. retail sales up, productivity up in 4th quarter, the dollar is gaining strength. Is any of it true? What does it mean? Or is it all a deception?
The 5.7 percent growth figure is a guesstimate made in advance of the release of the U.S. trade deficit statistic. It assumed that the U.S. trade deficit would show an improvement. When the trade deficit was released a few days later, it showed a deterioration, knocking the 5.7 percent growth figure down to 4.6 percent. Much of the remaining GDP growth consists of inventory accumulation.
please stop with the iamned spam links
HOENIG: INFLATION IN ARGENTINA WILL ALMOST CERTAINLY INCREASE
What does that have to do with anything?!
Many money people are leaving the USA and Europe and moving to Argentina. There are very smart and valid reasons for this...
Maybe this is a way to alert others it is time to go to Argentina RIGHT NOW?
Arghh Mateys, our financial ship of state has run into the Humpty Dumpty Syndrome - damn the dollar, printing presses at FULL SPEED, we'll sail out of this in bit, we always do....
FED's Hoenig: Should have bought some silver
In a rational expectations model, the central bank has to "surprise" (or con or fool) the public in order for its policies to have real economic effects. Hoenig is acting as the decoy here to turn the attention away from the real problem--deflation. If people believe that hyperinflation is the real issue, then getting leveraged makes a lot of sense. Buying real estate makes a lot of sense. And hopefully that would spur the kind of recovery and net borrowing that the Fed is looking for.
My 2 cents.
+11 thomasstreet. Although your short repost of Robert’s GDP figures in his article above has been removed (inadvertently?), after being junked and chastised by Wynn (please stop with the iamned spam links), truth bears repeating if it's to be heard over the government’s bombardment of falsehoods. Thank you. I, too, thought the revised GDP figure worth “repeating.”
HOENIG: Master of the obvious.
Out of work people not doing anything becasue no one will give them action coupons or FRN's. The people with the action coupons are just waiting around like sharks for people in authority to run out of action coupons and then "buy" them and somehow turn them into magical geese that shit cash for just the right people.
Just a little more rounding up into the pen ( I mean consolidation) and the people will know exactly who the hell they despise most in the world.
Glimmers of Rational Headlines
Emerging Marketsits called cover the butt.. their lips move to spue .. theit tongue wags to spit . their eyes are glossed over with shades of deciet ,
HOENIG: WITH THIS NAME WHY AM I NOT A GANGSTA RAPPER?!??!
FED's Hoenig
know he would not be in that position if he were not part of the scam ... those who think other wise are grasping at straws
hoenig ,, jaw boneing with the head of an ass
HOENIG: SURPRISED BY OBAMA'S REQUEST FOR HIS RESIGNATION
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