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Have We Entered the Twilight Zone?
Please read my latest entry and post your comments here:
http://pensionpulse.blogspot.com/2010/03/have-we-entered-twilight-zone.html
Thank you,
Leo Kolivakis
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the point on money supply is the apparent disparity between M1 and M2/M3. M1 is growing much faster, this means hard cash, which means more people are converting low interest money market accounts into currency. this is inflationary. as Bob Prechter notes, if you want to repatriot all those foreign bond holdings, paying cash to the bearer is the least inflationary way to do it, because it takes longer for hard currency to get into the system. That as a matter of policy, this event as an involuntary reaction on the part of investors. The way to counter the inflationary force of consumers moving to cash (I am reluctant to call them investors) is to raise interest rates. I said this to several people before the market crashed, that Bernanke should be RAISING INTEREST RATES, not lowering.
If the economy is a sick patient, the definition of sick is an imbalance, and the best way to handle that is to immediately restore balance, ie a normal rate of return. naturally people thought I was nuts. In an economy which is 70% consumer spending, putting money in the hands of savers makes the most sense. Putting money in the hands of borrowers, does nothing to stimulate spending, because they are only paying off debts on money they owe, which is where corporate and municipal revenue will end going, into pension funds whose benefit packages are way overstated, just as the debt on recent mortgage holders is overstated. Those houses aren't worth what it says on the title. Ditto those pension obligations...
Higher interest rates should encourge new spending, in the cash in the mattress investor class (M1 money supply) and transfer wealth indirectly to workers, the mortgage class (M2/M3).
But nooooo.
The political class, (which faces uber-populist anger, increasingly shrill,gun toting extremists, who were once mild mannerd progressive, highlighting the reversal of the Democratic game changing win of 2006, into humiliating defeat) decided to curry favor with the overleveraged consumer class, after allowing the global trade imbalance to steal all their income. Now they have to watch their fantasy pension funds, and fantasy mortgages disappear, (until the day Bernanke and the bankers say there is no more paper, and more ink) but that's the price the creditor class has to pay to vote for them!! Amazing.
All those retirement schemes worked as long as productive part of population grew. They, means financial companies, were taking fees, showing gains and so on. Now Boomers retiring and everything collapses, I understand that taking money is much easier and with N.American laws you can renege on your obligations and explain to all those retirees and near retirees that there is no more money, you have paid money to your programmes and now there is nothing left! All those pension specialists made beautiful life on those fees charged to funds, advising, tuning, tinkering to get better returns and so on.
Now Leo, our pension specialist ask questions how to fix the problem, there is no fix without our money!!!!!!! Do you understand? We get less than we put into that Ponzi shit! Don't do PR job for Government, please! And don't be so concerned about future of pension plans, you and your friends already fucked us up, need more?!
The really scary thing is that Leos and other specialists advocate compulsory contribution to gov. pension plans, this will guarantie him and others some good years to continue and shit at the end for all contributors.
Listen up you monkey, I do not work at any public pension fund. If it was up to me, I would scrap all private pension plans at companies as well as rinky dink city and municipal plans, roll them up into a few large public pension plans, set the tightest governance standards in the world, including anti-fraud measures, and last but not least, heavily reduce the bonuses paid out at public pension funds. If you want to be a cowboy, go open up a hedge fund, put some skin in the game, but do not use public money to take your big bets.
The biggest danger in all of this is inflation. If bonds have a sub inflation yield, the annuities business will collapse. If governments, as I expect, continue to understate inflation to prevent collapse, the West will become like Soviet Russia - you still get your pension, but it won't even be enough to cover food bills.
Seems to me, that crude prices should be flashing a warning signal to Bernanke, reflating bubbles has consequences and loose monetary policy does not make us richer, it simply fools us into believing it for a while...
it appears widows and orphans are no longer part of the renter class, Goldman trumps all
If bonds have a sub inflation yield, the annuities business will collapse.
Precisely. Theft-from-savers. This fact gives great credence IMO to the perceived threat of dot gov forcing people into Treasury-based annuities "to protect them"; once the remaining real assets are seized "for our own good", our holdings (now "government-backed annuities") will be inflated away into nothingness.
If the phrases "military intelligence" and "student leadership" strike you as ridiculous, then "government annuity" should scare the crap out of you.
The world is awash in debt - neither governments nor individuals could survive a 3% increase in rates.. ZIRP is the only way politicians can keep exploding trillions in your grand-kids face.. In Ontario - a case much worse than California, (see Mish for the numbers) two public sector jobs are being created for every private sector one and that public job pays much better - how in the world can this insanity work?
Leo - keep digging - it's pensions and health care that will sink the ship of state.
What financial crisis? Bloated governments are getting a thinning out. Rents are dropping, gold is rising. What crisis?
We entered the Twilight Zone right after the LTCM bailout by Mr Magoo (er....Greenspan).
Did you mean 'make' money from lending? How quaint.
"Send economies back into recession"?
Don't we have to begin asking whether a stimulus-driven economy "out of recession" might not be worse than an honest, self-supporting economy in a lingering deep recession?
"Twilight zone" was apt. It's getting very difficult to determine which businesses, funds and investments will prove able to stand on their own two feet when credit and interest conditions "normalize" and which ones are ERSATZ.
More years of these conditions will weed out the real entities from the fakes...
Generally at the expense of the real entities
two other words: bonds and commodities. if you think "lending" has taken a breather you are living in la-la land. lending for you and me maybe, but sure as the sign rises in the east and sets in the west we've had an explosion of lending. Just "not where you want it." Of course there is that pesky problem of "profitable lending." And there i was thinking it was a banks job to make money. SILLY ME!
two words, voluntary euthanasia...
"place is a madhouse, feels like being cloned"
Where am I to go, now that I've gone too far?
When the hitman comes, he knows damn well he has been cheated...
From my observations, the Twilight Zone was entered when Bush abandoned free market principles... in word and in action.