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Stockman On Bernanke's Actions: "The Ultimate Consequence Will Be A Train-Wreck"
There is "not a chance," that the Fed will be able to unwind its balance sheet in an orderly manner, "because everybody is front-running [them]," as the Fed is creating "serial bubbles," that are increasingly hard to manage since "we're getting in deeper and deeper every time." David Stockman has been vociferously honest in the last few days and his Bloomberg Radio interview with Tom Keene was extremely so. While Keene tries his best to remain upbeat and his permabullish self, Stockman just keeps coming with body blow after body blow to the thesis that this 'recovery' is sustainable. "They are using a rosy scenario forecast for the next ten years that would make the rosy scenario of the 1981 Reagan administration look like an ugly duckling,," he exclaims, adding that the Keynesian Krugmanites' confidence is "disingenuous" - "the elephant in the room - the Fed," that are for now enabling rates to stay where they are. The full transcript below provides much food for thought but he warns, if the Fed ever pulled back, even modestly, "there would be a tremendous panic sell off in the bond market because it is entirely propped up... It's to late to go cold turkey."
Via Bloomberg Radio,
On why he's so gloomy on the U.S. since every time we've gotten into this mess we get out of it with technological progress:
We didn’t get out of this mess entirely with technological progress. I believe in it. I believe in the free enterprise economy, and I think it does generate productivity, growth, and wealth over time. What I am arguing in the book is that the machinery of the state has failed badly because we piled on way too much. We are out of control fiscally. It is almost a doomsday machine, I can explain. And second, the central bank is off the deep end with this money printing, which is dramatically distorting and deforming the financial markets. You can’t have capitalism without prices in the bond market, in the debt markets, in the money markets. And the fed has essentially destroyed prices. It administers everything.
On Bill Dudley of the New York Federal Reserve Bank saying that he has confidence we can unwind all the damage we've done with a huge balance sheet:
I don’t buy that because that huge balance sheet has gone nowhere. It has stayed right within the canyons of Wall Street. They have taken their balance sheet from $800 billion, which took 94 years to assemble, and in seven weeks they doubled it. They were printing money like $600 million an hour. It is now tripled, quadruple, up to $3.2 trillion.
And what happened? During that period, from September 2, ’08, excess reserves in the banking system went from nothing - $40 billion – to $1.7 trillion today. So the money is staying in the canyons of Wall Street. It funds the carry trade where you can buy anything that might have a return, a yield, a risk asset.
On whether the Fed is going to be able to pull money out of Wall Street in an organized manner:
Not a chance because everybody in Wall Street is basically front running the Fed. What the Fed is buying, the belly of the curve, I am buying. What the Fed is buying, short term, I’m using to fund my position. So no one really owns the treasury bonds today, it is all rented on huge repo spreads. And the minute the yields start heading up a little bit and the bond prices go down, you are going to destroy the arbitrage, the fast money is going to sell, then the slower money is going to have to sell because the fast money is selling. And where is the bid? At the bottom of the market…The Fed never gets up.
On what the alternative is given the deflationary trap that the U.S. is caught in:
I don’t think we are caught in a deflationary trap…Well, because you are suffering, my friend, from the recency bias. Yes, prices in Phoenix are way down, but they are still a heck of a lot higher in real terms than they were in 1995. The only thing that happened is a bubble collapsed which had to because it was an artificial bubble fueled by the Greenspan one percent interest rate policy and now the Fed is basically saying that bubbles can’t collapse, we’ll just do it again...
On whether the Fed is trying to manage the bubble collapse:
Well, we’re getting in deeper and deeper every time. And the ultimate consequence will be more of a train wreck. Today, at 1560 plus or minute, we are at the same point the S&P was in March 2000, 4,750 days ago. We have had two massive collapses in the interim – the dot.com $5 trillion evaporated, the Lehman meltdown $7 trillion evaporated. So it is serial bubble. They are bicycling the thing up and down. It happens in Wall Street.
On whether he has patience that the U.S. will grind its way out and get to a better place five or ten years from now:
No, because the ten year ago forecast said that we would have a surplus in 2012, that revenue would be $3.5 trillion, and it was $2.5 trillion. What they are using today is a rosy scenario forecast for ten years that would make the rosy scenario I did in 1981 in the Reagan administration look like an ugly duckling by comparison. They are saying that we are going to create 17 million jobs in ten years compared to two million in the last ten years, that we are going to go 14 years without a recession. It has never happened in history. Most cycles last 48 months. So when you actually do a forecast based on the last ten years, just say the performance in the last ten years, the growth rate, the business investment, job creation, you have $15 trillion to $20 trillion in deficits in front of us, not $7 trillion. We are not on a glide path going downward.
On what Paul Krugman, Brad DeLong and others are getting wrong right now:
They don’t see the elephant in the room called the Fed, and the other central banks buying hand over fist almost all the treasuries that are being issued. The interest rate is not two percent, that is administered, pegged, set by the fed. Ask yourself, if the Fed said we’re going fishing for six months and we are not going to be in the market, we’re gone, do you think the treasury at ten years would stay two percent? Not a chance…It would go way up. There would be a tremendous panic sell off in the bond market because it is entirely propped up. So therefore, they are disingenuous.
On deposit insurance:
Deposit insurance creates a huge moral hazard in the banking system. Abolish it and if there are blue haired old ladies or other timid people who want to save in a bank, set up a postal banking system that will be backstopped by the government and guaranteed. But commercial banks out in the real world need to have their liabilities monitored by the market just like everybody else or you are going to have moral hazard. So I would say take the big banks out of deposit insurance, that is what I meant…I don’t know that it was necessarily caused by the postal banking system.
I didn’t say the deposit insurance caused the whole bubble. I’m saying deposit insurance and the Fed window, and the Wall Street coddling policies of the Fed, and the low interest rates created these giant banks - $2 trillion balance sheets at JPMorgan, $2 trillion at Citi – that couldn’t be managed and they were able to raise massive amounts of money from depositors who didn’t care because they believed their deposits were guaranteed…It’s a bad system. Banking is a great danger in the United States and in the modern world, and it needs to be fundamentally reformed.
On the Republican party:
That is the problem. We have no conservative party left. The Republicans have simply adopted Keynesianism for the prosperous classes by using the Tax Code for this stimulus, that stimulus, to help this part of the economy or that part of the economy.
On Paul Ryan's budget plan:
It’s a disgrace because, on the one hand, to give you three examples, one, he repeals Obamacare, says he saves $1.8 billion. I would do that, too. What he doesn’t tell you is he is keeping all the Obama taxes. He has got $1 trillion of Obama taxes hidden in his budget and he is not telling anybody. Second, he gives Medicare and Social Security the huge social insurance programs, some of which goes to the affluent middle class, a pass to ten years, not a cut, $19 trillion. He takes it all out of the safety net, which is only $7 trillion over ten years, a 30 percent cut, actually hitting hard the vulnerable people that have been left behind that we need to do something for. He doesn’t do anything about the defense. He rolls back the sequester and raises defense. We should massively cut defense.
On how much fiscal drag is appropriate:
I don’t think we should have any fiscal drag because the Keynesian formula is simply a program to tax the future generations so that we can live a little better today. It doesn’t matter whether we have one percent growth or negative one percent or positive two percent. We can’t belay massive burdens on future generations because someone finds it inconvenient that our economy can only grow one percent.
On whether he agrees with Glenn Hubbard who suggested that we need to go after entitlements on a long glide path and against the wealthy first:
No, because we have been kicking the can for decades and decades, according to the advice of Keynesians like Hubbard. Hubbard is a complete Keynesian. He is a brilliant guy who told Bush cut taxes in 2001, cut taxes in 2003, oh, while you are at it, go have two unfinanced wars and don’t worry about the deficit because it doesn’t matter. This is the kind of advice Republicans are getting from the likes of Professor Hubbard, and it is no wonder that we are heading towards national bankruptcy. It has got to stop.
On what would happen if we went cold turkey:
It’s too late to go cold turkey. Nobody is going to do it, that is why we are drifting towards the wall. The deficit is much bigger than they are saying. As I indicated, with an honest economic forecast, just like we’ve had for ten years, you are looking at $15 trillion, $20 trillion. You are looking at a national debt $30 trillion.
On whether he believes in American optimism and that we will grow and find a path through this:
No, the optimism was in the people of Main Street, the entrepreneurs, the businessmen, the hard workers, the bus drivers, the farmers. I am attacking the elite. I am attacking the people that run Wall Street, the people inside the Beltway in Washington. I am attacking all of the Keynesian professors from both parties who have gotten us into this idea, just print enough money and we are going to get wealthier, just borrow enough money and we’re going to stimulate the economy.
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Every single banking crisis to date has it's roots in Derivatives...
It won't be as simple as just moving on to another game
Bankers will feast on each other for survival..
The fact that you guys think that everybody is going to throw up their arms and say..oh well... is kinda hilarious...
Every domino can take down another 1.5 times it's weight.
I think that you are right... and they will have all of the valuable tangible assets in their possession by then, so they will be the only game in town. As for me, I find great comfort in having no power and desiring none.
Very zen - just remember to keep a low profile.
That's literally the most hilarious thing I've ever read here....
They can't continue operating like they did in Cyprus, look at all the money that was pulled from banks post Cyprus...WORLD WIDE
Besides they have a Derivatives implosion about to happen, they're just going to bring the whole thing down...they don't have a choice.
ONE SHOT DEAL, it's becoming quite clear.
IMHO, I think we are on the cusp of a sophisticated, very well orchestrated global banking cyber attack...
NYCE, PULSE, PLUS, INTERAC, CIRRUS, BACNET, NOVUS
The ultimate banking false flag......one size fits all
Not a chance - 'they' (the global elite, the 'illuminati' the '1%' whatever you want to call it) are completely in control. They don't need to resort to drastic measures, they've already won. Benanke or any one of the Euroland stooges could get in front of the press tomorrow, tell them that they're mandating that the sky be turned from blue to yellow, and that everybody with bank deposits over 10k has to turn over their first-born as 'collateral' and people would be lining up at the banks, children in tow, and looking up at the sky in anticipation of the big color change. It's all over.
one word, DERIVATIVES
I am quite impressed that a farmer understands the situation a lot better than an academic.
Well I gots lots of help....
Al both you and ekm are right. Ekm is right that they will crash this bitch. You are right that they have already won. The masses are asleep. The only question left is whether Al and ekm and me etc. can navigate this shitstorm and find a way to some port.
I've even lost appetite for soccer. Bayern and Juventus are playing right now, Juve is my team, since a little boy.
I feel disinterested. Financial knowledge is quite a killjoy
That is the truth.
And I've already forgotten about toronto (c)raptors.
ignorance is bliss.
It might crash, it probably will at some point, it's a fragile system. I really think it's incidental to the owners - if they take an active hand in triggering the collapse it will only be for shits and giggles, something to liven things up a little, maybe a way to confiscate a little more loot, or see what kind of additional pain and humiliation they can inflict upon the general population. My point is they don't NEED volatility (other than for a little adrenaline rush). They've already proven that they can just TAKE whatever they want whenever they want. That's what the last 5 years (or longer) have been all about.
- President can have ANYBODY killed ANYWHERE
- Banks and or governments can treat bank deposits as loans and confiscate them outright
- Government can tap your phone, read your e-mails, record all your conversations and communications in some data warehouse in Utah for future reference.
- Banks can foreclose without due process, without proper paperwork
- Banks can collude to manipulate LIBOR and ITS OK WITH THE FUCKING JUDGES AND THE COURT system.
I could go on and on, but why bother. To reiterate, maybe they used to need volatility for the money, and to consolidate power, but now they've got it all. That doesn't mean there won't be volatility, it just means its incidental to TPTB. They might crash the system, they might let it crash, or they might just declare your neighborhood a nature preserve, or order you to stand on your head for 18 days, or shoot you, or make you clean the elephant cage at the zoo, or move into the elephant cage at the zoo - whatever the fuck they think will give them a laugh and demonstrate their power.
Good points.
I love to have different competing points in my mind.
Al bottom line, do we sell the miners?
At this point? I don't know. I used to think it was only a matter of time before the price of gold started reflecting the reality of the global financial situation, and then the miners would go along for the ride. Now I'm really starting to question that. Seems there's just too much complacency in the system, too much control in a few hands. The game with respect to gold now seems to be some kind of Friday night revaluation (eg Oh, all those $ you're holding? They're now tradeable 100-1 on the new 'gold-dollar'), after the majority's sold off whatever scrape gold jewelry they have left. If that happens, who knows where we'll be. The increasingly blatant violation of every imaginable rule-of-law by TPTB seems to mean that there are no longer any dependable rules to play by (other than 'the ones with all the money will do whatever they want to do, whenever they want to do). Still, the mark-down's so huge now, I doubt there's any need at this point to rush to unload any you might still hold.
what a fucked up mess.
I'm not selling anything. I have winners and losers. Assuming there is still paper I will probably never do any better than break even.
Your bigger point is the scary one. There is no longer rules or accountability, and everything can be taken by force.
I was just looking at the really long-term chart, and both the HUI and POG are still on/above their trendline from the 2000,2008 lows, and the BPGDM on stockcharts is at 10%, so, to the extent that there's still some pretend version of markets out there, I think they're more likely to go up than down from here. But yeah, it's the lack of rules and accountability, and the ever-increasing blatant demonstrations of control and collusion across the political, financial and judicial sectors that scares me too. And not in a 'what are my stocks going to do' kind of way.
They're not in as control as you think....
They've let the Derivative market get totally out of control
now it controls them.....It's a global intertwined fucked up mess
It has nothing to do with bank insolvency...they can print their way out of that
wrongo. they are in control and the control team at least in usa which i know best are - jamie, lloyd and thomas montag. obama answers to them. what happens in the end is which of these guys beats the other. nothing else matters. hundreds of TRILLIONS at jpm, citi, bac and gs. guess who has the most guys in governments?
http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/derivatives-quarterly-report.html
That's not control...That's a game
There's something deeply deeply strange.
You see, bankers have no problem killing each other, it's fair game.
Spreads and volatility and their bread and butter. Stability is their death.
It's been for too too too toooooooooooo long stable, scaringly stable.
It's like people behind this are waiting for one and one shot only,JUST ONE SHOT.
It's like the movie : Silence of the Lambs.
The calm before the storm....
http://www.youtube.com/watch?v=qs4svkNZZXc
You mean like do I disagree with many people here....Yes
I don't think this turns out like many people think...and I know some pretty smart people that agree with me.
They got you looking over there...when It's really the other direction...
I have no doubt we're "moving" with respect to the oncoming collapse.
I've mentioned a few times before I work with a few Fortune 500 companies doing "stuff," and in the past couple years there's been one or two that have someone internally acknowledging we're fucked. I've had two more clients "come out of the closet" so to speak this year, openly suggesting what's obvious to most ZH'ers -- that the economy is fundamentally broken and won't be getting better.
Last week one of them put it as "I think we have to consider that the economy isn't ever going to recover and a realistic sales levels are much lower than currently believed." Wait until a few CEOs speak this during financial results calls. The mentality out there is shifting and some are starting to speak the truth, which will just accelerate the inevitable. My sense is we're moving into the "knee" part of the asymptotic rate of change.
Buckle up, Dorothy. Kansas is going bye-bye.
We are approaching the event horizon of Bernanke's Black Hole.
I was saying to some colleagues that I don't think the Black Swan is any particular event as God knows everybody and their dog has taken a swung at that riddle. Instead, I think the actual event doesn't really matta. The Black Swan, IMO is not the composition of the event as it is so much (this time) about the totally underestimated speed with which it occurs. So, pick your event. I don't think it much matters. Whatever it is, and whenever it occurs, it will be so fast and brutal that even those that happen to smart enough to actually figure it out - still won't see it coming.
good times.
...then they throw you in prison on trumped up charges and you accidentally hang yourself or drown in the shower.
Mr. Stockman certainly articulates a good case. However, doesn't he realize that growth, as measured by GDP/total credit market debt, started declining long before he became OMB head in 1981?
STOCKMAN "We are all going to die, quick buy my book before you do"
That's cutting it a little close, isn't it? I mean, just from a sales point of view...
No can do. The tax man dead line is in two weeks.
Brio Thomas, FTW!
I had it out with the fucking cunt neighbor of mine who has been trying to flip homes or buy them for rental income. She's pissed because the house on the corner is going to a sheriffs sale and she wants to buy it to rent it out instead. She already bought two other homes in the neighborhood and bragged about outbidding a young couple with two kids. I told her just to let it go and maybe we'll get a good young couple looking for their first home. I don't want renters in the neighborhood.
She yelled at me, claiming she is just trying to make money and what is wrong with that. I said to her, you are taking homes away from people who are just trying to buy something affordable so they can have a better life. They could have bought a great starter home for under $100k and had a sub $700 complete mortgage payment with tax, insurance, everything. How much are you charging for rent? Her reply was $1000. Or put a few flowers in the front yard and try to flip the home for an easy $15k right?
So of course she would be happy renting the home to a couple for $1000. But instead she put about $5k worth of paint and carpet in one house she bought and put in a $500 bay window. Now she thinks the home is worth $110k. Hoping to clear a $20k profit in just a few months. Of course she wants to do the same with any home she buys.
That is going on everywhere. Speculators preventing homes from dropping in value to the point working people can afford to buy. Speculators keep flipping to other speculators, trying to find that greater fool. Perhaps selling to a hedge fund loading up on property for rent based securities.
So yeah, the young couple can buy the home for $100k, it isn't a bad price. But just a few months ago the home was $85k and the upgrades didn't really add any value to the structure. Tearing down wallpaper and painting walls white isn't the same as new appliances, furnace, roof, etc. So they get fucked out of $25k dollars up front and over $40k over the life of a 30 year loan. Because some bitch wants to play Donald Trump.
So yes speculators do cause damage to regular people and do damage the economy.
I know someone like that. She is underwater in 8 houses and half are unrented. She is leaking cash faster than a banker in a hooker bar. Just deserts.
There is so much to love about these strong independent women.
their mustaches?
what are you going to do, ban them? let them speculate all they want, wall st obv included, and when shtf don't bail any of them out EVER.
You sound like you need a little cheering up.
When she gets hungry for cash she'll section 8 those properties. It's a steady income stream you know, the gov can print all the money it wants.
Blame Ben
this is what happened in the 70's in CA. then the tax man started raising property taxes, and a lot of old people had to move out. massive social dislocation. howard jarvis passed prop 13, which caps tax increases at 2% a year. sure old farts trying to live out their days in a house they bought and paid for, get a break, but then benny the zirp steals it from them down at the bank.
And tell Winn Dixie that I want that $4.99 ribeye that was on sale in Jul of 2011.
Thank you for a little sanity on this issue.
The root seems to be that some do not like others ("speculators" whatever that means) who have money to buy or sell things as they see fit. And at the same time think yet others ("regular people" whatever that means) have the right to buy or sell things at prices they solely determine to be reasonable prices. It is a bizarre philosophy.
what goes around comes around. it really does. greed is b.... she will find out.
and the related item. i'm wondering where/how/what bernake thinks his legacy is. i hope i'm around to see it.
I give Stockman a lot of credit for his book and share his sense of outrage and exasperation.
I've read the initial Sample Pages from iBook and he really spares no one involved in this coming catastrophe. And I remember back when he was Budget Director and he said the consequence of social/military spending on top of deep tax cuts was $200B deficits "as far as the eye can see." Both parties have always been focused on one thing: getting re-elected, and using PAC money to do it. Volcker in the early 1980s had courage.
Our children will say, it could have been avoided. I ran a PAC-free campaign for Congress in 1988 and pretty much got hammered from both sides for the effort. When a reporter asked me about my position on Social Security, I told her that revenue and benefits had to be recalibrated to ensure the system was viable for our children. Pretty simple, really. She was actually so surprised by my answer, that she didn't print it.
What is coming has been formulating and gathering steam for a generation. Very few would pay attention to this issue 25 years ago when the debt was $3.2T, and amazingly most people (including highly educated ones) still don't see it even with a debt of $16T (non-GAAP). I'm not sure why that is... almost a sort of mass paralysis to focus or act.
A guy I work with grew up in Moldova (near Russia) and he said the 1993 hyperinflation there wiped out his parents' savings overnight and locked up the supply chain. They were reduced to picking grass to make soup. He said there were reports in the neighborhood of cannibilism to survive. He's about to get laid off by our company, which has plenty of cash on the books and no real need to lay off anyone... still, he and 150 others are going to lose their job; in his case, with a wife, small child and another baby on the way.
We are going to experience a hard impact, and any belt-tightening now is too late. Brace yourself with gold/silver and a deep pantry... the gathering financial hurricane is near. There is not way out. When it happens, those who have prepared have an obligation to help others if, and to the extent, they can...
"And I remember back when he was Budget Director and he said the consequence of social/military spending on top of deep tax cuts was $200B deficits "as far as the eye can see." "
Actually, that was what was said about Slick Willie's first budget.
was thinking of some Silver Long Johns, to help ward off those nasty microbes
Excellent stuff.
Peter Schiff makes the same point about getting rid of deposit insurance; he mentioned it in an interview with Maria Bartiromo on CNBC March 18th - she and the panel lost it - rolling their eyes and smirking, laughing - as if he'd just suggested the moon was made of cheese.
The FED and the big banks have become part of their fairy tales come to life; "We can't possibly survive without FED intervention and the Big Banks providing liquidity!"
You mean, the FED and Big Banks POURING CEMENT into pricing and markets!?!?
Schiff's comment is at 3:10 in but the whole conversation is good:
http://video.cnbc.com/gallery/?video=3000155196&play=1
(Bob Pisani struggles to keep up)
Deposit insurance creates a huge moral hazard in the banking system. Abolish it
it took me some time to come around to it - but stockman is right. in true capitalism - if you simply want to maintain and safeguard assets - we should have some government vault similar to the safe my coin dealer owns. lock up your savings and pay some small fee for the safe guarding and zero interest because the assets really are all there and haven't been re-used. they can't be re-hypothecated, etc. the cash is there. you earn zip on it, but if you want it, you got it. paying for safe keeping. a safe deposit box.
on the other hand - a commercial bank is a casino and you lend them your money so they can attempt to ramp it up and in this case - you deserve a return and simultaneously put your self at risk and to some degree need to assess the risk in the same way you would with any investment and hopefully be rewarded for that risk. some banks will take more risk with it etc. it's your job to see that you invest with the best investment company of your choice. UNFORTUNATELY - there will inevitably be some kind of organization that sees to it the these entities are actually investing your money in the way that they have advertized. caveat emptor.
Yes.
The lie is the FDIC guarantee; just another government bail-out.
If banks were banks and required 20% down on a loan and held it for life it would be different.
However, the game has been to allow banks to become investment banks, ultimately meaning that they could gamble with deposits and pull the lever on the 777's of derivatives, securities, and re-hypothecation schemes - and when they lose being bailed out because their health is now tethered to deposits and the entire economy.
Stockman is right on, but... all this has been said here on ZH for 4 years now... and I didn't have to buy anyone's book.
I've done quite well with the investment advice I found on ZH. It's comforting to see Krugman disparge this site.
It's all true what Stockman says. And irrelevant. A hundred books like his will make no difference as long as Congress and the Prez want the Fed to print. What part of QEternity are folks not understanding??
sunny
You sure are a sunny ray of light, aren't you?
according to their avatar, that's not sunshine raining down on you. i have a hoodie.
We can all blame the FED but it takes 2 to tango. The state of current debt in this country, the manipulation of markets, the absense of our Constitutional Provisions regarding monetary policy would not be happening if the Federal Government did NOT wish for these matters to be happening. Truth of the matter is that the government is operating in a manner that;
- It needs to fund +$1.5 trillion each year in current year deficits above tax receipts received and total cummilative deficits of $16.5 trillion which increase by $1.5 trillion each year.
- At ZIRP rates set by the FED, it has to keep borrowing more money each year, as well as turning over a portion of the ever increasing $16.5 trillion debt that comes due each year. Also it has to pay interest on all government debt to a level of approx. $700 billion annually. What happens when interest rates go up?
BOTTOM LINE: The Federal Government is the Elephant in the room that we as citizens do not acknowledge. Spending beyond its means, not willing to change the tax system, providing subsistance payments to a huge portion of our population, with no hope for change to their existance, policing the world for our treaty partners, the United Nations and the huge multinational corporations.
We had all better find a way to live within the Constitutional Monetary Provisions of our Founding Fathers or the economic catastrophy in our future will not be pleasant.
the Is this the same david Stockman that was CEO of Collins and Aikman when it went bankrupt? So now we have Stockman, Biderman (surprised he hasnt fallen back off the ledge into SFO bay), Faber, Durden all just calling for an end to the world. They have been doing this since dow 8000....I do concede these guys are brilliant and well educated, However, what is supposed to happen according to the academic world does not translate to the world of market predictiions Academics are so certain that they are right that they fight the tape until they are out of money...As I said the dow will correct at some point but it may be from 16000 to 14000. Of course they will tell us that they were right. This country is going to keep printing money for the foreseeable future and as long as people are accustomed to low interest rates, money printing and bailouts the market will go higher. When this stops, is when the maret will correct. That wll take a good long time and in the meantime you just cant fight the fed and the tape. I really do enjoy reading the blog as Tyler and company make valid point after valid point. But as Paul Tudor Jones said "the market is telling us a diffrent story"
But as Paul Tudor Jones said "the market is telling us a diffrent story"
NO - 1.The FED manipulated market is telling you something 2. The perpetual $1.5 trillion annual Government borrowing needs at ZIRP rates is telling you something 3. The belief by people throught the world that the US always pays its bills is telling you something.
Change one of the above for the worst and lets see what that tells you.
I wonder how long the Fed will defer auditing the quality of all those MBS's they bought from the TBTFs?
Has everyone else been lying about Quality of those MBS bonds?
I think what we are saying is essenially the same in that the manipulation is what is driving this but what I am trying to figure out is how you make money by understnding how long the music may play before there is an epic decline. One of the three scenarios you mention WILL occur but I have to try and make money so I can only look at what the market is telling me. When a shoe drops it will start a panic and a major downward spiral. I may miss 5 to 10% of that move down but thats o.k.
Markets can be manipulated for years. Look at whats going on in Europe, they were on the brink (and still are) but the system is being manipulated. The Eurozone and Japan will fall before we do. That could take some time.
"Tyler and company make valid point after valid point"
If this were true, shouldn't the dow be down $100 and Gold be up $25 instead of the inverse (reality)?
How long can you guys keep the faith?
I know my wife is still expecting the second coming of Christ after 2,000 years....Can you guys beat that??
Buffet said "No one ever got rich betting against America"....But you faithful seem unable to understand this!!
Remove a rivet from an airplane. Will it crash and burn? Probably not. Keep removing them and the outcome is certain. Only the timing is uncertain.
Right now the economy is an airplane that has had many rivets removed. Would you feel comfortable on this airplane? If yes, hop on and enjoy the flight. You'll probably survive. But it's not a chance I'd feel comfortable taking. In fact, most people who regularly visit this site are just preparing for the inevitable.
It's math motherfucker.
Just FYI that is Joe Bruseulas guest hosting and asking questions. He's the slothy economist from Doomborg LLP and worked at Moody's Anal(ytics) prior to that. Guess who he sides with between Stockman and Kruger?
the voters could stop all this, if they put a few more GOP screamers in office, guys who will firewall off the FEDs balance sheet. right now BEN sleeps at night knowing that he can hand his bad paper back to the UST (and the taxpayer) if the need arises. in fact i can imagine a political party for just that purpose, keeping the Fed INDEPENDENT, which means no truth to the statement meus debitum est vestri debitum.
I wonder how long the Fed will defer auditing the quality of all those MBS's they bought from the TBTFs?
Has everyone else been lying about Quality of those MBS bonds?
TV news feature from FLA. couple gets foreclosed from their home, walk down the street, see another identical home in foreclosure, buy it for a lot less money, low down. (how did they qualify?) cut their mortgage payment in half. you know things are messed up, the price of keeping all the balance sheets in mark to fantasy goodness is a complete distortion of the market.
Somebody needs to rendition Krugman to Somalia... and replace the jagoff Lew with Stockman, Holder with Bill Black and Bernanke with jim Grant. And Obunga with Rand paul.
and the federal reserve note with a US Dollar
Pretty accurate summary, I'd say. Pop goes the weasle.
you mean Weaselthal
I posted this on the deflationary bear page....
Stockman: There are Bubbles All Over, Hide in Cash “…the Fed is a serial bubble machine….”
http://finance.yahoo.com/blogs/daily-ticker/stockman-bubbles-over-hide-cash-150205492.html
The exchange below with Stockman is interesting in that the accountant doing my taxes this year said he and his wife had $1,000,000 in IRA funds in the market in 2008 and withdrew it after the 2008 crash from fear of further decline. It's now worth, he says, $200,000. Whether or not this is an exaggeration and exactly how the funds were invested in, I don't know. But these are the consequences of booms and busts we don't hear from Suzy Orman and Jim Cramer. His wife is now being lulled, taking small steps back, like Lot's wife, into the market with her IRA contributions... He hasn't yet bit on the temptation.
Quote from your link:
Stockman advises people in his op-ed to “get out of the markets and hide out in cash.” But this isn’t the first time he has issued a warning like this. Last March, for example, he was quoted in an interview talking about the dangers of the stock market and saying he had his money in cash. However, if you had followed his recommendation, you could have missed out on some solid stock market gains. Total returns for the S&P 500 were close to 14% in the last year.
In that context, stocks seem like a pretty good place to be.
“That’s what they told me in late 2007 and early 2008,” Stockman says in response. “About seven months later people had lost 45% to 70% of their net worth. If you were in the Russell 2000, which is where Bernanke wants you, you were crushed – it dropped by 60% within 15 trading days.”
As for his advice to hide in cash he says, “I would rather have capital preservation, be safe. I don’t think another two, four, 10 percent is worth losing 50, 60, 70 percent when the crash comes.”
Stockman just wants to bring the house of cards down now, because he has his stash of beans, bullion, and bullets.
I thought I saw him on one of the preppers shows last summer, lurking in the crowd.
Just who in this financial crisis is being left behind? Maybe Stockman is missing the forgotten man.
“[Paul Ryan] gives Medicare and Social Security the huge social insurance programs, some of which goes to the affluent middle class, a pass to ten years, not a cut, $19 trillion. He takes it all out of the safety net, which is only $7 trillion over ten years, a 30 percent cut, actually hitting hard the vulnerable people that have been left behind that we need to do something for.” – David Stockman
The Fed is out of bounds: companies buying their own stock and not expanding, lack of IPOs, dropping manufacturing data – every month worsening numbers.
With the needs of the lower class, with the problems of the states having to finance such programs as Obama Care, I wouldn’t think it’s much longer before the economy hits the wall. The point is, when it starts to break it doesn’t limp along, it will be fast.
And make no mistake, the foundation of consumer spending is now Wall Street investors, government salaries and pensions and welfare spending (stimulus).
The Senate Budget Committee has released a report showing households living below the poverty line and receiving welfare payments are raking in the equivalent of $168 per day in benefits which come in the form of food stamps, housing, childcare, healthcare and more. That’s $62,400 a year, tax free.
Welfare spending represents the single largest budget item in 2011—more than the nation spends on Social Security, Medicare, or national defense.
At the same time,the median household income in 2011 was $50,054, totaling $137.13 per day. The worst part? Welfare payments are equivalent to making $30 per hour for 40 hours a week while the median wage for non-welfare recipients is $25 per hour. But because they pay taxes, unlike welfare recipients, the wage is bumped down to $21 per hour. That’s $43,680 wages, after taxes, for workers compared to $62,400 annually for people on welfare.
There are now 11 states that now have more residents dependent on the government than they have people with jobs in the private sector, including Ohio, California, Illinois and New York.
How much longer can the middle and upper middle classes support the rich, its 22 million+ government employees and its millions of welfare recipients – all who earn on the average more they do?
The bankers use America’s middle class base of value to be able to print. If there were no value, printed money created out of thin air would be worthless. There is only value in FRNs because they are backed by America's labor and reserves and resources.
The reason the US is not going under at moment as is Cyprus, is because of America’s true middle class. These are the people targeted by the bankers and the Congress who are confiscating directly and through constant inflations and deflations the value of their homes and savings accounts and, thus, the bulk of most of their saved labor. Not to mention what “the dot.com $5 trillion evaporated, the Lehman meltdown $7 trillion evaporated.”
This is not socialism. This is not capitalism. This is not business. This is robbery. It’s what tyrants do. They enrich themselves and then give excuses as to why it must be done; why you must be robbed. They are lawless. Only an apologist for socialism calls a system capitalism whereby private international bankers control the regulators and own and control the money supply, the world's reserve currency.
And, by the way, for those “vulnerable people that have been left behind” for whom Stockman says we must sacrifice even more, nearly 17 million more people are projected to gain coverage through the Medicaid expansion if all states participate.
"No, the optimism was in the people of Main Street, the entrepreneurs, the businessmen, the hard workers, the bus drivers, the farmers."
Gag me with a platinum coin. These people are optimistic because they believe the neo-Keynesian Masters of the Universe have it all under control, and have "our" best interests in mind, and are the smartest guys in the room. They are credulous and complicit fools who are only all too happy to support - and demand - anything that permits even one more day of debt-and-oil-fueled easy living, spare no expense - as long as someone else picks up the tab.
You cannot have it both ways. You want to live a comfortable middle-class life with endless government programs and services and manipulated markets and infinite moral hazard and cheap foreign-made useless trinkets and unlimited creature-comforts and billions of barrels of oil wasted? Then gird your fucking loins, plebs, cause no matter how many times they promise you that it's free and risk-free, that we can afford it and we deserve it, it's all a fucking lie and there will be massive, intractable, systemic, inherent corruption, fraud, abuse, waste, and manipulation along the way.
Stockman is another metastatus-quo idiot populist panderer promising pleasure without pain and plenty without sacrifice. All we need to do is make this handful of minor tweaks and all shall once again be well in the merry old land of Oz say they. Keep whistling past the graveyard. Keep grabbing the pennies in the steamroller's path. Keep missing the whole goddamn point.
I don't think that is the point that Stockman is making. Optimism in main street must be apparent before growth can occur. It is true, that almost everybody is bsing sibsidized in one way or another. But, that does not, in any way, imply optimism. And you're off base (way off) suggesting that Stockman is promising pleasure without pain. Stockman's point (which he has argued long before this interview), is simply that Deficit spending and the FED's distortionary effects on capital (moral hazard), and price, is destroying markets and productive incentives. Hardly an idiot populist, Stockman recommends the very things you wish the status quo government and banking sectors would admit to. So, I don't see sanybody but you "missing the whole godamn point".
Bravo. The only reason I think that Totentänzerlied wrote that is because he didn't read the article. Stockman cleary states (underlined for emphasis):
It’s too late to go cold turkey. Nobody is going to do it, that is why we are drifting towards the wall.
Toten.. Agree, with caveat. We are all "these people" living off the largess raped from future generations. If we were to live with only true revenue there would be social chaos. No SNAP benifits= 47 million starving people, *note* they will not quietly lay down and die. No SS, no medicade/care = up that number to well over 100 million who will die. No defence spending, we will have no access to oil. We all are living and taking part in a massive, debt fueled, fantasy/illusion. Do you see or wish to live in the alternate?
The New Normal, New America Mindset:
1. I wants my phone! (technological accoutrement)
2. I wants my O-bamafits (Proper governmental attention to citizenry)
3. I wants my ramps! (Advanced, Personal Investment Management)
Where my ramp at!!! Ben mutha fucka? ("Glory to the Republic!")
did I miss the memo? Btfd.who wpuld come in amd buy thiamarket up in the last 5 minutes?
I wonder how long the Fed will defer auditing the quality of all those MBS's they bought from the TBTFs?
Has everyone else been lying about Quality of those MBS bonds?
(sorry - but i can't help myself. this is 1000% sarcasm)
DUDE!!!! where have you been. housing has bottomed everyday for the last 5 years. home builders rock - the best investment you could ever make - except for buying a home. the stuff that was subprime and marked down to 30 now trades at 65 - get it? profit. profit. and it's only going up from there thanks to the 'recovery'. get in now, either via mbs bonds or buying homes outright. please believe me, and i'm not a realtor or in any way associated with the housing market.
I grew up with the Natives, the original inhabitants of the Americas.
I asked them about their cultures, etc. Did they remember?
Funny, property ownership and materialism was unknown to them.
“The Indians speak of the Old Ones, the people who were here before the Indians came.” – Louis L’Amour
As to property ownership and its retention by the Indians, whose nations had great differences among them… this also from L’Amour, the only true western author of all time, IMO, who was awarded the Medal of Freedom by President Reagan, from The Warrior’s Path:
“Indian forever killed Indian long before the coming of the white man…
“We (the settlers) had good friends among them [the Indians], but when a body becomes friendly with one nation, he naturally becomes an enemy of their enemies whether he is wishful for it or not….
“There was peace with his [Tenaco's] people, the Massachusetts. Before there was any settlement in his country, there had come a terrible sickness, which men called the plague, and it swept away most of his tribe, leaving them helpless before the attacks of their deadly enemies, the Narragansetts. Knowing their lands would be taken from them bit by bit by the Narragansetts and that his people would be destroyed, the chief of Tenaco’s people went to the white men and invited them to come and settle in his land, and he gave them choice land between his people and the Narragansetts.”
Sure the FED can back off anytime since everyone already bought CDS for all their positions.....
Stockmsn is a nobrainer, join the winning team: who has amo? Stockman or the FED? Never fight a losing battle!
Bernanke the Dumber has already perpetrated TWO train wrecks. So I don't think calling for a third is much of a reach.
Sinclair thinks that a train wreck is exactly what's intended, followed by a new world currency. Interesting that the UN is adding its efforts to the domestic full court press on firearms "control."
Been saying it for years...a slow train headed off the cliff and the feeling is like being seat belted in with no chance to stop it from going over the cliff, or getting off.
A funny fate for a modern world.
But lo! Can it all be changed? Could the train be stopped so the populace can off-board to go ashore safely? Can't we all get along without those who insanely drive the train at the highest speeds possible to destroy it all for materiel profits? This remains for the world to decide. The words of your higher powers are written here daily. You all KNOW what is right, but what holds most back from doing the right thing? Fright! The sheer load of fear is greater to many, than the righteous works they have sworn to do, and the laws of the land they have sworn to protect and uphold. Law enforcement is...what law enforcement does. It is righteous, or evil.
Death and taxes? Nothing to do with this. It is what it is. The one thing about evil is it is always predictable. It is always the same. Evil. No change, and yet it is the very answer to this huge problem of mad things at the wheels of power gone wild. No human could be doing this to the human world. They drive to destroy themselves in the population reduction agendas, as fast as they are driving the train to kill off the people of the world using all sorted means. The evil is prevalent and obvious. The one earth saving grace would be for this evil to back off and get in line with the rest of the mass mind before it is too late. There is no escape from universal law. Use those stolen funds that are the property of others to make the world a better place. Stop the insane puppets from doing harm, creating war, causing false flag events, and more, this huge possibility that ol Mike has pretty well nailed.
http://whatreallyhappened.com/WRHARTICLES/virtual9-11.php
As said, evil is predictable. It never ceases in it's 24/7 drive towards more war and destruction. What evil must know is it is well known and the greater forces of light and love are closing in on it from all sides. Evil has a choice to make. Cause the triggering events to start the final drive off the cliff, or actually do the right thing to stop it and change it all. There are after all the simplest of solutions that are abundant in quantity here on ZH to fix the entire worlds economical position. This is a fact.
Choices. We are all making them every day. May these greater force of the universe always guide you ALL in your heart place. Love and light comes from there and THIS, is the eternal word.
PS: Jim Willie just started an interview live right now on RBN. Listen live here:
http://republicbroadcasting.org/index.php?cmd=home
The solution:
1) 100% banking reserves so that banks cannot lend out more money then deposites
2) Ownership rights of deposites so that banks cannot lend other people's money
3) Mandate that banks act as private intermediaries to those individuals whome want to lend there own money for profit and in which are tied directly to a loan.
THe rest will fall in place.
There fixed it for you...
The New Normal, for the Banker Mindset:
1. I wants my fed window (technological accoutrement)
2. I wants my Bail out, with bonuses of course, (Proper governmental attention to citizenry)
3. I wants my 2 billion a day,, Need to short silver. (Advanced, Personal Investment Management)
Where my ramp at!!! Ben mutha fucka? ("Glory to the Republic!")
David, Please explain how the Fed taking a bath on its bond purchases would be a bad thing. Don't just say "impossible", draw out the likely outcomes were the Fed to decide to shrink its balance sheet to say $1T. I'll make a stab. 1) Bond prices drop and interest rates rise, 2) Bucky goes up in value because - well, there's fewer of them chasing assets, 3) folks save more (see 1), 4) the U.S. Government is forced to shrink due to the cost of its debt (see 1), 5) taxes go up to pay interest on the debt, 6) the stock market goes down, perhaps even crashes as who would want risk assets when bonds pay so well (I am also assuming that the Fed would stop buying MBS, 7) TBTF banks bleed to death as the value of their assets decline precipitously while their liabilities keep on growing, 8) a full-blown depression ensues, making the cut-off of deposit insurance a real political possibility.
David, if you don't mind my saying so, you might wish to re-read The Prince, or perhaps have lunch with Rahm Emmanuel. There is a political power in crisis and from time to time the astute politico might wish to instigate a crisis to accomplish his goals.
This guy is good. I love that he gets under the skin of the Krugmans of the world and points out the fallacy that we can continue to create accelerating amounts of debt to sustain wealth. Just because we haven't hit the endpoint doesn't mean it doesn't exist.
Fuck you Krugman!!!!!!!!!!!!!!!!!!!!
The train-wreck of Capital Raising train ripping into the Syndication Express is already happening in slow evo-motion; the FED has been spraying ZIRP-spam on the growing hole for over 4 years now wondering when the jobs are going to come out of the worm-holes of the Trillions in the Cayman and Jersey Islands
Sue the Fed.
How Derivatives brought down the oldest bank in the world....
And Italy's 3rd largest....
3 parts for the doubters and challenged....
http://www.reuters.com/article/2013/02/06/us-montepaschi-derivatives-boa...
"The three derivative transactions are the "Nota Italia" trade with J.P. Morgan in 2006, the 2008 "Santorini" trade with Deutsche Bank (DBKGn.DE), and the 2009 "Alexandria" trade with Nomura (8604.T).
The bank said the impact on net assets of the Alexandria trade would be 273.5 million euros; that of Santorini 305.2 million euros; and that of Nota Italia 151.7 million euros. It said there had been accounting mistakes in the past for all those three trades."
Hiding debt....
Part 2...
http://www.bloomberg.com/news/2013-04-02/monte-paschi-says-nomura-deutsc...
"The world’s oldest bank said the two firms were aware Monte Paschi’s then managers wanted to hide losses and designed with them two derivatives aimed at achieving that goal, the Italian lender said in a 74-page report to shareholders. Monte Paschi, which last month filed a lawsuit seeking damages from the two lenders and former executives Antonio Vigni and Giuseppe Mussari, said it will seek compensation if a court finds the behavior of Deutsche Bank and Nomura employees to be criminal"
Many, many banks are Derivatively challenged and this is the largest risk they face....
The dominoes will fall...
Part 3...stock halted...bank run
http://harveyorgan.blogspot.com/2013/04/monte-dei-paschis-stock-halted.html
How far will they go to save this bank?
Another Epic Fail (second today, the first being Ron Paul's wacky Cyprus theorizing). This one manages to slander Keynes and Keynesianism by making of it a straw man. Stockman's real gripe, were he honest, is with the Milton Friedman Chicago School of Economics monetarist theories that have ruined this country. The problem is not too much Keynes, but not enough Keynes. We need a massive program of new public spending to put the long-term unemployed -- I am one such -- back to work. We need targeted tax hikes on the 1% who control 40% of this country's wealth. And we need to stop listening to failures like Stockman.
Now listen, you rich people, weep and wail because of the misery that is coming on you. 2 Your wealth has rotted, and moths have eaten your clothes. 3 Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. 4 Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. 5 You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter.[a] 6 You have condemned and murdered the innocent one, who was not opposing you.
Patience in Suffering7 Be patient, then, brothers and sisters, until the Lord’s coming. See how the farmer waits for the land to yield its valuable crop, patiently waiting for the autumn and spring rains. 8 You too, be patient and stand firm, because the Lord’s coming is near. 9 Don’t grumble against one another, brothers and sisters, or you will be judged. The Judge is standing at the door!
Wrongest evil <ANAGRAM> Get silver now.