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Spot The Odd One Out: Fire, Complexity, Debt

Tyler Durden's picture




 

The BOE's Andrew Haldane is shocked SHOCKED, that over the past 30 years banks have done nothing but baffle with bullshit; and he has something to say about it. Quite a bit to say about it in fact, in his latest missive entitled "The Dog and The Frisbee" which was presented at J-Hole today, as he looks at 'why less is more - except in finance where 'more is more'', 'ignorance is bliss', and most importantly, 'the costs of cognition'. His conclusion is the following very sensible statement...

Modern finance is complex, perhaps too complex. Regulation of modern finance is complex, almost certainly too complex. That configuration spells trouble. As you do not fight fire with fire, you do not fight complexity with complexity. Because complexity generates uncertainty, not risk, it requires a regulatory response grounded in simplicity, not complexity.

...and yet, coming from a central bank, we feel this statement may be a little disingenuous; because while fire and complexity apparently comply with logic and common sense (as far as not being able to fight it with itself), debt is in a category of its own.

BofE_Haldane

 

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Sat, 09/01/2012 - 19:23 | 2755550 Dr Benway
Dr Benway's picture

How about free markets? If there is a problem with the free markets, is the solution always more free markets?

 

So for example if the justice system has been corrupted by money, the solution is to turn it into a free market?

 

Seems like every ideology has its holy cows. So for libertarians its free markets, for keynesians its debt, for communists the state will fix everything, and so forth and so on.

Sat, 09/01/2012 - 19:35 | 2755563 Dr. Engali
Dr. Engali's picture

Well since we've never had a free market maybe we should give it a try. It would certainly be better than the abomination we have now.

Sat, 09/01/2012 - 19:38 | 2755566 Dr Benway
Dr Benway's picture

We had free markets in justice system and law enforcement for thousands and thousands of nasty brutish years.

Sat, 09/01/2012 - 20:49 | 2755652 Pure Evil
Pure Evil's picture

Do I smell green shoots? There's always green shoots after a fire and just think its all "grounded in simplicity, not complexity".

Sat, 09/01/2012 - 21:25 | 2755689 Ignatius
Ignatius's picture

Unambiguous ownership of physical gold as savings is simplicity.

Sun, 09/02/2012 - 00:18 | 2755826 strannick
strannick's picture

whoops.

 

Sun, 09/02/2012 - 09:36 | 2756116 Precious
Precious's picture

Where is the part about people picking up the dog shit?

Sun, 09/02/2012 - 11:08 | 2756210 OneTinSoldier66
OneTinSoldier66's picture

This is my belief...

 

You might be able to fool some of the free market some of the time, but you can't fool all of the free market all of the time. And you can replace 'fool' with 'force'. There has been so much fooling and so much forcing of the free market for such a long time that anyone capable of putting the facts together using common sense and logic, can see that the emperor of what is currently called, or claimed to be, the free market, is not wearing any clothes!

 

Is it Gold or is it Fiat? It's not nice to fool the Free Market!

 

70s Mother Nature *Chiffon* Chiffon Margarine Commercial

Sun, 09/02/2012 - 00:18 | 2755827 strannick
strannick's picture

while fire and complexity apparently comply with logic and common sense (as far as not being able to fight it with itself), debt is in a category of its own.

That sentance deserved it'semphasis. Your logic professors are very proud, and your rhetoric prof is probably even smirking.

Sat, 09/01/2012 - 19:54 | 2755585 vast-dom
vast-dom's picture

at this stage, let's just get rid of gov and financial institutions entirely. let's have basic banks doing actual banking for a change. and no i'm no anarchist i just can't stomach anymore of this...

Sat, 09/01/2012 - 22:33 | 2755755 vast-dom
vast-dom's picture

more fucking political bullshit since not a single fucktard is capable of doing the right thing, even when they seem to be:

 

http://www.nytimes.com/2012/09/02/business/inquiry-on-tax-strategy-adds-...

 

 

Sat, 09/01/2012 - 23:42 | 2755803 q99x2
q99x2's picture

The extinction of bankers and banking is my solution. Close the monetary system and make it an open source project where the community of human beings are responsible for its code. Impossible for a banker or CIA to hack -- no but the hack will be found and quickly patched unlike todays system of corruption and devastation with possible world annihilation. Either we go to it now or die from bankster occupation.

Just a thought. I don't really care what happens. Its all good. I'll go along to get along. Join the DHS if needed. Whatever dude.

Sun, 09/02/2012 - 07:55 | 2756031 strannick
strannick's picture

Cant just exterminate the brutes, bcause we are all proto bankers, greed and pride are too ingrained in our source. And no, its not all good

Sun, 09/02/2012 - 06:42 | 2755975 mac768
mac768's picture

Today there is no such thing as a free market in existence in the financial world.

Just think about the ongoing discussion of "too big to fail" which is the best example that the problems will get worse until the whole complexity is reduced in a big bang to zero.

As long as the illusion is kept up that central planning can keep a financial system that is by definition unstable in a stable state, we will go from one crisis to the next and the longer it takes, the worse it will get.

Sun, 09/02/2012 - 09:39 | 2756120 pashley1411
pashley1411's picture

The reverse of "free markets" is "rule by our self-appointed betters".  How's that working?

 And tighten that dog collar a little more.

Sun, 09/02/2012 - 16:56 | 2756635 Dr Benway
Dr Benway's picture

You are a complete and utter moron if you think everyone being responsible for their own free market protection would lead to better outcomes than having police.

 

You would have a hundred dog collars in your hellish dystopia, where anyone with money and guns can set up a kangaroo court and execute you..

 

"Free market courts and law enforcement" is the EXACT point where libertarianism crosses into complete lunacy. 

 

You advocate a system that might work in a small rural town where everyone knows everyone. Galt Gulch Fantasy. Well what works in a small town does not necessarily work in New York City.

Sat, 09/01/2012 - 19:27 | 2755557 HD
HD's picture

Reinstate Glass–Steagall and 90% of the current banker bullshit disappears...

Therefore, it will never happen.

Sat, 09/01/2012 - 22:21 | 2755744 Peter Pan
Peter Pan's picture

You can have risk, complexity and debt in whatever quantites and configurations you want but you must allow failure of the bad parts and you must punish those that have been dishonest. This is the essence of the free market which has been absent from the whole process.

Sun, 09/02/2012 - 00:57 | 2755856 intric8
intric8's picture

Volcker wanted to keep it simple and enforcable in his measure, but it's actually the partisans that make such an endeavor hopeless and impossible. The volcker rule has become so watered down due to these congressional clowns that even once fully implemented, it will be difficult to punish and hold anyone accountable, not when commercial banks can hide all their speculative activity under "hedging" provisions.

Sun, 09/02/2012 - 14:40 | 2756445 Zero Govt
Zero Govt's picture

the biggest lie of Law/Regulation is that it can prevent anything, and that includes the non-stop bollocks talked about Glass–Steagall

legislation and its writers cannot forsee change (the future). So all legislation, like FrankenDodd, is written post-problem, post-crash. It is a reaction to a past problem that'll probably never recur, Law is not pro-active to a future problem because it cannot crystal ball and therefore all legislation is worthless, like yesterdays newspapers

the dribblers that keep humming "Glass–Steagall, Glass–Steagall" fail to recognise the problem with the banks was not their financial sector but banker gambling-junkies, debt and LEVERAGE

Glass–Steagall does not address any of those, nor 110% mortgages, nor sub-prime loans, it simply determines that a deposit bank should not gamble like a hedge fund. Well we have tons of laws on theft, fraud, mis-selling etc, has any of them been applied through this most corrupt era in financial history? Nope. So Glass–Steagall wouldn't have worked either because no laws have worked, they never have and never will, Glass–Steagall included

The Law is an expensive joke and those that perpetrate the lie a Law would fix something are idiots at best and frauds (lawmakers?) at worst. Period.

The free market WOULD have worked not in prevention (you cannot prevent a fraud or prevent a financial crime or people taking risk) but it would have nipped the gambling in the bud and brought the big rotten dinosaur banks across the West to a deserved end. They'd be stone cold extinct now, shareholders and investors may have taken revenge into their own hands and stuck pitchforks up the arses of gambling junkie bankers or asset stripped them and we'd already have green shoots of recovery by now. The healing completed, recovery and progress

Please stop humming a mantra about a Law which won't work just as hundreds of Laws rot today in the sunlight failing miserably. Free markets are the only solution that works

Sat, 09/01/2012 - 19:29 | 2755559 sablya
sablya's picture

This reads like a cry for help from a man who realizes that the system is too complicated not to fail.  At least he recognizes an aspect of the problem whereas Bernanke just brushed off the systemic risk of the global derivatives market as if it didn't exist.  In fact, he may be getting ready to feed the dragon yet again, inflating the bubble to such epic proportions that, when it pops, the whole economic system will go with it.  Of course, Bernanke hasn't even acknowledged the existence of the mother of all bubbles.

Sat, 09/01/2012 - 19:39 | 2755565 Dr. Engali
Dr. Engali's picture

The Bernank loves government debt. It's secured by generations of debt slave's labor.

Sun, 09/02/2012 - 11:13 | 2756220 OneTinSoldier66
OneTinSoldier66's picture

It's exactly what I would expect of a Loan Shark, and that's all Bernanke is.

Sat, 09/01/2012 - 19:44 | 2755574 bigdumbnugly
bigdumbnugly's picture

careful with that J-hole usage, td.

surprised you haven't gotten cease and desist notices from Jennifer Lopez' lawyers yet.  i think she has that patented.

Sat, 09/01/2012 - 19:51 | 2755579 Dr Benway
Dr Benway's picture

"Oh Ben you are so perfect, so spectacular in every way

You bring light into my life Ben

You almost make me forget about tacooos"

 

http://www.youtube.com/watch?v=fvjrzwwIWZQ

 

I think ZH will be safe from JLos lawyers if South Park can get away with that...

 

 

Sun, 09/02/2012 - 01:02 | 2755859 intric8
intric8's picture

I think she's got "J-hoe" on the books so J-hole is still cool lol

Sat, 09/01/2012 - 19:51 | 2755580 groundedkiwi
groundedkiwi's picture

To quote another international criminal. A lot of known, unknowns

Sat, 09/01/2012 - 19:59 | 2755586 Black Markets
Black Markets's picture

The show will roll on.

I don't really understand the nihilism I read on here, well I do, it's just another bunch of self assured dogmatic psychopaths. Desperate for the day of reckoning so that they can rise from their flaccid achievements to date and press down on the people in exactly the same way as the current status quo.

Hoarding gold in anticipation of some grand reset does not deliver us from evil. It is nothing but passing the baton.

The problems of the world are borne in the simultaneously divergent and conflicting belief systems that each subculture and each parent saturates the minds of their children.

Each generation plays the hand it is dealt. If you think the next generation will exist in a mad max world of terminal decline of war and hunger, of debt servitude then you underestimate them.

They will paste over the cracks and kick the can and digest whatever write downs they can and fudge the rest, because bending the rules and accepting the self delusion of fractional reserve banking is in THEIR interests.

The people don't want to starve, they don't want to queue outside banks for their money they don't want to take responsibility for fending off the rest of the world from their front door.

People want to delegate the responsibilities of security and sustaining the supply chain and they submit to authority in exchange for this peace. They will accept immoral and unjust acts that give them continued security and protect their supply chain, this includes bailing out criminals and collective austerity to socialise the crippling losses of a few capitalists.

The world will roll on and crisis will come and go (including this one), just as all the other "it's never been this bad" events, that are ten a penny throughout modern civilisation.

Our governments will continue to muddle through staffed by people of mediocre competence with access to vast resources.

Tick follows tock.

Sat, 09/01/2012 - 20:13 | 2755609 Poor Grogman
Poor Grogman's picture

Hmmm.

What could possibly go wrong....?

Sat, 09/01/2012 - 20:23 | 2755620 TJ00
TJ00's picture

If that were true then LTCM and Enron would still be in business, there are only two possible end games for any system cybernetic transition to a higher order or break down, these are denoted in our current culture as The Signularity and Collapse, sadly more resources have been put into pursuing the Collapse path, so that is where we are headed, to quote Albert Einstein

"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius -- and a lot of courage -- to move in the opposite direction."

Sat, 09/01/2012 - 22:03 | 2755726 Radical Marijuana
Radical Marijuana's picture

Indeed, the foreseeable future will be BOTH more destruction, AND creation, than any previous time, as the exponential growth curves continue ... for a little longer ???

The destructive collapse scenarios are relatively easy to imagine, and have far, far more probability, in the sense that they can happen way, way more different ways.

The singularity creation scenarios are almost impossible to imagine, although I also believe that some are possible and will be happening.

The future will be a truly hyper-complicated mixture of both happening at once ... so that all the bad things collapsing maybe clear the way for some new good things to emerge. Nature is full to the brim of parables about that!

Sat, 09/01/2012 - 20:47 | 2755651 AurorusBorealus
AurorusBorealus's picture

Would that you were right. Unfortunately, it is not going to go down like this.  The age of Breton Woods and then free global markets replaced the age of imperialism.  The current global system is based upon economic warfare instead of the real thing... we don't conquer resources, like our barbaric ancestors... we buy them.  However, all this global market stuff is based upon a stable international monetary and exchange system, with values that reflect reality and confidence in the digital / fiat currencies.  As that confidence breaks down and as it becomes clear that currency is not a proper measure of value, having created all sorts of misallocation of resources, the rules of the game change to "might makes right."  And that, my friend, is why we are not going to "muddle through."

Sat, 09/01/2012 - 22:09 | 2755732 Radical Marijuana
Radical Marijuana's picture

FOR SURE!

"Muddling through" the situation where quadrillions of units of fiat money, being gambled with, based on "faith" due to historical habits, but actually nothing but the threat of weapons of mass destruction, will be muddling through astronomically HUGE MADNESS!

I do believe we will ... since it is impossible to get people in general to agree on any coherent alternatives, and therefore, insane conflicts, producing what nobody wanted, is the most probable actual future.

This business of figuring out atomic energy, and the DNA, and quantum mechanics, and ALL of the technologies that those made possible has NOTHING in human history to compare it to!  The only things that are comparable are such profound events such as the evolution of photosynthesis! (That does provide lots of interesting metaphors for our times, if one studies the details about that.)

Sun, 09/02/2012 - 11:02 | 2756209 centerline
centerline's picture

Poster child for normalcy bias?

Sat, 09/01/2012 - 20:01 | 2755592 km4
km4's picture

Guest Post: Bernanke Pledges To Screw Your Grandmother For At Least Two More Years

http://www.zerohedge.com/news/guest-post-bernanke-pledges-screw-your-gra...(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+

Guest Post: The Federal Reserve: Our Policy Is To Steal From You

http://www.zerohedge.com/article/guest-post-federal-reserve-our-policy-s...

Sat, 09/01/2012 - 20:10 | 2755605 TJ00
TJ00's picture

Panarchy bitchez.

Sat, 09/01/2012 - 20:23 | 2755611 essence
essence's picture

Don't expect anyone from a central bank to speak the truth ad hoc,  for if they did, they are committing career suicide. Whether it's Ben B or Melvyn K, or one of their minions, they're still puppets in the same way the pres of US and PM of UK are. Anything they say is scripted. Nothing happens in politics by accident ...and these days, central banks fall under politics (or perhaps more correctly,  politics fall under central banks).

Digital money. The lords behind the big international banks seek digital money for its control purposes.
Look for it to appear as the 'solution' after the banking & economic meltdown
The electronic money doesn't even have to be debt based. It might even be rooted under a gold standard (gold bugs ...whatya going to do when a 90% + tax is slapped on the sale of PMs and ALL transactions are tracked and there's no physical cash around to transact in?
Oh barter ...right (I'll give you a silver coin if you reline my brakes) Right. That'll go far.

100% Digital money is the rubicon. It's the domain of banks, governments and intelligence agencies.
They could alter it selectively  or individually deny access.
Get slightly out of line and your access to the system gets vaporized.
We don't want to go there.

 

Sat, 09/01/2012 - 20:55 | 2755657 TrustWho
TrustWho's picture

If you want to educate yourself about the system constraints the Fed faces read the attached Minsky article. Per this document, monetary and fiscal monetary policy has kept asset values from falling like they would since 1966, but this practice has a cost. The stability of the manipulation causes instability to build. As the Tylers like to say, it is all about the FLOW.

http://digitalcommons.bard.edu/cgi/viewcontent.cgi?article=1154&context=hm_archive

Sat, 09/01/2012 - 21:21 | 2755685 essence
essence's picture

I think by now most of us realize the present system is going to blowup. Too much debt.
My comment was in regards to the aftermath. I believe we are seeing the harbingers of positioning by TPTB.

After the debt based system is proven unsustainable I would think the central planners would wish to shift the world over to a non-debt based system. That's much more in line with their agenda21 thoughts. And of course, a new system with an order of magnitude more granular control to the central planners.

Haven't you noticed the MSM chatter concerning gold standard about the web recently.
You didn't really think that was organic ...did you?

Sun, 09/02/2012 - 16:19 | 2756610 TrustWho
TrustWho's picture

When expectations of the 99.9% are completely dashed, some nut case will take advantage of the situation and promise revenge. China, likely has the most educated group that have been promised western level of consumption, will be the most uncontrollable. I suspect they will be a driver. America, with its history and guns, will not tolerate Marshall Law and military/law enforcement reaction will be interesting. My bet is America will go very right with revenge against groups that the power group alleges caused God to punish her children. Europe will not be a player.

Israel and Middle east oil or Europe are potential near term triggers.

MSM is composed of arrogant want-to-be intellectuals that will soon discover that they are not in control. The 19th century French revolution across western and chinese civilizations is my best bet. The rulers thought they were in control until they saw the blade of the giullotine fall.

Sat, 09/01/2012 - 20:53 | 2755656 buzzsaw99
buzzsaw99's picture

it isn't complicated at all as that maggot well knows.

Sun, 09/02/2012 - 10:13 | 2756160 11b40
11b40's picture

Bingo!  His speech was too complicated and convoluted.  Could be done on one page.

Sat, 09/01/2012 - 20:59 | 2755660 JR
JR's picture

“By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.’ The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.” – Paul Volcker, Chairman (1979-87), US Federal Reserve Bank

“Investment strategies tell a simple story”? Yes they do:

Wall Street banker? Lost your shirt?  No problem. You’re eligible for the Fed’s free $29 Trillion bail-out package.  

Joe 6Pak? Lost your shirt in 08? Lost your home in 2010?  Your problem. “Your decision; your investment your funeral!”   

A saver, retiree, or pre-retiree?  You’ve got problems. Your choice: “How to dodge the Fed.”

BOSTON (MarketWatch) — Ben Bernanke’s speech Friday in Jackson Hole, Wyo. didn’t throw a bone to retirees and pre-retirees who face the bleak choice of keeping their money in low-yielding bonds or riskier stocks…

The Fed, Bernanke said at the Jackson Hole Economic Symposium, stands ready to “provide additional policy accommodation as needed to promote a stronger economic recovery.” …

But for retirement-focused savers, the takeaway is that, long after Bernanke returns to Washington, they will continue to face a painful dilemma:

Accept safe investments with yields they can’t bear, or take more risk in the hope of greater returns, which they also find unpalatable.

With the safe choice, savers risk losing purchasing power by keeping money in assets that offer a low nominal return or, in some cases, a negative real return. On the more aggressive side, investors risk losing principal — hard-earned cash. Each choice could harm your standard of living.

“The Fed’s policies, which are designed to help the economy, are essentially a tax on savers since they are forced to get negative real returns on their savings…”

http://www.marketwatch.com/story/how-to-dodge-the-fed-and-get-more-yield-2012-08-31

And there you have it: why less (for you) is more... for finance where 'more is more.’

 

Sat, 09/01/2012 - 22:37 | 2755760 Burr's 2nd Shot
Burr's 2nd Shot's picture

My best MDB impression:

Savers need to get comfortable with the concept of meta-yield. Yes, their savings earn next to nothing in actual monetary yield, but lending money to the banks to lend to the government produces immeasurable quantities of meta-yield. Government investments in alternative energy, media, and marketing are making everyone's standard of living so much nicer. Since inflation is tame by historical standards (excluding transitory increases in food and energy), savers no longer need the high interest rates of the past to enjoy their standard of living.

As the Bush-inspired market crash of 2008 proved, people are just not very good at investing their own money. They should trust the top minds in Chicago and D.C. to allocate their capital. If they are greedy and want to try to earn more than their fair share, they need to take the appropriate risk in the highly unregulated stock markets.

Sun, 09/02/2012 - 01:02 | 2755858 JR
JR's picture

In the beginning, the Fed skimmed money and resources here and there in a kind of protection racket for the owners of the Federal Reserve in order to provide a constant flow of wealth to its initiators.

 No longer does it operate as a kind of drain on the nation’s wealth, turning now into a monster enveloping every aspect of Americans’ lives. It’s now become so large that there’s not enough value to feed it. It is enveloping municipalities, state governments, housing, savers and pensioners, small businesses, social security and investments; in short, the cost of living. It is bankrupting the nation. In other words, if you have value, if you are an American and you possess value, the Fed is coming for you. If it hasn’t appeared today, it will be on your doorstep tomorrow.

And where is Congress in this massive heist engineered by this alien force of international bankers who have America by the throat?  Why, it is in the pocket of the Fed, this “creature from Jekyll Island” that roams this continent and compels our people to serve it and obey it. What kind of politicians do a people have that would feed their most vulnerable, their young and their elderly, to this creature?

The Star Tribune reported the untold story in an August 27 article entitled: Middle class: Low interest rates throw wrench into retirements. Here are excerpts :

The Federal Reserve's near zero interest-rate policy, aimed at stimulating the economy, has created bargains for borrowers refinancing a mortgage or buying a car. But the low rates are penalizing "savers" such as seniors and others on fixed incomes, forcing millions of middle-class Americans to reconsider how they will live when they retire, if they can retire at all.

"We're not really seeing the positive benefit of low rates, but we're seeing a huge negative hit," said Tim Gillaspy, who recently retired as Minnesota's demographer. "And that needs to be discussed as a national policy issue."

The low-interest rates are the latest financial challenge for a wave of baby boomers on the cusp of retirement. Already, an estimated 44 percent of boomers between the ages of 48 and 64 will run short of money in retirement for their basic needs and uninsured health care costs, according to Employee Benefit Research Institute (EBRI), a nonpartisan research group in Washington.

As traditional pensions fade away, people approaching retirement typically shift their money into safer fixed-income investments, such as bonds, to generate income to carry them through their golden years. That leaves them more vulnerable when interest rates are low.

Combined with a volatile stock market, the rock bottom rates make you feel like "there's nowhere to go" with your savings, said Nancy Nonini, whose Apple Valley company Retirement Education PLUS counsels companies on aging issues…

Altogether, personal interest income in the U.S. totaled $986 billion last year -- down about 25 percent from 2007, according to the U.S. Bureau of Economic Analysis. That's $332 billion forgone….

Fed governor Sarah Bloom Raskin downplayed the impact of the interest rate policy back in March, noting that interest-bearing assets are only a "modest" portion of household assets, estimating it was less than 7 percent.

A Star Tribune analysis of federal data, however, shows that 17 percent of household assets were in interest-bearing classes last year, as opposed to say, stocks or pensions. That's up from 15 percent before the crash, meaning households are even more exposed to interest rates fluctuations.

As Jack Ablin, chief investment officer at Harris Private Bank in Chicago, sees it, the Fed's policy leaves savers and retirees as "collateral damage."

The situation has forced middle class Americans to make some difficult choices: take greater risks with their money, work longer, temper retirement expectations and safe-keep hard-earned savings money in accounts that won't earn much.

Many people are choosing ultra-safe vehicles such as bank accounts and certificates of deposit that pay next to nothing. People wary of the stock market and economic uncertainties have more than $8 trillion in such accounts, according to bank research firm Market Rates Insight.

The desire for safety has investors clamoring for U.S. Treasuries and investment grade corporate bonds -- staples in retirement portfolios -- driving those interest rates lower as well. Roger Aliaga-Diaz, a senior economist at mutual fund giant Vanguard Group, said he expects investment grade bond portfolios to average returns of 2-3 percent for the next 10 years.

"That's scary," Aliaga-Diaz said. "There is no easy way out of this.

The impact of low interest rates has affected the cost of insurance as well. Unable to make the investment returns they once enjoyed, many life insurers are hiking premiums or scrapping some lines of business, such as variable rate annuities. Average premiums for long-term care insurance, for instance, have jumped 30-50 percent since 2007, according to industry estimates.

Clare Gallagher, 73, said she "just about fell over" when she got a letter recently from her insurer, John Hancock. It said her yearly premium would rise from $900 to $2,600 -- unless she reduced her benefits, which she did…

Bill Wixon, head of Wixon Financial Advisors Inc. in Maple Grove, said he sees many people "paying more and getting less" for popular retirement products. Wixon and other financial planners describe a mix of frustration, fear, resignation and even some hopelessness among older clients.

"People are scared," Wixon said. "People can't live on interest anymore.

David Tysk, a financial adviser with Ameriprise in Edina, said some are altering their spending to adjust to lower returns -- delaying buying a new car, deferring vacations, opting to rent a home instead of buy.

"The story here is that you are seeing a deterioration of purchasing power and net worth that's not talked about," Tysk said….

More retirees with less income means the economy could feel the drag from less consumer spending. The critical question is how long will interest rates stay low, Jack VanDerhei, director of research at EBRI's Center for Research on Retirement Income. The Fed has committed to keeping rates near zero through 2014. If rates stay low beyond that, retirees spending less could be "the tip of the iceberg," he said.

"You're going to have retiree households that are going to literally run out of everything but Social Security and perhaps whatever housing equity they have," VanDerhei said. "Many of today's boomers are going to end up depleting their assets and at their point you get some really interesting societal questions like, do you expect to move in with your kids?"

http://www.startribune.com/printarticle/?id=167446995

Meanwhile, this report in June:

NEW YORK (CNNMoney) -- The average American family's net worth dropped almost 40% between 2007 and 2010, according to a triennial study released Monday by the Federal Reserve.

The stunning drop in median net worth -- from $126,400 in 2007 to $77,300 in 2010 -- indicates that the recession wiped away 18 years of savings and investment by families.

Middle-class families who ranked in the 40th to 60th percentile of income earners reported that their median net worth fell from $92,300 to $65,900 over the same time period.

http://money.cnn.com/2012/06/11/news/economy/fed-family-net-worth/index.htm

And, still, Congress does nothing to rein in Bernanke and his Band of Bankers.

 

Sat, 09/01/2012 - 21:29 | 2755700 ChacoFunFact
ChacoFunFact's picture

complexity is a device

Sat, 09/01/2012 - 21:49 | 2755714 Cabreado
Cabreado's picture

Free markets are over, and forever will be,

until expectations and truth find a balance.

Sun, 09/02/2012 - 04:03 | 2755944 gregga777
gregga777's picture

You are WAY, WAY too low.  Per Bill Gross of PIMCO, in a letter written to investors in 2011, the discounted net present value for the following programs are:

National Debt:         -$9 Trillion

Social Security:        -$7 Trillion (off balance sheet iten)

Medicare:               -$22.8 Trillion (off balance sheet item)

Medicade:              -$35.3 Trillion (off balance sheet item)

Agency & Student Loans:     -$2.4 Trillion (off balance sheet item)

TOTAL:                 -$76.5 Trillion.

Asssuming that U.S. 2012 GDP is $15.4658 Trillion, then the 2012 U.S. Debt-to-GDP ratio is currently almost 500%.  

The U.S. Government is the only entity that I know of that does not have to follow Federal Laws requiring the use of Generally Accepted Accounting Principles (GAAP).

Sat, 09/01/2012 - 23:50 | 2755806 MedicalQuack
MedicalQuack's picture

The article is right about complexities, take it from someone who used to write code and how things have changed with working with data platforms now instead of having full control of a desk top operation like it was when I was writing.  I have worked with platforms as a developer, not financial, but it doesn't make any difference as you depend on the code someone else has written and when you get several platforms built on top of each other...well you can figure that part out.  This is why myself and many others in tech get goose bumps at times as we know one day when you never expect it the algorithms will do something strange.  I just had my own experience with my FIOS telephone line and ironic it hits me since I watch this stuff, but it's not like the old analog telephone line as there's algorithms and programming in it too. Lucky I knew as well to reset my phone system to complete the process after the reboot but another consumer may not have known to do this as well.  

You know something is interacting in a strange way when every outgoing call you attempted to make tells you the "number you dialed is no longer in service"!  This is real and just happened to me this week and I must say too if you need Verizon support, use Twitter to get the fastest action, beats a web page or sitting on a phone.  Yes, this was like out of the Twilight Zone and they remotely rebooted my system and a few weeks before this occurance, the line went dead for no apparent reason and it took their engineers 12 hours to get it back up.  This was attack this week of the Killer Algorithms and you just don't know when some algo out there is going to do something strange and to me this is important as it shows how things happen outside the financial algos too.  Someone wrote not too long ago about Amazon with their live price updating that it could cause something like a flash crash their too with keeping up with real times as that more data, queries and algorithms in the systems:)

Complex it is and data platforms are not perfected yet and in the worlds of Sean Gourley, algorithms are not stable.  Here's my FIOS attack if you want to read the details and yes it was like something out of the Twilight Zone but it happened.  The data worlds are not perfect but love when they do work like they are designed to.  I sit and wonder myself on where in the world are they going to find regulators that can regulate all the complexities out there and as soon as they get a handle on one issue, another pops up as new algos get written. 

http://ducknetweb.blogspot.com/2012/08/fios-reboot-for-medical-quack-tod...

 

Sun, 09/02/2012 - 10:44 | 2756190 JR
JR's picture

Great website, Barbara Duck. Sign of the times, your story on El Camino Hospital Will Lay Off 140 Employees - 5 to 6% of The Hospital Workers, “the most wired hospital in the US” -- as you say in your opinion which appears to matter quite a lot in the field.

Interesting that…

“This is a not for profit facility that has its own genomics center as well. 

“El Camino Hospital in Mountain View, Calif., has announced plans to lay off 140 employees because of an ongoing decline in patient volume and revenue.

“The hospital will issue 195 worker adjustment and retraining notifications to potentially impacted employees warning them they could be laid off in 60 day.”

All this and more while the Pied Piper of the Fed plays on and the people follow him to their doom..

All the little boys and girls,

With rosy cheeks and flaxen curls,

And sparkling eyes and teeth like pearls,

Tripping and skipping,

Ran merrily after

The wonderful music

With shouting and laughter.

Robert Browning,, The Pied Piper of Hamelin

Sun, 09/02/2012 - 01:10 | 2755862 newengland
newengland's picture

Take toys away from pets when they misbehave. End the money. End the problem.

Reverse the discipline when the pet behaves well.

Sun, 09/02/2012 - 03:43 | 2755939 gregga777
gregga777's picture

First, I cannot believe I read so many words that said so little.

Second, I cannot believe that he did not invoke the classic methodology "KISS" -- "Keep It Simple Stupid"!  

Third, he gave little if any consideration to paradigm shifts in public perceptions.  All of their fancy equations contain no variables for how people think.  They think people's thinking never change.  A paradigm shift in the early 1930's was to never give your money to Wall Street.

People raised during the Great Depression maintained a life-long rejection to investing in the shark-infested waters of Wall Street.  My 88-year old mother will not even discuss the subject.  

Survivors of the Great Recession will likewise shun Wall Street for the same reason.  Wall Street is filled with government-protected sharks (crooks, con men, scammers and banksters) with huge advantages like zero trading costs and knowing exactly where your limit stops are set.

 

Sun, 09/02/2012 - 14:12 | 2756424 css1971
css1971's picture

I've got a simple solution for you.

 

Let them fail.

 

Don't protect them or their investors.

Sun, 09/02/2012 - 18:23 | 2756735 RiskAverseAlertBlog
RiskAverseAlertBlog's picture

No doubt, Haldane's push for Glass-Steagall is causing a great deal of weeping and gnashing of teeth, while infantile critiques of his call for simplicity in the foundational paradigm on which the banking system operates will in no way postpone the fateful hour when a mountain of insolvent garbage is washed away in bankruptcy reorganization along Glass-Steagall lines.

Sun, 09/02/2012 - 21:33 | 2756903 ZH11
ZH11's picture

Interesting as the situatuon gets worse and worse wordwide a never ending list of disingenious bastards appear telling everyone they have the answers.

I bet his folksy tales of the power of simplicity went down well with an audience of people responsible for the problem as they smiled then ignored him past the first page of this shite and then started to wonder what their 6 course dinner would be like.

The answer is simple, he got that much right.

Dispose with all of them, expropriate 'their' wealth and lets start again.

 

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