Again I want to know does Brian type these up as hes listening? 
's for Brian!
Anonymous wrote on Tue, 4/21/2009 - 6:08 pm CDT
denominator effect??? :
Again I want to know does Brian type these up as hes listening? 's for Brian!
Are we writing off the green shoots yet?
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what edzachary are 'green shoots' anyway?
TIA
.......
off to play in traffic!
COF's situation reminds me of the line from Kirk to Spock: "Why aren't you dead?"
gosh Brian is a busy guy!
Lets make Brian an offer!
Complete BS. If Cap1 is "expecting" 10% charge-offs they should not be in the business of lending for unsecured credit.
You know, as someone who knows absolutely nothing about banking and finance, I'd just like to say that the comments here are a wonderful and highly illuminating read.
CR - I've mentioned this before but I'll try again - this would make great finance chart porn if rates were plotted over time.
denominator effect??? :
Anonymous wrote on Tue, 04/21/2009 - 4:08pm.
denominator effect???
No issues with rounding.
What does the charge-off rate have to reach before Capital One just ceases to exist? I'm surprised they can even take 10% (or imply they can).
Ahem. Ex-squeeze me. They expect charge offs to EXCEED 10%. 15% exceeds 10%. 20% exceeds 10%. They're not exactly calling a ceiling here.
"f Cap1 is "expecting" 10% charge-offs they should not be in the business of lending"
---------
Why?
They're making 30% on the remaining 90%.
For now.
"last January the unemployment rate was 7.2% and we assumed it would increase to about 8.7% by the ends of 2009"
bad ASSumptions....Me tinks it will be over 10%
Neophyte wrote on Tue, 04/21/2009 - 4:07pm.
"You know, as someone..."
Neophyte, hmmm?
Drop and give me twenty! Then, wash my car and pick us up some beer. NOW! 
Cap One is one of the few companies that continues to bombard my mailbox. Some of their solicitations are tempting too - 0% interest for 15 months.
Credit cards have an built in outrageous interest rate because they expect a lot of losses ( at least that is the explanation for credit card rates that banks give Congress.) I expect that Capital One will be in the market selling equity after May 4. They are heavily exposed to credit card loans. I am sure their back office people are cutting credit limits on credit cards as fast as they can.
The denominator effect is the fact that loan balances will not grow so quickly (because they are cutting people off) but existing balances will continue to default.
"They're making 30% on the remaining 90%."
And even more on a select subset of the 90%, if you count the abusive fees as well as the interest charges...
Usury can be profitable even at high default rates.
(Presumably this is also why the "high yield" (junk) bond market hasn't imploded any further.)
Broward Horne wrote on Tue, 04/21/2009 - 4:10pm.
"f Cap1 is "expecting" 10% charge-offs they should not be in the business of lending"
---------
Why? They're making 30% on the remaining 90%. For now.
But are they? I suspect that all their cash cows are moving to greener pastures where they get milked half as much. That leaves only the Casey Serin cows who just stop giving milk long before they stop eating your grass.
"That leaves only the Casey Serin cows who just stop giving milk"
----------
Errr, whatever you say, Dawg.
I myself wouldn't know, I never milked Casey.
I suppose I'll walk back up to Juanita bay, I've got a dinner thing in a couple of hours.
"For context recall that when we articulated our expectations last January the unemployment rate was 7.2% and we assumed it would increase to about 8.7% by the ends of 2009."
This is exactly the problem with PPIP. The banks have consistently underestimated the losses they will face on MBS, Credit Card ABS, Auto Loans, etc. the supposed experts always overestimate the quality of the junk on their books.
However, instead of recognizing the huge bid/ask spread in "legacy assets" is due to differences in performance outlook between sellers (who continue to wear rose-colored glasses, and already own the assets so have an incentive to be optimistic) and buyers (who have to put new money to work so are more realistic), Timmay insists the problem is a lack of leverage.
Casey Serin cows who just stop giving milk long before they stop eating your grass.
Dawg
What ever happened to him...that was a blast from the past
I'm pleased to note that my mom is part of that 10%. She got into big trouble with credit cards and handling daily living expenses as my dad was dying. All of the credit card companies took 50 cents on the dollar to get paid. She's 85 years old, no income to speak of, and sold her home to pay the cards.
I was surprised to see a Bloomberg piece suggesting that regulators were starting to focus on underwriting standards and loan quality today w/r/t the stress tests. I would have assumed they would factor that in from the beginning. I guess I am going to need some guidance to explain to me what they were looking at in these stress tests after all, because I curiously started out giving them way too much credit.
10% is the magic threshhold: for GDP, unemployment, charge-offs, etc.
10% means 'Depression'!
Coming soon.
REally wrote on Tue, 04/21/2009 - 4:22pm.
Casey Serin cows who just stop giving milk long before they stop eating your grass.
Dawg
What ever happened to him...that was a blast from the past
I am glad to report; no one cares. I am equally saddened to report that includes the several hundred law enforcement agencies who were alerted to his activities. Make no mistake, their disinterest has been pivotal in this ongoing disaster.
Blueskies....that is sad! really!!
Your Mom could have had the cards in your Dad's name. The debts dont follow you to heaven.
I had a good friend that maxed out five cards prior to his demise. He wanted to share by buying nice gifts for his friends. Rather have the friend of course.
Wouldn't we all just s**t a brick if the government decided to back credit card companies, you know, "to get the economy moving". So that all the greasy food joints in the local shopping mall are always full on weekends.
How would this work?
1. Lower capital costs dramatically. Done. ZIRP is here.
2. Provide direct capital injections. Hmm. Already done. COF has received government money.
3. Have the Fed lend against credit card ABS. Hmm. Already done too. Via the TALF.
Wow, prudent savers and taxpayers really are paying for the spending of everyone else. Even for the fried mozzarella and onion rings combo.
Capital One - What's In Your Wallet
You have to love this double entendre slogan. They really are in your wallet. They own you. Your paycheck belongs to them.
MB - Not according to their charge-off rates.
Gotta love that line "greater than 10% charge-off rate", I'd say they're expecting way WAY higher ( 20% anyone ?), coupled with a decline in their cash cow of near-loan-shark interest rate customers who're struggling to pay balances down.
They'll have to go back to a business model of making the 2.5% transaction fees and milking a smaller number of permanent-balance customers.
- splat
Borrow from the Fed at 0%, lend at 30%, and be backstopped by the Fed? Even I could make money doing that. Sign up for your pre-approved Brewcrew card today! Special lower interest rates for customers of Lefty's Liquors.
http://www.marketwatch.com/news/story/no-rush-refinance-mortgage-rates/story.aspx?guid={AF2BCC20-1180-4C85-8A0A-C66D900AE006}&siteid=yahoomy
I dig some of the comments:
"The government can't keep printing money and buying mortgage backed securities forever," said Dan Cutaia, president and COO of Fairway Independent Mortgage Corp., at the MBA's National Secondary Market Conference and Expo."
Nope, I am guessing it stops at $2T of MBS on the Fed's books, sometime later this year. What happens after that? One hates to ponder that. Without a resolution to Fannie/Freddie, I guess mortgage rates spike to 150bps or more from wherever they are before the Fed steps out of the market.
"...In fact, it's possible that the current targeted yields by the Federal Reserve are below what other investors want, and there is a certain "crowding out effect... that may be delaying some of the return of [other] investors in the market,"
You think? I know. There are no MBS investors in the market, just the Fed and MSR hedgers, and a few dedicated funds who have to be because of their mandates (ANLY, etc).
Let me "articulate" this: Perhaps if they didn't "upgrade" customers' interest rates to 35% they wouldn't see so high of a charge-off rate. Dumbasses!
But I thought that usury was always profitable..
MB - Not according to their charge-off rates.
They still own you. Either you pay ever more exhorbitant rates to subsidize their losses, or the Gubmint subsidizes it with a bailout from you the taxpayer. They win, either way. You (and me) lose, even if we don't have a credit card.
Without a resolution to Fannie/Freddie, I guess mortgage rates spike to 150bps or more from wherever they are before the Fed steps out of the market.
Who's he kidding?? If the Fed stops buying, the GSEs (and all other institutions) stop lending -- period. Mortgage rates won't jump 150bps, they'll jump 1500bps.
-----
"Hope for the best, prepare for the worst"
I am concerned that people like me with quality paper outstanding will not be included in the Fannie/Freddie festivus.
Hugh Downs Report
Hemp - one plant can save us all
http://www.youtube.com/watch?v=wynmSZRmcr4
---------------------
Chemical con-trails from Air Force spraying operations cause cancer and respiratory problems! Where are all the environmental wackos concerns? See; Killer Chemtrails: The Shocking Truth
http://www.youtube.com/watch?v=Psdg3OAw_a8&fe
You have to love this double entendre slogan. They really are in your wallet. They own you. Your paycheck belongs to them.
Other way around in my case. I'm in their wallet drinking their milkshake. My Capital One cash rewards card pays me about $800/year, while I pay them $0 in interest and annual fees.
Quality paper will be worthless when the dollar collpases......and that may very well be right around the corner. Quality can run, but it can't hide. It's all equal in the end.
Ken! Please, I'm begging you. Filters.
OT,
"In its latest findings, Hedge Fund Research, an industry data provider, estimates investors redeemed up to $104bn from hedge funds in the first quarter, versus the record $152bn withdrawn from the industry in the fourth quarter of 2008."
http://ftalphaville.ft.com/blog/2009/04/21/54939/fund-of-funds-redemptio...
.............................
If you don't take your profits, someone else will.
Cap One is still financing breast augmentations.
RD,
I'm just patronizing CR's Add.
---------------------
Chemical con-trails from Air Force spraying operations cause cancer and respiratory problems! Where are all the environmental wackos concerns? See; Killer Chemtrails: The Shocking Truth
http://www.youtube.com/watch?v=Psdg3OAw_a8&fe
Michael (member) wrote on Tue, 04/21/2009 - 4:48pm.
RD,
I'm just patronizing CR's Add.
Ken, see?
@BondGirl: "I guess I am going to need some guidance to explain to me what they were looking at in these stress tests after all, because I curiously started out giving them way too much credit."
That's the problem. The folks in Washington use the same words that the rest of us do, but those words don't mean the same things to them that they do to us! Even when the words have agreed-upon meanings, the Washington Weasels arrange them in ways that aren't technically lies but intentionally lead everyone to false conclusions. (e.g. Timmy's claim today about the majority of banks being well capitalized... which is certainly not true in the dollar-weighted real world but happens to be true in some non-dollar-weighted regulatory world.)
Orwell's characters in 1984 had nothing on the assclowns of the current era.
The words being spoken today convey an impression of hope, of change, of honestly fixing the problem. Some of the words like "stress test" even imply some meaningful actions! But the actual actions belie the words being used.
Yet again we must watch what they *really* do, not what they say they're doing...
"TJ and The Bear (member) wrote on Tue, 04/21/2009 - 4:43pm.
Who's he kidding?? If the Fed stops buying, the GSEs (and all other institutions) stop lending -- period. Mortgage rates won't jump 150bps, they'll jump 1500bps."
I don't think 1500bps is realistic. MBS only spiked up to 250bps over Treasuries right before they were taken down (uh, I mean, taken over, or put into conservatorship, whatever).
Since they are at 120bps now, I am guessing they would be a bit over 250bps without the Fed support.
But, given the massive amount of Fannie/Freddie debt and MBS guarantees, the market may view that the goverment would allow them to become sacrificial lambs and default on their debt, so the spread could be higher. Not sure what there CDS are trading at now, but that would be a good proxy for where MBS would be trading today without the Fed (120bps + F/F default risk).
Plus, even jumbo mortgages can be had for 7% or so. Agencies wouldn't go much above that (assuming today's yield curve).
But imagine how bad things would be today if agency mortgages were at 7%. We could be facing that later this year, easily. I can't see how the Fed can take more than $2T of MBS on their books.
RD,
I don't think it means what you think it means.
---------------------
Chemical con-trails from Air Force spraying operations cause cancer and respiratory problems! Where are all the environmental wackos concerns? See; Killer Chemtrails: The Shocking Truth
http://www.youtube.com/watch?v=Psdg3OAw_a8&fe
@BondGirl: "I guess I am going to need some guidance to explain to me what they were looking at in these stress tests after all, because I curiously started out giving them way too much credit."
"Bank Profits Appear Out of Thin Air" NYTimes [ 2nd half of article ]
http://www.nytimes.com/2009/04/21/business/21sorkin.html?_r=1
.............................
If you don't take your profits, someone else will.
My daughter asked me if I died would she be responsible for my debts, I asked her "why," and she told me she has a friend who's mother died and the credit card companies are trying to make her sign a paper saying she will be responsible for the debt.
@Comrade Coinz: "Other way around in my case. I'm in their wallet drinking their milkshake. My Capital One cash rewards card pays me about $800/year, while I pay them $0 in interest and annual fees."
Except they're charging your merchants a lot more than $800/year, and the merchants are kindly passing those "credit transaction fees" on to you via higher prices. You're not getting any free lunches.
On the other hand, if there were true competition in the credit transaction fees, consumer prices would fall by about 1% across the board. Would that be even more deflation that we have now? Or would the extra cash in consumers' pockets be a "stimulus"????
Michael (member) wrote on Tue, 04/21/2009 - 4:54pm.
RD,
I don't think it means what you think it means.
I know you don't. That is why filters as so desperately required.
My daughter asked me if I died would she be responsible for my debts, I asked her "why," and she told me she has a friend who's mother died and the credit card companies are trying to make her sign a paper saying she will be responsible for the debt.
The friend is not responsible for her deceased mother's debts. The CC companies will try to guilt her into paying off her mother's debts, but there is no legal responsibility. Funny, how know one can guilt a CC company into forgiving debts due to extenuating circumstances.
----
"no one is pricing in low, mid teens unemployment in any of their assumptions." - Meredith Whitney
Regarding the fed buying MBS, Wayne Angel claims the fed's balance sheet is infinite. That and helicopter speeches only encourage foolish lending and bad behavior from banksters.
It's all about the bonus!
The size of the Fed's balance sheet is really key. For the moment, after AIG, it appears that the Congressional wallet is closed.
So the two backdoor mechanisms being enacted by the Administration to flood the market with cash are
1. FDIC guarantees on bank bonds.
2. Expanding Fed balance sheet.
Both cases have the effect of spreading out the pain over time - and perpetuating the current system. Politically this is far, far, far more stable than any resolution requiring a halt, rethink, rebuild and restart.
Both have their limits. The FDIC will have to go Treasury sooner rather than later to "borrow" money. I don't know what the limits are here. Anyone else? Will this request eventually have to fall back on Congress due to debt cap limits?
The Fed is the interesting one. Theoretically, the Fed can keep buying assets and ballooning at will. In some ways, they'll become the equivalent of the Chinese Central Bank: if they continue buying, they'll hold so many assets that they can't stop for fear of causing a bond/equity/forex market crash. Or as others have put it, at the limit, either the Fed buys and holds all the debt on offer or they cause a crash.
All indications are that the Fed believes they can stop ballooning their balance sheet as soon as the economy recovers. Optimistically, they probably believe that they can start shrinking it then.
Of course, what happens if the Fed is just feeding cash into an unsustainable banking & credit system: a system that lends without oversight, a system where buyers borrow without fear, a system that focuses risk instead of diffusing it, and a system that grossly misallocates capital. Can this system ever recover? The Fed has put us on a path to find out.
Meanwhile, prudent savers and investors are left gambling with their life "savings".
After certain well connected banksters are bailed out, then the hard work of paying off all this household debt will begin.
Should take the better part of a generation.
@ghostface: I don't think 1500bps is realistic. MBS only spiked up to 250bps over Treasuries right before they were taken down
That's because everyone understood there was a very high chance of a federal backstop on the Agency bonds.
Since they are at 120bps now, I am guessing they would be a bit over 250bps without the Fed support.
No, the companies would have gone bankrupt, and the bondholders could've been forced to take equity instead of debt, and then the dividends would be lower than the coupon payments and the equity would continue to drop in value because the companies are more insolvent than would have been admitted at the time of the bankruptcy... Except that no one had the stones to put them through BK because of the "too big to fail" nonsense.
Plus, even jumbo mortgages can be had for 7% or so. Agencies wouldn't go much above that (assuming today's yield curve).
Also not true. Jumbos would be much higher if Agencies hadn't been backstopped and Fannie/Freddie had stopped lending. There's only a small amount of available private capital that real banks could lend, and if they had to spread it over a larger number of mortgages the rates would go up for all.
But imagine how bad things would be today if agency mortgages were at 7%. We could be facing that later this year, easily. I can't see how the Fed can take more than $2T of MBS on their books.
And they probably will be... People with very unstable jobs and no down payments will not be buying houses regardless of rates. Lenders short on capital will cherry-pick and require higher down payments. The supply is likely to overshoot and be so far above demand that prices will drop well below the rent-vs-buy point.
I don't think 1500bps is realistic.
I do; the sky's the limit. What the spreads were prior won't matter a whit.
Repeat after me:
1) Nobody, repeat nobody, is buying MBS outside the Fed; everyone else holding is trying like hell to sell.
2) FNM/FRE & FHA are effectively the entire mortgage market; if they stop lending, there isn't anyone to take their place.
3) All remaining portfolio lenders are going to run like hell, because they know RRE prices will be cut in half overnight.
The GSEs are an open-ended obligation that'll eat the Fed alive. They can't buy everything, but they can't NOT buy everything. They are truly, totally screwed.
-----
"Hope for the best, prepare for the worst"
@Beach: It sounds like Congress may revisit the Federal Reserve Act. The Fed may have less room to maneuver than they think.
Wayne Angel claims the fed's balance sheet is infinite.
Theoretically yes, practically no. Unfortunately we won't know what the practical limit is until after we hit it, and that'll be too late.
-----
"Hope for the best, prepare for the worst"
I wonder how many are just flat out losing faith in the system? All of it. Rewarding failure and incompetence was the final straw for me. The CONstant lies are insult to injury.
Democrats or Banana Republicans - I see no difference.
Anonymously,
Your comments sound very familiar. I suspect we know you by another name.
Yes, rates and spreads are very low due to government intervention. Where it would be? No idea except that it would be much higher.
"The GSEs are an open-ended obligation that'll eat the Fed alive. They can't buy everything, but they can't NOT buy everything. They are truly, totally screwed. "
I'm counting on this, and not only that, I see it bringing down the world central banking cartel(aka Illuminati).
---------------------
Chemical con-trails from Air Force spraying operations cause cancer and respiratory problems! Where are all the environmental wackos concerns? See; Killer Chemtrails: The Shocking Truth
http://www.youtube.com/watch?v=Psdg3OAw_a8&fe
TJ: The GSEs are an open-ended obligation that'll eat the Fed alive. They can't buy everything, but they can't NOT buy everything. They are truly, totally screwed.
In this scenario: what would be some precipitating events that would cause the Fed to stop buying?
One off the top of my head: Fed buys an additional $2 trillion in paper this year. The economy as constructed pre-2008 returns with a vengeance. Commodities/equities spike hard. The Fed stops buying. Economy continues to scream higher. And then just like in 2008, it crashes, but not as much - because the belief that the Fed will continue buying.
Will people eventually understand that the Fed's ballooning balance sheet isn't a black hole that can hold all crap assets? As I mentioned earlier, a halt, rethink, rebuild and restart is required.
Capitol One is famous for their predatory practices. I imagine smiles across the nation as people take a small pleasure in defaulting on their Capital One credit cards.
i have a question. when a cc company write off, say in this case 10%..... i assume they sell that in bulk to a collection agency or two right? at what rate do they unload them at??? just curious.
Just think of all the future time and effort Americans have pledged as a result of foolish vanity. Temporary insanity? Maybe we need a new legal defense - Temporary (in)Vanity.
The economy as constructed pre-2008 returns with a vengeance.
That won't happen. Try again with a scenario wherein the economy floats marginally higher from here and then descends into oblivion.
Sort of like the last moments on the aft deck of the Titanic.
-----
"Hope for the best, prepare for the worst"
The Worries Facing Russia's Banks
As the number of nonperforming loans grows, the Russian government is beginning to take the threat to the country's banking sector seriously.
You can almost substitute USA for Russia in this article.
"A month ago, 15% seemed like a negative figure. Now people are talking about (the share [of nonperforming loans] reaching) 20% to 30%," says Natalia Orlova, banking analyst at Alfa Bank."
http://www.spiegel.de/international/business/0,1518,618843,00.html
I wonder if Natalia is as hot as Whitney.
.............................
If you don't take your profits, someone else will.
TJ and the Bear, you're on fire tonight and you owe me a keyboard...
" TJ and The Bear (member) wrote on Tue, 04/21/2009 - 5:07pm.
I don't think 1500bps is realistic.
I do; the sky's the limit. What the spreads were prior won't matter a whit."
But, at a 7% mortgage rate, the market stops in its tracks. Almost no agency MBS is in the refi window at 7%, especially now that anything that can is refinancing. So, at 7%, bank balance sheets could sop up whatever purchase business occurs.
Before the recent refi boom, the MBA was estimating the mortgage market at $1.8T. At a 7% mortgage rate, that probably falls to an annual rate of under $1T. Banks could fund that on balance sheet; remember, they still have the FHLBs to fund those mortgages. Then there are the credit unions, etc.
Maybe the rate goes to 7.5%, 8%. But 15%? No way. The natural, unsubsidized clearing rate is way below that.
Of course, guidelines would be tighter at 7% as well - 25% down seems to be the on-balance-sheet norm, further limiting the size of the market.
@TJ: That won't happen. Try again with a scenario wherein the economy floats marginally higher from here and then descends into oblivion.
It was a hypothetical.
Help me imagine steps leading up to either 1) The Fed being forced to stop purchases of assets or 2) The public losing faith in the ability to continue purchasing assets.
She's 85 years old, no income to speak of, and sold her home to pay the cards.
-------
Then whatever she has left from the sale of the home will got to pay the taxes on the remaining 50% that was written off. The IRS treats the written off amount as income and taxes you accordingly. WOnder if the CC companies told that when they were negotiating the mark down...
"Mr. Beach wrote on Tue, 04/21/2009 - 5:12pm.
TJ: The GSEs are an open-ended obligation that'll eat the Fed alive. They can't buy everything, but they can't NOT buy everything. They are truly, totally screwed.
In this scenario: what would be some precipitating events that would cause the Fed to stop buying?"
Here is my answer - politics. As I have said before, the announcement they would buy $1.3T of MBS was the beginning of the end of the Fed as we know it.
There are already rumblings in Congress about bringing the Fed under control. Expect that trend to continue.
Theoretically the Fed balance sheet is limitless. That theory probably doesn't include Barney Frank.
How To Collect Debts From The Dead
I thnk that, legally, they can only collect from the deceased's estate. However, they can and do try to get others to pay.
GERMANY PONDERS BAD BANKS: Toxic Waste Urgently Seeking Dump
"The German government is hosting talks with banking supervisors about what to do about the hundreds of billions of euros of toxic assets still left in the banks' balance sheets. It sounds like a mission impossible -- saving the banks without bankrupting taxpayers."
http://www.spiegel.de/international/business/0,1518,620181,00.html
.............................
If you don't take your profits, someone else will.
" Anonymously wrote on Tue, 04/21/2009 - 5:08pm.
@Beach: It sounds like Congress may revisit the Federal Reserve Act. The Fed may have less room to maneuver than they think."
Exactly. You can't crash Barney's Fannie/Freddie party and not expect to pay the price of admission.
Theoretically the Fed balance sheet is limitless. That theory probably doesn't include Barney Frank.
I think Congress will be convinced that the Fed is helping unlock frozen credit markets by buying ABS assets. And since it is buying AAA assets, it can't lose.
That actually sets up one scenario for the Fed being forced to stop:
What happens if the Fed begins to record losses on the assets on its books? Large losses on mortgages or credit cards?
TJ and the Bear, you're on fire tonight and you owe me a keyboard...
Put it on my tab, I'm good for it!
-----
"Hope for the best, prepare for the worst"
Eventually the government will own this debt and will want to be paid back. Imagine a new BK law that determines what can be charged off by the debtor based on who owns the debt. The Treasury will institute a new alphabet program that will allow the banks to sell them any debt up to 90 days past due. Uncle Sam will always get paid.
Far fetched, maybe? Isn't most of this debacle? Ironic if the changes in the Credit Card practices just happened to have this sort of addendum tacked on. The CC companies can't afford this level of charge offs and keep selling this debt. The buyers of this debt can't afford the losses either and will look for a bailout. Ain't securitization grand.
COF is considered a bank, so they file a quarterly call report with the FDIC. This will give you a detailed breakdown of the losses.
Perhaps yet another way to look at the Fed's ballooning balance sheet is to compare it to Fannie pre blowup.
Both bought assets to bring down yields to promote some social policy. Both were able to do so because of some implied guarantee: Fannie did get backed by taxpayers. And the Fed is the Fed - the source of USD.
At the limit, Fannie's balance sheet imploded leaving the parent company with losses that had to be bailed out.
What happens if the Fed's balance sheet implodes? Congress could recapitalize the Fed by asking the Treasury to borrow and give the proceeds to the Fed. Congress could "borrow" private assets (401ks, money-market funds, bank accounts etc.) and recapitalize the Fed.
Either way, it appears that USD suffers. Against what if all major economies do similar things? Perhaps the answer is that all major currencies fail at once - requiring a chaotic halt, rethink, rebuild, reboot.
It all reminds me of Hotel California...
Speaking of Hotel California... Sorry for this OT post, but please enjoy the following press release for some new 1500 sq ft condos in Hollywood, CA. Have a little kool aide before reading... 749k LP...
"These are uncertain times and making a major purchase like a new home in the face of potential market volatility is troublesome for families who remain fearful of buying," states MasterCraft Homes Group CEO, Dan Thompson. "We've worked hard to value-engineer and build new homes that represent the very best value for sophisticated, sustainable urban living. It's with that same diligence that we're able to price homes at The Gatsby well below their most recent appraised values from March of this year. This enables our first phase buyers to buy with the confidence that their purchase price leaves tens of thousands in potential equity appreciation on the table. It also sets buyers on the right course for successful, profitable home ownership."
In addition to The Gatsby Hollywood's reduced sales price, new-home buyers can take advantage of historic low interest rates as well as FHA loans for up to $729,000. Other government-mandated homebuying incentives include recent federal and state tax credits totaling up to $18,000 plus solar energy tax credits up to $3,000. Restrictions to tax credits apply; buyers are encouraged to speak to their tax professional for details. With a 10% down program on the purchase of a new Gatsby home plus the federal and California tax credits, reduced sales price, immediate equity, and other incentives, buyers see an immediate return valuing up to 10% of the homes' purchase price, resulting in an effective $0 down program. 3% down payment programs are also available on select homes.
Look! it's 2006 again!
Casey Serin ...
What ever happened to him...that was a blast from the past
Well, check this out: http://www.caseypedia.com/wiki/Main_Page
This is a real wiki, mostly composed by Serin haterz, among whom our own Rob Dawg is "premier".
Actual pictures of Galina, too!
OT: Japan Exports Fall at Slower Pace, Indicating Slump Is Easing
April 22 (Bloomberg) -- Japan's exports fell at a slower pace in March, ending a four-month streak of record drops and adding to signs the recession may start to ease.
Overseas shipments slumped 45.6 percent from a year earlier, compared with February's unprecedented 49.4 percent plunge, the Finance Ministry said today in Tokyo
Only 45.6%, second half recovery is obviously here
I guess I am going to need some guidance to explain to me what they were looking at in these stress tests after all, because I curiously started out giving them way too much credit.
I'm thinking they'll just take a page from Homeland Security and use color schemes.
Second half recovery may be delayed to the third half....
April 22 (Bloomberg) -- Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., Japan's three biggest automakers, may report quarterly losses after the global recession crippled sales. South Korea's Hyundai Motor Co. may also say its profit fell to the lowest in at least seven years.
Toyota probably had a net loss of 678 billion yen ($6.9 billion) for the three months ended March 31 from a profit of 317 billion yen a year earlier, according to the median of four analyst estimates compiled by Bloomberg. Net income at Hyundai, South Korea's largest automaker, probably tumbled 48 percent from a year earlier to 205 billion won ($151 million), according to the median estimate of 11 analysts surveyed by Bloomberg.
Ghost,
Need more time for a response -- too much to say.
Beach,
It's not the public that'll lose faith first, it's our foreign creditors.
-----
"Hope for the best, prepare for the worst"
http://www.nytimes.com/2009/04/22/business/economy/22leonhardt.html?hp
NY Times writer doesn't see housing bottoming anytime soon based on auction experiences
----
"no one is pricing in low, mid teens unemployment in any of their assumptions." - Meredith Whitney
Just listen to the Dave Ramsey radio show for a few minutes and you'll hear an astonishing variety of tragic financial situations -- often resulting from getting too far into credit card debt.
He sells books and classes teaching a common-sense, no-gimmick, multi-step program designed to help people get out of debt.
Ramsey also has people call in and tell their stories about how they became "debt free." The stories of people getting out of debt are equally captivating, and some are just downright inspiring. You can actually hear the joy in their voices; it brings tears to my eyes to hear some of these stories.
What's in your bra?
Dave Ramsey is selling commonsense to people who have none. Must be one hell of a lot when you consider the mortgage mess.
Many begging for a filter. If I was Ken and I looked at the donation meter, then at the amount of people who visit this site and commend him on the hard work he put into making this happen....I think I would put the meter to $10,000 and announce a filter when that goal was met. Until then put up or shut up already.
O/T :
Here a nice example of what a joke the US is :
(Banana republic is probably an insult to the real banana republics, haha. )
"Hackers stole data on Pentagon's newest fighter jet"
WASHINGTON (CNN) -- Thousands of confidential files on the U.S. military's most technologically advanced fighter aircraft have been compromised by unknown computer hackers over the past two years,...
The F-35 , expensive like hell , affordable only in homeopathic doses and thus practically useless in real military life , the incompetent US can not even protect it's plueprints ! "Thousands of confidential files .... over the past two years .
I guess the English can now buy the F-35's "secret computer codes" on the black market and I hope the Australians are not foolish enough to part with their money for such a piece of incompetence .
What a joke the US has become !
What is the limit on the Fed's ability to buy assets?
I don't see it as being limited in any meaningful way. As the assets grow, gradually people will fear inflation. But until inflation hits, most people will be convinced the Fed is committed to preventing it. When inflation hits, it won't be 100%. It'll just climb gradually, and slowly people will lose faith in tomorrow's value of $1. So the dollar will begin to decline, causing more inflation. The Fed will continue to intervene to keep domestic real interest rates low. Eventually, there will be a large shift in wealth from net savers to net borrowers, and from the owners of dollar-based assets to the owners of real assets.
Please step in if you see the limits more clearly, but I haven't seen the evidence yet that we are even close to the Fed's limits, or that there are any.
Basel Too (member) wrote on Wed, 04/22/2009 - 7:43am.
I guess I am going to need some guidance to explain to me what they were looking at in these stress tests after all, because I curiously started out giving them way too much credit.
I'm thinking they'll just take a page from Homeland Security and use color schemes.
That should work well, because I think someone is just going to sit down with an Excell spreadsheet and invent some numbers.
OT but for you tin foil hatters not keeping up out there this;
A danish scientist Niels Harrit, on nano-thermite in the WTC dust ( english subtitles )
http://www.youtube.com/watch?v=8_tf25lx_3o
---------------------
Chemical con-trails from Air Force spraying operations cause cancer and respiratory problems! Where are all the environmental wackos concerns? See; Killer Chemtrails: The Shocking Truth
http://www.youtube.com/watch?v=Psdg3OAw_a8&fe
patientrenter: Please step in if you see the limits more clearly, but I haven't seen the evidence yet that we are even close to the Fed's limits, or that there are any.
IMHO, the economy of pre-2008 is unsustainable. Having reduced the cost of credit by buying assets, the Fed is now on the path to continue to do so. In the best case, inflation returns in the real economy.
More likely is that the banks remain unhealthy and present onerous terms to borrowers. Business slows and jobs continue to get cut. The Fed continues to buy assets. At some point, the assets on the Fed's books begin to fail. Perhaps this is the point at which the Fed is forced to admit its folly?
"As you can see, being a TARP wife means, in short, making decisions according to a complex algorithm: balancing the need to look like your world hasn't crumbled beneath you-let's not alarm the investors!-with the need to appear duly repentant for your subprime sins. It also means we're part of the community of more than 400 companies that have received government bailout funds, whose fall from grace has been swifter and harsher than any since Mao frog-marched intellectuals into China's countryside."
http://www.portfolio.com/executives/2009/04/21/Confessions-of-a-Bailout-...
Hopefully this is satire. I couldn't tell.
But, at a 7% mortgage rate, the market stops in its tracks.
Yes, and it will. Funny, that was pretty much the average rate throughout the 90's, too.
Almost no agency MBS is in the refi window at 7%, especially now that anything that can is refinancing.
Again, yes. Note that all the refi activity is further concentrating risk in the GSEs.
So, at 7%, bank balance sheets could sop up whatever purchase business occurs.
What banks are those? FFDIC himself expects at least a thousand failures. They're all practically insolvent and the CRE storm hasn't even hit it's stride yet.
Keep this in mind...
The banks in 80's Texas had a lower exposure to oil than the entire country now has to RE -- ALL of those banks failed.
Before the recent refi boom, the MBA was estimating the mortgage market at $1.8T. At a 7% mortgage rate, that probably falls to an annual rate of under $1T.
If the mortgage market cuts in half, the value of housing cuts in half, too. Who's going to lend into that environment?
Banks could fund that on balance sheet; remember, they still have the FHLBs to fund those mortgages. Then there are the credit unions, etc.
FHLB? Another "Federal" bordering on zombie status, and I've already covered the banks. CU's? Not a chance.
Maybe the rate goes to 7.5%, 8%. But 15%? No way. The natural, unsubsidized clearing rate is way below that.
That's just it, there is no natural, unsubsidized clearing rate. What do you think the Treasury market would look like if China & Japan left?
-----
"Hope for the best, prepare for the worst"
Mr Beach, I think the key people (at the Fed, Treasury, WH and Congress) all know that the Fed's assets are likely to lose money. That's why they bought them. The only question is how far the inflation will be allowed to go. The further it goes, the lower the Fed's losses, and the lower the govt's debt obligations in real value. So the pols have no incentive to ease up, except public anger. Given what happened in the 1970's, I think inflation can be allowed to run for up to 10 years before people finally ask for the Volcker package.
The fed may WANT these assets at any price because to have dibs on all the personal, corporate, and mortgage debt gives them lots of power and control over people. formerly, the feds balance sheet was mostly treasuries. now it is the remnants of a consumption binge.
they are printing money, after all. so any price is good to them.
\\\\\\\\\\\\\\\\\\\|||||||||||||||||||///////////////////
I don't see it as being limited in any meaningful way.
patientrenter,
As I mentioned above, it's not J6P that'll notice, it's the people overseas.
-----
"Hope for the best, prepare for the worst"
TJ good point about Oil and banks. The other thing is that there was no other industry to pick up the slack either.
We won't recover in any measurable fashion,,, there is no industry to replace financial services in the same capacity. Even Japan had exports.
TJ and the Bear is corrrect, I am afraid. We really can't tell any more what the natural interest rate is for mortgages. The FHA, FHLBs, FDIC, FNMA etc that are supplying (or guaranteeing) the money going into mortgages now are probably so close to 100% of the home loan supply that there is no way to tell what would happen if they all backed out.
TJ and the Bear: Yes, people overseas will notice, and that will cause the dollar to decline. But if you look at the history of currencies, they always go up and down. It's not automatically fatal or catastrophic. it just increases inflation.
IMHO, the economy of pre-2008 is unsustainable.
Yes. The Fed's driving down a one-way street to oblivion.
It's like that adage about some guy buying a stock that keeps going up and up until the day he decides to sell, just to find out he can't because he was the entire market.
-----
"Hope for the best, prepare for the worst"
.. it just increases inflation when the currency is undergoing a down phase.
Okay. If your second cousin came to you looking for $20k as his 20% of a $100k house purchase how much would you charge? I'm thinking 9% 5/1 on a 30 with 2pts penalty refi before reset. Full recourse. For the 80%? 7% 3/1 30 1.5 pts.
It isn't hard to figure out what market rates would be.
I thought over 8% default was a company killer? Then, they are my bank now. Chevy Chase and Crapitol One. a match made in hell. Chevy has all the CRE so that should balance it out.
http://afterthecrash.net - Home of the Doomer Story Portal and Other Stuff
Interest rates are BS. Simply put people payment buy. Low interest rates only support higher prices. If Interest rates are high, prices have to drop to match area incomes.
But if you look at the history of currencies, they always go up and down.
If you look at the history of fiat, they all ultimately fail, too. We're getting to the end of the up & down part and headed for the tailspin.
-----
"Hope for the best, prepare for the worst"
Okay. If your second cousin came to you looking for $20k as his 20% of a $100k house purchase how much would you charge? I'm thinking 9% 5/1 on a 30 with 2pts penalty refi before reset
You would be a terrible banker. I mean it as a compliment.
Seriously though, in a declining market like this where 20% equity can possibly be wiped out within a year or two and the unemployment rate headed in double digits, I'd look for 20%+.
Thank you much, Iceman.
If Interest rates are high, prices have to drop to match area incomes.
Now more than ever, since equity trade-ups aren't the factor they once were.
-----
"Hope for the best, prepare for the worst"
TJ and The Bear (member) wrote on Tue, 04/21/2009 - 6:24pm.
...equity trade-ups aren't the factor they once were.
"Climbing the property ladder" sounds so 2006. 2010 will be the year of "rightsizing."
"Wayne Angel claims the fed's balance sheet is infinite."
Wayne Angel is a fool. So is his daughter.
Another Goldman lackey.
Russian rates are very high (really US credit card rates for most loans) so situation is really similar. It looks like Medvedev's goverment now try to half them.
As for Orlova see http://www.alfabank.com/research/team/orlova/
Chief Economist of Alfa Bank
We won't recover in any measurable fashion,,, there is no industry to replace financial services in the same capacity. Even Japan had exports.
Not last year:
Japan Logs Y725bn Trade Deficit In FY08, 1st Red Ink In 28 Yrs
TOKYO (NQN)--Japan logged a trade deficit of 725.3 billion yen for fiscal 2008, tumbling into negative territory on a full-year basis for the first time since 1980, according to preliminary data released Wednesday by the Ministry of Finance.
------------------
sacrealstats
Home trade up should never be considered until the first home is paid off and it should only take 10-15 years or you bought to much house. All you will do when trading up is have a perpetual money rental problem.
Better link:
http://www.nni.nikkei.co.jp/e/fr/tnks/Nni20090422D22SS774.htm
Japan Logs Y725bn Trade Deficit In FY08, 1st Red Ink In 28 Yrs
TOKYO (NQN)--Japan posted a 725.3 billion yen trade deficit for fiscal 2008, tumbling into negative territory on a full-year basis for the first time since 1980, according to preliminary data released Wednesday by the Ministry of Finance.
Exports plunged 16.4% year on year to 71.14 trillion yen, while imports declined 4.1% to 71.86 trillion yen.
For March, the trade surplus nose-dived 99% on the year to 11 billion yen, with exports tumbling 45.6% to 4.18 trillion yen and imports dropping 36.7% to 4.17 trillion yen.
------------------
sacrealstats
No sense debating where rates would ultimately reside post-GSEs, because anything significantly north of where they are now is pretty much guaranteed to throw gasoline on any and all green shoots.
-----
"Hope for the best, prepare for the worst"
The only question is how far the inflation will be allowed to go. The further it goes, the lower the Fed's losses, and the lower the govt's debt obligations in real value.
If the Fed owns long term debt (mortgages) and inflation goes up, it will lead to higher interest rates which will lead to the present value of the mortgage debt going down.
This is one of the reasons the Fed has avoided long term debt in the past.
I still haven't seen the evidence for limits on the Fed's assets, apart from:
1. This merry band of bloggers doesn't like it
2. Inflation's downsides gradually building more public opposition to inflation that to its alternatives. "Americans can always be trusted to fight inflation, after they've exhausted all the alternatives."
I don't see Larry Summers caring a lot about #1, so it's #2. But that takes years, maybe a decade. You can complete a lot of asset-buying, and a lot of wealth transfer, and a lot of moral hazard creation, and other long-term economic damage, in a decade.
calling conjures
a minute epoch sundown
tommorow bling
"What's In Capital One's Wallet?"
Timmay.
El Bobo, the Federal govt is a net debtor. Higher interest rates hurt the govt budget, but by less than high inflation helps.
I have updated the comments to a new look, based on people's feedback. If you don't see the change immediately, refresh your browser.
A couple of things to note:
We are now supporting homepages. If you go to My account->Edit->Personal Information, you'll see a text box for entering a URL. After entering this, it will make your name a clickable link. If you are not logged in, the homepage you enter in the comment box will be used.
The (member) text is now a link taking you to the user's profile. At present, profiles aren't all that interesting. Could change in the future, if people are interested. It will at least tell you how long someone has been a member.
The date is a permalink to the comment itself.
If a comment was in reply to another comment (i.e. someone clicked on Reply to enter it), a link (in reply to...) will appear between 'wrote' and the date. Clicking on this will expand the replied to comment in place for better context.
If there are things I've missed, let me know.
And yes, filters are coming...
2. Inflation's downsides gradually building more public opposition to inflation that to its alternatives.
Who needs inflation when you can just default on your personal debt? Plus, I seriously doubt we'll see wage inflation, so prices can only increase so much before demand gets hurt.
Deflation. It's not just for the 1930s any more.
------------------
sacrealstats
Here is a reply, to illustrate...
Hmmmm.. replies not working... hang on...
Chrysler bondholders' bluff called !!! White House says bondholder proposal not in the national interest !!!
White House says bankers not entitled to unjustified return !!!
The bondholders were admonished to work as diligently for an agreement as the other stake holders have worked.
The leaks and stories about the hacking of the JSF seem very convenient considering the bill before congress whcih would allow unprecedented information gathering. A little too convenient. No doubt network security is a threat but the leaks of this information are meant to push the bill through. The Fed's natural limit will be dicatetd not so much by cpacity rather it seems a loss of confidence. The rally in the bank stocks today defies logic - as Zerohedge headline says tonight COF misses stock goes to 1000. Watching that POS Geithner on the hill with his wooden and perfunctory language, to borrow a phrase from across the ponfd, is sickening. That smarmy ivy league arrogance was all to apparent in the Bs hearings.
Just to reiterate what GS said last week: $3.5T needs to be raised and rolled. The Fed can buy all it wants. Interesting comment on the ECB in its annual report selling gold. The threat of the IMF selling gold is a pure bluff. Every central bank in the world would snap that up before it came to market. The US indeed would be smart to use the toilet paper dollar to try and snap up gold at current levels and horde. One senses they are so delusional they actually really think gold is overvalued. sigh
Well, now they are. Odd.
I still haven't seen the evidence for limits on the Fed's assets
Just like there are no limits to Zimbabwe's?
-----
"Hope for the best, prepare for the worst"
Max, I forgot the near-religious devotion to deflation or inflation. Didn't mean to rouse the Gods. I guess my only little comment there is that the solution follows the culture of the country. In Japan, a nation of older savers, deflation is preferred over inflation. A full repayment of debts would help Japan, a creditor nation. But we are a nation of spenders, a net debtor. We (collectively) would probably prefer not to repay all of our debts. Individually, default is an option. But for the nation as a whole, an extra option is available - inflation. It's the way to default without admitting you're defaulting. Does that sound to you like something that would be attractive to our Congress, Administration, Fed, Paul Krugman.....?
Links to homepages seems disabled.
Hey reptillian,
So Obama shot the puppy...who'd a thunk it.
WASHINGTON (Reuters) -- The latest debt reduction offer by Chrysler LLC's lenders is unacceptable because it would yield the lenders an unjustified return, an Obama administration official said Tuesday.
"It is neither in the interest of Chrysler's senior lenders nor the country for them to advance a proposal that would yield them an unjustified return as Chrysler, its employees and other stakeholders are working tirelessly to help this company restructure," the official said.
Oops. now they work.
Here's a riddle:
For the last 80 years the Fed has been buying short term govt debt and the dollar is now worth a lot less than 80 years ago.
What happens to the worth of a dollar when the Fed exponentially prints dollars and buys dodgy assets and long term debt?
Looks like we'll find out.
Capital One's new slogan:
We want whatever's in your wallet
The Fed has gone way short on their maturities. They could not withstand any sort of inflation premium in their rates. They need to go long soon, say no later than early 2008.
Defaulting on debt thread music here:
http://www.youtube.com/watch?v=xtIM_TEQxwA
Spread it far and wide to every young person you know.
-------
http://www.afterthecrash.net - After the Crash, a blog shared by the CR Commenting Community. Hoopajoop on over.
I think I may have identified the flaw here. In the first place, the US currency is supposed to come from the US Congress; not from the banks, of which the FED is a parcel.
That is very clearly stated in the US Constitution. The currency of a nation is the means by which the citizens of that nation keep score in the game of economics that they play. Money plays two main roles in the life of every citizen: It is a store of value, and it is a medium of exchange. (It is also convenient, but that's why it's called "money" instead of barter.)
There are two basic components of a trade: the "sell" side and the "buy" side What matters most to both the seller and the buyer is that the medium of exchange is valid. That is the function of the state, at least according to the US Constitution. "(Article 1, Section 8, paragraph 5) "Congress shall have power...to coin money, regulate the value thereof, and of foreign coin, and to fix the standard of weights and measures."
Does anyone notice that there is no mention of a group of banks to control the issuance of the money of the US? Of course there isn't. That is because the founders of the US, the designers of this country, NEVER intended for the banks to have sway over the economic decisions of the United States!
We need a real national bank that is answerable only to the US Congress to manage the monetary supply of the US.
TJ and the Bear - Interesting, I was about to use Zimbabwe as my example of a country that takes the inflation path to default. But I decided not to, because it was more provocative to use such an extreme example than it was helpful. Since you bring it up, its shows how ridiculously high inflation can go before the govt that creates it collapses. We won't have to go near to that extreme before the goals on inflation are accomplished.
Instead of me preaching at you, just think about the 1970's. How old are you? Were you responsible for managing savings at that time? if you were, you'll know what I am talking about from first-hand experience. If you're young, then go check the history for that period.
Rob Dawg, I agree that the Fed going short is puzzling. Perhaps China said their trust level was a little too low for a lot of long-term debt?
Jim3, you'd prefer Barney Frank to make the decisions about our money supply directly? Actually, it's very, very close to that already, with an anxious-to-please head of the Fed Reserve. But allow me to think that having the Congress control the money buttons directly wouldn't help us.... at all.
Testing ...
reply to test ... again??
Not working?
reptilian, were you having a problem?
I thought it might quote what I was replying to. No? Delete my tests, if you want.
Does edit reply work? Yes.
Ah, I've noticed a problem. After replying, and returning to the original comments page, the 'in reply to...' code is not being executed, so it defaults to the behavior of navigating you to the replied to comment on the page. If you remove the #comment-XXXXX from the current page's URL, and refresh from that new one, it should work. I'll see about fixing it.
Oh, I see. There is a link to what is being replied to. Nice space saving feature!
The Fed has gone way short on their maturities.
Our foreign creditors have traded almost exclusively into short T's. What does it say when they want to minimize their exposure to inflation risk???
-----
"Hope for the best, prepare for the worst"
The new mechanism doesn't quote. It provides a way for you to see the original comment. Quoting can be kind of cluttering, and for a high volume site like this, I'm trying to minimize the clutter. Of course sometimes it's very helpful for context, but I just don't want it to be the default behavior.
patientrenter wrote on Tue, 4/21/2009 - 7:08 pm reply
Rob Dawg, I agree that the Fed going short is puzzling. Perhaps China said their trust level was a little too low for a lot of long-term debt?
We are going to have a failed auction like "mp" and I have been predicting and the SHTF like nothing we've seen yet. Remember how bad it was when the commercial paper spreads went to 450bps? Orders of magnitude worse.
Are these quotes created by the same program which does closed captioning on public access cable? Or is the Capital One exec a poor public speaker?
"It is likely that will our U.S. card charge off rate will increase at a faster pace than the broader economy as a result of the denominator effect and our implementation of OCC minimum payment requirements"
"Even though our U.S. card charge off rate was higher than the expectation we had last quarter delinquencies and charge-offs were a bit better than we would have expected given the actual economic worsening we've seen in the quarter."
I hadn't been to Trader Joes in like a few months, and popped into one in Vegas, and my how prices have risen on most everything...
It might be worth doing something like CR Companion did (and as Rob Dawg has done right above this): inserting selected text in italics when the reply button is clicked. I may save that for a future rev, as it fits in with some other work I have in mind.
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You mean you can borrow money and not pay it back?
Oh sorry, that's the New America, I forgot. Deadbeats.
Add a target='_blank' to the 'in reply to...' link so it opens a new window and you are golden.
We are going to have a failed auction like "mp" and I have been predicting and the SHTF like nothing we've seen yet. Remember how bad it was when the commercial paper spreads went to 450bps? Orders of magnitude worse.
This I agree will happen.
patientrenter, my mistake bringing up this old chestnut argument. I've always hated the def/inf debate, because the inflation argument depends on the Fed taking purposeful action. So far, they've only "inflated" to allow banks to meet balance sheet requirements through asset purchases. I guess we'll have to settle on deflation today, maybe inflation tomorrow if the Fed pulls the trigger for real.
------------------
sacrealstats
Credit card companies are getting squeezed on both ends, as sales are dying-they can't even make their 2-3% vigorish on the retailers.
There must be vast legions of boobus Americanus, on the verge of not being able to even make their minimum monthly payment, so it don't mean jack if they are getting whammy'd on 30% interest rates, does it?
patientrenter,
Yes, Zimbabwe's an extreme case, but the 70's -- during which I was a kid, BTW -- aren't relevant to the current situation. There wasn't any monetization occurring, let alone at the insane levels we're seeing now. Throw in our debt and CAD and it's a whole different ballgame.
Besides, what inflation we will get won't look anything like then. As many of us have mentioned, the chances for wage & asset inflation are practically nil. OTOH, anything we import (or export) can go through the roof.
Zimbabwe continues as a (questionably) viable state because it's currency is only really used internally -- nobody else'll take it. Fed monetization can and will do the same thing for the dollar. Think about it.
-----
"Hope for the best, prepare for the worst"
It looks like Spain May Be Deflating
15.5% unemployment.
"It doesn't mean it will spread here to the U.S., but we need to look closely at Spain and other places to understand the dynamic," says Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and a former chief economist for the International Monetary Fund. "It's like the front line of a new virus outbreak."
2. Inflation's downsides gradually building more public opposition to inflation that to its alternatives. "Americans can always be trusted to fight inflation, after they've exhausted all the alternatives."
Assuming for the moment that reflation is successful: Inflation's downside won't hit the "public" first...it'll hit the holders of dollar-denominated financial assets, who happen to be a pretty powerful bunch. When the likes of Bill Gross find inflation more objectionable than its alternatives, we'll see change.
Zimbabwe has adopted the S. African Rand and U.S. Dollar. If I remember correctly, their many-zeroed currency has been abandoned. Early this year ???
To patientrenter (@10.08 above)
"Jim3, you'd prefer Barney Frank to make the decisions about our money supply directly? Actually, it's very, very close to that already, with an anxious-to-please head of the Fed Reserve. But allow me to think that having the Congress control the money buttons directly wouldn't help us.... at all."
I presume that the reference to Barney Frank is directed to his sexual preference. He's gay, therefore he's some kind of a wimp, and therefore anything that he might do is is inferior? Is that the point? I had hoped that we'd grown beyond that silliness. What if the person in charge was Senator Richard Shelby?( He is the ranking member of the Senate Finance Committee.) Would your comment have been as sharp? Probably not. This ain't about fucking.
A country can issue as much money as it wishes . It can issue that currency for whatever thing it wishes.Now suppose, just suppose, that Country X issued enough money to build an electric generating plant. Now this country decides to sell the power generated from that plant, and use it to replace the money it created to build the plant. Is there any inflation because of the plant's construction? No, there is not. There is no mathematical model that can show such a thing. Neither is there a common sense model that can show it either.
Do you think you won't be held responsible for the debts of the FED? Maybe a reality check is in order.
That's a good idea, for the default no javascript case.
Jim3, What do Barney Frank's sexual preferences have to do with anything? He's currently the most powerful leader in Congress on financial issues, so if you want to know what Congress will do, you'd better check in with him first.
Patientrenter, I don't think Barney Frank's sexual preferences should have anything to do with anything, but if you'd kindly recall you are the person who raised his personage in this discussion. It didn't matter to you, it seems to me, that it was a member of congress who might have had a different view, but it was "Barney Frank," one of the very few self-identified gay members of Congress, who might mave some say over the issuance of the US currency. That's why you referred to Barney Frank, because he is gay and you think gay people are weak. That's it, isn't it? Is there another explanation?
Is this what the most basic economic issue facing the American public has been reduced to, whether or not we approve of gay americans? What an absolute travesty! For clearly that is the trajectory here.
I choose to stand with Thomas Jefferson here.
what's in your wallet...apparently not much.