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Author Topic: The Fed, Banking, Monetary Policy, Dollar & other currencies, Gold/Silver  (Read 46477 times)
Rarick
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« Reply #50 on: May 28, 2010, 04:55:50 AM »

At least we have a president with extensive experience and a solid financial background to get us through these perilous times.











Do I really have to point out that was sarcasm?

No.  An accountant is a calculator/ adding machine not doing much more than adding up numbers (or in this case subtracting them) according to a rigid system.  An Economist on the other hand............depending on his "school" (supply side, keynesian, austrian, socialist, comminist et al)........might be more capable of charting a path..........

I just wish we could get a little commonsense in national budgets.  You do not make big purchases with out having a considereable amount of the base price already saved up.  You do not commit to big new expenses in uncertain conditions.  You always have a saved reserve for disasters (wars, floods, sickness, layoffs).  When you help someone out you make sure they are worth/worthy of that help so you do not waste your charity.  always be efficient/ frugal with your non-self sufficient needs/ resources lest someone forces a compromise of your principles in your "need".
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DougMacG
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« Reply #51 on: June 04, 2010, 02:42:00 PM »

Answering Crafty from the Iran thread: "Tehran’s move toward the euro (2008-2009) as its preferred currency for its foreign exchange reserves, a policy that dovetailed nicely with its anti-American foreign policy posture...Iran is deciding (3020) to alter its currency policy and revert to a largely dollar-denominated foreign exchange reserve"

It was never out of love for America that OPEC, China etc. pegs, buys, holds or uses dollars, it is for lack of a better alternative. If 320 million Europeans in twenty-two countries can't make a currency better than the dollar in these times, neither can any third world conglomeration.  Even gold is not more secure, transmittable and predictable in value IMO than the flawed US$.
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Crafty_Dog
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WSJ
« Reply #52 on: June 14, 2010, 08:23:04 AM »

For 97 years the 12 regional banks of the Federal Reserve system have operated relatively free of political interference from Washington. The looming financial reform bill threatens that independence, not least through an effort to impose new presidential appointees at the regional banks.

The biggest underreported threat comes from Subtitle I, Section 1801 of the House financial reform bill titled "Inclusion of Minorities and Women; Diversity in Agency Workforce." Sponsored by California Democrat Maxine Waters, the provision requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to "establish an Office of Minority and Women Inclusion."

So what else is new, you say? Don't the feds already dictate racial and gender hiring? Yes, they do, through the Equal Employment Opportunity Commission and assorted other federal laws. As a matter of racial and gender diversity, the Waters provision is at best redundant.

View Full Image

Associated Press
 
Maxine Waters
.But Ms. Waters and the House are hunting bigger game—to wit, the political allocation of credit. They want to put a network of operatives at the highest level of government who are responsible for making sure that regulators put the hiring of, and lending to, minorities at the top of their priority list. The House provision makes that very clear by making each diversity officer a Presidential appointee who must be confirmed by the Senate. The post, says the bill, will be "comparable to that of other senior level staff."

The law says this diversity czar will "ensure equal employment opportunity and the racial, ethnic and gender diversity" of the work force and senior management of these institutions. More ominously, this creature of Congress and the White House will also be charged with "increas[ing] the participation of minority-owned and women-owned businesses in the programs and contracts" of each agency and conducting "an assessment" of stated inclusion goals.

Mull over that one for a minute. Having recently lived through a financial mania and panic caused in part by political pressure for "affordable housing," Congress will now order regulators to allocate credit by race and gender. Isn't the point of this financial reform supposed to be to make regulators better judges of systemic risks, which means focusing on financial safety and soundness? If the Waters provision passes, federal regulators will have to put racial and gender lending at the top of their watch list when they do their checks on the banks and hedge funds they are regulating.

This is especially pernicious at the Fed regional banks, which have long operated independently of political intrusion. Federal Reserve bank presidents aren't appointed by the President precisely to avoid Treasury and White House control. They are appointed by their regional bank boards.

However, in another threat to Fed independence, the Senate bill departs from that tradition by making the president of the New York Fed a Presidential appointee. Blame for this Congressional intrusion goes to Treasury Secretary Tim Geithner and former Goldman Sachs executive Stephen Friedman for orchestrating the selection of former Goldman economist William Dudley as Mr. Geithner's replacement at the New York Fed.

Mr. Friedman chaired the search committee to replace Mr. Geithner even as he increased his ownership of Goldman shares. Though this violated Fed rules, Fed Vice Chairman Donald Kohn and the Board of Governors gave Mr. Friedman a conflict-of-interest waiver. Congress has now seized on this to justify putting the New York Fed chief on a Washington political leash.

The Waters provision will also give Congress and the White House a new and powerful lever to influence the operation of the 12 regional Fed banks. Accusations of racial or gender indifference, much less outright bias, are politically deadly. With the threat of such an accusation in their holster, the Waters czars will have enormous clout to influence Fed governance and regulatory decisions, perhaps including monetary policy.

Fed regional presidents are often the main proponents of tight monetary policy. The presence of a diversity czar is one way Congress and the White House can intimidate these regional presidents to go along with the policies they favor. No Fed bank president will want to take the risk of being hauled before Congress to answer a report that the banks under his jurisdiction aren't racially or gender sensitive enough in their lending.

This political sway is already clear from how meekly the Fed as an institution is bowing to the Waters provision. The Senate bill doesn't have the same provision, so it could be removed in the House-Senate conference that begins this week. But we're told that Fed officials in Washington have told the regional banks to keep quiet because it can't be stopped and Ms. Waters and the House might punish them if they try. In other words, the political intimidation is already obvious even before the provision becomes law.

The public debate over Fed independence has focused on Congressional demands for an audit, but that's benign compared to the threat of political appointees sitting on the senior staff of the regional banks and Board of Governors. While masquerading as reform, the Waters and New York Fed provisions are the most brazen attempt to hijack central bank policy since its founding nearly a century ago.

The law will make it harder for regulators to do what ought to be their main job, which is making sure that they don't again let a credit mania run out of control. It's one more way in which this much vaunted reform will make the financial system even more politicized, and thus more vulnerable to another panic.
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Crafty_Dog
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« Reply #53 on: June 30, 2010, 12:34:18 PM »

By Ambrose Evans-Pritchard Economics Last updated: June 29th, 2010

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100006729/time-to-shut-down-the-us-federal-reserve/

Like a mad aunt, the Fed is slowly losing its marbles.

Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order.  Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).

“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”

Don’t you just love that throw-away line “decent”? Dr Athreya hails from the University of Iowa.

“The response of the untrained to the crisis has been startling. The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.”

You couldn’t make it up, could you?

“Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”

I hold my hand up Dr Athreya and plead guilty. I am grateful to Bruce Krasting’s blog for bringing this stinging rebuke to my attention.

However, Dr Athreya’s assertions cannot be allowed to pass. The current generation of economists have led the world into a catastrophic cul de sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.

Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low, throwing the whole incentive structure of the capitalist system out of kilter, and more or less forcing banks to chase yield and engage in destructive behaviour.  They ran ever-lower real interests with each cycle, allowed asset bubbles to run unchecked (Ben Bernanke was the cheerleader of that particular folly), blamed Anglo-Saxon over-consumption on excess Asian savings (half true, but still the silliest cop-out of all time), and believed in the neanderthal doctrine of “inflation targeting”. Have they all forgotten Keynes’s cautionary words on the “tyranny of the general price level” in the early 1930s? Yes they have.  They allowed the M3 money supply to surge at double-digit rates (16pc in the US and 11pc in euroland), and are now allowing it to collapse (minus 5.5pc in the US over the last year). Have they all forgotten the Friedman-Schwartz lessons on the quantity theory of money? Yes, they have. Have they forgotten Irving Fisher’s “Debt Deflation causes of Great Depressions”? Yes, most of them have. And of course, they completely failed to see the 2007-2009 crisis coming, or to respond to it fast enough when it occurred.

The Fed has since made a hash of quantitative easing, largely due to Bernanke’s ideological infatuation with “creditism”. QE has been large enough to horrify everybody (especially the Chinese) by its sheer size – lifting the balance sheet to $2.4 trillion – but it has been carried out in such a way that it does not gain full traction. This is the worst of both worlds. So much geo-political capital wasted to such modest and distorting effect.

The error was for the Fed to buy the bonds from the banking system (and we all hate the banks, don’t we) rather than going straight to the non-bank private sector. How about purchasing a herd of Texas Longhorn cattle? That would do it. The inevitable result of this is a collapse of money velocity as banks allow their useless reserves to swell.

And now the Fed tells us all to shut up. Fie to you sir.

The 20th Century was a horrible litany of absurd experiments and atrocities committed by intellectuals, or by elite groupings that claimed a higher knowledge. Simple folk usually have enough common sense to avoid the worst errors. Sometimes they need to take very stern action to stop intellectuals leading us to ruin.

The root error of the modern academy is to pretend (and perhaps believe, which is even less forgiveable), that economics is a science and answers to Newtonian laws.

In any case, Newton was wrong. He neglected the fourth dimension of time, as Einstein called it, and that is exactly what the new classical school of economics has done by failing to take into account the intertemporal effects of debt – now 360pc of GDP across the OECD bloc, if properly counted.

There has been a cosy self-delusion that rising debt is largely benign because it is merely money that society owes to itself. This is a bad error of judgement, one that the intuitive man in the street can see through immediately.

Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control.

Economics should never be treated as a science. Its claims are not falsifiable, which is why economists can disagree so violently among themselves: a rarer spectacle in science, where disputes are usually resolved one way or another by hard data.

It is a branch of anthropology and psychology, a moral discipline if you like. Anybody who loses sight of this is a public nuisance, starting with Dr Athreya.

As for the Fed, I venture to say that a common jury of 12 American men and women placed on the Federal Open Market Committee would have done a better job of setting monetary policy over the last 20 years than Doctors Bernanke and Greenspan.

Actually, Greenspan never got a Phd. His honourary doctorate was awarded later for political reasons. (He had been a Nixon speech-writer). But never mind.
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Rarick
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« Reply #54 on: July 01, 2010, 04:12:21 AM »

Recently I have started thinking of "trained" and "educated" as "programmed" and "drank the Kool aid"............   If you can balance your check book, and understand want vs. need, you can figure out a budget.   The want vs need part of the concept is seriously secrewed up right now.  Balancing the checkbook is straight math, and applies to everything from the lowliest day laborer, to the stars themselves (if you equate hydrogen to dollars).
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Crafty_Dog
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« Reply #55 on: July 01, 2010, 07:56:16 AM »

Which brings us to the system of accounting fraud known as Base Line Budgeting.

BLB is legal for the government to do, but not for we the sheeple.  Amongst its many wonders it allows increases lesser than previously projected increases to be called "cuts".  With this system in place it is impossible to think clearly or keep track of what the fcukers are up to. angry angry angry
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DougMacG
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« Reply #56 on: July 01, 2010, 05:11:06 PM »

We've had bad Presidents too and bad policies from certain congresses yet we never ask if it is time to shut down the Presidency or the congress.  I never understand how thinking they should do a better job translates to ending that operation entirely - although I understand in journalism that authors do not write their own headlines and that headline writers are only trying to get you to pick up their paper.

I'm no fan of Greenspan from before he was appointed, during his term or since, but "Nixon speech-writer" is hardly a serious summary of his credentials when he was picked by Reagan.

The "Writers who have not taken a year of PhD coursework in a decent economics department..." remark is snobbish but came from an individual staff economist, again hardly different than the Supreme Court where Justices Alito, Sotomayor, and Thomas are Yale grads, while Scalia, Roberts, Breyer and Kennedy all went to Harvard.

"Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low"

No.  For another opinion: the congress is the author of the credit crisis because they put the volume of credit too high.  When the cost of credit goes from 3% to 20%, what will that do to the federal budget and our ability to afford the public goods we require?

It was not the Fed was determined that the federal government would be the writer and guarantor of all mortgages or that required that mortgages be made based on criteria other than creditworthiness.  Those decisions came from the elected officials and the dysfunctional committees that they formed.

Once again I would pose the question: is there really a correct set of policies for a Fed in the situation where we are spending 50% more than we take in, have virtually outlawed manufacturing and energy production and choose instead to send dollars out to the places in the world that supply us?
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Crafty_Dog
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« Reply #57 on: July 01, 2010, 07:19:12 PM »

""Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low""

"No.  For another opinion: the congress is the author of the credit crisis because they put the volume of credit too high.  When the cost of credit goes from 3% to 20%, what will that do to the federal budget and our ability to afford the public goods we require?  It was not the Fed was determined that the federal government would be the writer and guarantor of all mortgages or that required that mortgages be made based on criteria other than creditworthiness.  Those decisions came from the elected officials and the dysfunctional committees that they formed. Once again I would pose the question: is there really a correct set of policies for a Fed in the situation where we are spending 50% more than we take in, have virtually outlawed manufacturing and energy production and choose instead to send dollars out to the places in the world that supply us?"

You posit the Fed as enabler of Congressional lunacies by artificially driving down interest rates.  This I reject completely.  THERE IS A PROPER POLICY/MISSION FOR THE FED:   A STABLE CURRENCY.  PERIOD. 

This clusterfcuk in which we find ourselves is a creation of BOTH the Congress and the Fed.  The Fed forced interest rates to way below market rates since the Year 2000 scare at least; then came the pump due to 911, then came the pump due to , , , whatever.   As stupid and capricious as was the Congress, so too the Fed.  Together, the both of them created this.
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JDN
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« Reply #58 on: July 01, 2010, 09:27:43 PM »



You posit the Fed as enabler of Congressional lunacies by artificially driving down interest rates.  This I reject completely.  THERE IS A PROPER POLICY/MISSION FOR THE FED:   A STABLE CURRENCY.  PERIOD. 

This clusterfcuk in which we find ourselves is a creation of BOTH the Congress and the Fed.  The Fed forced interest rates to way below market rates since the Year 2000 scare at least; then came the pump due to 911, then came the pump due to , , , whatever.   As stupid and capricious as was the Congress, so too the Fed.  Together, the both of them created this.

While I agree together the Fed and Congress created this "clusterfcuk" I do not agree with "THERE IS A PROPER POLICY/MISSION FOR THE FED:   A STABLE CURRENCY.  PERIOD."

The goals of monetary policy are spelled out in the Federal Reserve Act, which specifies that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” 
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Crafty_Dog
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« Reply #59 on: July 07, 2010, 11:39:06 AM »


COMMODITIES
JULY 7, 2010
Central Banks Swap Tons of Gold to Raise Cash, Surprising Market
By CAROLN CUI And LIAM PLEVEN
Central banks are pawning their gold to the Bank for International Settlements at a record rate, taking advantage of the precious metal's historically high value to raise cash.
A little-noticed data point at the back of a 216-page report released last week by the BIS shows the international agency has taken 349 metric tons of gold since December—allowing central banks to raise a record $14 billion.
The number surprised the market, which had assumed most central banks had retained their holdings of gold. Instead, the BIS data show that they have been entering these gold swaps—exchanging their gold with the BIS in return for cash, agreeing to repurchase the gold at a later date.




The sharp increase in January, when most of the borrowing took place, coincides with a flare-up in worries about a sovereign-debt crisis in Greece spreading throughout Europe. At that time, borrowing costs soared and liquidity tightened.
Some central banks may have begun to fret, and chose to turn some of their holdings to cash as a standby, said Philip Klapwijk, executive chairman of GFMS Ltd., a London-based metals consultant.
"It suggests a bit of a last-resort measure," Mr. Klapwijk said.
The increase in the use of gold swaps is particularly surprising because central banks have rarely used them for decades, and the amount of gold at the BIS has remained stable for years.


AFP/Getty Images

Central banks of developed countries have relatively easy access to capital and capital markets, while emerging countries have generally been increasing their foreign reserves.
While the use of swaps has no practical implications for the gold market, the report helped weigh on gold prices, which have already come under pressure since reaching a peak last month.
The prospect that the gold isn't locked up in central-bank vaults as investors thought—and that it may, in an extreme case, be seized and sold on the open market by the BIS—gave some investors pause.
On Tuesday, the most actively traded gold contract, for August delivery, dropped $12.60 per troy ounce, or 1%, to $1,194.80 on the Comex division of the New York Mercantile Exchange. It is now off 5% from its record high hit on June 18.
The BIS report could change investors' perception of gold as an asset to protect against the impact of global sovereign-debt woes, said Nicholas Johnson, co-manager of Pacific Investment Management Co.'s CommodityRealReturn Strategy Fund, a mutual fund with about $16 billion in assets.
"Originally sovereign financial troubles were taken as unambiguously bullish" for gold, Mr. Johnson said in an email.
"But some are now rethinking this if the gold that sovereigns hold has been pledged as collateral to someone else who has more ability to liquidate those holdings."
If the central bank that lent the gold is for some reason unable to make good on the loan, the BIS could opt to sell the gold in order to get its money back, which would amount to flooding the market with an unexpected boost to the global supply.
The BIS annual report covers the 12-month period through March. April data show that an additional 32 tons of gold were put up as collateral that month, suggesting further loans were taken out with the BIS, said Andy Smith, senior metals strategist at Bache Commodities Group.
At this rate, the BIS holdings represent the "biggest gold swap in history," Mr. Smith said.
Central banks probably chose to swap gold for cash with the BIS—which is known as the central bank for central banks—because it is less visible to the market and probably cheaper than a syndicated loan from commercial banks, Mr. Klapwijk said.
Gold is often regarded as a protection against inflation and is thought to benefit from the inflationary impact of governments' economic stimulus packages. It has also been used as a haven against another financial meltdown.
The news of the swaps comes as the World Gold Council, a trade group backed by miners, is trying to persuade central banks to buy more gold. The group sent a 28-page report to more than 800 central bankers and fiscal policy makers around the world, laying out the argument for increasing their bullion holdings.
Many central banks in rapidly growing countries have less than 2% of their reserves in gold, including China, Brazil, South Korea and Malaysia. By contrast, the U.S. has 72.8% of its reserves in gold.
Many developing countries are reluctant to increase their gold holdings significantly. Gold's volatility and its inability to generate income have long been cited as reason why central banks don't want to enhance their gold holdings. Countries also fear that it could become difficult to liquidate their holdings in a pinch.
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Crafty_Dog
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« Reply #60 on: July 17, 2010, 07:24:07 PM »

Rust Discovered On Bank Of Russia Issued 999 Gold Coins
 
Here's a head scratcher: as everyone knows from elementary chemistry courses, gold is the most inert metal in the world - it  does not rust, nor corrode. Yet this is precisely what Russian commercial precious metal trading company, International Reserve Payment System, discovered on thousands of (allegedly) 999 gold coins "St George" (pictured insert) issued by the Central Russian Bank. The serendipitous discovery occurred after various clients of the company had requested that their gold be stored not in a safe, but in a far more secure place: "buried under an oak tree." As the website of IRPS president German Sterligoff notes: once buried, "the coins began to oxidize under the influence of moisture." And hence the headscratcher: nowhere in history (that we know of) does 999, and even 925 gold, oxidize, rust, stain, spot or form patinas, under any conditions. Furthermore, as IRPS discovered, Sberbank of Russia released an internal memorandum ordering the purchase of the defective coins with the spotted appearance. Sterligoff concludes: "It should be noted that the weight and density of the rusty coins coincide with the characteristics of gold that would be expected after after conventional testing methods would reveal. We think that the experts will be interesting to determine the nature of this phenomenon." So just how "real" is 999 gold after all, either in Russia or anywhere else?


As a consequence of this discovery, IRPS decided to "rid itself of all stocks, bought up earlier from the Central Bank on behalf of investors. Investment coins "St. George The Conqueror", as well as other gold coins of the Bank of Russia, are now excluded from the company's operations until all circumstances in the case are determined." Additional, as disclosed in the interview below for Here and Now show on TVRainRu, the Russian Central Bank would buy back the coins at a price of 9,300 rubles, despite prevailing prices for the bullion at well over 10,000.


As Zero Hedge has pointed out previously, the Central Bank of Russia has been one of the biggest purchasers of gold in 2010, having bought gold every single month. It would be embarrassing if it were discovered that not only is the bank diluting the gold content once received with oxidizable materials, but subsequently passing it off for 999 proof precious metal.

And if this is happening in Russia, one wonder what trickery other Central Banks, with a far lower amount of gold in their vaults, resort to...

http://www.zerohedge.com/article/rust-discovered-bank-russia-issued-999-gold-coins?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero)
 
 
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DougMacG
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« Reply #61 on: July 23, 2010, 11:39:51 AM »

Asleep at the wheel.  If Bernancke's job on monetary policy was at all was to advise on fiscal policy, this advice should have been giver more than a year ago.  Most of the damage of the higher rates coming has already been done IMO.  Yet a little like Bush, he wants the so-called tax cuts for the wrong reasons, it seems to me. 
------
Bernanke Says Extending Some of Bush's Tax Cuts Would Maintain Stimulus
By Scott Lanman and Ryan J. Donmoyer - Jul 23, 2010
   
Ben S. Bernanke, chairman of the U.S. Federal Reserve, listens to opening statements during his semiannual monetary policy report to the House Financial Services Committee in Washington. Photographer: Joshua Roberts/Bloomberg

Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

While Democrats want to keep the 2001 and 2003 tax reductions passed during former President George W. Bush’s administration for families earning as much as $250,000, Republicans aim to continue the cuts for high-income people as well. Bernanke didn’t endorse either party’s position or recommend a time period for an extension.

“In the longer term, I think we need to be taking steps to reassure the American people and the markets that our fiscal situation is going to be well controlled,” Bernanke said under questioning from Representative Spencer Bachus of Alabama, the committee’s senior Republican. “That means that if you extend the tax cuts, you need to find other ways to offset them.”
http://www.bloomberg.com/news/2010-07-23/bernanke-says-extending-bush-tax-cuts-would-maintain-stimulus-to-economy.html
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DougMacG
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« Reply #62 on: October 01, 2010, 10:14:11 AM »

A Thomas Sowell piece that covers gold and dollars.  This really is about Glibness and the ruling regime sneaking a clause into the heathcare legislation about government control of private gold ownership, but includes a good historical perspective.
-----------------------
Politics Versus Gold
By Thomas Sowell
http://www.realclearpolitics.com/articles/2010/09/28/politics_versus_gold_107327.html

One of the many slick tricks of the Obama administration was to insert a provision in the massive Obamacare legislation regulating people who sell gold. This had nothing to do with medical care but everything to do with sneaking in an extension of the government's power over gold, in a bill too big for most people to read.

Gold has long been a source of frustration for politicians who want to extend their power over the economy. First of all, the gold standard cramped their style because there is only so much money you can print when every dollar bill can be turned in to the government, to be exchanged for the equivalent amount of gold.

When the amount of money the government can print is limited by how much gold the government has, politicians cannot pay off a massive national debt by just printing more money and repaying the owners of government bonds with dollars that are cheaper than the dollars with which the bonds were bought. In other words, politicians cannot cheat people as easily.

That was just one of the ways that the gold standard cramped politicians' style-- and just one of the reasons they got rid of it. One of Franklin D. Roosevelt's first acts as president was to take the United States off the gold standard in 1933.

But, even with the gold standard gone, the ability of private individuals to buy gold reduces the ability of the government to steal the value of their money by printing more money.

Inflation is a quiet but effective way for the government to transfer resources from the people to itself, without raising taxes. A hundred dollar bill would buy less in 1998 than a $20 bill would buy in the 1960s. This means that anyone who kept his money in a safe over those years would have lost 80 percent of its value, because no safe can keep your money safe from politicians who control the printing presses.

That is why some people buy gold when they lose confidence in the government's managing of its money. Usually that is when inflation is either under way or looming on the horizon. When many people start transferring their wealth from dollars into gold, that restricts the ability of politicians to steal from them through inflation.

Even though there is currently very little inflation, purchases of gold have nevertheless skyrocketed. Ordinarily, most gold is bought for producing jewelry or for various industrial purposes, more so than as an investment. But, at times within the past two years, most gold has been bought by investors.

What that suggests is that increasing numbers of people don't trust this administration's economic policies, especially their huge and growing deficits, which add up to a record-breaking national debt.

When a national debt reaches an unsustainable amount, there is always a temptation to pay it off with inflated dollars. There is the same temptation when the Social Security system starts paying out more money to baby boom retirees than it is taking in from current workers.

Whether gold is a good investment for individuals, and whether the gold standard is the right system for a country, are much more complicated questions than can be answered here. But what is clear is that the Obama administration sees people's freedom to buy and sell gold as something that can limit what the government can do.

Indeed, freedom in general cramps the government's style. Those on the left may not be against freedom in general. But, at every turn, they find the freedoms granted by the Constitution of the United States hampering the left's agenda of imposing their superior wisdom and virtue on the rest of us.

The desire to restrain or control the buying and selling of gold is just one of the many signs of the inherent conflict between the freedom of the individual and the left's attempts to control our lives.

Sneaking a provision on gold purchases and sales into massive legislation that is supposedly about medical care is just one of the many cynical tricks used to circumvent the public's right to know how they are being governed. The Constitution begins, "We the people" but, to the left, both the people and the Constitution are just things to circumvent in order to carry out their agenda.
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Crafty_Dog
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« Reply #63 on: October 01, 2010, 10:19:05 AM »

Specifically what does the Obamacare law say about gold?  huh
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« Reply #64 on: October 01, 2010, 10:39:54 AM »

"Specifically what does the Obamacare law say about gold?"
------------------------------------------------------------------------
Section 9006 of the Patient Protection and Affordable Care Act will amend the Internal Revenue Code to expand the scope of Form 1099. Currently, 1099 forms are used to track and report the miscellaneous income associated with services rendered by independent contractors or self-employed individuals.

Starting Jan. 1, 2012, Form 1099s will become a means of reporting to the Internal Revenue Service the purchases of all goods and services by small businesses and self-employed people that exceed $600 during a calendar year. Precious metals such as coins and bullion fall into this category and coin dealers have been among those most rankled by the change.

This provision, intended to mine what the IRS deems a vast reservoir of uncollected income tax, was included in the health care legislation ostensibly as a way to pay for it. The tax code tweak is expected to raise $17 billion over the next 10 years, according to the Joint Committee on Taxation.

http://abcnews.go.com/Business/gold-coin-dealers-decry-tax-law/story?id=11211611
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« Reply #65 on: October 01, 2010, 10:55:15 AM »

People buy gold with after tax money like I buy distressed real estate, with the thought if and when everything else goes to hell they will at least still own the gold that they bought and held and could sell barter or trade portions of the holding to acquire the essentials in life to protect, house and feed their family.  But in that situation, you don't really own your gold because you don't own the 'gain' on your gold.  Like gun laws, the government would like to track that and track you and in the event of a 'meltdown' they will be there to find you and tax, confiscate or jail you.

There is no gain in gold.  Gold is gold.  An ounce is an ounce.  It is the most stable of all commodities, sometimes called 'the gold standard'.  If the dollar collapses to almost nothing and you lose everything you own except for your gold which is still the same quantity and quality of gold that you bought previously with after tax money and held with no return, who besides a tyrannical totalitarian leftist would categorize that experience to your family as a taxable gain??
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Crafty_Dog
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« Reply #66 on: October 01, 2010, 11:23:15 AM »

Are you saying that the 1099 reporting requirement includes a self-employed person buying gold?  Wouldn't th requirement be limited to business expenses?  Elsewise perforce food purchases would be included too, yes?
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DougMacG
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« Reply #67 on: October 01, 2010, 12:31:59 PM »

"Are you saying that the 1099 reporting requirement includes a self-employed person buying gold?  Wouldn't th requirement be limited to business expenses?  Elsewise perforce food purchases would be included too, yes?"
-----------------
Crafty, I am not at all an expert on it.  Your questions hint at why these types wanted it buried in a big bill and not to stand on its own merit or popularity.  They are taking what steps they can take to track the buys and sells of gold for the purpose of increasing capital gains collections.  Also to increase tax avoidance prosecutions which is how you improve compliance with an unjust, invasive law.  As Sowell implies, they would also like to dissuade you away from gold and into dollar assets where they exert more control. The food example is also true but less likely to be purchased with the intent of making a gain.  Still they might want to track your purchases of everything to try to determine how much gold you might be hiding, buying or selling.

If they can track your gold purchases, then they can later pass an asset tax (and then increase it like my property taxes until it grows like mine to exceed the cost of food, clothing and shelter for my family) or they could demand to see your gold to prove you did not sell at a gain, or they could presume it sold, impute the gain and assess the tax until you prove otherwise, as IRS logic runs in other areas of tax policy.

I remember Obama's promise for transparency but I don't recall when this issue was debated on C-SPAN.
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« Reply #68 on: October 01, 2010, 12:36:34 PM »

Doug's right, due to section 9006 of the Patient Protection and Affordable Care Act, starting on January 1, 2012, IRS tax form 1099 will be required for all purchases of goods and services that exceed $600 per calendar year. This new reporting requirement will cover precious metals. With gold at $1200 per ounce, this would make it impossible to sell a typical one-ounce bullion coin without IRS paperwork.

However, not to argue semantics, there is a potential "gain" in the value of gold.  Just like (vacant land) property (gold is gold; property is property; an acre is an acre) if property goes up in value there is a gain and if sold, there is a tax.

Yet be aware that even today if you hold gold as an investment, and later sell it at a profit, you will have either a long-term or short-term taxable gain, just as you would with any other investment. Actually potentially worse since gold is taxed as a collectible. 

Under federal tax law, "collectibles" include:
Works of art.
Rugs and antiques.
Metals and gems.
Stamps and coins.
Any other tangible personal property specified by the secretary of the Treasury.
Normally, when you sell a capital asset you've owned for more than one year, your tax rate is capped at 15%.
But when you sell a collectible, tax law caps your maximum rate on long-term capital gains at 28%, not 15%. In other words, on a $100,000 gain (lucky you!), that means you don't pay $15,000 to Uncle Sam, you pay $28,000 -- an extra $13,000.
If you hold the asset for less than a year, it gets worse. Your gain becomes a short-term gain, and it's taxed at regular income tax rates. That means a rate of as much as 35%. On a $100,000 gain, that's $35,000 you pay to the government.

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« Reply #69 on: October 01, 2010, 01:29:52 PM »

JDN: "However, not to argue semantics, there is a potential "gain" in the value of gold.  Just like (vacant land) property (gold is gold; property is property; an acre is an acre) if property goes up in value there is a gain and if sold, there is a tax. "

You missed my point or you disagree which is fine.  I don't question that the IRS deems it a gain.  I'm saying they are wrong and it is unconscionable.  Property is different; vacant land can change by getting closer to development for example, though you are right that most of those gains are inflationary as well and I am saying that component of the gain is no gain at all.  You have no right to be taxed on the fact that they devalued our currency while you held the asset.

If you look historically at gold prices you will see it is the dollar that goes down and not gold that goes up. There is no gain when the money you bought with deteriorates and the commodity you purchased held its value.   Not semantics, that a crucial difference of opinion.

In the '70s, OPEC quadrupled the dollar price of oil yet the gold price of oil remained remarkably stable.  It is the dollar that devalues in times of inflation yet there is no mechanism in the tax code other than long term capital gains rates for accounting for that.

JDN: "That means a rate of as much as 35%. On a $100,000 gain, that's $35,000 you pay to the government"

More like as high as 50% if held less than a year. The top rate, in place now, for buying today with a sale after Jan. 1 is (I believe) 39.5% and that does not include STATE TAX which is roughly 10% where I live and has no mechanism whatsoever for income averaging, inflation adjusting or long term capital gains preference no matter how poor you were before or after you made the one time sale with a pretend gain of an inflated asset.
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« Reply #70 on: October 22, 2010, 05:00:33 PM »

Wednesday, September 29, 2010  02:53 AM
By Thomas Sowell


Hoover Institution on War, Revolution and  Peace
One of the many slick tricks of the Obama  administration was to insert a
provision in the massive Obamacare legislation  regulating people who sell
gold. This had nothing to do with medical care but  everything to do with
sneaking in an extension of the government's power over  gold, in a bill too big
for most people to read. 
Gold long has been a source of frustration for politicians who want to
extend  their power over the economy. First of all, the gold standard cramped
their  style because there is only so much money you can print when every
dollar bill  can be turned in to the government, to be exchanged for the
equivalent amount of  gold.
When the amount of money the government can print is limited by how much
gold  the government has, politicians cannot pay off a massive national debt
by just  printing more money and repaying the owners of government bonds with
dollars  that are cheaper than the dollars with which the bonds were
bought. In other  words, politicians cannot cheat people as easily.
That was just one of the ways that the gold standard cramped politicians' 
style - and just one of the reasons they got rid of it. One of Franklin D. 
Roosevelt's first acts as president was to take the United States off the
gold  standard in 1933. But, even with the gold standard gone, the ability of
private  individuals to buy gold reduces the ability of the government to
steal the value  of their money by printing more money.
Inflation is a quiet but effective way for the government to transfer 
resources from the people to itself, without raising taxes. A hundred-dollar 
bill bought less in 1998 than a $20 bill bought in the 1960s. This means that 
anyone who kept his money in a safe over those years would have lost 80
percent  of its value, because no safe can keep your money safe from
politicians who  control the printing presses.
That is why some people buy gold when they lose confidence in the 
government's managing of its money. Usually that is when inflation is either  under
way or looming on the horizon. When many people start transferring their 
wealth from dollars into gold, that restricts the ability of politicians to 
steal from them through inflation.
Even though there is currently very little inflation, purchases of gold
have  nevertheless skyrocketed. Ordinarily, most gold is bought for producing
jewelry  or for various industrial purposes, more so than as an investment.
But, at times  within the past two years, most gold has been bought by
investors.
What that suggests is that increasing numbers of people don't trust this 
administration's economic policies, especially the huge and growing deficits,
 which add up to a record-breaking national debt.
When a national debt reaches an unsustainable amount, there is always a 
temptation to pay it off with inflated dollars. There is the same temptation 
when the Social Security system starts paying out more money to baby boom 
retirees than it is taking in from current workers.
Whether gold is a good investment for individuals, and whether the gold 
standard is the right system for a country, are much more complicated
questions  than can be answered here. But what is clear is that the Obama
administration  sees people's freedom to buy and sell gold as something that can limit
what the  government can do.
Sneaking a provision on gold purchases and sales into massive legislation 
that is supposedly about medical care is just one of the many cynical tricks
 used to circumvent the public's right to know how they are being governed.
The  Constitution begins, "We the people" but, to the left, both the people
and the  Constitution are just things to circumvent in order to carry out
its agenda.
Thomas Sowell is a senior fellow at the Hoover Institution on War, 
Revolution and Peace in Stanford, Calif.

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G M
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« Reply #71 on: October 22, 2010, 07:53:52 PM »

http://www.europac.net/commentaries/decoupling_alive_and_well

Decoupling: Alive and Well
October 21, 2010 - 6:07am — europac admin
By:
Neeraj Chaudhary
Thursday, October 21, 2010

While the US economy continues to weaken (see my recent commentary: Don’t Doubt the Double-Dip), many foreign economies continue to experience solid – even spectacular – economic growth. When the global economic crisis began in 2008, many forecasters doubted that the world economy could return to growth without the US consumer. But the world is learning what Peter Schiff has long predicted: that the US consumer is a drag on the world economy, not an engine for growth. As “decoupling” becomes more apparent, emerging economies are forming trade links among themselves, accelerating the process of decline for the United States.
 
To get a better understanding of how decoupling works, it helps to picture a train in motion. Together, the cars and engine travel together on the track. Now imagine that last car, the caboose, detaches from the rest of the train. At first, the caboose travels at nearly the same speed as the rest of the train. The distance between the two is hardly discernable. Over time, however, the car slows down as friction and gravity take their toll. Meanwhile, the engine powers ahead. The distance between the caboose and the train gradually becomes greater and greater, until finally the engine is gone from sight, leaving the caboose sitting idle on the track.
 
This process describes how many of the world’s economies are steadily pulling away from the United States. As trade links grow between countries far from our shores (such as those being solidified between Asia and South America), the distance between the United States and the rest of the world is becoming larger, and decoupling is becoming more and more pronounced.
 
While the US economy sputtered to a 1.6% growth rate in the 2nd quarter (Q2), many Asian countries rapidly pulled away, powered by trade with each other and the rest of the world. In Q2, China’s economy grew a startling 10.3%. Americans would be thrilled with growth half that rate. Asia’s second rising star, India, expanded by a solid 8.8%. The Four Tigers also posted excellent numbers: Hong Kong grew at a 6.5% clip, South Korea at a faster 7.1%, and Taiwan at 12.53% – while Singapore clocked an astonishing 18.8% growth rate! If that’s not decoupling, I don’t know what is.
 
These numbers are not likely to be a short-term phenomenon. Instead, I feel they represent a dramatic realignment in the pattern of global economic activity. Economies that have long enjoyed a trade surplus are now less likely to loan money to broke and bloated deficit economies such as the United States. Instead, they are now more inclined to consume their own production or trade with other exporting nations. Indeed, China is now the largest trading partner for several of the world’s major economies, including Japan, South Korea, India, Hong Kong, Taiwan, Australia, Russia, and Brazil. Slowed by the gravity of excess debt and the friction of increasing taxes and regulation, the American caboose is straining to keep up.
 
But the trend is not limited to Asia. All around the world, countries with sound economic policies are continuing to expand. In fact, despite the attention paid to the so-called PIIGS, several European economies are also showing signs of decoupling. Germany, Europe’s economic powerhouse, grew at 2.2% in Q2 – its fastest rate in over 20 years! Switzerland expanded by 3.4% in the 2nd quarter, while Sweden and Finland grew by 4.6% and 3.7% respectively. Even historically tumultuous Poland boasted a 3.5% growth rate. Predictably, this growth has whetted Europe’s appetite for imports, causing the EU to recently surpass the US as China’s largest export market.
 
The trend also extends to producers of the single most important commodity in the world: oil. According to the Department of Energy, the US imports over 60% of its oil consumption; however, new production is increasingly being diverted to international markets, leaving our country vulnerable to 1970s-style shortages.
 
In the 1st quarter of this year, Saudi Arabia exported more oil to China than it did to the US. With a new growth market for its petroleum, Saudi Arabia is estimated to grow 3.9% this year. Russia grew at a rate of 5.2% in Q2, largely for the same reason. China is now believed to be Iran’s largest trading partner, according to some sources. And although the United States remains Venezuela’s largest trading partner, China’s nearly insatiable demand for oil has catapulted it into 2nd place for trade with this oil-exporting nation.
 
Whether you are looking at ASEAN, OPEC, or the EU, it is clear that decoupling is the order of the day. The world economy is rebuilding itself with China as its engine and hub. This is the essence of decoupling, and until recently, it was thought by many respected figures to be impossible.
 
In the old days, it was said that when the United States sneezed, the rest of the world caught a cold. This time, they might just excuse themselves and move to the next car.


This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Please feel free to repost with proper attribution and all links included.
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G M
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« Reply #72 on: October 24, 2010, 06:15:39 PM »

Unfortunately, a loaf of bread will cost 500,000US.

http://www.zerohedge.com/article/goldman-fed-needs-print-4-trillion-new-money

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« Reply #73 on: October 28, 2010, 12:00:11 PM »

http://www.cnbc.com/id/39828427

The dollar's slump could get far worse if the dollar index takes out last year's low, Robin Griffiths, technical strategist at Cazenove Capital, told CNBC Monday.

"If the (dollar index) takes out the low that was made roughly a year ago I really think that will not only encourage more sales, it will cause a little bit of minor panic," Griffiths said. "A year ago it was deemed too cheap, if it goes any lower than that it's actually become toxic waste."
resumed its recent downtrend Monday in the wake of a meeting of finance ministers from the Group of 20 nations at the weekend. The meeting failed to yield a definitive agreement on currencies, putting selling pressure on the greenback.

"The dollar is being trashed, we've actually had effectively devaluation of about 14 percent in the last two months," Griffiths said.
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« Reply #74 on: October 28, 2010, 01:32:16 PM »

The role of the dollar as "the" international currency is the only thing that distinguishes us from Greece at this point when we look at % of GDP consisting of government deficit financing is that we get to print the money in which our debt is denominated and Greece does not.

If the dollar loses its credibility, as it appears to be about to do, then the only thing that will reverse it as best as I can tell by working from my memory of the dollar's dive under Carter in the late 70s is a massive spike in interest rates.  In our current debt/deficit circumstances, this will, depending on the size of interest rate increase from present levels result in a long-term increase of the cost our deficit to the tune of several hundred million dollars a year to well over one trillion dollars.   The plausibly possible consequences here IMHO can be of epic proportions. 
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« Reply #75 on: October 28, 2010, 04:13:43 PM »

I'll happen fast and it will rock the world.

Invest in metals. Guns, ammo and canned food.
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« Reply #76 on: October 28, 2010, 04:37:32 PM »

The thing that scares me about metals is I remember the precipitous drop in gold in the late 70s from a high in the 800s (IIRC after being $33 from '45-'71 and $35 from '71-'73 when Nixon took the dollar off of gold, the root cause of much of our current disaster IMHO).  Carter-Blumenthal, building upon the fecund piles of excrement with which Nixon littered the landscape (wage and price controls, devaluing the dollar, ending the gold standard, establishing the Shah of Iran as the centerpiece of our mid-east strategy and as part of such enabling OPEC so that he would have enough money to buy the arms to build the military to offset the Russians in Egypt, Syria, and Iraq) created a stampede out of the dollar and stagflation (12% inflation?).  Thus Carter was forced to appoint Volcker to the Fed and V. raised interest rates to IIRC something like 20%! 

With these rates, money stampeded out of gold.
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« Reply #77 on: October 28, 2010, 04:43:54 PM »

When I say invest in metals, I literally mean guns, ammo and canned food.
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« Reply #78 on: October 30, 2010, 09:34:18 AM »

http://www.bloomberg.com/news/2010-10-29/gold-will-outlive-dollar-once-slaughter-comes-commentary-by-john-hathaway.html

The world’s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.

The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.

Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.

It’s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written.

Telltale signs of future trouble aren’t hard to spot. Only a few months ago, Federal Reserve Chairman Ben Bernanke and a chorus of other high-ranking Fed officials were talking about exit strategies from the U.S. central bank’s bloated balance sheet and the financial system’s unprecedented excess liquidity. Now, those same officials are talking about pumping more money into the system to stimulate growth.
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« Reply #79 on: October 31, 2010, 03:34:55 PM »

Pasting GM's post on the China thread here as well for ease of research:

http://www.europac.net/commentaries/one_sided_compromise

The One-Sided Compromise
October 28, 2010 - 1:35pm — europac admin
By:
John Browne
Thursday, October 28, 2010

Last weekend, the G-20 finance ministers met in South Korea to find areas of agreement in preparation for the main G-20 gathering in November. The Chinese rebuffed renewed American pleas for them to revalue their yuan. They rejected Secretary Geithner’s suggestion of a four percent cap on current account surpluses. However, in return for accepting America’s continued dollar debasement, the Chinese did agree to “look into” a revaluation of the yuan and the management of trade surpluses. They also agreed to an international self-policing regime to curb currency manipulation. This 'one-sided' compromise was hailed in the Western media as a triumph for Mr. Geithner. The US stock markets and dollar rallied. All looked good for the election season in November.

Unfortunately, compromises are never one-sided; they are only construed as such. Though the reporting failed to emphasize it, Mr. Geithner actually agreed to a massive shift of monetary power in exchange for China's empty concessions. The shareholdings and board composition of the huge and powerful International Monetary Fund (IMF) have now been shifted. China will now become the third largest shareholder of the IMF and the developing economies will get a six percent larger voting share. Two European states will lose their seats on the IMF's board in favor of developing countries.

Meanwhile, China, supported by Russia, India, and even Brazil, continued to lobby hard for the US dollar’s privileged role as the international reserve currency to be replaced by a wide basket of currencies and gold. To this end, the IMF has recently been given additional “emergency” lending facilities. These could be used in a coming sovereign default crisis to 'bail out' Western countries, at which point they would be unable to resist global economic governance under the guise of the reformed IMF.

In short, Secretary Geithner’s “victory” at the G-20 was one only King Pyrrhus could love.

But the blame cannot be laid entirely with Mr. Geithner. The fact that he left the meeting at least saving a bit of face for his delegation is a monumental achievement, considering the dismal condition of the US economy.

Fed Chairman Bernanke appears desperate to flood the United States with another round of quantitative easing (QE-2). In a $13 trillion economy, a release of anything less than $1 trillion would not be seen as effective. Remember, the Fed already injected over $1 trillion after the credit crunch – and we are still in recession. How much will it take to right this listing ship?

When Geithner pledged to China a “gradual” debasement of the dollar, it is astonishing that they didn’t laugh him out of the room.

If he were to make good on his pledge and convince Bernanke to cut QE-2 to, say, $500 billion, the US GDP and stock markets would almost certainly begin to contract. This would threaten the banking system with a second crisis borne out of the ashes, or toxic assets, of the first.

For a frame of reference, the US home mortgage market is valued at some $10.6 trillion. Indeed, foreclosures and past-due loans amount already to some 14 percent of the market, or about $1.5 trillion. Of this staggering figure, the loans delinquent or in foreclosure to which the top three banks (Bank of America, Wells Fargo and JP Morgan) are exposed amount to more than $600 billion, an amount roughly equal to the original TARP bailout fund.

At the same time, thanks to falsely low interest rates, the banks' net interest margins, or the difference between what they earn in loan interest and what they pay to their creditors, are being squeezed severely, while their non-interest earnings are falling, due to lower economic activity and the prohibitions contained in FinReg.

Finally, there is the murky question of how exposed the banks are to the massive derivatives market, a house of cards with a shaky foundation.

As we have described for several years, the US economy is virtually locked into a long arc of decline. There are no politically palatable solutions to this quandary. Until Americans are ready to take their lumps and accept a steep drop in their standard of living, the US government will have no leverage with the creditor nations and no ability to keep its promises. Therefore, we should celebrate when China even gives our Treasury Secretary an audience.

If China does manage to topple the US dollar from its perch as the international reserve currency, our economy will very likely move into free fall as decades of inflation come pouring back into the country. We will be forced to live within our means or face hyperinflation. Losing a few votes at the IMF is a small cost to delay this eventuality, but it also puts us one step closer to it.
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« Reply #80 on: November 02, 2010, 08:16:37 AM »

http://www.cnbc.com/id/39957072

The dollar is in danger of losing 20 percent of its value over the next few years if the Federal Reserve continues unconventional monetary easing, Bill Gross, the manager of the world's largest mutual fund, said on Monday.

"Other countries and citizens are willing to work for less and willing to work harder—and we forgot the magic formula somewhere along the way," Gross said.

"I think a 20 percent decline in the dollar is possible," Gross said, adding the pace of the currency's decline was also an important consideration for investors.

"When a central bank prints trillions of dollars of checks, which is not necessarily what (a second round of quantitative easing) will do in terms of the amount, but if it gets into that territory—that is a debasement of the dollar in terms of the supply of dollars on a global basis," Gross told Reuters in an interview at his PIMCO headquarters.
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« Reply #81 on: November 03, 2010, 04:31:17 PM »

Senator-elect Ron Paul will be where he may be able to do some serious damage afro

http://www.slate.com/blogs/blogs/weigel/archive/2010/11/03/ron-paul-to-chair-monetary-policy-subcommittee.aspx
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« Reply #82 on: November 03, 2010, 07:29:18 PM »

As much as I'm not a fan of Loon Paul, I actually am happy to hear this.
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« Reply #83 on: November 03, 2010, 10:07:40 PM »

This area I think well-suited to his talents.  Hopefully it will keep him too busy for too much foreign affairs.
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« Reply #84 on: November 04, 2010, 01:10:05 PM »

"The Federal Reserve's objectives - its dual mandate, set by Congress - are to promote a high level of employment and low, stable inflation."

"there is scope for monetary policy to support further gains in employment" - Ben Bernanke, below. 

 - monetary policy is not the only or the correct lever to expand employment!

" lower mortgage rates will make housing more affordable and allow more homeowners to refinance"

 - mortagage rates are artificially low already, and generally not available to buy foreclosures that need buying.  It is the principal that is too high on these loans, not the interest.

" Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending."

 - Other factors outside of the Fed's jurisdiction are destroying investment, and get the hell out of artificially stimulating stock prices and spending!
------------------
Perhaps Ron Paul's job will be to simply the Fed's double assignment.  This is a policy subcommittee Ron Paul is to head, if the report is accurate.  Bernanke appears before the full committee.

Ron Paul did a nice job of staying out of the spotlight during Rand Paul's senate election; I forgot he was still in the congress.  We might not need a monetary policy (IMO) if we followed Ron Paul's foreign policy. I hope he will use this role to steer, expose, oversee and influence the Fed, not as a podium to try to end the Fed.

My view of monetary policy is that there isn't a policy possible to compensate for a federal government that incurs $3 trillion in deficits in 21 months and that taxes and regulates itself out of production and into an unbalanced, import economy.  The current administration and congress want a Keynesian injection of trillions without correcting structural and competitive problems.  An independent Fed chair is not obligated to oblige if that destroys the purchasing power of the dollar and if the real answers to the problem lie outside of Fed policy.  Strong questioning along these lines could draw the Fed Chair into revealing how these other excesses create imbalance and complicate the monetary challenge. 


Here is what Bernanke says, including his meddling with private investment and target of keeping inflation ABOVE 2%.
----------

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html?hpid=topnews

What the Fed did and why: supporting the recovery and sustaining price stability

By Ben S. Bernanke
Thursday, November 4, 2010

Two years have passed since the worst financial crisis since the 1930s dealt a body blow to the world economy. Working with policymakers at home and abroad, the Federal Reserve responded with strong and creative measures to help stabilize the financial system and the economy. Among the Fed's responses was a dramatic easing of monetary policy - reducing short-term interest rates nearly to zero. The Fed also purchased more than a trillion dollars' worth of Treasury securities and U.S.-backed mortgage-related securities, which helped reduce longer-term interest rates, such as those for mortgages and corporate bonds. These steps helped end the economic free fall and set the stage for a resumption of economic growth in mid-2009.

Notwithstanding the progress that has been made, when the Fed's monetary policymaking committee - the Federal Open Market Committee (FOMC) - met this week to review the economic situation, we could hardly be satisfied. The Federal Reserve's objectives - its dual mandate, set by Congress - are to promote a high level of employment and low, stable inflation. Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 percent, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer. The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skills.

Today, most measures of underlying inflation are running somewhat below 2 percent, or a bit lower than the rate most Fed policymakers see as being most consistent with healthy economic growth in the long run. Although low inflation is generally good, inflation that is too low can pose risks to the economy - especially when the economy is struggling. In the most extreme case, very low inflation can morph into deflation (falling prices and wages), which can contribute to long periods of economic stagnation.

Even absent such risks, low and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating. The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed. With short-term interest rates already about as low as they can go, the FOMC agreed to deliver that support by purchasing additional longer-term securities, as it did in 2008 and 2009. The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August.

This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.

While they have been used successfully in the United States and elsewhere, purchases of longer-term securities are a less familiar monetary policy tool than cutting short-term interest rates. That is one reason the FOMC has been cautious, balancing the costs and benefits before acting. We will review the purchase program regularly to ensure it is working as intended and to assess whether adjustments are needed as economic conditions change.

Although asset purchases are relatively unfamiliar as a tool of monetary policy, some concerns about this approach are overstated. Critics have, for example, worried that it will lead to excessive increases in the money supply and ultimately to significant increases in inflation.

Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation. We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable.

The Federal Reserve cannot solve all the economy's problems on its own. That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators and the private sector. But the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability. Steps taken this week should help us fulfill that obligation.

The writer is chairman of the Federal Reserve Board of Governors.
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« Reply #85 on: November 04, 2010, 08:33:32 PM »

I really feel sick. It's like being in a slow motion car wreck, waiting for the final impact.


Tell me I'm wrong and these people know what they are doing.
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« Reply #86 on: November 04, 2010, 08:36:45 PM »

http://www.reuters.com/article/idUSTOE6A301Q20101104

Nov 4 (Reuters) - Unbridled printing of dollars is the biggest risk to the global economy, an adviser to the Chinese central bank said in comments published on Thursday, a day after the Federal Reserve unveiled a new round of monetary easing.

China must set up a firewall via currency policy and capital controls to cushion itself from external shocks, Xia Bin said in a commentary piece in the Financial News, a Chinese-language newspaper managed by the central bank.

"As long as the world exercises no restraint in issuing global currencies such as the dollar -- and this is not easy -- then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament," he said.

As an academic adviser on the central bank's monetary policy committee, Xia does not have decision-making power but does provide input to the policy-making process.

The Federal Reserve launched a fresh effort on Wednesday to support the struggling U.S. economy, committing to buy $600 billion in government bonds despite concerns the programme could do more harm than good.
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« Reply #87 on: November 05, 2010, 12:04:54 AM »

by Andy Sullivan
WASHINGTON | Thu Nov 4, 2010 6:14pm EDT
(Reuters) - Republican Representative Ron Paul on Thursday said he will push to examine the Federal Reserve's monetary policy decisions if he takes control of the congressional subcommittee that oversees the central bank as expected in January.

"I think they're way too independent. They just shouldn't have this power," Paul, a longtime Fed critic, said in an interview with Reuters. "Up until recently it has been modest but now it's totally out of control."

Paul is currently the top Republican on the House of Representatives subcommittee that oversees domestic monetary policy, and is likely to head the panel when Republicans take control of the chamber in January.

That could create a giant headache for the Fed, which earlier this year fended off an effort headed by Paul to open up its internal deliberations on interest rates and monetary easing to congressional scrutiny.

Paul, who has written a book called "End the Fed," has been a fierce critic of the central bank's efforts to boost the economy through monetary policy.

"It's an outrage, what is happening, and the Congress more or less has not said much about it," he said.

Paul said his subcommittee would also push to examine the country's gold reserves and highlight the views of economists who believe that economic downturns are caused by bad monetary policy, not the vagaries of the free market.

Global organizations like the International Monetary Fund also will come under scrutiny, he said.

"Eventually we're going to have monetary reform. I do not believe the dollar can be the reserve standard of the world," said Paul, who has called for returning the United States to a currency backed by gold or silver.

Many economists say that the Fed's decisive actions during the 2008 financial crisis prevented the deep recession that followed from turning into a depression. But grassroots outrage over the bank bailouts and other Fed actions helped propel many Republican candidates to victory in Tuesday's congressional elections -- including Paul's son, Rand Paul, who will represent Kentucky in the Senate.

"With a lot of new members coming and the problems getting worse rather better, there's going to be a lot more people who are going to be looking for answers," Paul said.

(Editing by Cynthia Osterman)
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« Reply #88 on: November 05, 2010, 12:11:01 AM »

"It's like being in a slow motion car wreck, waiting for the final impact. Tell me I'm wrong and these people know what they are doing."

 - I've been a pretty big defender of the Fed compared to others here, but reading Bernanke in his own words today he makes about as much sense to me as Krugman and I think we are exactly as you described, headed into a wreck.

It's just nuts to think the lack of jobs today comes from a lack of money considering already easy money along with everything else we know that is wrong, such as new taxes coming on capital movement scaring away new investment and locking in old investment, the new health monstrosity scaring away hiring, looming new energy taxes and regs scaring away production or factory expansion, $3 trillion in new debt hovering over the dollar and the future budgets, new individual tax rates aimed at small business owners along with the highest corporate tax in western civilization while are biggest competitor's was lower already and lowered it twice more since 2008.  No, this slump isn't caused by lack of money or solved by throwing money at it, and what slump ever was?

At the center of this, the Fed's mission is not a "dual mandate" and that needs to be re-set by the new Congress.  The Fed has a singular mandate, a stable dollar, and then some secondary objectives come in to play that are not at all equal to the Fed mission of protecting the value of our currency IMHO.
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« Reply #89 on: November 06, 2010, 08:02:55 AM »

 http://www.ft.com/cms/s/0/03567a28-e8a3-11df-a383-00144feab49a.html#ixzz14VT3P5S8

China has curtly dismissed a US proposal to address global economic imbalances, setting the stage for a potential showdown at next week’s G20 meeting in Seoul.

Cui Tiankai, a deputy foreign minister and one of China’s lead negotiators at the G20, said on Friday that the US plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back “to the days of planned economies”.

“We believe a discussion about a current account target misses the whole point,” he added, in the first official comment by a senior Chinese official on the subject. “If you look at the global economy, there are many issues that merit more attention – for example, the question of quantitative easing.”

China’s opposition to the proposal, which had made some progress at a G20 finance ministers’ meeting last month, came amid a continuing rumble of protest from around the world at the US Federal Reserve’s plan to pump an extra $600bn into financial markets.
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« Reply #90 on: November 06, 2010, 08:36:17 AM »

GM:  I've tried doing the "free registration" thing, but the program is being annoying.  Would you be so kind as to post the whole thing please?  TIA.
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« Reply #91 on: November 06, 2010, 12:04:27 PM »

China tees up G20 showdown with US

By Alan Beattie in Washington, Geoff Dyer in Beijing, Chris Giles in London

Published: November 5 2010 06:56 | Last updated: November 5 2010 19:03

China has curtly dismissed a US proposal to address global economic imbalances, setting the stage for a potential showdown at next week’s G20 meeting in Seoul.

Cui Tiankai, a deputy foreign minister and one of China’s lead negotiators at the G20, said on Friday that the US plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back “to the days of planned economies”.

“We believe a discussion about a current account target misses the whole point,” he added, in the first official comment by a senior Chinese official on the subject. “If you look at the global economy, there are many issues that merit more attention – for example, the question of quantitative easing.”

China’s opposition to the proposal, which had made some progress at a G20 finance ministers’ meeting last month, came amid a continuing rumble of protest from around the world at the US Federal Reserve’s plan to pump an extra $600bn into financial markets.

Officials from China, Germany and South Africa on Friday added their voices to a chorus of complaint that the Fed’s return to so-called quantitative easing would create instability and worsen imbalances by triggering surges of capital into other currencies.

Tim Geithner, the US Treasury secretary, has proposed using what the US refers to as current account “guidelines” to accelerate global rebalancing, partly as a way of changing the debate away from simply pressing China to allow faster appreciation in the renminbi.

But on Thursday and Friday, governments focused instead on the global impact of the Fed’s action. “With all due respect, US policy is clueless,” Wolfgang Schäuble, German finance minister, told reporters. “It’s not that the Americans haven’t pumped enough liquidity into the market,” he said. “Now to say let’s pump more into the market is not going to solve their problems.”

Pravin Gordhan, finance minister of South Africa, a key member of the emerging market bloc, said the decision “undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis”, and ran counter to the pledge made by G20 finance ministers to refrain from uncoordinated responses.

The US Treasury declined to comment on Friday.

Experts say the mood has soured since the G20 Toronto summit in June and worry that unless the summit can patch up differences on trade imbalances and exchange rates, the outlook for international economic agreement is poor.

Ousmène Mandeng of Ashmore Investment Management and a former senior International Monetary Fund official, said: “The G20 will also have to show [in Seoul] it can work on the issue or its very existence will be in question.”

In recent weeks, there had been some hints that China was favourable to the idea of current account targets. Yi Gang, a deputy central bank governor, said China aimed to reduce its surplus to 4 per cent of GDP in the medium-term

But Mr Cui’s comments suggest that China’s senior leaders have decided to reject Mr Geithner’s proposal. “We believe it would not be a good approach to single out this issue and focus all attention on it,” he said.

Separately, the deputy foreign minister also had a stern message for European leaders, warning them not to attend next month’s Nobel Peace Prize ceremony for Liu Xiaobo, an imprisoned Chinese democracy activist.
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« Reply #92 on: November 06, 2010, 08:26:56 PM »


The biggest economic problem we have today is that the US Federal Reserve is run by ideologues that will likely never back away from their erroneous recession-fighting ideas. This is a serious problem because QE2 isn't going to do anything positive for the real US economy, so the Fed will likely decide that yet more QE is necessary. As Noland says, below: "The dilemma for the Fed is that the financial and economic environment will dictate that their policies have minimal impact on both U.S. employment and growth, while providing a major impetus for additional global Monetary Disorder."


Even worse than that, most of the central banks in the world are operating according to the same principles. The Bank of Japan must be run by total lunatics (http://www.reuters.com/article/idUSTOE6A406520101105). I now believe that putting an end to loose money policies is a political impossibility, because the bust side of the cycle will be so severe that politicians and the monetary cranks in central banks will reverse themselves whenever they get the first glimpse of reality. Continued insanity will seem comfortable to these fools until a crisis completely beyond their control intervenes.


Tom


QE2:
The late-July arrival of St. Louis Federal Reserve President Bullard’s monetary policy white paper commenced serious discussion regarding “QE2.” From August lows, the S&P500 has gained almost 18%, the S&P400 Mid-Caps 21%, and the small cap Russell 2000 25%.  Notably, many global market prices have enjoyed even more robust inflation.  Gold is up 19% and silver has surged 50%.  The Shanghai Composite has rallied 22%.  India’s Sensex index rose 18% to a record high.  Copper is up 23% from August lows.  Cotton has surged 80%, sugar 82%, and corn 46%.  The Goldman Sachs Commodities index has gained 21% from mid-August lows.    

In Bill Gross’s latest, he posits that the Fed is “pushing on a string.”  This is not the case.  The current backdrop has little-to-no similarity to the 1930’s; the world is definitely not today stuck in a Credit collapse and deflationary quagmire.  Instead, much of the globe is facing an unrelenting onslaught of financial inflows and heightened inflationary pressures.  Faltering dollar confidence is the prevailing force behind troubling inflationary pressures and strengthening Bubble Dynamics.

Increasingly, “emerging” economy Credit systems have succumbed to overheating, while key developed economies are locked into a perilous cycle of massive non-productive government debt expansion.  Our unsound debt, liquidity and currency dynamics ensure that excess flourishes throughout global Credit systems.   Bubbles are today left to run uncontrolled and undisciplined by a market hopelessly distorted by liquidity overabundance.  Fed policies seemingly ensure that global liquidity goes from extraordinary to extreme overabundance.

The Fed may today be alone in “quantitative easing” through the purchase of domestic government obligations.  Our central bank, however, has considerable global company when it comes to monetization and liquidity creation.  From Bloomberg’s tally we know that global central bank international reserve positions have inflated $1.5 TN over the past 12 months.  That last thing the global financial system needs is an additional shot of liquidity and reason to believe that dollar devaluation will be accelerated.  

In post-announcement analysis of the Fed’s commitment to another $600bn of Treasury purchases, Bill Gross commented on CNBC that “the biggest risk is inflation down the road.”  I again disagree with Mr. Gross.  The greatest risk is a destabilizing crisis of confidence for our nation’s debt obligations.  Our system doubled total mortgage debt in just over six years during the mortgage/Wall Street finance Bubble.  Washington is now on track to double the federal debt load in just over 4 years.  Federal Reserve policy remains instrumental in accommodating a precarious Credit Bubble at the heart of our monetary system.

It seems again worth highlighting a couple key sentences from ECB President Jean-Claude Trichet’s July 22, 2010 op-ed piece in the Financial Times, “Stimulate no more – it is now time for all to tighten”:  “…Given the magnitude of annual budget deficits and the ballooning of outstanding public debt, the standard linear economic models used to project the impact of fiscal restraint or fiscal stimuli may no longer be reliable. In extraordinary times, the economy may be close to non-linear phenomena such as a rapid deterioration of confidence among broad constituencies of households, enterprises, savers and investors.”

The Bernanke Fed is playing with fire here.  QE1 was implemented in an environment of deleveraging, impaired global financial systems and acute economic contraction.  And, importantly, the dollar was enjoying strong performance in the marketplace as global risk markets suffered from de-risking and general outflows.  QE1 had a stabilizing influence, as it worked to accommodate financial sector de-leveraging.  

The QE2 backdrop is altogether different.  Global markets are these days demonstrating robust inflationary biases.  Risk embracement is back in vogue – speculation is rife.  The “emerging economies” and global risk markets have been on the receiving end of massive financial (“hot money”) flows.  Meanwhile, the dollar has been under heavy selling pressure with heightened risk of a crisis of confidence.  This week’s market activity supported my view that the environment would seem to dictate that QE2 will only exacerbate increasingly unwieldy financial flows and unstable global markets.

It has been critical to my analysis that current reflation dynamics are different in kind from those that for the past two decades provided the Federal Reserve the most potent mechanism for domestic monetary stimulus.  In today’s post-mortgage finance Bubble and housing mania backdrop, the Fed has lost much of its capacity to inflate household net worth and spending.  The robust inflationary biases – and fledgling Bubbles – are now in global markets and economies.  The “Core to Periphery” financial flow dynamic has become deeply embedded.

The key dynamic today is one where deep structural U.S. impairment elicits an unprecedented monetary response from our central bank.  Yet the markets anticipate that this liquidity will seek out the inflating asset classes and most robust global economies.  This week, gold climbed to a record high, crude oil to a two-year high, and copper to a 28-month high.  The Shanghai Composite jumped 5.1% this week and India’s Sensex was up 4.9%.  So far, indications support the view that the Fed’s move will further stimulate unfolding global booms.  

Whether it is Asia or the commodities/natural resources economies, QE2 will exacerbate the already powerful financial flows and Bubble fuel.  The U.S. economy is poorly structured to benefit from these new global financial flows, inflation and growth dynamics.  There may be some gain from inflating U.S. stock prices.  Yet the struggling consumer sector is going to get smacked with higher food and energy prices.

In his Thursday op-ed in the Washington Post – “What the Fed did and why: supporting the recovery and sustaining price stability” – Chairman Bernanke argued that “the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability.”  The dilemma for the Fed is that the financial and economic environment will dictate that their policies have minimal impact on both U.S. employment and growth, while providing a major impetus for additional global Monetary Disorder.  A strong case can be made that QE2 will only worsen already unprecedented global imbalances.  Global policymakers must be at their wits’ end.


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« Reply #93 on: November 06, 2010, 08:47:00 PM »

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html   

Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper. Most Germans were taken by surprise by the financial tornado.

"My father was a lawyer," says Walter Levy, an internationally known German-born oil consultant in New York, "and he had taken out an insurance policy in 1903, and every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread." The Berlin publisher Leopold Ullstein wrote that an American visitor tipped their cook one dollar. The family convened, and it was decided that a trust fund should be set up in a Berlin bank with the cook as beneficiary, the bank to administer and invest the dollar.

In retrospect, you can trace the steps to hyperinflation, but some of the reasons remain cloudy. Germany abandoned the gold backing of its currency in 1914. The war was expected to be short, so it was financed by government borrowing, not by savings and taxation. In Germany prices doubled between 1914 and 1919.

After four disastrous years Germany had lost the war. Under the Treaty of Versailles it was forced to make a reparations payment in gold-backed Marks, and it was due to lose part of the production of the Ruhr and of the province of Upper Silesia. The Weimar Republic was politically fragile.

But the bourgeois habits were very strong. Ordinary citizens worked at their jobs, sent their children to school and worried about their grades, maneuvered for promotions and rejoiced when they got them, and generally expected things to get better. But the prices that had doubled from 1914 to 1919 doubled again during just five months in 1922. Milk went from 7 Marks per liter to 16; beer from 5.6 to 18. There were complaints about the high cost of living. Professors and civil servants complained of getting squeezed. Factory workers pressed for wage increases. An underground economy developed, aided by a desire to beat the tax collector.

On June 24, 1922, right-wing fanatics assassinated Walter Rathenau, the moderate, able foreign minister. Rathenau was a charismatic figure, and the idea that a popular, wealthy, and glamorous government minister could be shot in a law-abiding society shattered the faith of the Germans, who wanted to believe that things were going to be all right. Rathenau's state funeral was a national trauma. The nervous citizens of the Ruhr were already getting their money out of the currency and into real goods -- diamonds, works of art, safe real estate. Now ordinary Germans began to get out of Marks and into real goods.

Pianos, wrote the British historian Adam Fergusson, were bought even by unmusical families. Sellers held back because the Mark was worth less every day. As prices went up, the amounts of currency demanded were greater, and the German Central Bank responded to the demands. Yet the ruling authorities did not see anything wrong. A leading financial newspaper said that the amounts of money in circulation were not excessively high. Dr. Rudolf Havenstein, the president of the Reichsbank (equivalent to the Federal Reserve) told an economics professor that he needed a new suit but wasn't going to buy one until prices came down.

Why did the German government not act to halt the inflation? It was a shaky, fragile government, especially after the assassination. The vengeful French sent their army into the Ruhr to enforce their demands for reparations, and the Germans were powerless to resist. More than inflation, the Germans feared unemployment. In 1919 Communists had tried to take over, and severe unemployment might give the Communists another chance. The great German industrial combines -- Krupp, Thyssen, Farben, Stinnes -- condoned the inflation and survived it well. A cheaper Mark, they reasoned, would make German goods cheap and easy to export, and they needed the export earnings to buy raw materials abroad. Inflation kept everyone working.

So the printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."
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« Reply #94 on: November 07, 2010, 08:12:05 AM »



http://www.bloomberg.com/news/2010-10-15/fed-japan-treasury-holdings-set-to-surpass-china-chart-of-the-day.html
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« Reply #95 on: November 07, 2010, 08:27:25 AM »

http://www.bloomberg.com/news/2010-10-13/japan-will-be-forced-to-default-greek-economy-done-hayman-s-bass-says.html

Subprime Soothsayer Bass Says Japan to Default on Debt as Economy Unravels

Japan will be forced to default on its debt, Greece’s economy is “done” and Iceland is worse off than Greece, said J. Kyle Bass, the head of Dallas-based Hayman Advisors LP who made $500 million in 2007 on the U.S. subprime collapse.

Nations around the world will be unable to repay their debt and financial austerity in a country such as Ireland is “too late,” Bass said today at the Value Investing Congress in New York.

Japan’s economy may unravel in the next two to three years, and its interest payments will exceed revenue, he said. “Japan can’t fund itself internally,” Bass said.

The country’s year-over-year gross domestic product was 2.4 percent as of June 30. It has the world’s largest public debt, approaching 200 percent of its GDP amid a 5.1 percent jobless rate. Consumer price fell by one percent in September and has been negative each month since May 2009, as deflation has taken hold.
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« Reply #96 on: November 07, 2010, 09:50:31 AM »

http://www.telegraph.co.uk/finance/comment/jeremy-warner/8111918/The-age-of-the-dollar-is-drawing-to-a-close.html

As we now know, dollar hegemony was itself a major cause of both the imbalances and the crisis, for it allowed more or less unbounded borrowing by the US from the rest of the world, at very favourable rates. As long as the US remained far and away the world's dominant economy, a global system based on the dollar still made some sense. But America has squandered this advantage on credit-fuelled spending; with the developing world expected to represent more than half of the global economy within five years, dollar hegemony no longer makes any sense.

The rest of the world is now openly questioning the merits of a global currency whose value is governed by America's perceived domestic needs, while the growth that once underpinned confidence in its ability to repay its debts has never looked more fragile.

Already, there are calls for alternatives. Unwilling to wait for one, the world's central banks are beginning to diversify their currency reserves. This, in turn, will eventually exert its own form of market discipline on the US, whose ability to soak the rest of the world by issuing ever more greenbacks will be correspondingly harmed.

These are seismic changes, of a type not seen for a generation or more. I hate to end with a cliché, but we do indeed live in interesting times.
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« Reply #97 on: November 07, 2010, 11:13:45 AM »

http://www.telegraph.co.uk/finance/currency/8111920/China-leads-backlash-against-US-stimulus-as-risk-of-currency-war-protectionism-grows.html

China leads backlash against US stimulus as risk of currency war, protectionism grows
China led an Asian backlash against US measure to boost an economic recovery which has stoked concerns that a flood of 'hot money' could destabilise regional economies.
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« Reply #98 on: November 07, 2010, 08:37:41 PM »

http://www.gainspainscapital.com/index.php?view=article&catid=39:stocks&id=182:graham-summers-weekly-market-forecast&tmpl=component&print=1&layout=default&page=

Check out the charts. Outside my area of knowledge, but it doesn't look good.
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« Reply #99 on: November 08, 2010, 12:00:21 PM »

Some interesting analysis here of the accuracy of govt. data and alternative data is offered:

http://www.shadowstats.com/
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