Friday, August 26, 2011

The Condition of the Patient

November 2, 2007

The 166,000 increase in nonfarm payroll employment in October reflects the great resilience of the U.S. economy, Congressman Jim Saxton, ranking member of the Joint Economic Committee, said in a statement today.

Here's an update.

The following chart shows the federal funds rate minus the 3 month treasury bill yield. As of January 2009, both the federal funds and the three month treasury have flatlined.

Click to enlarge.

Source Data:
St. Louis Fed: Custom Chart


Troy said...

Reading that rah-rah PR I'd like to utter a solid 30 seconds of curse words at these mofos.

St Louis Fred chart names are sorta dry, save for PAYEMS. I love that one, and it does show that Peak Jobs was late 2007.

If the ranking member had bothered to look at Z.1 he'd have seen numbers to scare the bejesus out of him.

I forget when I first discovered the FOF report -- sometime in 20078 -- but that was what opened my eyes to the reality of what the system was doing.

Change in household mortgage debt:

2000 +8.7%
2001 +10.6%
2002 +13.3%
2003 +14.6%
2004 +13.5%
2005 +13.3%
2006 +11.1%
2007 +6.8%
2008 -0.5%
2009 -1.5%
2010 -2.8%

falling interest rates created the boom but it was momentum that gave us the bubble.

Stagflationary Mark said...


I couldn't agree more.

December 7, 2007
Rocketing Housing Debt (Musical Tribute)

The combination of position, velocity, and acceleration helped to see that things would likely be heading south.

Stagflationary Mark said...

As a side note, the chart in this post tells me one thing.

We're very much trying to follow the steps of Japan. Their discount rate has been pretty much flatlined for 15 years. See here.

Is it any wonder that I was willing to lock in long-term TIPS? We could very well pull it off with some actual inflation, at least in theory.

Jazzbumpa said...

falling interest rates created the boom

I disagree. Falling rate were certainly an enabler, but the real problem was giving "liar loans" and all sorts of other deals to people who couldn't possibly service them.

It's been disinflation for decades, but the sensible policy of the 60's/70's - overextend yourself now, and inflation will bail you out - has been unsound since 1982.

The root cause - and libertarians will hate me (I welcome their hate) - is a lack of regulations.

Contra Rick Perry, one of the good things Texas has going for them is tighter mortgage regs than most of the rest of the country.


Jazzbumpa said...



Stagflationary Mark said... Irresponsibility

No single raindrop believes it is responsible for the flood.

I blame falling interest rates for enabling the seemingly painless accumulation of debt.

I blame trickle down economics for enabling the seemingly painless growth in income inequality (for the non-poor majority anyway).

I blame Japan style Keynesian economic theories for enabling the seemingly painless can kicking in the aftermath of the dotcom bubble (and now the housing bubble).

I blame some anti-regulation for enabling businesses to put their own interests ahead of society as a whole (as can be seen in the greed/fraud within the mortgage industry at the peak of the housing bubble).

I blame the general disdain of math for enabling the belief in long-term exponential trends that are/were GUARANTEED to fail. See long-term employment, LA area port traffic, and real GDP growth trends to name but a few. If economist Jeremy Siegel can't even predict these failures before they occur, then what hope does the typical American have?

But most of all, I blame all of us for wanting something for nothing. We are the ultimate enablers. Government, China, and Wall Street wouldn't be where they are without our help. They all sell the illusion of prosperity and we all keep buying it.

That's pretty much a summary of my beliefs and the basis of this blog.

Stagflationary Mark said...

I blew the quote. I was on the PS3 and could not see the original as I typed it. But hey, as they say... it was close enough for government work, lol. Sigh.

No single raindrop believes it is to blame for the flood.

Troy said...

Yup. I don't blame the system, I blame us.

We aren't really that smart, collectively. A democracy is lucky to get policy that corresponds to 100 IQ I guess.

(que Hitler's observation that democracies are fatally flawed because both a genius and an idiot have one vote)

As for:

"Falling rate were certainly an enabler, but the real problem was giving "liar loans" and all sorts of other deals to people who couldn't possibly service them"

I was talking about the boom. In most places the boom of 1999-2003 was sustainable, mostly.

The Fed had been tapping the brakes 1999-2001, so dropping interest rates from 8% to 5% did free up a lot of spending power that naturally bid up prices.

It was the bubble of 2004-2005 that was the excess, and, yes, sloppy/corrupted FIRE practices were greatly contributory to that.

Real estate is a curious thing. I only sensed how odd it was for most of my life, only since 2002 have I understood it to be "the mother of all monopolies", in Churchill's words.

Stagflationary Mark said...


A democracy is lucky to get policy that corresponds to 100 IQ I guess.

Oh man, the sun is out today and you just had to go and say something like that!

Back at you.

In order to be a really good politician you must devote your life to learning skills that are political. So what skills are probably lacking?

George W's Love-Hate Affair with Yale

"To those of you who received honors, awards and distinctions, I say, 'Well done,'" he told Yale graduates before breaking into a grin. "To the 'C' students, I say, 'You, too, can be president of the United States.'"

Anonymous said...

"However, being based on Ponzi dynamics, credit expansions and speculative manias are naturally self-limiting. Credit expansions proceed until the debt they generate can no longer be serviced, and there are no more willing borrowers and lenders to continue lending money into existence. Speculative manias continue until the greatest fool has committed himself to the exhausted trend, and no one remains to push prices up further."

Stagflationary Mark said...


From your link...

We stand on the verge of a precipice. The effects of the first real liquidity crunch for decades will be profound. We are going to see prices fall across the board, but far fewer will be able to afford goods or assets at those lower prices than can currently afford them at today's lofty levels.

I think there is a high probability that we continue to slide into Japan's mess (as can be seen in my latest post).

Zombie Bank Construction Kit

Stagflationary Mark said...

As seen here

Japan's inflation rate averaged 0.0% per year from 1993 to 2011.

I do not think it was a coincidence. I think it was by design. If the inflation rate can be permanently kept at 0.0% (big if), then an infinite amount of money can be borrowed.