I live in the USA and I am concerned about the future. I created this blog to share my thoughts on the economy and anything else that might catch my attention.
If we could just get debt flowing again to over-indebted households everything would be peachy! Unbelievably, this line of thinking is taken seriously.
It starts with bad history....... and illusion of posterity!
The new line of thinking is to derivatize all the debt, index the derivatives, hedge all the bets and have the Fed back the clearing houses and the TBTF. Derivatives to infinity! Who needs Mars when the American taxpayer will be backing the debt of the entire planet! This is a snarky synopsis of the one too many Dodd-Frank seminars I've attended.
Add the underlying debt plus all the derivatives at notional because absolutely everyone knows their bet is good because they're using the "winnings" as collateral on additional lending. It really is an infinity system. Everyone from the Fed to the regulators and our financial elite (including their attorneys) agrees that this will add stability to the financial system once a few bugs are worked out. Not kidding.
I believe our problems are not monetary and monetary solutions will make our problems worse.
The $15T rise in debt 2001-2007 was a close simulation of monetary solutions, but all those jobs went away when the debt stimulus was lost when the mortgage bubble popped in 2007.
The trade deficit is currently ripping $600B/yr right out of our paycheck economy. Throwing money at the masses, even if the Fed could do so, would just be a palliative.
To fix things is going to require addressing the foundational imbalances in the economy, the asymmetric flows OUT of the working class -- in housing, energy, and medical care.
Those are the true "headwinds", the gauntlet of rent-taking the middle class faces every day.
Heck, I'm beginning to believe government spending is part of the problem too; not counting SSA pensions, government is spending $50,000 per household. Notionally, there should therefore be one government job per household, no? Where is this money going???
Setting policy is Congress' job and Congress is going to have to fix things eventually. The Fed cannot fix things, they tried that 2002-2004 and look where that got us.
I think wisdom from economics studies begins and ends there.
And i think the entire profession has been bought off and/or cowed to obfuscate this reality.
All the surviving Marxist BS in academia is just Orwellian false-alternative cranked up to smoke up the field, crowding out any other heterodox alternatives. (I read somebody make that assertion some months ago and it made sense)
I think Michael Hudson borders on crankdom, but he put in a good word for Steve Keen recently so that is heartening, that two heterodox peeps I tend to respect are on the same page.
The Fed's desire is not to"fix" anything or to cure anything. The good Doctor's sole intention is to make the patient believe he is gravely ill and must place all his faith and support in the hand's of the good doctor...or else.
What they really do is reward Wall Street and create an illusion of prosperity.
ReplyDeleteThat was a tempting quote too, but I felt I was too biased to offer an objective opinion, lol. Sigh.
It's all for the greater glory of Wall Street!
ReplyDeleteIf we could just get debt flowing again to over-indebted households everything would be peachy! Unbelievably, this line of thinking is taken seriously.
It starts with bad history....... and illusion of posterity!
mab,
ReplyDeleteIt starts with bad history....... and illusion of posterity!
Nice, lol. As you know, I am a sucker for puns.
If the end is crappy....... then so too the illusion of posteriority!
The new line of thinking is
ReplyDeleteto derivatize all the debt,
index the derivatives, hedge all
the bets and have the Fed
back the clearing houses
and the TBTF.
Derivatives to infinity!
Who needs Mars when the American
taxpayer will be backing
the debt of the entire planet!
This is a snarky synopsis of the
one too many Dodd-Frank seminars
I've attended.
dd,
ReplyDeleteNo worries. I have $600 trillion in my couch no doubt. Just gotta flip it upside down and let the loose change fall out.
Here's some more good news. My margin of error is +/- $600 trillion which could very well mean that I have $1200 trillion in there! Woohoo! ;)
Add the underlying debt plus
ReplyDeleteall the derivatives at notional
because absolutely everyone
knows their bet is good because
they're using the "winnings"
as collateral on additional
lending. It really is an
infinity system. Everyone from
the Fed to the regulators
and our financial elite
(including their attorneys)
agrees that this will add
stability to the financial
system once a few bugs are
worked out.
Not kidding.
comment at DeLong's:
ReplyDeleteI believe our problems are not monetary and monetary solutions will make our problems worse.
The $15T rise in debt 2001-2007 was a close simulation of monetary solutions, but all those jobs went away when the debt stimulus was lost when the mortgage bubble popped in 2007.
The trade deficit is currently ripping $600B/yr right out of our paycheck economy. Throwing money at the masses, even if the Fed could do so, would just be a palliative.
To fix things is going to require addressing the foundational imbalances in the economy, the asymmetric flows OUT of the working class -- in housing, energy, and medical care.
Those are the true "headwinds", the gauntlet of rent-taking the middle class faces every day.
Heck, I'm beginning to believe government spending is part of the problem too; not counting SSA pensions, government is spending $50,000 per household. Notionally, there should therefore be one government job per household, no? Where is this money going???
Setting policy is Congress' job and Congress is going to have to fix things eventually. The Fed cannot fix things, they tried that 2002-2004 and look where that got us.
I am fearful.
dd,
ReplyDeleteI hear you. No joke.
Troy,
ReplyDeleteThe Fed cannot fix things...
I told my girlfriend that very thing last night.
There's an *illusion* of the Fed being able to fix things.
"Where is the money going???" is my mantra.
ReplyDeleteI think wisdom from economics studies begins and ends there.
And i think the entire profession has been bought off and/or cowed to obfuscate this reality.
All the surviving Marxist BS in academia is just Orwellian false-alternative cranked up to smoke up the field, crowding out any other heterodox alternatives. (I read somebody make that assertion some months ago and it made sense)
I think Michael Hudson borders on crankdom, but he put in a good word for Steve Keen recently so that is heartening, that two heterodox peeps I tend to respect are on the same page.
http://michael-hudson.com/2012/05/paul-krugmans-economic-blinders/
Troy,
ReplyDeleteAnd i think the entire profession has been bought off and/or cowed to obfuscate this reality.
As a former software programmer, obfuscate is such a powerful word.
The Fed's desire is not to"fix" anything or to cure anything. The good Doctor's sole intention is to make the patient believe he is gravely ill and must place all his faith and support in the hand's of the good doctor...or else.
ReplyDeleteFatboy,
ReplyDeleteThe good doctor always prescribes hairs of the dogs which bit us. These days, he's handing us entire pelts, lol. Sigh.
Mark,
ReplyDeleteIs that like pelting us with pelts?
nanute,
ReplyDeleteWe're "trapped" and there's no place to "hide"!