My way of fighting the fed, I cannot sit still anymore

[fearless9]

Quote from HolyGrail:

I'm a firm believer in NOT FUCKING with the normal business cycle. Recessions are good, and they help clean up the mess caused by excesses in various parts of the economy.

That being said, we have already fucked with the business cycle and we are now being FORCED to conitinue this terrible policy. Our only hope is that the economy will absorb the shock over the coming years. We are definitely robbing peter to pay paul but it could work. There is no question we have no other choice now.

I stand in your corner HolyGrail.

US economy is a mature economy and has been so far distorted out of shape that nobody can really tell you what that shape should be any longer.
Then there is the financial hole, the depth and breadth of which nobody really knows.

And so, I imagine, the plan will be to first stop digging ( no more creation of bad paper) and then to take each shock as it comes and use the Fed to spread it over as many years as it takes.

Right now, US is in the early stages, as the shocks have not began to be apparently cumulative. ie shock on shock on shock.
That is yet to come.

Given that the super rich remain just that, and the poor remain just that, this enormous load must be borne by the middle class from the wealthy to the not so wealthy.
The next 5+ years of living in the US will be bleak to say the least for most people.

The thought of allowing US to drop into recession has long passed by as an option, the hole is too dark and too deep.
And indeed options other than the current course have long passed their useby dates.

Any comparisons with Japan will bear no fruit.
Japan is not an open society and naturally will see its problems in a very Japanese way.

Argentina and Brazil are commodity countries supplying Asia ... excellent timing for their 2001 crashes.
2007 Y on Y Argentia grew 9.1% and its tax take grew at 4* that rate.

1997 asia crisis happened amongst emerging economies.

This mess in US is happening within a mature economy and an increasingly under employed work force.

regards
f9

 

[Landis82]

Quote from achilles28:

Would it surprise you to know the Top 15 US Banks sit on nearly Half-A-Trillion in retained earnings, alone?

Go check their balance sheets. I encourage you.

Most enjoyed consecutive YoY profits since 2005. And only a small few had a bad quarter ever since.

Keep in mind, these are massive institutions earning billions every quarter - all during this sub prime "contagion"! And if thats not enough, they're sitting atop massive cash reserves!!

Now, consider the total theoretical exposure from sub prime - worst case.

400 Billion? 700 Billion?

Say a Cool Trillion.

Just the top 15 Banks in America ALONE could shoulder half that loss. Some of course would go under. Some would not.

That leaves the other 100 or so American Banks to step up and fill their shoes.

What I see is economic fear mongering to justify Government bailouts.

Financial balance sheets are padded to the max and these guys are screaming "Cataclysmic Meltdown"! "Rampant Deflation"!!! ECONOMIC ARMAGEDDON!!

Yet, we still see blank ink, YOY, QoQ, with lots of cheddar to spare.

The only pie-in-the-sky proposition is yours - the bail out of distressed institutions. That worked well in Japan, didn't it?

Whether you choose to accept it or not, recessions and bankruptcies are an established fixture in the natural cycle of business recovery.

You shout - its too big to fail!

I say bullshit. Its a mathematical impossibility.

Bear Stearns just folded with a balance sheet of $350 BILLION. Take a guess ( genius ) as to who else and how much more would go under if the FED sat idly by in the last 48 hours?

The amount would be staggering.
And the contagion wouldn't be simply centered here in the U.S.

Again, your views are extremely simplistic given the MAGNITUDE of the current situation because your claim that this is a "mathematical impossibility" is not known to be a fact as you claim.

 

[makloda]

Ok guys, I can't take it anymore. I wrote this to my congressman:

"Dear Sir, I can't take wheat, crude and corn soaring to new highs while all that Bernanke seems to care about is bailing out the fat cats on Wall Street. Who cares about Bear Stears going belly up?

I urge you to force chairman Bernanke to take the Fed Funds rate to 8% on first thing on Monday morning, and thus send the major money center banks into bankruptcy, we seriously have to "clean out the system" of all these over-leveraged speculators at C, JPM, BAC and WB and finally bring down oil prices and stop the rampant inflation which are a lot more important long-term than a major meltdown of the US banking system!"

 

[risktaker]

Credit creation for what purpose?
To buy overpriced houses?
To buy cars? Look at your street...they're all new with 7 year loans to boot!
To go on vacation? Ha! $ is a little cheap.
For businesses to expand production with a recession here?

So, what good will "credit creation" do when nobody wants/needs it except the banks/brokers?

That's just it. This whole lower rate BS is designed to save their asses.

The FED and Bush just pander to the rich elite and nobody gives a shit for the average guy as long as the top cocksuckers like Nardelli and Mozillo are allowed to steal $millions.

Quote from Landis82:

It's about replacing bad collateral with good collateral so that credit creation can get going again. That is the basis for economic growth.

 

[BoyPlunger]

What's funny is that you are trying to be sarcastic but you're actually not.
As painful as a breakdown of the banking system is, a breakdown of the currency is much worse. I am curious to see what you and your ilk will say when we see the full effect of this monetization of bankruptcy play itself out.

Quote from makloda:

Ok guys, I can't take it anymore. I wrote this to my congressman:

"Dear Sir, I can't take wheat, crude and corn soaring to new highs while all that Bernanke seems to care about is bailing out the fat cats on Wall Street. Who cares about Bear Stears going belly up?

I urge you to force chairman Bernanke to take the Fed Funds rate to 8% on first thing on Monday morning, and thus send the major money center banks into bankruptcy, we seriously have to "clean out the system" of all these over-leveraged speculators at C, JPM, BAC and WB and finally bring down oil prices and stop the rampant inflation which are a lot more important long-term than a major meltdown of the US banking system!"

 

[Pa(b)st Prime]

Quote from Landis82:

Bear Stearns just folded with a balance sheet of $350 BILLION. Take a guess ( genius ) as to who else and how much more would go under if the FED sat idly by in the last 48 hours?

The amount would be staggering.
And the contagion wouldn't be simply centered here in the U.S.

Again, your views are extremely simplistic given the MAGNITUDE of the current situation because your claim that this is a "mathematical impossibility" is not known to be a fact as you claim.

Magnitude? Then where's Trichet?

This is no diff than 1970. DuPont, Goodbody, Irving Trust, Penn Central. MUCH bigger than friggin Bear Stearns. How did Burns and the Nixon admin respond? Much the same way. While fighting an expensive war (just like now) to boot. The result? A decade of inflation/stagflation/down stocks/job loss/weak dollar ect. Misery. In fact they called those inflation meters the Misery Index. History repeats.

You all have defended this misguided approach since August. Has it helped? Not an iota. And it's not even close to resolution. The asset depreciation crisis is bigger than the Fed.

It used to be the wisdom behind bank bailouts was protection of depositors and the FDIC. Now bailouts extend to IB's and brokerages.

Obviously Makoda is clueless but jeez Wags, you're one of the best market historians here. Don't EVER underestimate the probability that we fail ala' Argentina. They went down with debt to GDP minuscule to the U.S.

 

[austinp]

<i>"You all have defended this misguided approach since August. Has it helped? Not an iota. And it's not even close to resolution. The asset depreciation crisis is bigger than the Fed."</i>

Helluva long way from done... the fallout is just getting started. Admirable efforts by the fed, but it's akin to butterfly bandaids on a decapitation.

Enough money cannot be printed to bail out all of the global banks in over their heads in faulty debt.

Doesn't matter who is to blame for what in the credit crisis. It is what it is now. More debt than money exists. Tipping that fulcrum back to black did not happen today.

 

[makloda]

Quote from BoyPlunger:
As painful as a breakdown of the banking system is, a breakdown of the currency is much worse.

As far as I know the treasury department is in charge of setting the Dollar policy, not the Fed.

 

[kashirin]

Quote from makloda:

As far as I know the treasury department is in charge of setting the Dollar policy, not the Fed.

Makloda, you're the biggest idiot ever

Fed prints money - and money is the main thing what determines currency value

Fed prints hundreds of billions every day and dollar goes down

Fed buys treasuries with freshly printed money and yeilds go down

Then such idiots like you and Landis think that Fed is behind the curve although Fed just manipulates with treasuries prices - if you think it's conspiracy - try to read Bernane works - he clearly mentiones - Fed should put cap on treasuries prices by buying them if it wants

And yes they cooked today CPI number to prevent market crash before Bear sterns announcement

 

[scriabinop23]

Quote from kashirin:

Makloda, you're the biggest idiot ever

Fed prints money - and money is the main thing what determines currency value

Fed prints hundreds of billions every day and dollar goes down

Fed buys treasuries with freshly printed money and yeilds go down

Then such idiots like you and Landis think that Fed is behind the curve although Fed just manipulates with treasuries prices - if you think it's conspiracy - try to read Bernane works - he clearly mentiones - Fed should put cap on treasuries prices by buying them if it wants

And yes they cooked today CPI number to prevent market crash before Bear sterns announcement

You must be a nice guy to know in person. Are you tamer when not hiding behind a computer?