The Credit Crisis Financial Stocks Short Journal

[Ghost of Cutten]

Quote from Martinghoul:

I don't see how this is circular. The danger of "just printing away" is that a wage-price cycle eventually gets ignited and that's when things get unpleasant.

No, that is one way it can be harmful. The other way is by asset price inflation aka bubbles, and the subsequent inevitable economic busts. Surely after the last decade it is no longer a matter of controversy that asset price bubbles are extremely harmful, arguably just as much if not more so than wage/price inflationary spirals. The recession of 2008 was worse than the one in the early 90s or early 80s, after all.

We know the cause, we know the results, we know the cure. Why are we doing the same thing again? Why are people trying to pretend as though 2003-2009 didn't happen, and repeating the same error?

 

[Martinghoul]

Quote from Ghost of Cutten:
No, that is one way it can be harmful. The other way is by asset price inflation aka bubbles, and the subsequent inevitable economic busts. Surely after the last decade it is no longer a matter of controversy that asset price bubbles are extremely harmful, arguably just as much if not more so than wage/price inflationary spirals. The recession of 2008 was worse than the one in the early 90s or early 80s, after all.

We know the cause, we know the results, we know the cure. Why are we doing the same thing again? Why are people trying to pretend as though 2003-2009 didn't happen, and repeating the same error?

Right, which central bank was guilty of the "printing away" that generated the latest asset bubble?

I mean, honestly, can we pls stop trivializing the crisis? It really pisses me off that people can't deal with complicated explanations. Everyone wants to blame one specific agency or person, which is the absolute pinnacle of silliness. It just ain't that simple.

 

[ammo]

Quote from Ghost of Cutten:

No, that is one way it can be harmful. The other way is by asset price inflation aka bubbles, and the subsequent inevitable economic busts. Surely after the last decade it is no longer a matter of controversy that asset price bubbles are extremely harmful, arguably just as much if not more so than wage/price inflationary spirals. The recession of 2008 was worse than the one in the early 90s or early 80s, after all.

We know the cause, we know the results, we know the cure. Why are we doing the same thing again? Why are people trying to pretend as though 2003-2009 didn't happen, and repeating the same error?

now as it was then, we can't handle the truth,financially,so we do this,we would have to let the major banks go under,and they are in charge,a.k.a Benny,they have never been known to think of others first,only the big picture$$$$$

 

[Daal]

Quote from Martinghoul:

Not if Uncle Axel has anything to say on the matter.

If he becomes president than the EU is fucked, Japan outcome maybe worse. As of yet he is just a hoenig complaining, I dont believe he can get a hike out of the other members without a very good reason

Its really funny how they point to the headline inflation being above 2% but they never embarked on QE(or zero rates) back when headline EU inflation was quite negative during the post-lehman period

 

[Martinghoul]

Quote from Daal:
If he becomes president than the EU is fucked, Japan outcome maybe worse. As of yet he is just a hoenig complaining, I dont believe he can get a hike out of the other members without a very good reason

Well, methinks you're a bit behind the times, Daal... Uncle Axel is far from being a lonely voice in the desert. There's a whole bunch of them, e.g. Mssrs. Mersch, Bini-Smaghi, Wellink, Stark, with some others leaning that way. There's every reason to believe that they won't hesitate.

 

[Daal]

Quote from ralph00:

The economic data from all quarters is breathtaking this morning. Look around. The evidence is clear that Bernanke w/assists from the PBOC, BoE, and ECB have unleashed another inflationary boom, soon to be bubble. Tightening to come in the U.K. and Europe before summer. Bernanke is a truly misguided academic bureaucrat who will never admit a mistake, thus I expect US policy to stay easier for far longer.

There is not much inflation in the US ex-food and energy, I posted a while back many links to alternative inflation measures that are FAR superior in predicting future inflation than the noisy headline CPI, they are all either at lows or close to lows

 

[ralph00]

Quote from Martinghoul:

Well, methinks you're a bit behind the times, Daal... Uncle Axel is far from being a lonely voice in the desert. There's a whole bunch of them, e.g. Mssrs. Mersch, Bini-Smaghi, Wellink, Stark, with some others leaning that way. There's every reason to believe that they won't hesitate.

Not to mention Trichet who is on the record saying the ECB does not subscribe to the Fed's moronic views that "core" inflation is a valid measure. Now 75-100 points of tightening baked into euribor futures before the end of the year.

CPI with or without core is a terribly flawed measure in any case as excess money creation can show up in any number of things. In the 70s, it was wages, in the late 90s, internet IPO market and telcos, last decade real estate, now commodities and russell 2000. I really like the example of the Swedish Central Bank this cycle who are openly admitting they are targeting asset prices.

 

[Daal]

Quote from ralph00:

Now 75-100 points of tightening baked into euribor futures before the end of the year.

This could easily be due expectations of more stress in the money markets

 

[Martinghoul]

Quote from ralph00:
Not to mention Trichet who is on the record saying the ECB does not subscribe to the Fed's moronic views that "core" inflation is a valid measure. Now 75-100 points of tightening baked into euribor futures before the end of the year.

CPI with or without core is a terribly flawed measure in any case as excess money creation can show up in any number of things. In the 70s, it was wages, in the late 90s, internet IPO market and telcos, last decade real estate, now commodities and russell 2000. I really like the example of the Swedish Central Bank this cycle who are openly admitting they are targeting asset prices.

Well, I don't think it's quite as simple as all that, tbh... There's all sorts of views out there and we can, yet again, launch into a heated discussion of what's right and what ain't.

As to the RiksBank, the situation is not that clear cut. The RB board atually has a whole range of views on the matter. In general, every CB is struggling to find ways to incorporate the whole macro prudential aspect into their monetary policy. As an extreme example, the ECB actually doesn't give a rat's a** about asset prices. All they care about is the headline HICP number and that's it. That's one of the reasons the allowed Spain and Ireland to get so f*cked up. SNB doesn't give a rat's a** either and, pretty much, already have a forming housing bubble on their hands. Some people on the RiksBank board, including Gov. Ingves, care about the housing mkt a lot. Others, like Svensson and Ekholm (who, incidentally, is a babe, IMHO), actually don't. So it's complicated.

Quote from Daal:
This could easily be due expectations of more stress in the money markets

No, dude, this is hikes being priced in. EONIA now pricing 3 hikes by December.

 

[ralph00]

The fact that there are a range of views in Sweden is healthy IMO. I find it curious how some folks (won't mention names) run around beating their chests because nobody dissents from Bernanke's insane policy. Dissent is a good thing - it causes folks to think. Nothing frightens me more about a law than when the Senate votes 98-0 in favor. Greenspan never had even one dissenter in all the years he was serially blowing worldwide bubbles.

In other news, it looks like the BoE's MPC may have its 3rd vote in favor of hiking. Dep Gov Bean had some rather hawkish comments last night or this morning. That would make it 5-3-1 in favor of steady policy at next meeting. Rate hike is a done deal soon.

Too lazy to look it up, but I recommend M. King's speech last week in which he told UK consumers they're fucked by higher prices, but there's nothing anyone should expect him to do about it (because preserving banker pay is more important). Remarkable stuff. If Cairo were to spread to Dublin or London or NYC tomorrow, it wouldn't surprise me a bit.