I wanted to say special thanks to reader Lisa who deposited $2.38 into the Economic Disconnect account for safekeeping instead of T-Bills. I am currently trying to decide how best to apply my .04 cent cut and its a toss up between 1/450th of an ounce of silver or gunning SPY mini futures for a huge low volume gain. Any suggestions?
A Word About FED Transparency
While I am glad the better version of the Audit the FED bill passed (everyone from Massachusetts voted against it of course!) it is still a long way from becoming a reality. Who knows how much pressure will be put on politicians to kill this off by the FED and the banks before final passage. I would also add that it is my belief that even if passed, the FED will just decide to not comply, and I see no mechanism to make them do so. Still, a large victory today for better information.
Friday Night Litmus Tests
There come times when one has to figure out what they believe and where they stand. These times can be about many things and I think we are nearing a point where how you look at things finance will be faced with such a time.
Tonight I will present two articles that serve as a type of "litmus test" for economic thinking. How you respond to the ideas and opinions in the articles will say quite a bit about how you see policy.
The first article was posted at Naked Capitalism this morning penned by Marshall Auerback with some comments by host Yves Smith. When I read the piece this morning all I can say is that my reaction was heated to say the least. You should read the entire article for all the choice quotes, but I will submit a few here to get you started:
Does US Need a Second Stimulus to Create Jobs?Quite the start ,yes? More deficits, jobs for anyone that wants one, and full benefits for wards of the state. Forget for one moment the pie in the sky dreaming going here to think that the 10% unemployed in this country could or would take minimum wage jobs and that this in any way would save anything, what is the writer getting at? Is spending really unlimited? I have wrestled with this topic forever it seems. Moving on:
What we desperately need to do is to increase our deficit by several percentage points of GDP and offer public sector jobs to all those who want one. Government as Employer of Last Resort is one idea I have been pushing (along with Randy Wray, Bill Mitchell and a host of other people). As I said in an earlier post,
The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system.
Obama’s attempts at deficit expansion to date have been pitiful.
The US Government is a monopoly issuer of the US dollar and is not revenue-constrained The facts I presented above would tell anyone who knows the slightest bit about how our currency operates that anyone who talks about “neutral deficit” outcome at present is an irresponsible lunatic.I am a lunatic. More:
I do not, as the caricatures suggest, advocate completely unrestrained government spending, paying no heed to inflation. But inflation is the constraint on government spending, not a uninformed ideas about ’solvency’.i will be honest, I have no idea what the writer is talking about here.
People who think that investors will lose confidence in the US Government and somehow that will stop them spending even more because your spending is helping to put some semblance of a floor into aggregate demand which is retarding the jobs loss somewhat? If you think that tell Larry to close Mankiw for a while and learn something about how your monetary operations actually work.
The other dubious idea is that the government spending gets conflated with some idea of “fiscal insolvency”.
I can certainly see how government overspending creates inflation, but is that what you mean by “fiscal insolvency” in the sense that the inflation represents the de facto default?
That to me is a separate issue.
The inflation would be from too much aggregate demand and a too small output gap.
That would mean that fatefull day would be an economy with maybe 4% unemployment and 90%+ capacity utilization and an overheating economy in general.
My quick summary (and I may have the writers angle all wrong) is that there is no constraint on government spending as long as inflation is low. Solvency is a state of mind, not a numbers condition.
All I can say is Wow. I look forward to the readers comments on this one, but I think you can guess that I disagree with about all of the article. The comments section at Naked Capitalism for that post was full of great interplay and you should check that out as well. Tell me what you think and think about how this serves as a litmus test for your own ideas.
The second item relates to the T-Bill rates I posted on yesterday. As I noted Zero Hedge had picked up on it (as well as many others) and I found significance in such a rare event myself. Negative rates on short term money is very strange, unless you think it is not.
I always find it fascinating that as soon as Zero Hedge posts something people go nuts trying to show that the writers there are either wrong or crazy.
Moving on, if you are John Janzen of Across the Curve or Calculated Risk, you think this is just normal operations of the T-Bill market and any attention to it is a waste of time:
More on Negative T-Bills
On Negative T-Bills
Of course, it is hard to find one FED action Across the Curve does not think is "normal" and Calculated Risk stopped offering opinions on much of anything a long time ago.
So, was this story worth some attention or was it just a normal T-Bill market phenomena? What do you say?
Friday Night Entertainment
Next week is Thanksgiving, so lets try and set up the short week with some frivolity!
In my never ending quest for Google search hits......
Always remember to "clear history" and "clear temporary internet files". Just do it or else:
see more Lolcats and funny pictures
With all the rage about the next "Twilight New Moon" film, you may want to make sure your daughters do not buy these promotional underwear:
see more Epic Fails
A craven attempt to influence your weekend movie selections!
While I think many of Stephen King's horror novels hardly ever translate to good film (think Pet Semetary) his more thoughtful works always tend to make stellar films (think Shawshank Redemption). Perhaps the most moving story translation to film was "Stand by Me" which makes you feel 12 or 13 every time you see it. First 8 minutes:
This is so Boss!
PS, does Kid Dynamite know Will Wheaton (Gordy in the film) is a world class poker player?
If you have not seen the film "The Assassination of Jesse James" with Brad Pitt and Casey Affleck you are missing one of modern cinema's great works. Pitt should have won the Oscar for this role, and the film is a new classic and one of may all time favorites. Here is the trailer:
Now see it already!
A little music to set up the weekend.
A more modern song that sounds like an old classic comes from the band Cracker with "Low":
The Creedence Clearwater Revival song that was featured in "The Twilight Zone" films was "Midnight Special" and it is a good one:
I have not had my Joan Jett fix in a while, so enjoy "I Love Rock and Roll":
She just needs to admit she is in love with me. Come on Joan, what's a restraining order in the face of true love? (kidding!)
Last call! Everyone have a drink?
I will close the show with a little Queen. As I have stated numerous times, some of Queen's best work was done for the film "The Highlander" soundtrack! Enjoy "One Year of Love":
Have a good night.