Tuesday, May 4, 2010

Food for Thought

Funny story....

I had a generator installed so that there would not be any more long term power outages after the two in the last two years. Today there was quite the thunder and lightning show and I was inwardly hoping for a power failure so that my new toy would kick on automatically. Of course the power never went out (probably never will again after I bought the thing) but the Comcast went out! Unreal. It is always something.

As things are I am a bit late and not yet into the swing of things on financial happenings. Just a few quick thoughts and then I will direct you to two great though provoking essays.

Bonus points for the person that can identify from what film this quote comes from:
"Just directa your feetsa to Daddy Greens Pizza!"
Good luck.

Free Flow Thoughts
-I really cannot figure out why the market panics some times. The Greece stuff is not news. Now where is that May 2010 Treasury sales schedule again?
-If the FED is spending time lobbying against the transparency legislation what does that tell you?
-Old FED minutes show just how aloof and high minded the FED is; they did not want to discuss a mortgage bubble because it may actually get people thinking about one. Unreal.
-As a gold/silver lover I often get tagged as a hyperinflationist. I have spilled pixels by the millions on this and do not want to go over all that right now. Deflation is what precedes a panic by central banks to open up the money flow. This is what we are seeing right now. The problem with things finance is the glacial pace of things; you have to be able to look ahead a bit. Consider Mish's catch of an ECB panic move to guarantee everything and make it clear there is no end to any possible action:
European Central Bank President Jean- Claude Trichet, who capitulated on a January pledge not to relax lending rules for the sake of one country, may have to sacrifice more principles to prevent Greece from bringing down the euro.

Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The central bank may have to extend that to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt if the 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro’s slide, economists said.

Lending unlimited cash? Sounds like the housing bubble! More goodies:
The ECB may have to go even further and buy government bonds if it is to stabilize financial markets and avoid a return to recession as governments slash spending to appease investors, said David Owen, chief European economist at Jeffries Group Inc. in London. “There is a good chance the ECB will ultimately have to resort to quantitative easing,” he said.

Harvinder Sian, a senior fixed-income strategist at Royal Bank of Scotland, wrote in a report today that “markets should be alert to the risk of ECB bond buying, as early as today.”

While the ECB is prohibited from buying assets directly from authorities, it can buy them on the secondary market. Trichet said on May 2 that “at this stage, we have absolutely no decision on the purchase of government bonds.”

Central banks buying up their own debt and the markets act like they are an open market buyer and play along. This scam is getting really old.

Two Items for Consideration
The next two items may take a bit of time to wrap your head around; I am still thinking about them as well.

From Jesse:
Why Silver?
Asks why silver is targeted for manipulation and leaves the possibilities open with a great intro. Well worth a look.

From Edward Harrison via Naked Capitalism:
MMT: Fear of Hyperinflation
Uses Modern Monetary Theory (MMT) to look at the possibility of the the US going the hyperinflation route. The structural argument focuses on Wiemar Germany and Zimbabwe.

I will leave that one up to the readers to go over. The work is well done, but I feel the argument lacks any real comparative value at all. A better example would have been Argentina. Anyways, sleep well knowing the US as the reserve currency can print all the money we want and even though 70% of our economy is consumer spending based as well as service based with asset appreciation thrown in the mix it seems nothing can stop our ability to do whatever we want in this arena. Sounds pretty good!

Have a good night.


CT-Hilltopper said...

I'm starting to think we should all start keeping things around the house to barter with. Coffee, cigarettes, soap...things that might bw worth something to someone someday that we might be able to exchange with them for food. If that makes sense. I have a feeling that we are going to run into a stretch of time where gold, silver, etc...just isnt going to be that helpful, people will be looking for more practical things.

I just posted a slideshow that I found, a human interest piece about life in NOLA and how things are being affected by the oil spill. Check it out if you like. I havent had the time or the inclination to do much of anything lately. We're kinda going through the stuff that Jeff's company is (again). Not to the extent that his is, but still...

Anonymous said...

Movie quote is from "The Last Dragon."

zaloette said...

Great Blog full of common sense thoughts... and as my boss says on every comitee we maintain, the least common of sense.

Best Regards,

GawainsGhost said...

Well, the real problem is not so much the printing of money as it is the misallocation of capital.

For example, if banks are deliberately making fraudulent loans, dramatically increasing leverage, and taking inordinate amounts of risk, to the point of insolvency and bankruptcy, and then are on the brink of collapse. When the government prints money to give to these banks, thereby propping them up or bailing them out, without any regulatory oversight or penalties for malfeasance, just so the bankers can pay themselves huge bonuses which they then use to make contributions to the politicians who printed the money so they can remain in office and continue to print money for the purpose of maintaining the charade. That is misallocation of capital. What it is not is a sound financial or political system.

Something about fiddling while Rome burns. . . .