tag:blogger.com,1999:blog-1207581886255094115.post5984934245258098178..comments2024-02-26T05:51:17.859-05:00Comments on Economic Disconnect: Monday Observations March 1st 2010EconomicDisconnecthttp://www.blogger.com/profile/02802078645713106743noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-1207581886255094115.post-7172338571965011572010-03-02T12:54:37.585-05:002010-03-02T12:54:37.585-05:00Good stuff in your post.
I have heard directly fr...Good stuff in your post.<br /><br />I have heard directly from higher up:<br /><br />War will not stop.<br />War will be over resources.<br />We will fight wars over fresh water.<br /><br />You heard it here first. ;)<br /><br />G<br /><br />PS: Keep buying with that good old dollar cost average.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-74470443502670650392010-03-02T12:14:06.114-05:002010-03-02T12:14:06.114-05:00It is not a "side-effect" of ZIRP that w...It is not a "side-effect" of ZIRP that we are punishing savers. It is policy. Tax policy discourages savings as well.<br /><br />Why else is the tiny amount of interest income from savings taxed as ordinary income?<br /><br />Meanwhile income from short-term capital gains like hedge funds (aka gambling) is taxed at a far lower rate. WTF is this, if not conscious policy?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-80908940485862906962010-03-02T09:15:46.718-05:002010-03-02T09:15:46.718-05:00As to the savings rate vs treasury yield debate, t...As to the savings rate vs treasury yield debate, there is no question that low interest rates have been hell on savers. But I don't think that was the intention, rather the side effect. The purpose was to prop up the banks.<br /><br />Interesting article in BusinessWeek a couple of issues ago on exactly this subject. How heavenly have low interest rates been for the banks? $56 billion. That's the amount of extra interest income banks booked since the Fed started cutting interest rates in 2007.<br /><br />From the article: "Banks are getting a pretty sweet deal for nearly blowing up the financial system. Not only did the Fed ratchet down rates to save them, but wary depositers rushed to the comfort of their government-backed accounts. Banks have been able to use those ultra-cheap funds to make lucrative loans and investments since longer-term interest rates have remained relatively high. It's a hidden subsidy that may be as important to the bank bailout as the Troubled Asset Relief Program and the bond guarantees from the Federal Deposit Insurance Corp.<br /><br />The problem, says Joseph R. Morgan, a finance professor at Lousiana State University in Baton Rouge, is that savers are bearing the cost, and they won't be getting their money back. 'We're all funding the bailouts, whether we want to or not, both as taxpayers and depositors,' he says. As the Fed lowered short-term interest rates to near zero, banks sliced the rates they offered on savings accounts, certificates of deposit, and the like. The average rate paid to depositors dropped from 4.23% in September 2007 to 1.55% in September 2009. . . .<br /><br />Banks are making a nice profit on the funds, helping them to offset bad loans. Rates on 30-year fixed-rate mortgages declined only 1.24 percentage points during the two years, or less than half the 2.88-point decline in rates paid on a six-month CD. . . . 'The banks are making more money than they have ever made' on the difference between borrowing and lending, says David Bianco, equity strategist at Bank of America Merill Lynch."GawainsGhosthttps://www.blogger.com/profile/16719480047404817864noreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-41395062466146756482010-03-02T05:09:12.966-05:002010-03-02T05:09:12.966-05:00Regarding water, in the Dominican Republic where I...Regarding water, in the Dominican Republic where I vacation occasionally, the policy is no one, including the locals, drinks the water from the tap. In fact they warn not to even brush your teeth with it.<br /><br />And being a care free caribbean paradise, no one even wonders what the hell is going on with that situation.sedentary statenoreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-46648261735735547982010-03-02T00:22:37.557-05:002010-03-02T00:22:37.557-05:00"Almost has to be the plan, yes?"
Kohn ..."Almost has to be the plan, yes?"<br /><br />Kohn told us that it is exactly the plan.<br /><br />From 2009...<br /><br /><b>Fed's Kohn sees no asset bubbles building in U.S.</b><br /><br />http://uk.reuters.com/article/idUKTRE5AF5R820091117<br /><br /><i>CHICAGO (Reuters) - The Federal Reserve's low interest rate policy is meant to encourage investors to move into riskier assets in order to promote economic recovery, and there are no signs currently the policy is resulting in the build-up of a U.S. asset bubble, the central bank's number-two official said on Monday.</i><br /><br />Of course, some might argue that the riskier the assets are, then the riskier the assets are. Some might argue that anyway.<br /><br />From 2004...<br /><br /><b>Just How Risky Are Fannie and Freddie?</b><br /><br />http://www.businessweek.com/magazine/content/04_39/b3901044_mz011.htm<br /><br /><i>Not very, says a new report. But it probably won't sway the mortgage giants' critics</i><br /><br />From 2003...<br /><br /><b>Interest rates won't rise 'for a considerable period'</b><br /><br />http://www.usatoday.com/money/economy/fed/rates/2003-09-16-unchanged_x.htm<br /><br /><i>"The risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future," the Fed said in a statement accompanying the unanimous decision. Thus rates can stay low "for a considerable period."</i><br /><br />From 1998...<br /><br /><b>Fed Chairman Renews Hopes For a Rate Cut</b><br /><br />http://www.nytimes.com/1998/09/24/business/fed-chairman-renews-hopes-for-a-rate-cut.html?pagewanted=1<br /><br /><i>''We have to bring the existing instabilities to a level of stability reasonably shortly, to prevent the contagion from really spilling over and creating some very significant further difficulties for all of us,'' Mr. Greenspan told the Senate Budget Committee.</i><br /><br />In hindsight, the level of stability is continually stabilized as the contagion continues to really spill over and over.<br /><br />It's like being hit with an interest rate déjà vu stick, repeatedly, every few years or so, lol.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-19309015210731347182010-03-01T23:55:53.604-05:002010-03-01T23:55:53.604-05:00Nice post!Nice post!Remynoreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-48378141161248944902010-03-01T22:34:08.862-05:002010-03-01T22:34:08.862-05:00Dave,
yet another thing that I can never get; if m...Dave,<br />yet another thing that I can never get; if money is free to borrow then how can anyone not expect major capital dislocations/malinvestments? Almost has to be the plan, yes?EconomicDisconnecthttps://www.blogger.com/profile/02802078645713106743noreply@blogger.comtag:blogger.com,1999:blog-1207581886255094115.post-33989185070345840272010-03-01T22:25:35.467-05:002010-03-01T22:25:35.467-05:00Nice post tonight. Zero interest rates are for su...Nice post tonight. Zero interest rates are for sure the Fed's way to encourage dis-saving and consumption in an attempt to stimulate the economy. It ain't working.<br /><br />Zero interest rates also mean that eventually the bond market is going to shit the bed.Dave in Denverhttps://www.blogger.com/profile/03016238915167131989noreply@blogger.com