dimelab dimelab: shrinking the gap between talk and action.

addition Topic in The Credit Debacle Catalog

additional benefits (1); additional debt service (1); additional government stimulus (1); additional ounces (1); Additional Units Sold (2); additives sale (1); encouraged additional private sector spending (1); meet additional demand (1); provided Additional supporter (1); require additional draws (2).

Tue 2010-10-12 16:01 EDT

billy blog >> Blog Archive >> Iceland ... another neo-liberal casuality

...For a real world example of the benefits of adopting a floating, sovereign, currency we can look to Argentina....At the time of the 2001 crisis, the government realised it had to adopt a domestically-oriented growth strategy. One of the first policy initiatives taken by newly elected President Kirchner was a massive job creation program that guaranteed employment for poor heads of households. Within four months, the Plan Jefes y Jefas de Hogar (Head of Households Plan) had created jobs for 2 million participants which was around 13 per cent of the labour force. This not only helped to quell social unrest by providing income to Argentina's poorest families, but it also put the economy on the road to recovery. Conservative estimates of the multiplier effect of the increased spending by Jefes workers are that it added a boost of more than 2.5 per cent of GDP. In addition, the program provided needed services and new public infrastructure that encouraged additional private sector spending. Without the flexibility provided by a sovereign, floating, currency, the government would not have been able to promise such a job guarantee. Argentina demonstrated something that the World's financial masters didn't want anyone to know about. That a country with huge foreign debt obligations can default successfully and enjoy renewed fortune based on domestic employment growth strategies and more inclusive welfare policies without an IMF austerity program being needed. And then as growth resumes, renewed FDI floods in...sovereign governments are not necessarily at the hostage of global financial markets. They can steer a strong recovery path based on domestically-orientated policies -- such as the introduction of a Job Guarantee -- which directly benefit the population by insulating the most disadvantaged workers from the devastation that recession brings...

Billy Blog; blogs Archive; Iceland; neo-liberal casuality.

Mon 2010-09-20 18:49 EDT

What happened to US interbank lending in the financial crisis?

Many commentators have argued that interbank lending froze following the collapse of Lehman Brothers. This column presents evidence from the fed funds market that, while rates spiked and loan terms became more sensitive to borrower risk, mean borrowing amounts remained stable on aggregate. It seems likely that the market did not expand to meet additional demand for funds.

Financial Crisis; happened; Interbank Lending.

Wed 2010-07-21 10:34 EDT

Paul Debates Jamie and MMT | Corrente

Paul Krugman, well-known for his opposition to the austerity concerns of the deficit terrorists and his advocacy of additional Government stimulus to lower unemployment and end the recession, just ignited a paradigm conflict which promises to clarify for many, the issues dividing ``deficit doves'' like Paul, from economists who take a Modern Monetary Theory (MMT) approach to economics, which holds, among other things, that Government deficits and surpluses are not, in themselves important, and that Government spending has to be evaluated relative to its impact on public purposes...this conclusion and also Paul's first post both set up a ``straw man,'' because Jamie never claimed that deficits are never a problem, and even pointed to circumstances (conditions of full employment) where deficits could lead to inflation. Given the comments on Paul's first blog, including a very clear comment by Marshall Auerback, it should have been clear to him that he was distorting the position of both Jamie and MMT. But evidently, Paul didn't want to admit that...Jamie and the MMT economists are opposed to the very idea, the very framing of Government's role in the economy in a way that makes everything subject to deficits, national debts, and debt-to-GDP ratios. The position of MMT is that these numbers are just endogenous consequences of real economic activity including Government fiscal activity, and that it is this activity that ought to drive them and not the other way around...

Corrente; MMT; Paul Debates Jamie.

Sat 2010-05-22 20:28 EDT

New Economic Perspectives: What If the Government Just Prints Money?

As Congress gets set in the near future to consider raising the debt ceiling yet again, my fellow blogger L. Randall Wray creatively suggests not raising the debt ceiling but instead having the Treasury continue spending as it always does: by simply crediting bank accounts...Wray's proposal is based upon modern monetary theory (MMT) that is the focus this blog and those by Bill Mitchell, Warren Mosler, and Winterspeak. Of course, given the lack of understanding of basic reserve accounting at the heart of MMT and Wray's proposal on the part of the public, the financial press, and the vast majority of economists, one can already anticipate the outpouring of criticism suggesting that such a proposal amounts to ``printing money'' and thereby destroying the value of the currency...The approach here recognizes the importance of understanding the balance sheet implications of both of these options that are central to MMT. While most economists typically assume a supply and demand relationship, as in the hypothesized loanable funds market, and then build models accordingly, such an approach can miss important relationships in the real world...Both the Treasury's bond sales and the Fed's operations affect only the relative quantities of securities, reserve balances, and currency held by the non-government sector; the total sum of these is set by the outstanding government debt. With or without bond sales, it is the non-government sector's decision to spend or save that matters in regard to the potential inflationary impact of a given government deficit. Indeed, to be more precise, a deficit accompanied by bond sales is actually the MORE potentially inflationary option, as the net financial assets created by the deficit will be increased still further when additional debt service is paid.

Government Just Prints Money; New Economic Perspectives.

The Wall Street Examiner Sun 2010-05-09 10:02 EDT

The Minsky Cruise (part 3, Business)

...While non-financial domestic corporate profits have shrunk from a Korean War inspired 11% of GDP to average around 5% of GDP since 1970, the financial sector's profits have been growing...The love affair with finance and disdain for what, during the tech boom, we called the "bricks and mortar" industry- and admittedly a failure, by some in those industries, to accept the transition to maturity- has inspired, for want of a better word, envy in the non-financial sector. While financial sector stocks seem to levitate on their own, non-financial sector stocks, if intent can be inferred from behavior, are believed to require a boost. I suspect the use of options as payment has something to do with this as well...Additionally, the non-financial sector, since the mid-80s has- a true sign of envy- opted to copy finance, by breaking into that field. GE Capital and GMAC Financial are two prominent examples...To paraphrase Nixon, "we're all Ponzis, now."

business; Minsky Cruise; Part 3; Wall Street Examiner.

Jesse's Café Américain Wed 2010-04-07 19:06 EDT

Banks Come Back For Another Bailout in Ireland While the US 'Manages Perceptions'

The whole notion of bank bailouts is a tremendous injustice when not accompanied by personal bankruptcy and civil and criminal prosecution for those banks managers who created them and are found guilty of fraud. In addition, the owners of the banks, whether through debt or shares, should be wiped out and the bank placed in a proper receivership while its books are sorted out. The US is an accounting mirage. The notion that it will make money from its stake in Citi is a sleight of hand. The enormous subsidies to the banks both in terms of direct payments, indirect payments through entities like AIG, and subsidies such as the erosion of the currency and the deterioration of the real economy, will never be repaid. ...the facts seem to indicate that the US is still pursuing a policy of managed perceptions, accounting deceptions, and old fashioned insider dealing and other forms of corruption that always accompany government, but reach a feverish pitch in times of crisis. It is the establishment's form of looting.

Bailout; banking comes; Ireland; Jesse's Café Américain; managing perception.

Jesse's Café Américain Thu 2009-12-17 10:11 EST

Is the Price of World Silver the Result of Legitimate Market Discovery?

Ted Butler: ...the concentrated short position in COMEX silver futures is so extreme, that it is hard to imagine how it can be resolved in an orderly manner. The most recent data from the CFTC indicate that one US bank, JPMorgan, now holds 200 million ounces net short in COMEX silver futures, fully 40% of the entire net short position on the COMEX (minus spreads). As I have previously written, JPMorgan accounted for 100% of all new short selling in COMEX silver futures for September and October, some 50 million additional ounces...So extreme is JPMorgan's silver short position that it cannot be closed out in an orderly fashion...As extreme as JPMorgan's position is, there is a total true net short position of 500 million ounces (100,000 contracts) in COMEX silver futures. Try to put that 500 million ounce short position in perspective. It equals 75% of world annual mine production, much higher than seen in any other commodity.

Jesse's Café Américain; Legitimate Market Discovery; Price; resulting; World Silver.

Bruce Krasting Thu 2009-11-19 10:52 EST

FHFA's DeMarco Speaks - Ouch!

FHFA's Acting Director Edward DeMarco provided written testimony to the Senate today. I would give his presentation a B+. There is little room for optimism in this story. Mr. DeMarco did not gloss that fact over. A few snips from that speech: -From July 2007 through the first half of 2009--combined losses at Fannie Mae and Freddie Mac totaled $165 billion. In the first half of 2009, Fannie Mae and Freddie Mac together reported net losses of $47 billion. -Since the establishment of the conservatorships, the combined losses at the two Enterprises depleted all their capital and required them to draw $96 billion. The combined support from the federal government exceeds $1 trillion. -The short-term outlook for the Enterprises remains troubled and likely will require additional draws...

Bruce Krasting; FHFA's DeMarco Speaks; Ouch.

Thu 2009-11-19 10:09 EST

The downfall of Washington Mutual - Puget Sound Business Journal (Seattle)

WaMu suffered through not one but two bank runs in its final months. The first run was many times larger than the run that felled California lender IndyMac in July 2008, though neither shareholders nor the public knew about it. WaMu survived that run, and the second run was tapering off when regulators moved in and shut the bank, citing the run as the reason. In addition, WaMu's top executives, led by CEO Alan Fishman, were trying to sell the bank after federal regulators imposed a deadline, only to discover that they were being undermined by those same regulators, executives say. The government's plan to seize the bank, if it became known beforehand, would cause potential buyers to immediately cool their heels, because buying after a government takeover would be a lot cheaper than even the desperate private purchase deal that Fishman was seeking.

downfall; Puget Sound Business Journal; Seattle; Washington Mutual.

Bruce Krasting Sat 2009-10-10 12:57 EDT

FHFA's DeMarco Speaks

FHFA's Acting Director Edward DeMarco provided written testimony to the Senate today...From July 2007 through the first half of 2009--combined losses at Fannie Mae and Freddie Mac totaled $165 billion. In the first half of 2009, Fannie Mae and Freddie Mac together reported net losses of $47 billion. Since the establishment of the conservatorships, the combined losses at the two Enterprises depleted all their capital and required them to draw $96 billion. The combined support from the federal government exceeds $1 trillion. The short-term outlook for the Enterprises remains troubled and likely will require additional draws...

Bruce Krasting; FHFA's DeMarco Speaks.

zero hedge Sat 2009-10-10 11:57 EDT

The Federal Reserve's Balance Sheet: An Update

...the Federal Reserve has faced two historically unusual constraints on policy. First, the financial crisis, by increasing credit risk spreads and inhibiting normal flows of financing and credit extension, has likely reduced the degree of monetary accommodation associated with any given level of the federal funds rate target, perhaps significantly. Second, since December, the targeted funds rate has been effectively at its zero lower bound (more precisely, in a range between 0 and 25 basis points), eliminating the possibility of further stimulating the economy through cuts in the target rate. To provide additional support to the economy despite these limits on traditional monetary policy, the Federal Open Market Committee (FOMC) and the Board of Governors have taken a number of actions and initiated a series of new programs that have increased the size and changed the composition of the Federal Reserve's balance sheet. I thought it would be useful this evening to review for you the most important elements of the Federal Reserve's balance sheet, as well as some aspects of their evolution over time. As you'll see, doing so provides a convenient means of explaining the steps the Federal Reserve has taken, beyond conventional interest rate reductions, to mitigate the financial crisis and the recession, as well as how those actions will be reversed as the economy recovers...

Federal Reserve's balance sheet; Update; Zero Hedge.

Bruce Krasting Sat 2009-09-12 12:10 EDT

SSTF Shocker - $6B August Deficit

The Social Security Trust Fund reported an August net deficit of $5.865 Billion. This is the largest monthly deficit in nineteen years...This deficit is now the seventh in the past twelve months. That pace has never been seen before...Social Security is the mother of all systemic risks. Even the debate on this topic brings risk. It will expose an additional $7 trillion unfunded liability. Another reason for holders of dollars to worry.

6B August Deficit; Bruce Krasting; SSTF Shocker.

Calculated Risk Thu 2009-09-03 11:43 EDT

Houses and Autos: The Cost of a Tax Credit per Additional Units Sold

To calculate the cost of a tax credit per additional unit sold, we need to sum up the total cost of the credit - as an example $2.877 billion for Cash-for-Clunkers according to the Dept. of Transportation - and then divide by the estimated increase in sales because of the credit. Remember some cars or houses would have been sold anyway (even though they still receive the tax credit), but it is the additional sales that matter. That was the purpose of the tax credit! (update: Shnaps notes that the auto credit had an additional benefit of better mileage). Highly inefficient subsidies for home and auto purchases.

Additional Units Sold; auto; Calculated Risk; cost; Housing; Tax credit.

Mish's Global Economic Trend Analysis Wed 2009-08-26 15:55 EDT

Emails from a Bank Owner regarding FDIC and Under-Capitalized Banks

Here is an interesting Email from a Bank Owner and CEO regarding As of Friday August 14, 2009, FDIC is Bankrupt. ``I have been in banking for over 30 years and from my perspective this is much worse than anything I have seen.'' ABO, who as been in the business 30 years, writes: A comment concerning the FDIC - As of June 30 the rates being charged banks have increased substantially. Risk 1 category went to 12 basis points from 5, risk 2, 17 basis points, risk 3, 35 basis points, and risk 5, 50 basis points. Additionally, a 5 basis point special assessment is being charged on September 30 on total assets less tier 1 capital. It is probable that a second assessment will also be charged in December. The cost of FDIC insurance for a two hundred million dollar, 1 risk rated bank last year would have been around...

bank owner; capitalized banks; Email; FDIC; Mish's Global Economic Trend Analysis.