naked capitalism Fri 2010-07-23 17:08 EDT

Deficits Do Matter, But Not the Way You Think

L. Randall Wray

In recent months, a form of mass hysteria has swept the country as fear of ``unsustainable'' budget deficits replaced the earlier concern about the financial crisis, job loss, and collapsing home prices. What is most troubling is that this shift in focus comes even as the government's stimulus package winds down and as its temporary hires for the census are let go. Worse, the economy is still -- likely -- years away from a full recovery. To be sure, at least some of the hysteria has been manufactured by Pete Peterson's well-funded public relations campaign, fronted by President Obama's National Commission on Fiscal Responsibility and Reform -- a group that supposedly draws members from across the political spectrum, yet are all committed to the belief that the current fiscal stance puts the nation on a path to ruinous indebtedness...[however] the notion of ``fiscal sustainability'' or ``solvency'' is not applicable to a sovereign government -- which cannot be forced into involuntary default on debts denominated in its own currency...If we can get beyond the fears of national insolvency then there are many issues that can be fruitfully discussed. While inflation will not be a problem for many years, price pressures could return some day. Impacts of exchange rate instability are important, at least for some nations. Unemployment is a chronic problem, even at business cycle peaks. Aging does raise serious questions about allocation of resources, especially medical care. Poverty and homelessness exist in the midst of relative abundance. Simply recognizing that our sovereign government cannot go bankrupt does not solve those problems, but it does make them easier to resolve...

Deficit; matter; naked capitalism; Think; way.

The Wall Street Examiner Sat 2010-05-22 19:50 EDT

Merkel Does Mahathir and Martin Luther: Tilting the Market Table

...I'm very interested in Germany's policy shift because it's the first time in decades a mature industrialized nation has protested the allocation of profits decreed by financial orthodoxy. At core, German bans of "naked" (held by those who don't own the securities) shorts, paraphrasing Ms. Merkel- perhaps unsurprisingly the daughter of a Lutheran Minister- stops people profiting from the destruction of their neighbor's house at cost of less liquidity in the restricted markets...500 years ago, the Germans defied orthodoxy and ushered in a revolution which moved the center of Europe from South to North. They are defying orthodoxy again, and I can't wait to see what happens next.

Mahathir; Market Table; Martin Luther; Merkel; tilting; Wall Street Examiner.

Jesse's Café Américain Wed 2010-04-07 19:14 EDT

The Case for Position Limits: What is the 'Spot Price' of Gold and Silver And How Is It Set?

Jesse

...almost all retail transactions for physical bullion in the US key off a 'spot price' that is derived from a paper market which is not based in the reality of physical supply, since the futures exchanges explicitly allow for the settlement in cash if physical bullion is not available. In fact, the vast majority of transactions are settled in cash, and are little more than derivatives bets it seems, and often hedges related to other things like another commodity or interest rates...As someone who approaches it as an amateur economist, and has been looking at its dynamics for the past few years, I may be missing something, but this seems less like an efficient market mechanism for price discovery and capital allocation, and more like a carney game.

Case; gold; Jesse's Café Américain; position limit; set; Silver; Spot Prices.

zero hedge Tue 2010-01-19 12:18 EST

Guest Post: The Banker Bonus Diversion

I am so tired of the absolute nonsensical and foolish approach in regards to Banker Bonuses taken by both the Obama administration as well as the bankers themselves. Here's what is really going on and what should should be going on if we lived in a world that was dependent on telling the truth, prudent financial management, reduction of systemic risk, and if a cure to our banking system malady is genuinely being sought...This is a total and epic failure of the banking regulatory authorities in the U.S...The bankers should have taken every nickel of profit and allocated it to capital accounts to provision for loan losses: past, present, and future. The regulators should force every nickel on to the balance sheet irrespective of the menagerie of FASB FAS 157. The government should not be taking this needed capital from the banking system.

Banker Bonus Diversion; Guest Post; Zero Hedge.

Credit Writedowns Sun 2010-01-03 11:48 EST

Manipulating mortgages

The dust has settled a bit on the Treasury's recent decision to give Fannie Mae and Freddie Mac a green light to nationalize our mortgage problem...I see Fannie Mae and Freddie Mac as a means of manipulating interest rates and distorting the allocation of resources and funneling precious capital investment into a housing sector which suffers a dreadful amount of overcapacity. This is bubble economics pure and simple and it will fail spectacularly.

credit writedowns; Manipulation Mortgage.

Jesse's Café Américain Sun 2009-10-11 15:55 EDT

The Speculative Bubble in Equities and the Case for Deflation, Stagflation and Implosion

Jesse

As part of their program of 'quantitative easing' which is another name for currency devaluation through extraordinary expansion of the monetary base, the Fed has very obviously created an inflationary bubble in the US equity market...The monetary stimulus of the Fed and the Treasury to help the economy is similar to relief aid sent to a suffering Third World country. It is intercepted and seized by a despotic regime and allocated to its local warlords, with very little going to help the people...quantitative easing that is not part of an overall program to reform, regulate, and renew the system to change and correct the elements that caused the crisis in the first place, is nothing more than a Ponzi scheme...The most probable path is a lingering death for the dollar over the next ten years, with a productive economy that continues to stagger forward under the rule of the financial oligarchs.

Case; deflation; Equities; implosion; Jesse's Café Américain; Speculative bubbles; Stagflation.

naked capitalism Sun 2009-09-20 09:48 EDT

Guest Post: ``Assessing the Recent Performance of the Fed''

Richard Alford, former economist at the New York Fed

...the current Fed: 1) actively promoted the asset bubbles which precipitated the most costly business downturn since the Great depression; 2) passively sat by ignoring its regulatory and supervisory responsibilities allowing the growth of imbalances that led to the worst business downturn since the Great depression...the economic and financial imbalances that built up between 2000 and 2007 will generate the opportunity costs in terms of lost output and idle and misallocated resources that will exceed the costs inherent in the economic and financial imbalances reflected in the most expensive anti-inflation fight ever fought by the Fed (1980-1983). The US financial system remains on life support. Furthermore, the Fed has played a part in allocating credit and in engineering redistributions of wealth on a scale that is likely to on the same scale as the redistribution of wealth from the household sector to government during the inflation ridden 1970s. The independence of the Fed has been compromised. Many in the Congress want to audit the Fed and limit its ability to make loans in future emergencies. The Fed is seen by many as an agency of the Treasury.

assessment; Fed; Guest Post; naked capitalism; recent perform.

Fri 2008-06-06 00:00 EDT

naked capitalism: Should the Fed Be Independent?

Jeffrey Lacker; Fed "increasingly making resource allocation decisions which are political in nature and should arguably be debated and determined in that realm"

Fed; Independent; naked capitalism.