Jesse's Café Américain Wed 2009-12-02 18:58 EST

The 38 Year Cycle in US Monetary History

Jesse

..the longer cycle of 38 years and some others, is that they involve what people call 'generational memory.' People as a group essentially forget the lessons of the past, and human nature being what it is, events based on bad judgement and reckless behaviour seem to recur at these intervals. If there was any 'tell' for the current crisis, it was the general overturning of the safeguards for the financial system that had been put in place in the aftermath of the financial panic of 1929 and the Great Depression that followed, culminating in the eventual overturn of Glass-Steagall and the ascendancy of extreme leverage using exotic, unregulated instruments. This is why we call this a generational change. This is no slump, no recession. And it is far from over. We are experiencing some major changes that are easily lost when one only looks at the day to day moves, listens to the description of events on the mainstream media, and of course, have a lack of memory, a knowledge of history, of things that have happened to their grandfathers and great grandfathers. The arrogant ignorance of so many still in place is a sure sign of greater chastisement to come, until the lessons of history are learned again, and the system is brought back into a sustainable balance.

38 Year Cycle; Jesse's Café Américain; monetary History.

Jesse's Café Américain Thu 2009-10-15 16:38 EDT

Sumitomo Forecasts Dollar to 50 Yen, End of Dollar as Reserve Currency

Jesse

"We can no longer stop the big wave of dollar weakness," said Daisuke Uno at Sumitomo. ...The market is taking the dollar where it should be, where it needs to go. If only countries with obvious pegs and ongoing manipulation to support export mercantilism were also to allow their currencies to float more freely. It is going to kill off global trade. It is the great failure of the WTO and US trade policy to have allowed pegs and overt currency manipulation policies which are de facto tariffs and subsidies on trade.

50 yen; Dollar; ending; Jesse's Café Américain; reserve currency; Sumitomo Forecasts Dollar.

Jesse's Café Américain Tue 2009-10-13 20:27 EDT

Consumer Credit Contracting at Record Levels

Jesse

...The challenge facing Bernanke and the Obama economic team is how to get the US consumer spending again, if they cannot be paid a living wage, and if they can no longer be encouraged to borrow beyoned their means, by using their homes as a cash machine with variable interest rates, as they were encouraged to do by Fed Chairman Greenspan...There can be no denying that the Fed is promoting money supply growth in ways never seen before in the US. Whether they can be successful is open to question. We think they will keep at it until they break something.

consumer credit contracting; Jesse's Café Américain; record levels.

Willem Buiter's Maverecon Sat 2009-10-10 14:00 EDT

Expect little and you may yet be disappointed

Willem Buiter

...the most disappointing development this year was the performance of president Barack Obama and his administration - and my expectations were modest to begin with...On the fiscal side, Barack Obama is presiding over the biggest peace-time government deficits and public debt build-up ever. According to my back-of-the-envelope calculations there is about a 10 percent of GDP gap between the medium and longer-term spending plans of the Obama administration and the taxes the Congress is willing and able to impose. The reality that you cannot run a West-European welfare state (with decent quality health care, decent pre-school, primary and secondary school education for all), rebuild America's crumbling infrastructure, invest in the environment and fulfill your post-imperial global strategic ambitions while raising 33 percent of GDP in taxes, has not yet dawned on the Obama administration or on the American people at large...Clearly, the qualities one needs to get elected to high office in western democracies are not qualities that are likely to be helpful once you have achieved high office and are expected to govern and lead. To survive the selection process to become president you have to be able to stitch together a coalition of special interests that can provide sufficient financial and sweat equity resources to win this grueling race to the top. Once you get there, you should shed the unfortunate baggage you accumulated on your way up and govern in the interest of all the people. Few can do that. Apparently Obama is not one of them.

disappointment; expectations; Willem Buiter's Maverecon.

Wed 2009-10-07 10:31 EDT

Beijing's derivative default stance rattles banks

Reuters

For banks that are hoping to sell more derivatives hedges in China, the world's fastest-expanding major economy and top commodities consumer, the danger goes beyond the immediate risk to existing contracts to the longer-term precedent that suggests Chinese companies can simply renege on deals when they like...Air China, China Eastern and shipping giant COSCO -- among the Chinese companies that have reported huge derivatives losses since last year -- had issued almost identical notices to banks.

Beijing's derivative default stance rattles banks.

Thu 2009-10-01 17:56 EDT

98489 -- Landmark National Bank v. Kesler -- Leben -- Kansas Court of Appeals

J. J. LEBEN

Landmark National Bank brought a suit to foreclose its mortgage against Boyd Kesler and joined Millennia Mortgage Corp. as a defendant because a second mortgage had been filed of record for a loan between Kesler and Millennia. In a foreclosure suit, it is normal practice to name as defendants all parties who may claim a lien against the property. When neither Kesler nor Millennia responded to the suit, the district court gave Landmark a default judgment, entered a journal entry foreclosing Landmark's mortgage, and ordered the property sold so that sale proceeds could be applied to pay Landmark's mortgage. But Millennia apparently had sold its mortgage to another party and no longer had interest in the property by this time. Sovereign Bank filed a motion to set aside the judgment and asserted that it now held the title to Kesler's obligation to pay the debt to Millennia. And another party, Mortgage Electronic Registration Systems, Inc. ("MERS"), also filed a motion to set aside the judgment and asserted that it held legal title to the mortgage, originally on behalf of Millennia and later on behalf of Sovereign. Both Sovereign and MERS claim that MERS was a necessary party to the foreclosure lawsuit and that the judgment must be set aside because MERS wasn't included on the foreclosure suit as a defendant. The district court refused to set aside its judgment. The court found that MERS was not a necessary party and that Sovereign had not sufficiently demonstrated its interest in the property to justify setting aside the foreclosure. ...The district court properly determined that MERS was not a contingently necessary party in Landmark's foreclosure action. The district court also was well within its discretion in denying motions from MERS and Sovereign to intervene after a foreclosure judgment had been entered and the foreclosed property had been sold. The judgment of the district court is affirmed.

98489; appealing; Kansas court; Kesler; Landmark National Bank; leben.

naked capitalism Sun 2009-09-20 11:53 EDT

Financial Reform: Not happening but the need is clear

Edward Harrison of Credit Writedowns

If you are looking for reform in the financial sector, the moment has passed. And only to the degree that the underlying weaknesses in the global financial system are made manifest and threaten the economy will we see any appetite for reform amongst politicians. So, as I see it, the Obama administration has missed the opportunity for reform...Steve Keen, an Australian economist whose theories are heavily influenced by Hyman Minsky, has a cogent analysis of the true structural deficits in the current economic model...today we have finally reached a level of debt which is so great that another reflation is impossible. The collapse is now....unlike Keen, I am not convinced the time is now...What I would like to see is economic thought leaders developing a blueprint of a financial crisis strategy which tackles both the immediate crisis issues (liquidity) and the structural, regulatory and monetary issues that create financial volatility (solvency). When crisis does occur, I believe it will be systemic in nature due to the forces Keen so lucidly explains. Therefore, a blueprint which is 1) heavy on tactics and, 2) if implemented in a real systemic crisis, is likely to work, builds credibility. This is political capital which will carry over to longer-term preventive strategies and reforms.

clear; Financial reform; happened; naked capitalism; needed.

naked capitalism Sun 2009-09-13 15:59 EDT

Another Lehman Mess: No One Can Run the Software

Lehman's global derivatives book included contracts with a notional face value of $39,000bn and deals with 8,000 different counterparties when it went bust. The derivatives business was actually split into multiple strands, backed up by between 20 and 30 different systems. Once it went bankrupt, the staff who supported these systems "evaporated"...The more time goes by, the less insight remains in terms of the people who staffed those systems...Many previously hidden costs of running a derivatives business, including technology support of multiple disjointed systems, can no longer be discounted.

Lehman Mess; naked capitalism; running; software.

Asia Times Online Sun 2009-09-13 10:25 EDT

THE BEAR'S LAIR : Possible October surprises

Martin Hutchinson

The inflation that might be expected in the United States from unprecedented expansionary monetary policies has failed to appear, while huge budget deficits have yet to produce higher interest rates. Far from being signs of a new economic paradigm, this merely means new bubbles are forming...Commodities and gold therefore are the destination of this year's hot money and are forming the new bubble...a fair-sized bubble has developed in the T-bond market...however...a modest resurgence in US inflation or difficulty in a long dated T-bond auction could cause confidence to flee the Treasury bond market and yields to leap uncontrollably upwards...the long-term costs of excessively cheap money are beginning to be seen in the US economy itself. By allowing money to remain so cheap for so long, and by running incessant payments deficits, the United States has surrendered the advantage of its superior long-established capital base, narrowing its capital cost advantage over emerging markets and exporting that capital to countries with less profligate approaches. Huge budget deficits, themselves worsening the trade deficit, merely export yet more US capital to the surplus nations. That makes it inevitable that the years ahead, in which the United States will no longer enjoy a capital advantage over its lower-wage competitors, will see highly unpleasant declines in US living standards.

Asia Times Online; BEAR'S LAIR; Possible October surprises.

Thu 2009-07-30 00:00 EDT

Hussman Funds - The Destructive Implications of the Bailout - Understanding Equilibrium - May 18, 2009

-- ``The Treasury has issued an enormous volume of debt into the frightened hands of investors seeking default-free securities. This has allowed the Treasury to finance a massive and largely needless transfer of wealth to bank bondholders so easily over the short-term that the longer-term cost has been almost completely obscured...transferring wealth from those who did not finance reckless loans to those who did... the Treasury and Federal Reserve have crowded out more than a trillion dollars of gross investment that would have otherwise have been made by responsible people in the coming years, shifted assets to the control of those who have proven themselves to be irresponsible destroyers of capital, and have planted the seeds of inflation that will cut short any emerging recovery.''

18; 2009; Bailout; Destructive Implications; Hussman Funds; Understanding Equilibrium.

The IRA Analyst Fri 2009-07-24 00:00 EDT

The Institutional Risk Analyst: Mortgage Duration Risk: The Banks Are No Longer the Problem

``Washington has indeed fixed the solvency problems of the large zombie banks...by turning them into GSEs via FDIC guarantees on their debt.''

bank; Institutional Risk Analyst; IRA Analyst; longer; Mortgage Duration Risk; problem.

Fri 2009-06-26 00:00 EDT

Jesse's Café Américain: A Final Word on Inflation and Deflation

Jesse's Café Américain: A Final Word on Inflation and Deflation; ``serious monetary inflation is triggered by excessive government debt obligations, and not private debt, that can no longer be adequately serviced by a productive real economy and domestic taxation...the output gap is no sure barrier to this type of inflation is that it ironically serves to feed it in the presence of profligate government spending, since it dampens tax revenues and domestic GDP.

deflation; final words; Inflation; Jesse's Café Américain.

Wed 2009-04-01 00:00 EDT

Wall Street on the Tundra | vanityfair.com

Wall Street on the Tundra, by Michael Lewis | vanityfair.com; Iceland's de facto bankruptcy; ``Iceland is no longer a country. It is a hedge fund.''

com; tundra; vanityfair; Wall Street.

Tue 2009-02-24 00:00 EST

Jesse's Café Américain: Inflation v. Deflation and the Yield Curve: Jesse's Lifetime Trading Plan

Jesse's Café Américain: Inflation versus Deflation and the Yield Curve: Jesse's Lifetime Trading Plan; ``we could see short term rates spike up to 15 to 20 percent with much of the longer yield curve at 12+%''

deflation; Inflation; Jesse's Café Américain; Jesse's Lifetime Trading Plan; yield curve.

Fri 2009-01-16 00:00 EST

CHINESE CHECKMATE << Culture of Life News

``There is a game of chicken developing here: both China and Japan hold more than $1.5 trillion in US paper and whoever drops it off the cliff first, will beat the one who hesitates...Will they do it? I would think so! This will probably happen after Saudi Arabia falls to revolutionaries...It is the focal point of all of bin Ladens works and dreams. And it will happen if oil drops below $30 a barrel.'' ``Store shelfs are packed with goods. But let that not fool us! These are the detritus from deals made at least a year ago if not longer. There is nothing in the pipeline. Once the shelves are cleared of goods, there will be few replacements.'' ``The US and EU refused to police our bankers and brokers. So the Communist Chinese will do this for us. No one will bank with the West. They will bank with China if China has good controls...And our money will have Mao grinning at us. We deserve this.''

CHINESE CHECKMATE; Culture; Life News.

Thu 2009-01-15 00:00 EST

Calculated Risk: Q3 2008: Mortgage Equity Extraction Strongly Negative

``the Home ATM is closed, and MEW is no longer supporting consumption''

Calculated Risk; Mortgage Equity Extraction Strongly Negative; Q3 2008.