zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-10-08 19:33 EDT

Will We Have Hyperinflation In America?

I have been reading a lot lately about the coming hyperinflation in America. Among those I've read are Mr. Shadowstats John Williams, John Hussman, Jim Quinn, commentators on Zero Hedge, and Mr. Gloom Doom and Boom himself Marc Faber. My favorite philosopher, Nassim Taleb has also taken up the hyperinflation case. And I didn't forget Jim Rogers, Peter Schiff, and others...Will hyperinflation happen here? It is possible but unlikely and improbable...There are economic and political reasons why I don't think hyperinflation would occur...none of the economic or political factors required to set off hyperinflation are present. A careful analysis of theory, fact, and history leads me to conclude that inflation/stagflation is our future. It is quite a leap of fancy to say we are certain to have hyperinflation.

America; dropped; Hyperinflation; long; survival rate; Timeline; zero; Zero Hedge.

Minyanville Wed 2010-09-29 09:08 EDT

Excerpt From "Traders, Guns & Money" (Part 3)

Satyajit Das

Minyanville Professor Satyajit Das' book "Traders Guns & Money" is a wickedly comic exposé of the culture games and pure deceptions played out every day in trading rooms around the world. And played out with other people's money. Das is an international expert on financial derivatives and has more than 30 years of experience in the financial markets. Having worked on both the sell side and buy side for such banks as the Commonwealth Bank of Australia Citicorp Investment Bank Merrill Lynch and the TNT Group he now acts as a consultant advising banks and corporations and presenting

excerpts; gun; Minyanville; money; Part 3; Traders.

Mon 2010-09-20 18:49 EDT

What happened to US interbank lending in the financial crisis?

Gara Afonso, Anna Kovner, Antoinette Schoar

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.

Sat 2010-09-11 23:31 EDT

Excerpt From "Traders, Guns & Money" (Part 1)

Satyajit Das

Minyanville Professor Satyajit Das' "Traders, Guns & Money" is a wickedly comic exposé of the culture, games, and pure deceptions played out every day in trading rooms around the world. And played out with other people's money. Das is an international expert on financial derivatives and has more than 30 years of experience in the financial markets. Having worked on both the sell side and buy side for such banks as the Commonwealth Bank of Australia, Citicorp Investment Bank, Merrill Lynch, and the TNT Group, he now acts as a consultant advising banks and corporations and presenting seminars on derivatives throughout the world...

excerpts; gun; money; Part 1; Traders.

billy blog Tue 2010-08-31 18:22 EDT

Monetary policy under challenge ... finally

The central bankers have been meeting in Wyoming over the weekend as part of the annual Economic Symposium organised by the Federal Reserve Bank of Kansas City...some notable presentations...suggest that key central bankers are starting to realise that the economic crisis in not over and the fiscal-led recovery is slowing and that monetary policy alone cannot provide the solution. Moreover, one leading central banker [BOE deputy Charles Bean] indicated that monetary policy is not a suitable tool for controlling longer term problems such as price bubbles in specific asset classes. This view challenges the basis of the mainstream macroeconomics consensus that has dominated the policy debate for 30 odd years and culminated in the worst financial and economic crisis in 80 years. It is certanly a welcome trend in a debate which is typically flooded with ideological input from the mainstream macroeconomics profession....

Billy Blog; challenges; final; monetary policy.

Mish's Global Economic Trend Analysis Thu 2010-08-26 15:11 EDT

"Contained Depression"

Michael Shedlock

Kevin Feltes, an economist for the Jerome Levy Forecasting Center, solicited my opinion on a couple of their recent articles. Levy comes down on the side of deflation, as do I. However, the devil is in the details...That Levy managed to come to what I believe is the proper overall conclusion stems from Levy's rock-solid case presented in section 2: Why Aggressive Monetary Policy Isn't Causing and Won't Cause Inflation...

contained Depression; Mish's Global Economic Trend Analysis.

billy blog Sat 2010-08-07 20:01 EDT

The government is the last borrower left standing

Remember back last year when the predictions were coming in daily that Japan was heading for insolvency and the thirst for Japanese government bonds would soon disappear as the public debt to GDP ratio headed towards 200 per cent? Remember the likes of David Einhorn...who was predicting that Japan was about to collapse -- having probably gone past the point of no return. This has been a common theme wheeled out by the deficit terrorists intent on bullying governments into cutting net spending in the name of fiscal responsibility. Well once again the empirical world is moving against the deficit terrorists as it does with every macroeconomic data release that comes out each day...On July 22, 2010, Richard Koo appeared before the Committee and presented his testimony...his views have resonance with the main perspectives offered by MMT although he does get some things wrong. His recent testimony is one of the better commentaries on the current economic problems but probably fell on deaf (or dumb) ears at the hearing. Koo told the hearing that there are recessions and then there are depressions. The correct policy response must differentiate correctly between these two economic episodes...

Billy Blog; borrower left standing; government.

Credit Writedowns Thu 2010-08-05 20:20 EDT

Do Deficits Matter? Foreign Lending to the Treasury

L. Randall Wray

...a US current account deficit will be reflected in foreign accumulation of US Treasuries, held mostly by foreign central banks...While this is usually presented as foreign ``lending'' to ``finance'' the US budget deficit, one could just as well see the US current account deficit as the source of foreign current account surpluses that can be accumulated as treasuries...most public discussion ignores the fact that the Chinese desire to run a trade surplus with the US is linked to its desire to accumulate dollar assets...all of the following are linked...the willingness of Chinese to produce for export, the willingness of China to accumulate dollar-denominated assets, the shortfall of Chinese domestic demand that allows China to run a trade surplus, the willingness of Americans to buy foreign products, the (relatively) high level of US aggregate demand that results in a trade deficit, and the factors that result in a US government budget deficit...I am not arguing that the current situation will go on forever, although I do believe it will persist much longer than most commentators presume...there are strong incentives against the sort of simple, abrupt, and dramatic shifts often posited as likely scenarios...I expect that the complexity as well as the linkages among balance sheets ensure that transitions will be moderate and slow...

credit writedowns; deficits matter; foreign lending; Treasury.

Tue 2010-08-03 14:34 EDT

Rajiv Sethi: The Economics of Hyman Minsky [2009-12-03]

There has been a resurgence of interest in the economic writings of Hyman Minsky over the past few years, and for good reason...Minsky's theoretical framework combines a cash-flow approach to investment with a theory of financial instability...expectations of financial tranquility are self-falsifying. Stability, as Minsky liked to put it, is itself destabilizing...An essential feature of Minsky's financial instability hypothesis is that a long period of sustained stability gives rise to changes in financial practices which are not conducive to the persistence of stable growth...A sustained period of stability gives rise to optimistic expectations and a rise in speculative financing...if a large number of investments which are prompted by the availability of speculative finance are found to be inept, so that immediate cash flows are significantly lower than expected, then the need for short-term refinancing becomes acute while at the same time banks are less willing to roll over existing debt. A sharp rise in short-term interest rates occurs which can lead to present value reversals, a rush towards liquidity, a plunge in the prices of illiquid assets, both real and financial, and a corresponding drop in new investments...described as a credit crunch, a state of financial distress, or a financial crisis...

2009-12-03; economic; Hyman Minsky; Rajiv Sethi.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-07-30 15:41 EDT

China Has Been Covertly Funding A Housing Bubble Five Times Larger Than That Of The US: 65 Million Vacant Homes Uncovered

...a report [Fitch] released today titled Informal Securitisation Increasingly Distorting Credit Data, uncovers that China has in fact been massively underrepresenting the actual amount of new loans in the first half of 2010, courtesy of precisely the kinds of securitization deals that blew up half of our own banking system... [moreover, Yi Xianrong,] an economist at the Chinese Academy of Social Sciences noted estimates from electricity meter readings that there are about 64.5 million empty apartments and houses in urban areas of the country... China's banks are increasingly becoming more opaque in data presentation, which one can assume is due to their unwillingness to reveal the true state of affairs... [According to] Xianrong ``investment in the domestic property market has completely overturned China's traditional concepts of wealth management and investment and its price formation system'' [Chinese real estate bubble]

65; China; covert funding; dropped; housing bubble; long; survival rate; Time larger; Timeline; Vacant Homes Uncovered; zero; Zero Hedge.

New Economic Perspectives Sat 2010-07-24 16:30 EDT

Deficit Doves Meet the Deficit Owls

Paul Davidson, James K. Galbraith and Lord Robert Skidelsky

...We support the central objective of the letter -- a full employment policy now, based on sharply expanded public effort..apart from the effects of unemployment itself the United States does not in fact face a serious deficit problem over the next generation, and for this reason there is no "necessity [for] a program to cut the mid-and long-term deficit." On the contrary: If unemployment can be cured, the deficits we presently face will necessarily shrink. This is the universal experience of rapid economic growth: tax revenues rise, public welfare spending falls...The long-term deficit scare story plays into the hands of those who will argue, very soon, for cuts in Social Security as though these were necessary for economic reasons...We call on fellow economists to reconsider their casual willingness to concede to an unfounded hysteria over supposed long-term deficits, and to concentrate instead on solving the vast problems we presently face. It would be tragic if the Evans letter and similar efforts - whose basic purpose we strongly support - led to acquiescence in Social Security and Medicare cuts that impoverish America's elderly just a few years from now.

Deficit Doves Meet; Deficit Owls; New Economic Perspectives.

billy blog Thu 2010-07-15 16:58 EDT

We have been here before ...

The daily rhetoric being used to promote fiscal austerity maybe couched in the urgency of the day but we have heard it all before. In this blog I just reflect on history a little to remind the reader that previous attempts to carve public net spending, based on the ``expectations'' belief government was not going to tax everybody out of existence, failed to deliver. The expected spontaneous upsurge in private activity has never happened in the way the mainstream macroeconomic supply-siders predicted. Further, the chief proponents usually let it out in some way that the chief motivation for their vehement pursuit of budget cuts was to advance their ideological agendas. Of-course, the arguments used to justify the cuts were never presented as political or class-based. The public is easily duped. They have been in the past and they are being conned again now. My role is to keep providing the material and the arguments for the demand-side activists to take into the public debate...

Billy Blog.

billy blog Thu 2010-07-15 16:35 EDT

Employment gaps -- a failure of political leadership

Overnight a kind soul (thanks M) sent me the latest Goldman Sachs US Economist Analysis (Issue 10/27, July 9, 2010) written by their chief economist Jan Hatzius...It presents a very interesting analysis of the current situation in the US economy, using the sectoral balances framework, which is often deployed in Modern Monetary Theory (MMT)...some of the top players in the financial markets have a good understanding of the essentials of MMT...he US is likely to have to endure on-going and massive employment gaps (below potential) for years because the US government is failing to exercise leadership. The paper recognises the need for an expansion of fiscal policy of at least 3 per cent of GDP but concludes that the ill-informed US public (about deficits) are allowing the deficit terrorists to bully the politicians into cutting the deficit. The costs of this folly will be enormous...

Billy Blog; employment gap; failure; political leadership.

Fri 2010-06-18 10:37 EDT

Monetary Economics Review

Pablo Gabriel Bortz

Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth, W. Godley and M. Lavoie, Palgrave/Macmillan, London, 2007...Acknowledging the existence of a complex institutional structure that includes households, firms, banks and governments (sometimes separated from the Central Bank), "our aspiration is to introduce a new way in which an understanding can be gained as to how these very complicated systems work as a whole"...the "new way" referred above is currently known as Stock-Flow Consistent modelling (SFC)...The main bid of Godley and Lavoie (G&L, from now on) is to show (successfully, one could note) that the SFC models make it necessary to fully articulate an accounting structure, avoiding "black holes", gaining in consistency, accuracy, and providing a common framework for the comparison of different models...one gets really convinced that it is the type of approach that makes it possible to analyse a great number of elements and complexities of the real world, as much as one wishes!...G&L adopt an institutional classification (households, firms, banks, government and the central bank). All the models presented in the book start with a "balance sheet" matrix, where all the assets and liabilities of each sector are described...

Monetary Economics Review.

zero hedge Mon 2010-05-24 16:38 EDT

Presenting What Could Be The Oddest Capital Flow Observation In History

It is no secret that the last few weeks saw massive liquidations along all asset classes. The result was a huge outflow across almost all products: Loans, HY Bonds, Municipals, Commodities... all a typical reaction to broad based liquidations. However, note we said "almost" - one class that actually posted a $6.2 billion inflow was equities. Yet not is all as it seems: peeking underneath the hood indicates that the bulk of this inflow, or $10.3 billion, had to do with inflow into ETFs... or rather, just one ETF - the SPY, accounting for $10.1 billion. Did someone prop up the entire equity market last week by massively pushing capital into the most liquid equity proxy available?...

History; Oddest Capital Flow Observation; presenter; Zero Hedge.

Credit Writedowns Sat 2010-05-22 20:58 EDT

MMT: Economics 101 on government budget deficits

...when the government has a deficit in any period, by definition the non-government sector (foreign plus private) must have a surplus of exactly the same amount...I haven't talked about government as the creator of currency and the private sector as the user of currency. I haven't focused on any misallocation of resource or malinvestment issues. I haven't raised the spectre of inflation or currency depreciation. I have simply presented the economics and accounting of budget deficits...

credit writedowns; Economics 101; governments Budget Deficit; MMT.