That didn’t take long. It still makes no sense to me as to why this didn’t occur yesterday.
Federal Reserve, other central banks announce measures to address funding pressures
Posted in * Economics, Politics, Economy
That didn’t take long. It still makes no sense to me as to why this didn’t occur yesterday.
You do realize that the central banks “relieve funding pressures” by taking the hard-earned money of the rest of the taxpayers (many people who are too poor afford the loans) and using these funds to prop up the “market,” or the injudicious actions of a few?
6 But when they said, “Give us a king to lead us,” this displeased Samuel; so he prayed to the LORD. 7 And the LORD told him: “Listen to all that the people are saying to you; it is not you they have rejected, but they have rejected me as their king. 8 As they have done from the day I brought them up out of Egypt until this day, forsaking me and serving other gods, so they are doing to you. 9 Now listen to them; but warn them solemnly and let them know what the king who will reign over them will do.”
10 Samuel told all the words of the LORD to the people who were asking him for a king. 11 He said, “This is what the king who will reign over you will do: He will take your sons and make them serve with his chariots and horses, and they will run in front of his chariots. 12 Some he will assign to be commanders of thousands and commanders of fifties, and others to plow his ground and reap his harvest, and still others to make weapons of war and equipment for his chariots. 13 He will take your daughters to be perfumers and cooks and bakers. 14 He will take the best of your fields and vineyards and olive groves and give them to his attendants. 15 He will take a tenth of your grain and of your vintage and give it to his officials and attendants. 16 Your menservants and maidservants and the best of your cattle and donkeys he will take for his own use. 17 He will take a tenth of your flocks, and you yourselves will become his slaves. 18 When that day comes, you will cry out for relief from the king you have chosen, and the LORD will not answer you in that day.”
19 But the people refused to listen to Samuel. “No!” they said. “We want a king over us. 20 Then we will be like all the other nations, with a king to lead us and to go out before us and fight our battles.”
Kendall,
Every move by the central banks to “address funding pressures” represents an involuntary transfer of wealth from savers to spenders, from downstream recipients of dollars to upstream recipients of dollars, etc. Thou shalt not steal …
Kendall, I think you are being overly harsh on the Fed. They have a handful of levers to pull, all of which have primary and secondary impacts on the economy. Yes, they could have lowered a half point, or extended their short-term infusions to 90-day terms. This multi-lateral agreement is much better, involves other central banks in what is a major issue internationally, and it provides a mechanism that still requires banks to make decisions at the margin about whether they can find a risk-justified use for the money versus other uses, other banks, and other sources of capital (ie, an auction mechanism). By not using other mechanisms, the Fed is avoiding some of downsides of cutting rates – weaker currency, lower returns on for some investment classes, etc. Also, while I understand your call for the Fed to do more via short-term open-market operations, the fact is that those operations depend on a relatively small number of dealer institutions who were not then extending credit to other banks. These dealers’ worries were not about 30 vs. 90 days but about collateral for the loans. More importantly, the Fed also signalled that they are not simply jumping every time the market bakes in questionable expectations. Bernanke is smart enough to understand the problem of moral hazard. If the Fed constantly acts to cover the financial markets, either for making bad choices about risk or incorrect valuations, they can become enablers.
Every move by central bankers debases the dollar, meaning it increases inflation. It is not an accident that oil, food and other commodities are increasing in price. Inflation (caused by the expansion of credit) directly hurts the poor, and those on fixed incomes, while bailing out investment bankers who made bad choices. Nor will such moves be effective in preventing a recession. They will simply turn a deflationary recession (that at least would provide cheaper food and housing for the poor) into stagflation (which will hurt everybody). However the Fed moves will permit the canny to unload toxic waste CDOs and other debt on the trusting. As far as I can see, that is its only purpose.
Me, all my assets are in inflation linked and other treasuries, and I will be buying precious metals, which I plan to take possession of personally (have you noticed that there are three times as many shares of metal traded than were ever mined?). I will also be paying off my mortgage early. That 4.8% fixed rate of mortgage loan is a lot higher than the stock or bond market will provide (especially once the china bubble pops, and the subprime mess extends to credit cards) and unlike the markets, paying off your mortgage early really is as, “safe as houses”.
Clueless, you mentioned that you are investing in precious metals. In what form? Coins?
I’m looking to do similarly–at least to diversify my portfolio.
american eagles. They have their purity guaranteed by the US government (which is still worth something). I think the premium is worth paying, as it is likely that the nongovernment mints will start mixing alloys into their coins and bars soon, if they are not already doing so. But take possession in person. When there are more shares on Comex than was ever metal mined, then obviously there is fraud involved. Once the run on metal begins, and those who thought they owned large quantities of metals, stored elsewhere find they simply own a piece of paper promising this, then there will be a run on metals that will equal the run on pension funds holding CDOs (all those 401/403k bond and money market funds) that will dominate headlines in 2008.
What are dependable companies? Is there an index or going market price that can be referenced before buying from someone? (I’m guessing that an American Eagle costs more than its weight in gold?)
I believe we are at the start of an enormous, world wide depression, that will affect all markets. This is known as a “Kondratieff long winter (which we last saw at the start of the great depression, and which is an expected, cyclic phenomenon that can be reviewed here.
http://www.kwaves.com/kond_overview.htm
I would also go to the below website and download the pp presentations entitled “a bear tour†and the “case for a secular bear marketâ€
http://www.prudentbear.com/
For those with more time, I would advise studying the Austrian school of economic theory, rather than the usual Keynesian school that dominates US/Federal reserve thinking. An overview can be found here.
http://www.mises.org/books/dollarcrisis.pdf
“Buy and hold†was a good maxim during the long bull market, which was caused by the boomer generation saving for retirement in their pension funds. I bought and held then too. It worked well. If millions of people are putting money into the stock market, then the stock market has to go up. If you are going to buy a stock, then somebody has to sell it, and with increasing amounts of money entering funds, the price of the underlying stock will/must go up.
But the boomers are about to start taking their money out of their pension funds. And if you are going to sell a stock, then somebody has to buy it, and with increasing amounts of money being taken out of funds, the price of that stock will/must go down.
Do recall, my efriends that pension funds (unlike bank funds) are not guaranteed. One of Florida’s state pension funds is bankrupt, and I think that just as a third of banks closed during the Great Depression, many pension funds will close also.
Enough said.
I think silver may be more likely to rise than gold (if for no other reason than it has a commercial use). I also note that Rosevelt confiscated gold during the Depression, but it would be hard to confiscate silver due to its many commercial uses.
I also think that while gold will rise higher, it is only modestly lower than it’s historical peak, while silver is no where close to its historical peak.
http://goldprice.org/inflation-adjusted-gold-price.html
http://goldinfo.net/silver600.html
I would buy no more than you can afford as we are discussing an investment that cannot be easily converted (particularly if the US forbids the purchase of precious metals as they did previously). I would also keep it in the bank or you will invite breakins and will have no peace in your home.
As to sources, the best source would be a trusted local coin dealer near your home, that has a real address, and whom you can sue in local courts if he fails to provide the goods purchased. I personally have bought small quantities from the below supplier, but have not had any major purchases yet.
http://www.nwtmintbullion.com/
[blockquote]I would buy no more than you can afford as we are discussing an investment that cannot be easily converted (particularly if the US forbids the purchase of precious metals as they did previously).[/blockquote]
That’s crazy talk. Only a terrorist would think the US government would confiscate private wealth. I’m calling Homeland Security.
I suppose the next whopper you’ll tell me is that the government is going to make it a crime to melt down pennies for their copper content.
[i]Or… I suppose the next whopper you’ll tell me is that the government is going to make it a crime to melt down pennies for their copper content.[/i]
Crazy talk indeed!
…Or arrest a private company simply for printing their own coins. Oops: http://blog.washingtonpost.com/the-trail/2007/11/16/post_203.html?hpid=topnews
😉
Thanks Clueless.
With the talk of portfolios, y’all seem to be in an income/asset bracket that hasn’t been affected as devastatingly as others have.
My home was foreclosed on last month. It made me feel like a huge failure but there was nothing I could do about it. I had taken out some of the equity to pay cash for a very nice, foreclosed mobile home near where my son lives as I often depend on him to help me out. (For those who don’t know, I’m disabled.) With the cash-out refinance, the amount owed was still more than $25,000 less than the home’s value.
I figured I could sell it easily and all would be well. Indeed, there were lots of showings and I did get offers. But the banks clamped down and put in stricter lending regulations. My home was 1,450 sq. ft. and the folks who were interested in buying it were not affluent. They were just average Joes who, if they had the necessary credit score, couldn’t meet the greater proof-tests. Those with great credit and high incomes would not be interested in my home, even though it was in a super neighborhood and I had remodeled it. It sat on the market for more than a year and my savings ran out. Unless something gives, I expect that only an investor will be able to buy it from the bank but it’s “too nice” to be used as a typical rental. The property taxes in this great neighborhood are a bit steep.
There was one couple in particular who REALLY wanted my home and tried everything to get a loan. Both husband and wife worked, but the husband was a free-lancer and couldn’t come up with enough documentation showing a long-enough period of time to meet the stricter requirements. They couldn’t qualify on the wife’s salary alone.
It’s really been a bind and luck wasn’t on my side. If I had been able to put the house on the market even six months sooner, then all would have been well. So, any break in this credit situation is most welcome!