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What happened to all of the doom and gloom economic threads?

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koalabear said:
EXECUTIVE ORDERS ISSUED…
Teddy Roosevelt 3
Others to FDR NONE
FDR 11 in 16 years
Truman 5 in 7 years
Ike 2 in 8 years
Kennedy 4 in 3 years
LBJ 4 in 5 years
Nixon 1 in 6 years
Ford 3 in 2 years
Carter 3 in 4 years
Reagan 5 in 8 years
Bush 3 in 4 years
Clinton 15 in 8 years
George W. Bush 62 in 8 years
Obama 923 in 3 1/2 years!
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Not sure where you are getting your "data", but here's from the National Archives.

The Bear is an Idiot.
 


I didn't write this. I know the person who did. That person would not want to be credited here.

I don't agree with everything but I do agree with 90% of it. The current fiscal and monetary policies are doing nothing but sweeping problems under the carpet.


...the Fed creates money by purchasing assets (mostly mortgage debt) and expanding its balance sheet by about $40 billion per month. For all practical purposes, the expressions creating money and printing money are the same if measured by their impact.

In the late 1970s, as inflation kept rising into double-digit range, President Jimmy Carter decided that it was time for price controls. Price controls had been used many times before for periods of time but they never really worked and almost always had unintended consequences. Forcing prices lower usually results in increased demand and in lower supply. In the late 70s, the last item that stayed in a price control environment was beef. For weeks, you couldn’t go to a supermarket and find hamburger meat. People bought it in anticipation that prices would rise as soon as price controls went away. Beef suppliers withheld supply toward the end, exacerbating the situation. You can almost guess the conclusion. The price controls end, supplies flooded the market and there were no buyers. Everyone already had enough hamburger meat in the freezer to supply the entire barbeque needs of the following summer. Prices plunged.

Temporary tax credits aren’t exactly price controls but their impacts are similar. Look what happened while the home buyer tax credits or cash-for-clunker programs were in place and then looked what happened after. Sales spikes during, in effect, a government sale only to dry up once the program ended. Eventually supply and demand normalized again and life went on. Neither program had a long term effect on the auto or housing market. Indeed, housing is just bottoming now, a full two years after the last tax credits expired.

But we do have price controls in place elsewhere in the U.S. and they are causing major distortions. If you haven’t figured it out yet, I am talking about the zero interest rate policy of the Federal Reserve. In theory, the Fed thinks that zero interest rates will stimulate additional buying and increase monetary velocity. No one can prove whether that conjecture is right or not because I can’t prove whether 10 more houses or a million more houses were sold because interest rates were a quarter percentage point lower than would be in a free market environment. But what I can say is that with mortgage rates at all-time lows, the level of mortgage refinancing is far below record levels and the number of new homes being sold is only about half the 20-year average and only about a third of what they were at the peak less than six years ago. I also can tell you that corporations have record levels of cash on their balance sheets. They have used the low interest rate environment to raise money at a negative real cost (inflation minus the after-tax cost of debt) so that they will be able to withstand the next future economic downturn without being dependent either on the financial markets or the banks. The bottom line is that there probably has been some modest economic benefit from lower rates but not very much. Furthermore, each additional attempt to pump in more money and move rates fractionally lower seems to have less and less impact.


I have discussed the benefits but what about the costs? The most obvious and direct cost is what savers lose as the government forces interest rates lower. If I ignore government borrowing, there is roughly $10 trillion of monetary assets (net) tied to floating interest rates. Net means assets tied to floating rates minus liabilities (mostly working capital loans, home equity loans, and credit card debt). Thus every one percentage point change in rates equals about $100 billion in lost income. Clearly, the group most impacted is seniors living on retirement. The obvious beneficiary to the low rates is the government, both Federal and local, that get the benefit of a big reduction in borrowing costs.


The low rates have a more insidious cost. One of the purposes of a zero interest rate policy is to entice holders of money to put it to work. That means invest it or spend it. Money sitting still earning nothing in a world that has some degree of inflation loses its value. Since no one wants to lose, there is incentive to put it to work, particularly when the government tells you that it plans to keep rates near zero from now to whenever, which could be when my youngest grandson gets to the age where he might get Social Security, assuming it’s still there for him. That means more people buying junk bonds than should be buying junk bonds. That means junk bonds are overpriced. They may stay overpriced as long as the government artificially keeps interest rates near zero but they won’t remain overpriced when markets get back to normal. It means commercial income-producing real estate is overpriced for the same reasons. In fact, the Fed’s policy is designed to lift the value of all assets so that there will be some sort of trickle down wealth effect. That means bonds, stocks, art and even gold are overpriced.

Does that mean everything is a sale? Not today necessarily because the government has told us that it will keep prices artificially high indefinitely. But indefinitely doesn’t mean forever. At some point, this bubble bursts. At some point, inflation will erupt and force the government out of its fantasy world of distortion creation. Price controls always end badly and make no mistake, zero interest rates are simply another form of price control. Even the Fed acknowledges that what it is doing is a grand experiment. If governments worldwide showed more fiscal prudence perhaps the experiment might not be so epic. But it is. And the likelihood the central banks of this world can unwind all the excesses they are creating without doing any harm becomes more and more difficult as they expand their collective balance sheets more and more. If they withdraw the excess credit too slowly, then inflation will eat up the value of our assets. If they do it too quickly, then they create a recession, perhaps a nasty one.

During bubbles, it always feels good. Didn’t it feel good to own Amazon, Yahoo and AOL in 1999? Didn’t it feel good when the value of your home was rising near 10% per year and you could borrow to buy a new car any time you wanted to? So enjoy the moment. It may be here for another couple of years but it won’t last indefinitely.

What can we do? Right now, there isn’t much. Gold bugs suggest owning gold but the evidence doesn’t suggest that gold is going higher when everything else, including the world supply of money, is shrinking. Probably the best solution is to ride the wave, at least until there is at a conversation about tightening money or inflation starting to appear. At that point, cash and short term high quality bonds (e.g. Treasuries) become your friends.

What I am trying to say is that while economies are healing and the world is improving, the nice financial markets today are a composite of better economic news accelerated by an unnatural high fed by excessive money creation. The creation of excess money will create distortions that won’t be erased until normal market forces replace artificial ones. Perhaps the biggest pain will be felt by the Federal government itself which will have to find a way to service an exploding debt burden during a time of normal interest rates. The artificial cost today of about $100 billion could easily expand by a factor of four or five. The spending cuts necessary to offset rising interest costs will be very painful and felt by all.

So enjoy the ride for now. It isn’t time to get off. But be aware that today’s magic carpet ride is as real as the one in The Arabian Nights. It will come to an end. Proper policy can ease the pain but it is highly unlikely it will erase the pain...
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RobDownSouth said:
Tell us again about President Obama's 923 executive orders, you stupid son of a bitch.

Let's have yet another laugh at your expense.
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Tell us again how much weight you have to lose before you can have surgery. You stupid morbidly obese troll.
 
vetteman said:
Rob seems to be excessively bitter today.:D
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Not at all!

Any time I can rub your nose in an obvious fact is a GOOD day.

It's even more so when we get to see your vaunted Vietnam-era "Marine Corps Honor" in action, watching you jump through hoops to avoid taking personal responsibility for your lies.
 
koalabear said:
Slob is always bitter, he will be till he removes the mirrors from his sty.
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^^^ The Stupid son of a bitch continues to avoid taking personal responsibility for his false email spam. He's learned soooo much from his mentor Vetteman.
 
RobDownSouth said:
Not at all!

Any time I can rub your nose in an obvious fact is a GOOD day.

It's even more so when we get to see your vaunted Vietnam-era "Marine Corps Honor" in action, watching you jump through hoops to avoid taking personal responsibility for your lies.
Click to expand...

You mean like you eating yourself into immobility, then blaming high school sports. :rolleyes:
 
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