October 27, 2013

An Act Of Faith

A poster suggested this topic. “Any chance Congressional Republicans will muster the political might to put the kibosh on Yellen’s nomination? Given the political importance of the Federal Reserve Chair appointment, would it make sense to reconstitute it as an elected position?”

A reply, “Where were those same republicans when Greenspan was running the show ??”

From Forbes. “When Ben Bernanke completes his second term as Federal Reserve Board chairman in January, Janet Yellen should be more than ready to take the helm of the U.S. central bank, according to Wharton faculty and other experts. ‘She has to thread the needle between the Democrats, who want assurances for further supports for the economy, and the Republicans, who are concerned that [continuing] QE forever will give rise to asset bubbles that will set up the next crisis,’ says Phillip Swagel, a University of Maryland public policy professor and former assistant secretary of economic policy at the Treasury during the George W. Bush administration.”

“If growth and employment don’t pick up, we could be in QE for a lot longer than expected, says Kent Smetters, Wharton professor of business economics and public policy. ‘We could have a Japanese-style lost decade. The conditions are very similar: We have a bad banking sector and lots of government debt. But in many ways, we’re in a worse position, because Japan has a high household savings rate, and we have a low savings rate. Tapering could be pushed off for 10 years, starting from the beginning of the crisis.’”

“The enormous injection of liquidity by the Fed also threatens another bubble. Both the Fed and the banks have trillions of dollars on their balance sheets as a result of the Fed’s asset purchase program, says Wharton finance professor Joao F. Gomes. ‘The Fed will have to manage these amounts carefully to prevent an explosion of credit in the years ahead. The magnitude is so large — it’s never happened before — that it’s an act of faith that they have all the tools to prevent another boom and bust and inflation.’”

“Smetters concurs. ‘The Fed tripled money supply in the last four years, almost all held by banks in excess reserves. Even though we think subprime mortgages are behind us, they are not. The whole commercial side of the real estate bets will come to light next year, as the leases come up and we see the renewal rates and whether commercial loans are viable. There’s still a lot of uncertainty.’ Moreover, there’s another great ‘crisis at our doorstep — the tidal wave of [public] debt,’ Smetters adds. ‘How does the Fed keep the economy [running] when so many resources are going out to service higher debt and the budget deficit? Historically, the challenge has been met by printing money, which causes inflation. I give it a 95% chance that this crisis will come on Yellen’s watch.’”

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Comment by Ben Jones
2013-10-26 09:03:26

‘Where were those same republicans when Greenspan was running the show?

Ron Paul: “This real-estate bubble will burst, as all bubbles do” (part 3)


“Ron Paul Predicts Housing Bubble 5 Years Before it Burst”


Comment by scdave
2013-10-26 09:16:31

I Don’t consider Ron Paul a Republican particularly in the context of the current group;

Political party Republican Party
(1956–1988, 1988–present) Libertarian Party

Comment by Whac-A-Bubble™
2013-10-26 09:24:00

Like many of the rest of America, he apparently has a hard time aligning with either of the two ruling parties.

Comment by Ben Jones
2013-10-26 09:25:40

‘Sen. Rand Paul is threatening to block President Obama’s nomination of Janet Yellen to be the next Federal Reserve chief. According to a report Friday on CNBC cable financial news network, Paul intends to put a hold on Yellen’s nomination next week to force a Senate vote on a bill he has proposed that would require audits of the Fed’s policy making deliberations.’

‘Paul’s Fed transparency bill is similar to legislation that his father, retired Texas Rep. Ron Paul, previously introduced in the House.’

Comment by scdave
2013-10-26 09:37:34

I think there is a liberation road that could be achieved…It would take the moderate republicans middle right democrats to get on board with the rest on the Independents & Libertarians…

Dump the social agenda both personal and freebies…Nothing is free and I don’t like you trying to control my bedroom or my wives body..I don’t like the slackers either..

Give the state more autonomy in how they govern thereby being able to greatly reduce the size & power of the Fed’s…Pick your state that most fits your views..

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Comment by Bill, just south of Irvine
2013-10-26 10:32:07

This group will not win by voting. This group will prevail by revolting.

Comment by Bill, just South of Irvine, CA
2013-10-26 15:32:48

“Give the state more autonomy in how they govern thereby being able to greatly reduce the size & power of the Fed’s…Pick your state that most fits your views..”

sc that’s “racis’

Comment by Bill, just South of Irvine, CA
2013-10-26 15:38:04

It makes too much sense for having a weak federal government and allow the states to be the lab experiment of styles of government. But the “progressives” call this racism and they point to the civil war as reasons for making a strong federal government.

What idiot would think that slavery will ever renew in America again, particularly if you are from a place like California with a minority of population being white, there will not be slavery of non-whites by whites.

I like the 50 state lab experiment idea. If Michigan, the coldest weather state, allowed competing governments in its boundaries in such conditions, I would live there instead of California and Arizona.

I like the idea of voting with your feet. Taxpayer Americans will make this possible once again. Not the voters.

Comment by Whac-A-Bubble™
2013-10-26 17:20:39

“I like the idea of voting with your feet.”

It already happens.

And there is no reason to assume it won’t eventually reverse, either.

Detroit Set for 1st White Mayor Since ’74 as Politics Shift

By Mark Niquette - Oct 24, 2013 6:18 AM PT

Sean Davis said his friends called him a sell-out when he volunteered for Detroit mayoral candidate Mike Duggan in February. After all, Davis is a black man from a city that’s 83 percent black, supporting a white candidate who until last year lived in the suburbs.

Davis didn’t listen. He said Duggan, who led Wayne County Sheriff Benny Napoleon almost 2-1 in a poll last month, offers the best hope to change the trajectory of a bankrupt city where police don’t come, street lights don’t shine and neighborhoods are cut through by swaths of vacant homes and lots.

“I really wanted someone that was not part of the old regime,” Davis, 43, a former nightclub owner, said in an interview at Duggan’s campaign headquarters near downtown. “We definitely need a change.”

Duggan’s lead before the Nov. 5 election shows how smash-mouth racial politics may be giving way as voters look for a leader to assume power after the city emerges from a record $18 billion U.S. municipal bankruptcy and state control.

The default by the shattered auto-manufacturing capital has rattled municipal-bond investors’ confidence in the sanctity of a local government’s unlimited full faith and credit pledge, which backstops about $900 billion of its debt. A more pragmatic politics may restore the fortunes of not just the city but the state, where localities have had to postpone borrowing or pay a penalty to finance infrastructure projects.

Michigan’s Protectorate

Detroit has had a black mayor since 1974, when Coleman Young took office. Even as the city fell apart, it stood as a beacon of black political power. For many suburbanites, it became a place to be visited only for sports events and special occasions.

The city is being run for now by Kevyn Orr, appointed by Republican Governor Rick Snyder as a viceroy empowered to make all significant decisions. His term has no limit, though the City Council, which opposed state control, can end it in September with a two-thirds vote.

“The person who’s in charge is the emergency financial manager,” said Dennis Archer, a former mayor and Michigan Supreme Court justice. “The new mayor is going to be in office, and the question is, what kind of working relationship will he have with the emergency financial manager?”

Unlikely Candidate

Duggan, 55, a former hospital executive and prosecutor, won more than half the vote as a write-in candidate in the Aug. 6 primary after he was kicked off the ballot in a residency dispute. A poll last month by the Detroit Free Press and WXYZ-TV showed him leading Napoleon, 58, whom he outpolled by more than 20,000 votes in the primary. Duggan raised and spent almost $1.7 million through Aug. 26, compared with $645,000 for Napoleon, according to reports filed by the candidates.

The odds seemingly would have been against Duggan to succeed Mayor Dave Bing, a former professional basketball star who decided not to seek a second term, said Bill Ballenger, associate editor of “Inside Michigan Politics,” a newsletter in Lansing, the capital. Though Duggan was born in Detroit, he has lived in Livonia until moving to run in the overwhelmingly black city.

“You would think that would be the ultimate kiss of death, but miracle of miracles, we find ourselves in a situation where Duggan, I think right now, is still considered an overwhelming favorite to win pretty easily,” Ballenger said by phone.

Comment by Whac-A-Bubble™
2013-10-26 17:25:58

What I would like to know about this supposed ‘Silver Lining’ for blacks is how many of them were tempted to drink the subprime koolaide only to join the ranks of millions of U.S. households which went into mortgage default and foreclosure in the wake of the fall 2008 financial collapse.

The bean counting exercise of determining how many black families were able to join the Ownership Society thanks to white flight doesn’t go far enough to answer whether white flight was good or bad for black families.

White Flight’s Surprising ‘Silver Lining’
Emily Badger
Oct 15, 2013

“White flight” from American cities in the second half of the 20th century is associated with a number of problems that plague places like Detroit and Chicago to this day: the decline of urban school systems, the persistence of racial segregation, the job sprawl that pushed employment prospects even further from the urban poor.

Historic data suggests, however, that the mass exodus of the white middle class from central cities had one positive result for the people left behind: Suburban white flight helped boost black homeownership in America. And the extent of the effect is striking. Economists Leah Boustan of UCLA and Robert Margo of Boston University have estimated that for every 1,000 white households that moved out of central cities for the suburbs between 1940 and 1980, about 100 black households became homeowners.

Comment by Bill, just South of Irvine, CA
2013-10-26 19:48:08

You know, I’m not entirely a pessimist. I saw communism crumble nonviolently in most former Iron Curtain nations in the late 80s (much to Rio’s chagrin). There was violence in Romania, but I think it was directed primarily at government - and it was government soldiers who aligned with the people who got rid of communism.

I laugh at the perma pessimists who think that we taxpayers will allow ourselves to be taxed 100%, and maybe have 30% of it redistributed back, plus a kick in the behind, and a 2 year wait for a doctor appointment.

The nonviolent revolutions in eastern Europe and Russia were more significant because the populace were all disarmed.

I am also laughing at those who think that, assuming the revolution is violent, the people in the farm areas will survive (or any area with enough water and enough property to grow food) while the city residents will shoot each other. First, such a revolution will not happen overnight. Preceding it will be street riots in slum areas that become chronic and eventually the police just let it continue. You can basically move out in time to your rescue place. Some cities will be far safer than others. Cities of states where there is castle doctrine, and gun ownership and ammo ownership is popular. The hardened criminals (and also the ones outside of government) will pick on the blue states first where people are too stupid to want to own a gun and applauded the gun laws.

The revolution will take years. Bloodshed will be first in slums, then blue states, and may or may not make it to red states before the government realizes it ran out of OPM and forces itself to shrink.

Comment by tresho
2013-10-27 08:41:16

The revolution will take years. Bloodshed will be first in slums, then blue states…
There’s no way to know that ahead of time. The events surrounding the dissolution of the USSR were a surprise to everyone. E.g., a collapse of the US power grid, depending on the location, extent, and the time of year, could kill hundreds of thousands without overt “bloodshed.”

Comment by In Colorado
2013-10-27 09:07:16

You know, I’m not entirely a pessimist. I saw communism crumble nonviolently in most former Iron Curtain nations in the late 80s

And it happened without an armed citizenry or “go time”.

But why did the iron curtain collapse? Was it because of communism, or was it because of Soviet imperialism?

Comment by Whac-A-Bubble™
2013-10-27 09:34:08

“I saw communism crumble nonviolently in most former Iron Curtain nations in the late 80s…”

There were exceptions. Not all Stalinists had as happy a death as Stalin had.

Comment by Whac-A-Bubble™
2013-10-26 09:22:46

Is bubble denial embarrassing for central bankers? Or do they view their consistent bubble denial as a badge of honor that comes with their lofty position?

Comment by Whac-A-Bubble™
2013-10-26 09:27:55

The Conscience of a Liberal
Paul Krugman
January 12, 2010, 10:31 am
Bubble Denial

Via Mark Thoma, Economics of Contempt has done [did] a yeoman job [back in 2008] of assembling quotes from pundits/economists who insisted that there was no housing bubble. [At first I failed to note the date of EoC's post; special kudos to Mark for remembering it and providing the link]. Just as a reminder, the facts:

EoC’s list consists largely of the usual suspects — the WSJ op-ed contributors/Kudlow guests. As he suggests, some of this was my fault: I said there was a housing bubble, which to them was sufficient demonstration that there wasn’t. (They hate me! They really hate me!) Beyond that, to suggest that there was a housing bubble was to denigrate the wonderful Bush Boom.

Can I add anything to Mr. Contempt’s list?

One question is whether you can find clear bubble denial, or at least denial that anything really bad was going to happen, from more respectable economists. Ben Bernanke is one well-known example; I’ve found this from Glenn Hubbard on Face the Nation, August 21, 2005:

I think we do have a great deal of froth in housing markets. There’s no doubt about it. I don’t think we’re likely to see a large nominal price collapse, that is largely falling house prices, but I think we’ll see much slower rates of growth in house prices after 2005.

Comment by Whac-A-Bubble™
2013-10-26 09:29:48

SocGen analyst warns that central banks are ignoring housing bubbles amid market euphoria - just like in 2008
by Peter Spence
October 23, 2013, 2:26pm

Many central bankers claim that they’re making progress on the problems that caused the financial crisis - but Societe Generale analyst Albert Edwards doesn’t believe them.

He says that “exactly the same bozos who missed the last bubble deny there is one now.” In November 2008 Queen Elizabeth II asked why “no-one saw it coming”.

Edwards says they did - “but were ignored amid the euphoria - exactly the same way they are being ignored now”. He reflects back to five years ago when “we were standing in the ruins of the worst slump in living memory.” He says we are now back to that point.

Now “signs of bubbles abound, the most visible one being house prices”. Edwards thinks we “have truly slipped into another space and time dimension” where he sees headlines concerned with a German property price boom. London house prices have just risen by 10 per cent in just one month.

Comment by Whac-A-Bubble™
2013-10-26 09:32:22

The Housing Bubble Villains Deny Responsibility
Monday, 25 August 2008 15:13 By Dean Baker
Federal Reserve Vice Chairman Donald Kohn and Federal Reserve Chairman Ben Bernanke at the Annual Economic Symposium in Jackson Hole, Wyoming, on August 22. (Photo: Reuters)

The central bankers of the world gathered last weekend for their annual meeting at Jackson Hole, Wyoming. This was an opportunity to talk about the major issues confronting the world economy, as well as an opportunity to spend some time in a very beautiful vacation spot.

When they met in Jackson Hole in 2005, the meetings were devoted to an Alan Greenspan retrospective, honoring his 18-year tenure as Federal Reserve Board chairman, which was due to end the following January. A number of papers were presented analyzing his record at the Fed, including one that raised the question of whether Mr. Greenspan was the greatest central banker of all time.

The elite Jackson Hole crew did not debate whether Greenspan was the greatest central banker of all time this year. The world is now facing the most serious financial crisis since the Great Depression. At least, that is the assessment of Alan Greenspan. With house prices plunging, unemployment and inflation rates rising and banks failures mounting, Greenspan has a pretty good argument.

How did we get here? The centerpiece in this story is the United States allowed an $8 trillion housing bubble to grow unchecked. Between 1996 and 2006, house prices rose by more than 70 percent, after adjusting for inflation. In the previous century, from 1896 to 1996, house prices had just kept even with the overall rate of inflation.

When there is suddenly a sharp divergence from a long-term trend like this, it is reasonable to look for an explanation. Was there some fundamental factor on either the supply or demand side that was suddenly causing house prices to skyrocket?

Comment by dude
2013-10-26 09:27:26

I don’t know if maybe it is just me feeling this but I don’t feel the same sense of impending doom as we approach another day of reckoning. The only reason I can think of for this is that I am personally as stable or more stable financially than ever, or maybe said stability keeps me off point with regard to Wall Street and Washington?

Has anyone else noted a distinctly different feeling this round on the run up to the end game? The lack of hysteria perhaps?

Comment by Whac-A-Bubble™
2013-10-26 09:38:52

Foolish complacence + irrational exuberance + unchecked bullishness = DOOM.

Comment by Ben Jones
2013-10-26 09:41:46

May 18, 2005

Affordability vs. Recession: Who’s Fault Is That?

A member of the Royal institution of Chartered Surveyors put his finger on one of the main dilemmas in the housing bubble. “RICS national spokesman Harvey Williams said the only way to bring house prices within reach of most young people was a reversal in market conditions.”

“Mr Williams said: ‘It would take a recession to get properties into the price range that first-time buyers can manage and nobody wants a recession because that isn’t good for prosperity.’”

Williams has it backwards, in a way. It is clear that housing has propped up the major western economies and a recession will bring down home prices. Wouldn’t a recession happen regardless of what anyone “wants”?

On the other hand, the situation that the easy money has created is that of overpriced housing. And when it reverts to fair value, that will probably spark a recession. People who want affordable housing aren’t going to take any blame for that.

Comment by Housing Analyst
2013-10-26 09:56:04

It’s going to be a painful affair for anyone holding a mortgage… or any debt for that matter.

Comment by dude
2013-10-26 12:20:58

Don’t get me wrong, I know there will be another crash, and it is most likely going to be far, far worse than the last one. I am likely to be hurt badly financially. I just don’t understand why it doesn’t bug me as bad as it did in 05-08.

Comment by Whac-A-Bubble™
2013-10-26 12:47:30

“I just don’t understand why it doesn’t bug me as bad as it did in 05-08.”

You been there / done that. And lived to tell about it, no less.

Comment by dude
2013-10-26 19:27:10

Could be true.

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Comment by Ben Jones
2013-10-26 12:53:21

I’ve been having conversations about this. In the US, we have more people renting every month. Outside of a few places like Miami, there isn’t a lot of housing construction going on. There aren’t as many housing loans made through wall street.

There have been a lot of layoffs at mortgage firms lately. There is much more wall street money in single family housing. The US government is very involved in housing lending. The central bank is loading up on mortgage and government debt. There are millions of households draining cash into HARP and HAMP programs. It’s a complicated picture.

One reason you may not feel any worry is complacency. The Fed used to lower rates for 6 months, the economy would respond and the cycle would start over. For the last decade or more, we’ve seen increasing intervention from them and the government, now with not much bang for the bucks. Like the above piece mentions, it’s not noticed much how “extraordinary” these policies have become; in size and scope.

People say, ‘there are no bread lines.’ Pay attention the next time you are at a grocery store, because you’ll be standing in a bread line, and a Cheetos line too. One thing about today versus a few years ago is the economy is much weaker. Complacency, high unemployment, stock/bond and housing bubbles. It’s a very different place than 2006.

Comment by In Colorado
2013-10-27 09:10:13

One thing about today versus a few years ago is the economy is much weaker.

Agreed. We are finally paying the piper for offshoring every job we could.

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Comment by scdave
2013-10-27 09:15:11

+1 Colorado…

Comment by United States of Crooked Politicians and Bankers
2013-10-27 13:13:25

It’s not just offshoring. Every time I go into Home Cheapo or any grocery store, I use self-checkout because they have only one or two checkers left and there are lines. And, what used to be a career job (grocery store checker) is now a low-wage one. Technology is eliminating tons of jobs, and those that remain pay squat.

Comment by scdave
2013-10-27 09:13:53

One thing about today versus a few years ago is the economy is much weaker ??

Yep…Much greater risk that a “event” could throw the whole thing into mayhem…

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Comment by Carl Morris
2013-10-26 16:16:22

Don’t get me wrong, I know there will be another crash, and it is most likely going to be far, far worse than the last one. I am likely to be hurt badly financially. I just don’t understand why it doesn’t bug me as bad as it did in 05-08.

My thought is that now that we know they will do ANYTHING to perpetuate the current corruption, it’s likely that this could take another cycle or two before the big one. And even then…if they suddenly wipe out part of your wealth and give you Ameros, will it look like the 30s at that point? Probably not…it’s a different world now. Much more corrupt, but the people really suffering are much farther away. So far anyway…

Comment by United States of Crooked Politicians and Bankers
2013-10-27 13:16:01

I agree they will do anything. I think they will blow-up the whole economy and country before they will do the right thing. It’s all about power and monetary greed.

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Comment by dude
2013-10-26 19:41:55

Thanks all, helpful comments.

Comment by scdave
2013-10-27 09:09:25

and it is most likely going to be far, far worse than the last one ??

If it is, kiss your a$$ goodbye…There will be no safe house…Even Northeasterner with his arsenal will be vulnerable…World wide depression with more civil wars than you can count…

Comment by Housing Analyst
2013-10-27 09:37:50

Surrender Monkey.

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Comment by Whac-A-Bubble™
2013-10-26 09:37:03

‘The Fed will have to manage these amounts carefully to prevent an explosion of credit in the years ahead. The magnitude is so large — it’s never happened before — that it’s an act of faith that they have all the tools to prevent another boom and bust and inflation.’

What constrains the Fed from mushrooming its balance sheet to unimaginably gargantuan proportions? It’s already gargantuan; what’s to stop it from growing to 100X, 1,000,000X or a 100^100X its current size?

Comment by Ben Jones
2013-10-26 10:01:43

April 28, 2005

It is often said that as long as the Fed keeps liquidity available and rates low, the housing boom will continue. Those voices believe the central bank to have supernatural powers over market forces. For a check on the theory, lets look at Japan, which enjoyed a stock market and RE bubble.

“The Bank of Japan on Thursday officially abandoned hope that the economy would return to inflation before March 2006. Given the bank’s commitment to keep interest rates at zero until deflation is eradicated, it implies a one-year extension of the zero-interest rate policy.”

“With interest rates at zero and markets flooded with liquidity, the bank had few tools beyond language to affect market expectations.”

Comment by Whac-A-Bubble™
2013-10-26 10:11:11

“With interest rates at zero and markets flooded with liquidity, the bank had few tools beyond language to affect market expectations.”

Isn’t this roughly where we are right now?

Comment by Ben Jones
2013-10-26 10:33:28

April 27, 2005

“For generations of economists, it used to be a truism that ‘wealth creation’ implies capital formation in terms of generating income-creating tangible assets.To indiscriminately put this label of ‘wealth creation’ on rising asset prices in the absence of any income creation is plainly a novel usurpation of this concept. It is in essence wealth creation through a stroke of the pen.”

“Our general misgivings about ‘wealth creation’ simply through rising house prices has still another reason, however, and that is the way housing values are calculated. The conventional practice in America is to treat the whole existing housing stock as being worth the last trade. This contrasts wondrously with the tedious process of generating prosperity through saving, investment and production.”

“Everybody knows the answer, but few want to admit it: Lured by artificially low interest rates and easily available credit, private households have stampeded as never before into the purchase of homes, boosting their prices. Artificially low interest rates and easily available credit are, actually, the key features that specifically qualify an asset bubble.”

It’s interesting that currently private households have NOT stampeded as never before into the purchase of homes. It’s the opposite; they are leaving the market by the thousands and becoming renters.

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Comment by Whac-A-Bubble™
2013-10-26 12:13:33

Was encouraging investors to outbid families who just want a home to live in part of the Fed’s housing market reflation plan?

Families Blocked by Investors From Buying Homes
Thursday, 24 Oct 2013 07:39 AM

Home purchases by institutional buyers reached a record high in September and all-cash buyers accounted for almost half of sales as investors responded to rising demand from renters.

Institutional purchases accounted for 14 percent of sales, according to a report today from RealtyTrac. That was the highest share since the real estate data firm began in 2011 to track transactions by that group, which it defines as buyers of 10 or more homes a year. All-cash sales rose to 49 percent from 40 percent in August and 30 percent a year earlier, a sign that rising mortgage rates since May have kept some people out of the market and that smaller investors are stepping up purchases.

Both investors and traditional buyers are trying to snap up cheap homes before prices go higher, but the investors have the advantage of paying cash and not having to go through a convoluted mortgage process,” said Michael Hanson, a former Federal Reserve economist now working for Bank of America Corp. in New York. “People are being bid out of some markets because of investor demand.

Wall Street’s influence on the residential real estate market is growing as the biggest investors, Blackstone Group LP and American Homes 4 Rent, have together bought about 60,000 homes across the country to benefit from low prices and rental demand from millions of former home owners who have lost properties through foreclosures.

The homeownership rate declined to 65 percent in the first half of this year from a peak of 69.2 percent in June 2004. The level is expected to stabilize at about 63 percent, adding more than 2 million households to the rental population, according to Morgan Stanley analyst Haendel St. Juste.

Comment by niner
2013-10-26 09:39:47

you’re all forgetting that The Federal Reserve is a PRIVATE corporation with shareholders - who are unknown, but probably consist of Rothschild, Rockefeller, etc.

If you want to hold an election for Yellen’s position it would be better to abolish the Fed and put the power into Congress’ hands as it should be - as stated in the Constitution.

Elections don’t change anything anyways - haven’t we all learned that yet? Yellen will do what the men behind the curtain tell her to do.

Comment by cruz bustamante
2013-10-26 10:43:35

No she is different. She will look out for the people just like Obama did. Don’t you read some of our glorious posters?

Comment by Whac-A-Bubble™
2013-10-26 12:48:41

“Don’t you read some of our glorious posters?”

Reference, please?

Or should we just conclude you are making crap up again?

Comment by cruz bustamante
2013-10-26 18:15:56

bluestar…..also read some of the article you posted yourself.

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Comment by Bluestar
2013-10-26 20:24:36

Late comment but you might have missed my point.
I was try to point out that if we read and study what they (FED candidates) advocate for, what they write about years before they are FED chairmen then we can make some assumptions about how they will act once in power. Bernanke got the nickname Helicopter Ben years before he was in a position to carryout his theories of QE. Why are we shocked to find out they turn out to be what they claim to be?

I linked to an article that claimed ‘12 papers you need to read on Yellen’. All 12 of the papers, some co-written with her Nobel economist husband were about using monetary policy to increase wages not boost asset prices. Yellen has already had some effect on FED policy since she has been the main ones pushing for more FED transparency. I think Yellen will be the first Behavioral Economist to chair the FED.

I’m not defending Yellen. I’m pointing out that when people point to stories about how Yellen didn’t see the housing bubble coming they are ignoring the hundreds of stories about when she speaks about her economic philosophy.

As a counter point, Obama turned out to be completely different than what he appeared to be back in the 90s and early 2000s. That guy in his books doesn’t look anything like who he became. He’s a politician and you can’t judge him by his past.

Comment by Ben Jones
2013-10-27 08:50:05

‘if we read and study what they (FED candidates) advocate for, what they write about years before they are FED chairmen then we can make some assumptions about how they will act once in power’

Janet Yellen in her own words: An exclusive interview


On using monetary policy to try to get the economy revving:

“There are a lot of things holding back the economy. If one were making a list of the top five or ten things holding back the economy, you wouldn’t say money being too tight, and interest rates being too high were on it. But interest rates and credit conditions are what we can affect. They are not the problem, but they can be part of the solution.”

On why a stronger economy would help everybody:

“If people think broadly about their own financial well-being both in the short term and over the medium run, they likely will think that having the economy get back on track, recover, and grow more robustly, is a positive … stock returns, for example, are going to depend on the health of the economy…. Having the ability to get a job is extremely important to households. If you are a retiree and your kids can’t get jobs, and they decide they’re going to come home with you and live with you, that’s an important negative. . . .If we’re successful in what we want to accomplish, for the economy, for the job market, asset prices more generally — housing, the stock market — our policy is going to be broadly favorable.”

On whether Fed policies are creating new dangers:

“I don’t think it’s causing a danger. … Is our a policy a magic wand? No, it’s not. But is it working? Yes, I think it is working.”

There you have it.

I am an accountant. I passed the CPA exam the first time I took it. If someone with a lemonade stand told me that they shouldn’t be subject to an audit, I would immediately assume they were crooks. These central bankers are crooks.

Comment by Bluestar
2013-10-27 09:18:40

Yellen on Behavioral Economics.


Important points:
>Endorses New Keynesian - From what I can tell I assume that’s classic Keynesian without the parts about raising taxes and paying down debt when the economy is growing. Underlying New Keynesian economic theory is the assumption that as long as the absolute size of the population keep growing increasing the money supply has more positive effects than negative ones.
>Yellen thinks the Phillips curve is fundamental to implementing modern economic policy.
>Yellen on wages: She promotes the idea that when employers pay above market rates it can cause higher unemployment but that the increased income of the lower and middle class will actually life the standard of living for those trying to move up the economic ladder.
>Yellen will increase the volume of propaganda coming from the FED. You will see a lot more of her and other FED members going before the camera trying to spin economic data to influence the public and financial markets. I would not be surprised to see a FED Twitter and Facebook accounts as they leverage the new medium of the internet to implement Behavioral Economics.

So the question is, if we take Yellen as she presents her economic philosophy here what can we expect?
I don’t expect a radical shift from Ben Bernanke’s policies at first but I would not be surprised to see short term rates rise by the middle of 2014. The proof of whether Behavioral Economics is working will be if real wages (after inflation) are in fact rising 9-16 months after she becomes the chairwoman.

Bluestar, AKA Jack Smith

Comment by Bluestar
2013-10-27 09:37:12

Since you’re an accountant then I assume you can explain FASB logic and why they can rationalize suspending mark-to-market? My favorite accountant joke:
Two accountants are applying for a job they are asked the question, what’s 2+2 equal? The accountant that answered “what do you want it to be?” gets the job.

Comment by Whac-A-Bubble™
2013-10-27 09:40:32

“…also read some of the article you posted yourself.”

I post articles here to stimulate discussion, not to push a particular argument. Don’t get confused by the fact that many posters here, such as yourself, have an agenda to sell.

Comment by Whac-A-Bubble™
2013-10-27 09:43:01

“He’s a politician and you can’t judge him by his past.”

Politician = chameleon

Comment by Ben Jones
2013-10-27 10:18:04

‘explain FASB logic and why they can rationalize suspending mark-to-market?’

There was no logic. It was obviously political pressure that should never enter into a FASB ruling. Usually, any major decision is made over a course of years with lots of input. That this was done suddenly, with no input, shows that FASB has become another tool in the corrupt US financial system.

Comment by scdave
2013-10-27 10:39:01

+1 Ben…I would agree with that….

Comment by Bluestar
2013-10-27 10:43:53

My thoughts of the FASB logic to suspend Mark-to-Market.
I think they looked around a saw that only a small number of dealers actually traded MBS at that point in the crises and very few of them (all?) wanted to blow up the whole market when they could sequester the bad stuff by simple FASB decree. In reality there are two users of FASB rules, one covers the classic ideas of double entry accounting that has been in use for 800 years and the other users are the current financial wizards of Wall St. who are more likely to have a Phd. in mathematics or psychology than in accounting. Different rules for different folks.
Maybe there’s a reason that accountant textbooks don’t have a section on ethics.

Comment by Ben Jones
2013-10-27 10:52:37

I had a mandatory course on ethics. It was taught by the dean of the accounting department. I told him a few years later that it was the most important class I took.

Accountants know what’s at stake. We know how easy it is to fool people and break the law. That’s why the system is set up so conflicts of interest are checked. I remember a class discussion of the idea that a corporation’s accounting firm could also be its auditor. It was a new issue and most of us had a bad feeling about it. Then a few years goes by and we got Enron with that exact scenario.

As an accountant, I can tell you there is no reason an entity like the Federal Reserve should not be independently audited. Given the amounts involved, it is insane that they aren’t.

Comment by tresho
2013-10-27 11:48:50

As an accountant, I can tell you there is no reason an entity like the Federal Reserve should not be independently audited. Given the amounts involved, it is insane that they aren’t.
I agree completely. Yet, isn’t it strange this is NEVER discussed? Must not be politically correct.

Comment by Ben Jones
2013-10-27 11:59:30

‘Must not be politically correct’

The reason they hold out is it would threaten their independence. This makes no sense. An audit would simply confirm their financial statements, and evaluate internal controls. How would that make them less independent? If the public knew more of how they operate, would they face political pressure? What are they doing that would put them under political pressure?

Reasons to audit the Fed? What if it turns out they are influencing elections, here or abroad? Financing wars? Sticking a few billions into private off-shore accounts? After all, we aren’t talking about angels here, they are men and women.

Comment by Whac-A-Bubble™
2013-10-27 14:36:12

Not only is the Fed not staffed by angels, but behavior is not independent of accounting scrutiny. A lack of audits is a free pass to do whatever they want, plus they have a PR department to generate whatever propaganda is needed to cover their tracks.

Comment by Ben Jones
2013-10-27 15:25:06

We were taught in auditing that poor internal controls can tempt otherwise good employees to steal. That said, I am 100% certain there are audits of the central bank’s finances. They just aren’t made public.

Comment by Whac-A-Bubble™
2013-10-27 15:33:01

Cedric Muhammad, Contributor
10/25/2013 @ 1:38PM
Senator Rand Paul Is Right To Hold Up Janet Yellen’s Federal Reserve Nomination, And Democrats Should Support Him

Senator Rand Paul is shrewd to attempt to delay the confirmation of Janet Yellen to become Chairperson of the Federal Reserve – a tactic which seeks a bipartisan vote on his Federal Reserve transparency bill, S. 209.

Not only should he be commended for the step by Republicans but he should be supported by as many Democrats as possible – which would only be in keeping with the 89 Democrats who contributed to the bi-partisan support of H.R. 459 in 2012 which simply sought to “To require a full audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks by the Comptroller General of the United States, and for other purposes,” the exact same language as Rand Paul’s S.209 — Federal Reserve Transparency Act of 2013.

Comment by "Uncle Fed, why won't you love ME?"
2013-10-26 13:46:18

How do you know those aren’t women behind that curtain?

Comment by Whac-A-Bubble™
2013-10-27 10:07:12

Fisher: Fed selection process has been ‘terribly’ mishandled
Monday, 23 September 2013 | 1:22 PM ET

The White House has “terribly mishandled” the process of picking the next chair of the Federal Reserve, allowing the U.S. central bank to be politicized and potential nominees to be denigrated in the process, a top Fed official said on Monday.

Picking a Fed chair “should not be a public debate,” Dallas Fed President Richard Fisher told the Texas Association of Independent Bankers.

Former Treasury Secretary Lawrence Summers, considered President Barack Obama’s preference, withdrew his name from consideration a week ago, saying his confirmation would incite acrimony.

Fed Vice Chair Janet Yellen is now seen as the front-runner.

Comment by Patrick
2013-10-26 09:42:27

“We have a bad banking sector” - and lots of government debt

It is way beyond my pay grade to be able to understand how the banking sector can continue to be in such a miserable state - and this not have been communicated to the world - and yet they continue to drag our anchor.

Comment by Whac-A-Bubble™
2013-10-26 09:50:41

Note that as that anchor drags, the share of the world’s wealth in the hands of the 0.1% steadily grows.

Comment by scdave
2013-10-27 09:24:16

the share of the world’s wealth in the hands of the 0.1% steadily grows ??

Yep….A neighbor of mine works for a fairly large private company…Has worked there 25 years and is very close to the Billionaire owner…Guess where the Billionare has his cash ??

USA Bonds…2% on a Billion ?? I could get by on that….

Comment by Whac-A-Bubble™
2013-10-27 09:51:03

“USA Bonds”

What’s stopping you? I recommend the Vanguard Long-term Treasury fund. Wait to buy until the next time fears flare up that QE3 may soon end, and long-term rates have another short-term spike in response — maybe by mid-2014, after the next round of FOMC taper talk. Sell after the next 10%+ stock market correction. Admittedly it’s kind of a no-brainer investment strategy.

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Comment by inchbyinch
2013-10-26 11:21:42

The PTB will see their plan fail eventually, but I’ve to tell you guys, it’s been a DECADE of this shenanigans already, and nothing surprises me anymore. Yellen is just another well connected puppet. When ISDA started being in fierce competition with otc’s, all hope was lost. No one is watching the store.

Comment by Ben Jones
2013-10-26 11:49:19

‘On stagnant street’

‘The realty scene in Punjab’s commercial capital is lacking the usual verve and momentum with virtually no takers for the residential and commercial projects’

‘Property prices in the investor-driven market of Ludhiana have seen more than 10 per cent price correction due to dearth of buyers, all-around liquidity squeeze and erosion of investors’ faith in the property market.’

‘Massive housing projects are coming up or have already been constructed around Jalandhar bypass and Pakhowal Road but the prices have remained flat as a large number of apartments in these remain unsold. Whatever sale had materialised here was by the investors who had booked flats in the hope of making a neat profit soon. But with a virtually non-existent end user in the market, the investors are now getting desperate to exit from these projects.’

Comment by Whac-A-Bubble™
2013-10-27 09:58:00

Real estate is not the only part of India’s economy that is sagging.

As in the U.S. real estate market, an artificial gold “supply shortage” is driving up prices, masking a collapse in demand.

No chance of a gold rush

By Piya Singh
Published: 27th October 2013 10:11 AM
Last Updated: 27th October 2013 10:12 AM

Savithri, a 40-something frequent-flier and a project manager with a large IT firm with a penchant for chunky jewellery, is feeling the heat from Indian customs every time she lands at IGI airport in New Delhi. “Gold,” she says, “That’s what the customs officers are looking for. Anyone carrying any type of jewellery is under their scanner.”

And with good reason. The government’s clampdown on gold imports in January this year–which has intensified since June–has seen an unprecedented surge in gold smuggling.

Gold prices in India currently command a premium of $120 per ounce over London prices, according to World Gold Council’s India managing director Somasundaram PR. It is this premium that is encouraging gold smugglers; by some estimates, smuggling has gone up by over 50 per cent this year. Market players estimate that gold smuggled into India is likely to go up to 200 tonnes in 2013 alone. “We have strong anecdotal evidence that shows gold smuggling has gone up substantially,” says Somasundaram.

Not that the smuggled gold is helping ease the shortage caused by the import curbs. Shelves in gold jewellery stores across the country lie barren this Diwali, and consumers have begun buying pieces which focus on precious stones instead of the yellow metal.

Near Bangalore’s Safina Plaza, Vinod Hayagriv, managing director at jewellers C Krishniah Chetty & Sons, recounts the same tale of bare shelves. “There is no import of gold taking place,” he says emphatically. “The shortage of stocks is evident in stores and customers can no longer buy off the shelf. They now have to place an order and wait for weeks,” he explains.

The ongoing shortage in the precious metal has put consumers and the gems and jewellery industry, which accounts for seven per cent of the country’s GDP, in a severe bind as Diwali and Dhanteras–the Hindu calendar’s traditional day for buying gold–draws near.

“The shortage is definitely there, but what is also worrying us is the retail price that is hovering around `32,000 per 10 gram,” says Satish Chand Singhvi, president, Delhi Jewellers’ Association. “The consumer is not upbeat about buying gold this festive season. People who would opt for big jewellery pieces are buying smaller ones. The demand is lower than the festive season last year.”

Comment by Ben Jones
2013-10-26 12:06:56

‘Chinese State Council has recently issued general guidelines to resolve the overcapacity problem. The guidelines particularly highlight overcapacity problems in the following five industries: iron and steel, cement, electrolytic aluminum, flat glass, and the shipping industries, as their utilization rates were only 72.0%, 73.7%, 71.9%, 73.1%, and 75.0%, respectively, in 2012.’

‘The guidelines encourage local governments to cut back production capacity by 15 million tons in the iron industry, 15 million tons in the steel industry, 100 million tons in the cement industry, and 20 million weight boxes in the flat glass industry by 2015.’

‘The guideline shows that the government recognizes the serious overcapacity problem in the manufacturing industries and may take further actions to correct the imbalances in the economic structure. While the effect is hard to assess at this stage due to the lack of details, we believe the recovery led by heavy industry in August is not sustainable.’

‘We maintain our view that GDP growth will peak in the third quarter at 7.8% and slow to 7.5% in the fourth quarter and 6.9% in 2014, as the government will likely tighten policies after the November CCP meeting to lower GDP growth to ensure better quality growth in the future.’

‘China is the world’s biggest producer of steel, aluminum and cement. But overcapacity in several industries has depressed prices and crimped profit margins, causing slower economic growth.’

‘The iron and steel industry lost nearly 700 million yuan ($114.7 million) in June, the first monthly deficit this year.’

‘The combined first-half profits of members of the China Iron and Steel Association totaled only 2.27 billion yuan, with an average profit margin of 0.13 percent, the lowest among all industries, according to CISA.’

‘However, the overcapacity problem isn’t limited to traditional industries. Capacity in emerging sectors such as solar power and wind turbines has surged beyond demand, driving prices down sharply.’

‘Oliver Barron, head of the Beijing branch of North Square Blue Oak Ltd, said that overcapacity fueled by local governments through approving large-scale projects to boost local GDP has persisted for years.’

“The larger companies in these industries are great assets to local governments in terms of tax revenues, employment and GDP,” he said. “Local governments like to support them and arrange subsidies or cheap credit to expand their business.”

Comment by Ben Jones
2013-10-26 12:11:57

‘The tumble in Hong Kong’s home sales to a record low signals further declines in Midland Holdings Ltd, the city’s largest listed realtor, according to Bocom International Holdings Co.’

‘Bloomberg’s Chart of the Day shows the three-month average of residential transactions in Hong Kong fell to 3,693 units in September, the lowest since at least 1996, according to government data compiled by Bloomberg.’

‘Sales have plunged even as Centaline Property Agency Ltd’s housing-price gauge holds within 3.1 per cent of a record high.’

‘The company had a net loss of HK$95 million (US$12 million) in the six months to June 30, the biggest since the second half of 2008, as operating expenses exceeded sales. Residential sales have declined as government taxes and the prospect of rising interest rates deter buyers in the world’s most expensive property market.’

‘The number of real estate agents in Hong Kong surged 68 per cent to 36,225 in September from January 2008 as home prices doubled, according to government data.’

‘Midland’s managers “have to cut jobs and they have to cut shops,” said Nicole Wong, a property analyst at CLSA Asia-Pacific Markets in Hong Kong. “There is no other way out.” Brokerages from UBS AG to Bank of America Corp and Jefferies Group LLC predicted this month the city’s home values will fall at least 20 per cent through next year.’

Comment by Whac-A-Bubble™
2013-10-26 12:49:55

‘The company had a net loss of HK$95 million (US$12 million) in the six months to June 30, the biggest since the second half of 2008, as operating expenses exceeded sales.”

Was there something special about the second half of 2008 that we should know about?

Comment by Whac-A-Bubble™
2013-10-26 12:43:48

Do central bankers destroy household savings rates by accident or by design?

Comment by Whac-A-Bubble™
2013-10-26 12:46:18

Luckily this problem could never occur here in America.

The euro zone
Europe’s other debt crisis
It’s not just sovereign borrowing; there are too many zombie firms and overindebted households
Oct 26th 2013 |From the print edition

FIFTEEN months ago, in July 2012, Mario Draghi, the president of the European Central Bank (ECB), promised to do “whatever it takes” to preserve the single currency. Although the bond-buying scheme set up to fulfil that pledge has never been tested, yields on sovereign bonds have fallen. The euro mess has morphed from an acute crisis into a chronic one.

This week Mr Draghi launched what could become the second big turning-point in the euro saga: an inspection of the balance-sheets of the region’s 128 biggest banks which the ECB will supervise from late 2014. As part of its “asset-quality review”, ECB officials, along with outside experts, will start peering into the banks’ balance-sheets and impose common standards for loan quality (see article). This process is supposed to find out which banks are viable now, which will need more capital and which should just be closed down.

Mr Draghi should be tough. The euro zone’s politicians, even in supposedly prudent Germany, have been reluctant to look too deeply into banks’ balance-sheets, let alone to force them to clean themselves up. There are certainly questions to be asked about all the government bonds that the banks have bought in recent years. But the main dodgy assets that have been swept under the European carpet are private: bad loans made to households and companies.

Comment by "Uncle Fed, why won't you love ME?"
2013-10-26 13:12:07

It’s by design. It keeps the masses poor, while enriching the elite.

Comment by scdave
2013-10-27 09:27:47

It keeps the masses poor, while enriching the elite ??

It keeps the masses clothed & fed so the elite can keep what they have….

Comment by Mugsy
2013-10-26 15:33:25

Strictly by design. They refuse to allow banks/financial institutions to pay competitive interest rates that the uppity hoi-polloi could use to fund their retirements. They’ve also destroyed the bond market which was a relatively safe place for folks to get 6-7% on their savings at lower risk. They will keep up QE until everybody’s savings are drained or in some kind of risky investment. What the FED giveth, the FED taketh away.

And when I say the FED I mean ALL central banks worldwide. I lived in Cyprus until a month ago and I’ve seen what a CB and politicos can do to destroy an entire economy.

Comment by cruz bustamante
2013-10-26 16:48:41

Where do you live now?
Were you able to move all (or most) of your money outside Cyprus?

Comment by Mugsy
2013-10-26 19:48:49

Luckily I only had 1000 Euros in the Hellenic bank when the system collapsed. I was able to withdraw most of it the day before currency controls were fully implemented. I live in Augusta, Georgia now.

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Comment by Housing Analyst
2013-10-26 14:12:59

“Why would someone pay more than new construction cost ($55 per square foot) for a depreciating 20+ year old resale house?”

Because they have no idea how to establish the value of a depreciating asset…. in this case, a house.

Comment by Mugsy
2013-10-26 15:26:08

So if the unemployment rate drops and the labor participation rate drops, do they keep printing? If the unemployment rate goes up and the participation rate stays the same, do they keep printing? If the unemployment rate and the participation rate stay the same, do they keep printing?

If the unemployment rate goes down and the participation rate goes up do they… oh wait, never mind. That won’t be happening. Keep the rotors engaged Miss Yellen, we are off on another round of fractional reserve vertreps!

Comment by inchbyinch
2013-10-26 17:38:35

We had a Columbia MBA come talk to our professional networking group. We’ve been told to skip the online job circus and get a connection before the job is created. She was bi-coastal and said cronyism is our only hope. I need rose colored glasses. Could it really be that bleak?

Comment by cruz bustamante
2013-10-26 18:13:51

Unless you in high demand fields like IT (at the moment anyway), cronyism is the only way.

Comment by Dudgeon Bludgeon
2013-10-26 23:08:40

The good jobs are on the other side of the planet - for now.
And cronyism has always been the best way to secure a gig.
A Columbia MBA,huh? But what’s this persons job?
And to answer your question, yes, it’s really that bleak for unconnected reputation-less unknowns.

Comment by scdave
2013-10-27 09:31:22

Who you know vs. what you know has never changed…

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Comment by Ben Jones
2013-10-26 19:18:15

‘The introduction of restrictions on cash transactions to a sum of Hr 150,000 from Sep. 1, 2013 by the National Bank of Ukraine (NBU) has resulted in a fall in the number of transactions on the secondary housing market by 50-60 precent, and it is unlikely that the figure will grow by late 2013 due to the absence of a proper interpretation of the mechanism in practice by market players.’

Comment by Mugsy
2013-10-26 19:53:42

The Cypriot real estate market is virtually dead. It’s amazing what currency controls will do to transactions involving currency! Maybe the Ukranians wanted some of the same?

Comment by Whac-A-Bubble™
2013-10-27 10:02:46

I can think of no better way to promote affordable housing than to shut out foreign buyers from making domestic residential real estate investments.

Is there any chance affordable housing advocates in the U.S. might try this approach at some point?

Comment by tresho
2013-10-27 11:54:27

Is there any chance affordable housing advocates in the U.S. might try this approach at some point?
Perhaps local taxing authorities could use this approach, similar to what is already being done for absentee homeowners in some jurisdictions, i.e., Homeowners who reside in their homes pay 1X the rate. Homeowners who reside outside the taxing area pay 3X the rate. Corporate homeowners pay 10X the rate. Rapid resolution of failures to pay local R.E. taxes, especially for corporate owners. Failure of corporations to respond to written queries about property problems in a timely fashion will rapidly result in forfeiture of the real estate.

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Comment by Ben Jones
2013-10-27 09:56:38

Oh dear.

‘About 1 in 10 houses sold in Pierce County in the past year wasn’t bought by real people. A News Tribune analysis of sales and property data between October 2012 and 2013 shows that three major private investment funds have spent about $172 million on almost 1,000 properties, all destined to become rentals.’

‘Brokers with direct knowledge of Blackstone’s moves in Washington told The News Tribune that the company generally has a five-year plan: Buy low, fix cheaply, maximize rent, then sell high. Or, higher.’

‘The brokers would not speak on the record for fear of damaging their livelihoods. Last year, a newspaper in Tampa Bay, Fla., quoted a local broker by name who was working with Blackstone to buy houses in the area. The day after the report published, the broker said he ended his relationship with the company because he wanted to avoid being sued. According to the newspaper, the broker said company officials told him that he “should have kept my mouth shut.”

‘That attitude is how they come across to competitors, too, one broker told The News Tribune. “They are kind of bullies,” the broker said. “They are willing to pay more.”

‘They are overpaying for properties,” Kevin Knoben, a broker who regularly attends the auctions, said this summer. “Their people are given an amount they can go up to and it doesn’t matter where it’s located. They’re buying houses that would be assessed at $150,000 in South Tacoma and they’re paying $200,000 and up. “They don’t care as long as they can put a renter in it,” he said.’

‘Paying higher prices changed the behavior of banks that were auctioning homes, said broker Lorrie Garl, who buys properties on behalf of regional investors. “Banks are setting opening bids higher because they know they can get it,” she said. “It’s made it a lot more difficult because (the big companies are) willing to pay market value and sometimes above, which is crazy to us, but they do.”

“This is no different from institutional investors being bullish in other commodities,” said Jody McNamer, a Gig Harbor-based real estate investor who has focused on the South Puget Sound region for 20 years. “They run those commodities up and dump their holdings after they make their profits. And little guys are all, um, what happened?”

Comment by Whac-A-Bubble™
2013-10-27 10:48:51

“They are kind of bullies,” the broker said. “They are willing to pay more.”

‘They are overpaying for properties,” Kevin Knoben, a broker who regularly attends the auctions, said this summer. “Their people are given an amount they can go up to and it doesn’t matter where it’s located. They’re buying houses that would be assessed at $150,000 in South Tacoma and they’re paying $200,000 and up. “They don’t care as long as they can put a renter in it,” he said.’

Slumlord Billionaires

Comment by Whac-A-Bubble™
2013-10-27 10:50:05

“They run those commodities up and dump their holdings after they make their profits. And little guys are all, um, what happened?”

I can’t wait to read about the all-cash Chinese and Canadian investors turned bagholders!

Comment by Housing Analyst
2013-10-27 11:38:03

‘They are overpaying for properties,” Kevin Knoben, a broker who regularly attends the auctions, said this summer.

And so are the braindead suckers who are end users.

Comment by Rick O'Shay
2013-10-27 19:19:07

Pierce County: Once the methamphetamine capital of the west coast…


Still ground-zero for the war on meth.

Comment by Taxpayers
2013-10-27 10:13:35

PORTugal-hungary and argentina took everyone’s private pensions- do the gov workers still get theirs?

Comment by Ben Jones
2013-10-27 11:15:36

‘Steven and Janet Sparker never planned to leave the house they purchased in 2006 in Golden Gate Estates in the southwest section of Florida. But when Janet, 57, lost her six-figure job, and the home’s value fell by more than half from the $585,000 they had paid for it during the recession, they decided to leave their home and let the bank foreclose on it.’

‘Only the bank didn’t — and still hasn’t.’

‘So the Sparkers’ home became a so-called “zombie” home — an unloved, unlived in home in a twilight limbo state. About 62 percent of bank-owned homes in Collier County and 54 percent in Lee County, both in Florida, fall into that category, compared with 47 percent nationwide.’

‘Homes that sit vacant for long periods are a magnet for vandals and thieves, who steal everything from air conditioning units to copper piping, said Sgt. Mark Williamson of the criminal investigations unit of the Collier County Sheriff’s Office. Some also attract scammers, particularly in isolated, heavily landscaped areas with big lots.’

“They’ll break in, change the locks, and rent the home to an unsuspecting victim,” he said.’

‘That’s exactly what happened to the Sparkers, who went back to their vacated Golden Gate Estates home in April 2012 to retrieve some curtains and discovered a woman and her three young sons had moved into it.’

“We heard music playing — it was quite a shock,” said Steven Sparker, 58, a prototype tool and die maker. “I wish the bank would take it back,” he said.’

Comment by Whac-A-Bubble™
2013-10-27 11:24:25

‘…compared with 47 percent nationwide.’

The 47 percent continue to play a major role in the Housing Bubble denouement.

Comment by Whac-A-Bubble™
2013-10-27 11:28:54

‘About 62 percent of bank-owned homes in Collier County and 54 percent in Lee County, both in Florida, fall into that category, compared with 47 percent nationwide.’

Turns out the 47 percent aren’t the only folks dogged by foreclosures.

Watching this Housing Bubble collapse is WAY more boring than watching paint dry.

Oct. 27, 2013, 7:37 a.m. EDT
Foreclosures dog even wealthiest home buyers
Why banks deny mortgages to some high-earning Americans
By AnnaMaria Andriotis

Jumbo borrowers who went into foreclosure a few years ago are learning the hard way: You can’t go home again.

Affluent home buyers attempting to get back into real estate after defaulting on their home loan are finding that few lenders are willing to work with them. Those that do often impose long waiting periods, higher down payments and higher interest rates.

Since spring, lenders say they have increasingly been hearing from would-be buyers who went through foreclosure. “We get the calls routinely,” says Al Engel, executive vice president at Valley National Bank, based in Wayne, N.J.

Callers include self-employed borrowers whose income dropped during the recession, causing them to fall behind on their mortgages, but who have since financially recovered. Also affected are borrowers who walked away from their homes after their values plummeted and owed more on their mortgage than the house was worth. Now that home values have stopped falling in most housing markets, they want back in.

Terri Conrad and her husband saw their 4,500-square-foot, five-bedroom home in Carbondale, Colo., foreclosed on last year. They purchased the home for $1.25 million in 2007, but its value had dropped to roughly $700,000 by 2012. Ms. Conrad, who manages finances of affluent families, says the couple tried refinancing but was denied. Although they could afford the payments, they decided to walk away because they didn’t want to keep paying for a home that was worth significantly less than the loan. They are now renting in Houston and plan to wait at least a couple of years before applying for a home loan again. “I’m worried about who’s going to give me a mortgage,” she says.

Most lenders who offer private jumbo mortgages, which start after $417,000 in most parts of the country and at $625,501 in pricier housing markets, remain very selective and limit themselves to borrowers with the strongest credit profiles.

Foreclosures stay on credit reports for seven years from the time homeowners default on their mortgage. What’s more, a foreclosure can lower a borrower’s credit score by 100 points, says John Ulzheimer, a former manager at FICO, the credit score used by most lenders. Borrowers who were previously always on time with payments would see a bigger drop. For instance, someone with an 820 FICO score (FICO scores range from 300 to 850) could drop to 580 following foreclosure, he says. That borrower could need more time to work his or her way back to a top score before getting a mortgage.

Separately, many affluent borrowers went into foreclosure later largely because they were able to tap their savings to pay their mortgage. Foreclosures on homes worth over $1 million peaked in 2011, while foreclosures on homes worth less than $1 million peaked in 2009, according to RealtyTrac, which tracks real-estate data. By delaying foreclosure, they will likely have to wait—possibly until after housing has fully rebounded—to get a home loan.

Comment by tresho
2013-10-27 11:56:37

By delaying foreclosure, they will likely have to wait—possibly until after housing has fully rebounded—to get a home loan.
Boo hoo. They can probably pay cash for a used mobile home in a trailer park with a small portion of what they usually spend on dining out.

Comment by tresho
Comment by Whac-A-Bubble™
2013-10-27 16:32:23

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

– H. L. Mencken

Comment by Whac-A-Bubble™
2013-10-27 16:42:29

The guy who made that ought to run for Congress.

P.S. What’s scarier? A fake Halloween drone swooping down on you while jogging, or a drone striking your face during your own wedding?

Drone Strikes Wedding, Hits Groom in Face #N3

Published on Aug 21, 2013

A wedding was crashed by a drone when the photographer operating the airborne camera lost control of the device. The device then went crashing into the groom’s face.

A photographer, who goes by the user name WeddingMan123 on YouTube, was using a type of flying drone camera called a quadcopter to get photos of a happy couple in a field before their wedding. The photographer then lost control of the device, which then made a beeline for the groom.

Comment by Ben Jones
2013-10-27 12:46:15

‘China’s central bank added fuel to fears on Thursday it was clamping down on inflation risks as it allowed cash to drain from the financial system for a second straight week, sparking a jump in short-term rates.’

‘The move by the People’s Bank of China (PBC) happened as Beijing stepped up its efforts to counter surging property prices in the capital in an attempt to calm rising discontent over the city’s record-high home prices.’

‘Housing data released earlier this week has raised fresh concerns about property bubbles in major cities, which could add to consumer inflation - already at a 7-month high - and add to criticism that home prices are increasingly out of reach for many.’

‘Zhu Haibin, chief China economist at JP Morgan in Hong Kong, argued the tighter conditions were overdue. A pick-up in the economy had probably reassured the central bank it could raise rates without damaging growth. “That will increase the determination of the PBC for credit normalization, for credit tapering. The policy in the last few years overall has been very loose, with credit growth way higher than nominal GDP,” Zhu said.’

‘The central bank, which sparked a market panic in June by engineering a cash crunch, refrained from taking part on Thursday in scheduled money market operations for the third consecutive time. It has drained more than 157 billion yuan ($26 billion) from money markets since the week of September 30.’

Comment by Ben Jones
2013-10-27 13:36:40

‘Dear Edith: I have a house in another state that I rent out. The rent does not cover the mortgage payment, so I am paying $400 out of pocket for mortgage plus $900 to rent a home for myself here. I owe $160,000, but my real estate agent said the house is only worth $130,000. Should I refinance or sell and take the loss? — D.I.’

‘Answer: I don’t see how refinancing is an option. Nobody’s going to lend you $160,000 on a house worth $130,000, especially when it’s rental property. There doesn’t seem much reason for holding on to a place that loses money every month’

Comment by Mr. Banker
2013-10-27 14:26:37

Edith should do whatever it takes to keep up with the mortgage payments on the house she rents out even though she is underwater. If she needs to work a second job then this is what she should do. If she has a 401k then she should borrow against it.

She should do whatever it takes because it’s the right thing to do, it’s the proper thing to do, its the moral thing to do.

Comment by Mr. Banker
2013-10-27 14:28:14

errr … not Edith but the person who wrote to Edith.

But Edith too, if she’s willing to help.

Comment by Whac-A-Bubble™
2013-10-27 15:29:54

Lender’s perspective: “All of Edith’s monies are belong to us.”

Comment by Housing Analyst
2013-10-27 14:40:04

“The rent does not cover the mortgage payment,”

This is true of any SFR bought since 1998. You can insist your depreciating house will cashflow positively….. but it doesn’t. And considering rental rates continue to slide, it will never cashflow.

Comment by Whac-A-Bubble™
2013-10-27 15:49:18

Dumb question of the day: Does quantitative easing work as advertised?

Comment by Whac-A-Bubble™
2013-10-27 15:50:46

21 October 2013 Last updated at 19:12 ET
UK QE has failed, says quantitative easing inventor

When the UK embarked on quantitative easing (QE) in March 2009, in the aftermath of the Lehman Brothers collapse, the Bank of England was expected to administer a monetary stimulus equal to £50bn, writes Liam Halligan.

Over the past four years, such “extraordinary measures” have extended somewhat more, with the Bank’s bond-buying programme now amounting to £375bn - almost eight times the original estimate.

Since the financial crisis began, the Bank of England’s balance sheet has expanded four-fold. But where did the phrase “quantitative easing” come from?

Arguably among the most controversial economic policies of recent years, QE is surely the most unpronounceable. Not many Western analysts are aware that this tongue-challenging name originated in Japan, the modern-day spiritual home of money-printing.

Even fewer know that the man who coined the phrase comes from Germany - which, of all the big Western economies, has probably the most deep-seated aversion to printing money.

In the mid-1990s, Prof Richard Werner, a German academic fluent in Japanese, was working as an economist in Tokyo. Japan’s real estate bubble had burst and property and share prices were tumbling. The country was locked in a debate about the use of unconventional monetary policy to support asset prices and boost broader commercial activity.

Prof Werner submitted an article to Nikkei, a leading business newspaper, advocating a new type of radical monetary measure.

Rather than attempting to shift interest rates, he argued that the country’s central bank, the Bank of Japan should instead intervene directly to influence the size of the money supply by taking steps to encourage commercial banks to extend more credit.
Prof Richard Werner Prof Werner argued against lowering interest rates or expanding central bank reserves

“I was promoting a policy that involved more credit creation, rather than changing the price of money,” says Prof Werner.

“So when I wrote my article, and after the newspaper’s editors insisted on a phrase readers would understand, I added the Japanese adjective for quantity to the standard expression for monetary stimulation. ‘Quantitative easing’ was the literal translation back into English of these two Japanese words.”

Prof Werner’s article was widely noticed. Several years later, in fact, the Bank of Japan decided to implement extreme monetary measures and adopted the Japanese name the German economist had coined.

“In 2001, the Japanese central bank said, ‘Now we’re actually doing this’,” he recalls.

“To communicate this to global markets, they had to give the policy a name in English. I suppose the translators had a bad day, or were under time pressure. Normally, you’d try to come up with something slightly more fluent than ‘quantitative easing’, but they did only a literal translation.”

While the Bank of Japan adopted the precise name of Prof Werner’s policy, it was somewhat less accurate when interpreting his actual proposal.

Incredibly, the Japanese version of QE that was eventually implemented was a policy Prof Werner had specifically ruled-out.

Comment by Whac-A-Bubble™
2013-10-27 15:54:31

Tiberius Used Quantitative Easing To Solve The Financial Crisis Of 33 AD
Bryan Taylor, Global Financial Data Oct. 26, 2013, 7:10 AM 3,815 30
Jean-Paul Laurens’ “La Mort de Tibere”

Although many people have hailed Ben Bernanke’s response to the current financial crisis for going outside of the box and using unorthodox policies to avoid a financial collapse, in reality, similar policies were used by Tiberius during the Financial Crisis of 33 AD, almost 2000 years ago.

Tiberius ruled the Roman Empire from 14 AD to 37 AD. He was frugal in his expenditures, and consequently, he never raised taxes during his reign. When Cappadocia became a province, Tiberius was even able to lower Roman taxes. His frugality also allowed him to be liberal in helping the provinces when, for example, a massive earthquake destroyed many of the famous cities of Asia, or when a financial panic struck the Roman Empire in 33 AD.

As with many financial panics, this one began when unexpected events in one part of the Roman world spread to the rest of the Empire. To quote Otto Lightner from his History of Business Depressions, “The important firm of Seuthes and Son, of Alexandria, was facing difficulties because of the loss of three richly laden ships in a Red Sea storm, followed by a fall in the value of ostrich feather and ivory. About the same time the great house of Malchus and Co. of Tyre with branches at Antioch and Ephesus, suddenly became bankrupt as a result of a strike among their Phoenician workmen and the embezzlements of a freedman manager. These failures affected the Roman banking house, Quintus Maximus and Lucious Vibo. A run commenced on their bank and spread to other banking houses that were said to be involved, particularly Brothers Pittius.

“The Via Sacra was the Wall Street of Rome and this thoroughfare was teeming with excited merchants. These two firms looked to other bankers for aid, as is done today. Unfortunately, rebellion had occurred among the semi civilized people of North Gaul, where a great deal of Roman capital had been invested, and a moratorium had been declared by the governments on account of the distributed conditions. Other bankers, fearing the suspended conditions, refused to aid the first two houses and this augmented the crisis.”

At the same time, agriculture had been on the decline for several years, and Tiberius required that one-third of every senator’s fortune be invested in Italian land. The senators had 18 months to make this adjustment, but by the time the period was up, many senators had failed to make the proper adjustment. This deadline occurred at the same time as the events above occurred, placing a further squeeze on the financial sector.

When Publius Spencer, a wealthy noblemen, requested 30 million sesterces from his banker Balbus Ollius, the firm was unable to fulfill his request and closed its doors. Over the next few days, prominent banks in Corinth, Carthage, Lyons and Byzantium announced they had to “rearrange their accounts,” i.e. they had failed. This led to a bank panic and the closure of several banks along the Via Sacra in Rome. The confluence of these seemingly unrelated events led to a financial panic.

To protect themselves, banks began calling in some of their loans. When debtors could not meet the demands of their creditors, they were forced to sell their homes and possessions, and with money unavailable even at the legal limit of 12%, prices of real estate and other goods collapsed since there were so few buyers. A full scale panic followed. The panic occurred not only in Rome, but throughout the Empire. If anyone thinks that it is only in recent times that financial markets have been so fully integrated that the failure of the Creditanstalt in 1931 or Lehman in 2008 could precipitate a panic, they clearly have not read their history. By their nature, financial markets have always been integrated, and failure in one part can create the domino effect which created the Great Depression and was witnessed in 2008.

Tiberius had retired from Rome. Although a great general, some felt Tiberius never wanted to be emperor, and he became reclusive in his later years. It took time to contact him and get a response. Several days later, he sent a letter to Rome with measures to alleviate the crisis. The decrees which had precipitated the problem were suspended. 100 million sesterces were to be taken from the imperial treasury and distributed among reliable bankers, to be loaned to the neediest debtors. (A loaf of bread sold for half a sestertius and soldiers earned around 1000 sesterces, so if you take an average soldier’s salary of around $20,000, you could say that one sestertius was equal to about $20 today.) The 100 million sesterces was equivalent to around $2 billion.

No interest was to be collected for three years; but security was to be offered at double value in real property. This enabled many people to avoid selling their estates at low prices, stopping the fall in prices and ensuring that the lack of liquidity never occurred. Though a few banks never recovered from the panic, most continued business as usual, and the financial panic ended as quickly as it began.

If you think about Tiberius’s response, it is little different from what Bagehot would have recommended in Lombard Street, written in 1873, or what Bernanke did in 2008. Just as Bernanke expanded the balance sheet of the Fed, Tiberius increased liquidity by a huge amount, an early version of the TARP. Tiberius lowered interest rates to zero for three years to alleviate any additional pain, again, little different from the quantitative easing the Fed has carried out to keep both short- and long-term interest rates low.

Comment by Housing Analyst
2013-10-27 16:13:26

Is it anymore or less effective than a junkie upping the dose while the high diminishes?

Comment by Carl Morris
2013-10-27 16:18:25

What was it advertised to do? Anything more specific than “prevent the end of the world”?

Comment by Whac-A-Bubble™
2013-10-27 16:30:13

How can printing money “create” economic growth? Sounds like a free lunch…i.e. something which doesn’t exist.

Fed’s quantitative easing is fully justified to get the world growing faster than its debt
Stable cost of energy is a huge help while buying time
Lou Barnes Contributor
Oct 25, 2013

The shutdown preoccupied markets, and everyone else. As the world reboots, there’s a lot of eye-rubbing and “Whazzat?!”

Economic data. What a novelty.

The September payroll gain of 148,000 (undistorted by shutdown), with wages up 0.1 percent for the month and 2.1 percent for the year, is embarrassing to the Fed’s forecast for acceleration.

Excluding transportation, orders for durable goods had no gain at all in September. There is no justification in these numbers for tapering quantitative easing (QE). Markets now suppose that the soonest we’ll see that is in March, when Janet Yellen takes the gavel.

New data from now into December, including October payrolls due Nov. 8, will be distorted — either by economic drag that may have been inflicted by the shutdown, or by nobody-home faults in collecting the data.

In the vacuum, “technical” aspects tend to dominate. A powerful 10-year Treasury chart formation has the eye of every bond trader on the globe. If the 10-year yield takes another step down, through 2.47 percent, mortgages will head for the threes. Even if not, it will take very strong economic data for rates to go up any distance.

Led by overconfident stock market people, many finance types question the need for QE, oblivious both to the spike in rates caused by taper-talk, and the continuing global weakness. Led by Europe.

Ignore, please, talk of an end to European recession spawned by fractional percentage gains in GDP. The overall eurozone economy is 3 percent smaller than in 2007, Spain by 8 percent and Italy by 9 percent. Overall unemployment is 12 percent; in Spain 26 percent, Italy 14 percent.

The European Central Bank is about to begin its new job of stress-testing European banks. Operation Clouseau. It will fuss about all sorts of loans and securities, but not these entombed in Euro banks: 700 billion euros in Spanish bonds, and another 800 billion of Italian. Since they are government guaranteed, and the euro cannot fail, then these bonds cannot default. Uh-huh.

And you were worried about U.S. default? Spanish GDP grew by 0.1 percent last quarter. Its government debt is now 92 percent of GDP, up from 77 percent one year ago (Eurostat/WSJ), Italy headed for 120 percent.

Chancellor Merkel has complained that the U.S. has been spying on her cell phone. One response: “Why, no, Chancellor, there is nothing worth listening to. We could tell you if you do say something that is worth the trouble. By the way, you might consider a secure phone. The Russians will listen to anything.”

The fundamental problem facing the developed world: sovereign debt growing faster than GDP, from here to Europe to Japan and China.

Not Germany. Europe is desperate for Germany to loosen its purse and to buy its exports. In the last year, German debt has fallen from 82 percent of GDP to 80 percent, forcing the rest of deflating Europe to sell exports elsewhere, which exports deflation elsewhere.

QE is fully justified to get the world growing faster than its debt, and the Bank of Japan has joined the effort. China’s version is already far overdone, no help there, and Germany will not allow the ECB to participate. Even if it did, the underlying problem may be global wage competition causing wage deflation, which even aggressive QE cannot solve. Until we see progress there we’ll feel the creepy sensation of buying time.

Comment by Carl Morris
2013-10-27 17:38:11

Oh, OK. So anytime you have too much debt, all you need is more QE to outrun it? I’m surprised this wasn’t used in the past…seems like such a simple solution.

(Comments wont nest below this level)
Comment by Whac-A-Bubble™
2013-10-27 15:56:59

Paul Krugman Annihilates Stanley Druckenmiller And Everyone Else Who Says We’re On The Verge Of A Debt Crisis
Joe Weisenthal Oct. 25, 2013, 6:07 AM 8,546

Once again, Paul Krugman is teeing off on the Very Serious People who keep running around claiming that the US is on the verge of a major debt crisis, and that we’re doomed if we don’t cut entitlement spending NOW.

This is pretty familiar territory for Krugman, who goes after this crowd all the time and in his columns, but it’s still enjoyable to watch.

This week Krugman includes in his target list hedge funder Stanley Druckenmiller, who has been going around to college campuses warning of “Generational Theft” and how young people will get screwed by the old people on Social Security.

A couple paragraphs really stand out:

Once upon a time, walking around shouting “The end is nigh” got you labeled a kook, someone not to be taken seriously. These days, however, all the best people go around warning of looming disaster. In fact, you more or less have to subscribe to fantasies of fiscal apocalypse to be considered respectable.


This is so spot on. Being extremely worried about the future is the mark of respectability these days, even though these “end is nigh” calls have been terrible. Everything people have said about how debt and money printing would lead to spiking interest rates and a collapsing dollar have been 100% wrong. It doesn’t matter. If you don’t believe in some major looming crisis, you’re seen as having your head in the sand, and being unrealistic.

It’s a strange time for that reason.


Comment by Carl Morris
2013-10-27 17:43:59

Well I guess that settles it, then.

Comment by Whac-A-Bubble™
2013-10-27 19:17:02

I’m wondering if this article is a hoax. To see why, try to spot the blatant factual errors. (I’ll point them out later…)

Yellen not reassuring choice as Fed chief
Pittsburgh Tribune-Review
John Browne, a financial analyst and former member of the British Parliament, is a financial columnist for the Tribune-Review.
Sunday - October 27, 2013
Saturday - October 26, 2013
Friday - October 25, 2013
By John Browne
Published: Saturday, Oct. 26, 2013, 9:00 p.m.

The chairman of the Federal Reserve Board is probably the world’s most important job.

The central bank can influence economies around the world by manipulating interest rates and regulating the supply and purchasing power of the dollar, the international reserve currency, which is used for global trade and held by more than two-thirds of foreign central banks because it is believed to be strong and stable.

Earlier this month, President Obama nominated Janet Yellen to replace Ben Bernanke in this role. Investors, business people and politicians throughout the world will try to evaluate what changes, if any, Yellen likely will bring to Bernanke’s policies.

When the Fed was authorized in 1913, Congress gave it a dual mandate: Protect the strength of the dollar and — unlike central banks elsewhere — ensure full employment. The first was a financial goal. The second helped politicians win elections. Often the two conflicted.

Over the remainder of the century, the political goal overwhelmed the financial goal as the dollar lost some 97 percent of its value. In recent decades, this reduced the living standards of American workers while benefiting politicians, owners of real assets and financiers.

Yellen’s three immediate predecessors — Paul Volcker, Alan Greenspan and Bernanke — all began their Fed chairmanships as what is known as “sound money” men. They believed in a strong dollar. Backed by the strong money President Reagan, Volcker held to his principles. Persuaded by politics, Greenspan and Bernanke adopted the debt-fed economic growth through quantitative easing, the printing of synthetic currency and currency-debasing policies of British economist John Maynard Keynes.

In 1933, Treasury debt stood at $4.9 trillion. Twenty years later, it is more than $17 trillion, nearly 3.5 times as much.

During the great Greenspan/Bernanke asset booms, wealth — of those rich enough to own real estate, stocks, bonds and precious metals — mushroomed. Meanwhile, the standard of living of most ordinary Americans eroded markedly. Single-job families became two-job dependent to get by.

Bernanke used the nation’s credit to save the “too-big-to-fail” banks. No major financial leader was arrested for the widespread frauds.

In an excessively indebted economy, Bernanke’s quantitative easing of $85 billion a month in bond purchases has provided only tepid economic growth. The activity has become so bad that even within the Fed there is strong disagreement.

Unlike her immediate predecessors, Yellen is an avowed Keynesian from the start. She believes that just 12 people should regulate the price and supply of international Reserve Currency for the more than 7.1 billion people in the world. Furthermore, at her acceptance, she reaffirmed her belief in the controversial dual mandate.

Yellen’s appointment promises increased Fed distortion of money and markets. It is unlikely to end well.

Comment by Bluestar
2013-10-27 22:03:15

I spotted at least 4;
The dual mandate (unemployment) didn’t start till after Reagan.

“In 1933, Treasury debt stood at $4.9 trillion. Twenty years later, it is more than $17 trillion, nearly 3.5 times as much.”
^ these numbers make no sense?

Yellen is a quasi Keynesian and leans more toward behavioral economics.

Greenspan dropped the strong dollar support before he was FED and Bernanke never was strong dollar.

The dollar is the reserve currency because it’s the Petrodollar and almost all oil is priced in dollars.

“It must be true - I read it on the internet”

Comment by Whac-A-Bubble™
2013-10-27 19:54:57

Speaking of acts of faith, would now be a good time to pile into risk assets?

Comment by Whac-A-Bubble™
2013-10-27 19:56:33

ft dot com
October 27, 2013 5:03 pm
Retail investors embracing risk fuel US junk bond fund revival
By Vivianne Rodrigues in New York

Global retail investors have renewed a push into the riskiest corners of the US credit markets, lured by the relatively high yields provided by assets such as junk bonds.

After shunning the securities earlier this year, bruised by widespread losses, investors are once again pouring money into US mutual funds and exchange traded funds buying junk debt.

Weekly inflows into the funds more than tripled to $2bn, according to the latest figures by Lipper. The cash infusion brought year-to-date flows for junk bond funds to $842m and back into positive territory.

The recent push comes amid a broad rally in so-called risk assets after the Federal Reserve’s decision to delay tapering its stimulus programme last month. It illustrates the massive demand for fixed-income returns as central banks suppress interest rates.

Junk debt and equities often move in tandem, and with the S&P 500 trading at new record highs, speculative rated corporate bonds are also on a tear, analysts said.

The Fed’s decision “has breathed new life into the formerly anxious credit market, which is now seizing the opportunity to recapture the returns that were lost during this summer,” said Edward Marrinan, macro credit strategist at RBS Securities.

Equity markets have just made new highs, and sentiment surveys show investors expect them to keep rising over the next six months,” he said. “There is a good chance the rally in risky assets can continue, possibly through the remainder of the year.

Comment by Whac-A-Bubble™
2013-10-27 20:00:29

QE3 means never having to worry about stumbling growth.

Comment by Whac-A-Bubble™
2013-10-27 20:02:28

Oct. 27, 2013, 12:03 p.m. EDT
Engines of U.S. growth hard to find
Economy slowed by government shackles, cautious consumers and companies
By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) — U.S. growth was sputtering before the government shutdown in early October, and judging by the latest look under the hood, it could take a while before the economy generates enough power to get over the latest speed humps.

A series of economic roadmaps such as job creation and business investment point to decelerating growth toward the end of the summer. And a batch of data this week, led by retail sales in September, is expected to support the view of an economy struggling to gain traction.

With the brakes partly applied to growth, the Federal Reserve is virtually certain to maintain its massive stimulus program aimed at boosting the economy. Top central bankers meet Tuesday and Wednesday to plot their strategy for the near future.

As recently as last month, the central bank had been expected to start to cut back on bond purchases meant to keep U.S. interest rates low.

But no longer.

“Nothing is going to happen this week,” said Scott Brown, chief economist at Raymond James. “The markets think it’s very likely the Fed won’t move this year.”

Drip, drip, drip

So what happened? For starters, interest rates jumped over the summer in anticipation of the central bank reducing its bond purchases. The spike in rates, though still low by historical standards, appears to have constrained the resurgent housing market and may have caused consumers to put off other large purchases. Housing has been one the economy’s few growth engines in 2013.

At the same time, companies cut back on hiring after a burst of job creation earlier in the year. Prolonged softness in the labor market has also kept a lid on wages, capping the ability of consumers to sharply boost their spending, especially after a tax increase at the start of 2013.
Enlarge Image

“I think the economy in general, and retail in particular, were already slowing down,” Brown said.

For September, economists polled by MarketWatch forecast little change in sales at U.S. retailers, largely because of a modest drop in auto purchases. Sales probably rose excluding autos.

Still, retail stores are simply not selling enough goods to click the economy into a faster gear. And without more consumer spending, businesses are hesitant to ramp up investment despite the ridiculously cheap cost of borrowing. The government shutdown merely exacerbated the uncertainty.

“It may not be until next year that we see a pickup in business investment and hiring,” said Sal Guatieri, senior economist at BMO Capital Markets.

Fed up with the Feds

Most economists point the finger at government when divvying up blame for lackluster U.S. growth. Repeated budget showdowns over the past few years have disrupted the economy again and again. And Congress still hasn’t resolved all the disputes left over from the now-ended shutdown. It could take several months before consumers and businesses know if the coast is clear.

Comment by Whac-A-Bubble™
2013-10-27 20:09:57

Oct. 26, 2013, 2:34 p.m. EDT
Brainwashed investors can’t grasp Nobel ideas
Commentary: Contradictory picks mirror the rational-irrational investor brain
By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, the Nobel prize committee got its psycho-logical diagnosis absolutely right: America’s 95 million investors have dual-processor computers trapped in split brains. In fact, all Americans may be trapped in this simultaneous unstable blend of rational and irrational genes. The two polarities:

* Winner Gene Fama has been telling us for decades that “Mr. Market” is rational (in obvious disagreement with two of the real world’s most successful investors, Ben Graham and Warren Buffett), that the stock market is an all-knowing rational cosmic entity that processes all information, sees all, knows all.

* In contrast, new Nobel economist Robert Shiller has been telling us just the opposite, that the investor’s brain loves getting high on its self-addicting cocktail of “irrational exuberance,” blowing bubbles until destroying itself and “Mr. Market,” as it did in 1929, 2000 and 2008.

Can both be right? Or is the Nobel committee also delusional, in denial, wacko?

They’re both 100% right. The Nobel committee is making a crucial point, although it’s going over the heads of most investors. Why? Our brains are a bundle of contractions often at war within us, rational versus irrational genes. Our hemispherical brain reflects this split in our normally out-of-balance behavior. We’ve been so long brainwashed by Wall Street propaganda that we’re rational, investors can’t grasp being both rational and irrational.

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