Hoarding is exactly what the government is doing right now by filling the SPR, and frankly it's the best thing that could happen. It drives prices up. High prices encourage demand destruction. They also finance new well development. The hoarded oil gives us a buffer to fall back on once shortages become more prevalent. High prices are what we need in order to adapt to what's coming, and the sooner they happen, the better.
mark _________________ "If we lose confidence in the ability and the willingness of the Fed to deal with inflationary pressures and sustain confidence in the dollar, we'll be in trouble." Paul Volcker, May 15, 2008
Posted: Fri Apr 25, 2008 10:06 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
I saw this over at the Calculated Risk forums by "Ben Frank'll Tank Bernanke":
Bernanke as he sits alone, " WE are so screwed, WE are so screwed, I am so screwed!" I did everything, reflated, inflated, pushed fiscal stimulus, IB bailouts. Treasury offered super sivs, subprime lifelines, neg am certs, lender forebearance & forgiveness, congress offered relief legislation. Coordinated to stop gold runup. Cut, cut, cut rates...destroyed dollar. If I zirp we have Japan, if I don't stock market crash and consumers turn back for good. China seething, Europe seething, US dollar holders seething. Lied about inflation, jobs, production, inventories: put all talking heads on talking points for pump-n-dump. Made new facilities, diluted future creditworthiness by taking agency & MBS with roll over loans to stoke liquidity. Pressured regulators to turn blind eye to covert balance sheet manipulations, gave IBs gilded US charter to operate as banks, invoked plunge protections to stop fast erosion of equities. Tried jamming sidelined money with inflation to get it back in investments WE need it in. Increased Fannie & Freddie caps although they are insolvent, freed cash for student loans because private side collapsed; sent out every bank crony to make approaches to dumb rich and SWF to buy derivatives/securites under ruse that they are overimpaired and chance-of-lifetime. Implicitly backed JPM/BS takedown with taxpayer. Coordinated policy with world CBs. Can't lend direct to consumer, banks won't lend, monetary policy Kaput.
Whats left? Give up? If I do -- we crash, and have worst depression I've ever studied. What would uncle Milt say? What would Irving Fisher say? What would Greenspend say? wa,wa,wa. Guess I'll just hyperinflate, monetize, and ruin everyone equally -- although Wall Streeters are a little more equal than everyone. I'll spare them in the margins. Wonder if my Dubai hideaway is ready? I want out already! B-52 ben they call me. Bah! I'd settle for a discreet Gulfstream to an insignificant, unknown particle somewhere else in the world. Maybe I could just vanish and God would put me somewhere else, somewhere less grim, in his wide (scary) universe. How great is this anguish. How exquisite the pinch. I am checkmated. Maybe I will just change all the rules, and toss board & pieces in air! _________________ One of these now am I too, a fugitive from the gods and a wanderer, at the mercy of raging Strife.
--Empedocles
The Conference Board Consumer Confidence Index, which had declined sharply in February, fell further in March. The Index now stands at 64.5 (1985=100), down from 76.4 in February. The Expectations Index declined to 47.9 from 58.0. The Present Situation Index decreased to 89.2 from 104.0 in February.
U.S. consumer confidence fell more than forecast in April to a 26-year low as record gasoline prices and rising unemployment threaten to reduce spending.
The Reuters/University of Michigan sentiment index decreased to 62.6, from 69.5 the previous month. The measure was down from a preliminary estimate of 63.2 issued on April 11.
Consumers are growing increasingly anxious because the economy has lost almost a quarter million jobs so far this year, the cost of refueling a car is up 17 percent and property values have fallen. Sales of houses and cars have declined as a result, contributing to a slowdown that may bring an end to the six-year expansion.
The consumer confidence index is my canary in the coal mine.
That's a pretty steep slope on that downtrend, don't ya think?
regards,
mark
[edit - added bloomberg article] _________________ "If we lose confidence in the ability and the willingness of the Fed to deal with inflationary pressures and sustain confidence in the dollar, we'll be in trouble." Paul Volcker, May 15, 2008
Posted: Fri Apr 25, 2008 2:56 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Ah I get it now - thats why the dollar is going "up" TPTB are ratcheting down our collective wealth.... tank the US... now tank the Eurozone.... lather rinse repeat until economies resemble the third world.
-G _________________ All right, you primitive screw-heads, listen up!
Posted: Fri Apr 25, 2008 3:21 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
GeoJAP wrote:
Their strategy appears to be to print money and cause inflation until general prices rise high enough to be proportionally equal to the high price of homes and real estate. The benefit of this strategy to the powers that be is that it will maintain their wealth. One of the problem that I notice, however, is that salaries will not adjust upwards as fast as costs (if ever), which will be very painful for Joe Six Pack in the interim.
Bingo! We have a winner.
Can't find the article anymore but the Itulip gang had proposed the "100% solution" where the fed would cause 100% inflation over 5 years so that incomes would rise and make housing more affordable.
However this requires wage inflation which the FED really hates, but eventually it will come. All the Fed needs to do is keep lowering rates and get corporate spending to turn around.
The clue that the FED is taking this direction can be seen by them loading up on Mortgage securities. Think the FED will let home prices fall when they own the homes? You bet you're wheelbarrow they won't
Last edited by FoxV on Fri Apr 25, 2008 3:24 pm; edited 1 time in total
Posted: Fri Apr 25, 2008 3:34 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Quote:
However this requires wage inflation which the FED really hates, but eventually it will come. All the Fed needs to do is keep lowering rates and get corporate spending to turn around.
Of course they hate wage inflation. People can't be allowed to have enough money to live. It's unthinkable. _________________ "If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"George W. Bush loves poor people. He keeps making more of them." -unkn
Joined: Oct 23, 2004 Posts: 5198 Location: New Jersey
Posted: Fri Apr 25, 2008 4:15 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
FoxV wrote:
GeoJAP wrote:
Their strategy appears to be to print money and cause inflation until general prices rise high enough to be proportionally equal to the high price of homes and real estate. The benefit of this strategy to the powers that be is that it will maintain their wealth. One of the problem that I notice, however, is that salaries will not adjust upwards as fast as costs (if ever), which will be very painful for Joe Six Pack in the interim.
Bingo! We have a winner.
Can't find the article anymore but the Itulip gang had proposed the "100% solution" where the fed would cause 100% inflation over 5 years so that incomes would rise and make housing more affordable.
However this requires wage inflation which the FED really hates, but eventually it will come. All the Fed needs to do is keep lowering rates and get corporate spending to turn around.
The clue that the FED is taking this direction can be seen by them loading up on Mortgage securities. Think the FED will let home prices fall when they own the homes? You bet you're wheelbarrow they won't
I am in agreement that the Fed/Government wants to inflate the housing market, and also, completely subsidize it.
The main problem with ramping up inflation too fast is that there is wage inertia, with many workers usually just getting some kind of annual wage adjustment.
I suppose if oil gets to $200 rather quickly for whatever reason, inertia may be overcome and wages will be adjusted more frequently. In that case that government may order some type of continuous wage adjustment - or maybe give out some new rebate/energy subsidy.
I know the possibility of the later is not likely, so rising inflation is probably going to hit the economy fairly hard.
Posted: Sat Apr 26, 2008 7:26 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
Twilight wrote:
Wage inflation requires the existence of wages to work.
The obvious needs to be stated here - if the goal is to reinflate back up to support current real estate / asset valuations, it will probably fail as the economy tanks, people lose their jobs and prices are pulled down with them.
But if prices fall below costs (raw materials, energy etc) then before long goods no longer make it to market as manufacturers/service providers can no longer stay in business at all. Beyond a certian point BAU becomes non-economic ... obsolete. The whole system comes crashing down irrespecive of labour costs (wages).
The only option we really have is a managed collapse. Allow the system to deflate, but safe-guard vital industries/services. It is the anti-thesis of our current path.
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