patrick.net

Bellingham Bill says

H says

China is the next Japan.

. . .

Japan...China...India...Nigeria...there will always be an emerging market and a fading market...

debyne says

Who is getting the money that the Fed is injecting into circulation?

In both cases, nobody is getting "free" money--owners of US bonds are selling those bonds for cash, or owners of MBS are selling them for cash. The Fed puts more cash into circulation by taking on assets.

mell says

Since 2009 the one year treasury bill is far, far below inflation, whereas in the years before (bailouts+QE) it was mostly well above inflation.

OK--I was referring to bank savings--1 year treasury isn't as liquid. In any event, 1 year treasury rates are determined by supply and demand--I feel like a broken record, but the reason its rate is low is because there is too much savings, not too little. More demand = lower rate.

mell says

No it means banks can borrow from the Fed's discount window at zero. Why pay anybody else more?

Incorrect. They borrow from other banks first and, when annualized, the rate is higher than savings rates.

sbh says

It and its member banks are independent of congress

The member banks, of which the NY Fed is the most important, are owned "by big private banks." Source: http://www.factcheck.org/2008/03/federal-reserve-bank-ownership/

It seems difficult to determine who these banks are. It is not inconceivable that if the NY Fed is owned by Wall Street banks, and they are committing securities fraud, that the NY Fed will look the other way.

indigenous says

Deflation is caused by a decrease in the money supply.

Inflation is caused by an increase in the money supply.

There is no other definition.

And just because there is inflation does not meant there are price increases. Several factors may explain that such as lack of demand and increase in supply.

adarmiento says

And just because there is inflation does not meant there are price increases. Several factors may explain that such as lack of demand and increase in supply.

lol--what is the point of defining inflation in that manner? The point of that measure is to characterize price increases and their effect on consumers. Who cares about increases in money supply if they have no effect?

sbh says

hanks for that. There are attributes of the FED system better left to the fog of memory.

Very true and well said.

Recall that NY fed president said he did not view his role to be that of a regulator when questioned during his confirmation hearing why he did not regulate the Wall Street banks in the run up to the financial crisis.

From the Fed website:

"What is the purpose of the Federal Reserve System?

Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers."

One shouldn't expect Patnet posters to be experts on the Fed, especially with regards to ownership of its member banks,information regarding which is purposely opaque, IMHO. But even the NY Fed president is unsure of the role of the Fed, it seems.

But the Fed didn't do its job in the run up to the financial crisis.

tatupu70 says

First of all, wages HAVE kept up.

No they haven't.

Here is an analysis from your very same source:

Five Decades of Middle Class Wages: Update
November 12, 2014
by Doug Short

Here's a perspective on personal income for production and nonsupervisory private employees going back five decades.

If we multiply the hypothetical weekly earnings by 50, we get an annual figure of $34,983. That's a 15.5% decline from the similarly calculated real peak in October 1972. In the charts above, I've highlighted the presidencies during this timeframe. My purpose is not necessarily to suggest political responsibility, but rather to offer some food for thought. I will point out that the so-called supply-side economics popularized during the Reagan administration (aka "trickle-down" economics), wasn't very friendly to production and nonsupervisory employees.

http://dshort.com/

sbh says

The FED and the Treasury and the Full Faith and Credit of the U.S. Gov. aren't going to prevent free market excess. They're going to clean up after it.

They are creating/aiding free market excess by forcing interest rates at lows. Greenspan, Bernanke, Yellen doesn't matter.

mell says

sbh says

The FED and the Treasury and the Full Faith and Credit of the U.S. Gov. aren't going to prevent free market excess. They're going to clean up after it.

They are creatiing/aiding free market excess by forcing interest rates at lows. Greenspan, Bernanke, Yellen doesn't matter.

There is nothing even resembling a "free market" today. At best, the U.S. economy should be described as a fascist form of crony capitalism.

As Milton Friedman so accurately stated,

"Indeed, a major source of objection to a free economy is precisely
that... it gives people what they want instead of what a particular
group thinks they ought to want. Underlying most arguments against
the free market is a lack of belief in freedom itself."

New Renter says

No they haven't.

Here is an analysis from your very same source:

Are you arguing that since Reagan they haven't kept up? I agree with that. My point was that from 1939 to 1978 or so, they did.

bgamall4 says

Well, if companies were not up to their eyeballs in debt, they would not have to lay so many people off.

That is fiction. Companies only employ the minimum number of people needed to meet demand. Whether they have a mountain of cash, or are up to their eyeballs in debt, they will lay off employees that are not needed.

Otherwise, they wouldn't be serving their stockholders....

sbh says

mell says

They are creating/aiding free market excess by forcing interest rates at lows. Greenspan, Bernanke, Yellen doesn't matter.

darlag says

There is nothing even resembling a "free market" today.

OK, guys, is what we have too free (as in too much government meddling) or not free enough (as in too much government meddling)? The government is your boogeyman, so show me how it's responsible for both the presence and the absence of something. Or you could just cut to the chase and blame it for existing in the first place.

Too much government meddling:

Telling two consenting human adults can and cannot do in the privacy of their own bedroom.
Marijuana laws

To little government meddling
Goldman Sachs and the rest of the gang.

New Renter says

This also does not relate to yoru overall point that inflation is good for normal americans as it keeps money from being hoarded

That wasn't my point. My point was that inflation is a distraction. Real wages is what matters--whether inflation is 1% or 10%

New Renter says

So there is PLENTY of money in circulation and PLENTY stashed in real negative interest bank accounts. Yet the labor participation rate continues to drop. What's clear is inflation is NOT helping spur demand for labor.

Obviously. The problem is inequality, not inflation.

New Renter says

I think you are making the rather dramatic assumption that deflation will make people hoard cash looking for a bottom. I'm not seeing it.

You don't see it because that's not at all the point I'm making. The point is that deflation occurs because of reduced demand. It doesn't happen in a vacuum.

New Renter says

Here are a real world example of "deflation" spurring demand for a high ticket item:

http://www.greencarreports.com/news/1084621_price-cuts-work-waiting-lists-for-electric-honda-fit-evs-now

http://www.cnet.com/news/microsoft-cuts-windows-8-oem-prices-to-spur-demand-wsj/

Maybe you didn't see my earlier post, but I'll summarize it again. Both loss of demand and productivity gains can both cause prices to fall, but they are not the same thing.

@New Renter, I have a problem reconciling your graphs with the concept that people are paid according to their productivity.

1) the productivity gains may not have raised prices of the goods. Fast food restaurants are incredibly productive but the dollar menu is still there.

2) I don't think your graphs show total wages paid to employees. i.e. employee wages + paid holidays + paid sick leave + paid personal days + paid vacation time + employer subsidized dental/medical/vision/prescription insurance + retirement plan employer contributions + employer paid life insurance + Medicare tax + Social Security tax + unemployment tax + workers compensation tax + etc., etc., etc.

3) they do not measure the specific contribution of labor to growth in output. Rather, they reflect the joint effects of many influences,
including changes in technology; capital investment; utilization of capacity, energy, and materials; the use of purchased services inputs, including contract employment services; the organization of production; managerial skill; in addition to the characteristics and effort of the workforce.”

tatupu70 says

That wasn't my point. My point was that inflation is a distraction. Real wages is what matters--whether inflation is 1% or 10%

So show some evidence that workers are directly worse off with deflation than inflation.

indigenous says

@New Renter, I have a problem reconciling your graphs with the concept that people are paid according to their productivity.

1) the productivity gains may not have raised prices of the goods. Fast food restaurants are incredibly productive but the dollar menu is still there.

Why would productivity gains raise the price of goods?

indigenous says

I don't think your graphs show total wages paid to employees. i.e. employee wages + paid holidays + paid sick leave + paid personal days + paid vacation time + employer subsidized dental/medical/vision/prescription insurance + retirement plan employer contributions + employer paid life insurance + Medicare tax + Social Security tax + unemployment tax + workers compensation tax + etc., etc., etc.

Most of these benefits have been declining as well.

indigenous says

they do not measure the specific contribution of labor to growth in output. Rather, they reflect the joint effects of many influences,

including changes in technology; capital investment; utilization of capacity, energy, and materials; the use of purchased services inputs, including contract employment services; the organization of production; managerial skill; in addition to the characteristics and effort of the workforce.”

If labor isn't productive it's eliminated rather quickly.

New Renter says

1) the productivity gains may not have raised prices of the goods. Fast food restaurants are incredibly productive but the dollar menu is still there.

Why would productivity gains raise the price of goods?

Misspoke, meant to say price of labor.

New Renter says

Most of these benefits have been declining as well.

How does that effect the graphs?

New Renter says

If labor isn't productive it's eliminated rather quickly.

Not the point.

New Renter says

Too much government meddling:

Telling two consenting human adults can and cannot do in the privacy of their own bedroom.

Marijuana laws

To little government meddling

Goldman Sachs and the rest of the gang.

Exactly. Keep in mind that no laws were needed, just enforcement of existing laws. GS committed clear cut fraud for which joe 6 pack would go straight to prison. But the rule of law was abolished by the administration.

mell says

GS committed clear cut fraud

What did they do?

indigenous says

mell says

GS committed clear cut fraud

What did they do?

Sold toxic investments to clients as "prime" and "safe" while knowing they would blow up shortly thereafter, even bragging in emails about it (referring to them as "junk" or similar). It doesn't matter what rating they had, you cannot sell a car with a perfect carfax record if you have inside knowledge that it is in very bad shape and will break down shortly. This will get you straight to jail. Yet, nobody was prosecuted, ergo the rule of law was abolished. Placeholder was the perfect lapdog to preside (or better not preside) over this.

indigenous says

mell says

GS committed clear cut fraud

What did they do?

JPM did that too - look up "sack of shit" with jpm.

sbh says

Clearly the market is too free then. We need more regulation and oversight.

No, you just need to apply existing laws. Otherwise the new laws will affect the small fish only and make things worse, same for too cryptic/long laws. There is no leeway in this, if you have knowledge something is shit you have to disclose it. Also keep in mind that not only weren't the laws enforced, the offending institutions were bailed out from going bankrupt, rewarding criminals who should be in jail with continued multi-million dollar bonuses. How's that for a good slap in the face?

sbh says

Clearly the market is too free then. We need more regulation and oversight.

That is what you got out of that? I get corrupt crony capitalism that deserves the AF treatment.

More robots, more productivity gains ?

http://www.gurufocus.com/news/293061/rise-of-the-robots

New Renter says

So show some evidence that workers are directly worse off with deflation than inflation.

See 1930s. That's deflation.

bgamall4 says

Last time they laid off employees who were needed, in order to pay the debt.

I doubt it. If they laid off employees that were needed, their profits would go down and they would pay off debt more slowly.

mell says

Sold toxic investments to clients as "prime" and "safe" while knowing they would blow up shortly thereafter, even bragging in emails about it (referring to them as "junk" or similar). It doesn't matter what rating they had, you cannot sell a car with a perfect carfax record if you have inside knowledge that it is in very bad shape and will break down shortly. This will get you straight to jail. Yet, nobody was prosecuted, ergo the rule of law was abolished. Placeholder was the perfect lapdog to preside (or better not preside) over this.

It's not that simple. I agree that they should have been prosecuted, but it's far from a slam dunk case.

A good lawyer can easily make a case that it's not fraud if they have an outside ratings agency certify the risk-regardless if the broker disagrees. That's why those agencies exist--to get an "unbiased" certification of risk so that the brokers can't screw you.

IMO--the ratings agencies ought to be prosecuted as well.

tatupu70 says

See 1930s. That's deflation.

And I think it's clear that the 1970s higher unemployment rate and concomitant inflation were BOTH driven by the same dynamic, baby boomers (born in the 1950s) flooding into the workforce.

We got inflation then because the job market expanded to take this influx.

We've not got inflation now because the job market is NOT expanding iike then.

shows we're "expanding" at HALF the peak rate of the 1970s.

And I put that in scare quotes since the job growth under Obama has been just getting us back to the 2007 peak still.

sbh says

I can hear Indigiot clawing at the door, but his squealing catechism just doesn't come through

That I believe...

You say deflation as if it were a bad thing???

The question is not "how much money", but "does it circulate".

With deflation the money moves slower because everyone wants to hang-on to it.

And this is a self-reinforcing mechanism.

2% of inflation just nudges people to spend or invest, both of which help.

The problem with "printing money"/QE is that it is done in a way that doesn't create inflation or extra circulation of money. It's just added cash that sits idle in accounts. Which is why Japan is falling back in recession and why recovery is so slow in the US.

It's so obviously wrong that it's hard to think it's not deliberate.

It's wrong to say deflation helps lenders, inflation helps debtors:

Interest rates compensate for either deflation or inflation, unless it is somehow unexpected in the market, which is unlikely.

Heraclitusstudent says

2% of inflation just nudges people to spend or invest, both of which help.

Not if they think the financial system will crash again. Not far fetched, as we are reminded that the world can be pitched into another tailspin by the mere indictment of criminal bankers.

it is clear that the US and likely world financial system is a fraud, and that crimes will not be prosecuted. In such of an obvious environment, sitting on cash might be the prudent thing.

Blurtman says

Not if they think the financial system will crash again.

The system will crash again if debts go up but not wages, which comes back to "does the money circulate?". They mask deflation with asset inflation which is temporary because the real economy doesn't follow, and assets ultimately have to align with reality.

And when the system DOES crash it will be the perfect pretext to do more of the same.

This is NOT a necessary consequence of "money printing" or trying to force to inflation. This is just a consequence of THE WAY THEY DO IT. i.e. giving cash to rich people.

Look at 3 stories that speak volume about current policies:

1 - Japan falling in recession in spite of (or because) massive QE.
http://www.nytimes.com/2014/11/17/business/international/defying-expectations-japans-economy-shrinks-further.html?ref=business

2 - Workers unclear on the concept ask the central bank for more help. Everything the central bank did provided almost no help to them. But they think an emotional appeal to a technocratic organization will help. That's the thing with QE: giving public money to the rich has never been that popular.
http://www.nytimes.com/2014/11/15/business/economy/face-to-face-with-the-fed-workers-say-the-economy-needs-more-help.html

3 - complaints that inequality are increasing. Duh.
http://www.nytimes.com/2014/11/17/opinion/inequality-unbelievably-gets-worse.html?_r=0

CaptainShuddup says

Deflation is the stuff "OH Happy days are here again!" is made of, for everyone that doesn't depend on what the market is doing.

Unless you depend on a job and income, that is.

Deflation is great for manufacturers that aren't in debt up to their eyeballs, or is owned and operated by private funds. They get to enjoy cheap production costs, while all of the Idiots with their heads up Wall streets ass and the Banks and Investors owns those companies, it's pure pandemonium and panic. Don't confuse your worst nightmares for everyone else sweet dreams.

The small guy has been living deflation for about 8 years now, so it's about damn time you people get some. The end of our economic hardship DEPENDS on it.

I see the US dollar, S&P and other US markets are living in a bull environment for what could amt. to several years. Anyway that’s what my eyes, numbers and understanding are saying to me. This is a sweet spot for those who can interpret the current flow of capitol cause and effect, deflation and continued low gold, silver and interest rates ranging between 2.6% - 5.25% etc.

The causes are a long list to pick from geopolitical, austerity of policy, unrest of people living in poverty, riots, wars and so on, the effect is countries around the world taking risk off the table. Their exposure is real; US companies (1% ers) are bringing assets back to the US in both monetarily and human form. Other countries are moving the money flow to the west investing in dollars and markets which will soak it up critical mass, including the bond markets.

RE median and below will likely go sideways in the range of the last high 2014 and low 2011 in general excluding high end and luxury. I witnessed many median home sellers going into the RE market this season with realized losses with expectation of the buyer, buying the remainder of the sellers loss above reasonable fundamental market levels. Many of these properties stayed as seller’s home or rental and some having to go back threw the process of finding new renters.

Gold, silver and digital currency will continue to fall to lows most can’t come to terms with in the same regards as the bull rally in the dollar.

Price in the Dollar stabilizing above the high of 88.70 will be a 2nd stage confirmation and the odds are heavy we will not see the dollar (DXY) below 85 for an extended length of time although it maybe tested. This will provide some long term opportunity for currency trading and investing.

All I see is opportunity and and have plans to participate.