patrick.net

Another example of smart governance in China, unlike here ....

NEW YORK (MarketWatch) -- China plans next month to raise tax on regular gasoline by five fold and diesel fuel tax by eight fold, in a move to take advantage of falling crude prices and encourage energy conservation, state-run media reported Friday.

Under the proposed measures, gasoline tax will go from 0.2 yuan a liter (3 U.S. cents) currently to 1 yuan, and diesel tax will rise from 0.1 yuan per liter to 0.8 yuan, effective Jan. 1, Xinhua news agency reported, citing a government statement.

The problem with physical gold is, you really need to be fast.

Unless you are able to buy 200, 300 ounces per transaction, retail physical gold is drying up very fast, and the premium is ridiculous these days. Do not expect to get your hands on physical gold at anything even remotely close to the "paper spot" anywhere.

Only wholesale gold can still transact physical gold at a price close to spot, but god knows how long that will last.

OO,

Good call. I wonder if POMO (Permanent Open Market Operations) always is equivalent to raw printing, or not?

(It's funny, in the link above I read .../pomo/display/... as /.../fed/po*no/display/...
I bet I was not the only one, but then this link really *is* Fed-po*n, and in more ways than one to some people :-)).

Our political leaders understand economy as well, do not think for a moment that they are stupid. The chance is, they are smarter than all of us on this blog.

But, their goal is slightly different from yours and mine. Their goal is to preserve their power base at whatever it costs the nation, our kids and our grandkids, as long as they get to keep their power one more day. That is how skewed the considerations are.

That's why you have to evaluate their next move from their angle, not from the perspective of what makes sense for all of us. We don't mean shit to these people. The most important thing for them, is to keep the current game going, because fractional reserve system requires ever growing credit, and ever growing asset value to survive. Once that stops, the fractional reserve system falls apart, and so will the key stakeholders behind the whole system.

And sure fractional reserve system will fall apart in the end, but holding the fiat means you go down together with it.

Yes, POMO is raw print, and they are very refrained from doing this, so it happened very rarely before. When Fed engages in loosening credit, it is always REPO, and there is collateral to account for it.

Well, you can argue that the Fed has taken in over a trillion rubbish in exchange for T, that is in essence printing, because it knowingly attached a higher value than the collateral is really worth.

The Fed has been printing in stealth mode or it couldn't have grown its balance sheet a trillion within 3 months. But this is big, because this is out in the open, and it is following what Ben said in his helicopter speech, setting a cap rate in MBS, GSE, and eventually T.

When Fed sets a cap rate at long-term T, USD collapses.

What's the deal with physical gold? A bullion bubble maybe?

Or is it just paranoid gold bugs?

Could it be something more sinister?

The government mints are shutting down supply to the small guys.

If gold is worthless, why is that Fed has not sold one ounce of its gold? Why is that you go to IMF, it has section reporting on gold reserve at each country's Treasury?

When countries transact gold with each other, they don't buy gold ETF. They take deliveries from each other. So paper gold is the bubble and it will become worthless at some point due to manipulation, physical is never a bubble.

Of course physical gold could be a bubble.

Anything can be a bubble. Tulips, tech stocks, houses, beanie babies... anything really.

Once everyone figures out the end is not nigh (yet) they will sell their hoarded gold and go chase after the next big thing.

Unless you are able to buy 200, 300 ounces per transaction, retail physical gold is drying up very fast, and the premium is ridiculous these days.

Isn't this saying that small guys (usually wrong) are buying while the professionals are not?

Of course physical gold could be a bubble.

Small denomination gold coins may be in a bubble.

Not investment advice.

OK, I stand corrected, physical gold is never a bubble when you have a fiat raw print going on.

Peter P, don't worry, the raw print is only going to increase in scale, first they raw print only a $300B, then this will obviously not be enough, so they keep driving the rates down by printing more, like $1T, 2T, 5T, and the market is not going to react overnight, but there will be a last straw, as the camel is doing more and more heavy lifting.

I expect Ben to start raw printing on Treasury within 6 months. He probably has already started, but I bet that he will make it obvious with POMO to buy Treasury by 2009.

Honestly from an academic point of view, this will be so exciting to watch, how many people in history get to watch the collapse of a world reserve fiat with 6-7 years of warning on a PHD thesis paper? I can't wait.

@OO

I agree with your comment that our leaders are not stupid. They are getting exactly what they want - the results are helping them - not helping us the common man.

There actions are beyond being self centered. They are very sociopathic - no conscience, no remorse, no moral compass.

This feels like Biblical end times.

This feels like Biblical end times.

4 more years to Mayan end times. :)

Yes, POMO is raw print, and they are very refrained from doing this, so it happened very rarely before. When Fed engages in loosening credit, it is always REPO, and there is collateral to account for it.
Now that's just wrong. Look at the historical data. The Fed, under normal conditions, purchases and sells Treasuries to rebalance the SOMA accounts (with as much as $50billion swings per year, depending on their bias). They just ended a streak of selling off a massive ($300+billion) amount of their securities to fund the special lending facilities (TAF, PDFC, etc).
It is worth noting that what is historical (and maybe this is what has you fired up) is that they are purchasing agency coupons (Fannie, Freddie, FHLB). No reason to suggest they are at the raw print stage. As I pointed out earlier, they actually paid back the Treasury ~$40Billion last week. These are the operations (previously announced) to try and drive down the mortgage rates. If any "printing" happens at this stage, it will be from the collateral dropping below "haircut" valuations and the Fed not calling the loans, or the agency coupons going sour.

If the Fed was raw printing we should be experiencing a weaker dollar and more inflation than we currently are.

Maybe we should give Boom-Boom more credit?

"The real problem with deflation is the lack of jobs, so a direct hire approach beats the print to prosperity method."

That didn't work in Japan. You can't spend yourself to prosperity.

EBGuy,

thanks for the clarification.

OK, looking for the next week for them to start raw printing in public. Postpone beer for one week.

Weaker dollar will come, when the Treasury bubble bursts.

Treasury is the biggest bubble around, when that bursts, you will get far more than a weak dollar.

EBGuy :

What's a best book/blog/website/article etc for a layman like me to understand what Fed does, and how it affects the money supply ?

Thanks.

Stuck, I read mostly Fed propaganda (see newyorkfed.org) and have probably been brainwashed by the Rothschilds. For all I know, Ben has a printing press in his basement. If you find any good "independent" sources, please share with the blog. Still trying to get a grip on the rapid expansion of the monetary base these past couple of months...

Floyd Norris gets us caught up with Donald Trump's latest effort to wiggle out of repaying $40 million to Deutsche Bank as part of his new Chicago hotel-condo development deal.

He points to a "force majeure" clause in the lending agreement that allows the borrower to delay completion of the building if construction is delayed by things like riots, floods or strikes. That clause has a catchall section covering "any other event or circumstance not within the reasonable control of the borrower," and Trump figures that lets him out, even though construction is continuing.

"Would you consider the biggest depression we have had in this country since 1929 to be such an event? I would," he asked in an interview, adding, "A depression is not within the control of the borrower."

He wants a state judge in New York to order the bank to delay efforts to collect the loan until "a reasonable time" after the financial crisis ends.

Deutsche Bank thinks the idea that an economic downturn should free people from the obligation to pay their debts is laughable.

Trump, it may be noted, does not want everyone to be treated in the same way. When I asked him if he would let remorseful buyers walk away from contracts to buy condominiums at pre-depression prices, he said he would not. "They don't have a force majeure clause," he explained.

A survey by Inside Mortgage Finance and Campbell Communications of 2,508 real estate brokers nationwide found that two-thirds of those polled are expecting a housing bottom in 2009. Well, actually, here’s how it broke down …

REALTORS
=======
17.1% saying it’s already occurred; or will happen sometime before end of 2008
66.4% saying in 2009
14% saying 2010
1.6% saying 2011
0.9% saying ‘12 or later

HOME OWNERS OR BUYERS
==================
It has, or will by year's end 447% of all votes
'09 12822% of all votes
'10 19934% of all votes
'11 11720% of all votes
'12 or later 10618% of all votes

Total Votes: 594

Why is this data not surprising?

Both surveys simply asked about a "housing bottom".

As a result, both survey results may prove to be correct - realtors forecasting a bottom in sales volume next year and respondents forecasting a bottom in sales price in 2010.

It should become painfully clear that realtors care a lot more about making the sale than they do about the sale price.

For example if a $300,000 home is sold through a realtor, a six percent commission would result in $18,000 to be divvied up between the agents and brokers for the buyer and seller. If the sale is not made, the commission is zero. Whether the sale price is a little higher or lower has no significant impact on the commission amount, relatively speaking. What's important is that the sale is made.

Realtors will naturally think of a "housing bottom" in terms of home sales and the number of commissions they are likely to generate rather than home prices and the size of those commissions.

Correction:

It has, or will by year’s end ==> 44 7% of all votes
‘09 ==> 128 22% of all votes
‘10 ==> 199 34% of all votes
‘11 ==> 117 20% of all votes
‘12 or later ==> 106 18% of all votes
==================================
Total Votes: 594 100%

The ever-growing Obama stimulus package
Thursday, December 04, 2008
While the $50 billion economic stimulus package proposed during his presidential campaign now looks almost laughable after the events of the last few months, the size of the plan now thought to wind up on President Obama's desk come inauguration day is anything but.

As there are no real numbers to report since legislators have yet to sharpen their pencils and get to work, all that is available at the moment are informed guesses as to the total cost, and these estimates seem to grow by the day.

Some time ago, conventional wisdom had it that something in excess of $300 billion would be needed. Then Senator Charles Schumer (D-New York) got on one of those Sunday morning talk shows and cited $500 to $700 billion as a reasonable size - about five percent of GDP.

But, with the recession now believed to be of a longer duration than first thought, this seems to have morphed into $500 to $700 billion for each of the next two years bringing the total to at least 20-times the size of President-elect Obama's original figure.

And it could go even higher.

This report from Bloomberg fills in some of the details:

Calls for $1 Trillion Stimulus Package Grow as Economy Tumbles
By Rich Miller and Matt Benjamin

Dec. 4 (Bloomberg) -- The one thing that isn’t shrinking in the U.S. economy these days is the size of the stimulus package that financial experts say is needed to turn it around.

With automobile sales dropping, payrolls plunging and manufacturing contracting, economists from across the political spectrum are raising the ante on how much the government should lay out. Some are now calling for at least a $1 trillion boost.

Kenneth Rogoff, a Harvard University professor who was an adviser to Republican presidential candidate John McCain, and Joseph Stiglitz, a Nobel Prize winner who served in President Bill Clinton’s White House, are among those who say President- elect Barack Obama should push for a package of that size.

“They need a stimulus of $500-to-$600 billion a year for at least two years to counter what is going to be a collapse in consumption,” said Rogoff, a former chief economist at the International Monetary Fund.

Central banks all around the world were busy today slashing interest rates with abandon:

Bank of England -------------- cut 100 basis points to 2.0 percent
European Central Bank -- cut 75 basis points to 2.5 percent
Sweden's Riksbank ---------- cut 175 basis points to 2.0 percent
Bank of New Zealand ------- cut 150 basis points to 5.0 percent
Bank of Indonesia ------------ cut 25 basis points to 9.25 percent

Earlier in the week, Australia's central bank cut short-term interest rates by 100 basis points to 4.0 percent and Thailand slashed by a full percentage point.

The Swedish central bank couldn't wait for their regularly scheduled mid-December meeting and hastily made their biggest rate cut in 16 years in an attempt to combat a recession that officially began two months ago. The government also announced a $4 billion stimulus plan.

In New Zealand, rates were slashed by a record 1.5 percentage points and Reserve Bank Governor Alan Bollard indicated there are more, smaller cuts to come. The kiwis entered a recession back in the first quarter of the year and short-term rates have been slashed from 8.25 percent over the summer to just 5.0 percent.

In Indonesia, both interest rates and inflation (~12%) are still quite high and the central bank has received some criticism for making its first rate cut in over a year. They were no doubt influenced by the full-point rate cut in Thailand a few days ago.

Facebook has delayed a plan to allow employees to sell some of the stock options they have in the privately held company because of the bad economy. Many technology insiders have speculated that the shares would no longer get the price they would have last year, when the company's value was pegged at $15 billion when Microsoft bought a 1.6 percent stake.

Santa Cruz school No. 3 in nation
By Sharon Noguchi
Mercury News

Five area schools have been honored among the top 100 high schools in the United States by U.S. News & World Report.

The magazine's annual survey of public high schools ranked Pacific Collegiate Charter in Santa Cruz as No. 3; Mission San Jose in Fremont No. 60, Monta Vista in Cupertino No. 73; Gunn in Palo Alto No. 74 and Saratoga No. 80.

"Silver" winners, roughly the next top 500 high schools, included Evergreen Valley in San Jose, Homestead in Cupertino, Leland in San Jose, Los Gatos High, Lynbrook High in San Jose, Mountain View High, Palo Alto High, Amador Valley and Foothill in Pleasanton.

The ranking is based on three criteria:

How much schools exceed statistical expectations in state reading and math test scores;

Whether a school's disadvantaged students exceed state averages in proficiency;

How many students participate and how well they perform on advanced-placement and international-baccalaureate exams.

The survey honored 1,900 schools with awards ranging from "gold" to honorable mention. Ten percent, or 209, of California's high schools won a bronze award or better. The survey indicated that more schools are offering college-level work and more students are doing better on that work.

OO said:
Unless you are able to buy 200, 300 ounces per transaction

Where do you do this? Tulving? Is there a local dealer who can handle such a transaction?

Can't you just request delivery? One contract of COMEX GC is 100oz.

I still think it is hard for gold prices to really take off until most small-time gold bugs become deeply disappointed.

Not investment advice.

Treasury is the biggest bubble around, when that bursts, you will get far more than a weak dollar.

And how many years have we waited for the housing bubble to correct?

A treasury bubble makes about as much sense as a cash bubble.

Cash bubble is the same as hyperinflation?

As Tech Job Cuts Mount, Layoff Rumors Pervade The Valley
Posted by Eric Savitz

When the Internet and telecom bubble burst, Silicon Valley jobs evaporated: by 2005, California’s Santa Clara County - which includes San Jose, Palo Alto, Cupertino, Mountain View and other tech-focused towns - had given up more than 20% of its total job base, a loss of over 200,000 jobs. So how bad will it get this time around?

http://news.cnet.com/In-Silicon-Valley,-help-not-wanted/2008-1022_3-5571238.html

Chordiant Software, the Cupertino company that last month slashed the forecast for its fiscal fourth quarter by a third and said it would lay off 33 employees, or about 13 percent of its workforce, said Tuesday that its board approved payment of "special cash bonuses for outstanding performance during the 2008 fiscal year" as a "retentive tool."

Chordiant's chief executive, Steven Springsteel, is set to get an extra $100,000 distributed over the next four quarters. He won't be getting a raise next year but will have to make do with the same $550,000 salary he was paid in 2008.

The day before that, Maxygen, the Redwood City biopharmaceutical company that said last month it would cut 30 percent of its staff during the first quarter of 2009 "in order to preserve cash," filed details about bonuses being paid to its top officers, including $200,000 for its CEO, Russell Howard.

Eighty percent of their bonuses were to be based on company performance while the remaining 20 percent would be distributed at the board's discretion. Evidently, the performance goals weren't entirely met. Based on the performance targets set up, only "a portion of the achievement of certain corporate objectives" was paid, while the "full amount of the discretionary component" was approved.

The board also used its "discretionary authority" to give even more extra bonus money to its CEO and chief business officer, "to recognize their contributions to the achievement of corporate objectives that were not included in the previously established goals."

“retentive tool.”, indeed

Friedman, Billings, Ramsey & Co. analyst Craig Berger wrote in a note to clients that "recent industry checks" suggest that Santa Clara, Calif.-based Intel is preparing a large work force reduction that could be as high as 8,300 employees, or 10 percent of its global staff.

Intel's last major round of cutbacks came in 2006, when about 10,500 jobs were eliminated as smaller rival Advanced Micro Devices Inc. was stealing market share and cutting deeply into Intel's profits in a bruising price war.

Berger said Intel could save $1 billion a year from a new restructuring and by reducing or eliminating some raises and bonuses because of the company's performance.

An Intel spokesman declined to comment.

Liz Perkins, 24 and the mother of four young children in Colorado Springs, began looking for work in October after she learned that her husband, James, was about to lose his job at a bed-making factory.

But the jobs she found either did not pay enough to cover child care or required her to work overnight. “I can’t do overnight work with four children,” she said. She has since stopped looking for work.

The family has paid its bills by dipping into its savings and borrowing money from relatives. But Ms. Perkins said that unless her husband found a job in the next three months, she feared the family would become homeless.

Cash bubble is the same as hyperinflation?

Hah, actually deflation could be considered a cash bubble.

Hyperinflation is hyperinflation. No bubble to see there.

“The real problem with deflation is the lack of jobs, so a direct hire approach beats the print to prosperity method.”

That didn’t work in Japan. You can’t spend yourself to prosperity.

What I meant by that is if the gov wants to throw money at the problem, a "jobs program" would be better than a "stimulus" handout.

You do not believe that the Great Depression was ended by WWII and the GI Bill? That may be an example of how spending on jobs and production ended a severe economic downturn. Of course, I'd rather see a space program and infrastructure bulidup, and not a major war, powering an economic recovery.