patrick.net

Take a look.

http://finance.yahoo.com/banking-budgeting/article/109739/the-bad-news-bad-news-on-jobs?mod=bb-budgeting&sec=topStories&pos=5&asset=&ccode=

lower prices could mean deflation and double-dip recession

http://finance.yahoo.com/news/Lower-prices-could-mean-cnnm-4270795979.html?x=0&sec=topStories&pos=5&asset=&ccode=

Some Guy says

So you’re drawing a distinction between the Fed and the government? How quaint.

Not in the slightest. They are one and the same. It's important to understand that the $1T of excess reserves the banks are sitting on isn't "free money", nor is it the banks' money per se, it (to a great extent) is their depositors' money.

Taking Bank of America as an example, on the asset side BAC is sitting on over $800B in cash right now (!) and has already $1.6T loaned out. (Remember this $1.6T cuz I will come back to it)

On the liability side, it has $1.5T in various short-term and long-term debts (interest-bearing savings accounts of its customers). The TARP debt to the Treasury was paid off last year.

OK, back to that $1.6T "asset" it holds in loans. BAC's equity cushion is $200B (the difference between assets and liabilities), so just a 12.5% write-down on its existing loans will wipe BAC's equity out.

Now, I have no idea how accurately BAC's assets have been marked to market, nor do I particular know whether the market has another 12.5% step down in store for us.

My only point is that after the $5T debt bubble of 2002-2008, everyone is running scared, and rightly so.

Total home mortgages ended 2001 at $5.4T and had bubbled up to $10.5T in Q108. Yet prices are back to 2001 levels in many areas.

5% 30 year FHA financing and extend & pretend loan mods are the only things keeping the system together now.

Wong,

I have always thought that the grocery add is a realtime barometer of inflation/deflation. Particularly theproduce, which unlike meats are not stored in the freezer to wait for better pricing, and unlike dairy does not have government price controls.

Save Mart is advertising seedless red California grapes for 77 cents per pound. I remember in the 1990's; the typical price was $0.99 to $1.29 per pound; a "sale price" was $0.69 per pound.

Yep, deflation.

thomas.wong1986 says

sybrib says

What jolted the USA out of the depression was WWII.

Not so much the War itself, but the aftermath, yes… we were the only economy still standing while the rest of Europe and Asia was still in ruble. It was the US factories that was rebuilding the world which expanded the economy.
We gotta get back into being a top producer/exporter of goods somehow.

Not too mention the dismantling of the New Deal. After Truman got rid of FDR's new deal policies, we saw huge economic growth in the 1950's.

Truman tried to nationalize the US steel industry during the Korean War.

Goddamn, I swear 40% of this country are f---ed in the head.

Your refusal to acknowledge the government’s role, with TAXPAYER MONEY, in putting the “too big to fail” banks in the position of having excess reserves

I deny no such thing. The main change that caused these reserves is the legislation in Oct 2008 allowing the Fed to start paying interest on excess reserves.

How much TAXPAYER MONEY is involved is the confusion here, as it is unclear to me whether the Fed is printing this money or is actually debiting TAXPAYER MONEY it holds for the treasury.

The Fed is a creature of Congress and thus is part of government, but it has the ability to spend money that is not TAXPAYER MONEY. This is the part I'm trying to explain, when it doesn't spend TAXPAYER MONEY, that's inflationary, something of a good thing unless you want to see the $14T consumer debt:

http://research.stlouisfed.org/fred2/series/CMDEBT?cid=97

and $7T of commercial debt:

http://research.stlouisfed.org/fred2/series/LOANS?cid=49

do a Jenga impression.

The banks have "paid back" the bulk of the TARP money, and the Treasury is currently in the process of unwinding its Citibank position now:

http://www.foxbusiness.com/story/markets/industries/finance/treasury-sells--stake-citi--bln/

Truman did not end the New Deal, he tried to augment it with something he called the Fair Deal.

Ptipking must've learnt his US History from Sarah Palin or at some Tea Party event.

shrekgrinch says

One was labor union legislation. After the war, the laws were changed to provide more balance to between business and unions. Also, a lot of the ‘alphabet soup’ New Deal agencies/programs were dismantled.

Taft-Hartley was passed over Truman's veto. Truman's Fair Deal was an expansion on the New Deal. The rising prosperity of the country (and concomitant appearance of inflation) diluted Truman's ability to force Big Government interventionism on the people.

Congress did establish the Hoover Commission blue-ribbon panel to review existing gov't organization http://en.wikipedia.org/wiki/Hoover_Commission but there was a great degree of continuity between the FDR and Truman administrations. And AFAIK Eisenhower himself also accepted much of the surviving New Deal superstructure, though his administration was rather opposed to any expansion of it, other than the Federal highway spending initiative.

shrekgrinch says

The only real money is M0

That's the classical way of looking at it. Money multipliers and all that. It's not really true though when nobody want's it.

Treasury bills? Deposits with the Fed or Cash (m0)? They are almost same thing to the banking system at this point, and no particular preference for which to hold, and nobody is interested in borrowing excess reserves. They're just safe marks on it's balance sheet earning about 0% interest. That's what it means to be at the zero bound. Demand for "real money" has gone infinitely elastic. And now it applies not just to treasury debt, it applies to GSE debt too since it's backed by the government. The distinction between real base money and much of the universe of credit money has become blurry. The concept of base money kind of made since when gold/silver was "real money", but it doesn't much any more. Even Federal reserve notes are backed by debt, just like your account at your bank.

I agree though that m0, m1, m3, mzm, etc. just confuses things. It's all just counting of some subset of liabilities in the financial system.

Ptipking222 says

MarkinSF, if tax rate are that high, people simply stop paying the tax. They somehow avoid it legally or illegally. You can’t seriously expect someone to work or take risk when they only get 20% of any positive return on the money.

Yes I can. Based on the historical fact that people did work and take risk (economic growth was very robust), I seriously can expect someone to work or take risk when top tax rates are high. But I was not advocating or defending those high rates. I was just pointing out they are historical facts.

Ptipking222 says

i.e. taking more risk

assertion not in evidence