From Panzner Insights: The Downside of Easy Money

Here is a brief commentary from Panzner Insights, my members-only website, which I posted yesterday:

Leaving aside the question of whether correlation equals causation, there appears to be a strong link between the level of U.S. interest rates and the overall health of the U.S. economy.

As the chart shows, the Federal Reserve-orchestrated slide in interest rates over the past three decades has been accompanied by a falling savings rate, a narrowing of the gap between personal income and expenditures [which is encouraging some to choose options such as Aspire Money], and a substantial increase in total credit market debt.

While there may be more to it than that, including government policies that favor debt over equity and a deregulation trend that encouraged bad behavior by banks and other financial intermediaries, one could readily conclude that the Fed’s current aggressive monetary stance is doing little to return the economy to good health.

In fact, the central bank’s policies may well be making things a lot worse than they already are.

Comments

[professional liars]

Mailbox

This is THE big joke of Keynesian economic theory and Central Banking, and very few actually ‘get it’ (although you can bet our privately-owned and for-profit FED does, since they are in on it).

- It’s also one of the reasons they hate precious metals like vampires hate garlic.

While the career politicians prance about in their clown shoes and red rubber noses quacking about "the fiscal cliff" and are obediently parroted by the MSM and FTV charlatans, this is something they do NOT want to talk about or want anyone to even ‘think’ about.

This is actually very simple. Look at the two lines on this chart.

- The blue line reflects the falling purchasing power of the Dollar. From the creation of the FED when one Dollar was worth one Dollar to today, when one Dollar is really only ‘worth’ 3.8 cents.*
- The red line represents rising prices over time. This is the inflation the professional liars say does not exist.
- The turning point is pretty clearly indicated in the 1970′s. This is one trend that is NOT your friend!

It has been said before, but is worth repeating:

- It isn’t that the value (price) of Gold has gone UP. It has not. It is the value (purchasing power) of paper fiat that has gone DOWN.

http://www.jsmineset.com/2012/12/01/jims-mailbox-1082/

[bezzle]

Financial scandals and their cost take center stage

A revolution—or perhaps, more accurately, a reformation—is now under way: a full-scale assault on what Bank of England Deputy Governor Paul Tucker called the "cesspit" in the City. This has come as a terrible shock to many City workers who believe they lead blameless lives of tireless devotion to clients.
But it wasn't just the "casino bankers" in the fixed-income divisions who lost their moral bearings. Few parts of the City weren't compromised, aided by London's famously "light touch" regulatory regime that often seemed to favor the industry over its customers.
There were the commission-hungry retail bankers guilty of misselling; the investment bankers who gamed the listing rules to bring emerging-market companies with appalling governance to the London market, often targeting passive investment funds; the executives who colluded in the vast escalation of boardroom pay; the fund managers, whose excessive fees—often deeply embedded—for mediocre performance ate into their clients' savings; the hedge funds that paid inflated commissions to secure access to market-moving information the moment—or was that the moment just before?—it was published; the auditors who signed off on aggressive accounting treatments knowing lucrative consulting contracts were at stake; the lawyers whose clever ruses enabled companies to operate at the outer limit of the law, not least in their tax affairs.

Of course, this reformation will have real world consequences. Implicit in the unwinding of the bezzle is a redistribution of wealth from finance to businesses and savers.

http://tyillc.blogspot.com/2012/12/financial-scandals-and-their-cost-take.html

[Blurtman]

Kill the bankers!

[Debt kills]

Study: American Households Hit 43-Year Low In Net Worth

The median net worth of American households has dropped to a 43-year low as the lower and middle classes appear poorer and less stable than they have been since 1969.

According to a recent study by New York University economics professor Edward N. Wolff, median net worth is at the decades-low figure of $57,000 (in 2010 dollars). And as the numbers in his study reflect, the situation only appears worse when all the statistics are taken as a whole.

According to Wolff, between 1983 and 2010, the percentage of households with less than $10,000 in assets (using constant 1995 dollars) rose from 29.7 percent to 37.1 percent. The “less than $10,000″ figure includes the numerous households that have no assets at all, or “negative assets,” which is otherwise known as “debt.”

Over that same period of time, the wealthiest 1 percent of American households increased their average wealth by 71 percent.

As noted by Daily Finance, from 1983 to 2010 the share of total wealth held by the richest 10 percent of American households increased from 68.2 percent to 76.7 percent. Meanwhile, all the rest of Americans lost financial ground.

http://washington.cbslocal.com/2012/11/30/study-american-households-hit-43-year-low-in-net-worth/

[Easy rhymes with sleazy]

Wall Street finds a foreign detour around U.S. derivatives rules

(Reuters) - Wall Street banks are looking to help offshore clients sidestep new U.S. rules designed to safeguard the world's $640 trillion over-the-counter derivatives market, taking advantage of an exemption that risks undermining U.S. regulators' efforts.

U.S. banks such as Morgan Stanley (MS.N) and Goldman Sachs (GS.N) have been explaining to their foreign customers that they can for now avoid the new rules, due to take effect next month, by routing trades via the banks' overseas units, according to industry sources and presentation materials obtained by Reuters.

The rules, a result of Washington's Dodd-Frank reforms, aim to prevent financial catastrophes in the over-the-counter (OTC) market - a huge, opaque market which is partly blamed for felling Lehman Bros in 2008 and fuelling a global financial crisis.

The banks' solution is to route trades via their non-U.S. affiliates - subsidiaries with their own separate balance sheets, often in London - rather than the parent banks. It is a detour that could eventually be shut down by foreign regulators, but for now offers shelter from the U.S. regulatory storm.

"What we are seeing now is a gamesmanship dance in which firms do whatever they can to avoid regulation, which is an age-old phenomenon," said Thomas Cooley, a professor of economics at New York University's Stern School of Business.

http://www.reuters.com/article/2012/12/02/us-banks-regulation-derivatives-idUSBRE8B10F220121202?

[FIRE in the hole]

Financial Firms Have Been Hollowing Out America for Decades -- Now We're on the Verge of a Debtpocalypse
40 years of austerity politics have hollowed out the heartland, as financial wizards of Wall Street gobbled up ever more of the nation's resources.

For the last 40 years, prosperity, wealth, and “progress” have rested, at least in part, on a grotesque process of auto-cannibalism -- it has also been called “dis-accumulation” by David Harvey -- of a society that is devouring its own.

The FIRE Next Time

Meanwhile, for more than a quarter of a century the fastest growing part of the economy has been the finance, insurance, and real estate (FIRE) sector. Between 1980 and 2005, profits in the financial sector increased by 800%, more than three times the growth in non-financial sectors.

In those years, new creations of financial ingenuity, rare or never seen before, bred like rabbits. In the early 1990s, for example, there were a couple of hundred hedge funds; by 2007, 10,000 of them. A whole new species of mortgage broker roamed the land, supplanting old-style savings and loan or regional banks. Fifty thousand mortgage brokerages employed 400,000 brokers, more than the whole U.S. textile industry. A hedge fund manager put it bluntly, “The money that’s made from manufacturing stuff is a pittance in comparison to the amount of money made from shuffling money around.”

Here, instead, is the fable we’ve been offered: Sad as it might be for some workers, towns, cities, and regions, the end of industry is the unfortunate, yet necessary, prelude to a happier future pioneered by “financial engineers.” Equipped with the mathematical and technological know-how that can turn money into more money (while bypassing the messiness of producing anything), they are our new wizards of prosperity!

http://www.alternet.org/financial-firms-have-been-hollowing-out-america-decades-now-were-verge-debtpocalypse?paging=off

[freaking nuts]

ALL I WANT FOR CHRISTMAS IS THE TRUTH

I find myself more amazed than ever at the ability of those in power to lie, misinform and obfuscate the truth, while millions of Americans willfully choose to be ignorant of the truth and yearn to be misled. It’s a match made in heaven. Acknowledging the truth of our society’s descent from a country of hard working, self-reliant, charitable, civic minded citizens into the abyss of entitled, dependent, greedy, materialistic consumers is unacceptable to the slave owners and the slaves. We can’t handle the truth because that would require critical thought, hard choices, sacrifice, and dealing with the reality of an unsustainable economic and societal model. It’s much easier to believe the big lies that allow us to sleep at night. The concept of lying to the masses and using propaganda techniques to manipulate and form public opinion really took hold in the 1920s and have been perfected by the powerful ruling elite that control the reins of finance, government and mass media.

Peddlers of Propaganda

“Great is truth, but still greater, from a practical point of view, is silence about truth.” – Aldous Huxley – Brave New World

America’s corruptible politicians, greedy corporate chieftains, criminal banking overlords, and despicable media manipulators all learned the sordid lessons of mass propaganda from the masters. Our willingness to lie and be lied to set us up to be manipulated by those who understood the mass psychology of a nation. Goebbels and Hitler were heavily influenced by the father of propaganda – Edward Bernays. He and his disciples are professional poisoners of the public mind, exploiters of public foolishness and ignorance, and never allow truth to interfere with a good story. What master manipulators realized is that it is easier to change the attitude of millions than the attitude of one man. By analyzing and understanding the process and motives of how the group mind works, the invisible government has been able to manipulate and regulate the masses according to their will without the masses knowing they are being managed. Bernays described this elitist view of the world in 1928:

The super-rich elite believe they are more intelligent, more capable of managing the affairs of state, masters of the financial world, and chosen to decide what is best for the masses. In reality, they are egocentric, psychotic, power hungry, myopic, self-serving ravenous vultures, feasting upon the carcass of a once great nation. Truth is inconsequential and irritating to their plans for world domination and control. Therefore, no truth will be forthcoming from any organization or person that is associated with the existing political, economic, financial or social order. Every bit of information that is permitted into the public realm has been vetted, manipulated and spun for public consumption. The public does not like bad news. They do not like hard facts. They do not like to think or do math. They want to be spoon fed mindless sound bites and happy talk. The oligarchs need to keep the masses sedated and subservient while they continue to plunder and pillage, so all data is massaged to provide a happy ending.

http://www.theburningplatform.com/?p=43582

[Pure extraction]

Risky bonds tie schools to huge debt

About 200 districts in California may have to pay as much as 10 to 20 times the amount borrowed.

The CABs enable schools to borrow wantonly without violating state or locally imposed caps on property taxes, at last for now. The long delays in interest payments can result in increased interest expenses of 10 or 20 times the amount borrowed. The practice has been banned in one state, but California has borrowed liberally through the scheme

“They are terrible deals,” California Treasurer Bill Lockyer said. “The school boards and staffs that approved of these bonds should be voted out of office and fired.”

The school system won’t, in the end, be who is on the hook to pay back the loans; that’ll be left for homeowners. For that reason, the CABs are dragging down property prices where they are known to have been used.

The Newport Mesa Unified School District in Orange County issued $83 million in long-term notes in May 2011. Principal and interest will total about $548 million.

"This is part of the 'new' Wall Street," Lockyer said. "It has done this kind of thing on the private investor side for years, then the housing market and now its public entities."

http://articles.latimes.com/2012/nov/29/local/la-me-school-bond-20121129

[helicopter drops to the rich]

Still Not Spreading the Wealth Around

Obama might throw a lot of rhetoric about fighting for the middle class.

But the reality has been the opposite. America today is all about the enrichment of big banks, financial corporations and the military-industrial complex, while the working class has rotted.

The truth of Obama’s policies (and successive administrations prior to Obama) is more concentrated wealth within the financial elites and Wall Street. Banks get bailed out. Campaign donors get stimulus money. And the middle class and future generations pay for it in taxation and the Cantillon Effect.

The Obama reinflation is a rotten bubble built on rotten foundations. Trying to reinflate the economy from a starting debt ratio of over 350% of GDP through crony corporatism and helicopter drops to the rich is an absurd notion that is doomed to abject failure.

And the growing gap between the rich and the poor is steadily beginning to resemble neofeudalism.

http://www.zerohedge.com/news/2012-12-03/guest-post-still-not-spreading-wealth-around

[Angelina]

I noticed that the title of this article was 'the downside of easy money.' Yes, there clearly is a downside, since the system is abused. However, a gold-backed or silver-backed currency also has its major downsides, the cost of acquisition and storage, for example, when we're already so deeply in debt. Since these assets would continue to be traded on the free-market, banks with billions of dollars could still destabilize our currency as they affect the exchange rate to their own ends, etc.

There's really no perfect currency, but yes, I agree, the current system must change.

[Too many Making Money Off the U.S. Debt]

It’s the Simpson-Bowles Personal Profit Tour: Making Money Off the U.S. Debt

The nation’s debt is a good deal for Alan Simpson and Erskine Bowles, the leaders of the failed deficit commission. The two are profiting personally by urging fat cats and CEOs to support their two-year-old, already-interred deficit reduction plan.

Simpson, a former Republican Senator, and Bowles, a Morgan Stanley director, charge $40,000 a pop to promote their rejected scheme to fix the debt by slashing Social Security, Medicare and other programs for the middle class. That means every time they speak, Simpson and Bowles each pocket more than 2.5 times the $15,000 that a typical senior citizen gets from Social Security in an entire year.

The Simpson-Bowles personal profit tour reveals that for them, for their creation – the speciously labeled Campaign to Fix the Debt – and for the CEOs, right-wing groups and Republicans rallying round them, the effort has nothing to do with deficits or fixing anything. For them, it’s all about personal profit. And if their personal gain costs the vast middle class any sense of retirement security after a lifetime of paying into these earned benefit programs, well Simpson-Bowles & Co. are just fine with that.

http://www.alternet.org/speakeasy/leowgerard/its-simpson-bowles-personal-profit-tour-making-money-us-debt

[kelly]

and you already spoke about what this will do to the market. There is a shocking coming to the market.

I listen to http://sentiment-trader.blogspot.com as their market calls have been dead on, and chip is saying we get one more up, before a horrible crash on the market in 2013 which goes along with what you are saying.

[Compromised all around]

Then we look into the role of Senator Feinstein’s husband Richard Blum, the head of the world’s largest commercial real estate company, who has an exclusive contract with the U.S. Postal Service to list and sell its valuable and historic public property as the Congress deliberately bankrupts the Post Office in the name free enterprise. U.C. Berkeley professor of Geography, Gray Brechin joins us to discuss the theft of our national heritage which the press is ignoring while only reporting that the Postal Service is in default, but not why, and who is profiting from its deliberate destruction.

http://ianmasters.com/sites/default/files/mp3/bbriefing_2012_12_04b_gray%20brechin.mp3

http://ianmasters.com/

[Happening everywhere]

Oligarchs Remain Obstacle to Growth

But as Greece’s economy soured in recent years, his fortunes sagged and he began embezzling money from a bank he controlled, prosecutors say.

Greece’s economic troubles are often blamed on a public sector packed full of redundant workers, a lavish pension system and uncompetitive industries hampered by overpaid workers with lifetime employment guarantees. Often overlooked, however, is the role played by a handful of wealthy families, politicians and the news media — often owned by the magnates — that make up the Greek power structure.

http://www.nytimes.com/2012/12/06/world/europe/oligarchs-play-a-role-in-greeces-economic-troubles.html?

[The Fed is a fairy tale come true]

Emmy Award-winning The Mary Tyler Show actor Ed Asner recently asked a Fox News producer if he could “piss on” him after he was confronted about a California Federation of Teachers video that showed cartoon rich people urinating on poor people.

Fox News host Sean Hannity and other conservative pundits first began attacking Asner on Tuesday after the animated ad that he narrated appeared on the federation’s website to explain how rich people used tax evasion, tax loopholes and tax cuts to become even richer.

Raw Story (http://s.tt/1w53h)

Tax the Rich: An animated fairy tale http://youtu.be/S6ZsXrzF8Cc

[William]

GARBAGE !!!! The FED DOES NOT set/determine interest rates. "Mr. Market" does.

[William]

ONE reason (among others) why interest rates fell is that after say 1981 wage increases were consistently lower than the REAL inflation and even lower than the CPI.

This forced consumers to save less and to go deeper into debt, in order to stay afloat financially. And this going deeper into debt was facilitated by rates going lower.

[Tom]

It's not going to matter what happens in the financial markets soon because all the wealth in the world isn't going to be able to buy anyone anything that will keep them alive a single day longer once the food cycle gets interrupted permanently by human induced climate change. We're on our way out people, due to overpopulation, resource depletion and pollution that we continued despite warnings to the contrary (and no political leadership anywhere on the planet).
In other words - all the so-called wealth you're talking about is fictitious.

Enjoy your remaining time.

[stock rocket]

I couldnt agree more about the "one more up" and tough 2013 coming soon.

Forex Kong at http://www.forexkong.com has this nailed down to the minute...and has been an awesome resource for navigating the markets.