October 31, 2008

MV=PT. 1%. ZIRP. Deja vu?

25 comments:

jim said...

?

Anonymous said...

Deja vu - Not exactly.

Beginning to look more like zero percent.

The last time this happened, the economy turned around.

This time it just started to get bad.

Remember after Oct 28, if small firms do have access to credit, then the unexpected has to happen.

http://www.247wallst.com/
2008/10/a-prairie-fire.html

A Prairie Fire Of Layoffs

Many of the layoff announcements which came over the last several days were as unexpected as they were large.

Anonymous said...

The mortgage securitization scheme, not to mention the investment banking model, are toast. And, there's too mcu leverage now. No housing binge redux. We're throwing everything overboard right now to avoid the deflationary vortex presently sucking us in. IF we survive that, look for oil to rocket for $200 by next summer as a consequence, and that will really knee the economy in the testes...

Anonymous said...

I'm confused ..... maybe my coffee hasn't kicked in yet.

keith said...

Here's Bernanke's 2002 speech

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

ZIRP

Learn it. Live it. Love it.

keith said...

And the most important paragraph, considering that we're now seeing deflation and wealth destruction unlike anything we've ever seen before:


"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

Anonymous said...

It's worked well so far.

Jersey Girl

Anonymous said...

I like Hitlers 'Special Treatment' and 'sanitary shower' solution better than Kool Aid.

Let's get started Right Away, today, NOW.

No Time to lose on these swine.

vanilla ice said...

MV=PT. I took plenty of econmics courses, maybe I took the wrong ones. I'm just hearing about this for the first time.

keith said...

My point here is that 1% interest rates and ultra-stimulative government policy led to the biggest bubble in the history of humanity a few years ago.

And here we are again - negative interest rates, and the government shoveling in trillions.

Hmmmm...

Someone get the punchbowl back out. Nobody's got their invitations yet, everyone's depressed, but I think it's gonna be party time soon.

But what will the next bubble be?

Anonymous said...

European Interest Rates May Drop at Historic Pace, Surveys Show

By Brian Swint and Gabi Thesing

Oct. 31 (Bloomberg) -- European interest rates will drop at a historic pace as central banks try to limit economic damage from the global financial crisis, surveys of economists show.

The European Central Bank and the Bank of England will slash their benchmark rates to 2.5 percent by the middle of next year, lowering them by a total of 1.75 and 2.5 percentage points respectively, according to median forecasts in two surveys. The ECB and Bank of England, which have already cut their rates by half a point, are poised to deliver further half-point reductions on Nov. 6, the surveys show.

hp fan said...

But what will the next bubble be?

There are getting to be lots of good buys out there. All companies use some debt which means they can be taken out by determined shorts but some are just too good to pass up.

Infrastructure looks stupid cheap like Alcoa with a P/E of 5 and Dividend of 6%. Try beating that with high yield savings, CDs, or treasuries.

Obama will be spending hundreds of billions in federal money on domestic energy and infrastructure projects which will increase profits even more. I'm starting to drool.

Professor Ichiro Vader said...

R2-D2 = David Archuleta. 40% by Volume. iPOD?

Anonymous said...

MxV = PxY? if "T" is your version of total output

M is the money supply,
V is the velocity,
P is the price level, and
Y is the quantity of output

Anonymous said...

"...As frequent critics of the Fed in recent years..."

That was a good one.

Romulus said...

How long before free money?

And where can I get some?

Wouldn't it be nice if national fiscal policy wasn't defined by the single word "banks".

Fuck, we should all, each of us, start our own banks. That's how you get ahead. And then we can borrow money at 1%. Instead of 5.99%-29.99% depending on credit method and secretly divined number.

(Remember the scene in Falling Down with the guy with the "Not Economically Viable" sign? When do they start handing those out?)

Romulus said...

As for gold, I expect alchemy to become, to paraphrase Darwin Mayflower, the business term of the 21st century.

Srsly, we can create plutonium from uranium and we can create synthetic diamonds from coal, I don't see artificially created gold to be that much of a stretch.

To make another controversial paraphrasing, if we could succeed, at a small expenditure of labor, in creating synthetic gold, its value might fall below that of dirt.

gutless and lazy said...

The BIG LIE in the WSJ article is that the depth of the recession is based ONLY upon future policy decissions.

It is not.

The magnitude is mainly already greated by the depth of PREVIOUS fiscal policy errors.

The length or the duration will be influenced by future policy decisions. That's about it.

This is all about trying to tag the depth of the comming recession on President Obama and the Dems. And avoiding responsibility to the Bush and the Repig party.

Of course, the WSJ has many more friends/tools in the GOP and they are seeking to protect them. That's about it.

lazy and gutless said...

But what will the next bubble be?

Inflation and higher, much higher, interest rates.

edd said...

RSE - RSE = 0

RSE = real science education

Therefore, RSE or death.

Anonymous said...

Yen Carry Trade is just like the housing bubble - main stream media do not want to talk about it until after it unwind.

BOJ may have save Yen Carry Trade by lowering rate for now, but when the next round of central banks rate cut come will BOJ be able to do the same.

http://www.newsweek.com/id/166661

The 2008 financial crisis has prompted many analysts to speculate about the decline of major developed economies like the United States and Japan as hubs for global capital. Currency flows, however, tell a different story.

The Japanese yen has risen even more sharply—even against the dollar—prompting G7 officials to indicate they may move to intervene in currency markets to dampen the yen's volatility, and forcing the Bank of Japan to cut interest rates.

Anonymous said...

Will the US dollar continue to be the reserve currency of the world.

http://onlinejournal.com/artman/
publish/article_3944.shtml

What explains the paradox of the dollar’s sharp rise in value against other currencies (except the Japanese yen) despite disproportionate US exposure to the worst financial crisis since the Great Depression? The answer does not lie in improved fundamentals for the US economy or better prospects for the dollar to retain its reserve currency role.

The rise in the dollar’s exchange value is due to two factors.

One factor is the traditional flight to the reserve currency that results from panic.

The other factor is the unwinding of the carry trade. The carry trade originated in extremely low Japanese interest rates.

Investors and speculators sold their higher-yielding financial instruments in a scramble for dollars and yen in order to pay off their Japanese loans. This drove up the values of the yen and the US dollar, the reserve currency that can be used to repay debts, and drove down the values of other currencies.

The dollar's rise is temporary, and its prospects are bleak.

This resentment, combined with the harm done to America’s reputation by the financial crisis, has led to numerous calls for a new financial order in which the US plays a substantially lesser role. “Overcoming the financial crisis” are code words for the rest of the world’s intent to overthrow US financial hegemony.

Brazil, Russia, India and China have formed a new group (BRIC) to coordinate their interests at the November financial summit in Washington, D.C.

gutless and lazy said...

I think it's a good bet that history will show, that manipulating interest rates so low, and injecting massive amounts of liquidity into the economy, just to avoid necessary cyclical recessions, will create A GREAT BIG DEPRESSION.

It may or may not come this time around. But if not this time, then next time seems all but certain. You've been warned.

vanilla ice said...

"The BIG LIE in the WSJ article is that the depth of the recession is based ONLY upon future policy decissions."

Yeah you WSJ bithes.

"The BIG LIE in the WSJ article is that the depth of the recession is based ONLY upon future policy decissions."


The best way to rob a bank is to own one.

Anonymous said...

HP fan...i drooled over BAC s dividend of 13 percent till they cut it, yet i see your alcoa at 6 percent