St. Louis Fed President James Bullard says ‘Fed will act if economy weakens further’
We are totally screwed. I am sorry to have to use such crude vernacular but it is true.
It comes down to this, we have a debt-based monetary system in the United States and it have been replicated across the globe. The problem we face that NONE of our officials / representatives seems to be able to own up too is that we have too much debt in our system. When addressing debt, you have two options, pay it off or default (restructuring debt is a default).
When you are dealing with this type of monetary problem, you response can not be, “create more debt”. That is like drinking your way out of being drunk, it is a total oxymoron. Why does no one out there in our journalistic world have the gull to just straight up call them out on this subject. All the options the Fed and Treasury have come up with keeps coming back to creating debt.
We need to do the following to fix the economy and yes, its painful but not as painful as it will be if we let the hole get bigger: Raise Taxes (across the board but make it the least onerous on our poor), Reform entitlements (period, we can’t afford the current level of service) and reduce the annual budget deficit (means we spend what we tax, you want large government, then we pay for it).
I know if you don’t agree you are shaking your head and thinking, oh that is easy to write down. Your right, it is easy. But, we need to do it and to this point no plan I have seen seems to address these in any meaningful way. If I was President Obama, I would do it under executive order if I had too and take the consequences in court and defend yourself there. I believe he could make the argument that he is doing it for the welfare of the country as his duty. It would be unpopular at first but if he could hold out and let these changes take affect, we would see major changes in how the world treats U.S. debt and equities and we would start to see a real recovery.
The last issue we need to address which is the major reason unemployment has maintained itself over 9% is because of the false promise of “free-trade”. That term is a oxymoron in itself, if you know about exchange and barter (trade), there is always a winner and loser for an exchange in raw value. In this era of “free-trade”, the United States is the loser and any country that can sell their manufactured goods in our domestic market is the winner. It is basic math, if I can pay someone $400 a year compared to $44,000, which is more profitable? With that answer, you find that is where the jobs are going and in my opinion, the housing bubble only masked the problem by creating many jobs that are not permanent and if that did not happen, we would have even worst unemployment numbers.
Now if we accept that at the expense of our national job economy we feel that we need to “share the wealth” that is one thing, but then we should state it as a national policy, not dress it up as something else and try and sell it to us by “experts”. Middle-class income jobs are disappears and the cold hard facts are they are not coming back and even if we re-train our workforce for the “job of tomorrow”, as soon as a company figures out they can do it somewhere else for 1/10th of the pay, I’ll let you guess what happens next.
We use protectionism as such a dirty word. It is funny we will all stand up and salute for national military defense but cower away for any mention of national economic defense. As far as I see, it is a privilege to be able to sell in the world’s richest country, NOT A RIGHT.
Yahoo! Finance (Kristina Cooke in New York) The Federal Reserve will act if the economy weakens further and has the tools to do so, a top Fed official said on Friday. St. Louis Fed President James Bullard said he expects the economy to grow modestly over the next year — though the sluggish pace leaves it vulnerable to shocks.
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Debt deal done, U.S. rating still in question
I guess we did something, that is for sure. We need to get serious on this issue and fast. People keep citing that our borrowing rates are so low and this is a good time to borrow more so you can take advantage of these “historically low” rates. I see it like this.
Investors in United States Treasury debt are terrified about the prospects of any major disruption in the income of this asset. U.S. Treasuries are suppose to be the par excellence risk instrument. Everything’s risk premium is considered riskier than a U.S. Treasury. That means there is almost no chance of default.
We are creating massive spending deficits on scales that pale even 10 years ago. 20 years ago and we are talking about spending in one year, the same amount of the whole countries existence combined. We d0n’t seem to grasp the amount that government is increasing its spending on the U.S. economy. I don’t think we will decide not to pay the debt holders their payments, but that government will increase the money supply when we do not have enough participates to purchase all our debt we need sold.
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Geithner warns Congress raise debt limit to avoid national catastrophe
With all the economic rhetoric about fiscal and monetary policy, some things never change. One of them is the pretty straight talk from politicians on the U.S. debt limit when we get ever closer to the new limit. We stop the talk about cutting deficits and living within our means and bring out “the sky is falling” talk because of the reality of what will happened if we stop issuing debt and refinancing our Treasuries. You can’t hide this fact and I do like the lack of beating around the bush when it come to this subject.
Yes, we will have grandstanding by both parties on the ideology grounds but when push comes to shove, they all know the score. The debt will be raised or we will literally have a mini-civil war in this country. We are too used to this bubble-based living. Just saying….
Washington Post - Treasury Secretary Timothy Geithner warned lawmakers Thursday that the national debt could hit the legal limit on federal borrowing as soon as March 31, and he urged them to act quickly to avoid a government default that would spark “catastrophic economic consequences that would last for decades.”
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Federal Reserve may be `Central Bank of the World’ after UBS & Barclays aid
Bloomberg - Federal Reserve data showing UBS AG and Barclays Plc ranked among the top users of $3.3 trillion from emergency programs is stoking debate on whether U.S. regulators bear responsibility for aiding other nations’ banks.
UBS was the biggest borrower under the Commercial Paper Funding Facility, with $74.5 billion overall, more than twice as much as Citigroup Inc., the top U.S. bank recipient, according to the data released yesterday. London-based Barclays Plc took the biggest single amount under another program that made overnight loans, when it got $47.9 billion on Sept. 18, 2008.
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Central Banks Cut Holdings of U.S. Agency Debt by 7% This Week
There is a very interesting statement in this news piece. The writer said that investors in agency debt like mortgage bonds backed by Fannie & Freddie were cutting their holdings because the worry that the U.S. will push the refinance of mortgages that are underwater and borrowers that have no equity.
What is interesting is if they do not refinance these borrowers then many will default on their loan. If this happens then the available income for the mortgage bond payments would be less so you would think that this would be an undesirable effect if you were expecting payment from these bonds. If you did refinance then you would have more income to make these interest payments. Another problem with the defaults would be th affected value of homes around them and that could create more defaults. So the question is why would an investor sell agency debt if that was the was the real reason.
This seems like a pretty weak argument for correlating this 7% sellout and actions by the U.S. government. More likely it is because of our fiscal and monetary policy and they want to reduce their exposure to the U.S. dollar. The Federal Reserve is actively talking about doing more quantitative easing (money printing) and this is worrying investors in U.S. assets about the coming devaluation.
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Bernanke signals Fed is ready to prop up U.S. economy
Following up on my comments yesterday, it looks like inflation is going to be the route to try and bring a recovery. The Federal Reserve and Ben Bernanke will fail in this attempt because at the end of the day, income (wages) will not keep prices and real growth where it is needed to stop deflation.
The recovery is basically over when we are getting statements like this from our central bank chairman. It can become really dangerous when the Fed create uncertainty by talking about purchasing long term treasuries. The gold market has sniffed this out and the price is almost nears its nominal high of $1,253.00 per ounce.
The more these type of discussions keep coming up, the more it shows that the Fed and Treasury so not have a handle on the macro-economic situation and the market is what is really dictating our conditions. Bernanke said that deflation is not a risk to the economy but he is wrong, to him this is the biggest risk and that is why he is continuing the program of Quantitative Easing (QE aka: money printing).
Ask yourself this question, do you fight inflation with inflation or do you fight deflation with inflation?
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Fed chairman says ‘unemployment will remain stubbornly high for several years’
Well you have it from the proverbial horses mouth in Ben Bernanke, our Federal Reserve Chairman. It does not bode well for the U.S. economy when the head of our central bank tells us that we should expect high unemployment for the next several years. On a political note, that is going to make this election cycle and the 2012 presidential election far from certain.
When the economy is going south, it makes it easier for a new candidate to make promises of a better economic environment even if they can not deliver. Bernanke said we will still be between 7-7.5% in 2012 for our percentage of unemployed population. We also need to take account for discouraged workers that will also come back on the rolls and possible push that statistic even higher.
This is also a best case senario, we need to take into account that a double-dip recession is not out of the cards either. I have to tip my hat to Ben for atleast giving us a realistic picture and not telling us our economy through rose colored glasses.
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