Mystery Economic Theater 2012

[cheesehead]

Originally Posted by ewmayer

< snip > the folks in questions really *do* believe themselves to be so smart/productive/witty/talented/indispensable-to-society that any dent to their already-hugely inflated incomes and undeserved (because mostly correlated with some measure of being a 'successful' parasite on the productive, genuine wealth-generating parts of the economy) bonuses really is seen by them as 'catastrophic hardship', needing to be remedied by some form of welfare-for-the rich.

That attitude has not been discouraged by the right-wing billionaires who've funded conservative think tanks for the past four decades.

[ewmayer]

Reuters Exclusive: DOJ casts wide net with mortgage subpoenas

WASHINGTON (Reuters) - A Justice Department inquiry into the packaging and sale of home loans by the biggest U.S. banks casts a wide net and appears to significantly overlap with other enforcement efforts, according to people who have viewed subpoenas sent to the firms.

This sounds like an encouraging shift by the until-now-completely-absent DOJ, but I suspect it's 2-3 years too late, and further that by the time any major prosecutable offenses "come to light" the statute of limitations will have conveniently run out, or the banks will be covered by a broad umbrella of immunity resulting from their in-the-works settlement with the various state AGs.

As the saying goes, "I'll believe they really mean it when we start seeing perp walks."

From where I sit it smells like an election-year "get tough on the same Wall Street crooks who can't really get into trouble because they helped fund everyone's respective campaigns" ploy.

[Fusion_power]

Greece is a trainwreck. Cars are still colliding, dust is still flying, loud screaming can be heard.

The second wave of bailouts for Greece are now set to take place, yet some economists say the problems have not been addressed.

"The debt swap deal does not solve the problems of Greece at all," said Holger Schmieding, chief economist at Berenberg Bank. "Of course, without it, Greece would be in huge trouble. But Greece's problem is that it has to return to growth. Otherwise, no debt burden is sustainable."

i

http://news.yahoo.com/greece-eyes-el...015433643.html

Note that $100 Billion has been written off in this latest deal. From an investors perspective, Greece has to be seen as a pile of doggy doo.

I wonder how the ratings agencies will spin this latest confabulation?

DarJones

[garo]

100 billion has not been written off. If you parse the minutes of the deal it substitutes official for private lenders who have got massive cash sweeteners to accept this deal. The debt burden for Greece has not been reduced sufficiently which is why this deal will fail.

[literka]

I did not follow news about the latest debt swaps of Greece. News were unclear about it. Even this simple fact creates some suspicions that something strange is going on. But CNBC already announced default of Greece. Ha ha ha ha ha. And there are many meetings about returning to drahma by Greece. Ha ha.
Wait a minute. I see on a tv screen right now that default was averted. This is after an announcement that Greece defaulted.
Europe needs something like Obama did in the U.S. Something that would supply European banks with cash, so that they can lend, for Greece too. Issuance of eurobonds would be the best in my opinion. All countries in the world issue such bonds, but EU doesn't. The reason is that Central Bank duties were overtaken by banks of large countries. But this is a wishful thinking, something that will never happen. Some countries would lose easy huge income.

[ewmayer]

Originally Posted by literka

I did not follow news about the latest debt swaps of Greece. News were unclear about it. Even this simple fact creates some suspicions that something strange is going on. But CNBC already announced default of Greece. Ha ha ha ha ha. And there are many meetings about returning to drahma by Greece. Ha ha.
Wait a minute. I see on a tv screen right now that default was averted. This is after an announcement that Greece defaulted.

One needs to be careful how one defines "default" ... "bond restructuring" which forces bondholders (except for the ECB, which was happy to blow tens of billions of Euros to gobble up Greek bonds in a failed attempt to "restore confidence" and then exempt itself from the inevitable writedowns) to take large losses is the currently-sought-after form, which is seen as "less default-y" than a 100% "sorry, we have no intention of paying these off, ever" default.

Mish is predicting a "surprise announcement" of a Greek "bank holiday" soon - we shall see.

Europe needs something like Obama did in the U.S. Something that would supply European banks with cash, so that they can lend, for Greece too. Issuance of eurobonds would be the best in my opinion. All countries in the world issue such bonds, but EU doesn't. The reason is that Central Bank duties were overtaken by banks of large countries. But this is a wishful thinking, something that will never happen. Some countries would lose easy huge income

Here in the US, the central bank has supplied the big banks with multiple $trillions in free/cheap money - but lending has not occurred on any scale near what was hoped for. You should ask yourself why. Issuance of Eurobonds in any form would simply be another can-kicking exercise, permitting various profligate-spending sovereigns to continue to live way beyond their means. Enough of the countries who would be paying most of the resulting bond-market subsidy now recognize this, which is why it'll never fly. Not that that has stopped various Euro-crats from proposing some "new version" of the idea on a near-weekly basis.

[literka]

"the central bank has supplied the big banks with multiple $trillions"
These banks didn't keep this money in socks, but have lent it to somebody enabling business to strive.
In EU we have an opposite situation. The role of Central Bank is played by banks of large countries. Why would they care about business of Greece? Large countries issue new bonds instead of Central Bank of EU. This is a big difference. Instead of expanding EU (for example by bond issuance) we have few countries using EU for own purposes, expanding theirs economy.

[ewmayer]

Originally Posted by literka

"the central bank has supplied the big banks with multiple $trillions"
These banks didn't keep this money in socks, but have lent it to somebody enabling business to strive.

You are entitled to your own opinions, but not your own facts. Most modern money is bits in computers, not physical paper, coin or other tangible assets. Banks can and do "sock it away" or use it for other purposes than lending, especially if it costs them little to nothing to borrow it.

Feel free to continue living in your fantasyland and not doing the slightest bit to educate yourself, but until you start showing some reality-based comments not rooted in your particular brand of national chauvinism, I'm putting you on [ignore].

[Christenson]

Hence my dumb question: We are told that we actually live in a credit economy...as noted, most of the $$ moving about are bits only...not even portraits of various figures such as Andrew Jackson and Ben Franklin printed on smelly bits of paper....(and I knew there was something fishy about the new "play money" $100 bill)

At what point does all this expansion of *credit* lead to inflation?

[only_human]

Originally Posted by Christenson

At what point does all this expansion of *credit* lead to inflation?

I missed your emphasis on *credit* and everything that follows skews off into the weeds but it was too much work to throw away.

First, it doesn't hurt to review bank processes that create money.

Currently banks can get cheap money from the Fed and use that money to buy treasury securities, which themselves only exist in computer records of banks and security institutions, and then collect interest. This has been discussed in the news lately because banks seem to prefer doing this over the risks involved in issuing loans.

This other method works even when banks can't get cheap money from the Fed: Money creation-> Example of deposit multiplication

Now, for this case there is this: Criticisms of fractional-reserve banking#Inflation which simply says:

Fractional reserve banking involves the creation of money by the commercial bank system, increasing the money supply. According to the quantity theory of money, this larger money supply leads to more money 'chasing' the same amount of goods, which leads to a higher price level.

That is veering into economics, which as has been opined here before, is a dismal science. Here is an interesting link: Economists don’t understand the financial system (http://mathbabe.org/) I will quote a different article from this site in a little bit.

Here are the first two hit summaries for a Google Search on: fractional reserve banking mortgage interest slavery

A Privatised Money Supply: Modern Banking and the Fractional ...
www.basicincome.com/basic_banks.htm
Do you know where the bank gets the $160000 for your mortgage? ... This is called fractional reserve banking, and it's the greatest scam of all time ... Charging interest on money created out of nothing is, in the main, unjust and .... But, if you want to be the slaves of the bankers and pay the cost of your own slavery, then let ...

Criticism of fractional reserve banking - Wikipedia, the free ...
http://en.wikipedia.org/wiki/Critici...serve_banking"
Criticisms of fractional-reserve banking have been put forward from a variety of ... One criticism posits that since debt and the interest on the debt can only be paid in .... The Grip of Death: A Study of Modern Money, Debt Slavery and Destructive ...

Now my final quotes from mathbabe.org relate to how we are being served by this economic serfdom: Charity auctions and hate crimes

I read an absolutely incredible story last night on Bloomberg.

This Morgan Stanley executive William Jennings (co-head of North American fixed-income capital markets) is being charged with a hate crime. Let me piece it together a bit.

On December 22nd Jennings hosted a charity auction at Morgan Stanley until 6pm, then went to Ink48, a hotel in midtown on the west side. After partying on the rooftops for some time, and drinking, his car service didn’t show up fast enough for him so he hailed a cab to take him to Connecticut, where he lives with his wife and three kids in a $3.4 million house.

When he got to Connecticut, he got into a fight with the cab driver and ended up refusing to pay, stabbing the guy in his hand with a knife (which required 60 stitches) while using ethnic slurs. Then he went away to Florida for two weeks on the DL. My favorite line from the article:

Jennings fell asleep during the trip, the driver said. Once at the destination, though, Jennings said “he did not feel like paying” because he was already home.

(now I'm skipping most of the article and the context gets a bit distorted)

The part about the car service not showing up is absolutely key: these guys use car services a lot, and when you do that, you get used to not paying for such trivial little things as rides, or for that matter food or drinks. All such things are handed to you for free when you are this important (read: rich). Paying, writing a check or what have you, is reserved for ostentatious displays of wealth. I know hedge fund guys that don’t even carry money in their wallet because they never use cash. Actually I don’t know them personally but I know that this is true because they brag about it in the elevators.

I’m not trying to generalize this story – most Morgan Stanley execs haven’t been charged with knifing down working class cabbies. But it’s impossible for me not to see the consistency in the two events.

[literka]

Originally Posted by ewmayer

Feel free to continue living in your fantasyland and not doing the slightest bit to educate yourself, but until you start showing some reality-based comments not rooted in your particular brand of national chauvinism, I'm putting you on [ignore].

Let me write few facts of my fantasy. It was four months ago, when everybody, even educated people were writing about collapse of euro. Not only that value will decrease, but that it will stop to exist. I was the only one person, who wrote that euro will appreciate with respect to a dollar (euro was 1.19 then).
The same was about Greece. I wrote against everybody that there would not be a default. These are facts. You may write that I lack education, I don't care about it, but you cannot deny facts, unless you don't know that Greece still exists.