Mish's Global Economic Trend Analysis |
- Reader Question on Banking System Insolvency, QE, and "Necessity"
- McCain Wants More Weapons Delivered to Al Qaeda Rebels; How Do Warmongers Get Elected?
- Outrageous but Highly Believable Rumor Involving Syria, Turkey, Kerry
- Are You Minding the Curves? Sweet Spot is Likely Not Where You Think
| Reader Question on Banking System Insolvency, QE, and "Necessity" Posted: 28 Mar 2014 08:26 PM PDT In response to Will Prices Rise Significantly When Velocity of Money Picks Up? reader Dave, a friend, noted that as the Fed jacked up its balance sheet, velocity has mirrored the curve to the downside. Dave asks "Can't an argument be made that since much of the banking system is really insolvent, that the Fed increasing its balance sheet is necessary?" "Necessity" This depends on what you mean by "necessary" and more importantly, who gets to decide. I am one of those who staunchly believes that banks should fail. More precisely: Banks did fail, but taxpayers bailed them out. Was the last bailout "necessary"? No - not to me. The world will not end if banks fail. Bondholders would have and should have paid the price. Who are the bondholders? In general, the wealthy own most of the assets, including bonds. However, if "necessary" means in the eyes of central bankers, then yes – it was deemed "necessary". It's all part of the moral hazard tactics of central banks that tells the "too big to fail banks" that no matter what they do, they will be bailed out, again and again and again. Privatize the Gains, Socialize the Losses Last time, Tim Geithner preached to Congress that financial Armageddon was right around the corner if Congress failed to pass a resuce package. Congress did pass a packages on the second attempt. Then Geithner promptly changed the terms of it to do what he wanted with the money. Speaking before Congress, Bernanke said the collapse of Lehman was his biggest mistake. I suggest it was his only success. Over-leveraged financial institutions should pay the price for their folly, not overburdened taxpayers in general. The poor bailed out the wealthy. The poor continue to pay the price in two ways.
Not only is that unnecessary, it's middle-class destructive. It's also conveniently disguised theft. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| McCain Wants More Weapons Delivered to Al Qaeda Rebels; How Do Warmongers Get Elected? Posted: 28 Mar 2014 10:53 AM PDT Lawmakers Bash Obama's Delusional Syria Policy In a recent post I noted Turkey Plans Military Intervention in Syria, Bans YouTube for Leaked Reporting. As a followup, please see Outrageous but Highly Believable Rumor Involving Syria, Turkey, Kerry. Meanwhile, back in the US Lawmakers Bash Obama's "Delusional" Syria Policy. U.S. lawmakers lashed out at the Obama administration's handling of Syria's civil war on Wednesday, demanding a stronger American response to the conflict and better communication from the White House about its plans.Secret Deals and the Failure to "Do More" Once again McCain proves he is little more than a war-mongering puppet for the military "offense" industry. "Defense" has nothing to do with involvement in Syria. Late January, Reuters reported Congress secretly approves U.S. weapons flow to 'moderate' Syrian rebels. It seems that was about as secret as Turkey's secret discussion on intervention in Syria. Rebel Infighting And what are the rebels doing with the weapons the US sent? Here is the answer: Syrian Rebels Fighting Each Other: Al Qaeda Clash with Rival Islamists. The Al Qaeda-affiliated Al Nusra Front have sent an ultimatum to the rival Islamic State of Iraq and Syria (ISIS) to cease killing fellow rebels or face "expulsion" from Syria.US Backing Al Qaeda "Moderates" That's right. McCain wants more US weapons for Syria, perhaps even a US invasion (when dealing with war-mongers it is usually correct to assume war is the real goal). Yet, those weapons either go straight into the hands of Al Qaeda or eventually end up in Al Qaeda hands anyway. This is precisely the idiocy of the policy "The enemy of my enemy is my friend". Supporting the overthrow of one corrupt regime for another corrupt regime typically makes matters worse. Clear Policy Statement The US needs a clear, consistent, easily explained policy on Syria. And I can sum it up in two words "stay out". If we supply arms and the Syrian government falls, the next government is likely to be run by Al Qaeda or militant extremists, and McCain and his ilk will be back at it, hoping to overthrow the next government, or worse yet, invade Syria to impose our will. Clearly, the only winning option is to not get involved. How Do Warmongers Get Elected? Given that it's crystal clear that involvement is a losing option, some might wonder: "How Do Warmongers Get Elected?" Here's the easy to understand explanation: The "offense" industry supports any and every candidate that supports war. If you are a candidate against war, the "offense" industry will label you "weak on defense", then toss massive amounts of campaign money at your opponent. Democrat-sponsored pro-union advocates get elected the same way. In fact, it is difficult to get elected if you do not take campaign bribes. This explains why those on the outside want campaign finance reform. But, once elected, bribes come in from every corner. The newly-elected want to stay in power so they too take bribes. Campaign finance reform dies in the process every time. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Outrageous but Highly Believable Rumor Involving Syria, Turkey, Kerry Posted: 28 Mar 2014 10:03 AM PDT Normally I stay far away from the rumor mill. Typically, most rumors turn out to be false. However, actions in Turkey suggest at least some substance to this rumor. Moreover, it's entirely believable. First let's tune in to what Bloomberg reports (which I also commented on yesterday). Please consider Turkey Blocks YouTube After Syria Incursion Plans Leaked Turkey defended its decision to block YouTube after a leaked recording of a meeting where top officials discussed a possible military incursion into Syria appeared on the site.What We Know The above is what is claimed by Erdogan and discussed by Bloomberg. We do know that Erdogan tried to shut down Twitter (but failed), and he did shut down YouTube. He also called the leak an act of treason and refused to let media even discuss the allegation. What follows is the rumor. Turkey Transcript Here is the alleged Turkey Transcript involving a plot to invade Syria. Select Quotes Hakan FİDAN: But hear me out, we know how to put two and to together. Now, we know that what happens there has no real strategic value for us, besides the political outward appearance and whatever. Now, if we are going to enter a war, let us plan this beforehand and do it. Now, I..Entirely Believable I do not know whether that is an accurate translation of a real tape or not. But the fact is, it is entirely believable. Moreover, shutting down YouTube, and then banning media discussion of the tape, while calling its release an act of treason, lends further credence to the rumor. True or not, that something of this nature could be so easily believable says a ton about the corrupt state of global politics. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Are You Minding the Curves? Sweet Spot is Likely Not Where You Think Posted: 28 Mar 2014 12:16 AM PDT Curve Watcher's Anonymous has its eye on the yield curve again. Over the course of the last year, and except for the close front-end, US treasury yields have risen across the board, and in some cases dramatically. This is what one would expect from a tapering Fed that is also discussing rate hikes. However, the action in the last three months is not what one would expect.  click on any chart for sharper image In the past year, 5-year treasuries have been hit the hardest (sharpest yield increase). That is not what one might expect from a strong recovery. And certainly a drop in the 30-year long bond is not what one would typically expect either. Typically, when the Fed starts hiking or announces intention to hike, the long end of the curve changes the most. It did, until the beginning of the year. The following charts will help put things in perspective. Yield Curve as of 2014-03-28 Monthly  The above chart shows monthly "closes" where the yield was at the end of the month. The current month shows the present value. Yield Curve as of 2014-03-28 Weekly  The above chart shows weekly "closes" where the yield was at the end of each week. The current week shows the present value. Symbols
Since the beginning of the year, the middle and long portion of the yield curve has flattened dramatically. The "sweet spot" for investors has been the long end of the curve. Those hiding in 5-year treasuries have been hit the hardest. Given the Fed is holding the low end of the curve near zero, the typical inversion one sees in the yield curve preceding a recession is not going to happen. We could see the 5-10 spread invert but that would take some doing. Regardless, this flattening of the curve is certainly not a sign of a strong recovery. Given blatant Fed yield curve manipulation, this may be as close to a recession warning that we get. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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