Is the Financial Tsunami Over?

September 22, 2009

Nearly everyday for the past 6 to 8 months there have been reports that the recession is over, or that the recession is nearly over.  I guess I should jump up and go out and purchase a new Lamborghini!

Not My Car!

Lamborghini, Not My Car!

Just last week Federal Reserve Chairman Ben Bernanke announced that the recession is “very likely over”.  He then added, “it’s still going to feel like a very weak economy for some time.”  What does that mean?  Can anyone make any sense of this?  Yes I understand that technically speaking the recession ended for a month, but are things actually getting better?

Things are not getting better, in fact things are about to take a turn for the worse.  The only question is how long will it take for the government sponsored economic masquerade party to end.  Think about it, nearly every positive piece of economic news that we have had in the past 12 months has come from ill conceived government programs that have had the purpose to “jump start” the economy, but have only prolonged the pain.

Clunker...More like my car

Clunker...More like my car

Take for example the “cash for clunkers” program.  This program basically subsidized the UAW and the governments newly acquired possessions of GM and Chrysler to spark the manufacturing sector. This program gave money to people to buy cars, so people bought cars, a lot of cars.  Dealers ran out of inventory, UAW members were called back to work, and manufacturing showed improvement for 2 consecutive months, thus the program was declared a huge success.    Soon however UAW members will be getting laid off again, and manufacturing is once again stalling.  The price tag was $3 Billion, a hefty price tag  to prop up an industry for a few months.   Check out this article at National Taxpayer Union for a more in depth article.

You and I both could  list several other government “prop up programs” that have had short term success only leaving the tax payer flipping the bill.   We have been told that these programs have worked, but have they?   I’m sure you’ve heard the President take credit for bringing the economy back from “the brink”, but what exactly is he talking about, and how can we know that he is right?   They haven’t been right about anything else.

The sad truth is that there are no government programs that can end the economic crisis that we are still facing.  Ever since Wilson started the Federal Reserve, and FDR embraced John Maynard Keynes economic model, we have had a date with destiny.  Keynesian economics is not a perpetual form of economics, it has a life cycle and we are now nearing the end of this life cycle and the Fed and the government know it.

Every time they reach in their magic bag of tricks and pull out a new bail out, or new “cash for clunkers” program they are acting exactly like an magician_hat_200ER doctor getting the defibrillator and trying to shock life back into a dying body.  Perhaps this is “the brink” that the President is referring to.

Is the Financial Tsunami Over?  What do you think?


U.S. Already Bankrupt

March 23, 2009

The stock market has shown 2 consecutive weeks of gains.  Are we beginning to see the greatly anticipated bottom of the market, or is this just the Federal Reserve and the government artificially inflating our economy again?  Unfortunately most of the “pro’s” think that we are still in deep water.   I found the following headlines on CBNC.com stock-market-roller-coaster2

  • US is Already ‘Bankrupt’ Technically

The U.S. is already “bankrupt” because it has a debt that is almost four times the size of its economy, says Puru Saxena, CEO of Puru Saxena Wealth Management. He tells CNBC that the U.S. is at risk of hyperinflation.

  • federal_reserve_board_of_governors1Fed to Buy Treasurys is Not a Good Sign

Stephen Roach, chairman for Asia at Morgan Stanley does not view the Fed’s plan to buy $300 billion worth of long-dated government debt as a constructive sign for prospects going forward.

  • Fed’s Move Unlikely to Help Economy

The Fed pumping money into Treasurys won’t help, says Martin Weiss, president of Weiss Research. He also discusses what can be done to turn the US economy around.

  • The US Stuck in Zero-Rate Mode?

America is arrogant to deny their similarity to Japan’s economy, says Stephen Roach, chairman for Asia at Morgan Stanley. He tells CNBC that the US economy is in a “zero-interest rate” mode, like Japan.

  • Quantitative Easing & the Fed’s Balance Sheet

Thomas Lam, vice president and senior treasury economist at UOB, says the Fed’s latest moves such as to buy long-dated Treasurys will stretch its balance sheet and pump more liquidity into economy.

  • The Fed’s Recent Moves are Right

“This decision to purchase long-term assets, mortgages, long-term treasury securities, is the right thing to do. The Fed would clearly rather err on the side of inflation rather then depression,” said Dennis Gartman from the Gartman Letter. He also touches on the housing market in the US as well as the TALF.

  • Tackling US Economy

Housing problems need to be tackled before the U.S. economy can pick up, according to Adam Carr, senior economist at ICAP.

  • 2010: ‘Real Peak of the Crisis’

“We are going to see real problems in 2010 when the Fed and all the other governments which issued stimulus packages are going to try to reabsorb some of that liquidity,” Nicu Harajchi, CEO & Founder of N1 Asset Management, said Thursday. He considers whether the Fed’s latest move will work.

  • Fed’s Actions Bode Well for Asia china_worker1

The Fed’s bold moves to support the U.S. economy is good news for Asia, believes Yuwa Hedrick-Wong, economic advisor at MasterCard Worldwide.

  • Redirecting China’s Foreign Investments

China is unlikely to unload their dollar-denominated reserve as such a move will only hurt themselves at this point, says Yuwa Hedrick-Wong, economic advisor at MasterCard Worldwide. He tells CNBC how its foreign investment strategy may change.

  • China Needs Internal Demand

China needs to change its structure to an internal demand driven economy, says Stephen Roach, chairman for Asia at Morgan Stanley. He tells CNBC that China is hugely dependent on external demand as a major source of economic growth.

  • ECB in “Splendid Isolation”

The ECB should be out there pumping money into the system, says Paul Donovan, MD & head of global economics at UBS. He tells CNBC that the central bank is sitting in “splendid isolation”.

  • More Pain Ahead for Europe

There is no cause for optimism in the medium term, despite the better-than-expected data from the ZEW survey, says Par Magnusson, senior analyst at Danske Bank.

  • UK Due for Inflation Spike?

inflation1The UK economy is facing higher inflation down the road, Andy Hartwill from Quasar told CNBC, as Britain posted its highest ever budget deficit Thursday.

  • Deflation Will Hit Mid-Year

Deflation is a near-term risk that may hit global economies in the middle of the year, warns Paul Donovan, MD & head of global economics at UBS.

  • Preventing Runaway Inflation

When liquidity floodgates open, global central banks will have to sterilize very aggressively and in time to prevent runaway inflation.

Source:     http://www.cnbc.com/id/29769858


Federal Reserve Refuses to Identify Recipient(s) of $2 Tillion

November 11, 2008

Very Interesting Article from Bloomberg.

Fed Defies Transparency Aim in Refusal to Disclose (Update2)

By Mark Pittman, Bob Ivry and Alison Fitzgerald

Nov. 10 (Bloomberg) — The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

“The collateral is not being adequately disclosed, and that’s a big problem,” said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. “In a liquid market, this wouldn’t matter, but we’re not. The market is very nervous and very thin.”

Click the link below to read the entire article.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOngFPgq7r3M&refer=home