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« Elizabeth Warren On Bank Stress Tests: Deja Vu All Over Again (Clip) | Main | Fed President Hoenig Warns Against "Perpetuating The Banking Oligarchy" »
Tuesday
Jun092009

$5 Trillion Is A Lot Of Salami: Will Bond 007 Spoil The Equity Orgy?

Will The Bond Market Rout Spoil The Equity Orgy...Beware The Soylent Green.

Suffice it to say that fixed income markets were not invited to the orgy-fest seen in equities the past 3 months.  And lately, the market for Treasuries has been showing its disdain.  Yields spiking, prices falling--almost exclusively on the longer end. Yesterday there was a shift in the selling to the shorter duration paper as investors began to consider the chaos that $5 trillion in new supply will bring to the market.

The spike in mortgage rates has been substantially violent and has slowed re-financings to a trickle.  Not what the Fed-Treas cabal is looking for.  Quantitative easing has failed.  Will B-52 double-down and committ a few more trillion to a losing construct?  Let's hope he's not that stupid.  He's playing a game he can't win.  Not when the bond market knows there could be upwards of $5 trillion in expected borrowing from team Obama in the next 20 months.  That's alotta salami to be selling.

(Quick timeout: let's not forget it took us 213 years to accumulate a national debt of $1 trillion--from 1776 through 1989.  So $5 trillion really, really is alotta salami.)

The green shoots are Soylent Green. 

Don't buy the hype, lest you may later choke.  Pretty decent discussion after the jump.

Problems in the Land of Soylent Green Shoots

Will 007 Spoil The Equity Orgy...?

 

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Reader Comments (20)

There is NO amount of money that can be either MINTED or PRINTED that will alleviate the deflationary spiral we are on....PERIOD. The Fed is fighting a war it cannot win......asset prices are going to fall because citizen's wages CANNOT support them. No amount of credit or liquidity can solve the financial problems of the JOB LESS Citizens. Where is my economics professor who used to say an increase from the lowest level......is still below average?
Jun 9, 2009 at 12:46 PM | Unregistered CommenterAin't Bullshittin'
Deflation, hello, what planet are you from? The Fed wants the power to issue its own debt to "mop up liquidity" before inflation takes over. Bernanke is trying to kill at least two birds flying in two different directions with one stone and he knows he is not a baseball pitcher from Cuba. The solution to our problems start with an audit of the Fed and restoring the powers of Congress to monitor then put a stop to the Treasury, the Fed, and Obama. Yes we can! Yes we can!
Jun 9, 2009 at 4:37 PM | Unregistered Commentergobias bluth
The deflation is in the assets...what planet are you from? Have you had your home appraised lately? Do you really believe equities will NOT fall further? Do you really believe 9.4% unemployment is going to lead to inflation? Lowering our standard of living is here to stay........The only place the liquidity went that "Heli Ben" provided was to banks balance sheets and the tab was sent to the taxpayer. Joe 6 pack would have to actually spend money to participate in inflation......That ain't happening. If the bread costs 10 bucks a loaf but no one eats.....It doesn't matter WHAT it costs.
Jun 9, 2009 at 5:15 PM | Unregistered CommenterAin't Bullshittin'
@AB

Good points, but we all do have to eat. If the bread costs 10 bucks a loaf, then we will be forced to pay for it, steal it, or starve.

I do agree with you on asset deflation, but how possible input cost inflation and international demand play out for foods, I have no idea. We are in uncharted territory. Unless you run your own kibbutz/commune and have ready access to fresh water, livestock, and produce, you are largely dependent on the grocery chains, local farmers markets, and public utility/municipal water works. You will pay whatever they charge or it's the soup kitchen and bread lines for you. This could get very ugly in terms or soft/nondurable goods consumed out of necessity.

However, I think Gob has it wrong. The Fed's talk of wanting the power to issue its own debt has nothing to do with stemming inflation whatsoever. That's a smokescreen. The Fed has historically induced and actually desires inflation. As both the Fed and the US Federal Govt. are currently in deep and would very much like to reduce the burden of their debts through the magic of the printing press. I guarantee you, if the Fed had the power to issue its own debt, it would foment inflation as quickly as possible.

Technically the Fed already issues its own debt in the form of Federal Reserve Notes, IOUs backed by nothing. They only exchange them in a bit of sorcery with Treasury's own IOUs. IOUs backing IOUs. The Fed's IOUs are only valid in that Treasury's IOUs are supposed to be repaid with future tax receipts and Congress, in their great wisdom, have made them solely "legal tender for all debts public and private". You could refuse payment by Federal Reserve Notes, but a court would just nullify the debt contract. You won't exactly have recourse for payment in wheat and flour, now will you?

The Fed wants to issue their IOUs without petty constraints like backing by US public debt. INFLATION UNENCUMBERED!

I highly recommend reading "The Creature from Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin. Murray Rothbard's stuff is excellent. Avoid William Greider's keep the mystery alive propaganda BS.

"The Mystery of Banking" by Murray Rothbard is available as a free PDF here: http://mises.org/Books/mysteryofbanking.pdf

Take the red pill.
Jun 9, 2009 at 9:50 PM | Unregistered Commenterspideydouble
Hey, C-SPAN fans, fire up the popcorn and grab yo self a seat -- Thursday should be an exciting day with the House Committe on Oversight and Government Reform. A little Q and A about the BoA/Merrill acquisition. Bernanke will be there and so will Darrell Issa (said "No" to TARP). At the very least, this should stir up support for HR 1207.

http://www.businessinsider.com/house-panel-subpoenas-the-fed-over-bofa-merrill-2009-6

Also, check this out -- FireDogLake has apparently joined the black helicopter crowd and supports HR 1207. Must be the end times.

http://action.firedoglake.com/page/s/Fed1207
Jun 10, 2009 at 1:13 AM | Unregistered CommenterJames H
Spidey

I've been following that story about the Fed issuing its own debt. It's a power tht most central banks have and occasionally utilize to absorb excess liquidity when they fear inflation. It's not something I have ever studied and so I can't comment on its effectiveness when used in other countries.

Someone like Simon Johnson or James Kwak would likely know the history.
Jun 10, 2009 at 1:50 AM | Registered CommenterDailyBail
1) They can charge whatever they want for bread or groceries because "a country boy can survive". I can skin a buck and run a trout line....THIS COUNTRY BOY CAN SURVIVE. As long as I have ammo and a fishing pole, I can take out dinner from the fields, woods , or streams as needed.

2) The Fed in my estimation wanted the power to issue it's own debt because the Citizens are onto their game of deflate the cheese so everyone gets a piece is a bad idea. The folks working 9-5 see the Fed is unregulated and is starting to pay attention to the nat'l debt. The Fed decided against printing it's own because they may just be a little scared of Joe 6 Pack going Walstreetpro2 on their buttocks.
Jun 10, 2009 at 2:28 AM | Unregistered CommenterAin't Bullshittin'
AB,

I 'm pretty sure I grew up not far from walstreetpro2, but you've got to be his long-lost cousin or something. He's got some video where he talks about going out and catching a fish and fixing himself "a fish sammadge." He's got to be some kind of genius, anyway. I don't know what kind exactly, but he's got a gift.
Jun 10, 2009 at 2:59 AM | Unregistered CommenterJames H
Well put AB.

And for the record, I think we will have continuing deflation of assets and inflation of commodities. I don't really fear hyper-inflation as some do. There is just too much deflationary pressure for it to take hold. Now, ask me in 2012 and I might start to fear some inflation then after the crisis has finally waned.
Jun 10, 2009 at 3:02 AM | Registered CommenterDailyBail
All the talk of Walstreetpro2 made me sentimental for some of his homespun wisdom.

http://dailybail.com/home/there-are-no-words-to-describe-the-following.html

Hey Kevin, (Walstreetpro2's real name) if you're reading, send me another one of your recent videos from youtube. I will be happy to post it I just never find the time to search for your stuff over there.
Jun 10, 2009 at 3:06 AM | Registered CommenterDailyBail
Here are the other 2 videos from Kevin that we have posted. One is very short (about 1 minute) and the other is a bit longer, but both are hilarious.

http://dailybail.com/home/2009/1/25/bailout-comedy-by-popular-demand-more-from-the-maestro.html


http://dailybail.com/home/2009/2/18/bailout-news-video-hes-an-original-hes-back-and-hes-still-no.html

The guy is an original.
Jun 10, 2009 at 3:09 AM | Registered CommenterDailyBail
I think we need to put together a drive to raise more "Chinese Sh1t" for the man. We don't want to miss out on a good rant because WSP2 is in need of stuff to break...... Kevin...if you are out there...WE DESPERATELY WANT TO HELP YOU......Tear Sh1t Up!!!!!!!
Jun 10, 2009 at 9:25 AM | Unregistered CommenterAin't Bullshittin'
And for the record, I think we will have continuing deflation of assets and inflation of commodities (from Daily Bail). Hmmm, what are commodities if not the most basic of assets, I don't get this statement. This site may have already jumped the shark with such nonsensical points of view. Please, I need more.
Jun 12, 2009 at 3:40 PM | Unregistered Commentergobias bluth
Wow, I see that this site is already removing opinions that are not left leaning, shame shame shame.
Jun 12, 2009 at 3:42 PM | Unregistered Commentergobias bluth
Gobias.

I remove nothing from comments unless it is racist or sexist. I'm not sure what you are referring to, but what happens is if you add a link to your comment, your comment doesn't go straight in. A 2nd page with a bot test. pops up. People miss the 2nd page all the time and so their comment never gets posted.

It happens all the time. Always wait for the verification page.
Jun 12, 2009 at 3:54 PM | Registered CommenterDailyBail
Gobias said:

"And for the record, I think we will have continuing deflation of assets and inflation of commodities (from Daily Bail). Hmmm, what are commodities if not the most basic of assets, I don't get this statement. This site may have already jumped the shark with such points of view. Please, I need more."

By assets I am referring to homes, cars, land, equities, bonds, buildings, CDOs, CLOs and the rest of the securitized mess, etc. Financial assets. Commodities are of course assets, anything that one owns can be called an asset. But I was making the point of separating them from financial assets.

It's a pretty widespread belief among deflationists that while commodity prices might rise, fiancial assets because of the massive deleveraging still to come, will continue to fall in value.

Hope this helps.
Jun 12, 2009 at 4:00 PM | Registered CommenterDailyBail
Ohhhh my aching Greenback.......
Jun 12, 2009 at 4:05 PM | Unregistered CommenterAin't Bullshittin'
DailyBail…Yes, that helps and it is surely something to keep an eye on. The world economy will continue to fly in the face of the basic economic principles until the wizard of oz shenanigans of the Federal Reserve are put to an end by an audit and then the responsible decision to end the Fed is made. The other obvious problem is that basic economics fails to account for the emotional element people want to attribute to it. Many Americans have the luxury based on the prior successes of capitalism in the country combined with their poor knowledge of history to think that socialism is more successful than capitalism for the creation and distribution of wealth and fairness based on our democratic ideals. Their version of failed capitalism is born our of the Gordon Gekko Wall Street sentiment the capitalism is rooted in “greed-is-good” and fraud is the resulting nature of the beast that is shamelessly showered on them by our government and the media. If anyone is rewarding the criminal elements within the capitalist system it is the government, the Fed, and the media. Socialism works only on the back of a countries capitalist wealth relative to its small population (Denmark and Norway) and low cost immigrant labor that when asked to leave leaves. As the financial crisis takes hold in Denmark, they are battening down the hatches and taking care of their own and working to remove the failed government policy in their capitalist financial system. Obama, and yes Bush, have squandered any hope of a small recession by rewarding the wrong people and by confusing the role of government. For Obama to believe that anything the government does can be described as efficient is ludicrous.
Jun 13, 2009 at 5:37 PM | Unregistered Commentergobias bluth
"Ohhhh my aching Greenback....."

Well done, AB.

From Gobias.

I"f anyone is rewarding the criminal elements within the capitalist system it is the government, the Fed, and the media. Socialism works only on the back of a countries capitalist wealth relative to its small population (Denmark and Norway) and low cost immigrant labor that when asked to leave leaves. As the financial crisis takes hold in Denmark, they are battening down the hatches and taking care of their own and working to remove the failed government policy in their capitalist financial system. Obama, and yes Bush, have squandered any hope of a small recession by rewarding the wrong people and by confusing the role of government. For Obama to believe that anything the government does can be described as efficient is ludicrous."

Well said. Governments are the antithesis of efficiency. Thanks for the post.
Jun 14, 2009 at 4:54 PM | Registered CommenterDailyBail

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