Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

[BadJuju]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

win, win, win

Yup!

[metalman]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Although the implications of the chart suck, it is also a good thing in light of peak cheap oil. People need to move away from fossil fuel intensive transportation. If people just tried to be more energy efficient and conserve, it would produce a major economic boost.

peak cheap oil = rising prices

when gas prices go up folks ride trains/busses more... if they have the option.

http://usnews.msnbc.msn.com/_news/20...p-reports?lite

fast price rise = economic shock...



solution...

raise gas taxes 50 cents/year & diesel 25 cents.

use the tax $$$ to build public transport.

in 4 yrs gas = $6 & diesel = $5... cars fleet smaller... more efficient diesel cars on the road... folks drive fewer miles... usa energy efficiency shoots up.

prep the usa auto industry on the plan... gm & ford kick ass

win, win, win

[BadJuju]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Perhaps collapse isn't the correct term. More like decay (rusty metal or termite infested wood).

Although the implications of the chart suck, it is also a good thing in light of peak cheap oil. People need to move away from fossil fuel intensive transportation. If people just tried to be more energy efficient and conserve, it would produce a major economic boost.

[dummass]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Perhaps collapse isn't the correct term. More like decay (rusty metal or termite infested wood).

[thriftyandboringinohio]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

When "the international monetary system finishes its slow motion collapse", how would one get rid of the gold? Sell it for fiat? After a monetary collapse, fiat won't be worth anything.

I see three possible strategies:

1) Sell gold right before the collapse, and immediately buy things of value -- houses, tractors, land, anything "real" that won't lose value during the crash. This would be hard to time, but after the crash the government might pass nasty laws dealing with gold ownership, so this could be the safest move.

2) Hold the gold until after the monetary system crashes, then trade it for "real" stuff.

3) When the world economy recovers, sell the gold for the new fiat, which will hopefully be stabilized and worth something, then invest the fiat.

Gold will being accorded a lot more respect after the fall of fiat, so it should be easy to sell or trade.
But government interference could be a problem. Gold owners are in the minority, so lack the political ability to protect themselves.

All 3 options would work for me.
My initial plan was centered on option one, to try to capture the overshoot in gold during the panic.

[raja]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

We’ll hold gold until the international monetary system finishes its slow motion collapse, unless war breaks out and it collapses in a hurry.

When "the international monetary system finishes its slow motion collapse", how would one get rid of the gold? Sell it for fiat? After a monetary collapse, fiat won't be worth anything.

I see three possible strategies:

1) Sell gold right before the collapse, and immediately buy things of value -- houses, tractors, land, anything "real" that won't lose value during the crash. This would be hard to time, but after the crash the government might pass nasty laws dealing with gold ownership, so this could be the safest move.

2) Hold the gold until after the monetary system crashes, then trade it for "real" stuff.

3) When the world economy recovers, sell the gold for the new fiat, which will hopefully be stabilized and worth something, then invest the fiat.

Gold will being accorded a lot more respect after the fall of fiat, so it should be easy to sell or trade.
But government interference could be a problem. Gold owners are in the minority, so lack the political ability to protect themselves.

[think365]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Bernanke's comments and the Q&A afterwords added little or nothing to the FED's written announcement, except for the regular caveat that they may need take more action in the future (but obviously, not now). The overall market reaction, so far, is moderately negative.

Also, of note, Bernanke did not come on strong on the "fiscal cliff" issue (like saying it could result in a 4% negative hit to GDP, etc). While he mentioned that it would be nice if Congress would "help" out through responsible fiscal policy (eg., extend tax credits, streamline and economize government programs, etc), he mitigated the pressure on them by stating that there were still things the Fed could do to help the economy with "unconventional" monetary policy. However, he did state that such "unconventional" policies are untested and could carry with them some "risks".

Overall: status quo for now.

[gwynedd1]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

I am partial to this comment.


"It’s a dickish comment. Of course we’d all like to invest in productive businesses. I’ve been waiting for 12 years to invest in the stock market. If Munger’s and Buffett’s best friend, the government, would stop doling out freebees to our financial oligarchy, price fixing the bond market and fueling asset bubbles, I’d be all over it."



Speaking of oligarchy...

"I say, on the contrary, first, that the word demos, or people, includes the whole state, oligarchy only a part; next, that if the best guardians of property are the rich, and the best counsellors the wise, none can hear and decide so well as the many; and that all these talents, severally and collectively, have their just place in a democracy. But an oligarchy gives the many their share of the danger, and not content with the largest part takes and keeps the whole of the profit; and this is what the powerful and young among you aspire to, but in a great city cannot possibly obtain. "

Athenagoras of Syracuse

[think365]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

At 2:00 p.m. ET (in about 5 minutes) the Fed will update its economic forecast and Bernanke will be speaking around 2:15 ET. Stay tuned for more ripples in the pond...

Stocks fell sharply amid disappointment that the Fed offered no additional easing programs.

In a change in its statement, however, the Fed said it is "prepared to take further action," a stronger sign that the central bank may initiate a third round of quantitative easing, or QE3.

[think365]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Here is the first ripple in the pond...

Fed Extends 'Operation Twist,' Citing Concerns on Economy

Published: Wednesday, 20 Jun 2012 | 12:52 PM
By: CNBC.com with Reuters


The Federal Reserve, worried about the US economic recovery and Europe's continued debt crisis, decided Wednesday to extend the stimulus program known as "Operation Twist" through the end of this year.

Stocks fell sharply amid disappointment that the Fed offered no additional easing programs.

In a change in its statement, however, the Fed said it is "prepared to take further action," a stronger sign that the central bank may initiate a third round of quantitative easing, or QE3.

Many economists had expected the Fed to extend "Operation Twist," the program aimed at pushing down longer-term interest rates to shield the still fragile economy, which faces rising financial strains in Europe, a year-end fiscal showdown in Washington and a sharp slowdown in hiring by U.S. employers.

"The prevailing bias at the Fed is very much tilted toward providing more accommodation,'' said Eric Green, global head of rates research and strategy at TD Securities in New York.

An extension of "Operation Twist,'' in which the central bank sells bonds with maturities of three years or less and buys securities with maturities of six years and longer, is seen as a less extreme step than outright purchases of new securities.

Another option for the U.S. central bank would have been to push back its estimate for when it will finally raise overnight interest rates, which have been held near zero since December 2008.

After its meeting in April, it said it expected to keep them "exceptionally low'' through at least late 2014.

Many economists argue that a move to provide more monetary accommodation is a necessary adjustment to disappointing economic developments, and Fed Vice Chairwoman Janet Yellen has said it might make sense to "insure'' against downside risks.

Fed Chairman Ben Bernanke, however, declined to tip his hand in testimony to Congress earlier this month. A Reuters poll on June 8 put the chances of an extension of Operation Twist at 42.5 percent.

Even though Greek voters over the weekend supported candidates who back taking painful steps to stay in the euro currency union, Europe's debt crisis remains a threat to the global economy.

Spain on Tuesday paid a euro-era record price to sell short-term debt.

"I don't think this provides (Fed officials) with much relief,'' former Fed Vice Chairman Donald Kohn said of the vote in Greece. "As we're seeing...tensions in the euro area remain pretty intense.

Expressing concern about strains in global financial markets emanating from Europe, the Fed said it was extending its Operation Twist program by buying $267 billion in longer-dated securities by the end of 2012.

The Fed's first Twist program was set to end this month.

"This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,'' the Fed said in its post-meeting statement.

The Fed added that for the duration of the new program, it would stop reinvesting the proceeds from maturing Treasuries in its portfolio.

Richmond Fed President Jeffrey Lacker, who has dissented at every meeting this year, voted against the action, saying he opposed the extension of Twist.

The central bank retained its guidance that rates were likely to stay near zero until at least late 2014.

The Fed stuck to its characterization of the economy as "expanding moderately,'' but said growth in employment had slowed in recent months. It also expressed worries about weaker consumer spending.

The U.S. economy appears to be faltering as growth in the emerging world slows and Europe sinks deeper into its political wrangling over sovereign debt. First-quarter U.S. gross domestic product was recently revised down to a 1.9 percent annual rate from 2.2 percent.

At the same time, May jobs data confirmed that a weak labor market is faltering again, with only 69,000 new jobs created and the unemployment rate rising to 8.2 percent.

Heading into the Fed's meeting this week, economists were closely divided on whether the central bank would decided more monetary stimulus was needed now.
The Fed has held overnight interest rates near zero since December 2008 and has bought $2.3 trillion in mortgage and government bonds in a further effort to help the economy.

Last year, it launched "Operation Twist,'' in which the central bank sold bonds with maturities of three years or less and bought $400 billion of securities with maturities of six years and longer to push longer-term interest rates lower.

[think365]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

UBS floor guy Art Cashin has provided a preview of today's Fed announcement.

Here are the key points:

• The conventional wisdom is that the Fed will only extend Operation Twist (selling short end bonds, buying more long end, and keeping the balance sheet the same size.
  
• The market will sell off on the news.
• At 2:00 PM, the Fed will significantly lower its economic outlook.
• At his 2:30 press conference, Bernanke will be very explicit about his willingness to do more in the imminent future.

Below is Cashin's full comment:

This afternoon the FOMC will announce its decision on policy. At 2:30, Chairman Bernanke will hold a press conference to expand on that and take questions from reporters. The conventional wisdom is that the Fed will extend Operation Twist.

If that were so, we think the market would be disappointed. We also think that Mr. Bernanke knows that. Mr. Bernanke, throughout his tenure has scrupulously tried not to surprise the market. He has tried to make the Fed more transparent in order to avoid the risk of surprise.

Yet, Mr. Bernanke also knows that every Fed initiative is not greeted universally with open arms. The QE initiatives and even Twist have been criticized by some for producing spikes in commodities and even food prices. Within the FOMC itself, there are said to be critics who feel the recent efforts have run into the law of diminishing returns.

So, Mr. Bernanke is in a bit of a quandary. The economy may need some easing. The markets want more easing. Prior efforts, however, have not achieved the desired effect and may even have produced some unintended negative consequences.

That quandary was very much like the one that Bernanke was addressing in that speech back in 2002. So, once again we went to the file to go over the checklist. On page 5 of the speech, after introducing the concept of ultimately addressing deflation by the process of printing more dollars, Mr. B went back to monetary policy:

"Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).8 Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."

Mr. Bernanke then details other means to lower rates further out in the yield curve (Operation Twist) and suggests buying mortgage paper along the curve.

If those measures fail, the bank could circuitously get money to private companies. The means would be to lend money to banks, interest free for 90 days or 180 days, taking as collateral private paper of the same duration. He then returns to the concept of devaluing the dollar and cites success of that effort in the early 1930’s.

And, finally, in a separate speech back then, Mr. Bernanke suggested that the Fed might announce a wider tolerance for inflation. That might spur some of the money to mobilize as folks bought “stuff” fearing the price might rise.

So where will we go today?

Look for the Fed to lower its forecasts, perhaps significantly, at 2:00. Then at the 2:30 press conference (or maybe even in the statement) look for the Fed to dangle a big carrot - some semi-specific course of action that would be put in place if the labor markets continue to worsen.

Net/net, he needs to keep the door wide open and maybe outline certain milestone “triggers” that will allow the Fed to act later in an election year without being accused of being overtly political.


June 20, 2012 - Business Insider

[Chris Coles]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

CI: Keynes isn't Mises is he?
EJ: Wrong construct. Keynes argued that the government's balance sheet can be used for a short period to buffer the macro-economic volatility of the business cycle. Show me where Keynes recommends using fiscal policy for decades on end until a country is broke.
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Stocks are motherhood and apple pie, an investment in “productive businesses.” Not owning stocks is as un-American as not owning a home. Name another product with that kind of branding. Maybe deodorant. Everyone is now convinced that they stink without it. A hundred years ago smell was how you knew who was in the room before you saw them.

There are days when EJ is on a roll and this is certainly one of them. Gems! Pure and simple, absolute gems.

[jpatter666]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

There is a link at the top of the second part that reads: Continued from Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Is that what you're looking for?

Yes, perfect, thanks!

[FRED]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

I've found myself wishing for that as well -- thought it was just me!

There is a link at the top of the second part that reads: Continued from Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

Is that what you're looking for?

[jpatter666]

Re: Janszen Scenario Update Two – Part III: Practice Run - Eric Janszen

FRED, one small simple request for these multi-part Itulip articles. In the same way you provide a link at the bottom of the first article to part 2, Could you guys at the begining of part 2 provide a link to part 1? I know you can re-type the title in the search bar and look for part 1, but some times when reading this site on tablets this isn't so easy. What tends to happen is that most of the comments are in part2, and after a while, finding part 1 is not so easy. This also applies to this multi-part document. Part 4 was easily found, but I had to search for part 3.

So in summary, link to the previous article part at the top, and a link to the next article part at the bottom.
Thanks!
Adeptus

I've found myself wishing for that as well -- thought it was just me!