Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

[porter]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

EJ writes in:

QE Lite was aimed at the housing market and at currency depreciation.

How do they expect this will this help the housing market? Or even unemployment?

[jiimbergin]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Hi, jtabeb!! Long time no see.

+1

[Chris Coles]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Welcome back, jtabeb. And thanks for chiming in with such a great summary!

+1. Very well put and much appreciated.

[astonas]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Welcome back, jtabeb. And thanks for chiming in with such a great summary!

[jtabeb]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Thanks all, appreciate the warm comments back. Took EJ's advice and tried to take the whole summer off from everything except for family, friends, and of course work.

Have to say it was great advice. Life's great when you put your head in the sand for a while (esp on a nice long vacation with the fam.). Unfortunately, reality seems to be the ever successful intruder on ignorant bliss. ;)

Well, it was fun while it lasted. But Big Ben seems to have brought reality crashing back down onto our collective heads.

Heads, Bernanke is successful in producing and inflation spike recession driven by commodity, food and energy prices.
Tails, We get a much sharper recession (aka Greece) via retrenchment driven by A new president's policy of Austerity for the Masses.

Pick your poison, but don't worry about which choice you make. Both are equally fatal even thought they accomplish their task via completely different pathways.

The really sad part is, that a biological organism is constrained by metabolic processes. Our Economy is not. BUT policy makers seem to to act as though it were (due to corruption, willful or genuine ignorance, incompetence, or some combination thereof). I fear that the forcing function necessary to propel the political will to action necessary to fix our problems will not develop enough potency to allow us to act in time before market driven forces impose change upon us.

I liked the republican health care reforms offered in place of obama care (common sense, trusted business principles), and find myself among the neoconservative hawks when it comes to active involvement (when possible) in efforts to oust Mid-East Dictators. But I find the platform lacking entirely on social issues of personal freedom (but you expected that from a little "l" libertarian leaning individual). I find the policy of privatized gains and socialized losses (Fed largess for the oligarchic financial sector, austerity for everyone else) with the attendant corruption of the political process antithetical to the principles of a free republic. (It must be nice to have the ability to use taxpayer derived bailout funds to lobby politicians to enact policies in YOUR own best interest which are in direct conflict with general welfare of 99% of society.)

I find the entire disgusting mess abhorrent.

In my admittedly simpleton view, capitalism should reward success and punish failure. But in our present crony-capitalist system, that existential pillar of capitalism is essentially removed and replaced instead by perverse inversion of that esteemed pillar.

(Of course, I also think that citizenship [and the vote] should be tied to service not birth right. Which is why I tell all my kids to "do what dad did" and fund their education through service to this still great nation. To me it is simply the difference between unearned entitlement vs. reward for personal sacrifice benefiting the entire social welfare of the nation. I believe that the former destroys the fabric of society, while the latter renews and strengthens the whole.) And, yes I am a fan of the book starship troopers, sue me.

Our society should be organized to maximize the productive talents of each member of society, and every individual is responsible in turn, for the contributing to the success of society. That should be the social contract. ( I really love the facebook founder that renounced his citizenship to avoid tax liability on his capital gains even though it was THIS society that enabled him to reach such levels of success in the first place.

We all play (weather we like it or not) in the same football stadium. Now ideally, government should build the stadium, maintain the stadium, ensure the up-keep of the stadium, be responsible for the just enforcement the rules of the game governing the players on the field, and ensure that the stadium is kept safe (and provide for all the necessary support structures to accomplish these tasks). I also have to agree with Dr. Hudson that the government CAN set the objective of the game, and also the rules. The desirability and necessity of that last characteristic of government FADES, as the preceding objectives are achieved. But It MUST necessarily increase when we are diverging rather than converging on these common objectives. Neither party seems to be willing to put the politics of ideology aside for the sake of persuing the greater societal good. (With good reason, of course. They would loose). It is truly terrible to realize that we are in a negative feedback loop, that will run to it's disasterous logical conclusion if nothing is done to break the causal chain AND THAT SIMULTANEOUSLY, the present structure of the societal reality that we find ourselves in, is behaving as the forcing function to impede this essential change.

(And yeah, I'm talking about all of it -resource constraints, crony capitalist wealth polarization with attendant capture of the political and media process, etc. You know the descent from first world to third world society... all that stuff we know and talk about here).

Hmmm. After a rant like that I think it's time for me to take another break. See you all in another 3 months this xmas after the election. Talk to you then.

V/R

JT

[astonas]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

If goldman (goldman) makes campaign contributions to president Obama & he make Hank Paulson (goldman) treasury secretary, then the treasury secretary (goldman) decides to bail out goldman (goldman) and those who wrote insurance products on fraudulent goldman contracts like AIG (flowing again to goldman) and give advanced insider info to hedge funds to trade on (goldman), one can hardly find fault with goldman (goldman).

Then again, maybe not.

Or, put another way, ...



It is intellectually dishonest to try to separate blame between government and the companies that leverage government to scam society when they are so intertwined that they function as a single entity.

The person who says "blame government & ignore the private parties" miss how the money from those private parties (and individuals from those private parties) undermine any semblance of democracy or rule of law when they create a system of justice that is "just us."

Why does the public want the government to fix everything? In part because the government has raped many of them & made them dependent on government. It is easy to hold oneself to high ideals when one is doing well, but most people who need to steal a loaf of bread to feed their children probably will. Individually most everyone on here is resilient enough to do well short of a whole collapse of society. But some people have pre-existing health issues, some married people who came with baggage, some are trying to help a lot of extended family, some are not as smart, and people are constantly fed propaganda that is aligned with the interest of grifters undermining society for self-gain.

The blame is mutual. It isn't one or the other.

+1. And very well put, I should add.

[thriftyandboringinohio]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Great to see you around again, jtabeb.
Over on another thread we're talking about buying and selling physical gold, you should give your take on that!

[shiny!]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Yeah, HI, jtabeb! Long time no hear. Glad you're back.

[BadJuju]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Hi, jtabeb!! Long time no see.

[jtabeb]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Inflation expectations suggest 5% inflation is in the cards.....

http://www.zerohedge.com/news/inflat...nflation-cards

How are they going to raise rates if inflation rises to 5% within the next 3 to 6 months?

Very Simple Grasshopper, THEY WON'T. They want a positive inflation rate (sorry should say a very negative real rate) and they want everyone to know about it. This is the mother of all asset price pumps (till we hit the wall again when gas hits$5-6 per gallon), then we get another ka. But, I think that after Obama gets re-elected, the bond market will not flinch. Over $1 T in defense cuts next year. The biggest Austerity in the US will be in the defense industry. Luckily, I think I'm in the only growth Industry in DOD right now. Just enough salve to goose the election, and then REAL pain next year as QE3 will not offset defense cuts. But till those cuts are announced IN DETAIL, yeah we got a rally in all risk assets, till may next year.

If I'm wrong and Romney wins, I think you are going to see a sell off on the risk side after the honeymoon rally, he's actively targeting Bernanke and pushing really hard for domestic austerity, (in all things OTHER than defense). Bond market will like that but risk assets won't. If Romeny succeeds in pushing through his domestic austerity agenda sans defense, dollar rallies strong, strong deflationary trend, dollar gets way overvalued and real economy grinds to a halt. And then we get a real no kidding big ka followed by big almost immediate poom. (Aka Argentina)


Assuming, of course, no IRAN strike, no unexpected crisis, and Draghi stays on the path of QE European style. As long as europe QEs at a slower rate than the fed, then we hit the wall first. Otherwise they do. But bottom line there is a recession coming hard core when gas breaks the $5 gallon thershold.

Lots of variables and ways for this to play out, my guess is May June next year if obama is re-elected, or if Romney wins (based on the end of the rally and gas crossing a threshold price)
Outcome seems the same, the only diff seems to be who will be left holding the bag in the White house when bad things happen.

Maybe I'm wrong and Romney is pandering to fiscal conservatives, but if he practices what he preaches, we are likely to hit the Big One (the one the bond market takes notice of) sooner than the Obama Scenario.

Obama = Gas Price driven demand destruction recession (inflationary)
Romney = Austerity led Super KA (followed immediately by Market driven POOM)

I actually think that the Romney path gets us on the Argentina Trajectory Faster than the Obama path.



Should have some clarity come November.

[seobook]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

The problem is not businessmen and speculators and investors taking advantage of stupid goverment/Fed policies that make vast amounts of money available at below-market rates. The problem is that the public wants a government that promises it will fix everything, that will smooth the business cycle, eliminate unemployment, and guarantee never-ending prosperity. And the poor understanding of economics (and human nature) that is taught to the people who grow up to be Fed chairmen and Senate banking committee chairs, etc, etc. It is ridiculous to expect investors not to act in their own self-interest and take the free money that the government is handing out to them. The problem is not the takers. It's the handers-out and the ignorance of the population that put the handers-out in power. Blaming the businessment and grumbling about "how do they sleep at night" completely misses the point.

If goldman (goldman) makes campaign contributions to president Obama & he make Hank Paulson (goldman) treasury secretary, then the treasury secretary (goldman) decides to bail out goldman (goldman) and those who wrote insurance products on fraudulent goldman contracts like AIG (flowing again to goldman) and give advanced insider info to hedge funds to trade on (goldman), one can hardly find fault with goldman (goldman).

Then again, maybe not.

Or, put another way, ...



It is intellectually dishonest to try to separate blame between government and the companies that leverage government to scam society when they are so intertwined that they function as a single entity.

The person who says "blame government & ignore the private parties" miss how the money from those private parties (and individuals from those private parties) undermine any semblance of democracy or rule of law when they create a system of justice that is "just us."

Why does the public want the government to fix everything? In part because the government has raped many of them & made them dependent on government. It is easy to hold oneself to high ideals when one is doing well, but most people who need to steal a loaf of bread to feed their children probably will. Individually most everyone on here is resilient enough to do well short of a whole collapse of society. But people here are on average gifted in numerous ways. Broader society is less well off: some people have pre-existing health issues, some married people who came with baggage (student loans or other such issues), some are trying to help a lot of extended family (an internal moral obligation to them ... when I was on a submarine one of my roommates would send money home to his parents than he kept to live on), some are not as smart (half of people have IQs that are below the median), and people are constantly fed propaganda that is aligned with the interest of grifters undermining society for self-gain.

The blame is mutual between government and FIRE. It isn't one or the other.

[jiimbergin]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Did I miss Part 2, or has it not been published yet? Maybe EJ is updating it based on Bernanke's comments yesterday?

read the end of part 1 and you will see that Part 2 will be delayed.

[switters]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

Did I miss Part 2, or has it not been published yet? Maybe EJ is updating it based on Bernanke's comments yesterday?

[FRED]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

How strange: QE on course but interest on 10 year Tīs up a lot. I donīt understand.

EJ writes in:

It was QE technically but not the QE the markets were expecting.

This QE3 forecast was typical: "RBS looks for the Fed to announce open-ended asset buys, but to commit to buying at least $600 billion in Treasurys and MBS between October and March, and to announce it will keep buying both beyond March."

Instead it was limited to MBS only and was only $230 billion over six months rather than $600 billion with no additional Treasury bond purchases.

I'm calling it QE Lite.

By failing to commit to the full QE3 that markets expected, bonds sold off.

That did not happen after QE1 and QE2.

QE Lite was aimed at the housing market and at currency depreciation.

QE Lite succeeded in weakening the USD. That's why gold popped.

A bigger bone for Bill Gross than I expected, but not full-on QE, either.

[Chris Coles]

Re: Election as Forcing Function - Part I: On Track for a Bond Market Panic - Eric Janszen

A simple question from someone who can't do math:

If the Fed is determined to print, why doesn't it simply give the money directly to The People? Or to small businesses? That would directly stimulate spending and employment, I would think. Not that I advocate this, but at least we'd get some use out of the money we'll all be on the hook for.

There is always the proposal I keep on plugging; to take $2.2 Trillion of dodgy paper, (originally proposed as Ģ450 billion to create 6 million new jobs here in the UK), convert the dodgy paper into vanishing bonds and then use them as free enterprise equity capital to directly create 30 million new jobs right down at the grass roots. The money thus gets removed from the wrong end of the FIRE systems bank balances and is re-deposited back into the Main Street banks as new business banking deposits. http://www.chriscoles.com/page4a.html