Friday, November 12, 2010

The mold speaks

Treasury bonds fell like a rock today despite the Fed buying $7.3B in bonds and in fact investors were selling everything in all markets and prices fell as the dollar strengthened against the Euro. This is reported in scary terms like the Fed is ineffectual but its too early to tell. The whole purpose is to shake money loose that is sitting in corporate money bins but the sell off today did just the opposite as investors were selling and staying in cash.

If selling continues the risk increases that deflation will set in and panic selling would drive down prices of everything. Deflation makes repaying debt impossible and is what made the last Great Depression so difficult to overcome. Lower prices sound great but deflation drives income down even faster than prices. People with cash assume they can make a killing like the people who are buying McMansions for 30 cents on the dollar. But if prices don’t rebound your investment becomes just as worthless as it was for the guy who paid the original price and lost it when his income dried up.

The Wall Street bankers and corporate predators however will buy assets that make money in themselves. This works especially well if you can create yourself a monopoly and then you don’t have to compete on price anymore. That’s why anybody who thinks deflation is going to be a good deal is kidding themselves. You’ll find your income is down but the cost of essentials will continue to go up driving down your standard of living, assuming you still have a job.

I’m personally hoping the Fed is able to make this work but I’m not confident. Guiding an economy with monetary policy is like steering a ship by firing broadsides. It can work but it raises hell with your port city.

The corporate media is painting Obama’s trip to the G-20 as a complete failure but Obama can’t do miracles. This same corporate media spread the lies that allowed the dismantling of  Alexander Hamilton’s manufacturing and trade policies after 200 years of incredible success. Now they are cheerleading for the dismantling of the New Deal on the pretense that it is a failure after 70 years of success.

The New Deal is only in trouble because we don’t make anything anymore and they all know this. That’s why they get seven figure salaries so they won’t be tempted to start telling the truth. They can afford their gated community, private schools, gold standard health care and so on. They are living the new American dream to be the mold living on the rotting corpse of democracy.


Anonymous said...

I offer a corollary to the notion that, under deflationary conditions, nothing prevents a "bargain" McMansion investment from dropping further in value.

I can accept the prognosis that "the Wall Street bankers and corporate predators however will buy assets that make money in themselves."

However, who do the predators think will be able to afford the products of their brand new, very reasonably priced, "assets that make money in themselves," whether canned goods or credit default swaps?

And, the more efficiently these scum have constructed a "global economy," the more likely there will be no geographical healthy economic blocs to depend on. (The reverse, and perhaps karma, of there ALWAYS being a geographical labor force willing to accept lower wages than the previous hot spot.)

It truly seems to reduce to an international "Monopoly" game being played by the super rich among themselves.

John Puma

prairie2 said...

The monopoly players don't need a huge market as long as they have 100% of it. They want a Dickens style society with no significant middle class and nobody but the top few percent owning anything.

macnow said...

"Guiding an economy with monetary policy is like steering a ship by firing broadsides. It can work but it raises hell with your port city."

Man these are golden. You have really hit your stride. Reminds of BillMon (Moon over Alabama blog) in his prime.

Except you are so more subtle, witty and damningly precise in your analysis.

Wish I wasn't one of the huddled masses, broke, unemployed and maybe a couple of weeks from living in my parents basement...

...cause I would definitely hit your tip jar.

So... unfortunately humble praise from the libraries computer is all I usually can supply at times like this.

Please keep what your doing up as long as possible... it really does help, a lot.


Anonymous said...

So the motto of our real life Monopoly players must be:
"There's a lot of money in poverty!"

John Puma

prairie2 said...

Conservatives have never seen a problem they couldn't fix by creating more poor people.

Anonymous said...

The wheels are coming off the lefty bankrupt British welfare state.

prairie2 said...

The "lefty" Brits? They've been living under Thatcherism (Reagan stole all her ideas) Welfare is what you provide to keep the middle class from catching on. They are transferring the wealth to the top just as the Republicans are here. The "socialist" countries in northern Europe are doing just fine despite the US trying to drag them under but the US (Republicans) may succeed in the end. Societies like the Libertarian paradises of Mexico, Somalia and Haiti are where we are heading.

Anonymous said...

I really don’t believe that Bernanke wants the corporations and banks to give up the money they’re hoarding, like he says. After all, if he really wanted that money to “shake loose” why wouldn’t he just tack on an interest rate that would encourage them to do so? Instead these people are getting this money at less than 1% interest. I think Bernanake’s plan is to print this economy right into the dirt and watch all the dominoes of other reserve currencies tumble with them, thereby burying the global economy. After all, since America’s GDP and manufacturing is utterly piss poor, when our spending power is finally eliminated, who are China and the other big exporters going to sell too? I think a nice little global currency collapse is what the World Bank needs to set the precedence to take over and implement a one world currency, thereby allowing them to take control of all the world’s wealth. Considering the the IMF and World Bank’s affiliation with one another, Bernanke and Geithner representing the highest percentage quota of the IMF and therefore having the most voting power, it makes me a bit nervous. And if I’m wrong, then thank God.