Credit Writedowns - Latest Comments

Re: Bill Gross Channels Edward Hugh on Demographics and Austrians on Malinvestment

Murray — Thu, 29 Jul 2010 12:49:53 -0000

Terrific article and analysis. Thank you Ed

Re: Household Net Worth – Back to the Old Normal

attitude_check — Thu, 29 Jul 2010 12:17:21 -0000

Of course most dynamic system's tend to overshoot equilibrium. It wouldn't surprise me to see net worth go south of the numbers seen in the 70's before returning o the normal range. The present bounce is most likely due to the very rapid initial descent, and intentional asset value "propping" by the Fed, particularly in housing. I don't think they will be able to hold-off the required house value reset without stoking huge inflation, which will spike the income denominator.

Re: On xenophobia and other links

tjfxh — Wed, 28 Jul 2010 21:30:02 -0000

But look at if from the other side. A lot of the problems today are the result of a traditional discrimination. Women have not completely caught up yet. Thank heaven we are finally beginning to address these issues after the Civil War, women's suffrage movement, Brown v. Board of Education, the Civil Rights Act, the feminist movement, etc. It's been a long, slow slog for women and minorities. And yet, we still have festering problems. Hopefully, this will be past us before long, and people of the future will look back and wonder what it was all about.

Re: On xenophobia and other links

Namazu — Wed, 28 Jul 2010 19:42:10 -0000

The younger generations may be less conscious of race, but they'll be confronting institutions created under a different mind set. Race-based affirmative action in college admissions is highly problematic and highly entrenched. Imagine trying to "fix" it in good times, let alone against a backdrop of negative social mood. I share your optimism, but in the long run.

Re: On xenophobia and other links

Daniel — Wed, 28 Jul 2010 15:19:12 -0000

Demand for labour continues to improve

Die Arbeitskräftenachfrage hat sich vom krisenbedingten Einbruch erholt.
Gegenüber Oktober 2008 - der Monat bevor die Auswirkungen der Wirtschaftskrise am Arbeitsmarkt
sichtbar wurden - liegt der BA-X erstmals einen Punkt im Plus.

http://www.pub.arbeitsagentur.de/hst/services/s...

interesting fact of the day

Das Erfolgsprinzip ließ die Aldi-Brüder zu den reichsten Männern Deutschlands aufsteigen. Trotz Wirtschaftskrise behaupteten sich Karl und Theo Albrecht nach Schätzungen des "Manager Magazins" auch 2009 auf Platz eins und zwei der reichsten Deutschen. Sie verfügten über ein geschätztes Vermögen von 17,35 beziehungsweise 16,75 Mrd. Euro. Während die beiden reichsten Deutschen ihr Vermögen durch den Verkauf von Discountware schufen, ist der Blick nach Frankreich interessant. Der reichste Franzose, Bernard Arnault, machte sein Vermögen mit Luxusgütern - und ist heute Inhaber des Luxusgüterkonglomerats LVMH.

http://www.ftd.de/unternehmen/industrie/:die-al...

Re: On xenophobia and other links

tjfxh — Wed, 28 Jul 2010 12:46:45 -0000

The future demographics are clear. White America is soon to be a phenomenon of the past. Good riddance.

There will be piles of ink wasted on discussing this "momentous" non-issue. It is largely a non-issue because the generations coming along don't even notice it, for the most part anyway, rural communities notwithstanding perhaps.

It's chiefly a geezer pseudo-problem, and we will be gone soon enough. (Pat Buchanan was a classmate of mine.) Thank heaven our children and grandchildren have more sense around this than we do.

Re: James Montier does MMT

steve_from_virginia — Wed, 28 Jul 2010 00:28:29 -0000

Check out Steve Keen's deflation paper here:

http://www.debtdeflation.com/blogs/wp-content/u...

MMT combined with Minsky. It's a good model. There is another take on Parenteau/MMT @ Steve Waldman's Interfluidity if anyone is interested ...

http://www.interfluidity.com/v2/871.html

I think exploring the accounting entity idea is at its infancy. More lateru ...

...

Re: Subversive Economists

facebook-517810703 — Tue, 27 Jul 2010 23:09:14 -0000

If they are going to buy assets what assets should they buy? Hopeful they won't buy the assets that drove up the cost of housing beyond what American's can pay. Additionally if they are going to buy these assets hopefully they will pay what they are actually worth rather then overpaying as was alleged of the US government:

"Five months later, the administration disclosed under intense congressional pressure that $13 billion had gone to pay 100 cents on the dollar on some of Goldman Sachs’s derivative bets, a payout that Neil M. Barofsky, the Special Inspector General for the Troubled Asset Relief Program (TARP) called a “back door bailout” for Goldman."
http://www.theamericanscholar.org/too-bad-not-t...

Perhaps buying an index fund would be more balanced but if they did this they would be accused of market manipulation but then again isn't mucking with the interest rate market manipulation anyway?

Here's a radical idea. They could invest in a company which buys up houses sold at bankruptcy auctions and rents them out. This way their would be a supply of cheap affordable rental accommodations for people that lost there home.

Re: James Montier does MMT

Scott Fullwiler — Tue, 27 Jul 2010 17:03:05 -0000

John,

It's an identity, so it has nothing to do with the money supply. But, yes, to USE the identity to discuss inflation, you have to bring other things in.

Re: James Montier does MMT

facebook-517810703 — Tue, 27 Jul 2010 14:57:47 -0000

How can we use the identity to discuss inflation without discussing the supply of money. I Define the money supply as money spent per time because this will be equal to the aggregate demand and hence effect inflation. Inflation is dependent on the amount of money chasing goods. The money consumers will have to spend on goods will depend both on their income and their change in net savings. The change in net savings of one consumer does not need to be balanced with a change in net savings with the rest of the economy because bank lending can increase the money supply (see fractional reserve banking). Well, the proponents of MMT argue that government spending must make up for lower private sector spending if the identity is relay strict then couldn't governments simply spend less so people in the private sector would spend more? Clearly their is something missing in the identity.

Re: James Montier does MMT

enh124 — Tue, 27 Jul 2010 04:55:13 -0000

The identity has nothing up do with money supply.

Sent from my mobile phone
twitter.com/edwardnh

Re: James Montier does MMT

facebook-517810703 — Tue, 27 Jul 2010 02:43:48 -0000

The identity assumes constant money supply. The money supply won't stay constant if either the leverage ratio changes, the velocity of transactions changes or the government increases the base money supply. Additionally, if the government sector is smaller their will be more room in the private sector to make up the extra demand.

Re: Chart of the Day: Home Builder Stocks and New Home Sales

yahoo-35PNKWRVMTAVHTFDZCL6BLCHWE — Mon, 26 Jul 2010 20:36:08 -0000

Consumer Metrics has some really amazing commentary today. Check it out.

Re: Is Brazil Overheating?

enh124 — Mon, 26 Jul 2010 16:43:05 -0000

If Brazil has a current account deficit, it will definitely help to sustain the global recovery. The US also is a large exporter to Brazil along with Argentina and Germany (and increasingly China).

Re: Is Brazil Overheating?

facebook-517810703 — Mon, 26 Jul 2010 16:22:11 -0000

If the the emerging markets are going into trade deficit territory shouldn't this be good for north american corporations?

Re: Links 7/25/10

enh124 — Mon, 26 Jul 2010 03:41:44 -0000

For the record, I wouldn’t have linked to Jim Webb’s piece if I didn’t think it worthy of reading. I agree with the thrust of much of his comments but of course I think the piece is politically motivated given how Virginia was put in play for the Democrats in 2008.

The real point, of course, has to do with the psychology of depression. When the chips are down, people take a greater interest in blaming others for problems. From a European context, this is also true. Originally, I had put in a part about the same going on in Europe regarding the Spanish, Greeks, and Germans (with some blaming the Anglo-Saxons and their financiers) but I couldn’t find a link to a previous post I was looking for.

As for affirmative action, I believe there does need to be an adjustment. What exactly should that adjustment be? In education, for example, I would advocate changing affirmative action to reflect the economic status of the applicant (regardless of race). I ran a piece recently which demonstrated that poor whites are underrepresented at Ivy League colleges. This is part of the issue that Jim Webb speaks to.

'Outsiders' like ethnic and religious minorities also become xenophobic and close ranks during a poor economic climate. But I do believe what we are going to see is more anti-outsider legislation and I certainly believe the law in Arizona is in part an outgrowth of xenophobia.

Whether this particular law is justified is another question. I don't think it is. In Germany people must have an identification card at all times so there are other advanced societies where this is accepted. I oppose that law on civil libertarian grounds.

Historically, it is outsiders against whom legislated xenophobia turns in economic downturns. And, if this economic downturn continues, expect to see more anti-immigrant (and anti-affirmative action) laws. Eventually, these laws will move from the justifiable to more extreme measures. Historically, that is how it has played out.

Re: Stock Market Capitalization Exceeds GDP

facebook-662417522 — Mon, 26 Jul 2010 03:33:49 -0000

It could be that the US market cap/ GDP could be supported at a higher level because of internationalization of US companies' operations. It could also be (and there is ample evidence to support this) that US companies are more profitable in their home market when they face weak competition at home from their international peers.

If you offered e.g. IBM the choice of having the US market to themselves, or competing with SAP in both the US and Germany, I'm pretty sure that IBM would go for "protected home market" and happily live wthout profits from their German subsidiary.

Yet in the 1950's, a period which probably fits this description pretty well (Volkswagen and Siemens building up from the ashes, IBM with virtually no international competition) we see Mcap/GDP quite low.

Globalization is not a free lunch. US companies cannot open Asian and European branches/ subsidiaries and just rake in money, any more than Asian and European companies can do so in the US.

I would argue that "the globalization era," which you hilariously guesstimate started in 1992, should bring lower, not higher margins on each dollar of sales and in turn lower returns on each dollar of shareholder equity.

Re: Stock Market Capitalization Exceeds GDP

facebook-662417522 — Mon, 26 Jul 2010 03:32:56 -0000

It could be that the US market cap/ GDP could be supported at a higher level because of internationalization of US companies' operations. It could also be (and there is ample evidence to support this) that US companies are more profitable in their home market when they face weak competition at home from their international peers.

If you offered e.g. IBM the choice of having the US market to themselves, or competing with SAP in both the US and Germany, I'm pretty sure that IBM would go for "protected home market" and pass on their profits from their German subsidiary.

Yet in the 1950's, a period which probably fits this description pretty well (Volkswagen and Siemens building up from the ashes, IBM with virtually no international competition) we see Mcap/GDP quite low.

Globalization is not a free lunch. US companies cannot open Asian and European branches/ subsidiaries and just rake in money, any more than Asian and European companies can do so in the US.

I would argue that "the globalization era," which you hilariously guesstimate started in 1992, should bring lower, not higher margins on each dollar of sales and in turn lower returns on each dollar of shareholder equity.

Re: Looting by public officials in Bell California

Fire1 — Sun, 25 Jul 2010 12:08:18 -0000

The worst is that it is only an example - and the public response (and media) is to typically only respond to the extreme. Thus, gutted city pensions, like San Diego and some other major cities,counties and, yes, New Jersey, will serve as the examples for which state legislatures and the Feds will "solve" local problems with the iron fist.

Nevermind they have their own problems they haven't addressed. Thousands of public sector workers will be screwed out of their legitimately earned and funded pensions (many with their own added contributions) so that higher level politicos can meddle in local politics by "riding to the rescue" with no-cost-to-them solutions.

Re: PBS: Scientist Shows How Corexit, Bacteria Disperse Oil

twitter-15659909 — Sat, 24 Jul 2010 15:17:48 -0000

It will be interesting to hear the outcome of this study...

I really wish that the government would totally halt the use of Coreexit until it's effect on marine life is understood.

I fear that it's Agent Orange all over again.

Re: Edward Hugh speaks to PBS about Spain’s underground economy

Guest — Sat, 24 Jul 2010 15:08:21 -0000

Edward Hugh clearly doesn't live in the real world. In Spain the 'black economy' IS because of the taxes being high and not because those cultures 'like to cheat'. Some many but on the whole it is because social taxes for Autonomos and PYMES (self-employed and small to medium sized businesses) and that IVA (Valued added tax) was paid up front causing severe cash flow problems to many.

The other part of it is because Unions and socialist governments have left such an inflexible labour market that if you are unemployed your dole could easily run out whilst you are looking for work which leaves many with no option but to work in the black or see you and your family starve.

Even, during a recent interview on Canal 9 by the head of the Valencian Autonomos association made this very clear. The fault is high taxes, unions and socialism and not the small businesses and self-employed.

This report is another case of an economist being too far removed from the real picture to have a valid comment to make.

Re: Looting by public officials in Bell California

DisinterestedObserver — Sat, 24 Jul 2010 12:47:54 -0000

Astronomical? Maybe they just got delirious and thought they were working for Goldman Sachs. After all, their salaries are basically the amount of Wall Street bonuses in a bad year. This is what happens when we sanction continued looting on Wall Street; Main Street decides it's time to emulate the money grabbers ...

Re: US Government now tracking gross proceeds on sales over $600

steve_from_virginia — Sat, 24 Jul 2010 01:28:43 -0000

Unless the IRS massively increases its (competent) pool of analysts it will be literally buried under an avalance of 1099's.

I recommend all citizens start sending the IRS forms for ALL transactions including gasoline and coffee from McDonalds.

Filing is hit - or - miss now. Most small busnesses - and large ones too - ignore the rules. Home Depot sells thousands of dollars in materials to small contractors daily (or they did before the GFC). No 1099s, thanks. Ditto with car repairs, vacations, business trips and other 'big ticket' service items.

Real estate transactions are reported but the IRS misses them since it lacks the staff to pick individual transactions from the flow.

The reporting requirement is unrealistic, more vaporware from Capital Hill.

As far as Congress adding bits and pieces to unrelated legislation; this is something that has been begging for reform for a long time. A related problem is the recent phenomenon of 2k+ page acts that are impossible to parse. No law should be enacted that has more than one subject and requires more than standard sized 20 pages to describe.

Re: US Government now tracking gross proceeds on sales over $600

DG — Fri, 23 Jul 2010 22:16:38 -0000

Here's why a tax on gold trading is insidious:
It is not that gold is gaining value, it is that $USD is losing value. You put your cash into something stable and then then they tax you on the amount their worthless fiat has fallen!

Re: US Government now tracking gross proceeds on sales over $600

enh124 — Fri, 23 Jul 2010 17:13:56 -0000

Exactly. If you are a small business making an order for bottled water or printer paper, you better do it in increments of $599.99 or less or you're going to have a 1099 filing on your hands. This is absurd of course. What I would like to know is who inserted this provision and what was the specific rationale. Right now, people are focused on the $17 billion in alleged missing gold sale taxes and I think this is why the focus has been on gold. But the burden to business is pretty large.

And note, even if you individual charge are low, say no more than $15 each, if you pay more than $600 to a single vendor, you now need to file a 1099.