Thank God Our Systems Protect Us From Idiots

[Buzz]

If you think investors aresitting on their cash then why are there these record highs in commodities?? For the most part HUGE RECORD HIGHS!! I didn't mention cotton -$1.49 a pound and I don'tthink that I have seen it over a $1.00 a pound in my lifetime. All the commodities are at record highs for the most part and most of them ar at record highs. You are right they do fluctuate but not to such record highs and as I said huge record highs. Silver was less that $10.00 an ounce when Obama came to office which was quite high now it is over $26.00 an ounce. Just trying to put perspective on it. Also when there is inflation then commodities is the first place it shows up.. Maybe Paul Volker will live long enough to come back as head of the FED and institute 20 plus interest rates again. If I had borrowed money before that, I would probably have been broke now. Glad I didn't take your advice and borrow a lot of money then.

I figured I may as well post the links up here that I sent you this morning by PM. I thought it was interesting that I ran across them in the print edition of "The Economist" that I got in my mailbox yesterday just after we had this discussion online. I doubt there will be any interest among commenters here on POTUS, but you never know. I'll also include a paragraph from one:

So why is gold, a classic anti-inflation hedge, still doing so well? The answer to this enduring puzzle may lie in the level of real interest rates. As Chris Watling of Longview Economics points out, gold’s last great bull run was in the 1970s, when real yields were negative. Positive real rates in the 1980s and 1990s had bullion trading sideways for 20 years. In a world of negative yields, owning gold has no opportunity cost.

The Fed's big announcement
Down the slipway
“Quantitative easing” is unloved and unappreciated—but it is working

http://www.economist.com/node/17417742


Buttonwood
Accentuate the negative
A very unusual sign of confidence in economic policy

http://www.economist.com/node/17420106

[menmon]

Ambiguous, are they printing money or not??

Yardley says yes and he know everything!!!


RK

The treasury prints money everyday as they take old money out of circulation. The truth is we probablly have less printed dollars today than we had 10 years ago because of the increased velocity of money...ACH, Wires, Debt Cards...etc.

But back to your question, no they are not printing money. They are buying up debt with money they have already borrowed which they had taken out of the monetary base when they issued the debt thus strengthening the dollar based on dollars to the overall basket of goods. Now by buying debt with money they had borrowed puts more money into the monetary base. The money supply is then determined by the velocity of money.

Long in short of it is a weak dollar increase exports but hurts imports. But I think to create jobs exports are good, but its a fine line because we are so depended on other countries resources.

I agree with the feds actions here and enjoy the run in gold but be carefull because at some point they will take this money out and tighen interest rates and your precious gold will tarnish. It's going to be awhile but pay attention.

[menmon]

you are right to say that by the FED buying treasury notes, the primary goal is to increase siquidity and thereby lower interest rates, making borrowing for investment more attractive. That is probably the only reason to take such an action during a recession, but alas, the interest rate is for all intent and purposes and still we have no investment and corresponding growth. WHY?? Could it be that investors are unwilling to borrow or invest is the political climate of today? With a 2000 page healthcare bill which no one knows the cost(surely you will accept the fact that all econimic forcasts are highly speculative (President Obama said that the American public would see their healthcare premiums go down but they have gone up at least 20% since the bill was passed). With a finantial reform bill of at least 2000 pages which Obama said that credit card interest and fees would go down(Credit card interest went up 11% after the bill passed). With a stimulus bill that he said had to be passed or unemployment would go up to 8.5%(now 9.6% and that does not count those who are no longer looking for a job), is it not understandable that no investors would be willing to expand their business. Why would you thnk that there would be increased investment by increasing the money supply would increase investment if the effective interest rate is alreade near 0%? If investors are unwilling to borrow and expand because of the massive uncertainty caused by the government. If the is no increase in investment and a corresponding economic growth, would you not expect to see more dollars chasing the available goods and services and as a result an increase in inflation?? I don't think you have to look very far to find the answer. You like statistics so I will give you some. Gold up around $100.00 per ounce since the the FED announcement. Soybeans up about $0.50 per bushel since. Crude oin up 11.5%. Corn up about $0.20 per bushel. Silver up at least $3.00 per ounce. What does that tell you about investment and what does that tell you about what will happen to interest rates befor there is any real investment?
Today Federal Governmentspending aproaches 15% of GDP, almost as high as it was during WWII but at that time people understood that the very existence ofthe country was at risk and were willing to tolerate rationing using coupons.

Germany tried to expand their money supply to pay reparations to England and France but the only thing the got was a currency that no one would accept as a medium of exchange for goods and services. FDR tried it to a lesser extent along with increased taxes and protectionism and we had a depression of almost 15 years.
Unfortunately if we continue with this political and economic policy, 15 years of depression will look good compared to what happened to Germany. I sincerely hope I am wrong.

Most of what you just mentioned is why to be long this market. Obviously the smart money is not concerned about the reasons you just mentioned. Please quit listening to the political side of this because they all have agendas that are so for from reality.

[menmon]

Why?

That would be the conditions under which I would cutoff all unneeded spending.

That is exactly the mindset in DC and the reason we have the economic problems we have. Big Gov has been spending money like drunken sailors, allowing Wall St to legally steal from tax payers, idiots & crooks in charge of the Fed and other gov institutions. No one in power either knows what the tough decisions are or they are too weak to make them!

Wrong answer!

Borrow with rich dollars and pay it back with cheap.

[Buzz]

Mike, congrats on Sam's 2nd in the 100+ dog open at Metro.

[menmon]

I don't think political leadership has anything to do with investment. Their are many reasons investment is low in the US. Not the least of which is demand is diminishing. It has nothing to do with debt instruments. It has to do with wages. The fed, the administration, and congress are all barking up the wrong tree. The supply of money in the US is not the problem. It is all about DEMAND. Which equals JOBS and middle class wages.

Government can only make jobs immediately by spending money. They can encourage spending with lower interest rates and tax cuts but that is not necessarily immediate.

Example: I could put $100 in Sara Palins G-String and the next day it buys a pair of shoes and the shoe merchant makes $50 and then pays his wholesaler that make $25 dollars and then the wholesaler pays the leather company that makes $12.50 and the cowboy makes $6.25.

Taxes then get payed on $93.75 at 35% so the fed gets $32.81 back. That is how it works and works well. So many of our jobs are the result of government spending. Now if you cut taxes, they have less to spend so they have to cut spending, which eliminates jobs, but maybe makes a few somewhere else as long and who got the savings spends.

Low interest rates lower debt cost and give people more money to spend as long as they don't cause other varibles cost to increase.

Our problem right now is that we had been employing many buy building houses and commercial buildings. That has stopped and until this market digest the surplus, these jobs are not coming back and the people displaced are going to struggle to find work and probablly need to recreate their skills. Right now based on our current real estate portfolio here at my bank, my guess is that it needs 2 more years to get on solid footing and then maybe 2 more years before any notable new constrution will occur and Houston is the least damaged by this fallout. The truth sucks and no polititian can fix it.

We have a president that feels the pain and knows that now is not the time to cut spending and providing assistance with unemployment insurance buys time for people to recreate their skills, and yes there is abuse but not near as much as you think. Their is a lot of people hurting and we all enjoyed the last 20 years but now we paying up and some are more than others. So it makes me sick when I listen to some spin doctor spin the blame at people that are trying to help and it makes me sicker when those than are more fortunate don't get it or better yet ignore it.

[menmon]

Mike, congrats on Sam's 2nd in the 100+ dog open at Metro.

Dave thanks!!! I'm still high as a kite!!! Sam has put all together and I'm looking forward to 2011!

[Roger Perry]

Eskimo Bimbo???? What an intelligent Man. She couldn't do worse then Obongolo. You Sambo are the idiot

Look, the pot calling the kettle black

[Cody Covey]

Look, the pot calling the kettle black

Thats racist

[Roger Perry]

Thats racist

What? little black sambo