Another Economic Thread

[Iskaral Pust]

[quote name='Ashaman' post='1607649' date='Dec 3 2008, 12.20']ok i can see that makes sence, BUT the fed can acctually make money out of thin air, not trough
fractional reserve banking whitch are commonly accepted by most people.
this means that the fed ultimately can create money out of nothing and demand it back in the future whit interest, and on top of this the money created goes to its member banks?

pleace shoot me down becours i dont want this to be true, but i am a bit currious way (,if what i just said is true,) more people dont question this in a criticaly way.[/quote]

Yes, the Fed creates money by lending to banks (monetary easing) to stimulate the economy and then receives it back with interest (monetary tightening) to avoid over-heating the economy once the recession is past. The interest belongs to the tax-payer, the Fed passes it to the Treasury. The banks paid a fair rate for the use of that money, which they used to lend for profit.

[Iskaral Pust]

So now Paulson is suggesting that the govt will provide mortgages at 4.5% to home buyers through Fannie and Freddie for a limited time. But not for refinancing and not for people facing foreclosure on an existing mortgage. Just to tempt in new buyers.

Sounds like a clusterfuck of epic proportions to me.

Do we really need another temporary bubble in real estate from cheap credit? The only redeeming feature is that 4.5% is currently a fairly priced yield for a qualified borrower (2% over ten year Treasury yields). So at least it isn't a complete giveaway by taxpayers, just a capriciously focused boon that will trap the beneficiaries in houses with negative equity for years to come as soon as the window closes on these cheap rates.

[Lany Freelove Cassandra]

[quote name='Annelise' post='1607592' date='Dec 3 2008, 11.53']Right then. Will have to rely on luck (and the good fortunes of Ford). :uhoh:

Ok soothsayers, how about when will we stop dreading investment statements?[/quote]

And just think of all those people who don't have investment statements to dread.

[lokisnow]

can we have a brain storm on what other ways Paulson could show himself to be incompetent and clueless? surely we could come up with much worse than what he's currently done, gotta be a silver lining somewhere, right? right?

good grief. On NPR they had a soundbite of Bernanke today saying that the government should do something for homeowners now, I was literally screaming at the radio, "that's what the fucking 700,000,000,000 TARP bailout was for you clusterfuck corrupt imbeciles!"

[AndyP]

Remember at some point W looked at Paulson and said something like 'Sounds like a good idea Paulie lets do it'. :thumbsup:


and here we are!

IP
hey maybe the home buyers will by homes from people who are having problems with their mortgages. Ok, so that is not what is going to happen. :cheers:

[url="http://corner.nationalreview.com/post/?q=YWU0ZjgwYzJkZjdhN2QxYjY1MzQxMDE4MjU0MTMyM2E="]Larry Kudlow[/url]

[quote name='Bailout Nation']But bailout nation continues in a story in this morning’s Wall Street Journal. Car rental company Avis wants TARP money now. BlueFire Ethanol, Inc. wants TARP money. The Equipment Leasing and Financial Association wants TARP money for its member companies. There’s a pattern here. Any economic sector that uses credit is coming ’round to the view that it deserves TARP money. That’s right. A TARP for all seasons. A TARP for all companies. That’s what we’ve created here.

The headline for this WSJ story is “Non-Bank Firms Seek U.S. Credit Relief.” Yup.[/quote]

You know the Houston area is full of houses with blue tarps on their roofs due to Hurricane Ike, when do we get our TARP money anyone.

[AndyP]

[url="http://www.ft.com/cms/s/0/48ac15fc-c1bc-11dd-831e-000077b07658.html"]Well it was only a matter of time[/url]

[quote]“We hope the US side will take the necessary measures to stabilise the economy and financial markets as well as guarantee the safety of China’s assets and investments in the US,” he said.

The dialogue was dominated by the global crisis. Zhou Xiaochuan, governor of the Chinese central bank, urged the US to rebalance its economy. “Over-consumption and a high reliance on credit is the cause of the US financial crisis,” he said. “As the largest and most important economy in the world, the US should take the initiative to adjust its policies, raise its savings ratio appropriately and reduce its trade and fiscal deficits.”[/quote]

[ThinkerX]

Well, I have seen a bit of speculation lately that Head Fed Ben wants gold to be much higher priced against the dollar than it is now...

[Ashaman]

i just resently learned that my country's central abnk sold most of its gold reserve as long a go as in 2003, and that they then had planes to sell the rest of it apart from 7 gold bares for display :stunned:
and i heard something simmilare happened in GB, any other heard simmilare storries from where they live?

i am just wondering way some country sold of most of their gold reserve just a few years ago?
and who by that many tons of gold any way :dunno:

[Tormund Ukrainesbane]

[quote name='Iskaral Pust' post='1609820' date='Dec 4 2008, 20.13']So now Paulson is suggesting that the govt will provide mortgages at 4.5% to home buyers through Fannie and Freddie for a limited time. But not for refinancing and not for people facing foreclosure on an existing mortgage. Just to tempt in new buyers.

Sounds like a clusterfuck of epic proportions to me.

Do we really need another temporary bubble in real estate from cheap credit? The only redeeming feature is that 4.5% is currently a fairly priced yield for a qualified borrower (2% over ten year Treasury yields). So at least it isn't a complete giveaway by taxpayers, just a capriciously focused boon that will trap the beneficiaries in houses with negative equity for years to come as soon as the window closes on these cheap rates.[/quote]

Seriously. These are the brightest minds the financial world can spew forth? A nutless chimp could do a better job than this. My high school history teacher would know better than this. I nominate myself for treasury secretary because, if I couldn't do a better job, I sure as hell couldn't do a worse one.



[quote name='Ashaman' post='1610209' date='Dec 5 2008, 07.54']i just resently learned that my country's central abnk sold most of its gold reserve as long a go as in 2003, and that they then had planes to sell the rest of it apart from 7 gold bares for display :stunned:
and i heard something simmilare happened in GB, any other heard simmilare storries from where they live?

i am just wondering way some country sold of most of their gold reserve just a few years ago?
and who by that many tons of gold any way :dunno:[/quote]


Apparently it's common knowledge that the gold standard is an anachronism with no place in modern economic thought. Why should your country keep a gold reserve? It's just another commodity. Surely Norway has a supply of polar bears they can use.

[Moshe Goldberg Rubinshteyn]

[quote name='Ashaman' post='1610209' date='Dec 5 2008, 09.54']i just resently learned that my country's central abnk sold most of its gold reserve as long a go as in 2003, and that they then had planes to sell the rest of it apart from 7 gold bares for display :stunned:
and i heard something simmilare happened in GB, any other heard simmilare storries from where they live?

i am just wondering way some country sold of most of their gold reserve just a few years ago?
and who by that many tons of gold any way :dunno:[/quote]
Why would you want them to keep the gold?

[WarGalley]

I'm beginning to think double digit unemployment is inevitable.

[Moshe Goldberg Rubinshteyn]

[quote name='WarGalley' post='1610342' date='Dec 5 2008, 12.01']I'm beginning to think double digit unemployment is inevitable.[/quote]
The rate of job loss is the highest since 1974, and I don't think we have reached the bottom yet.

[WarGalley]

[quote name='Cobblestones' post='1610350' date='Dec 5 2008, 12.08']The rate of job loss is the highest since 1974, and I don't think we have reached the bottom yet.[/quote]

I'm wondering if it's possible to reach a bottom while housing prices keep dropping i.e. if other sectors of the economy can recover independently of it.

[Ashaman]

[quote name='Cobblestones' post='1610318' date='Dec 5 2008, 17.47']Why would you want them to keep the gold?[/quote]
its been around for a weary long time, people died to fend of the germans during the world war to by time so they could ship it to safety in england.
and i dont see whay we should have more money (1.5 billion NOK for the gold) when we have 2000 Billion NOK in a state pention fond. and still some oil left in the sea.
i just dont see the point of trading some thing that have inherit wallue by the fact that it is rare to something that can are more subject to wariation.
i dunno i dont see many arguening for that one shuld empty fort knox and have some dollar bills there in stead.

[Moshe Goldberg Rubinshteyn]

[quote name='WarGalley' post='1610357' date='Dec 5 2008, 12.13']I'm wondering if it's possible to reach a bottom while housing prices keep dropping i.e. if other sectors of the economy can recover independently of it.[/quote]
In principle yes, in practice I don't know. Too many consumers have treated their house as an atm. They won't have much liquidity in years to come, so domestic demand is coupled to the housing sector. Foreign demand could in principle take up slack and help export (which is largely independent from housing), except the crisis is global and I don't see that happening either.

[Iskaral Pust]

[quote name='Cobblestones' post='1610318' date='Dec 5 2008, 11.47']Why would you want them to keep the gold?[/quote]

Yes, this.

Unless you wanted your govt to essentially speculate on gold prices and try to time the market, why would they hold a store of a useless metal that was no longer involved in their currency? If you do want them to speculate on investments, it's better to still convert the gold to cash and buy a diversified portfolio. You don't want to hold a single asset, even if hindsight tells you that it would have worked out well if you omnisciently sold at the top of the market.

Lots of people listened to your brand of nostalgia for gold and bought gold in late September at the height of the financial crisis. Gold has lost 40% since. It has done about the same as the equity market in that period. It's not a store of value, it's just a place for speculators to profit at the expense of those who who still think in 19th century terms.

BTW - speculating on gold prices is not a good business for your govt to be in.

[Angalin]

[quote name='Tormund Midgetsbane' post='1610219' date='Dec 5 2008, 09.04']Apparently it's common knowledge that the gold standard is an anachronism with no place in modern economic thought. Why should your country keep a gold reserve? It's just another commodity. Surely Norway has a supply of polar bears they can use.[/quote]
Norway might be the richest country in the world on the polar bear standard. ;)

[quote name='Iskaral Pust' post='1610366' date='Dec 5 2008, 11.24']BTW - speculating on gold prices is not a good business for your govt to be in.[/quote]
But they do everything else so well! :P

[Moshe Goldberg Rubinshteyn]

[quote name='Ashaman' post='1610362' date='Dec 5 2008, 12.18']its been around for a weary long time, people died to fend of the germans during the world war to by time so they could ship it to safety in england.
and i dont see whay we should have more money (1.5 billion NOK for the gold) when we have 2000 Billion NOK in a state pention fond. and still some oil left in the sea.
i just dont see the point of trading some thing that have inherit wallue by the fact that it is rare to something that can are more subject to wariation.
i dunno i dont see many arguening for that one shuld empty fort knox and have some dollar bills there in stead.[/quote]
Let me reply to your second argument:
Gold is an investment as any other investment, so from an investor's pov, you could argue that a diversified portfolio should contain some commodities such as gold. From an economist's point of view, gold is not a productive investment such as stocks, bonds etc. You do not help the economy grow by hoarding it. Worse, hoarding a important commodity might actually hurt economic growth by creating an artificial shortage.

Your first argument is sentimental, your third argument isn't true, gold does not have inherent value, and your fourth one is just silly, nobody ever said that.

[WarGalley]

I believe Paulson is facing Congressional pressure to provide foreclosure relief and that's why the Treasury wants to bring loan rates down to 4.5%. Congressional figures have made statements that they are not going to give the next $350 bil installment unless something is done about foreclosures ([url="http://www.bloomberg.com/apps/news?pid=20602007&sid=ad0zAYvGDuvc&refer=govt_bonds"]Link[/url]):

[quote]Two top U.S. lawmakers warned Treasury Secretary Henry Paulson that he may not get the second half of the $700 billion financial rescue fund, joining Republicans upset with how the program is being managed.

“I would be a very hard person to convince that this crowd deserves to have their hands on the next $350 billion,” Senate Banking Committee Chairman Christopher Dodd told reporters yesterday in Washington, referring to the Bush administration. “I am through with giving this crowd money to play with.”

Some lawmakers are pushing the Treasury to use its Troubled Asset Relief Program to aid the beleaguered U.S. automakers, and Democratic legislators are also urging money for struggling homeowners. An increasing gulf between the Treasury and Congress makes it more likely that decisions on the remaining TARP funds will be up to the incoming Obama administration.

“It looks like the only way Paulson could get the TARP money is to make a deal on foreclosure relief,” said Tom Gallagher, head of policy research at International Strategy and Investment Group in Washington.

Paulson, who has committed all but $20 billion of the first half of the funds, is also under fire for abandoning the original TARP plan to buy toxic mortgage assets. Under the terms of the law, lawmakers have 15 days to reject a request for the second half of the TARP funds.[/quote]

This particular method of dealing with foreclosures does look pretty stupid though. I have ceased to figure out what Paulson is doing.. he changes his mind and course of action every other day it seems. I get the feeling he's playing politics more than trying to deal with the financial problems.

[Moshe Goldberg Rubinshteyn]

[quote name='Angalin' post='1610368' date='Dec 5 2008, 12.26']Norway might be the richest country in the world on the polar bear standard. ;)[/quote]
Africa, as always, is screwed on that front.