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Yields on ten and thirty year Treasuries have shot up in the last few days as investors have become fixated on burgeoning Treasury supply in coming months and years. and, as belief in the "green shoots" story is rising, a shift to riskier assets. In addition, while the Chinese are still buying Treasuries (that is, they are still pegging their currency, determined to hold on to exports), they have shifted to the shorter end of the yield curve (and their past harrumphing about the dollar and Uncle Sam not stiffing them is probably on a delayed basis weighing on nervous investors). The yield curve is the steepest it has ever been. The dealer community is also apparently very long Treasury bonds, so the losses they are taking now will be an offset to the "banks are earning their way out of this mess" picture.
The move up in yields isn't simply a problem for companies that might have wanted to raise longer-term funding in the newly optimistic environment; it's a huge spanner in the works for the Fed's efforts to keep mortgage rates artificially low. Recall that while the Fed has been intervening in the markets, it has gone to great lengths to stress that it not doing quantitative easing, but influencing spreads. But with the long bond at 4.65%,, it can't keep yields on mortgages as low as it wants them to be (not much north of 5%).
E.F. Schumacher
An irony endured, and occasionally relished, by those of us whose concerns about peak oil have found their way into print is the awkward fact that it’s difficult to talk publicly about using less fossil fuel energy without using more of it. The networks of transportation and communication left to us by the collective decisions of the recent past demand a great deal of energy input, and social habits evolved during the heyday of cheap energy amplify that, making long-distance trips a practical necessity for the working writer. These days, that usually means air travel.
Think for a moment about a drug addict. A man takes his first dose for the euphoria he expects to experience. A trusted source told him how much better his life could be by using. Pretty soon he is dosing every day. Then it’s a double dose, because if he stops, he feels nothing but withdrawal pain. Later his life is in chaos, but he cannot stop feeding his addiction, even if he wanted to. In the end he is a shell of his former self, completely dependent upon the drug for survival, even though it is slowly killing him.
For all the horror the global economic crisis has caused for so many people, one progressive consequence has emerged: many of these people are becoming politically conscious — searching for information to better understand their political and economic system. They want to know how things got the way they did and what can be done about it. Unfortunately, much of the resulting analysis has focused too little on actual causes, and too much on abstract financial details and other consequences of deeper economic problems. Therefore, the typical explanation of the economic crisis goes as follows: depression-era financial regulations were tossed aside, and banks were allowed to merge into new institutions that then invented ways to transform debts into assets, which were gambled away on the stock exchange to the tunes of trillions of dollars.
All of which is true.
What’s missing, however, is why. Why did successive governments allow the regulations to be destroyed? And more importantly, why did the entire political establishment agree that these regulations needed to go? One important statistic can help provide some insight: Whereas manufacturing was twice as large as the financial sector of the U.S. GDP in 1970, these numbers have since been reversed — the financial sector is now 21 percent of U.S. GDP, while manufacturing is just 12 percent, and shrinking. Why did the financial sector grow as manufacturing sank? And how are the two related?
Bernanke cannot have his cake and eat it too. If the economy is recovering the yield curve should steepen. And steepen it has. The Yield Curve Is Steepest On Record.
If the economy is recovering, the Fed should welcome this steepening. However, what if the yield curve is simply reacting at the thought of Bernanke monetizing Obama's massive deficits and the various stimulus plans? Regardless why the yield curve is steepening, Bernanke's belief that he can control both the long and short end of the curve is seriously misguided. The fact is he cannot really control either, at least for long.
If Globalism brings universal prosperity, why are so many national economies burdened with crushing debt? Why have millions of middle-class Americans lost their jobs to overseas competition? Why is the global economy in the worst economic crisis in history?
These are typically leftist-populist complaints that blame the free market, but maybe it's time that libertarians questioned the premise of the debate.
Is Globalism a genuine manifestation of the free market, or just another guise for government intervention?
Discussion of the 50% Retracement Rule,
potential future price levels, time studies, key dates, Fibonacci, Gann, Astro numbers, Robert Rhea's Great Depression analysis.
Month ago we posted article German 1 Trillion Toxic Assets Problem, where a report by Sueddeutsche Zeitung cites an internal paper by the banking regulator that puts the total of bad assets in the German banking system at €816bn. This report caused outrage among German officials, as always when someone uncovers the truth. The above mentioned number includes toxic securitized assets, and also bad loans, and unlike previous lists, this report named the banks. In one case, half of all assets of a particular Landesbank are classified as toxic, Commerzbank was also on the list with a huge depot of toxic waste. This is now past. And now remember this name, Achim Dübel , we could hear about him more and more in coming months. Achim Dübel, CEO of FINPOLCONSULT (http://www.finpolconsult.de ) in Berlin, one of the leading and relatively few independent voices in the German housing finance community. The Institutional Risk Analyst posted yeasterday great interview with Achim, which could give you a nice perspective of what we can encounter in Europe in the coming year. We are going to highlight some thoughts, but you can read it in its entirety here.
The conspiracy theorists of the world believe the U.S. government faked the landing of Apollo 11 on the moon. They also believe 9/11 was an inside job, ordered by operatives within the government. The rationale of these acts was to distract the masses from the disastrous Vietnam War and the plummeting stock market, while escalating their control over the American people. I believe I have uncovered the largest conspiracy in history. The government wants you to believe that banks are recovering, housing has bottomed, stimulus works, borrowing leads to prosperity and war leads to peace. President Obama and his cronies at Treasury and the Federal Reserve are trying to mislead the public regarding the health of our banking system. If you believe their spin on these issues, I have a structurally deficient bridge in Brooklyn I'd like to sell you. The government has something up its sleeve this time. They are perpetrating the greatest fraud in the history of the world. The conspirators are Barack Obama, Timothy Geithner and the Treasury Department, Ben Bernanke and the Fed, Sheila Baer and the FDIC, and Barney Frank and the Democratic Congress.
If you have any info that would help, please contact me at my private email address: bailout@michaelmoore.com
