Comments on: If Only Central Bankers Would Hit Bottom http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html Sun, 22 Nov 2009 16:56:52 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13375 Anonymous Sat, 23 Aug 2008 05:58:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13375 ps How can good decisions be based on such a faulty framework and dodgy numbers. GDP inflated beyond reality. CPI similarly understated. <br/><br/>No wonder everyone is confused. Its felt like a recession for a long time now but the figures dont reflect that reality.<br/><br/>When will everything be true and accurate again? ITs like the Emperors New Clothes.<br/><br/>How can the situation be remedied when a true prognosis cannot be determined due to faulty wobbly and unreliable numbers?<br/><br/>How many sets of books does the Fed and the government keep? One for the public and one for them? ps How can good decisions be based on such a faulty framework and dodgy numbers. GDP inflated beyond reality. CPI similarly understated.

No wonder everyone is confused. Its felt like a recession for a long time now but the figures dont reflect that reality.

When will everything be true and accurate again? ITs like the Emperors New Clothes.

How can the situation be remedied when a true prognosis cannot be determined due to faulty wobbly and unreliable numbers?

How many sets of books does the Fed and the government keep? One for the public and one for them?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13374 Anonymous Sat, 23 Aug 2008 05:51:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13374 What we (the World) need is a visionary LEADER. Someone who is a true leader with forward looking visions and not just to the next election cycle. A true leader who doesnt succumb to the masses (ie lower the bar to the lowest common denominator).<br/><br/>Sadly, 25 years of increasingly easy credit has created a mindset and expectations of the general population that will not be unwound in 5 or even 10 years. We are talking about the values of a generation here.<br/><br/>We truly are stuck. What needs to be done will not win many popularity votes. So more bandaides will be slapped on while the crack becomes ever deeper (although I suspect we have reached the point where bandaides will be futile and an amputation is needed).<br/><br/>Dismantling is easy. Reconstructing is hard.<br/><br/>As to the Asian economies (refer Anon above) - we cannot compare. They are in different place on the growth curve and in any event are set on imitating our (now clearly) disasterous system. Further, consuming half the world's available resources and ruining their environment and ours (a lot of that chinese polution ends up in the US! - causing heavy metal poisoning to fish populations and that is only part of a story best saved for a relevant topic) to produce cheap disposable consumer items will be looked upon by future generations as madness.<br/><br/>We know what needs to be done. But who can get this job done?<br/>And would such a person ever be voted in or appointed? What we (the World) need is a visionary LEADER. Someone who is a true leader with forward looking visions and not just to the next election cycle. A true leader who doesnt succumb to the masses (ie lower the bar to the lowest common denominator).

Sadly, 25 years of increasingly easy credit has created a mindset and expectations of the general population that will not be unwound in 5 or even 10 years. We are talking about the values of a generation here.

We truly are stuck. What needs to be done will not win many popularity votes. So more bandaides will be slapped on while the crack becomes ever deeper (although I suspect we have reached the point where bandaides will be futile and an amputation is needed).

Dismantling is easy. Reconstructing is hard.

As to the Asian economies (refer Anon above) – we cannot compare. They are in different place on the growth curve and in any event are set on imitating our (now clearly) disasterous system. Further, consuming half the world’s available resources and ruining their environment and ours (a lot of that chinese polution ends up in the US! – causing heavy metal poisoning to fish populations and that is only part of a story best saved for a relevant topic) to produce cheap disposable consumer items will be looked upon by future generations as madness.

We know what needs to be done. But who can get this job done?
And would such a person ever be voted in or appointed?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13373 Anonymous Sat, 23 Aug 2008 03:35:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13373 Who pays for the central bankers' boondoggle in Jackson Hole? Who pays for the central bankers’ boondoggle in Jackson Hole?

]]> By: Jesse http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13370 Jesse Fri, 22 Aug 2008 23:16:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13370 Part of the problem is what is "bottom" in a world of your own design where you define the terms, ie. a fiat currency.<br/><br/>China has a suggestion about where NOT to stop.<br/><br/>http://jessescrossroadscafe.blogspot.com/2008/08/china-will-demand-adequate-compensation.html Part of the problem is what is “bottom” in a world of your own design where you define the terms, ie. a fiat currency.

China has a suggestion about where NOT to stop.

http://jessescrossroadscafe.blogspot.com/2008/08/china-will-demand-adequate-compensation.html

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13369 Anonymous Fri, 22 Aug 2008 22:40:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13369 Lets be honest, we have had 10 years of asset inflation, money has been too cheap and too easy to borrow, many company accounts reflect this. <br/><br/>Removing mark to market from accounting standards would be my first step back to reality. The equity market represents the price a leveraged (or in the current market deleveraging) investors will pay to exchange a small percentage of a company for easy money. To claim share price reflect the value of the whole asset value is unmitigated rubbish. <br/><br/>We now have ( in some cases bigger) derivative markets betting on what the leveraged or whatever investors will do to asset inflation. Perhaps central banks can work on a method to bring casinos into the game. Perhaps start with a paper on why the risk involved in a random walk can be mitigated with the throw of a dice.<br/><br/>If the inflation measure had been real and included asset inflation we would have seen unacceptable inflation numbers for the last 10 years, oh it was great fun, but the party had to end. <br/><br/>Change the inflation measure so it includes asset inflation.<br/><br/>Going forward one of two things has to happen, the unit of measure ($) has to be devalued until the asset numbers are right (inflation in the real economy) or the numbers have to change to reflect some sort of reality (deflation in the asset economy). It looks like the central banks are going for the inflation option (however 0% interest didn't work for Japan did it).<br/><br/>I can't see any way the central banks can stop things happening, nor why they should (we are all going to suffer may be a good reason if they could). Asset deflation has happened in the equity market, property is on a slower cycle and it is yet to finish, it is just the way it is.<br/><br/>If I was Uncle Sam the first thing I would do is stop pretending I can run two wars and reduce taxes. He is going to have to face that reality one day.<br/><br/>Sorry nothing for the central banks (except work on the casino problem), in fact I think it is a waste of time trying to blame them, the problem is a lot bigger. <br/><br/>The central banks has been trying to fill the punch bowl but it's been broken by the drunks and the party is dead. Lets be honest, we have had 10 years of asset inflation, money has been too cheap and too easy to borrow, many company accounts reflect this.

Removing mark to market from accounting standards would be my first step back to reality. The equity market represents the price a leveraged (or in the current market deleveraging) investors will pay to exchange a small percentage of a company for easy money. To claim share price reflect the value of the whole asset value is unmitigated rubbish.

We now have ( in some cases bigger) derivative markets betting on what the leveraged or whatever investors will do to asset inflation. Perhaps central banks can work on a method to bring casinos into the game. Perhaps start with a paper on why the risk involved in a random walk can be mitigated with the throw of a dice.

If the inflation measure had been real and included asset inflation we would have seen unacceptable inflation numbers for the last 10 years, oh it was great fun, but the party had to end.

Change the inflation measure so it includes asset inflation.

Going forward one of two things has to happen, the unit of measure ($) has to be devalued until the asset numbers are right (inflation in the real economy) or the numbers have to change to reflect some sort of reality (deflation in the asset economy). It looks like the central banks are going for the inflation option (however 0% interest didn’t work for Japan did it).

I can’t see any way the central banks can stop things happening, nor why they should (we are all going to suffer may be a good reason if they could). Asset deflation has happened in the equity market, property is on a slower cycle and it is yet to finish, it is just the way it is.

If I was Uncle Sam the first thing I would do is stop pretending I can run two wars and reduce taxes. He is going to have to face that reality one day.

Sorry nothing for the central banks (except work on the casino problem), in fact I think it is a waste of time trying to blame them, the problem is a lot bigger.

The central banks has been trying to fill the punch bowl but it’s been broken by the drunks and the party is dead.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13367 Anonymous Fri, 22 Aug 2008 20:42:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13367 Any moderation of the business cycle has more to do with the reduction of agriculture as percent of economy over last 100 years and not the guidance of the fed. Better than fed to smooth out rest of cycle is states celebrating xmas and new years in diff months of the year. Any moderation of the business cycle has more to do with the reduction of agriculture as percent of economy over last 100 years and not the guidance of the fed. Better than fed to smooth out rest of cycle is states celebrating xmas and new years in diff months of the year.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13365 Anonymous Fri, 22 Aug 2008 20:02:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13365 Brilliant analysis, Yves. And some very good comments as well.<br/><br/>Having worked as a compliance officer in several financial institutions, it's clear to me that the US regulatory system is undermined by competing bureaucratic and political interests, which are usually covert and of which the US public is not generally.<br/><br/>There's little question in my mind that this is a crisis of capitalism - just stop and consider how much farther this crisis has moved in the direction of socialized finance. <br/><br/>As such, it becomes a more overt political fight as well.<br/><br/>But all large political struggles are based on even deeper philosophical divisions. I would suggest that those divisions are also becoming more apparent - consider the rise of Asian economies, which generally come from a far different world-view than the Northern European assumptions that gave birth to classical economics and capitalist systems. The form of capitalism practiced in those systems is having an impact on traditional capitalism that is not well enough understood.<br/><br/>At some point, it becomes mere hubris for the practitioners of any human intellectual discipline or tradition to believe that it can actively manage the course of events.<br/><br/>So, while I share your discomfort over the lack of leadership of central bankers, I also sense that the real questions needing resolution are far, far deeper than any of us really understands...<br/><br/>- Eric Dewey, Portland, OR Brilliant analysis, Yves. And some very good comments as well.

Having worked as a compliance officer in several financial institutions, it’s clear to me that the US regulatory system is undermined by competing bureaucratic and political interests, which are usually covert and of which the US public is not generally.

There’s little question in my mind that this is a crisis of capitalism – just stop and consider how much farther this crisis has moved in the direction of socialized finance.

As such, it becomes a more overt political fight as well.

But all large political struggles are based on even deeper philosophical divisions. I would suggest that those divisions are also becoming more apparent – consider the rise of Asian economies, which generally come from a far different world-view than the Northern European assumptions that gave birth to classical economics and capitalist systems. The form of capitalism practiced in those systems is having an impact on traditional capitalism that is not well enough understood.

At some point, it becomes mere hubris for the practitioners of any human intellectual discipline or tradition to believe that it can actively manage the course of events.

So, while I share your discomfort over the lack of leadership of central bankers, I also sense that the real questions needing resolution are far, far deeper than any of us really understands…

- Eric Dewey, Portland, OR

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13364 Anonymous Fri, 22 Aug 2008 19:10:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13364 My summary is that IB have forgotten they are a service industry; they are not a part of the world's economic base that creates value by actually making things or providing direct services. Their function is to price and provide capital; they do not create fundamental wealth. Because they have levered too much debt on too little income the entire system is now seeing the destruction and delevering of wealth. Unfortunately, there is a mismatch between the sectors past ability to extract wealth from the real economy and who is suffering from the inevitable loss of wealth from their past overpricing of their "services." My summary is that IB have forgotten they are a service industry; they are not a part of the world’s economic base that creates value by actually making things or providing direct services. Their function is to price and provide capital; they do not create fundamental wealth. Because they have levered too much debt on too little income the entire system is now seeing the destruction and delevering of wealth. Unfortunately, there is a mismatch between the sectors past ability to extract wealth from the real economy and who is suffering from the inevitable loss of wealth from their past overpricing of their “services.”

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13363 Anonymous Fri, 22 Aug 2008 18:14:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13363 Yves, we aren't dealing with science; We are dealing with religion. Yves, we aren’t dealing with science; We are dealing with religion.

]]> By: RebelEconomist http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit.html#comment-13362 RebelEconomist Fri, 22 Aug 2008 16:53:00 +0000 http://www.nakedcapitalism.com/2008/08/if-only-central-bankers-would-hit-bottom/#comment-13362 As central banks became more academic, the type of people they employ changed. They insist on outstanding academic qualifications but their current pay (as opposed to pension benefit) is mediocre, so central banks tend to recruit the kind of people who succeeded in education by being sensible and compliant rather than sceptical and audacious. Dissent is not in their nature. As central banks became more academic, the type of people they employ changed. They insist on outstanding academic qualifications but their current pay (as opposed to pension benefit) is mediocre, so central banks tend to recruit the kind of people who succeeded in education by being sensible and compliant rather than sceptical and audacious. Dissent is not in their nature.

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