Comments on: Libor Surges to Nearly 7% But US Stock Futures Rise on Bailout Bill Revival Hopes http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html Mon, 23 Nov 2009 08:18:14 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Stephen A. Meigs http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18716 Stephen A. Meigs Wed, 01 Oct 2008 15:14:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18716 Richard Kline--As for consuming being excessive, I think that is only part right. Discouraging consumption is always appropriate in a sense, because if people can be discouraged from spending, then by printing money to make up for the slackening of demand, voila! everyone can be made more wealthy without materially affecting how the economy functions. Excess consumption is bad because it conflicts with people having wealth, and wealth is what ordinary people sorely need more of. But encouraging consumption by giving people wealth does not make them less wealthy, and so it is nothing to fear in my opinion. But I'd say that except for the wealthy, people in the U.S. aren't consuming enough, largely because they don't have enough wealth. The store of value people have in cash will be mostly offset by their debt when debt is easy—largely for this reason and because debtors must pay interest, most Americans have little wealth or security. <br/><br/>To me, straightforwardness and simplicity in an adjustment is better than a complicated one that worries a great deal about effects that are higher-order with respect to time. Higher-order phenomena are probably very hard to predict (e.g., who knows when foreign governments will stop buying US debt?), and when it comes time to making correcting adjustments later, it will be easier if our government is trying to adjust something brought about by something easy to understand. Richard Kline–As for consuming being excessive, I think that is only part right. Discouraging consumption is always appropriate in a sense, because if people can be discouraged from spending, then by printing money to make up for the slackening of demand, voila! everyone can be made more wealthy without materially affecting how the economy functions. Excess consumption is bad because it conflicts with people having wealth, and wealth is what ordinary people sorely need more of. But encouraging consumption by giving people wealth does not make them less wealthy, and so it is nothing to fear in my opinion. But I’d say that except for the wealthy, people in the U.S. aren’t consuming enough, largely because they don’t have enough wealth. The store of value people have in cash will be mostly offset by their debt when debt is easy—largely for this reason and because debtors must pay interest, most Americans have little wealth or security.

To me, straightforwardness and simplicity in an adjustment is better than a complicated one that worries a great deal about effects that are higher-order with respect to time. Higher-order phenomena are probably very hard to predict (e.g., who knows when foreign governments will stop buying US debt?), and when it comes time to making correcting adjustments later, it will be easier if our government is trying to adjust something brought about by something easy to understand.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18617 Anonymous Wed, 01 Oct 2008 05:02:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18617 I think deep down, the majority of Americans are willing to endure the hardships of a recession if it truly means the absolute killing of the [financial industry] beast [as we know it] once and for all. It has been sapping our energy and resources for entire lifetimes. The negative reaction of the public [to the bailout] is the same as a driver floors a vehicle when a carjacker tells him to stop. Or better yet, it's like when Captain Kirk unflinchingly sets the destruct codes to blow up the Enteprise saying, "Either I command my ship or nobody does." I think deep down, the majority of Americans are willing to endure the hardships of a recession if it truly means the absolute killing of the [financial industry] beast [as we know it] once and for all. It has been sapping our energy and resources for entire lifetimes. The negative reaction of the public [to the bailout] is the same as a driver floors a vehicle when a carjacker tells him to stop. Or better yet, it’s like when Captain Kirk unflinchingly sets the destruct codes to blow up the Enteprise saying, “Either I command my ship or nobody does.”

]]> By: Richard Kline http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18556 Richard Kline Tue, 30 Sep 2008 21:57:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18556 So Stephen Meigs, I half agree with you; the first half. We do need to _close_ insolvent banks. That is different than letting them fail, whereby their unwinds can be disorderly; better to seize failing banks, and do a controlled burn. Yes, that may be somewhat more expensive for the public, but the increase in stability derived is worth it. I also couldn't agree more strongly that the first fulcrum of a public intervention in the financial crisis involves making the deposit guarantees rock solid, and unquestioned. This is not even so much a question of fairness, or a desire to favor middle class depositors over wealth class lenders. We have to know what the solid assets are in the banking system, and guaranteeing appropriate levels of deposits draws a fence around assets that will and deserve to be defended. Bankers aren't going to buy deposits (and thereby keep the banking system running), if they know those deposits have no backstop, either. <br/><br/>I'm opposed to birdshot stimulus proposals, however. We have had over-consumption in the US, and we have to get our consumption figured out differently. Such proposals are mondo expensive, but with quite transitory gains, and not even necessarily good ones. The best focus for the expense of public funds is in _targeted_ lending to keep the banking system and real economy going. That may not feel like much 'relief' to us average taxpayers, but it will support the job market better, and keep realistic home mortgages and car loans available at the retail level, i.e. match consumer borrowing with consumer cash flow. This matters far more than getting a $500 check for Christmas. A stimulus plan should be more Johnny Appleseed than Nick the Saint. [And I know that Appleseed isn't that good a metaphor in reality, but let's leave it there.] So Stephen Meigs, I half agree with you; the first half. We do need to _close_ insolvent banks. That is different than letting them fail, whereby their unwinds can be disorderly; better to seize failing banks, and do a controlled burn. Yes, that may be somewhat more expensive for the public, but the increase in stability derived is worth it. I also couldn’t agree more strongly that the first fulcrum of a public intervention in the financial crisis involves making the deposit guarantees rock solid, and unquestioned. This is not even so much a question of fairness, or a desire to favor middle class depositors over wealth class lenders. We have to know what the solid assets are in the banking system, and guaranteeing appropriate levels of deposits draws a fence around assets that will and deserve to be defended. Bankers aren’t going to buy deposits (and thereby keep the banking system running), if they know those deposits have no backstop, either.

I’m opposed to birdshot stimulus proposals, however. We have had over-consumption in the US, and we have to get our consumption figured out differently. Such proposals are mondo expensive, but with quite transitory gains, and not even necessarily good ones. The best focus for the expense of public funds is in _targeted_ lending to keep the banking system and real economy going. That may not feel like much ‘relief’ to us average taxpayers, but it will support the job market better, and keep realistic home mortgages and car loans available at the retail level, i.e. match consumer borrowing with consumer cash flow. This matters far more than getting a $500 check for Christmas. A stimulus plan should be more Johnny Appleseed than Nick the Saint. [And I know that Appleseed isn't that good a metaphor in reality, but let's leave it there.]

]]> By: Richard Kline http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18554 Richard Kline Tue, 30 Sep 2008 21:47:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18554 I completely agree with FT Alphaville's observation, that massive, _cheap_, unquestioned central bank liquidity has exacerbated credit shortages. The idea of a lender of last resort from its inception was to lend freely _to sound banks_, AT PENALTY RATES. This is excactly what Bernanke and Paulson _have not done_, which only illustrates the extent to which they are in the industry's vest pocket. Bernanke's Easy Facilities are all buttered carrots and no stick. Even dead banks can post rotting collateral at far above market rates. Why would the banks lend to each other at all when they can get everything they want and more from Sugar Daddy? <br/><br/>There is no threat to take out insolvent banks, either. Oh, if a bank is in actual collapse before our eyes, the authorities will act---to save their counterparties in similar shape, not the liquefying firms. Over and over from Paulson in various contexts we hear how 'important it is for interventions not to be punitive.' Important to WHOM?? By coddling broke banks, Paulson has destroyed spreads, and is threatening lending activity in the real economy. His philosophy is a failure, but that should come as no surprise. He's a caddy for the industry, and as the bubble shows they _cannot_ save themselves from themselves. And just so now, as in the industry's Easy Facilitation and Preferred Proposal, the industry's language will not save themselves from themselves.<br/><br/>Credit spreads are undoubtedly tightened by end of quarter issues as well. But beyond that, there seems to me more than a whiff of a 'lenders strike' as well. These big financials _WILL_ get their bailout, and will hold the real economy hostage until they do, with the Fed's No-Question terms putting _the industry_ in the driver's seat. This is exactly why we need a public slice of the banking industry to lend to the real economy when lenders go on strike. Lead, follow, or get out of the way, but don't lie down in the middle of the highway screaming for another bottle. I completely agree with FT Alphaville’s observation, that massive, _cheap_, unquestioned central bank liquidity has exacerbated credit shortages. The idea of a lender of last resort from its inception was to lend freely _to sound banks_, AT PENALTY RATES. This is excactly what Bernanke and Paulson _have not done_, which only illustrates the extent to which they are in the industry’s vest pocket. Bernanke’s Easy Facilities are all buttered carrots and no stick. Even dead banks can post rotting collateral at far above market rates. Why would the banks lend to each other at all when they can get everything they want and more from Sugar Daddy?

There is no threat to take out insolvent banks, either. Oh, if a bank is in actual collapse before our eyes, the authorities will act—to save their counterparties in similar shape, not the liquefying firms. Over and over from Paulson in various contexts we hear how ‘important it is for interventions not to be punitive.’ Important to WHOM?? By coddling broke banks, Paulson has destroyed spreads, and is threatening lending activity in the real economy. His philosophy is a failure, but that should come as no surprise. He’s a caddy for the industry, and as the bubble shows they _cannot_ save themselves from themselves. And just so now, as in the industry’s Easy Facilitation and Preferred Proposal, the industry’s language will not save themselves from themselves.

Credit spreads are undoubtedly tightened by end of quarter issues as well. But beyond that, there seems to me more than a whiff of a ‘lenders strike’ as well. These big financials _WILL_ get their bailout, and will hold the real economy hostage until they do, with the Fed’s No-Question terms putting _the industry_ in the driver’s seat. This is exactly why we need a public slice of the banking industry to lend to the real economy when lenders go on strike. Lead, follow, or get out of the way, but don’t lie down in the middle of the highway screaming for another bottle.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18518 Anonymous Tue, 30 Sep 2008 19:19:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18518 guys:<br/><br/>You should understand that the market is ahead of the news. So,<br/>why are you spending your time talking about the past when you could profited from it. You have to be ahead of the curve.<br/><br/>I wrote yesterday that you should buy the bottom towards the close. Some wrote that I was an idiot to buy the bottom at close. It has made a lot of money.<br/><br/>Now it is time to take profits. A call to this effect has just been issued at financialtraders.blogspot.com . 80 NDX profits in less than 5 hours of trading (NDX is around 1500 range). Do the maths folks. Make sure you receive the information that fills your pockets. That is the name of the game.<br/><br/><br/>http://financialtraders.blogspot.com/2008/09/nq-qqqq-ndx-qid-stock-trading-profit.html guys:

You should understand that the market is ahead of the news. So,
why are you spending your time talking about the past when you could profited from it. You have to be ahead of the curve.

I wrote yesterday that you should buy the bottom towards the close. Some wrote that I was an idiot to buy the bottom at close. It has made a lot of money.

Now it is time to take profits. A call to this effect has just been issued at financialtraders.blogspot.com . 80 NDX profits in less than 5 hours of trading (NDX is around 1500 range). Do the maths folks. Make sure you receive the information that fills your pockets. That is the name of the game.

http://financialtraders.blogspot.com/2008/09/nq-qqqq-ndx-qid-stock-trading-profit.html

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18497 Anonymous Tue, 30 Sep 2008 17:47:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18497 I certainly hope the current financial crisis doesn't lead to the demise of YouTube. Right now it's possibly one of the USA' most valuable exports (along with microprocessors). I certainly hope the current financial crisis doesn’t lead to the demise of YouTube. Right now it’s possibly one of the USA’ most valuable exports (along with microprocessors).

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18494 Anonymous Tue, 30 Sep 2008 17:35:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18494 I don't buy the reason that the market is up because of bailout hopes. Yesterday the market was down about 400 points before the vote. This is bargain hunting. I don’t buy the reason that the market is up because of bailout hopes. Yesterday the market was down about 400 points before the vote. This is bargain hunting.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18493 Anonymous Tue, 30 Sep 2008 17:21:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18493 [URL=http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3104666/Banking-crash-hits-Europe-as-ECB-loses-traction.html]Telegraph. uk[/URL]......<br/><br/>"The ECB is no longer able to inject liquidity because the money is just coming back to them again. This is extremely serious. If monetary policy is no longer working, there is a risk that the whole system will blow up in days," he said. [URL=http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3104666/Banking-crash-hits-Europe-as-ECB-loses-traction.html]Telegraph. uk[/URL]……

“The ECB is no longer able to inject liquidity because the money is just coming back to them again. This is extremely serious. If monetary policy is no longer working, there is a risk that the whole system will blow up in days,” he said.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18489 Anonymous Tue, 30 Sep 2008 16:57:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18489 I can't get through to my Congressman, are other people having trouble with democracy? Do these people only come to town when they need votes?<br/><br/>http://www.house.gov/dicks/<br/><br/>If anyone gets through, can you tell him he's an idiot! I can’t get through to my Congressman, are other people having trouble with democracy? Do these people only come to town when they need votes?

http://www.house.gov/dicks/

If anyone gets through, can you tell him he’s an idiot!

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock.html#comment-18488 Anonymous Tue, 30 Sep 2008 16:55:00 +0000 http://www.nakedcapitalism.com/2008/09/libor-surges-to-nearly-7-but-us-stock-futures-rise-on-bailout-bill-revival-hopes/#comment-18488 The L.A. Times front page today is more shameful doom-saying hyperbole. The L.A. Times and NPR still replay the message they got straight from Cheney's office. <br/><br/>Guess what? The sun came up and most markets are working. This is what a national-scale deleveraging looks like.<br/><br/>Right now, the S&P is trading at about the average trend over the entire history of the index. It will probably go down a little more as more deleveraging is worked out of the U.S. The sun will rise again tomorrow and markets will trade again.<br/><br/>The Fed needs to force the trust issue somehow. Right now banks don't have to lend to anyone. They just go to the central bank. The L.A. Times front page today is more shameful doom-saying hyperbole. The L.A. Times and NPR still replay the message they got straight from Cheney's office.

Guess what? The sun came up and most markets are working. This is what a national-scale deleveraging looks like.

Right now, the S&P is trading at about the average trend over the entire history of the index. It will probably go down a little more as more deleveraging is worked out of the U.S. The sun will rise again tomorrow and markets will trade again.

The Fed needs to force the trust issue somehow. Right now banks don't have to lend to anyone. They just go to the central bank.

]]>