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Thread: Bubbles thread

  1. #1261
    Super Moderator LivinLOS's Avatar
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    Toward Stagflation | Bawerk.net

    Norway.. Another commodity driven economy with a housing / debt bubble.. Who knew ??

    Please note that Norway is heading straight into stagflation and at some point Norges Bank will be forced to tighten monetary policy into a weakening economy. The world should take note, because the real end game for central banks will come when they are constrained by rising inflation in a weakening economy. We all know what happened after the 1970s stagflation; and hiking rates to 20 per cent in an overleveraged world is a lot harder than it was back then.

    The small vulnerable economies will go down this route first, with the likes of Norway, Australia and Canada already struggling. While they are still on the side of monetary accommodation, that could change abruptly as exchange rates depreciate and inflation takes hold, just as their commodity dependent housing bubbles bursts and drags economic activity down with it; larger, more diversified, economies will be next.

  2. #1262
    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by Dupree View Post
    Obama Care did not cause the rise in rates. The Insurance Lobby did.
    Insurers are losing 100s of millions.. How is it their fault ??

  3. #1263
    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by sundancekid View Post
    As far as I recall though, 2017 was always going to see a substantial hike increase due to the new provisions kicking in. Of course, these preliminary numbers are excluding the subsidies, which means that the real effects will not be as large. Besides, it's not as if double-digit increases were unfamiliar before 2010..
    My point is not ACA per se.. My point was, those who are denying that real inflation is far above the gamed statistics..

    Look at the inflation in housing, in trophy assets, in art, cars, wine, Manhattan condos.. "Inflation is always and everywhere a monetary phenomenon" but the money this time is not being dispensed equally within the system (why you will probably soon hear Keynsians whose policy approach has got us into this mess, and whose constant solution to the problem is simply more of the same thing which hasnt worked.. Hammer and nail as I have constantly said.. Start promoting universal basic incomes and cash for the masses programs) so that the distribution of the excesses are kept within asset classes associated with the spending patterns of the recipients of the money..

  4. #1264
    Senior Member Dupree's Avatar
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    Quote Originally Posted by LivinLOS View Post
    Insurers are losing 100s of millions.. How is it their fault ??
    Your post said ObamaCare caused the rise in rates. I said it was happening well before Obamacare was a twinkle in his eye...
    “Vote for Trump and grab them by the poosy "

  5. #1265
    Super Moderator LivinLOS's Avatar
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    So its rising costs ?? Of 25% per annum.. While still saying theres 1 % price inflation ??

  6. #1266
    Super Moderator LivinLOS's Avatar
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    James Grant: «The Fed is now hostage to Wall Street» | International Selection | Finanz und Wirtschaft

    Well worth the time..
    Where do you see the biggest risks?
    Sovereign debt is my nomination for the number one overvalued market around the world. You are earning nothing or less than nothing for the privilege of lending your money to a government that has pledged to depreciate the currency that you’re investing in. The central banks of the world are striving to achieve a rate of inflation of 2% or more and you are lending certainly at much less than 2% and in many cases at less than nominal 0%. The experience of losing money is common in investing. But where is the certitude of loss even before your check clears? That’s the situation with sovereign debt right now.

    On a worldwide basis, more than a third of sovereign debt is already yielding less than zero percent.
    There is not quite a bestseller, but a very substantial book called «The History of Interest Rates». It was written by Sidney Homer and Richard Sylla. Sidney Homer is no longer with us, but Richard Sylla is alive and well at New York University. So I called him and said: « Richard, I’ve read many pages but not every single page in your book which traces the history of interest rates from 3000 BC to the present. Have you ever come across negative bond yields?» He said no and I thought that would be kind of a major news scoop: For the first time in at least 5000 years we have driven interest rates below the zero marker. I thought that was an exceptional piece of intelligence. But I notice however that nobody seems to have picked up on it.

    It’s now already two years ago since the ECB was the first major central bank to introduce negative rates.
    There are some other historical settings: In Europe, ​​Monte dei Paschi di Siena, this 500 and plus year old bank in Italy, is struggling and as broke as you can be without being legally broke. Monte dei Paschi has survived for half a millennium and now it is on the ropes. Meanwhile, the Bank of England is doing things today that it has never done in its history which is 300 plus years. So I suggest that these are at least interesting times and in many respects unprecedented ones.

    So what’s the true meaning of all this?
    In finance, mostly nothing is ever new. Human behavior doesn’t change and money is a very old institution and so are our markets. Of course, techniques evolve, but mostly nothing is really new. However, with respect to interest rates and monetary policy we are truly breaking new ground.

    Now central bankers are even talking openly about helicopter money. Will they really go for it?
    I already hear the telltale of beating rotor blades in the sky. I also hear the tom-toms of fiscal policy being pounded. There seems to be some kind of a growing consensus that monetary policy has done what it can do and that what me must do now – so say the «wise ones» – is to tax and spend and spend and spend. That seems to be the new big idea in policy. In any case, it is not good for bondholders.

  7. #1267
    Super Moderator LivinLOS's Avatar
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    For anyone who thinks QE has ended.. Theres more QE happening now than at any time..



    And for that global QE, destroying the bond market, destroying savers and pensioners, pushing the entire demographic hunting low risk fixed income into high risk highly speculative markets (tha always ends well) we get what ??

    Now the ECB is eating itself.. Selling itself bonds in a simple churn action.. Is the ECB Buying Bonds From Itself? - MoneyBeat - WSJ But get ready ?? With Draghi at the helm, and a desperate need to monetize MOAR debt.. Given theres no bond market left to talk about, its time to destroy any sense of price discovery in the Stock Market !! I mean where Japan goes (and fails !!) Europe is soon to follow..

    INVESTMENT FOCUS-Any ECB move into stocks unlikely to be plain sailing | Reuters

    The absolute refusal to see the obvious corner.. The mindset that just keeps pushing the 'it hasnt worked, so we much do much more of it' over and over.. Is just nuts..

    Just pushing more money into the system does not make economic growth.. That money needs to be used in productive investment into the future, it is the sound investment of money, into productive investments, that enabled growth.. Its the Keynsian cart before the horse, the burying money in mineshafts..

  8. #1268
    Super Moderator LivinLOS's Avatar
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    Why ObamaCare failed

    WOW.. That paints a bleak picture..

  9. #1269
    Senior Member sundancekid's Avatar
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    I particularly loved these two sections 555.

    The left has two ideas to overcome the adverse selection death spiral and create self-sustaining exchanges. Reinhardt's suggestion is to embrace the Swiss model, which involves imposing very stiff penalties on insurance scofflaws and then enforcing them harshly by garnishing wages. The other idea is creating a public option or a non-profit government-run insurance plan that would compete with the private underwriters on the exchanges and bring down prices.

    This would be tantamount to creating a single-payer system — a government-run monopoly. And the only thing worse than a private monopoly is a state monopoly. Indeed, single-payer systems in countries like Canada and Denmark only stay afloat by dipping deeply into public coffers and/or rationing care — defeating their whole purpose. Even if the left tried, it'll be nigh impossible to pull this off in a debt-ridden country already careening toward a massive entitlement spending crisis.
    Yes, there are indeed problems with the law. I have always mentioned the Swiss law as a functioning precedent, but that was not followed in terms of penalties. The biggest failure however was not to allow for a public option, which became politically toxic. I've always seen it as a first step though, and today 20 million more Americans have health insurance because of it. Whatever the next step will be, those are not suddenly going to be revoked.

    The biggest problem with health care has always been the diversity of the risk pool. If only sick people sign up it will invariably fail regardless of what system you have. The Swiss model actually works because of the steep penalties. And pretty much every other developed nation on earth has a version of single-payer. Ask any of those if they want to swap theirs for the old US system 555. It works simply because there is no larger or diverse risk pool than the entire population...
    Last edited by sundancekid; 4th September 2016 at 22:12.

  10. #1270
    Super Moderator LivinLOS's Avatar
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    20 million more may have coverage, at what cost to those who have to pay ?? What cost to the increases in cost, decreases in choice, worsening of service for those in the system.

    Its looking more and more like the predictions some of us made, on the costs, and what happens when risk cannot be controlled, are exactly what is now happening. The challenge will be what to do with it now.

  11. #1271
    Senior Member sundancekid's Avatar
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    20 million more with health insurance... as if that is not a big deal? We're talking about people's lives... The rate of insured citizens has increased to record high levels. Making people more healthy, and subsequently more productive.

    Yes, covering more people will invariably cost more money. Duh. Yet I will never be caught supporting a health care system still based primarily on private insurance plans. Curious to know exactly what health care system you believe the US should adopt? Moving in the right direction now with regard to the number of people having access to health care for the first time in their lives. So that's the first step. Proper allocation of funds is the next.

  12. #1272
    Super Moderator LivinLOS's Avatar
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    Quote Originally Posted by sundancekid View Post
    20 million more with health insurance... as if that is not a big deal? We're talking about people's lives... The rate of insured citizens has increased to record high levels. Making people more healthy, and subsequently more productive.
    If you legislate 100% coverage its done.. But at what cost.. if the cost of that, is a system that falls apart a few years later, reducing quality of care, or cost of care beyond the reach of the people involved, its hardy a success..

  13. #1273
    Senior Member sundancekid's Avatar
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    As I see it, there really is no fundamental economic argument against near-universal coverage. In Switzerland, you have the same building blocks as the ACA: An individual mandate, exclusively private insurers, subsidies for the poor, no discrimination against pre-existing conditions etc. etc. They have managed to obtain a 99% + coverage by spending the least amount per capita on health care in all of Europe.

    Of course, the US is not Switzerland... but that's a discussion for another day 555.

  14. #1274
    Senior Member Loop's Avatar
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  15. #1275
    Super Moderator LivinLOS's Avatar
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    Yeah theres crazy implications with ships full of product all around the world..

    Look at the baltic dry (or oil or any of the usual metrics) and show me where the result of all this global QE has fixed the system !!

  16. #1276
    Super Moderator LivinLOS's Avatar
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    Didnt someone say QE was finished ??

    more and more.jpg

  17. #1277
    Senior Member sundancekid's Avatar
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    Quote Originally Posted by LivinLOS View Post
    Didnt someone say QE was finished ??
    Correction 555. I've never claimed that QE was "finished". I was only focusing on the US, and correctly predicted the month they would begin tapering. Something you claimed would never happen... I never gave any predictions with regard to QE in Europe, Japan or China.

  18. #1278
    Super Moderator LivinLOS's Avatar
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    There is no taper.. 0.25% rise, in one location.. While the whole world monetizes balance sheets.. Is not normalization of rates..

    QE is not only not over, its happening faster than ever.. My prediction is we will soon enter QEx where x is near infinity.. All governments printing and talking about things like universal income and other ways to push MOAR cash into the system..

    When your models fail, rather than re-evaluate the models. Just keep doing more of whats failing.. I think I coined that years ago as 'when all you have is a hammer, everything starts to look like a nail"..
    Last edited by LivinLOS; 7th September 2016 at 01:18.

  19. #1279
    Senior Member sundancekid's Avatar
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    Quote Originally Posted by LivinLOS View Post
    There is no taper.
    Seriously LIL, you cannot just continue to invent your own facts or redefining terms. We've even covered this exact issue before. Again, my comments back in 2013 pertained only to the US.

    Tapering is the gradual winding down of central bank activities used to improve the conditions for economic growth.
    FACT: The US halted it's purchases of bonds in October 2014, something which your "aggregate" chart even supports. Selling off the bonds or "unwinding" is something completely different from tapering. Today they can just simply let the securities on their balance sheets go to maturity, which will reduce the balance sheet naturally over the course of time.

    Fed completes the taper

    The Federal Reserve ended its historic easing program Wednesday Oct 29 2014, ceasing the final $15 billion of monthly bond purchases it had made in an effort to keep the economic recovery going, in a statement that kindled market talk about a more hawkish central bank.
    Fed completes the taper

    For reference here's the exchange from June 2013. Clearly you were also referring to the US Federal Reserves:

    Quote Originally Posted by LivinLOS
    Consider this point..

    The government can only finance its current size or expansion with cheap credit.. they cannot sustain their current spending with conventional borrowing or tax revenue..

    So how can the fed taper.. and not also have government reduce size ?? Reducing the size of government will appear like 'austerity' even tho that term has been truly bastardized..

    So here we have the corner they are painted into.. Market prices have levitated (inflation no ??) purely on cheap credit.. Now after 5 years of these polices main street and the real economy has not improved.. Every other post war recession 60 months after the issue theres been a genuine recovery in the business cycle, but not this time !! Why ?? Because the economy is merely living on the 'stimulus' to increase borrowing when it should have paid down debt and restructured.

    So, if the policies are really going to taper, you can expect a proper market crash as the price level reverts to main streets output. If the fed tapers, government has to contract, as it cannot borrow or tax itself to fund it current size.. The 2 of these effects combined will dwarf what we have seen so far in real problems.

    So they wont taper.. Look at what happens at the hint of it..
    Quote Originally Posted by sundancekid
    If by that you mean that the US deficits of today will have to be somehow repaid by future generations, then well... that is one of those myths that just refuse to die.

    What the middle-class needs today are jobs that make them active consumers, with the odd nickle to spare. Gutting welfare programs only makes that equation worse, both for the employees and the overall economy.

    With regard to tapering, still think we'll see less Fed involvement in the months to come. Has nothing to do with the govt. contracting as the QE "money printing" (or whatever it's called) does not actually require funding. As the private economy improves --- albeit sluggishly --- the deficit will decrease and so will the Fed buy-backs. So certainly less QE in late 2014 than today.
    Last edited by sundancekid; 7th September 2016 at 03:32.

  20. #1280
    Super Moderator LivinLOS's Avatar
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    Tapering is the gradual winding down of central bank activities used to improve the conditions for economic growth.
    And clearly.. That has not happened.. Look at the charts..

    And you didnt say it was 'specifically related to the USA' I seem to recall you later admitting how 'surprised you were at how much was happening at other central banks'.. QE and monetary expansion is global, its happening in multiple direct and indirect ways, its not only not gone away, its happening at the fastest pace on record, the precise opposite of going away..

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