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However, all those losses that have occurred in the financial industry compared to the funds being injected into to, the losses are still substantially higher, but wouldn't this also might suggest that the market was over valued to begin with? A bubble that is merely in the process of correcting itself? If that is the case or even part of the case, then by injecting funds in an attempt to return to something more of this level be a re inflation of that bubble?
There is no doubt that the market was over valued. If I understand your question correctly, the interjection wasn't to revalue assets to their previous, but to buy troubled assets at above fire sale price and to hold them "to maturity" levels. The idea, as I understand it, was that if these toxic assets were simply written off or sold at far below market value, confidence (see foreign investors) would have fled US financial markets.
There is no doubt that the market was over valued. If I understand your question correctly, the interjection wasn't to revalue assets to their previous, but to buy troubled assets at above fire sale price and to hold them "to maturity" levels. The idea, as I understand it, was that if these toxic assets were simply written off or sold at far below market value, confidence (see foreign investors) would have fled US financial markets.
Ok, I can get my mind around this. So in order to prevent foreign investors who we now depend on to prop up our financial system, we pump cash into the system to prevent further collapse. Awesome, I understand the rational behind this, but what I don't seem to understand then is why have we become so dependent upon foreign sources of capital to maintain our financial system? If globalization of world economic systems is supposed to have the benefit of being a hedge or buffer to a variety of economic downturns or crisis, then why on earth have we become so dependent upon yet another source of foreign resources, in this case, capital?
Now if only inflation can wait to rear its head until after we buy a cheap house on a low fixed rate this upcoming summer (assuming no lay-offs). Sad to say, but inflation, if kept in check, would not be horrible in that case. Selfishly speaking , of course I know it's never a good thing overall.
I think the reason why the banks are hoarding TARP funds is because they are bordering on insolvency.
Nouriel Roubini,has estimated U.S. capital losses of $3.6 trillion, half at banks and broker-dealers. The total capitalization of U.S. banks is $1.4 trillion.
Inflation is currently postponed because people are saving money instead of spending.The rate of household saving as a percentage of disposable (after-tax) income rose a little above 2% in the second quarter of 2008.
Industries that depend on discretionary income such as new auto sales, restaurants, and trinket stores(circuit city, linens n things) will continue to suffer depressionary conditions. During the Great depression falling prices was due to a contraction of the money supply when the banks went under.
Food isn't discretionary and food prices are soaring, we will see the first signs of price inflation within various non-discretionary goods and services within the next two years..
I think the reason why the banks are hoarding TARP funds is because they are bordering on insolvency.
Nouriel Roubini,has estimated U.S. capital losses of $3.6 trillion, half at banks and broker-dealers. The total capitalization of U.S. banks is $1.4 trillion.
Inflation is currently postponed because people are saving money instead of spending.The rate of household saving as a percentage of disposable (after-tax) income rose a little above 2% in the second quarter of 2008.
Industries that depend on discretionary income such as new auto sales, restaurants, and trinket stores(circuit city, linens n things) will continue to suffer depressionary conditions. During the Great depression falling prices was due to a contraction of the money supply when the banks went under.
Food isn't discretionary and food prices are soaring, we will see the first signs of price inflation within various non-discretionary goods and services within the next two years..
Based upon absolutely nothing but a hunch, I expect to see inflation really take off by June-August of this year.
All those folks on CNBC, Bloomberg, etc... who said, all is well, its just a bump are now showing signs of despair and in some cases, something that resembles terror (deer in the headlights) Just this morning on one of these shows I'm listening to in the background, some guy goes off with... the market may have hit bottom, to which the reply from four other talking heads was... are you smoking crack.
So it seems that things are looking pretty gloomy and at best there is a sense of confusion and doubt as to how far this will all fall or how much further borrowing it is going to take to ease things.
If we look at the historical context that gold is a proxy for goods in general.
It seems to be above its usual relation with goods prices at present.
Its parity is probably around $600, but the price is $885. It has risen sharply. Gold is anticipating an inflation in goods prices to come.
Have a look at this chart, the almost vertical rise on the right is the inflationary damage being done by the Fed. St. Louis Fed: Series: M1, M1 Money Stock
If we look at the historical context that gold is a proxy for goods in general.
It seems to be above its usual relation with goods prices at present.
Its parity is probably around $600, but the price is $885. It has risen sharply. Gold is anticipating an inflation in goods prices to come.
Have a look at this chart, the almost vertical rise on the right is the inflationary damage being done by the Fed. St. Louis Fed: Series: M1, M1 Money Stock
I think gold is just a little unhooked at this moment, very overvalued. While I agree that it is generally an inflationary "mine canary", it has a very strong relationship to the price per barrel for oil, and it is way out of line. Either oil should double within the next few months, or gold should dive.
inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.
Few observers here at the World Economic Forum debate the need to restart America, the world's largest economy, with a package that could hit $1 trillion over two years. But the long-term danger of increased borrowing by the U.S. government, and its potential to drive up inflation and interest rates around the world, seems to be getting more attention in Switzerland than in Washington.
With the US economy continuing to contract, unemployment on the rise and borrowing at unprecedented levels, it seems the only people who are unconcerned about inflation or a falling dollar is the US. While the short term seems to be one of great concern and caution, long term outlook is beginning to look really grim.
I particularly enjoyed this line:
"The U.S. needs to show some proof they have a plan to get out of the fiscal problem," said Ernesto Zedillo
Considering that many are here right now wondering where much of the first 350 billion went to as it was just handed over in a fashion more resembling an 19th century train robbery than a transparent and well conceived plan.
Welcome to mans first attempt at a global economy based on little more than faith.
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, of course I know it's never a good thing overall.
