Dr. Duru on 12 October 2008 warns us that Zimbabwe Ben can "Print As Much As It Takes". Here's a link: http://www.drduru.com/money/081012_PrintAsMuchAsItTakes.htm.
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5 comments:
Thanks for the pointer. Duru noted that he was long SPY.
I question that the SPX components can keep up their earnings in this environment. Key to inflating SPY is maintaining or raising earnings. If earnings tank, there is nothing to keep SPY up, other than the perceived asset values. Bankrupt companies don't have a lot of asset values.
Take a look at retail for example. Other than Walmart, I could see virtually every other retailer go into bankruptcy. The recent Mervyn's bankruptcy is a portend. Macy's has already been there. Target would seem to be next on the weak list, noting that they owned Mervyn's at one point and are targeting the same market.
As for industrials, there I see a lot of gloom. Autos. Ha ha. Defense, say hello to Obama or belt tightening. Any money will go to military salaries, not more gadgets. Electronics & software? What is left in this country? There are a few defensible companies that will sustain, the rest will whither. Consumer goods? Not so good either since they will see price pressure at the likes of Walmart. Healthcare and drugs? Expect government interference.
The only up sector is government, and it is not in the SPY. Government will crowd out private industry. Look at the Obama plans to pillage corporate balance sheets. It will only push them offshore. With the unionization secret ballot ban, expect the auto industry to be nationalized permanently. Auto workers can join police, fire, and government employees on the gravy train. Expect the defense industry to be nationalized. After that you have the formula for hyperinflation with everyone on government controlled salaries.
So SPY, I cannot see it recovering except in a technical fashion where government interference like the Fed steps in to levitate it. The fundamentals are not there.
Oh yes, I forgot to mention the proposal floating around to tax 401Ks. That will really help the SPX. I can see how that would help raise GM out of possible bankruptcy.
Perhaps all of this bluster is designed to tank the market ahead of the election, and at the same time make the socialist base excited and tingly.
Perhaps Obama plans to say "I didn't mean what I said" again after the election. I suppose that is the one great hope that one can have is nothing Obama says has any meaning.
The Federal Reserve's balance sheet
On Thursday, the Federal Reserve issued its weekly H.4.1 report, which provides details of the Fed's balance sheet. Once upon a time, this was one of the least interesting of the government's many releases of data. These days, it's become one of the most exciting.
http://www.econbrowser.com/archives/2008/10/the_federal_res.html
Thanks Anonymous for the pointer. It was a great read. I felt like I was looking at Enron's balance sheet with off balance sheet nonsense, and horrendous complexity.
I still don't know what the fed has done.
All this nonsense about sterilization is junk. The only sterilization that can take place is raising bank reserve requirements, but even that is temporary.
As Keynes said: "In the long run we are all dead". When it comes to sterilization, "in the long run the additional federal debt is inflationary if it is not paid". Currently Federal debt is not being paid.
Sterilization gives me a headache...sure sign its nonsense.
500 economists in the Fed Reserve system... you would think they could craft more effective smokescreens...
Maybe they should hire some financial marketing specialists.
Or maybe we should do what Mr. Skeptical wants and repeal the 1913 Act... maybe in 2013... succumb to the dreaded Century Death disease..
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