Market calm shattered: Dow closes down almost 400 points on rate fears

[ckaihatsu]

http://www.usatoday.com/story/money/markets/2016/09/09/stocks-dow-friday/90114650/

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Market calm shattered: Dow closes down almost 400 points on rate fears
Adam Shell, USA TODAY 5:17 p.m. EDT September 9, 2016



Stocks sold off sharply Friday on concerns that the Federal Reserve is getting closer to raising interest rates. Video provided by TheStreet Newslook

AP APTOPIX FINANCIAL MARKETS WALL STREET F A USA NY
(Photo: Richard Drew, AP)
The market calm on Wall Street was shattered Friday as stocks suffered their biggest slide since Brexit on fears an interest rate hike is around the corner.

The return of volatility was sparked by comments from Federal Reserve Bank of Boston president Eric Rosengren that suggests a September rate hike might not be totally off the table. The so-called "hawkish" commentary follows the European Central Bank decision this week to keep rates at current levels – a disappointment to investors who thought an additional stimulus was needed to get the eurozone economy moving again.


USA TODAY
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At the market close, the Dow Jones industrial average was down 394.46 points at 18,085.45 – its worst one-day drop since the 610-point slide on June 24 after the United Kingdom voted to leave the European Union – as investors fretted over the prospect of getting less support from the world's central banks.

The broad Standard & Poor's 500 index closed down 2.5%, ending a 52-trading day streak of not closing down 1% or more. The Nasdaq composite, which had its stretch of record closes snapped Thursday, fell 2.5%.

In a speech earlier Friday, Rosengren said: "My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy."

Those words rattled investors who had pretty much written off an interest rate increase at the Fed's Sept. 20-21 meeting following the weaker-than-expected August jobs report. Although Rosengren did not specifically mention September, his words leave the door open to a rate hike sooner than many investors expected. Low rates have been a key driver of higher stock prices.

John Canally, chief economic strategist for LPL Financial, said both the stock and bond markets have been "underpricing" the risk of a Fed rate hike this year, either in September or December. But Friday's sell-off puts the market more in sync with a Fed move sometime in 2016.

"We think at a 1-in-3 chance of a September hike and a 2-in-3 chance of a hike in December, that the market has now appropriately priced in a Fed rate increase," Canally told USA TODAY.


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Prior to Friday's decline, it had been a quiet period for stocks, with volatility very low, a development that was starting to make some investors nervous. Heading into Friday's session the S&P 500 had gone more than 50 trading days without a drop of 1% or more, only the 48th time that has happened since 1950, according to Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence.

So what's next? According to history "after going 50 days without a 1%+ decline, the S&P 500 slipped an average 1.5% in the following 20 trading days and fell in price two out of every three times," Stovall wrote.

A closely watched Wall Street "fear" gauge, dubbed the VIX, jumped 39% to a level of 17.33. It was the CBOE volatility index's highest level since June 28. Still the daily bump up in fear Friday was less than the 52% rise on June 24 after the Brexit vote on June 23.

But Canally says the return of volatility may be here to stay. "Volatility, which has been abnormally low since mid-February, may begin to pick up as we approach the election and move closer to the end of the business cycle," he says.

Interest rates on long-term U.S. government bonds also shot up on fears of a coming rate hike, perhaps as early as the Fed's Sept. 20-21 meeting. The yield on the 10-year Treasury bond ticked up as high as 1.675, its highest level since June 24, when shocked markets reacted to the Brexit vote a day earlier.

Some market pros say investors should not overreact to Friday's sell-off.

"Right now, the biggest risk investors face isn't volatility but the urge to overreact to it; keep calm and carry on," says Brad McMillan, chief investment officer at Commonwealth Financial Network.

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[ckaihatsu]

http://www.wsws.org/en/articles/2016/09/13/fedr-s13.html


Turbulence returns to financial markets

By Nick Beams

13 September 2016

Volatility is returning to global bond and equity markets amid growing concerns over how much longer the flood of cheap money from the US Fed and other major central banks can continue to fuel their rise.

Last Friday, the Dow Jones index fell by almost 400 points following the European Central Bank decision the previous day not to further lower it base interest rates and its silence on whether to extend its quantitative easing program, which has already seen €1 trillion injected into financial markets, beyond March 2017.

Even more significant than the slide on the share markets was the shift in bond markets as yields began to rise and their price fell (the two bear an inverse relationship to each other).

Over the past year the flood of cheap money into financial markets, coupled with the lowering of interest rates, has seen the creation of a massive bubble such that $13 trillion worth of government bonds are now trading at negative yields. This means that their price is so high that an investor purchasing a bond and holding it maturity would make a loss.

This phenomenon means that the international market has been turned into a giant casino in which bonds are purchased on the basis that their price will rise still further and speculators will be able to make capital gains. However, if prices fall and yields begin to increase, they will incur significant losses.

That was in evidence on Friday. The yield on the US 10-year treasury bonds rose to 1.67 percent compared to a low its low of 1.46 percent it had reached several weeks earlier. In the past few days, the yield has increased by 0.15 percentage points, a significant movement. In Europe, yields on some German bonds, which had been negative, moved into positive territory for the first time in several months.

Another factor in Friday’s share market slide was remarks from members of the Fed’s open market committee that sets its base rate indicating they were in favour of an increase. Consequently all eyes on Monday were focused on a speech by Federal Reserve governor, Lael Brainard, a voting member of the open market committee. Brainard is considered to be a “dove,” that is, favouring a cautious approach on lifting rates, and so a turn by her would have almost certainly have sent the markets falling.

In the event, Brainard stuck to her previous line and the markets got the comment they wanted to hear, with the Dow Jones up by 239 points and recovering more than half of its losses on Friday. After reviewing the economic and financial situation and deflationary pressures in Europe and Asia Brainard said: “Today’s new normal counsels prudence in the removal of policy accommodation.”

Immediately after her comment, the futures market priced in a 15 percent chance of a rate rise when the Fed next meets on September 21, down from 24 percent two days earlier.

Significantly, the yield on bonds did not fall. One reason may have been a prediction by Goldman Sachs, one of the world’s largest bond market traders, that prices could fall further, with yields rising to 2 percent by the beginning of 2017. A rapid increase implies major losses for speculators who have gambled on their continuing decline as a result of central banks policies.

Apart from its immediate impact on the share market, Brainard’s speech was significant because of the picture it painted of the US and global economy and the growing perplexity at the top levels of the financial establishment over what to do next in view of the evident failure of the policies adopted since the financial crash of 2008 to end what is being recognised as ongoing stagnation.

Dealing with a series of interrelated phenomena, dubbed the “new normal”—other observers, such as former US treasury secretary Lawrence Summers, point to “secular stagnation”—she began by noting that a “sustained period” of undershooting the Fed’s inflation target of 2 percent could not be ruled out “along with global deflationary pressures that are weighing on inflation expectations.”

Labor market slack on the US had been greater than anticipated, she said, pointing to the lower participation rate in the labour force, which could be an expression of the “very slow recovery in job opportunities and wages.”

Financial transmission from foreign markets was strong and the disinflationary pressures and weak demand from abroad “will likely weigh on the US outlook for some time to come,” with “fragility” in global markets poising risks for the American economy.

Japan remained “greatly challenged” by weak growth and low inflation as is Europe and the experience from these economies highlighted the risk of becoming trapped in a “low-growth, low-inflation” environment. “Downside risks” were also present in emerging markets and growth in China was slowing.

Turning to the US economy, Brainard said it has been becoming increasingly clear that the so-called neutral rate of interest—the rate which neither stimulates the economy nor depresses it—remained “considerably and persistently lower than it was before the crisis.”

Highlighting the shift that has taken place, she said given the underlying relationships that prevailed at the time it would have seemed inconceivable ten years ago that with the Fed rate at or near zero, growth and inflation could have remained as low as they have.

One of the factors contributing to lower growth, and hence a fall in the neutral rate, is the sharp fall in productivity growth. In the years from 1950 to 2000 productivity, Brainard noted, had risen at an annual average rate of 2.5 percent. In the past five years it had only increased on average at a rate of 0.5 percent.

Brainard concluded her remarks with a discussion of policy options. Under the “new normal,” with interest rates near zero and likely to return there because of the lower neutral rate, the measures available to the Fed, were asymmetric. In other words, while the Fed can use interest rates to lower demand, they cannot be employed to lift it.

Neither Brainard nor any other members of the financial establishment have any alternative economic or financial measures to counter the present situation and so are continuing to fuel financial markets with cheap money, even as they know that this will create the conditions for ever greater turbulence and potentially another crisis.

[Red Terror Dr.]

I haven't been paying attention to the markets. Thanks for the notice.

[ckaihatsu]

I haven't been paying attention to the markets. Thanks for the notice.


No prob.

My pet theory here is that market activity *would* -- in the current situation -- boil down to nothing but psychology and jitters over whether The Fed will raise the interest rate or not, meaning whether speculators will continue to get inflows of public funds so as to stave-off outright collapse of the financial system through a locking-up of liquidity and prevailing rampant deflation.

As things are now savers (an economic faction) (vs. liquidity-needing investors) are getting *screwed* on their rentier-based ownership because the returns from interest rates are so low, or even negative. (The negative-rate regimes force pure speculation as an economic activity since there's nothing safe / promising long-term anymore.) And of course actual equity investors (the other economic faction) have little to nothing around for *their* normal activity of returns-on-productive-investments-over-time.

The economic maneuvering space is getting tighter and tighter, and at some time there has to be a tipping point where the speculative bubble around government debt *pops*, with prices then falling due to a run for the exits. The sudden withdrawal of funds and accompanying sharp increase in risk of holding government debt would effectively un-hinge Wall Street from the U.S. state, to interesting socio-political results.

[ckaihatsu]

If markets believe that monetary policy could be tightened, even if only slightly, this could send bond yields rising and bond prices falling (the two move in opposite directions), leading to losses for speculators who have banked on the continuation of ever-cheaper money. In the past week or so, bond yields have started to rise on the basis that the policies of the major central banks are running out of steam.


---


The problems facing Chinese authorities are being compounded by low global growth and the apparent slowing of the US economy.
The Financial Times reported yesterday that US imports from China dropped “sharply” in July, “in the latest sign that that the engine of growth for the world’s developing economies is sputtering.”

According to figures from the US Federal Reserve, US merchandise imports from China have been contracting in value terms since March and in volume terms since April.

Elissa Braunstein, an economist at the UN Conference on Trade and Development, described the result as “extraordinary,” given that reports of US growth and a higher dollar should boost the American demand for imports.

“It is going to be much harder in future [for emerging market exporters]. If exports are going to deliver the growth they promised, you really need external demand,” she said.

http://www.wsws.org/en/articles/2016/09/20/econ-s20.html

[willowtooth]

the bond price dont care what the fed say they will go up and down regardless, stocks are at record highs a little drop every now and then is fine there maybe some problems like 2 years from now but there is no reason to expect any dramatic stuff right now

[ckaihatsu]

the bond price dont care what the fed say they will go up and down regardless, stocks are at record highs a little drop every now and then is fine there maybe some problems like 2 years from now but there is no reason to expect any dramatic stuff right now


The significance of all of this is 'How to maintain liquidity / funding of the markets when all funds just get locked up right away in private, immobile accounts, resulting in deflation.' There's a dearth of productive investment opportunities available, so the regular paradigm of steady, productive economic growth from capital loans is *not* what's happening any more. Recall the primitive accumulation of capital -- that dynamic is *still* in effect. It never ended.

So Western / developed countries continue with their use of public funds as 'electricity' for 'jumpstarting' their economies -- 'quantitative easing' -- but the productive-investment cycle isn't taking hold. Public funds continue to flow in as welfare for the rich, essentially, that empirically have no 'multiplier effect (https://en.wikipedia.org/wiki/Fiscal_multiplier)'.

We have to ask what's providing the confidence for continued practices of present-day investments, as into U.S. Treasuries. Right now it's the 'quantitative easing' -- the public funds that continue to undergird the daily economic activity of almost sheer speculation on just the prices of government debt themselves (like tulips, or anything else).

So the government is using public monies to give to financial speculators to bet on and buoy the economics of the government. (Why not just give the public monies to the *public*, according to unmet humane demands, and cut out the circuitous route of the money into finance / speculation altogether -- ?)

Since the markets aren't political, what's to keep the government *solvent* if, due to a near-future sudden sea-change in speculative confidence, capital *ceases* to buy government debt and is even *withdrawn* from the government -- ? (Recall that such purchases of government debt are purely *speculative*, meaning that the buying activity is directly dependent on the price continually going higher and higher.)





In the past week or so, bond yields have started to rise on the basis that the policies of the major central banks are running out of steam.




http://www.wsws.org/en/articles/2016/09/20/econ-s20.html


Bond yields have been *low* (near-zero, or even *negative*) because of the dependence of global capital on 'safe havens' like government debt, which is usually stable and gives long-term returns based on its yield. These current low yields also correlate to *high prices* since there's so much capital chasing after it -- speculation on the financial asset purely as a generic tradable commodity, like tulips (https://en.wikipedia.org/wiki/Tulip_mania).

[willowtooth]

The significance of all of this is 'How to maintain liquidity / funding of the markets when all funds just get locked up right away in private, immobile accounts, resulting in deflation.' There's a dearth of productive investment opportunities available, so the regular paradigm of steady, productive economic growth from capital loans is *not* what's happening any more. Recall the primitive accumulation of capital -- that dynamic is *still* in effect. It never ended.
you better get to dancing, you gotta figure out how to get these rich people's money somehow

So Western / developed countries continue with their use of public funds as 'electricity' for 'jumpstarting' their economies -- 'quantitative easing' -- but the productive-investment cycle isn't taking hold. Public funds continue to flow in as welfare for the rich, essentially, that empirically have no 'multiplier effect (https://en.wikipedia.org/wiki/Fiscal_multiplier)'.your basically making a Keynesian argument here


We have to ask what's providing the confidence for continued practices of present-day investments, as into U.S. Treasuries. Right now it's the 'quantitative easing' -- the public funds that continue to undergird the daily economic activity of almost sheer speculation on just the prices of government debt themselves (like tulips, or anything else).The confidence to invest in US treasuries ,comes from the instability of all the other alternatives. Its the safest place to invest, even if you lose money on treasuries you would have probably lost a lot more in equities or even another countries debt. In some countries you can buy their debt in hopes of making a short term profit, since there is larger risk of a financial collapse or full scale default, but the larger wealthier markets dont have those investors, since there is no short term profits to be made on government treasuries in Japan or the USA


So the government is using public monies to give to financial speculators to bet on and buoy the economics of the government. (Why not just give the public monies to the *public*, according to unmet humane demands, and cut out the circuitous route of the money into finance / speculation altogether -- ?) I dont agree with that assessment you make it sound as if the government prints money and hands it off to investment bankers to decide where it should be spent and they get a cut. You would need a massive government owned banking network with branches in every city and massive amounts of financial analysis done on a daily basis, in order to produce similar results. you however could have a small infrastructure bank that invests in railroads or airlines, but that again would be a form of corporate welfare to those industries and supporting industries as well. If it wanted to build a railroad it would either have to sell the railroad after its built, for a discount, or have it managed through a government owned railroad department, which would either have to buy, compete or outright confiscate the financial assets of all its competitors in the railroad industry, and that would be a problem


Since the markets aren't political, what's to keep the government *solvent* if, due to a near-future sudden sea-change in speculative confidence, capital *ceases* to buy government debt and is even *withdrawn* from the government -- ? (Recall that such purchases of government debt are purely *speculative*, meaning that the buying activity is directly dependent on the price continually going higher and higher.)

not really since treasuries aren't usually bought in hopes of profit. They are used as collateral more often than not, if they go down in value by any large measure, the whole system would collapse. so its really the safest thing you can buy for $10 billlion, safer than gold or diamonds for example



Bond yields have been *low* (near-zero, or even *negative*) because of the dependence of global capital on 'safe havens' like government debt, which is usually stable and gives long-term returns based on its yield. These current low yields also correlate to *high prices* since there's so much capital chasing after it -- speculation on the financial asset purely as a generic tradable commodity, like tulips (https://en.wikipedia.org/wiki/Tulip_mania). tulips were an equity crisis though, its different with debt. They were strongly based on a consumer trend and on something that had no long term value (biodegradable flower bulbs), nobody bought tulips with the hope of holding on to them for decades and making a profit from them that way, or using them as collateral to get a bank loan. Gold was purchased because if your government collapsed and its currency was deemed less valuable than the paper its written on, then you would still have gold which would have value almost everywhere. Not so with tulips.

[ckaihatsu]

you better get to dancing, you gotta figure out how to get these rich people's money somehow


Well *they* certainly don't need it.... (grin)


US corporate tax cheats hiding $1.4 trillion in profits in offshore accounts

https://www.wsws.org/en/articles/2016/04/15/oxfa-a15.html


---





So Western / developed countries continue with their use of public funds as 'electricity' for 'jumpstarting' their economies -- 'quantitative easing' -- but the productive-investment cycle isn't taking hold. Public funds continue to flow in as welfare for the rich, essentially, that empirically have no 'multiplier effect (https://en.wikipedia.org/wiki/Fiscal_multiplier)'.





your basically making a Keynesian argument here


No, I'm just *mentioning* the empirical situation, without commenting (aside from the 'welfare for the rich' part).


philosophical abstractions



http://s6.postimg.org/cw2jljmgh/120404_philosophical_abstractions_RENDER_sc_12_1.j pg (http://postimg.org/image/i7hg698j1/full/)


---





The confidence to invest in US treasuries ,comes from the instability of all the other alternatives. Its the safest place to invest, even if you lose money on treasuries you would have probably lost a lot more in equities or even another countries debt.


Yes.





In some countries you can buy their debt in hopes of making a short term profit, since there is larger risk of a financial collapse or full scale default, but the larger wealthier markets dont have those investors, since there is no short term profits to be made on government treasuries in Japan or the USA


I think you're missing the reality that *any* commodity can be treated as a vehicle for capital gains, based on the price (going upwards) itself.





Automated trading system

An automated trading system (ATS) is a computer program that creates orders and automatically submits them to a market center or exchange.

Automated trading systems are often used with electronic trading in automated market centers, including electronic communication networks, "dark pools", and automated exchanges.[1] Automated trading systems and electronic trading platforms can execute repetitive tasks at speeds with orders of magnitude greater than any human equivalent. Traditional risk controls and safeguards that relied on human judgment and manual speeds that were appropriate to manual and/or floor-based trading environments, must now be automated to evaluate and control automated trading.[2]

Use in trading[edit]

As of 2014, more than 75 percent of the stock shares traded on United States exchanges (including the New York Stock Exchange and NASDAQ) originate from automated trading system orders.[3][4] ATSs can be designed to trade stocks, options, futures and foreign exchange products based on a predefined set of rules which determine when to enter an order, when to exit a position and how much money to invest in each trading product. Trading strategies differ; some are designed to pick market tops and bottoms, others to follow a trend, and others involve complex strategies including randomizing orders to make them less visible in the marketplace.




https://en.wikipedia.org/wiki/Automated_trading_system


---





So the government is using public monies to give to financial speculators to bet on and buoy the economics of the government. (Why not just give the public monies to the *public*, according to unmet humane demands, and cut out the circuitous route of the money into finance / speculation altogether -- ?)





I dont agree with that assessment you make it sound as if the government prints money and hands it off to investment bankers to decide where it should be spent and they get a cut.


You're correct -- I oversimplified a little in the description. The end result is the same, though.

Here's the *technical* process:





Quantitative easing

Quantitative easing (QE) is a monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective.[1][2][3][4] A central bank implements quantitative easing by buying financial assets from commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply.[5][6] This differs from the more usual policy of buying or selling short-term government bonds to keep interbank interest rates at a specified target value.[7][8][9][10]

Expansionary monetary policy to stimulate the economy typically involves the central bank buying short-term government bonds to lower short-term market interest rates.[11][12][13][14] However, when short-term interest rates reach or approach zero, this method can no longer work.[15] In such circumstances, monetary authorities may then use quantitative easing to further stimulate the economy by buying assets of longer maturity than short-term government bonds, thereby lowering longer-term interest rates further out on the yield curve.[16][17]




https://en.wikipedia.org/wiki/Quantitative_easing


---





You would need a massive government owned banking network with branches in every city and massive amounts of financial analysis done on a daily basis, in order to produce similar results.


At face-value you're describing *central banking*:


https://en.wikipedia.org/wiki/Central_bank


But if economics truly became contained within the government over decades and centuries I don't think *currency* (market-based abstract valuations of exchange-value) would continue to be used. If all material matters were *internal* to the government monopoly it could just *issue* production appropriately and the market mechanism would probably wither away over time.





you however could have a small infrastructure bank that invests in railroads or airlines, but that again would be a form of corporate welfare to those industries and supporting industries as well. If it wanted to build a railroad it would either have to sell the railroad after its built, for a discount, or have it managed through a government owned railroad department, which would either have to buy, compete or outright confiscate the financial assets of all its competitors in the railroad industry, and that would be a problem


It's called 'Amtrak':





The National Railroad Passenger Corporation, doing business as Amtrak /ˈæmtræk/, is a passenger railroad service that provides medium- and long-distance intercity service in the contiguous United States. Founded in 1971 to take over most of the remaining U.S. passenger rail services, it is partially government-funded yet operated and managed as a for-profit corporation.[1]




https://en.wikipedia.org/wiki/Amtrak


---





Since the markets aren't political, what's to keep the government *solvent* if, due to a near-future sudden sea-change in speculative confidence, capital *ceases* to buy government debt and is even *withdrawn* from the government -- ? (Recall that such purchases of government debt are purely *speculative*, meaning that the buying activity is directly dependent on the price continually going higher and higher.)





not really since treasuries aren't usually bought in hopes of profit. They are used as collateral more often than not, if they go down in value by any large measure, the whole system would collapse. so its really the safest thing you can buy for $10 billlion, safer than gold or diamonds for example


The current situation, though, is one in which government debt is being treated like junk bonds and just traded for potential capital gains -- the price is pushed higher and higher, which is *unsustainable* over the long term since it's just pure commodity-speculation.

(Also take a look at the Dow Jones activity since the 9th -- it's *stagnating*, at best.)





tulips were an equity crisis though, its different with debt. They were strongly based on a consumer trend and on something that had no long term value (biodegradable flower bulbs), nobody bought tulips with the hope of holding on to them for decades and making a profit from them that way, or using them as collateral to get a bank loan.


But government debt is now being treated the same way -- what good is government debt in the long-term if no one has any long-term *confidence* in it, because the underlying growth (GDP) simply isn't there -- ?





Gold was purchased because if your government collapsed and its currency was deemed less valuable than the paper its written on, then you would still have gold which would have value almost everywhere. Not so with tulips.


Okay, but gold isn't as *elastic* as currency, etc. -- yes, gold is up in 2016 versus the U.S. dollar, but there has to be some economic *activity* (rentier rent-based *returns* and/or equity investments for production and *profit*) for capital, in any form, to make any sense.

[willowtooth]

I think you're missing the reality that *any* commodity can be treated as a vehicle for capital gains, based on the price (going upwards) itself.


in theory, yes your right



You're correct -- I oversimplified a little in the description. The end result is the same, though.an alternative could be the complete nationalization of the US banking system.



It's called 'Amtrak':
Amtrak is a publicly backed for profit corporation, I'm talking about an infrastructure bank that could loan money to fund roads bridges schools, etc. So instead of profits going to the CEO of XYZ bank it goes to fund some kind of public works program, creating a tangible asset with as you called it a multiplier effect.



The current situation, though, is one in which government debt is being treated like junk bonds and just traded for potential capital gains -- the price is pushed higher and higher, which is *unsustainable* over the long term since it's just pure commodity-speculation.

(Also take a look at the Dow Jones activity since the 9th -- it's *stagnating*, at best.)

they're decreasing transactions costs, the same way creating a paper currency to buy and trade gold lowered the transaction costs from the old method of trading physical gold. its the new technology and automation thats causing the trend of HFT's trading securities rather than a decrease in regulation, like the one that led to the debt crisis of 2008 or the completely unregulated price crash of tulip mania



But government debt is now being treated the same way -- what good is government debt in the long-term if no one has any long-term *confidence* in it, because the underlying growth (GDP) simply isn't there -- ?It isnt any good, thats why the credit rating systems like moody's and fitch, are in charge of determining whether or not we should have confidence in investing in US debt, or Euro debt or Zimbabwean debt.



Okay, but gold isn't as *elastic* as currency, etc. -- yes, gold is up in 2016 versus the U.S. dollar, but there has to be some economic *activity* (rentier rent-based *returns* and/or equity investments for production and *profit*) for capital, in any form, to make any sense.im saying there is no major increase in volatility or trading activity for us treasuries (and that would be something thats hard to measure either way). Speculation on treasuries is nothing new the dow and the S&P are at record highs. Bond prices will change regardless of what the federal reserve does, when the fed changes interest rates its in response to what they believe the price will be in the future, so if they dont raise or lower interest rates they will go up and down either way. So what is more important here is why are people and institutions buying paper rather than inventory, payroll, real estate etc. Why is the dow jones, the S&P and GDP at record highs but wages are stagnant and basically the same since the 1980's?

[ckaihatsu]

I think you're missing the reality that *any* commodity can be treated as a vehicle for capital gains, based on the price (going upwards) itself.





in theory, yes your right


Then I'll return to the initial point:





The significance of all of this is 'How to maintain liquidity / funding of the markets when all funds just get locked up right away in private, immobile accounts, resulting in deflation.' There's a dearth of productive investment opportunities available, so the regular paradigm of steady, productive economic growth from capital loans is *not* what's happening any more.


---





I dont agree with that assessment you make it sound as if the government prints money and hands it off to investment bankers to decide where it should be spent and they get a cut. You would need a massive government owned banking network with branches in every city and massive amounts of financial analysis done on a daily basis, in order to produce similar results. you however could have a small infrastructure bank that invests in railroads or airlines, but that again would be a form of corporate welfare to those industries and supporting industries as well. If it wanted to build a railroad it would either have to sell the railroad after its built, for a discount, or have it managed through a government owned railroad department, which would either have to buy, compete or outright confiscate the financial assets of all its competitors in the railroad industry, and that would be a problem





You're correct -- I oversimplified a little in the description. The end result is the same, though.





an alternative could be the complete nationalization of the US banking system.


I would welcome this action, of course, as a way to cut against Wall-Street-oriented privatizations, but it would still just be a *reform*, and not a *solution*. (Many would howl at this kind of Big Brother approach since the control would ultimately be in the hands of a professional bureaucracy, even if subject to democratic voting. Also the overall dynamics / mechanics of the market-based for-profit system would still exist, presumably, which would favor the rich.)





Amtrak is a publicly backed for profit corporation, I'm talking about an infrastructure bank that could loan money to fund roads bridges schools, etc. So instead of profits going to the CEO of XYZ bank it goes to fund some kind of public works program, creating a tangible asset with as you called it a multiplier effect.


Sure -- again, good reform, but it's not a revolutionary solution.


---





The current situation, though, is one in which government debt is being treated like junk bonds and just traded for potential capital gains -- the price is pushed higher and higher, which is *unsustainable* over the long term since it's just pure commodity-speculation.

(Also take a look at the Dow Jones activity since the 9th -- it's *stagnating*, at best.)





they're decreasing transactions costs, the same way creating a paper currency to buy and trade gold lowered the transaction costs from the old method of trading physical gold.


Yes -- a corollary would be 'better liquidity', per transaction.

But I'll repeat that the hazard here is this unsustainable cycle and expectation of government-funds-to-bolster-the-markets-so-that-growth-can-happen-so-that-the-government-recoups-its-deficit-spending-and-the-economy-becomes-self-sustaining-and-adds-to-the-government-coffers.

As things are now public funds are being directly *privatized* by market participants with no return guarantee that such funds will jump-start the overall economy.





its the new technology and automation thats causing the trend of HFT's trading securities rather than a decrease in regulation, like the one that led to the debt crisis of 2008 or the completely unregulated price crash of tulip mania


I'm not sure what your *point* is here, if any.


---





But government debt is now being treated the same way -- what good is government debt in the long-term if no one has any long-term *confidence* in it, because the underlying growth (GDP) simply isn't there -- ?





It isnt any good, thats why the credit rating systems like moody's and fitch, are in charge of determining whether or not we should have confidence in investing in US debt, or Euro debt or Zimbabwean debt.


Here's a little recent history on that:





Credit rating agencies (CRAs) — firms which rate debt instruments/securities according to the debtor's ability to pay lenders back — played a significant role at various stages in the American subprime mortgage crisis of 2007-2008 that led to the Great Recession of 2008-2009. The new, complex securities of "structured finance" used to finance subprime mortgages could not have been sold without ratings by the "Big Three" rating agencies — Moody's Investors Service, Standard & Poor's, and Fitch Ratings. A large section of the debt securities market — many money markets and pension funds — were restricted in their bylaws to holding only the safest securities — i.e securities the rating agencies designated "triple-A".[1] The pools of debt the agencies gave their highest ratings to [2] included over three trillion dollars of loans to homebuyers with bad credit and undocumented incomes through 2007.[3] Hundreds of billions of dollars' worth of these triple-A securities were downgraded to "junk" status by 2010,[1][4][5] and the writedowns and losses came to over half a trillion dollars.[6][7] This led "to the collapse or disappearance" in 2008-9 of three major investment banks (Bear Stearns, Lehman Brothers, and Merrill Lynch), and the federal governments buying of $700 billion of bad debt from distressed financial institutions.[7]




https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis


---





im saying there is no major increase in volatility or trading activity for us treasuries (and that would be something thats hard to measure either way).


What -- ?

U.S. Treasuries are *bonds* and are measurable in U.S. dollars.

Their yields (long-term bonds) have *dropped*, consistently, year-to-year (2015 to 2016).





Speculation on treasuries is nothing new the dow and the S&P are at record highs.


You're talking about two different things here.





Bond prices will change regardless of what the federal reserve does, when the fed changes interest rates its in response to what they believe the price will be in the future, so if they dont raise or lower interest rates they will go up and down either way. So what is more important here is why are people and institutions buying paper rather than inventory, payroll, real estate etc. Why is the dow jones, the S&P and GDP at record highs but wages are stagnant and basically the same since the 1980's?


Sure, I appreciate your point about wages, but you're glossing over the significance of this particular, current economic situation.

[willowtooth]

I would welcome this action, of course, as a way to cut against Wall-Street-oriented privatizations, but it would still just be a *reform*, and not a *solution*. (Many would howl at this kind of Big Brother approach since the control would ultimately be in the hands of a professional bureaucracy, even if subject to democratic voting. Also the overall dynamics / mechanics of the market-based for-profit system would still exist, presumably, which would favor the rich.)
The real cut against wall st privatization is the technological advancements ousting most of them from the industry the article you posted earlier shows that 75% of trading activity is now handled by computers, the era of the ivy league frat boy with a bought and paid for degree that he cheated to get, getting to make the decisions that govern that financial markets is over. Now you see its computers and their engineers, and more and more of "wall st" is just becoming a server room. While we were all focused on demonizing the financial sector during the 2008 recession many people didn't notice the massive closures and collapses of financial firms on wall st (and all over the world).



Sure -- again, good reform, but it's not a revolutionary solution.
Oh you want revolutionary solutions? I thought you were trying to critique the federal reserve. which is not revolutionary. the right wing has been trying to tear down the federal reserve since we got off the gold standard. So you understand where im coming from.



Yes -- a corollary would be 'better liquidity', per transaction.

But I'll repeat that the hazard here is this unsustainable cycle and expectation of government-funds-to-bolster-the-markets-so-that-growth-can-happen-so-that-the-government-recoups-its-deficit-spending-and-the-economy-becomes-self-sustaining-and-adds-to-the-government-coffers.I agree with what your saying just not the way your saying it. Its not the expectation of government funds it the reliance by the institutions themsleves on government funds, for security. Rather than risk spending it, which as i said before is going to stop in about 2 years. The FOMC is not going to raise rates until there is atleast 80% of their economic indicators pointing in the right direction. therefore institutions wont move their funds from treasuries into buying riskier investments. Deficit spending itself is being recouped more form the fact that US is allowing the dollar to weaken, allowing them to pay back their debt cheaper than they normally would. Not whether or not exxon mobil is buying treasury bonds instead of new equipment, land, new employees etc


As things are now public funds are being directly *privatized* by market participants with no return guarantee that such funds will jump-start the overall economy.I disagree, they absolutely have done that. QE brought the US economy out of the recession and rescued them from another great depression. Its been 8 years and its worked, now we can argue what are the possible long term consequences from the past 8 years, and what other decisions like full or partial nationalization of the financial sector shouldve been made, but saying that QE has not jump started the economy is false. The idea that this policy will continue infinitely is false, barring a nuclear attack or something the USA has about 2 more years to raise its rates back up to around 4% and they will. There is nothing suggesting they will keep rates low (or even could)





What -- ?

U.S. Treasuries are *bonds* and are measurable in U.S. dollars.

Their yields (long-term bonds) have *dropped*, consistently, year-to-year (2015 to 2016).

yes but there is nothing suggesting that there is inflated value based on speculation (thats what your saying right?) which is a real problem with the equity market, not with the debt or treasury market right now



Sure, I appreciate your point about wages, but you're glossing over the significance of this particular, current economic situation.Yes and im doing that because there is nothing about the current economic situation that requires critique or analysis of the federal reserve or central banking system. This is a scapegoat and a distraction. Conspiracy theories usually laced with anti-semitism have been spread since the 2008 collapse, nobody talked about the federal reserve before the recession, if it was so important to the overall economy, or if poor old janet yellen's judgement was some kind of major deciding factor in global economics. We would've always been discussing it. It is tabloid journalism and right wing conspiracies that have led to all the nonsense about the federal reserve.

If you look on any right wing media you will find rantings and ravings about the federal reserve from cnbc to fox news to the wall st journal, it is a great scapegoat because its hard to understand. People with masters degrees in finance have trouble understanding how the federal reserve works, or even explain it to the layman, much less have the ability to critique QE. Unless your the next John Nash and your telling me your a math genius and your going to genuinely and academically critique the federal reserve system or present an alternative to it, then that would be something i would be very interested in hearing (although admittedly wouldn't understand)

However spreading his fear of the scary central banks and their confusing judgement callls, and throwing out big numbers about trillions of dollars in debt and quadrillions of dollars in the derivative market is nothing more than conspiracy theory and it feeds into that public fear the more you talk about it because most of what your saying (or even understanding ) is complete nonsense. A red flag needs to go off in your mind whenever you hear somoone talking about the federal reserve. There needs to be bigger discussion like how can we put bankers in jail how can we expand labor unions to become international unions. How do we fight against protectionist economic policies. Not how do we get the average person to rebel against poor old janet yellen and the boring banking beuracracy known as the federal reserve there is nothing sinister about them or their actions. They do not have evil motives any more than the postmaster general does. The fact that they have so much influence over the economy is because of necessity not greed

[ckaihatsu]

The real cut against wall st privatization is the technological advancements ousting most of them from the industry the article you posted earlier shows that 75% of trading activity is now handled by computers, the era of the ivy league frat boy with a bought and paid for degree that he cheated to get, getting to make the decisions that govern that financial markets is over. Now you see its computers and their engineers, and more and more of "wall st" is just becoming a server room. While we were all focused on demonizing the financial sector during the 2008 recession many people didn't notice the massive closures and collapses of financial firms on wall st (and all over the world).




Oh you want revolutionary solutions? I thought you were trying to critique the federal reserve. which is not revolutionary. the right wing has been trying to tear down the federal reserve since we got off the gold standard. So you understand where im coming from.


Well, this is telling -- such a libertarian-type stance as 'pro-gold-standard' is actually *conservative* since it puts the person in the 'savers' (rentiership) economic faction (vs. equity capital), and shows them to be economic-history-*backward*, since only the providing of *equity* capital can actually lead to productive activities and economic growth (whereas rentier capital *cannot*).





I agree with what your saying just not the way your saying it. Its not the expectation of government funds it the reliance by the institutions themsleves on government funds, for security. Rather than risk spending it, which as i said before is going to stop in about 2 years. The FOMC is not going to raise rates until there is atleast 80% of their economic indicators pointing in the right direction. therefore institutions wont move their funds from treasuries into buying riskier investments.


Okay.





Deficit spending itself is being recouped more form the fact that US is allowing the dollar to weaken, allowing them to pay back their debt cheaper than they normally would. Not whether or not exxon mobil is buying treasury bonds instead of new equipment, land, new employees etc


Hmmmm, *fully* recouped, just from a weaker dollar -- ? My understanding is that total world trade is slipping, so the simple velocity / volume may not be there anymore. Also, *many* countries weakening their own currencies in the same way is what leads to world war, incidentally.





I disagree, they absolutely have done that. QE brought the US economy out of the recession and rescued them from another great depression. Its been 8 years and its worked, now we can argue what are the possible long term consequences from the past 8 years, and what other decisions like full or partial nationalization of the financial sector shouldve been made, but saying that QE has not jump started the economy is false. The idea that this policy will continue infinitely is false, barring a nuclear attack or something the USA has about 2 more years to raise its rates back up to around 4% and they will. There is nothing suggesting they will keep rates low (or even could)


I disagree -- the economy is running on fumes, and is fully dependent on government backing of whatever speculative-type gambles go bad and require re-capitalization. Look at the reporting I provided at post #5 which shows the whole financial *system* at the government teat while becoming downright neurotic on the slim *chance* that the U.S. will raise the interest rate even slightly.


---





U.S. Treasuries are *bonds* and are measurable in U.S. dollars.

Their yields (long-term bonds) have *dropped*, consistently, year-to-year (2015 to 2016).





yes but there is nothing suggesting that there is inflated value based on speculation (thats what your saying right?) which is a real problem with the equity market, not with the debt or treasury market right now


My understanding is that since the *yields* on these bonds are so low, that correlates to a prevailing paradigm of *high prices* (demand outpacing supply) -- I'm certain many equity markets are overvalued as well, but so is the government bond / debt market, as well. (Capital has nowhere to go so it 'comes home' into 'safe' nationalistic assets -- 'economic nationalism' -- despite the returns being negligible or even negative.)





Yes and im doing that because there is nothing about the current economic situation that requires critique or analysis of the federal reserve or central banking system. This is a scapegoat and a distraction. Conspiracy theories usually laced with anti-semitism have been spread since the 2008 collapse, nobody talked about the federal reserve before the recession, if it was so important to the overall economy, or if poor old janet yellen's judgement was some kind of major deciding factor in global economics. We would've always been discussing it. It is tabloid journalism and right wing conspiracies that have led to all the nonsense about the federal reserve.


So there's *zero* valid discussion space around these national-economic developments -- ?

From a left-wing perspective, it's better to have an *elastic* currency / economics, as with floating dollars, rather than an *inelastic* one tied to non-performing gold or whatever. Deflation is bad enough without tying everyone down to something that requires *mining minerals* in order to expand the money supply.





If you look on any right wing media you will find rantings and ravings about the federal reserve from cnbc to fox news to the wall st journal, it is a great scapegoat because its hard to understand. People with masters degrees in finance have trouble understanding how the federal reserve works, or even explain it to the layman, much less have the ability to critique QE. Unless your the next John Nash and your telling me your a math genius and your going to genuinely and academically critique the federal reserve system or present an alternative to it, then that would be something i would be very interested in hearing (although admittedly wouldn't understand)


You're welcome. (grin)

It's actually not a 'math' thing, it's more of a *procedural* thing, with variables that may have positive or inverse relationships to others.

At this point I'd say just read and re-read the Wikipedia entries about the Federal Reserve, quantitative easing, etc. -- I'll also recommend the website critiqueofcrisistheory.wordpress.com.

I'll add that, from (our) *political* perspective, we have to ask 'What will provide the greatest amount of abundance to everyone on earth?', and then turn our nominal (short-term) positions in that direction. If the government intervenes in the economy to *increase* the money supply, as with quantitative easing, that means relatively more opportunities for equity capital to participate in some regard, even if the whole economic environment is basically at a standstill anyway. (It's a *nominal* position.)

We certainly know that *removing* the government's ability to provide cheap investment capital to the markets -- the proposal of shutting-down The Fed -- would be *contrary* to populist-type political demands for a general material availability.

Of course, to us, this would be nothing more than a *tactic*, at most, since we remain solidly critical of the capitalist system as a whole, since its foremost concern is always with supplying the *profit* pay-off to those who handle material matters, excluding labor itself.





However spreading his fear of the scary central banks and their confusing judgement callls, and throwing out big numbers about trillions of dollars in debt and quadrillions of dollars in the derivative market is nothing more than conspiracy theory and it feeds into that public fear the more you talk about it because most of what your saying (or even understanding ) is complete nonsense. A red flag needs to go off in your mind whenever you hear somoone talking about the federal reserve. There needs to be bigger discussion like how can we put bankers in jail how can we expand labor unions to become international unions. How do we fight against protectionist economic policies. Not how do we get the average person to rebel against poor old janet yellen and the boring banking beuracracy known as the federal reserve there is nothing sinister about them or their actions. They do not have evil motives any more than the postmaster general does. The fact that they have so much influence over the economy is because of necessity not greed


Agreed, and the toughest part will be combatting protectionist economic policies. *This* is the domain where prevailing politics is now playing out, I would say, instead of the relatively-crude jingoistic and xenophobic nationalist politics of the historical past (though that kind does continue to exist, and is at least *attempted*, per expectations, as by the likes of Trump).

[ckaihatsu]

http://www.wsws.org/en/articles/2016/09/23/ecbd-s23.html

[willowtooth]

Well, this is telling -- such a libertarian-type stance as 'pro-gold-standard' is actually *conservative* since it puts the person in the 'savers' (rentiership) economic faction (vs. equity capital), and shows them to be economic-history-*backward*, since only the providing of *equity* capital can actually lead to productive activities and economic growth (whereas rentier capital *cannot*).whats the difference between rentier capital and equity capital?



Hmmmm, *fully* recouped, just from a weaker dollar -- ? My understanding is that total world trade is slipping, so the simple velocity / volume may not be there anymore. Also, *many* countries weakening their own currencies in the same way is what leads to world war, incidentally.
not fully no, but too the extent that some are saying the USA is already in default and since dollar acts as a reserve currency its much different than if china or Saudi arabia devalues theres





I disagree -- the economy is running on fumes, and is fully dependent on government backing of whatever speculative-type gambles go bad and require re-capitalization. Look at the reporting I provided at post #5 which shows the whole financial *system* at the government teat while becoming downright neurotic on the slim *chance* that the U.S. will raise the interest rate even slightly.


they're gambling on short term returns that is true, but long term returns aren't really an issue, they make bets essentially on whether they will raise interest rates, or not. So theyre are just as many betting that they will keep interest the same



My understanding is that since the *yields* on these bonds are so low, that correlates to a prevailing paradigm of *high prices* (demand outpacing supply) -- I'm certain many equity markets are overvalued as well, but so is the government bond / debt market, as well. (Capital has nowhere to go so it 'comes home' into 'safe' nationalistic assets -- 'economic nationalism' -- despite the returns being negligible or even negative.)
thats correct but as treasury rates pay lower interest rates investors look for returns in the equity market, so if they can get 4% investing in the micrsoft stock and only 1.5% return on a bond they may still buy bonds for security but they will be much more eager too buy stocks which is why the equity market is overvalued. Once they raise rates the stock market will fall thats why they are hesitant to do it. ive heard doom and gloom stories about the stock market being over valued so much that if they raise rates to 4% the stock market would be cut by as much as 50%.



So there's *zero* valid discussion space around these national-economic developments -- ?

From a left-wing perspective, it's better to have an *elastic* currency / economics, as with floating dollars, rather than an *inelastic* one tied to non-performing gold or whatever. Deflation is bad enough without tying everyone down to something that requires *mining minerals* in order to expand the money supply.in the sense that there is room for criticizing israel. theres nothing wrong with it and shouldn't escape criticism. but it definitely gets too much negative attention as it is. So separating valid critics from nonsense is more important right now then trying to come up with a new criticism entirely


You're welcome. (grin)

It's actually not a 'math' thing, it's more of a *procedural* thing, with variables that may have positive or inverse relationships to others.

At this point I'd say just read and re-read the Wikipedia entries about the Federal Reserve, quantitative easing, etc. -- I'll also recommend the website critiqueofcrisistheory.wordpress.com (http://critiqueofcrisistheory.wordpress.com).seems interesting ill give it a look


I'll add that, from (our) *political* perspective, we have to ask 'What will provide the greatest amount of abundance to everyone on earth?', and then turn our nominal (short-term) positions in that direction. If the government intervenes in the economy to *increase* the money supply, as with quantitative easing, that means relatively more opportunities for equity capital to participate in some regard, even if the whole economic environment is basically at a standstill anyway. (It's a *nominal* position.)

We certainly know that *removing* the government's ability to provide cheap investment capital to the markets -- the proposal of shutting-down The Fed -- would be *contrary* to populist-type political demands for a general material availability.

Of course, to us, this would be nothing more than a *tactic*, at most, since we remain solidly critical of the capitalist system as a whole, since its foremost concern is always with supplying the *profit* pay-off to those who handle material matters, excluding labor itself.
exactly, dont throw the baby out with the bathwater. Also, there might an argument to be made from a socialist perspective about tying a nations economy to the HDI which is something they dont currently do. If credit ratings factored in infant mortality or life expectancy it would provide motivations for wall st to improve those things, using the metrics they have today, legalizing slavery would make their ratings go higher



Agreed, and the toughest part will be combatting protectionist economic policies. *This* is the domain where prevailing politics is now playing out, I would say, instead of the relatively-crude jingoistic and xenophobic nationalist politics of the historical past (though that kind does continue to exist, and is at least *attempted*, per expectations, as by the likes of Trump).whats wrong with international unions? outsourcing and immigration would be less of a problem if you could unionize labor across borders.

- - - Updated - - -


http://www.wsws.org/en/articles/2016/09/23/ecbd-s23.html
the ecb has been a disaster ever since switzerland left the eu

[ckaihatsu]

whats the difference between rentier capital and equity capital?





Hence the extraordinary growth of a class, or rather, of a stratum of rentiers, i.e., people who live by 'clipping coupons' [in the sense of collecting interest payments on bonds], who take no part in any enterprise whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies.[7]

It therefore becomes clear that the term "rentier capitalism" could not be coined by Marxists simply because of redundancy of the words composing it. Marxist thought perceives capitalism as inherently "rentier", or usury-based, which would lead eventually to its demise precisely because of this inner deficiency in its organization.

Current usage[edit]

Probably because presently capitalism is perceived in a positive light,[8] current usage of the term rentier capitalism is often derogatory and opposed to "normal" capitalism such as free enterprise and private enterprise.




https://en.wikipedia.org/wiki/Rentier_capitalism


---





Hmmmm, *fully* recouped, just from a weaker dollar -- ? My understanding is that total world trade is slipping, so the simple velocity / volume may not be there anymore. Also, *many* countries weakening their own currencies in the same way is what leads to world war, incidentally.





not fully no, but too the extent that some are saying the USA is already in default and since dollar acts as a reserve currency its much different than if china or Saudi arabia devalues theres


The U.S. can't be in 'default', for the reason you're stating -- the U.S. will continue to be an attractive 'safe haven' for capital, also due in part to its military 'protection' services to other countries.

What's *more* telling these days regarding countries' economic health is their debt-to-GDP ratios since all advanced countries are using deficit spending (Keynesianism) and racking up unprecedented levels of government debt.

https://en.wikipedia.org/wiki/Debt-to-GDP_ratio





they're gambling on short term returns that is true, but long term returns aren't really an issue, they make bets essentially on whether they will raise interest rates, or not. So theyre are just as many betting that they will keep interest the same


You're not understanding the *significance* of this kind of economic activity -- the foreseeable 'horizon' for *all* investments is getting shorter and shorter, meaning that there's less *stability* and overall *maneuverability* if the activity is no longer long-term investments for actual material productivity and profits on equity capital.

Today's prevailing low-interest-rate regime means that market activity is *flooded* with available cheap capital, but there are no good avenues to go to for *investing* that capital. So the ongoing government provision of liquidity / underwriting of *bad economic avenues* is equivalent to *funding the markets*, when the whole market economic system is supposed to be *self-sustaining* and *growth-oriented*, and isn't supposed to be dependent on public funds.





thats correct but as treasury rates pay lower interest rates investors look for returns in the equity market, so if they can get 4% investing in the micrsoft stock and only 1.5% return on a bond they may still buy bonds for security but they will be much more eager too buy stocks which is why the equity market is overvalued. Once they raise rates the stock market will fall thats why they are hesitant to do it. ive heard doom and gloom stories about the stock market being over valued so much that if they raise rates to 4% the stock market would be cut by as much as 50%.


My understanding is that the landscape of potential returns on equity investments is *very sparse* right now -- as verified by your "excitement" over a 4-percent return.

As long as the government is providing cheap capital (low interest rates) the regime of casino capitalism (pure speculation) can continue, but the *real economy* (of material-productive activity) just continues to stagnate.


---





So there's *zero* valid discussion space around these national-economic developments -- ?

From a left-wing perspective, it's better to have an *elastic* currency / economics, as with floating dollars, rather than an *inelastic* one tied to non-performing gold or whatever. Deflation is bad enough without tying everyone down to something that requires *mining minerals* in order to expand the money supply.





in the sense that there is room for criticizing israel. theres nothing wrong with it and shouldn't escape criticism. but it definitely gets too much negative attention as it is. So separating valid critics from nonsense is more important right now then trying to come up with a new criticism entirely


What's all this about Israel -- ? You're definitely off-topic. (And I'm pro-BDS, by the way.)


---





I'll add that, from (our) *political* perspective, we have to ask 'What will provide the greatest amount of abundance to everyone on earth?', and then turn our nominal (short-term) positions in that direction. If the government intervenes in the economy to *increase* the money supply, as with quantitative easing, that means relatively more opportunities for equity capital to participate in some regard, even if the whole economic environment is basically at a standstill anyway. (It's a *nominal* position.)

We certainly know that *removing* the government's ability to provide cheap investment capital to the markets -- the proposal of shutting-down The Fed -- would be *contrary* to populist-type political demands for a general material availability.

Of course, to us, this would be nothing more than a *tactic*, at most, since we remain solidly critical of the capitalist system as a whole, since its foremost concern is always with supplying the *profit* pay-off to those who handle material matters, excluding labor itself.





exactly, dont throw the baby out with the bathwater. Also, there might an argument to be made from a socialist perspective about tying a nations economy to the HDI which is something they dont currently do. If credit ratings factored in infant mortality or life expectancy it would provide motivations for wall st to improve those things, using the metrics they have today, legalizing slavery would make their ratings go higher


And what's this -- ? You're *apologizing* for capitalism, and saying that it can somehow be *reformed*. This is *not* the statement of a revolutionary.





whats wrong with international unions? outsourcing and immigration would be less of a problem if you could unionize labor across borders.


The prevailing corporatist major trade unions are *not* really international -- they favor nationalist labor-protectionist schemes that divide international laborers from each other for the sake of *national* identity.





the ecb has been a disaster ever since switzerland left the eu


You're not understanding that the dynamics for the ECB are the same as for the U.S. or any other major advanced economy.

[ckaihatsu]

---





As the British Daily Telegraph commented, if the German government does not stand behind the bank, then other banks and financial institutions will start to be very nervous in dealing with it. “As we know from 2008, once confidence starts to evaporate, a bank is in big, big trouble” and “if Deutsche goes down, it is looking increasingly likely that it will take Merkel with it – and quite possibly the euro as well.”

Like a flock of vultures, hedge funds have been circling with a number of them shorting Deutsche Bank shares in the expectation they will rapidly fall.

Whatever the final amount of the fine, Deutsche Bank would almost certainly have to raise additional capital to meet it. But here it encounters a major problem because the low and even negative interest rate regime of the European Central Bank has hit the business models of all major banks. As one commentator on the US CNBC business channel noted: “How do you raise more capital if your profits are declining?”




If Deutsche Bank were to fail it would not stop there. Because of its connections with other banks and financial institutions, the effects would rip through the entire European financial system and extend globally. No one knows the full extent of the consequences but some commentators have already pointed to the possibility of a “Lehman moment” – a reference to the collapse of the US investment bank Lehman Brothers which sparked the global collapse of 2008.




The crisis over Deutsche Bank points to two interconnected processes. First, far from having been resolved, all the contradictions of the global financial system that exploded eight years ago not only remain, but have worsened. Second, that despite all rhetoric about cooperation and collaboration issuing from major economic summit meetings of world leaders, the global economy and financial system is increasingly becoming a battleground of each nation against all.




http://www.wsws.org/en/articles/2016/09/27/deut-s27.html

[ckaihatsu]

http://www.wsws.org/en/articles/2016/10/31/bond-o31.html