reserve requirements is just a tool for monetary policy, its not supposed to be about risk or leverage in the banking system. thats what capital adequacy ratios are for
Not really a Ponzi scheme. Ponzi scheme is based on investors. When you deposit money in a bank, are you investing? No, you put it there for "safe-keeping". Fractional reserve banking has a long long history. And back in the day, those who employed this practice were stripped of all assets, run out of town, thrown in jail and even executed. It's far from obsolete, it has actually evolved to such a level that the more intelligent people are fooled easier than the common folk.
Been trading for sometime now. I trade oil futures and deal in private equity, so not on the same path as I was with Schonfeld and Last Atlantis. You are correct. There is a move during the fed annouc. then usally a big move a day or so after words. This huge up move, i figuer would happen but thought it might give way to more selling. I never took positions into the Fed, NEVER, only traded the moves after words, all ways got flat into 1:15. So, if I where trading equities, I would have missed most of this move to the upside anyways. nevertheless, we are in uncharted waters. Main Street has a huge unemployment storm yet to hit them in the first two quarters of 09. I highly doubt the market will be above 9000 going into 09, but then again, you never know. The fact of the matter is, 10% unemployment coming for sure, if not 14% on its way. The "Financial Sector" is toast and will be for some time. Key numbers come out tomorrow. Reality, 401ks are still toast and Madoff just triggered "Serious Regulations" coming for the Hedgefund Industry. Traders are falling like soldiers in battle, regardless of what the "ET" crowd tends to portray. Feds are now outa ammo as far as rate cuts. IMHO, market will give back all if not more of these gains before 1st quarter 09. But this is the best Volatility since the Russian Currency crash and the Tech Bubble bursting.
Perhaps Ponzi Scheme is a little harsh but I can't think of any positive way to describe a system that needs that next loan to support the last loan -- a system where money is created when a loan is created. If I had the time or desire I'd study the economic and monetary policies since the massive expansion began back in the mid-90's and compare them to previous decades. I have an idea what the conclusion would be but it would be an interesting investigation, nonetheless. Interestingly enough, the November bottom occurred right on the trend established by the normal movement that originated back in the 80's and early 90's. Perhaps the market is exactly where it is supposed to be right now. Chart attached below.
If you don't know your history, you're doomed to repeat it.... but how about when you're a historian like Bernwankie? It seems to me that when you put someone in charge who is an authority on the Great Depression, he attracts to himself what he knows best. I wish we had an authority on the Golden Age of Reagan. What I worry about is the extreme short-sightedness the Fed, Treasury, Congress, etc. are all caught up in. Don't they realize that re-inflating the situation will only put house prices out of reach for new home buyers and kill the retirement savings of the largest retirement group the U.S. has ever seen? I mean that is exactly what Japan has gone through, and it wasn't pretty. I think the economy should have been allowed to contract through most of 2009. Sure, we would have had to support 10% unemployment for a while but if the new administration would get us out of Iraq, forget about that damn Bin Laden, he won, we didn't, (although he gets to live in a cave) and spend money on new jobs instead of giving it away to banks, I really believe we would recover a lot better than this present plan, which I believe is completely idiotic. Fed up with the Fed, Pete PS: Sheila Behr is the only one I think who has made a positive difference.
What will all of the out of work soldiers do for work after they come home from Iraq? I think we will need two stimulus packages. One to boost the economy and another just to give our ex-soldiers something to do. Get ready for another boom cycle.
We should have more than enough money from savings from the war to stimulate a work program at home; I'm not too worried about that. The problem is the difficulty of ending that damn war. That is no easy task. Even if we confiscated all the guns, they'd end up throwing shoes at each other. (I think Bush either has great reflexes, by the way, or just loads of experience with people throwing stuff at him.) As far as Sheila Bair goes, and my apologies, I made an incorrect spelling of her last name in my original post, She helped to get failing banks merged with healthier banks, before we experienced a run and she increased the deposit insurance amount through 2009. That helped to restore some confidence and slowed the rapid rate of withdrawals that were happening in many major banking institutions. Pete
in the end they will destroy the $ through inflation. unemployment will be double digit and gnp will show little or negative growth.
I heard that crap on the news to about we are being more aggressive than Japan was but I'm not going to be too confident of a Fed that helped create a housing bubble under Greenspan and missed the 40:1 leveraging that fueled it to the point of collapse. If throwing all this money at the problem was the fix, the Fed could have done this a year ago. All they are doing is creating hellish debt that they plan to inflate themselves out of. Stupid idea to inflate commodities and watch Russia and China buy up the U.S. at 10 cents on the dollar seven years from now. Of course, it all depends on how the rest of the global economies attack this problem the U.S. is largely responsible for. Damn pseudo-socialistic system we are turning into. Pete