Tuesday, September 18, 2012

Pretty obvious what's going on at the Fed...


The banks have millions of bad loans. As I've posted several years ago, until these loans "disappear" from the books the banks are toast. And since they are owned pretty much by the people who own or governemnt they have priority.

What puts the screws to this is that the consumer is still bankrupt and can't borrow. Those of us who can are tapped out and are paying off old loans.  And since our economy revolves around borrowing and few are taking up the slack who needs banks? 

Is this rocket science? 

So what happens? We collectively pay off the debts and resume our middle class lifestyles. We then can borrow. When we borrow we create jobs. Leading to more borrowing. Leading to more job creating.

And that leads to full employment.

Why hasn't it happened? Too many people are bust and can't find a job that will pay the bills and leave enough left over,, called discretionary income, to buy and borrow to create these jobs.

For instance, firing cops, teachers, fireman, or not hiring them in the first place means that my Wamart's sales go down and the store cuts my hours and can't hire new people. What the Hell's wrong with this picture?

But it's the fraud that isn't being addressed. The gang in Washington will continue to bail out the banks because that's where the money is coming from. The same gang for the last 30 years  has got us in this mess and we will stay in this mess until the jails are full of big shots.

In the meantime, our politicians will argue over whether little rich princess' get free birth control, Romney has too many legal tax breaks, Oba mama is a closet Muslim, paying poor people enough to eat this week is bad for morale, the fast food restaurants are fattening our kids because we are to stupid to feed them nutritious food, oil companies are the enemy because they give us all the gas we need, balancing the budget by stealing geezers SS, VA and Medicare so we can keep killing little brown fuckers who can't find Jesus, and so on and so on!

Is QE3 Yet Another Stealth Bank Bailout? « naked capitalism

The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates. But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs…. A study published in February found that interest rates decreased, but only for companies with top credit ratings. “Rates that are highly relevant for households and many corporations — mortgage rates and rates on lower-grade corporate bonds — were largely unaffected by the policy,” wrote Arvind Krishnamurthy and Annette Vissing-Jorgensen, both finance professors at Northwestern University

QE3, Deflation and the Money Illusion | ZeroHedge

The first reason for sadness was the idea that people here in New York and elsewhere in the global financial community were actually surprised by the Fed’s move.  The FOMC is fighting deflation.  Credit continues to contract globally as much of the western world goes on a pure cash budget.  So while I would like to see the Fed raise short term rates, the fact is that the central bank has little choice but to support the markets.  But buying RMBS will neither help housing nor reverse the current deflationary spiral on which we all ride.  The second reason to be circumspect is the fact that the Fed’s leaders continue to pretend that driving down yields in the RMBS markets will have any impact on the housing sector or the economy.  The two thirds of the mortgage market that cannot refinance their homes will be unaffected by QE3.  In fact, the latest Fed purchases are a gift to Fannie Mae and Freddie Mac, the TBTF banks and the hedge fund community.  A fund on the floor of our offices in New York actually started dancing around like little children shouting “QE3” after the Bernanke press conference. “The entire move in MBS prices will go into profit margins,” one mortgage market veteran told the Berlin-New York-Los Angeles mortgage study group last week.  “FHFA has made sure that the mortgage market has oligopoly pricing and zero competition for the existing servicers.  QE3 is risk free profits for the unworthy.  And we wasted 40 years and Trillions of dollars fighting the USSR over the need for a free enterprise system?  Mussolini would be proud.”

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