Monday, November 11, 2013, Hitchhiker's
VUE
General Information and Analysis
Today, I will start this section
in order to state and analyze ideas that relate only to currencies in minor
ways. They are things I’m working on or
are concerned about.
Questions For Janet Yellen:
On Thursday this week, the US
Senate Banking Committee will hold hearings on the nomination of Janet Yellen
for the Federal Reserve Chair. Since neither
Paul Ryuan nor Rand Paul sit on this committee, most of the questions will be
like a slow-pitch softball. Things like “Do
you think unemployment is a problem since it since it is going down year/year
(y/y)?” She will give a standard
Greenspan/Bernanke answer – yes it is a concern, but we are data driven.
Her answers are all likely to be “data
driven”, “data driven”, “data driven”…
Whatever the question, it will be answered by “data driven”. That is the safe thing to do. Somewhere in
the course of these lob-pitches, she will indicate that a significant increase
in QE is needed, but temporarily we will let “data driven” indictors tell us
when to cut back or increase QE.
If you’ve been paying any
attention at all, you know about all the research papers the Federal
Reserve(s) across the nation have been publishing. We can sum them up in a few words: Boring,
nothing new, support to enrich the elitist.
Paul Krugman, economists, is in an ecstasy over Janet Yellen. He made no
tough questions, and hinted how she would answer as a Academic Economists. (Sigh!!!!) http://krugman.blogs.nytimes.com/2013/10/10/janet-joy/
May I take this opportunity to
suggest a few questions. Now why am I
qualified to ask these? Well, overall, Dr. Krugman, Dr. Bernanke, and many
others would say I’m not, but I do have a PhD in information systems with an
overwhelming emphasis in Behavioral Economics.
So, while I never broke into “inner circles” I have somewhat of an
expert opinion, and I own several small businesses that suffer under what the
USA is going through.
So here are some economic questions:
1.
Does 0% interest rates stimulate economic
recovery or suppress it?
2.
Why in a recession should governments stimulate
economic recover? If you answer they
should and why, then explain the anemic recovery. If you answer under the philosophy of Free Market economics and the free market should govern, then explain how the Federal
Reserve is assisting the Free Market.
3.
How should welfare benefits (specifically
Foodstamps) be maintained or cut in response to high unemployment? Please include your analysis of why
Foodstamps enrollment and payout have skyrocketed while unemployment has gone
done. (Oh my dear readers, this is such
a hard hard question for Democrats. Read Dr. Krugman’s blog for a defense of the Democrat's position.)
4.
How should depositors in failed banks be
protected? Or should they suffer big losses?
(Hello out there dear reader… If you are in the USA or Europe and USA
TBTF (To Big To Fail) bank fails, what happens to your deposit? Let’s add into the question: FDIC insurance for
the whole country is estimated to have only enough money to cover less than 1% of
the funds held by Banks and that assumes the FDIC could go to other banks. (There is a move world wide to implement a
Cyprus style solution for a run on banks. For example, Finance Minister Bill
English of New Zealand is proposing a Cyprus styel solution for managing bank
failure.) Believe me, you want to know
about this. “joint paper by the US Federal Deposit Insurance Corporation and
the Bank of England dated December 10, 2012, shows that these plans have been
long in the making; that they originated with the G20 Financial Stability Board
in Basel, Switzerland”
5.
Specifically, state your opinion on how
inequality encourages or damages economic growth? Explain that in terms of Dr. Bernanke’s (and
your) reign since the “Great Recession” started in December 2007. Explain what has happened under QE I, II, III
and now infinity. How will QE to who
knows when, assist?
6.
As a follow up, How will the USA ever be able to
liquidate the debt the Federal Reserve has built up on its books? FRED St. Louis shows approximately 2.1
Trillion dollars. The published numbers
for China’s holding is 1.3 Trillion and Japan’s holding is $1.1 Trillion. What happens when we start liquidating that
debt? Or must we hold that debt forever?
7.
Will free market forces destroy or enhance
economic response to the “great recession”?
How has the current approach of the Federal Reserve helped or hindered?
The important things about those
questions, is there is NO ECONOMICS GURU that can answer them. Economists (Krugman are you listening?) offer
plenty of rhetoric (or answers as they put them) on government deficits,
printing money, inequality, environmental issues and poverty.
Not any of these answers are good
enough to persuade other economists in this country.
Because they can’t answer (really)
they hide behind “data”. Well, they
should take the word of another government Bureaucracy – the SEC. Every mutual fund says something like this “high past returns do
not guarantee high future returns and that investors in the fund could lose
money.”
Robert Shiller, Sterling Professor of Economics Yale University
The following is from an expert of an interview as Dr.
Shiller won the Nobel Prize.
On why so many experts missed the
2008 financial crisis: “Experts have always missed big events like this. If you
look at the record of statistical forecasting models, they tend to get to the
recession when it’s starting to come. A casual observer might start to worry
about it. Forecasting it years out, they don’t get; in particular, if you look
at the Great Depression of the 1930s, nobody forecasted that. Zero. Nobody. Now
there were, of course, some guys who were saying the stock market is overpriced
and it would come down, but if you look at what they said, did that mean a
depression is coming? A decade-long depression? That was never said.”
On short-term thinking: “I think
that there’s too much faith in analysis of short-term data. You see some
pattern, and you can do a statistical test and prove that will prove that it is
significant or passes the smell test to a statistician. But the problem is, the
world is always changing. It’s not a stable thing. The underlying human
parameters may be stable, but you can see that there is institutional and
cultural evolution, and it’s not something that you can quantify.”
US
Canada
Eurozone
Australia:
China
China’s October industrial
Production unexpectedly took a huge jump to +10.3% year on year. It was expected that industrial production
would decline. Retail Sales were weaker
than expected.
Wholesale delivery of Cars and
Sport utility vehicles rose 24%. This
was much higher than expected, and would indicate the wholesalers believe there
will be strong retail demand.
New Yuan loans were 506.1 billion
Yuan; well below estimates of 580 Billion Yuan.
China’s curtailment of loans internally seems to be working.
China’s CPI roase +3.2% y/y. This is a continual improvement (if inflations
is improvement), and continues to climb as China focuses on building the middle
class of consumers. However, unexpectedly
PPI fell -1.5% y/y.
Overall, these numbers (along with
iron ore shipments last week) seem to indicate that the global economy driven
by China’s consumption is on track even with the USA problems.
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