US economic recovery is complete. pt 2

[Daniel_Plainview]

I actually agree Operation Twist was a stupid idea. Don't think it'll do much, if any, good. A flatter yield curve will support the dollar, but that's about it. Maybe the FOMC was seeing inflation get a bit too high for comfort and decided to support the dollar without actually raising interest rates. The downside, of course, is that the stock market usually doesn't like a rising dollar.

Can't prove this, but I also wonder if they decided to support the dollar to send the Euro down, which would provide a bit of help to the European situation. If the Euro tanks that'll make the PIIGS debt burdens a bit easier to bear, and will help the export-led economy of Germany, who seems to be the main country propping up the rest of the Eurozone.

Though even if all this is true, there's no way anyone on the Fed would admit it. Could be a sort-of silent agenda.

My guess is that Operation Twister is primarily a thinly veiled means of monetizing $400 billion worth of US debt ... so that Obama's accumulated debt load won't appear so hideous. But who knows ... the Fed is the most opaque entity in existence (as far as their true motivations).



But Heli-Ben will be revisiting the QE3 invitation many more times over the next year. And eventually he'll cave.

[OilFinder2]

There is no additional monetization of debt occuring with an Operation Twist. All they're doing is replacing short-term debt with an equal amount of long-term debt.

The US government has more debt in short-term bonds than in long-term bonds, so this operation will actually make servicing the debt a bit harder, since it's driving up the yield on the short-term debt at the expense of the long-term debt.

[Daniel_Plainview]

There is no additional monetization of debt occuring with an Operation Twist. All they're doing is replacing short-term debt with an equal amount of long-term debt.

The US government has more debt in short-term bonds than in long-term bonds, so this operation will actually make servicing the debt a bit harder, since it's driving up the yield on the short-term debt at the expense of the long-term debt.

In any case, Mish notes that the Fed is out of bullets, stating succinctly: "none of this can possibly do much of anything for the real economy, and the patient will die."

[pstarr]

From Associated Press

In record-setting numbers, young adults . . . suffer from the highest unemployment since World War II and risk living in poverty more than others - nearly 1 in 5.

About 1 in 6 older Americans is now in the labor force - the highest level since the 1960s, before more generous Social Security and Medicare benefits made it more attractive to retire.

Nationwide, employment among young adults 16-29 stood at 55.3 percent, down from 67.3 percent in 2000 and the lowest since the end of World War II.

Hey oily, not only are you a predicting failure. You are a heartless d3ck.

[OilFinder2]

No, actually pstarr, you are a heartless d3ck because you don't want "this" economy to recover at all! You'd rather have all those unemployed moving to 20-acre Little House on the Prairie farmsteads - a move which would be 100% guaranteed to condemn them to a life of poverty.

[peripato]

No, actually pstarr, you are a heartless dick because you don't want "this" economy to recover at all! You'd rather have all those unemployed moving to 20-acre Little House on the Prairie farmsteads - a move which would be 100% guaranteed to condemn them to a life of poverty.

Actually that would be a great outcome of energy descent, except there are now too many to support in the "ol' fashun' way" and a lot of the nicest aggie land has been expropriated for 'burb production anyway.

Too bad, so sad...

[prajeshbhat]

From Associated Press

In record-setting numbers, young adults . . . suffer from the highest unemployment since World War II and risk living in poverty more than others - nearly 1 in 5.

About 1 in 6 older Americans is now in the labor force - the highest level since the 1960s, before more generous Social Security and Medicare benefits made it more attractive to retire.

Nationwide, employment among young adults 16-29 stood at 55.3 percent, down from 67.3 percent in 2000 and the lowest since the end of World War II.

In France there was a massive protest from the youth when the government tried to increase the retirement age from 60 to 62. The retirement age in USA is already 65.
But there is demographics. The older people are slowly beginning to outnumber the young. At some point these two trends could nullify each other. There simply wouldn't be too many young people. But again, OECD countries are now opening their borders to young immigrants to increase their work force. Don't know how all this will end.

[peripato]

Don't know how all this will end.

All hell will break loose, once the economy collapses and people realise that they cannot get what they are entitled to, or think they are entitled to.

[prajeshbhat]

All hell will break loose, once the economy collapses and people realise that they cannot get what they are entitled to, or think they are entitled to.

Once people reach entitlement age, they are by definition retired. Don't think there is any reason for them to be rioting on the streets.

They do have a lot of free time which they spend listening to fox news. So they come up with revolutionary slogans like "Keep your government hands off my medicare". Not a good start for the hell to break loose.

[peripato]

All hell will break loose, once the economy collapses and people realise that they cannot get what they are entitled to, or think they are entitled to.

Once people reach entitlement age, they are by definition retired. Don't think there is any reason for them to be rioting on the streets.

They do have a lot of free time which they spend listening to fox news. So they come up with revolutionary slogans like "Keep your government hands off my medicare". Not a good start for the hell to break loose.

Yep, only retired people get benefits...

[prajeshbhat]

Yep, only retired people get benefits...

Benefits and entitlements are two different things. People who have worked all their lives have a feeling of entitlement. And I am not even talking about social security or medicare. Most of them are just pi***d about their falling property value. Young people, not so much(notice that they don't have any assets, just debt).
The benefits they receive are also small in comparison. Given the amount of debt they are going to be inheriting in legacy, that's just a small bribe. Actually the young could benefit enormously if the previous generation simply refuses to pay their debt outright. That will crash the prices of most of the assets.

[Duende]

prajeshbhat wrote:

Actually the young could benefit enormously if the previous generation simply refuses to pay their debt outright. That will crash the prices of most of the assets.

Tell me more. I'm listening...

[TheAntiDoomer]

Weekly Jobless Claims Fall, Offering Glimmer of Hope
http://www.cnbc.com/id/44623253

Americans filed fewer new claims for jobless benefits last week, data showed on Thursday, offering a glimmer of hope for the beleaguered labor market.

Applications for unemployment benefits slipped to 423,000 in the week ending Sept. 17 from an upwardly revised 432,000 the prior week, the Labor Department said.

Nice turn in the right direction.

[Armageddon]

To be revised later to 450,000+

[prajeshbhat]

Tell me more. I'm listening...

I'm not kidding. Apparently the total credit in the system is 95% in excess of where it should be. Most of it is going into assets like houses and stocks. America has the so called FIRE economy(finance, insurance and real estate). Now if the people refuse to pay their debts, all that credit will be destroyed. So you will see an unprecedented deflationary spiral where house and stock prices could become dirt cheap.

But of course that will also nearly destroy the rest of the economy. Deflation is good for the consumers who have money in the short run. But not for the producers. Most employers will shut down their businesses or just cut their workforce.
Most people live paycheck to paycheck. What will happen if the paychecks stop coming? What is the point of deflation if there are no consumers?

[pstarr]

No, actually pstarr, you are a heartless d3ck because you don't want "this" economy to recover at all! You'd rather have all those unemployed moving to 20-acre Little House on the Prairie farmsteads - a move which would be 100% guaranteed to condemn them to a life of poverty.

Only in your warped/wealthy mind is 20 acres poverty. No wonder you have no idea. Let em eat cake?

[The Practician]

prajeshbhat wrote:

Actually the young could benefit enormously if the previous generation simply refuses to pay our debt outright. That will crash the prices of most of the assets.

Tell me more. I'm listening...

fixed it. Screw you, screw your suburban bungalows you've deluded yourselves into believing are worth half a million dollars, screw your economy. Let the sucker burn.

(by "you" I mean the boomer generation generally, please don't take this as a personal attack)

[prajeshbhat]

prajeshbhat wrote:

Actually the young could benefit enormously if the previous generation simply refuses to pay our debt outright. That will crash the prices of most of the assets.

Tell me more. I'm listening...

fixed it. Screw you, screw your suburban bungalows you've deluded yourselves into believing are worth half a million dollars, screw your economy. Let the sucker burn.

(by "you" I mean the boomer generation generally, please don't take this as a personal attack)

I had posted

Actually the young could benefit enormously if the previous generation simply refuses to pay their debt outright.

Why change it. And then you go ranting about the frivolous and reckless baby boomers. You also seem to have this impression that I am a baby boomer.(I am not, I am not even generation X).

The baby boomers are a lucky generation. Probably the wealthiest in human history. They were the ones who got to enjoyed the benefits of all the progress made by humanity till date. They had the cheapest and the most abundant sources of energy. Since the 80's there has been an explosion in miniaturized semiconductor devices that can perform trillions of calculations a second. Using binary logic and imagination, we have also created services unimaginable to any previous generation (we can now create hundreds of small loans to the same person through different credit cards and keep an accurate track of all the loans made to millions of such people). The baby boomers got the benefit of that too through increased stock and property prices. But the generations after 2000 will see these marvels disappearing one by one. We'll see how this works out.

[Daniel_Plainview]

Mish: Hello Global Recession

A very tiny excerpt:

If you did not know it before, you should know it now: The global economy is in recession. ... [Current bond yield] curves are not synonymous with growth and we are not going to see growth either. Germany, Australia, and Brazil curves are inverted. Short-term yields are so low in the US and Japan that there is no room for inversion. ... There may indeed be no hiding places in this downturn.

[dolanbaker]

No, actually pstarr, you are a heartless d3ck because you don't want "this" economy to recover at all! You'd rather have all those unemployed moving to 20-acre Little House on the Prairie farmsteads - a move which would be 100% guaranteed to condemn them to a life of poverty.

Only in your warped/wealthy mind is 20 acres poverty. No wonder you have no idea. Let em eat cake?

I personally know several farmers who have small farms and they believe that it's impossible to make a living on less than 45 acres.