This is a post that I had issued back in May during the Memorial Day holiday period. Let us not forget those sacrifices as we move forward today.
Have a safe and happy 4th of July!
Wednesday, July 4, 2012
Happy 4th of July
As we all take time to celebrate our Independence in the US today let us not forget that there have been significant sacrifices made by generations past and present in order for us to celebrate this great national holiday.
This is a post that I had issued back in May during the Memorial Day holiday period. Let us not forget those sacrifices as we move forward today.
Have a safe and happy 4th of July!
This is a post that I had issued back in May during the Memorial Day holiday period. Let us not forget those sacrifices as we move forward today.
Have a safe and happy 4th of July!
Michael Burry’s UCLA Economics Commencement Speech
Michael Burry was the driving character behind Michael Lewis's book The Big Short. He was quite the visionary when it came foreseeing the economic crisis specially the housing bubble.
As Burry put it, "I bet against America and won." He ended up being in the proverbially 1% but not how he had envisioned.
As Burry put it, "I bet against America and won." He ended up being in the proverbially 1% but not how he had envisioned.
Monday, July 2, 2012
Mish Shedlock: Zero Hedge Provides Empirical Proof of Deflation (However, He Does Not Even Realize It)
Full post by Mish Shedlock on post by Zero Hedge concerning shadow banking. Eventually he turns to the deflation vs. inflation debate.
I encourage you to visit the link shown above, but also take a look at On The Verge Of A Historic Inversion In Shadow Banking by Zero Hedge.
Here is the introduction by ZH.
Here are the pertinent charts and commentary.
That chart is from the NY Fed.
On a similar chart ZH commented ... "As another reminder, US Shadow Banking liabilities - a combination of Money Market funds, GSE and Agency paper, Asset-Backed paper, Funding Corporations, Open market paper and of course, Repos - hit a gargantuan $21 trillion in March 2008. They have tumbled ever since, printing at just under $15 trillion at the end of March 2012, the lowest number since March 2005 when shadow banking liabilities were soaring. This is an epic $6 trillion in flow being taken out of credit-money circulation, with a $143 billion drop in Q1 alone!"
Sequential Change in Shadow Bank Liabilities
The chart immediately above is from ZH, not the NY Fed article.
ZH comments ... "It is precisely this ongoing contraction that the Fed does all it can, via traditional financial means, to plug as continued declines in Shadow Banking notionals lead to precisely where we are now - a sideways "Austrian" market, in which no new credit-money money comes in or leaves."
Emphasis in bold by ZH.
Deflation It Is
There is nothing "sideways" about it. The charts clearly show credit money is indeed leaving (contracting) to the tune of a whopping $6 trillion since March 2008.
Interestingly, Zero Hedge did not mention "deflation" once in his post.
Yet, those charts, without a doubt, depict deflation if one accurately describes inflation and deflation as measures of credit, not prices.
Based on real-world experience of what is most important, here is my definition: Inflation is a net increase of money supply and credit with credit marked to market.
Deflation is the opposite, a net decrease of money supply and credit with credit marked to market.
If one woodenly sticks to the view that inflation and deflation are about prices (while ignoring a devastating collapse in housing), then yes, the US is still in a period of inflation.
Likewise, if one foolishly sticks to measures of money supply like M1, M2, or TMS (true money supply) by Michael Pollaro, then the US is also in a period of inflation.
Real World Viewpoint
Neither money supply nor the CPI can adequately explain interest rates, housing prices, lack of jobs, and numerous other real-world phenomena.
In the real-world, in a credit-based economy, it is credit that matters.
The above charts show the real story. That story explains 10-year treasury yields at 1.61% and 2-year yields at .29% even though the CPI is 1.7% year-over-year.
Those charts also show why hyperinflationists are in an alternate universe and why proponents of "huge inflation but not hyperinflation" are on Mars.
Mike "Mish" Shedlock
Zero Hedge, citing a Federal Reserve Bank of New York report on Shadow Banking, makes (without even realizing it) a sure-fire
case for deflation.
I encourage you to visit the link shown above, but also take a look at On The Verge Of A Historic Inversion In Shadow Banking by Zero Hedge.
Here is the introduction by ZH.
While everyone's attention was focused on details surrounding the household sector in the recently released Q1 Flow of Funds report (ours included), something much more important happened in the US economy from a flow perspective, something which, in fact, has not happened since December of 1995, when liabilities in the deposit-free US Shadow Banking system for the first time ever became larger than liabilities held by traditional financial institutions, or those whose funding comes primarily from deposits.Empirical Proof of Deflation
As a reminder, Zero Hedge has been covering the topic of Shadow Banking for over two years, as it is our contention that this massive, and virtually undiscussed component of the US real economy (that which is never covered by hobby economists' three letter economic theories used to validate socialism, or even any version of (neo-)Keynesianism as shadow banking in its proper, virulent form did not exist until the late 1990s and yet is the same size as total US GDP!), is, on the margin, the most important one: in fact one that defines, or at least should, monetary policy more than most imagine, and also explains why despite trillions in new money having been created out of thin air, the flow through into the general economy has been negligible.
Here are the pertinent charts and commentary.
That chart is from the NY Fed.
On a similar chart ZH commented ... "As another reminder, US Shadow Banking liabilities - a combination of Money Market funds, GSE and Agency paper, Asset-Backed paper, Funding Corporations, Open market paper and of course, Repos - hit a gargantuan $21 trillion in March 2008. They have tumbled ever since, printing at just under $15 trillion at the end of March 2012, the lowest number since March 2005 when shadow banking liabilities were soaring. This is an epic $6 trillion in flow being taken out of credit-money circulation, with a $143 billion drop in Q1 alone!"
Sequential Change in Shadow Bank Liabilities
click on chart for sharper image
The chart immediately above is from ZH, not the NY Fed article.
ZH comments ... "It is precisely this ongoing contraction that the Fed does all it can, via traditional financial means, to plug as continued declines in Shadow Banking notionals lead to precisely where we are now - a sideways "Austrian" market, in which no new credit-money money comes in or leaves."
Emphasis in bold by ZH.
Deflation It Is
There is nothing "sideways" about it. The charts clearly show credit money is indeed leaving (contracting) to the tune of a whopping $6 trillion since March 2008.
Interestingly, Zero Hedge did not mention "deflation" once in his post.
Yet, those charts, without a doubt, depict deflation if one accurately describes inflation and deflation as measures of credit, not prices.
Based on real-world experience of what is most important, here is my definition: Inflation is a net increase of money supply and credit with credit marked to market.
Deflation is the opposite, a net decrease of money supply and credit with credit marked to market.
If one woodenly sticks to the view that inflation and deflation are about prices (while ignoring a devastating collapse in housing), then yes, the US is still in a period of inflation.
Likewise, if one foolishly sticks to measures of money supply like M1, M2, or TMS (true money supply) by Michael Pollaro, then the US is also in a period of inflation.
Real World Viewpoint
Neither money supply nor the CPI can adequately explain interest rates, housing prices, lack of jobs, and numerous other real-world phenomena.
In the real-world, in a credit-based economy, it is credit that matters.
The above charts show the real story. That story explains 10-year treasury yields at 1.61% and 2-year yields at .29% even though the CPI is 1.7% year-over-year.
Those charts also show why hyperinflationists are in an alternate universe and why proponents of "huge inflation but not hyperinflation" are on Mars.
Mike "Mish" Shedlock
Sunday, July 1, 2012
Anyone Can Be An Economist
Have you ever though that you would like to be an economist? If so then this TD Ameritrade piece is just for you. (Full Disclosure: TD Ameritrade is the custodian that DWCM uses for most of our clients)
The article dives into the detective work that you can do on your own to come up with your own take on the economy. All it takes is a look around and the desire to ask allot of questions and to connect the dots to formulate an interesting plot.
Peter Lynch, famed manager of the Magellan Fund was the first person that came to mind when I read this article. Lynch keenly was always aware of his surroundings weather he was in a mall, grocery store, or restarunt. This led him to several successful investing strategies just by looking, listening, and asking a few questions.
According to the TD Ameritrade article, "amateur economists can potentially read deeper into the behavior of those around them. After all, most of us are privy to snapshots of consumer actions dozens of times each day, observations that are accelerated, perhaps accurately, maybe distorted, through social media and Web videos."
The article dives into the detective work that you can do on your own to come up with your own take on the economy. All it takes is a look around and the desire to ask allot of questions and to connect the dots to formulate an interesting plot.
Peter Lynch, famed manager of the Magellan Fund was the first person that came to mind when I read this article. Lynch keenly was always aware of his surroundings weather he was in a mall, grocery store, or restarunt. This led him to several successful investing strategies just by looking, listening, and asking a few questions.
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According to the TD Ameritrade article, "amateur economists can potentially read deeper into the behavior of those around them. After all, most of us are privy to snapshots of consumer actions dozens of times each day, observations that are accelerated, perhaps accurately, maybe distorted, through social media and Web videos."
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