Why hasn't inflation accelerated?

[flow5]

Dr. Milton Friedman's (Nobel Laureate),"monetary base" has never been a base for the expansion of new money & credit.

(1) The trend of currency held by the non-bank public has been up since 1930 (draining required reserves - unless these commercial banking customer's deposit outflows were concurrently offset by the FRB-NY's open market operations of the buying type, etc.).

(2) The Fed pays the commercial banks not to lend by inverting the short-end segment of the yield curve on wholesale loan-funds (where interest rate arbitrage is conducted with the remuneration rate on excess reserve balances – the Fed’s policy rate). I.e., the remuneration rate’s rate-of-return is greater than all money market instrument maturities.

But this payment of interest on excess reserve balances causes dis-intermediation among just the non-banks (an outflow of funds or negative cash flows). These loan-funds (archetypal wholesale money market funding), are borrowed as short or as cheap as the non-banks can (e.g., funding is rolled over & reinvested as they mature on a daily basis), to then lend in the capital markets: for as long/high as non-banks can (i.e., to obtain the widest net interest margins or spreads by matching asset inflows with liability outflows).

(3) And Basel III regulatory capital and liquidity requirements have been increased counter-cyclically-retarding loan expansion (e.g., supplementary leverage ratio buffer), to dissuade broker-dealers from relying on wholesale short-term funding, e.g., repos (note: an increase in bank capital releases excess reserves).

For an explanation of non-bank (non-inflationary), vs. commercial bank (inflationary), lending/investing (traditional vs. shadow) see:

"Should Commercial Banks Accept Savings Deposits?” by Leland J. Pritchard, Edward E. Edwards, and Lester V. Chandler at the 1961

[Aman A.K.A. Ahamburger]

Unprecedented times, flow. I just wonder if Friedman, Leland J. Pritchard, Edward E. Edwards, and Lester V. Chandler would have ever dreamed of the wizardry that are CDOs, CMOs, MBSs, and CDSs??

More reasons for low to no inflation..

(4) Starting in the year 2000 after the dot com bust, more and more money was needed to fill the debt holes that the finicial wizardry created. This is displayed in falling velocity since then, as well as, the fact that it now takes $5 of debt to create $1 of GDP.

(5) Wages. Because of the severity of the housing bust and the off shoring of jobs since the 1980's, it has take longer to recover from this downtown that any other in the post war period. Because the recovery has had to rely on private capital(see point 4) a complete reorganization of the US economy is under way. Wage pressure has been one of the primary drivers of inflation and there has been little to no wage pressure because of the severity of the situation.

[flow5]

Right. The housing boom-bust (the misallocation & mal-distribution of available credit within the residential & commercial mortgage markets), was primarily fueled through the introduction of new financial innovations -- assets that served as loan collateral: CMOs, CDOs, CDSs, ABSs, CLOs, CFOs (i.e., securitization – the packaging of loans into complex financial products - including credit enhancements), via: SIVs, SPEs, other investment non-banks, etc.

The liquidity of these asset classes was at first validated & underwritten by an easy money policy in conjunction with laissez-faire Congressional legislation.

 
Then the Fed pulled the rug out from under investment bank [NB], lending/investing during the 4th qtr of 2008 - but didn't offset the non-use or bottling up of existing savings – i.e., the decline in the transactions velocity [Vt] of monetary savings. The fall in the exchange value of the U.S. dollar beginning in July 2008 should have been a clear signal that the economy was decelerating (and that the markets were becoming very illiquid).

NB lending/investing will raise both direct & indirect (intermediary), investment income streams. It will incent CAPEX's expenditures by increasing the efficiency of capital. It will lower the loss from bad debt. It will lower the capitalization rates on corporate earnings (increasing profitability or ROI).

Reversing the flow of funds back to the NBs will increase the proportion of real-gDp relative to nominal-gDp (i.e., will be accomplished via lower rates of inflation), and it will raise the proportion that real-interest rates are to nominal-interest rates.

[Aman A.K.A. Ahamburger]

Laissez-faire? More like social engineering because "everyone deserves to own a home." Nothing free market about that.

The bottom fell out of the market because of securitization, like you said. Look at the Chinese real estate market. No amount of stimulus will stop that.

Also, I will ask again, do you really think printing money to save bear sterns and Lehman would have "saved" the market from the wizardry?

[flow5]

"The bottom fell out of the market because of securitization"

The Fed controls the price level. The rate-of-change in money flows (the 24 month proxy for inflation) peaked at the same time the S&P/Case-Shiller Home Price Indices peaked. Thus, inevitably, via the 29 consecutive months of contraction in required reserves (RRs), which are based on transaction type accounts 30 days prior, Bankrupt U Bernanke turned "safe assets" into "impaired assets".

Then Bankrupt U Bernanke destroyed non-bank lending/investing by introducing the payment of interest on excess reserve balances (i.e., destroyed the wholesale money market funding used by the investment banks/non-banks in their borrow short to lend long paradigm). Henry C.K. Liu predicted this:

 (www.atimes.com/atimes/Global_Economy/GI29Dj01.html).

Concurrently, there was also an international "flight to safety".  This temporarily propped up the exchange value of the U.S. dollar (changing Purchasing power parity (PPP)) after July 2008.  This increased the demand for "safe assets" (which are used by the non-banks in their funding operations), at the same time the Fed tightened (introduced the payment of interest on reserves).

[Aman A.K.A. Ahamburger]

May 11, 2014 14:47:07 GMT -5 flow5 said:

Right. The housing boom-bust (the misallocation & mal-distribution of available credit within the residential & commercial mortgage markets), was primarily fueled through the introduction of new financial innovations -- assets that served as loan collateral: CMOs, CDOs, CDSs, ABSs, CLOs, CFOs (i.e., securitization – the packaging of loans into complex financial products - including credit enhancements), via: SIVs, SPEs, other investment non-banks, etc.

Since you can't answer the direct question and launched into your regular tirade about Ben B., I will take that as a "yes, they should have bailed out the people responsible for what I explained in the quote above."

Good to know... Especially because Clinton started the whole problem...

Former Treasury Secretary Timothy Geithner claims White House asked him to lie during TV interviews

[flow5]

"do you really think printing money to save bear sterns and Lehman would have "saved" the market from the wizardry"

Bear Sterns & Lehman would have survived if the Bankrupt U Bernanke hadn't depressed the values of their asset backed securities. 

The 4th qtr of 2008 was "baked in" by Dec 2007. Prior to the contraction that began again in July, the rate-of-change in MVt was a negative figure (less than zero) for 29 consecutive months (and liquidity was already a problem - e.g., the term auction facility was introduced Dec. 12 2007). Those assets that served as loan collateral were principally effected by the protracted contractionary economic policy.

See Wikipedia: "The bursting of the U.S. housing bubble, where the median price for real estate home sales in US started to decline after its peak in July 2006, had caused the values of securities tied to U.S. real estate pricing to plummet, which damaged financial institutions globally—to a degree ultimately resulting in the subsequent interbank credit crisis"

What do you think suppressed the S&P Case-Shiller 20-City Home Price Index in the last few months?  It wasn't securitization wizardry.  You confuse cause & effect.  That makes it impossible to see the forest thru the trees.  

2013-07-01 162.38
2013-08-01 164.49
2013-09-01 165.60
2013-10-01 165.90
2013-11-01 165.80
2013-12-01 165.63
2014-01-01 165.40
2014-02-01 165.35

[Aman A.K.A. Ahamburger]

No sir it is you that doesn't understand the cause and effect.... The market was going down because of oversupply. The powers that be just failed to realize how big of a problem they created. Why? Hubris, the "we got everything figured out mentality"

Look at the bankruptcies that have already started to hit China... The market is oversupplied...

Subprime mortgage crisis

There were many causes of the crisis, with commentators assigning different levels of blame to financial institutions, regulators, credit agencies, government housing policies, and consumers, among others.[3] A proximate cause was the rise in subprime lending. The percentage of lower-quality subprime mortgages originated during a given year rose from the historical 8% or lower range to approximately 20% from 2004 to 2006, with much higher ratios in some parts of the U.S.[4][5] A high percentage of these subprime mortgages, over 90% in 2006 for example, were adjustable-rate mortgages.[2] These two changes were part of a broader trend of lowered lending standards and higher-risk mortgage products.[2][6] Further, U.S. households had become increasingly indebted, with the ratio of debt to disposable personal income rising from 77% in 1990 to 127% at the end of 2007, much of this increase mortgage-related.[7]

[flow5]

The Fed reacted to the economic downswing in the 4th qtr of 2008 very timidly. The FRB-NY's "trading desk" didn't purchase any significant volume of SOMA securities until April of 2009 (when stocks & gDp bottomed):

Securities held outright - H.4.1 (Factors affecting Reserve Balances)


07/2/2008 -- $478,838.00
08/6/2008 -- $479,291.00
09/3/2008 -- $479,701.00
10/1/2008 -- $488,541.00
11/5/2008 -- $490,027.00
12/3/2008 -- $488,445.00
01/7/2009 -- $495,383.00
02/4/2009 -- $511,440.00
03/4/2009 -- $581,721.00
04/1/2009 -- $773,497.00

I.e., Bankrupt U Bernanke executed a qualitative or "credit easing" program (sterilized balance sheet expansion via emergency credit facilities involving the substitution of risk quality & change in the gov’t vs. private-sector composition of the Central Bank’s assets), instead of quantitative easing (an outright expansion of the money stock).

[Aman A.K.A. Ahamburger]

Ya, I get it, you blame the whole finicial crisis on Ben B.. Even though you have already admitted it started with the wizardry and the idea that everyone should own a home... Fact is, all you keep saying is, Ben B. should have "not tightening" policy so that the bubble would have kept growing and people would have got further into subprime debt. I get it.

[flow5]

You tell on yourself. I used to play Russian roulette with the Mexican government’s pegs on its peso (extreme exhilaration in just seconds in the FX market). I understand prices, i.e., supply & demand, weak hand’s to strong hand’s speculation, bid & asked spreads (liquidity), etc. All Bankrupt U Bernanke had to do was to stabilize housing prices. Before Feb 2006, there were multiple bids for the same house. But in a down market you get “short sells” (or defaults & foreclosures).

It's all about the price level (which the Fed controls). Financial innovation (securitized assets), predominately affect the transactions velocity of money (Vt). Even if the liquidity of the new financial products was circumscribed, the volume of new money isn't (the M variable in Irving Fisher's "equation of exchange", where PT=MVt). E.g., housing prices would have benefited from the continuation in the protracted fall in the dollar’s exchange rate & additional foreign buying.

Unrestricted credit standards (sub-prime lending), resulted increased credit default risks. Those risks could have simply been supplanted by new cash flows (e.g., refinancing originations & debt consolidation at lower interest rates). An easier money policy would have prevented job losses and the reduction in income streams.

[Aman A.K.A. Ahamburger]

Flow, I tell on myself? From your post above, it seems like you have no idea about supply and demand. Massive over building was a HUGE problem in the US before the Great Recession, and once again you are saying the FED should have pumped money into the market to keep the bubble growing...

Stabilizing prices while reigning in excess speculation is exactly what they were trying to do(a fools game). Geithner in his new book, and the FRB minutes all show that they failed to see the magnitude of the financial crisis. Why? Because they failed to grasp how much damage securitization and mortgage manipulation had already done in the market.

In other words, they wanted the market to come way down from where it was, slowly, but they underestimating how much all the wizardy had distorted real estate market over 15-20 years.(The black hole of debt I have mentioned time and again. When this thread was about inflation I made the point of how it took 5 dollars in debt to make 1 dollar of GDP, which is close to double what it was in the 80's.)

But let me guess, that's a lie right? They knew, they just knew it was going to cause a massive financial downturn, because you say so.. The irony in this same circular conversation that you have been dragging all your threads into to(which I'm done with) is that after the bottom fell out, they realized the severity of the situation. How do I know this? Your death march thread from 2010! If they were really trying to Bankrupt you(which is what you're claiming), they could have just let it all fall apart like you were predicting they would.

What you are saying in your post above is that they should have done exactly what the Chinese did in 2008 and 2011. That's why I have been saying look at the Chinese market, look at how well that has worked. It slowed prices for a few months and stopped nothing, now China is essentially screwed.

If the FRB would have kept pumping new money into the market to after the initial pull back in 2006, it wouldn't have stabilized anything, and they would have had to do the same thing again in about 2008. All that would have happened during this time is that instead of empty developments, the USA would have been just like China with empty cities and an even bigger securitization(debt) problem.(Bubble)

Honestly, I'm just stunned by your thinking here. It's a known fact that Goldman and others started betting against the market once prices peaked and that was a huge reason for MBS to plummet.. You want to talk about a Case-Shiller chart.. How about this one?



Yes, prices were sure to stabilize in 2006, there wasn't an unsustainable bubble at all, it was all Ben B... If only he would have pumped the bubble up more... Have fun with your circular conversation. I'm done.

[flow5]

You obviously flunked math.

[bimetalaupt]

FLOW5,

IN DEFENCE OF THE INCREASED PRODUCITITY: INFLATION IS NOT ALWAYS THE NORM. during THE 19TH CENTURY WE HAD A COST OF GOOD PRICE REDUCTION OF 0.5%PER YEAR AVERAGE FOR 100 YEARS ACCORDING TO MY NOTES FROM ECON 689.

I think the world is so completive now that the inflation pressures are more about out of date systems vs. next generation productive disruptive technology.  The 30 Year T-Bond interest tells what Wall Street thinks about future inflation.  EXPERT 50/50 is in the neutered Position (50/50). 

Just a thought,

BiMetalAuPt

[Aman A.K.A. Ahamburger]

Dr. L,

As someone who is an ACE in history(my grade twelve paper made Sask education recognize the KKK's past here) I say...EXACTLY!!! It's decentralization on a global scale, and a national one. This is why North Dakota and TX have had stronger recoveries than the rest of the US, stronger REGIONAL banks.(Per Janet at the FRB)

If only the industrialist in the 1800's would have understood what Henry Ford did, we could have avoided all this Keynesian confusion..

How many times in the last 4 years have I said that you guys are in the same place right now that Canada was in the mid 90's? At least 30, eh?

God Bless,

Keynesian Economics

Indeed Canada was one of the first countries of the world to commit itself to active use of fiscal (and later monetary) policy to stimulate domestic output and employment. The buoyant economic period of the 1960s and 1970s seemed to support the appropriateness of such a Keynesian approach. However, the higher rates of both unemployment and inflation from the mid-1970s through the early 1980s caused critics, in academic and government circles, to argue on both theoretical economic and political grounds that Keynesian-style interventions are more likely to increase, rather than dampen, economic fluctuations. Furthermore, they claim that such actions have an inherent inflationary bias which has created severe long-term economic problems both in Canada and in other countries.

Keynesian economists counter that many of the difficulties of the last decades can be attributed to events (such as the rapid fluctuations in world oil prices) that are largely outside the control of national economic policies. Furthermore, while they acknowledge that some policy errors have been made, they assert that the application of Keynesian principles has kept the world from experiencing another Depression. Throughout most of the 1980s and 1990s, the use of active Keynesian fiscal policy in Canada became limited by the large deficits experienced by the federal and provincial governments. Once these deficits were paid down, the prevailing conservative ideology prevented any return to government spending. The burden of macroeconomic policy has been left entirely on monetary policy.

Ottawa posts massive February budget surplus Goverment on track for quicker-than-expected budget balance

The federal government posted another massive monthly budget surplus in February — the largest since the recession and one of the biggest ever — putting it on the road to easily beat its target deficit for the year.

The Finance Department said Friday it took in $5.1 billion more than it spent in February, the third large monthly surplus in a row.

And China's BS centrally planed commie economy could easily change this situation..

[flow5]

The Fed controls the price level (not speculators). If U.S. housing statistics deviated from money flows, I would concede. The fact is that Ben Bernanke doesn't understand money & central banking (in spite of his IQ).  If money doesn't expand at the rate prices are pushed up, then the jobs will be lost (i.e., gDp will decline).  M1 peaked on release date 2004-12-27 @ $1,467.3 trillion.  The figure wasn't surpassed until 2008-09-29 @ $ 1,535.9 trillion. 

The Fed didn't have to defend housing prices at the excess levels exacted by speculators.  It merely had to stop the free fall.  Bankrupt U Bernanke drained legal reserves (drained the money stock & money flows) for 29 consecutive months (i.e., the 24 month rate-of-change in money flows or the proxy for inflation, was a negative figure for 29 consecutive months beginning in February 2006).  This turned "safe assets" into "impaired assets".  Bankrupt U Bernanke was successful in deflating the housing market between 2006-2007.  It wasn't until the rate-of-change in money flows (the proxy for real-output), turned negative (less than zero), that the economy fell into a recession in the 4th qtr of 2008:

POSTED: Dec 13 2007 06:55 PM |
The Commerce Department said retail sales in Oct 2007 increased by 1.2% over Oct 2006, & up a huge 6.3% from Nov 2006.
10/1/2007,,,,,,,-0.47,,,,,,, -0.22 * temporary bottom
11/1/2007,,,,,,, 0.14,,,,,,, -0.18
12/1/2007,,,,,,, 0.44,,,,,,,-0.23
1/1/2008,,,,,,, 0.59,,,,,,, 0.06
2/1/2008,,,,,,, 0.45,,,,,,, 0.10
3/1/2008,,,,,,, 0.06,,,,,,, 0.04
4/1/2008,,,,,,, 0.04,,,,,,, 0.02
5/1/2008,,,,,,, 0.09,,,,,,, 0.04
6/1/2008,,,,,,, 0.20,,,,,,, 0.05
7/1/2008,,,,,,, 0.32,,,,,,, 0.10
8/1/2008,,,,,,, 0.15,,,,,,, 0.05
9/1/2008,,,,,,, 0.00,,,,,,, 0.13
10/1/2008,,,,,,, -0.20,,,,,,, 0.10 * possible recession
11/1/2008,,,,,,, -0.10,,,,,,, 0.00 * possible recession
12/1/2008,,,,,,, 0.10,,,,,,, -0.06 * possible recession
Trajectory as predicted:
  

[tyfighter3]

All I know is the US has spent over 17 trillion and going higher each sec. and I haven't seen one dime of it so far. Road repair? Haven't seen it, Better sevices? Haven't seen it, Better Military? Haven't seen it. Where has all of that Money went to? Anwser me that ONE simple question.

[Aman A.K.A. Ahamburger]

May 17, 2014 16:56:53 GMT -5 flow5 said:

....

How is money velocity dropping from 1999-2004 not a deviation in housing stats and money flows? From 2000-2004 was the majority of the bubble. Or how about since 2011 til now? Velocity is still going down and housing has been picking up... Honestly I can find one single chart that doesn't show M1 going up since 2000 with some sideways movement from 2004-2006(while housing was still going up.). Then in 2008 it rockets, while housing drops..

Seems to me that since 2000, once the ratio to debt to GDP hit 5:1, housing as has deviated from money flows, big time.

"It merely had to stop the free fall.."

They couldn't stop the free fall because the banks started betting against the very complex instruments they set up.(The debt hole) It wasn't just Ben B. that didn't see how bad the recession was going to be. Secretary Geither, and the whole FRB in 2007, along with many of the talking heads, etc, were still saying this will be a "short lived" setback.

This is why the banks are being charged for what they did, it was a criminal act. So in other words, if they would have pumped all the money into the market when you are saying, flow, they would have essentially rewarded the banks for their criminal act, kept the speculative bubble growing, and now more than likely there would be ghost cities in the US because of speculation.

May 17, 2014 22:36:57 GMT -5 tyfighter3 said:

All I know is the US has spent over 17 trillion and going higher each sec. and I haven't seen one dime of it so far. Road repair? Haven't seen it, Better sevices? Haven't seen it, Better Military? Haven't seen it. Where has all of that Money went to? Anwser me that ONE simple question.

Debt would be my answer. In all fairness the national debt started a long time before this crisis, but I get your point. Since 2008 M1 has skyrocketed and it all went to filling the hole that Clinton made when he stated "everyone should own a home.".

[tyfighter3]

So we are going to be like Japan was for 20 years, stagnent?

[Aman A.K.A. Ahamburger]

Doubt it. Japan relies on imports, and their housing never really came back. I can see Canada's housing bubble deflate in the way Japan's did, but I see the US going to a monetary based economic system like it is here in Canada. I have yet to meet an American that thinks getting into more debt is a good idea. How fast it the transition is depends on what happens in the east. Either way, the end result is shaping up to be the same. When you have land and resources, time heals all wounds.. . Later my friend.

[flow5]

The divergence in your Chart 1 (between money flow figures & housing prices during the period 2001-2007), suggests other factors were at work [Vt]. I.e., financial innovation in the mortgage industry changed the savings-investment paradigm from 30 year originate-to-hold loans (traditional level-payment, non-recourse, amortizing mortgages), to the transfer of multiple maturity, securitized risk tranches of MBS “pass thru” pools to both domestic & foreign off-balance sheet vehicles (then also re-packaging & re-selling MBS into CDOs - by using CDS insurance to evade capital requirements – which turned CDOs into AAA risk rated securities, etc.).

 
This had the impact of transforming non-negotiable illiquid assets to negotiable (tradable), higher yielding, lower risk rated, i.e., highly liquid asset-backed securities. In effect, this vastly increased liquidity (vastly increased the transactions velocity of money via refinancing & reselling).  I.e., our means of payment money began to approximate M3 instead of M1. This would have been easy to see if the G.6 debit & demand deposit turnover release was still being published (it reported debits for both new & existing commercial and residential property sales).

[flow5]

Definitions of the money supply are not timeless. The extension of the scope and practices of the Federal Housing's Administration's Authority accompanied by Federal Government guarantees - assures a secondary market for housing - the "store of purchasing power" attribute of money (e.g., Fannie Mae & Freddie Mac ensuring a secondary mortgage (resale) market for residential mortgages). I.e, there are various types of "tertiary money". These assets possess general liquidity. They do not bear a direct, unit for unit, unvarying relationship, to the primary money supply. Legislation which establishes a new classification of tertiary money made these Government guarantees inflationary (by underwriting & insuring with the credit of the U.S. Government).

[flow5]

And the commercial banking system was never in any peril. There was no “contagion” (systemic risk or chain reaction of TBTF banks). TARP capital infusions weren’t needed. The CB’s assets were carried on their books rather than in trading accounts. The irresponsible underwriting was confined to the investment banks: Goldman Sachs, Morgan Stanley, Bear Sterns, Lehman, as well as Citigroup’s & JP Morgan’s investment bank divisions (& Merrill Lynch was absorbed by Bank of America). Indy Mac & Washington Mutual as well as many smaller banks were exceptions. Loan-loss provisions would have been lower and bad debt write-offs could have been extended.

And contrary to the pundits, the liquidity funding facilities that Bernanke created did not replace the private wholesale funding for the non-banks (short-term commercial paper & overnight repurchase agreement funding). The investment banks Goldman Sachs & Morgan Stanley had to become bank holding companies to participate. And by then the damage had already been done.

[bimetalaupt]

May 19, 2014 18:59:27 GMT -5 flow5 said:

And the commercial banking system was never in any peril. There was no “contagion” (systemic risk or chain reaction of TBTF banks). TARP capital infusions weren’t needed. The CB’s assets were carried on their books rather than in trading accounts. The irresponsible underwriting was confined to the investment banks: Goldman Sachs, Morgan Stanley, Bear Sterns, Lehman, as well as Citigroup’s & JP Morgan’s investment bank divisions (& Merrill Lynch was absorbed by Bank of America). Indy Mac & Washington Mutual as well as many smaller banks were exceptions. Loan-loss provisions would have been lower and bad debt write-offs could have been extended.

And contrary to the pundits, the liquidity funding facilities that Bernanke created did not replace the private wholesale funding for the non-banks (short-term commercial paper & overnight repurchase agreement funding). The investment banks Goldman Sachs & Morgan Stanley had to become bank holding companies to participate. And by then the damage had already been done.

Flow5,
What the bad bank lending standards did to the financial insurance firms FGIC and AIG was devastating: still not resolved.

BiMetalAuPt

FOR IMMEDIATE RELEASE
FGIC Announces Settlement with Bank of America
NEW YORK
, April 16, 2014
–
Financial Guaranty Insurance Company (“FGIC”) t
oday
announced that it has reached a comprehensive settlement with Bank of America
Corporation and certain of its subsidiaries (“Bank of America”) concerning nine second
-lien residential mortgage backed securitizations sponsored by Countywide Home Loans,
Inc., for which FGIC provided financial guaranty insurance. Under the terms of this
settlement, FGIC received a settlement payment of $584 million in cash and all
outstanding litigation between FGIC and Bank of America, as well as outstanding and
potential claims by FGIC related to alleged representations and warranties breaches and
other claims involving such securitizations, were resolved.
In addition, The Bank of New York Mellon, as trustee or indenture trustee for such securitizations (the “Trustee”),
has agreed on the terms of separate settlement agreements
for each of such securitizations, pursuant to which the Trustee will receive specified cash settlement payments
and outstanding and potential claims by the Trustee related to alleged representations
and warranties breaches and other claims involving such securitizations,will be resolved. At FGIC’s direction following the receipt of requisite investor approval,the Trustee has already completed
seven of the trust settlements
. The two remaining trustsettlements are subject to receipt of requisite investor approvals (or the absence of
specified investor objections)in a process that is expected to be completed within the next
45 days. The Trustee has already received payments totaling
about $ 307 million under the completed trust settlements and will receive
aboutan additional $48 million if theremaining two trust settlements are completed

[Aman A.K.A. Ahamburger]

Exactly B! Exactly. Systemic to the core and still not out of the woods yet. Then you add consumers using their houses as piggy banks for deprecating assets(boats, cars, etc) and you have yourself a completely unsustainable market.

May 19, 2014 12:10:37 GMT -5 flow5 said:

The divergence in your Chart 1 (between money flow figures & housing prices during the period 2001-2007), suggests other factors were at work

Exactly flow, exactly what I have been saying for years now. This, plus(+) what you admitted above "The housing boom-bust (the misallocation & mal-distribution of available credit within the residential & commercial mortgage markets), was primarily fueled through the introduction of new financial innovations -- assets that served as loan collateral". Plus(+) what BiMetal pointed out, plus(+) the consumer abusing home equity, plus(+) speculation, plus(+) banks betting against the housing market, equals(=) why it's impossible to blame the great recession on one person.

[flow5]

All recessions since the Great-Depression have the same exact cause (an unforeseen shortfall in the money stock). You depress incomes (& gov't receipts), when the money stock doesn't grow faster than at least prices are being pushed up. It's all relative.

[bimetalaupt]

May 23, 2014 10:37:58 GMT -5 flow5 said:

All recessions since the Great-Depression have the same exact cause (an unforeseen shortfall in the money stock). You depress incomes (& gov't receipts), when the money stock doesn't grow faster than at least prices are being pushed up. It's all relative.

Flow5,

I am not sure what you are telling me as M1 is growing at 15.4%?

Just a question,

BiMetalAuPt

www.federalreserve.gov/releases/h6/Current/

From H.6
Percent change at seasonally adjusted annual rates.........................M1....................M2
Thirteen weeks ending May 12, 2014 from thirteen weeks ending:
Feb. 10, 2014 (13 weeks previous)..........................................15.4..................7.1
Nov. 11, 2013 (26 weeks previous)...............................................12.4.................6.4
May 13, 2013 (52 weeks previous)................................................10.5.................6.2

Also M3 is up 7% year / year.

Finally and to put M3 into proper perspective with inflation (as measured by CPPI), the M3 and M2 strong inflation link is virtually unquestionable. The longer term inflation picture is clear, although M2 shows a pause and likely temporary disinflation as of 2008. Certain bloggers are incorrect and have continually avoided these facts and the linked chart.

[flow5]

The "link" depends upon the lag & the most accurate money metric. A surge in M1 will push up Vt (current 15.8% roc). What I call "money flows" (roc's in legal reserves), is a surrogate for bank debits (where money is the measure of liquidity). Unbeknownst to Dr. Milton Friedman, the lags in money flows have been mathematical constants for the last 100 years. 

I use this tool to identify large swings in economic activity.  I gave up frequent trading years ago - so I haven't found any need to fine tune the analysis for short-term scalping. You can make more than enough money by just following the big trends. 

The change (from July to August), in the 10 month roc in the proxy for real-output (first column) is significant enough to target (base your trade).  The market will fall at that time despite the current rapid rise in M1.  But you don't want to short stocks when the gap between the roc in M1 vs. the roc in inflation is expanding (i.e., real money growth rates are increasing).

01/1/2014 ,,,,, 0.16 ,,,,, 0.34
02/1/2014 ,,,,, 0.13 ,,,,, 0.38
03/1/2014 ,,,,, 0.14 ,,,,, 0.32
04/1/2014 ,,,,, 0.15 ,,,,, 0.33
05/1/2014 ,,,,, 0.15 ,,,,, 0.39
06/1/2014 ,,,,, 0.14 ,,,,, 0.35
07/1/2014 ,,,,, 0.14 ,,,,, 0.30 sell short beginning in July
08/1/2014 ,,,,, 0.09 ,,,,, 0.26
09/1/2014 ,,,,, 0.09 ,,,,, 0.27
10/1/2014 ,,,,, 0.02 ,,,,, 0.23
11/1/2014 ,,,,, 0.02 ,,,,, 0.22
12/1/2014 ,,,,, 0.03 ,,,,, 0.16

We still have 2 months left before the next drop.  The Fed's "open market power" is awesome.  They can quickly correct their error if they recognize the magnitude of it (so we have to wait & see). 

Greenspan offset the biggest drop in the roc in real-output since the Great-Depression on Black Monday Oct 19, 1987.  Bankrupt U Bernanke offset the Feb 27 2007 drop & the May 6 2010 drop, etc. These market moves were all huge mistakes made by the Federal Reserve.

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See:

www.centerforfinancialstability.org/amfm_data.php#fig

Advances in Monetary and
Financial Measurement (AMFM) AMFM Home | US Data | International | Library


Divisia Monetary Data for the United States:
rigorously founded in economic aggregation and index-number theory.

Federal Reserve Official Monetary Aggregates

Extensive published results demonstrate that the best monetary aggregate for almost all uses was the Federal Reserve’s former broadest aggregate, L, but only if computed as a properly weighted index number, such as the Divisia or Fisher-ideal index. The second-best monetary aggregate was the former next-broadest aggregate, M3, properly constructed as an index number. In contrast, when computed as simple-sum accounting numbers, disconnected from economic aggregation theory, M3 and L were among the worst monetary aggregates and were inconsistent with elementary principles of economic measurement. Narrow aggregates, such as M1 and M2, give no weight to many highly-liquid substitutes for money

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