For those who still believe that the Fed can exit and raise interest rates without a financial crash. This is just one example of the amount of junk on a balance sheet of just one major US bank.
P.S. I provide a link to this at the comment section.
Sunday, March 17, 2013
Fed Exit?
The Fed has an exit plan? As I've said a few years ago when they started their first QE program - not a chance.
For those who still believe that the Fed can exit and raise interest rates without a financial crash. This is just one example of the amount of junk on a balance sheet of just one major US bank.
P.S. I provide a link to this at the comment section.
For those who still believe that the Fed can exit and raise interest rates without a financial crash. This is just one example of the amount of junk on a balance sheet of just one major US bank.
P.S. I provide a link to this at the comment section.
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This is one example of a financial statement taken from the SEC. Search "U.S. Treasury" on the file, and take a look at the amount of government bonds and mortgage-backed securities the bank holds. Take note that those are just 'armotized' costs, meaning the actual amount of junk that they have is several times larger. If interest rates rise, they'll suffer big losses.
ReplyDeletehttp://www.sec.gov/Archives/edgar/data/70858/000007085812000308/bac-6302012x10q.htm
I agree. The Fed will be in for a while, at least for another 8-10 years until recovery from a severe dip in the market takes place. (my guess/no data) But at some point they will finagle their way out, wether in one fell swoop or incrementally, I don't know, but I do suspect exit strategies have been planned and fall out is being evaluated on a regular basis. Also after doing some light reading on the Bank of America (who I assume you reference above) SEC filings (mainly 8K and 10K forms) I find Bank of America to be a poor example of a company recovering from the 08/09 recession. In its stead, I offer Wells Fargo or JP Morgan for your criticism. (I actually haven't looked at their SEC fillings intensively, but I am interested to see what you find). Also I would encourage you not judge a company solely off their current holdings of MBSs or Government Backed bonds. There is more to a company than their holdings. Although the future flashes in front of us at times with horrid visions of ground zero for Financial Institutions, the apocalyptic cries seem a bit caricatured if you will. Articles with extreme statements get read, not articles that claim that they can not accurately predict outcomes. We can not confidently predict outcomes so I do not pretend to with any level of confidence. This being said, I gladly oppose those who assume the future is set in stone or close to that. (No offense Jin, just personal differences in economics and finance. I still respect your opinions and wish to hear them, I just find them overstated)
ReplyDeleteI mis-spoke when I said, "We can not confidently predict outcomes so I do not pretend to with any level of confidence." What I intended to say was that we can not predict outcomes with certainty, only within confidence intervals. Also one can make "100% sure" without my rebuttal if they justify them with statements of uncertainty such as "my opinion is..." or "I think..." and so on.
ReplyDeleteThe problem is, if they stay there for 10 years, turned into confetti. They have been saying that they have an exit strategy since QE1, and back then I was saying that there is no exit plan. It's mathematically impossible, not to mention that there is absolutely no historical precedence that a nation can print its way out of trouble.
ReplyDeleteWells Fargo is a well-managed bank, which was why the top management was so angry that the government forced them to accept the bailout fund.
If those banks cannot even stand a 6% interest rate back then in 2007 (and they only had MBS and not as much government bonds), what will happen when interest rates rise again? Now they are so highly leveraged with government bonds + MBS.
I agree that we cannot predict things with certainty, but certain things can be predicted. All these big picture stuff can be predicted. It's just maths, history, and some logic untarnished by what we see and hear from the media and schools =)
* if they stay there for 10 years, the USD will be turned into confetti
ReplyDeleteI figured the dollar was the confetti you spoke of. Mathematical impossibilities are rare but I have not looked at the numbers, so I have no comment when it comes to this. Although I think Bernake is incorrectly applying the idea (in this situation) "you have to spend money to make money" to "you have to dig deeper to get our of a hole."
ReplyDeleteBernanke really doesn't have a clue... You can try searching "Bernanke was wrong" on youtube and enjoy the video. It's pretty entertaining.
DeleteThat was fairly entertaining. Just a suggestion for your blog, put a suggest section somewhere for someone to post an idea they want to see your ideas on something of some concept. Just an idea.
ReplyDeletewell, I am not so into promoting my blog. I just started this blog to get what I've learnt off my chest. Because the stuff I've learnt is totally opposite from what I learnt in school and from the media.
DeleteThanks for the suggestion though, will definitely consider that if I want to start promoting the blog!
Ahh, so this is your vent spot?
ReplyDeleteYep, sort of - for now. I'm quite a private kind of person :D
DeleteI will improve my blog towards the end of the year, and maybe promote it more. Right now I have other stuff to take care of first.
What kind of politics do you endorse?
ReplyDeleteI'm a libertarian, supporter of Ron Paul. How about you?
DeleteEh, I voted Romney. But I don't think that one candidate or party fully encompasses my views. I think we should attempt to assist society as much as we can, as long as it falls within budget. I think this should be done while avoiding as much interference with businesses as possible. I think that is an adequate summary of my views.
DeleteI agree we should assist society as much as possible. The libertarian view is that society will be much richer without such a big government, and society will take care of itself.
ReplyDeleteRomney at least believes somewhat in capitalism, although he doesn't understand it. Compare him to Obama, who loves socialism and doesn't believe in capitalism.
My bad for not clarifying; when I said we, I meant the government. This is where we differ. All political parties (that are taken seriously) consider themselves most efficient at benefitting society, both in power relative to the world and in wealth. Both power and wealth are defined differently as well as pursued differently, but ultimately the fundamental target of pursuit lies one and the same.
ReplyDeleteAs far as Romney and his understanding of capitalism goes, I believe that his understanding is accurate in the ways capitalism is currently defined by society. I just find that society generally misuses the term and idea of capitalism.
Well, the US started with a libertarian-style party. And that was how it became an economic superpower. People had more freedom and can do what they want, as long as they don't break rules.
ReplyDeleteRomney is more pro-capitalism than other candidates other than Ron Paul, but he does not fully understand it though. So there's still a likelihood that he'll succumb to pressure to abandon capitalism. He didn't even want to perform any real cuts to the budget.
Assuming that libertarian-style thought was the driving force for America's economic success is speculative to say the least. America originated as a country rich in resources. This and mass influx of population could be argued as the determining factors in America's establishment as an economic superpower, without tributing any political system. As far as capitalism goes, the reason that most people advocate capitalism is because of their limited knowledge of it. In America, most assume that we are capitalistic as of now, while that is not the case. Capitalism, in its truest form, is a hard philosophy to accept due to its unemotional, nearly inhumane, stance. As far as Romney and cuts go, I agree, he did not want to make any real cuts, but he did want to limit the addition of expenses.
ReplyDeleteI'm not sure which part of capitalism you find inhumane though. Do you mind explaining?
DeleteWhat I was trying to say was, America had much more freedom back then. There were low regulations and even no income tax. That was why immigrants want to try their luck in America. The British, for example, escaped high taxes in their own country and emigrate to US.
ReplyDeleteI agree that US is no longer capitalistic. It has become a socialist country unfortunately. Plato once said that a nation goes from chaos to dictatorship to oligarchy to democracy, and back to chaos again. That seems to be true for the empires I've read about so far.
Obama is really a socialist but doesn't want to admit it lol.