Tuesday, October 26, 2010

Federal Reserve Asset Purchases

Many are worried about the Federal Reserve's asset purchase schemes. I don't see how they can buy trillions of assets without risking inflation and other dire effects. Maybe the economy is so weak that this is a last resort to stave off a depression. But it may result in hyperinflation, a dollar collapse, or even worse a stagflation with a dollar collapse. Probably the bankers are trying to discourage Obama stimulus II or real tax and spending reform.

I think the main purpose of this is for the banks to unload a lot of junk paper to the Fed for the government to hide and ultimately dilute the value of the currency. This will allow the costs of the banking fiascos to be spread surreptitiously to the general public. Most are clueless as to economic reality. When the dire effects become too big to hide, the government can claim they had no idea this was coming and that it was not their responsibility and outside of their control. Talking heads and pundits will continue to commentate to no avail. Electorate will continue to elect idiots and crooks.


Bernanke Asset Purchases Risk Unleashing 1970s Inflation Genie. For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.

Sunday, October 10, 2010

California Budget Deficit

California should be rich with several booming industries: 1) Computers 2) Drugs 3) Hollywood 4) War Machines 4) Fruits and Nuts. Still these are not generating enough tax revenues so CA is running a deficit. The new budget failed:

They did not cut enough
They assume some revenues which will not arrive
They are borrowing more 

So they not collect enough taxes and will face another round of cuts next year.  By failing to properly address the issue they just postpone the day of reckoning and make the cuts more severe.  If they raise taxes too much then businesses and rich people will retire or leave causing even less tax revenue in the future.  Spending and borrowing must be cut way back to get out of this mess

From the news:

Democrats agreed to cut schools by $3.1 billion, but they made $1.9 billion of that a deferral that they promised to give education next year.

The budget does little to solve the state's structural imbalance, and fiscal experts believe that the state is heading toward another massive deficit next year.  California is counting on $5.3 billion in federal funds to balance this year's budget, yet the state only is commited for $1.3 billion. Chiang still has not ruled out IOUs, though legislators passed a bill Thursday that would allow the state to defer $5.5 billion in payments to schools and social services.


The $87.5 billion spending plan relies on rosy assumptions about revenues from taxpayers and the federal government, as well as reductions to state worker pay, prisons, and social services.


the pending $87.5 billion spending plan does little to solve the state's permanent fiscal problems and makes several questionable assumptions that could make next year's deficit worse should they fall short. "We said they were facing a multibillion-dollar shortfall in 2011-12, and nothing has changed the underlying economics and budgeting of that"


Wednesday, October 6, 2010

Obama stock market rally

Does the stock market rally mean that Obama is doing a good job getting this economy recovered from the Bush crash? Or does it mean investors are hoping the fall elections may get rid of some democrats who helped him socialize medicine? Obamacare expands coverage without expanding the number of doctors meaning that some getting medical care will have to get less in the future. The Federal Reserve has pushed interest rates down to liquidity trap levels and are now attempting further stimulus. I worry this will only cause more trouble in the future. In the short run the low-interest rates are punishing retirees who need those interest payments to live. In the long run it builds up inflationary pressures, lowers the dollar, scares foreigners away from US assets, and postpones needed steps to fix the economy.

Why doesn't Obama do more to win the war on drugs and illegals being fought along our southern border? USA is being invaded but he is sending troops around the world to kill heterosexual Muslims who hate our gay-friendly culture. Drugs and homosexual diseases kill more Americans than do Muslim terrorists. I believe USA could stop the flow of drugs and illegals by moving our troops along the border and careful inspection of anything crossing the border or complete shutting down of the border.