‘Tight’ credit undermines Fed easy money ‘growth’ efforts

Stacy Summary:  The Bloomberg headline is the deflationary argument you have been hearing from Steve Keen, Mish, etc.; I have linked to a blog entry by Keen that discusses what this credit contraction means in terms of the flations.

So has the government cavalry ridden to the rescue? If the crisis were one simply of liquidity, the answer would be yes. A government stimulus can overwhelm the impact of a credit crunch, and the innate dynamic of a productive economy can re-assert itself after such a crisis, leading to renewed growth.

But this not merely a crisis of liquidity. It is one of excessive private debt, on a scale that is also unprecedented: the USA is carrying US$41.5 trillion in debt on the back of a US$14 trillion economy, proportionately 70 percent more debt than it had at the start of the Great Depression. In December 2007, the private sector swung from ramping up debt levels as it chased speculative gains on asset markets, to retreating from debt as the asset bubbles burst.

In the space of a year, private debt went from adding US$4 trillion to aggregate demand, to subtracting US$165 billion from it. Private debt had ceased being the economy’s turbocharger and had instead become its flooded engine.

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NHS paying too high a price for bungled operations at private clinics

Stacy Summary:  I was sent this article from the Telegraph I assume as proof that government run health care is disastrous?  The headline reads, “One in six NHS patients ‘misdiagnosed.’  How much do you want to bet that Drudge will carry this headline as propaganda this morning?  Most, however, probably won’t open the article and read that the study on which this headline is based: “The experts drew on research published in the American Journal of Medicine that estimated that up to 15 per cent of all medical cases in developed countries were misdiagnosed.”  I.e., including the UK.    Another headline about the NHS this morning is below.  Missing in the debate in the US about what the UK national health system looks like is that there has been much privatization of certain surgeries (many argue the ‘easy’ and ‘profitable’ ones) such as cataract and joint replacement surgeries to private clinics set up to service just those surgeries.   Of course, outsourcing these easy surgeries makes the survival stats on NHS surgeries look worse (if you want to use stats that way) as they will have a growing concentration of the complicated and dangerous surgeries with fewer ‘easy’ operations; but at least in the UK the citizens are lucky to have the NHS to turn back to when the private sector health care delivers disaster.

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Shock! Bankers get their way again!

Stacy Summary:.    What a total con.  So the taxpayer took on these banks’ bad debts, gave them untold trillions and now they are going to lend back to us at higher interest rates?

Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.

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Hong Kong’s speculative frenzy; Estonia’s post speculative frenzy

Stacy Summary: Alas, it seems we need a deep, long, painful depression before people will give up their frenzied speculative herd mentality. Bad news for those that aren’t part of the speculative herd.   Despite the collapse detailed in the Baltic piece, their markets there are booming this year (after falling heavily last year), with Latvia up the most.

Cost per sq.m has dropped from €1,611 (£1,455) to €669 since April 2007, according to Ober-Haus Real Estate Advisors. Swedbank says up to 30pc of its mortgages in Estonia are in negative equity. Recent loans are in euros – not the local kroon.

Professor Ülo Ennuste from Tallinn University says the private net wealth of Estonia’s people has fallen below zero. I know of no other country in the world where this has occurred, though Latvia may be deeper in hock. Estonia’s foreign debt is 116pc of GDP, second highest in Eastern Europe.

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HSBC says sun is setting on the dollar [Updated]

Stacy Summary:  H/t @Mike/Liverpool for the article.  Of course, HSBC has been talking about this for the past few years and they are no doubt right for the medium to long term; but, in the short term, this headline is probably a contrarian indicator.  Right now, bullish sentiment on the dollar is at only 3% which is lower than where it was just before the dollar turned around last year and rallied ferociously.

“The whole picture of risk-reward for emerging market currencies has changed. It is not so much that they have risen to our standards, it is that we have fallen to theirs. It used to be that sovereign risk was mainly an emerging market issue but the events of the last year have shown that this is no longer the case. Look at the UK – debt is racing up to 100pc of GDP,” he said

Update: Video on dollar carry trade that might interest you.

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The Great Inflation / Deflation Debate

Stacy Summary:  In case you are bored or just curious this Sunday afternoon, I recommend the following inflation/deflation debate held by FinancialSense Newshour.  It’s the third hour, listen to both the inflation/deflation debate and then the next segment with Marc Faber.  By the way, my own organic fresh produce bill has gone down over 10% (and up to 20% on some items) in the past two or three months.  After you listen to it, your comments below!

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UN takes a page out of Paulson’s rule book

Stacy Summary:  They also warn of anarchy in the streets just as Paulson apparently was warning of in telephone conversations with Congressmen.

paulson-flu

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The On the Edge Interview with Steve Keen

Stacy Summary: This just the Steve Keen portion of the latest On the Edge for those who want to share it.

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Canadian healthcare and banker bailouts

Stacy Summary:  Some thoughts this morning from north of the border.

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Obama intervenes in state election to save Ken Lewis from jail?

Stacy Summary:  I wonder how many honey traps Cuomo avoided?

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[1061] The Truth About . . . Specflation

Stacy Summary:  Max and Stacy for Truth About Markets London.  And Revolution Broadcasting in the US.

For more download and listening options, visit Archive dot org

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[OTE19] On the Edge with . . . Steve Keen

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In case you missed the previous 30 announcements, IMF announces (again) that it will sell 1/8th of its alleged gold reserves

Stacy Summary:  Gordon Brown I notice is most vocal in pushing for this IMF alleged gold sale to help the allegedly poor.  Perhaps he should look at his own debt problem.

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Imagine if the world’s reserve currency becomes its most shorted

Stacy Summary:  Welcome to the new global casino order.

“The dollar is the cheapest funding currency bar none and only challenged by the U.K. in terms of the risks from money printing and escalating deficits,” says Simon Grose-Hodge, a strategist at LGT Group in Singapore.

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