It looks like you're using an Ad Blocker.
Please white-list or disable AboveTopSecret.com in your ad-blocking tool.
Some features of ATS will be disabled while you continue to use an ad-blocker.
The Federal Reserve has no option but to start buying Treasurys as the government's needs for financing are huge, but the government bond market is a disaster in the making, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, told CNBC.
Federal Reserve policymakers start a two-day meeting on Tuesday, weighing options on how to spur lending to help cash-strapped consumers kickstart the economy.
Economists expect them to leave rates at zero and look to other ways of boosting liquidity, such as buying government bonds – a measure which has already been taken by the Bank of England.
"Well I think other central banks have done it already around the world but basically what it amounts to is money printing and in fact I don't think that it will help the bond market at all in the long run," Faber told CNBC's Martin Soong.
The yield on the 30-year Treasurys touched a low of 2.51 percent last year in December but now it is back up at 3.77 percent, he said.
"Yields have already backed up pretty substantially and I tell you, I think the US government bond market is a disaster waiting to happen for the simple reason that the requirements of the government to cover its fiscal deficit will be very, very high," Faber said.
"The Federal Reserve will have to buy Treasurys, otherwise yields will go up substantially," he said, adding that as their reserves were dwindling, foreign investors were likely to scale down their purchases.
But there will be a time when the Federal Reserve will have to increase interest rates to fight inflation, and it will be reluctant to do so because the cost of servicing government debt will rise substantially.
"So we'll go into high inflation rates one day," Faber said.
The stock market is likely to continue its bounce at least for a while, but the outlook is bleak, he added.
"I think we may still have a rally (in the S&P) until about the end of April and probably then a total collapse in the second half of the year sometimes, when it becomes clear that the economy is a total disaster," Faber said.
The Obama administration is “open minded” about giving General Motors Corp. and Chrysler LLC more aid and will use “all the resources” of the federal government to avoid bankruptcy for the automakers, said Steven Rattner, chief adviser to the U.S. Treasury’s autos task force.
U.S. auto suppliers may get some aid, and the task force plans to meet a March 31 deadline for assessing GM and Chrysler viability, Rattner said yesterday in an interview. “We are open minded about committing additional resources to ensuring a viable domestic car industry,” he said.
“We will bring all the resources of the government to bear on these various stakeholders and try to reach a fair compromise, a set of compromises,” Rattner said. “Bankruptcy is not our goal nor a desirable outcome.”
Sheesh, you'd think that my tax proposal was akin to running outside my house naked - in front of the kindergarten school bus.
Where do some people get their concept of what we should be doing in this country from? The "burn it all down and let God sort it out" mentality is, to be rather blunt, disgusting.
I have been steadfast and remain so in wanting to see a lot of people go directly to prison. Those folks at AIG don't deserve bonuses - they deserve to be violated - repeatedly. I echo Grassley's comments that the honorable thing is for these bankers to commit Seppuku - and do it on National Television so we all have proof that they didn't get into the G-IVs and head to some Caribbean island, leaving some look-alike flunky to do the deed for them (and no, I wouldn't put that past some of them, especially the clown-car brigade that includes former Secretary Paulson)
I have been steadfast in my support of The Fair Tax; it is the only way we will ever get rid of the "game the system" mentality that permeates K Street and the rest of Washington DC. But I have no particular belief that we're going to be seeing it tomorrow, as it would unemploy most of K Street and make "Ways and Means" just another committee within the US House.
Everyone (with the exception of Merideth Whitney) seems to think that the solution to this mess is to "restart securitization" - that is, the "shadow banking system."
To be blunt, that's not going to work.
The securitization business relied on suckers. It relied on people who would buy something that was so complex it was impossible to read the underlying documentation before purchase.
Not difficult, impossible.
This means that such a purchase was inherently a "trust me" acquisition and that is fundamentally unsound.
This means that we must stop relying on "creating as much credit as possible"; irrespective of the fact that we have reached the point where such charades are unsustainable, we are also at the "you can't get there from here" point as well in terms of pushing this credit into the marketplace even if it could be repaid, which it can't.
This means that we must shift from an economy that is funded on borrowing to one that is funded on capital formation. THAT in turn means we must increase saving as that is ultimately where capital formation comes from. The adjustment is going to be excruciating in the economy and it cannot be avoided; the day of being able to use your home as an ATM is in fact over - not just for a while, but forever.
The capital gains tax proposal is intended to provide incentives for doing other than borrowing as a means of funding.
Believe it or not, there are reservoirs of capital out there. I have some, and so do others. We will come out to play with the proper incentives - MCSNet "the Internet company" got its leg up literally as a consequence of another firm's business failure that happened at an auspicious time and gave me the opportunity to acquire hardware at a very nice price.
I want to incent people to take risks in capital formation. While it seems suicidal to do so into the maw of a deep recession in point of fact this is exactly when fortunes are made. The survivors who come out of an economic recession (or Depression) with a new idea and manage to capitalize on the asset fire sales are precisely how we form the base necessary for economic recovery.
Yes, I want to punish the guilty - severely so.
But this does not mean punishing the innocent, nor does it mean suppressing the entrepreneurial animal spirits.
Doing either of those things can turn what is an economic nightmare into something out of Mad Max, and if I get to choose, I'll take a pass on that latter option.
WASHINGTON (MarketWatch) - Boosted by an 82% increase in construction of apartment buildings, U.S. housing starts surged 22% in February to a seasonally adjusted annual rate of 583,000, the Commerce Department estimated Tuesday. It was the first increase in eight months. Construction of new housing units had plunged 38% in the previous three months before February's unexpected jump. Economists had forecast a further drop to 456,000, despite an expected surge in multifamily construction. Building permits, which are less volatile than the starts data, rose 3% in February to a 547,000 annual rate. Permits for single-family units rose 11% to a 373,000 rate, the largest percentage gain in 18 years
The PPI report today was good for a second straight month showing deflationary pressures in the manufacturing sector.
While the headline PPI came in 0.1% positive, the ugly was in the intermediate goods and crude goods numbers, both of which declined (by 0.9% and 4.5%, respectively.)
The crude goods number in particularly is rapidly decreasing, and this is not oil. It was down 2.9% in January and now, at 4.5% down, appears to be accelerating toward the floor at Warp 9.
Here's the ugly folks - this is not being translated into prices on the shelf. That is, manufacturers are maintaining prices into the economic malaise in a desperate attempt to hold profit margins (and squeeze consumers.)
The only actual good news was the concurrent housing start number, up 22% from January. This is somewhat stupid as a statistic since few people start building anything in January due to the weather, but the fact remains that this is a significant jump. Most of the new start gains are multifamily - apartments and condos.
Oh, and its focused in the Northeast.
Condos in New York?
I wish those who are building these things the best of luck. After all, its St. Paddy's Day (and boy, are they going to need the Luck Of The Irish on this one!)
Were I in their shoes I'd be hitting that Irish Whiskey about now, especially given the continued focus on attempting to borrow our way to prosperity - when we're already too far in the debt hole.
Something about trying to fix a drunk with a bottle of whiskey comes to mind..... but heh, its St. Paddy's Day - time to forget rationality and head to the bar!
(Just kidding. I think.)
...so what...we give till we're a worthless pile of mush laying in a gutter???
Justice Thomas Says Americans Self-Indulgent, Don't Sacrifice
LEXINGTON, Va -- Americans today are self-indulgent and don't make the sacrifices that their parents and grandparents did, and the nation's leaders don't ask people to act for the higher good, U.S. Supreme Court Justice Clarence Thomas said Monday at a Virginia college in a rare public speech.
"Our country and our principles are more important than our individual wants," Thomas told close to 400 people who greeted him with a standing ovation at Washington and Lee University, a Shenandoah Valley liberal arts school.
He quoted President Kennedy's famous, "Ask not what your country can do for you" speech, but said Americans today are more likely to say, "Ask not what you can do for yourselves or your country but what your country can do for you."
CNT Threads Can Transmit Radio Signals and Could Replace Copper Wires
“It transmitted almost as well as the copper did, but at about one ten-thousandth of the weight. That was a very pleasant surprise, how easy it was to do. The hardest thing is to manipulate them. They float on ambient air” said Mast.
According to Schulz, the reason behind nano-antenna’s success was the so called “skin effect” as “the electrons transfer well because they want to go to the surface” and “instead of traveling through a bulk mass, they are traveling across a skin.”
Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.
The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.
“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”
This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.
Other measures could include everything from purchases of Treasuries to corporate bonds, Tilton said. The Fed has already agreed to work with the Treasury on implementing a program to revive consumer and business loans, which the Obama administration has said could reach $1 trillion.