Wednesday, February 19, 2014

Dalio's view

Moral: Wherein we see that the FED had a fractious meeting. Did Yellen have to yell to get people back into line?

Do any of those care about savers being slapped silly?


From those people, let's go over and listen to Ray Dalio. He was interviewed for Business Week (need I put in the Bloomberg?) by Charlie Rose. In that interview's write up, there is a link to a video.

   How the Economic Machine Works

It was only 30 minutes, so I watched (and cut out a few snaps). The topic deals with an economy that recognizes markets (see basis, this blog). Starting from transactions, Dalio lays out how things get to where credit comes about, then we have the multiplying effects, and more. Of course, the nature of the beast is cyclic.

So, we have the ups and downs. Into the mix, Dalio adds central agents: government and bank. Now, the former we can think of from several angles; but, let's just leave it for later. We see that Dalio defines the work of the central bank (Yellen's bailiwick) as two things: interest changing and printing money. Of course, it also buys bonds from the central government so that they have money to spend beyond that taken in by taxes.

It's a nice little video. Let's look at a few things; see the video for the remainder. What we're commenting on relates to the theme of the blog.

 This snap comes 05:43 of the video. If an economy only uses money, things can be dire. Why? For one, restraints (something that Ben never applied).

Dalio equates spending and income; that is, what you spend is someone else's income. Now, see the borrower in the image. If one can borrow, and that is determined by ability to pay, then one can spend more than one could if only the money was spent. It's that simple. So, there is a multiplying effect since everyone can contribute by borrowing and spending. How far does it go?

Well, then, if you put on your thinking hat, you would hope that the spending was not wasteful, as in, for something that might make money later. Unfortunately, much borrowing is not wise. Too, ought borrowing be done without collateral.

You see, before this last downturn, we had people claiming collateral that was bogus. Ah, how many ways was this done. For one, people borrowed to buy stock which is risky (it's still happening, folks). For another, with creatively defined financial instruments (fictitious capital, ala Marx) we had things that were only chimeric come to fore.

Oh, what did we learn?

This snap comes at 08:41. You see people standing on credit on the upside. Then, you see people burdened on the downside (that is a wave, if it wasn't apparent - as in, what goes up must come down - unless, of course, it's propped up by Ben and Janet). For any credit situation, at some point, the debt needs to be settled.

Well, we had people walking from houses and mortgages. And, much worse (even if we ignore Made-off).

If credit was founded upon collateral, the many problems could be contained. Yet, the FED has this thing about bubbles (quoting Alan, can't see it before the bust - no, clean up - much like diapers).

So, that brings us to this. The image, at 09:53, shows how money (based upon something - perhaps, gold, if we were lucky) is far outweighed by credit (due to the multiplying effect). And, what do we know of the credit?

Let's ask Janet if she has looked at Ben's books yet. And, that booming size of the credit realm, in many cases, is not based upon any type of collateral.

Rather, we have serious leveraging.

And, lots of spending can be used to buy financial assets (called such, but they might very well be toxic and of no value). We see the markets soaring. What is behind that other than mania pushed by Ben's (and now Janet's) coddling of the addicts who need to deal daily in such manipulative schemes.

We'll have to go on about this, again and again.
Finally (18:53), we get to some point where the debt load outweighs money. Wait! Didn't we say earlier that credit outweighed money? Yes, we did say that. When things are rosy, no one seems to care. It's when the risk of non-payment becomes visible, banks close their doors.

Remember in 2008? They all took their money home and wouldn't play. Why? Well, they knew that the underpinnings were crap. Ben didn't really clean things up.

In fact, what does he have in his possession (er, Janet's) that is toxic?

As Dalio says, it's a brief little thing that touches lightly. Yet, it's not a bad overview. This use of snaps was meant to show how there are things to discuss all along the video.

Perhaps, we'll get back to it with more comments.

Remarks:  Modified: 01/02/2016

03/06/2014 -- Watched this, again, with another viewer who thought that it was a nice little video. A couple of things stood out for me. One was his use of "thin air" (or, in other words, highly-ephemeral collateral) several times. The whole multiplier thing is based upon faith in getting repaid. A recent article pointed to where things were grim for future retirees. Many face the retraction of a promise sometime in the future; some are already facing the reality of a withdrawal. How do we ensure promised payments? One of the toxic types, supposedly, dealt with that (the CDO). ... Around the 19:40 frame, he talked about four ways to de-leverage. We have go on in length about leveraging. Many seem to have forgotten as we hear of people borrowing to buy stock, again; it was a no-no from way back. One of the four was was printing money. Ben made good use of that.

06/09/2014 -- Further on Ray's take.

01/02/2016 -- Dalio used in Quora.

Wednesday, February 12, 2014

Yellen effect

Moral: Wherein we look at what Yellen brought that might be different. Actually, it's too early to tell, yet.

Yellen is the boss;
she likes slapping savers silly
We can see what's up with this little thing from USAToday. It lists five reasons for the markets (investors, addicts, what have you, ...) feeling coddled. One is that Janet is a continuation of Ben (we'll have to look at that, at some point). Another is that she will keep slapping the savers silly (ah, that ilk, who cares about any "investor" who isn't into risky gaming?). Then, she's the boss; yes, we know that (it's now on her head that millions are being screwed out of their potential earnings - why is this allowed? - so that some "investors" (those who throw tamper tantrums) can continue to play the ca-pital-sino).


Earlier, there was Alan's put (yes, bail out at any time that he deemed necessary). Then, we had Ben's bounce (yes, lifting up to carry the markets when they were too weak to walk [reminder, weak due to excessive partying and screwing around]; then, placing training wheels so that they could continue to play their game of raking in oodles from the pockets of the hapless and of being those who milk the system). Now, we have the Yellen effect (which will be a focus for a long while).

But, big mama Yellen might wake up one of these days (we can only hope). When? After she realizes that she can move from under that cloud of puts offered, for years, by males who wanted to their buddies to dominate finance. At some point in time, she will hear the slaps (torture, really, being done under her reign -you did not know that, Janet?) up besides the heads of the millions of hapless.


We have these little reactions to the FED speak all the time (in fact, be truthful Alan and Ben, is it not downright additive? - such power (people eating out of your hand?)? - it'll be interesting to see how Janet handles that part of the role). So, there is a pop/fizz; then, a few days later, the dope (that which the FED provides to the addicts - what is in the punch bowl, by the way?) wears off.


Oh, for a mature mind that would consider a proper economic model.

Remarks:  Modified: 06/23/2014

02/12/2014 -- Because of Yellen, perhaps, the markets are up. USAToday has a headline (today, let's say): Dow has first 4-day winning streak of 2014. What? Winning? You mean more dupes came into the market. Remember, those who lost from this last drop (bought recently) have not recovered their paper loss. Other than some FED titillation, what was there that would cause anyone to think of "winning" as the proper word? Usually, teams have winning streaks from being better than their opponent in whatever game is being played. How can that concept be used here? Too, those supposed gains are chimeric, to say the least.

06/07/2014 -- The ECB beat Janet to the punch (not to the bowl).

06/23/2014 -- Yellen behind the curve?