Tuesday, January 14, 2014

Being slapped silly

Moral: Wherein we think about what has happened over the last five years and wonder what Janet will bring that is new.

Slapped silly? Yes, Ben started the slapping. I know, he had his rationale. And, in his mind, savers meant nothing, evidently. It seems as if he would rather have those playing the heated equity markets thinking well of him than worry about how he has trashed the lives of the lowly types, namely savers.

What will Janet do? Well, we have said that we'll give her time.


In the meantime, we'll go back over the past few years from our perspective. I knew of the coming downturn. Too bad that Ben was such a cowboy when it happened. You see, he has us over the barrel with his huge balance sheet. Does the fact that he is leaving a mess mean nothing? Of course, why ought he worry since Janet will have to deal with the issues.

The savers' gains are important; savers' gains are emphasized here as equity gains, in terms as we've seen of late, are ill-begotten (to the max - look it up in a search here). And, anyone with a conscience wouldn't want to brag about such gains. A sustainable approach would favor steady gains that are of a nature which has some rationale behind it.

All of this is arguable, of course. But, look at the thing from the viewpoint of someone who retired in 2005, after years of hard work and saving. The person sacrificed over the years in order to not have debt (yeah, Ben, the guy, he has us in hock up to the ears). The person paid his bills, monthly. The person was a good citizen. The reality is that the advent of retirement (which is well understood) meant that some bit of income was expected from savings.

You see, it doesn't take much to sustain a reasonable lifestyle. Unfortunately, such a lifestyle is far away from the gaudy live's of those who spend other people's monies (concentrated in NY and DC, for one). Now, mind you, for a year or two, Ben's actions weren't troublesome. As one could hope for a turnaround. The recoveries always happened before within a reasonable time frame.

But, no, this time it was different, due to the depth of the depravity of financial scheming. So, Ben kept interest low. Why? Liquidity. But, for one thing, this act encouraged debt. And, it wasn't just reasonable debt; it was debt without collateral. Plus, it was leveraged debt. What we saw were several bankruptcies along the way of firms who took on debt (many times, it was so that those in the upper realms could have a payday on the backs of the workers - ah, yes, how can one even think that this would be the way to go? -- is it that players like the golden sackers don't allow limits on themselves? - other than legal, if that?).


So, let's see, how to end this? Yes, we had two years, And, then, three years. Slapping of the face, on a regular basis, as laddered things came to maturity, each time spawning off lower returns. In the meantime, though, Ben was feeding the addicts (QE infinities, one upon another). He would coo (talk baby talk to them) when they had a tantrum. The latest of these was last year. Ben talked taper (some little semblance of asking maturity from those who were suckling - we all know that weaning is a step toward growth) just a little. And, things got hairy (not really; as, at the time, Ben could have pulled the plug - he could have unwound all along this crazy trail of his).

Then, three years turned to four. Now, he was talking ad infinitum access to the teats, almost. But, then, he is going. Janet has to step up and resolve Ben's mess. Yes, what thinks she of savers?


So, again, we're sitting here, six years down the road, without any insight as to when those who control the money will help the little guy. You see, Ben could have allowed a reasonable interest for those who are on fixed income. But, no. He ran after the chimera (actually spawned its reemergence). Why? That is the one question I have not heard him answer (oh yes, he's put out rationalizations galore - these do not answer the question).

Aside: That measure is bogus; there is no way that all could sell out and get their monies. Stable value approaches are better in that regard. Of course, people see paper gains. What likelihood is there that they will get those goodies when needed? Not as great as some think. That side of the story is never discussed.


What if we could have a more severe taper now, actually an unwinding? Let's try it and see; too, let's measure the impact. From what we see, now, of how main street has not benefited much, it could not be any worse. Too, savers would not be slapped so much; we have been seriously bruised. Ben needs to make note that he did not kill off the class (savers - was such his goal?). He must understand that debt upon debt upon debt (which is how we can characterize his balance sheet) cannot be viable; someone holds the other end who is, then, lord and master. With the chimera, as he's inflated the thing, it's a game, not unlike Russian roulette, into which he has pulled us.


WSJ quoting
(see Remarks 01/15/2014)
In essence, Ben has trashed the retirement of a whole lot of folks with his decisions and actions. Okay, he had the right. But, let's enumerate that total pain for the guy. And, let's let Janet know, to boot. Have you heard these people whine like the fat cats on Wall Street (and at other places)?

No, many of them have worked a lot harder than has Ben, Janet, or their ilk (this is even discussed in the realm of The Tablet - talking about capabilities and attitudes - heck, I would like to muck manure with Ben while we talked truth and economics). And, these retirees have learned throughout their lives to sacrifice. What has Ben sacrificed? His ride in a limousine? ... Needless to say, the guy being gone will not keep his name out of the ensuing analysis and discussions.

Remarks:  Modified: 01/16/2014

01/15/2014 -- A recent WSJ quoted from a Boston College Study. The study was from the Center for Retirement Research and asked whether or not the upturns were going to help those who are now or close to retirement. See image, above. The equity chimera gets more attention, in my opinion, than is warranted.

01/15/2014 -- We need to have some type of model to explain the bulging that comes with equities (and its ilk when gamed via markets) on the up side and the rapid plunge on the other. Say you have 10 things, you don't know their value. Okay, you sell one of them for $1. Well, you can say that you now have $9 worth of stuff (9 at a $1). But, overall, there is $10 in value for the whole mix.

Let's use a table.

             seller has                        1 sold at $x                  total value
  1             10                                                                       ?
  2               9                                       $1                          $10
  3               8                                       $5                          $50
  4               7                                       $10                        $100
  5               6                                       $15                        $150
  6               5                                       $9                          $90
  7              ...

You see, an idiot shows up at step 4 and puts out $10 for 1 item. So, that raises the total to $100? Just like that, magical, isn't it? As the price goes up, so too does the tide (nowhere, in nature, is there a tide that keeps going up and up without going back to low tide - oh, yes, we can set traps and dam up water). Ben's been doing that now for several years as his easy money is supporting such a thing, via gaming. Too, automated trading is seeding (they actually admit this, it's called necessary to establish liquidity - crapola!). So, at step 4, you had seven things left that are worth $10 or $70 with an overall value of of $100. You know that this is a paper value. You know that you would have to sell the remainder of the items at that price to keep the value up. Where, at step 4, did that $90 (in total increase) come from? Yes, talk to Buffet and them and you'll hear about value (accumulated over time). But, his (and his ilk's) small value part does not outweigh that total gaming aspect that is a high-leveraged illusion. As long as Ben has kept up his support, this thing has gone upward. Supposedly, letting the balloons fly will lift us. But, it's like the dirigible. Isn't it better to have a 747 freighter? How do we get that with the market situation? Believing in the need to have stable value is one thing. There are other things to consider. ... But why is so much effort put into talking about the chimera, everyday? Is this to try to establish a more realistic framework for the aeration? But, the reality of the fizz is hidden underneath of the weight of the verbiage; how can that be science? ... By the way, step 6 is shown at $9 to indicate the down side. That is, $60 is lost on paper, just like that. Ben has prevented this by keeping interest low such that people had to go to equities in order to make something (or so they thought). So, in a sense, you get the ponzi (made-off) aspect - new money coming in (calling this gains is laughable - yet, it's so tragically stupid). ... Janet may not be any better in this regard; we'll have to see. In the meantime, I'll continue describing "stable" value's characteristics and need. Aside: not in any way to be associated with what are called stable value funds.

01/16/2014 -- After starting the above example, complications started to lurk that we could ignore for awhile, but, at some point, these would have to be addressed. Say, after a few items were sold by the one who had them first (arbitrary boundary situation, here), those who bought would look at how they could, perhaps, make more than illusory money by selling at a higher price. The value determination then would become some type of functional problem bringing in difficulties that have been long the domain of the mathematicians (the ultimate abstraction'ists, somewhat, but, analytics would be involved). While looking at pedagogic material that would be of interest, I ran across this web site (Intuitive guide to exponential functions). I have not read this yet, but the fact of the amount of comments that have ensued, plus those who commented, got attention. Too, John von Neumann said that we don't understand mathematics (higher-order types); no, we get used to it. However, there must be an intuitive aspect if we are going to appeal to truth and people's place in its determination. So, that usage resonated with my thinking. Too, though, we have a class'ist split that is happening under our noses. In one sense, it relates to numeracy. But, the more insidious part deals with overlays (computationally enhanced) becoming more real than the reality itself (we'll get into that ad infinitum).

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