A Modest Proposal: A Nation of Bankers
My friend Scott is a hedge fund manager who noted the following, with just a trace of irony in his voice:
Joe Stiglitz, in an interview from Paris with Bloomberg over the weekend, noted that “if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”
With all due respect to a Nobelist who’s been on the right side of many of the economic debates of the last few years, I’m surprised that the obvious and simple answer to declining worker incomes in the United States escaped him: We all become banks, borrowing short from the Fed at zero interest, and lending long to the Treasury at 330-370 basis points. The profits from that trade can be invested in the stock market, so that we can all diversify our income streams.
Presto, household balance sheets repaired, and we’re off to the races again.
Sounds like a plan, Scott!
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September 15th, 2009 at 9:11 am
no kidding-
what a scam-
and those who saved- the one’s who did the right thing- who cares if the interest they get on their savings is zero-
what losers-
you have to a player and lose all your blue chips- then you are rewarded-
the Fed sucks- and should be investigated- all books opened – all banks independently audited- a complete and utter travesty that they are able to trample over everyone to protect the TBTF banks-
criminal
September 15th, 2009 at 9:12 am
Yeah, green shoots and all. We’re doin’ jes fine thanks, aren’t we?
“US credit shrinks at Great Depression rate prompting fears of double-dip recession”
http://www.telegraph.co.uk/finance/financetopics/recession/6190818/US-credit-shrinks-at-Great-Depression-rate-prompting-fears-of-double-dip-recession.html
September 15th, 2009 at 9:24 am
Fully agree with ahab on having to investigate FED.
If anything, is there *any* institution watching over them?
Public opinion alone most certainly does not.
September 15th, 2009 at 9:25 am
How about we open up the Fed meetings to public viewing and broadcast!!! This is the part that irritates me the most. They sit behind the doors in secrecy when what they are discussing should be broadcasted just like our Congressional meetings! “Who” do they really represent?
September 15th, 2009 at 9:31 am
Agreed, the Fed meetings should be open to the public. It is a disgrace how conflicted their interests are between Wall St. and Main St.
September 15th, 2009 at 9:40 am
…yeah, & as soon as every balance sheet is repaired we Americans can all get on to what we do best…
MISALLOCATE CAPITAL!
September 15th, 2009 at 9:52 am
BR: What a deliciously snarky comment. Ah, the subtlety of it all. And the elitism.
Well, I suppose those without a substantial stock portfolio or a 401K that just got pumped up will all just have to eat cake.
And go into the lawn maintenance business.
September 15th, 2009 at 10:02 am
BR:
How did your friend get his hands on that playbook!?
Who the hell does he think he is…
Bellicheck?
September 15th, 2009 at 10:03 am
@alfred e
Beware of the lawnmower man… Didn’t Steven King write a story about him?
September 15th, 2009 at 10:03 am
OT:
Interesting interview with Rep. Alan Grayson:
http://wallstcheatsheet.com/knowledge/interview-knowledge/exclusive-interview-congressman-alan-grayson-talks-fed-transparency-and-missing-money/?p=1878/
The more I hear from this guy, the more I like him.
September 15th, 2009 at 10:08 am
marcus-
thx for the link-
yes we need more outspoken folks like him- asking the right questions
September 15th, 2009 at 10:19 am
Anyone see the Yahoo! Finance page lately? It has this headline: Rally May Only Be in 6th or 7th Inning, Ritholtz Says ;-)
September 15th, 2009 at 10:21 am
here is a great link- discussing inflation, debasement of currency and the Roman Empire- if you take the time to read it- you will understand how a currency can lose 95% of its purchasing power- as in the US $- very harsh view of leaders, the military and civil servants-
please note how freedom of the common man was slowly deprived and the transition to actual servitude to working hereditary plots of land occurred – the beginnings of a feudal system- fascinating stuff-
http://mises.org/story/3663
hat tip Wes
September 15th, 2009 at 10:26 am
And here is the link:
http://finance.yahoo.com/tech-ticker/article/330576/Rally-May-Only-Be-in-6th-or-7th-Inning-Ritholtz-Says;_ylt=AgR0fGbXQrOoi7vkPADMGFm7YWsA;_ylu=X3oDMTE2czFodDc4BHBvcwMxMARzZWMDdG9wU3RvcmllcwRzbGsDcmFsbHltYXlvbmx5?tickers=^gspc,^dji,aci,sbux,fdx,dell,dis&sec=topStories&pos=8&asset=&ccode=
Hope it works.
September 15th, 2009 at 10:26 am
The fact that it is not illegal for Banks who borrow from the Feds to invest in Treasuries is a crime in itself. Does anybody have numbers on how big that problem is ?
September 15th, 2009 at 10:31 am
as i’ve said cost, per commodities going up 100% are now ready to hit bottom line, they estimated wholesale prices would be up .8% they came in at 1.7%, double, and the band plays on
September 15th, 2009 at 10:37 am
BR’s friend suggested:
We all become banks, borrowing short from the Fed at zero interest, and lending long to the Treasury at 330-370 basis points.
reply:
—————-
This is just a variant of the carry trade, only the dollars remain within the US and aren’t invested in Icelandic Bank CDs or something so exotic. Japan was famous for this.
September 15th, 2009 at 10:43 am
I’ve walked out many a baseball game in the 7th.
September 15th, 2009 at 10:55 am
ahab, very intersting read, insigtful……………replace soldiers with bankers and what have u got, eeks, the same story……….in some ways it opens my eyes, in that it is a possibility in the fact debasement has it’s own path, especially when u have no growth, which seemed to be there basic problem, yet, it was obvious to the ruling class they were too big too fail
September 15th, 2009 at 10:59 am
@flipspiceland
LA Dodger fans don’t even GET TO THE BALLGAME until the 3rd inning.
September 15th, 2009 at 10:59 am
Barry is on TechTicker right now… http://finance.yahoo.com/tech-ticker/article/330576/Rally-May-Only-Be-in-6th-or-7th-Inning-Ritholtz-Says?tickers=^gspc,^dji,aci,sbux,fdx,dell,dis&sec=topStories&pos=8&asset=&ccode= and
http://finance.yahoo.com/tech-ticker/article/330627/Dow-Unchanged-Since-911-But-Don%27t-Bet-Against-America-Ritholtz-Says?tickers=^DJI,^GSPC,SPY,DIA,BGU,QQQQ,FXI&sec=topStories&pos=9&asset=&ccode=
September 15th, 2009 at 11:18 am
My wife used an analogy of a car as the American people the other day. She said, if you don’t check the oil (resources) or the tires (condition) or the engine (income) periodically and you keep driving it hard, eventually it will break down.
““if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”
But this line disturbs me. It’s bad enough that I am expected to fuel the U.S. economy but now they’re telling me that I’m expected to fuel the world economy. I don’t know about the rest of you but I wasn’t created to be a tool for the rest of the world. Stiglitz; let the rest of the world fuel their own economies and stop treating me like an ATM machine.
September 15th, 2009 at 11:29 am
People ask how this market will ever break down again. What could make it go down when the govt uses so much of our resources (and future generations’) to prop it up?
The answer lies in this little facetious remark above, in a way. When too many parties have jumped on this same trade and it’s just so easy, the imbalances will grow and eventually be dislocated. The energy released in that dislocation will be huge and will wreak havoc on the unsuspecting holders who can’t move fast enough or are paralyzed by their complacency.
September 15th, 2009 at 11:33 am
Of course the underlying reason is that the fundamentals don’t support this level in the market, only other factors that make it just a greater fools market, with everybody in because it’s going up. No foundation means it will fall quickly when it cracks. Time will tell. (and no, I’m not short the market, no way)
September 15th, 2009 at 11:38 am
Priceless!
September 15th, 2009 at 12:14 pm
torrie-amos @10:55
very good read indeed- and anyone who is half way interested in economics and debasement of currency and ending of empires should absolutely read it-
pass it along
September 15th, 2009 at 12:42 pm
Best plan I’ve heard in a while, BR. We can all just act like banks and trade worthless paper too each other and we’ll all be rich. Brilliant. Problem solved. Next.
September 15th, 2009 at 1:31 pm
@ahab
Dude… you think I’M schizo with cvienne & DOA?
What’s up with popeye & bluto?
September 15th, 2009 at 2:20 pm
@ Ahab:
In addition to all the articles, there is a wealth of FREE audio podcasts on The Risks of Fiat Currencies, Ron Paul advocating Gold, Inflation, etc. at http://mises.org/media.aspx
September 15th, 2009 at 2:23 pm
[...] Vorschlag aus Barry Ritholz’ Blog The Big Picture: Joe Stiglitz, in an interview from Paris with Bloomberg over the weekend, noted that “if workers [...]
September 15th, 2009 at 3:30 pm
Very amusing. As one of currently o.o5% dollar bulls, I’m not sure I can stand another two innings of this, Barry…
September 15th, 2009 at 4:18 pm
cv-
at my office- so can’t even see the avatars at the moment- downloaded a couple pictures- was doing Bluto- but downloaded Popeye as well- thought i set Bluto as the avatar
September 16th, 2009 at 5:47 am
[...] Idee im O-Ton bei The Big Picture: Joe Stiglitz, in an interview from Paris with Bloomberg over the weekend, noted that “if workers [...]