FedUpUSA

Archive for January 13th, 2011

We’ve been featuring the recent Massachusetts Supreme Court ruling here in the past week.  We are of the opinion it is a very big deal, despite what the banks want people to think.  Apparently, we aren’t alone in that thinking.

From Bloomberg:

Mish Shedlock has an awesome explanation of the price inflation we are seeing in goods that we need right now.  This is not to be confused with generalized inflation or what many people term, ‘hyperinflation’ – most commonly associated with Zimbabwe or Weimar Germany.

I’m excerpting only part of his post here to try to keep this subject as concise as possible.  Please click the link below to read the entire article.

Prices Affected by the “Demand for Money”

In a general sense, if the demand for money drops for any reason, prices will rise. Conversely, if the demand for money rises for any reason, prices will fall.

The demand for money (the desire to hold on to it vs. consume) can change as consumer preferences change. Demographics is one such reason consumer preferences may change.

For example, someone at retirement age and barely scraping by has a far greater demand for money than a young person at age 30 with a decent job.

Here is another way of phrasing the same thing: A person aged 30 with a good job is far more likely to have high demand for the latest and greatest electronic gadget than someone aged 62 scared half-to-death about running out of money in the near future.

Changing demographics is a very powerful “price deflationary” card at this stage of the game. Indeed, Bernanke is doing his best to counteract the increased demand for money associated with boomer dynamics by pumping up actual money supply.

The result so far has not been the expansion of credit that Bernanke wants, but rather a massive increase in the amount of “excess reserves” held with Fed. (Please see Fictional Reserve Lending for further discussion).

In short, banks have no real desire to lend except to a small pool of creditworthy borrowers who have no desire to borrow.

In the real economy, demand for money is high (as evidenced by unprecedented drops in consumer credit). However, Bernanke (with much help from the Bank of China) did manage to ignite more recklessness in numerous speculative ventures including equities, leveraged buyouts, and commodities.

Thus, the Fed can increase money supply, but it cannot easily dictate where that money goes or even if it goes anywhere at all.

Frugality Revisited

The “Demand for Money” construct forms the basis for many “frugality arguments” I have presented over the years.

It is a topic much in need of discussion and understanding, especially by various inflationistas calling for hyperinflation later this year. The good news is we only have 11 more months to see them proven wrong. The bad news is they will simply bump up their target by a year or two.

Cliff Event In Japan

Meanwhile, Japan is the perfect example of strong demand for money in spite of amazingly low interest rates and in spite of all efforts by the Japanese central bank to cause inflation.

Nonetheless, Japan is at a state in its economy where it has consumed all of its savings and then some just as its retirees need to drawn down on savings that the government spent building bridges to nowhere in foolish attempts to fight deflation.

Please see Japan’s Finances “Approaching Edge of Cliff” for details.

As a result of that “cliff event”, strongly rising import prices in conjunction with a rapidly falling currency will likely hit Japan before the same thing hits the US.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Claims: Where Are The Apologists Now?

As part of the most recent observations on the boil up (melt up is so QE1) in the S&P, we find something quite interesting. A quick glance at the chart below shows the general market 45% climb since Bernanke’s leak of QE2 in August, as well as the market’s 10 day (purple line) and 50 day (green line) moving averages.

As a point of reference the S&P has been above the 10 day average for 30 days straight, and above the 50 day average for 92 days straight. What is remarkable are some statistical findings as pertain to the average’s movement with respect to the SMAs. Sentiment Trader points out that while as part of the recent surge in the S&P, the market has gone for “92 days without closing below its 50-day average, which has been matched only 17 other times since 1928.”

Where it gets scary, is that as pointed out, during this time the market has not closed below the 10 DMA once during the past 30 days. And as Sentiment Trader notes, “this has never happened before, in 82 years of history.” Congratulations to the Centrally Planned Socialist States of America: its Chairman has just made the Guinness Book of Manipulation Records.

ZeroHedge

After Bernanke was outed for perjuring himself before Congress in which he said “The Federal Reserve will not monetize the debt“, followed by Dallas Fed President Fisher stating he was late last year.

If you remember, at the time I ran the following:

Now Richard Fisher has come out with this:

The entire FOMC knows the history and the ruinous fate that is meted out to countries whose central banks take to regularly monetizing government debt. Barring some unexpected shock to the economy or financial system, I think we have reached our limit. I would be wary of further expanding our balance sheet. Yeah, like you’ve done for the last two years.

What’s “regularly” if not that?  Over a trillion and change in possibly-worthless mortgage-backed securities where we have reason to believe there are no actual mortgages in them, and then roughly a trillion more in government debt – at a run rate, at present, which will basically encompass the entire deficit through its term?

It would be nice if it stopped there, of course.  But it did not.

No, now we got this:

On the MERS website (as well as a Congressional website), you can find the testimony of MERSCORP, Inc. President and CEO, R.K. Arnold.  http://www.mersinc.org/files/filedownload.aspx?id=668&table=ProductFile

In this testimony before the House Subcommittee on Housing and Community Opportunity, Mr. Arnold states:

To be a MERS certifying officer, one must be an officer of the member institution who is familiar with the functions to be performed, and who has passed an examination administered by MERS.

Remember that?  I talked about it at some length.  This was our wonderful Congressional hearing where MERS defended its existence and stated quite clearly that only actual officers of the member institution were eligible to be a “certifying officer” (you know, someone who signs all those documents?  Yeah, one of those.) 

This was all part of the “industry” trying to defend its foreclosure and securitization practices.  Practices that have cost a couple of million Americans their homes, have trampled on Due Process rights and have involved massive submissions of affidavits that the submitters have admitted were attested to without any knowledge of what was inside – certainly an arguable act of perjury.

Number of indictments issued thus far for this conduct?  Zero.

And now it turns out that we have a deposition of one Ms. Arango in which she says…. oh I’ll just quote it:

First, Ms. Arango is obviously not an officer of the “member institution” which would be the bank:

Q. Okay. Are you now or have you ever been –

17 strike that.

18 Are you now an officer or director of

19 Countrywide Home Loans?

20 A. No.

21 Q. Have you ever been an officer or director

22 of Countrywide Home Loans?

23 A. No.

(p. 6)  Note that the corporate resolution she is relying on is signed by Arnold’s underling William Hultman, (Senior Vice President and corporate secretary of MERS, see http://www.mersinc.org/about/exec.aspx) which appoints employees of Marshall C. Watson, P.A. as officers of MERS.  (see Corporate Resolution, Exhibit 1 to the deposition, attached).  Note also that the appointment was as to loans shown to be registered to Countrywide Financial Corporation.  The assignment that Ms. Arango executed, however, was from MERS, as nominee for Countrywide Home Loans, Inc. (Exhibits 4 and 7, attached).

Nor is Ms. Arango herself or her law firm a “member” of MERS:

1 Q. All right. Are you a member of MERS?

2 A. No.

3 Q. Is your law firm a member of MERS?

4 A. No.

(p. 8)  So her testimony contradicts Arnold’s testimony that a certifying officer must be an officer—or even an employee—of a member institution.

Second, Ms. Arango never took any examination to become a signing officer for MERS:

11 Q. Okay. Did you have — did you have to take

12 any training from MERS or some other entity to qualify to

13 be an assistant secretary or agent for them?

14 A. I don’t — no, I didn’t.

15 Q. How about any type of testing or

16 certification, exam, anything along those lines?

17 A. No.

(p. 10)

There’s more – including the entire deposition – over at 4closurefraud.  Have at it folks.

Oh, and while we’re at it, may I politely ask when Congress is going to consider perjury a serious matter - if ever?  Because if the answer is “never”, I’d love to come up there and lie to you for an hour or two.  I might even be able to scam something for myself out of that.

After all, lying to Congress does appear to be a new and rather-novel American sport, and the so-called compulsion to “testify” before Congress has in fact turned into both a national disgrace and an international joke.