Cyrenaic Syndrome

According to Weldon Financial founder, “The EU, like the US, suffers from what we might call the ‘Cyrenaic Syndrome,’ a dynamic linked to the ancient Greek philosophers Aristippus and Hegesias of Cyrene, who, in third and fourth centuries BC, hypothesized that the goal of life was the avoidance of pain and suffering.

Addicts accomplish this through substance abuse. The EU [and the US, we would add] is trying to accomplish this thru pure denial, and an outright refusal to accept that austerity, like sobriety, is the ONLY way to actually deal with the problems it faces.”

Craig Dismuke, The Market Today ONLINE

The US government’s budget stalemate

The US government’s budget stalemate – It shall surely be interesting to see what our fearless (fearful) leaders 'accomplish' over the next several months as they attempt to hash out a budget for our federal government. A budget process that has thus far been less than efficient and effective and politics free!

It makes things interesting when you take into context the basic financial issues that our country currently faces –

1) the belief that government spending is always the first answer to any problem…and still more spending, even if it comes at the cost of significantly higher levels of leveraging our future, is always exponentially better!

2) the age of entitlement has been so ingrained in America's psyche over the last 60+ years thus creating a large and growing portion of our populace that truly believes that the government owes them (ie: is obligated to take care of them from birth to death)

3) the notion that the government has ALL the money available that we shall ever need or want and it will cost us nothing because fewer and fewer of our citizens really know, or even want to know, where the money actually comes from!

4) the role that special interest plays in the grand picture – money is power and power means accommodation and accommodation means the continuing sacrifice of freedoms for everyone else

5) iconic, ‘has been’ legislators that no longer know what daily life in America really is about – they have lost touch with the people who do the living and dying and working and raising kids and paying the bills and spending within their means! Many of these ‘long in the tooth’ congress people have been living in a congressional fantasy land for far too long…

6) and finally – who will be willing to relent in their desire, their drive, their addiction to gain power (the power that spending other people’s money and leveraging to the hilt brings) - the never ending struggle to gain more power and control…

Overview summary of the lessons gleaned from the Great Recession

We have been hearing quite a bit lately about what happened in and to our economy that produced the Great Recession. Numerous economic experts, in addition to a government- sponsored commission (which could not agree on a final report that stipulated their findings), have provided their unequivocally ‘unbiased’ findings and accounts of the debacle. Within all of the ‘findings of causation and fault’, I would say that there are bits of truth scattered among the reams of presented opinions. But only bits.

As a response from the peanut gallery (that’s me), after spending quite a bit of time pondering what really happened, I have put together my summary of the root causations and the lessons to be gleaned from this time of economic distress.

Overview summary of the lessons gleaned from the Great Recession:
Leverage ALWAYS has a limit – over-leverage ALWAYS has a price.

Bubbles ALWAYS deflate (pop) – the only question is the rapidity and the breadth of their destructive wake.

Economic cycles come and go – it’s only a matter of the height, depth, time span and finally, the amount of unemployed.

Rapid price appreciation in any asset class cannot exceed fundamentals for an extended period of time – no matter what the experts say – without a proceeding deflationary adjustment (i.e.: economic pain).

Government policy (fiscal and/or monetary) drives market economic decision- making, thus providing the motivation, or might I say, encouraging, asset value manipulation along the way.

Excesses occur when markets, motivated by policy, progress beyond, ahead of, and/or in spite of, fundamentals.

Government policy-making largess ensures bubble formation – past, present, and future.

Government policy-making is usually short-sighted, and in the instances of crises have a preference for topical, symptomatic band-aid fixes – and pledge to worry about the root causes when the next crisis arrives.

When you play the hyperbole of a heated economic lottery, very few end up winning.

Summation: Time, perseverance, minimal governmental intervention, and a return to foundational financial truths are the quickest way back to sound economic health.

2011 P.R. Barriball

What happens when the yield curve begins it's move upward! ! !

The Fed not only has pressure due to the low and slow GDP growth, the high level of unemployment and the high level of unused liquidity in the system but they also have the gargantun task of keeping rates low so that our government's debt load cost (interest expense on our borrowed money that is now over $14T) doesn't skyrocket...and totally 'bust the bank' as they say.....
So, my prognostication is that we will continue to hear that there is NO inflationary pressure - how long the markets buy that will be interesting to see....increasing price pressures for the things of daily living are hitting consumers from all sides (except housing) and that is inflationary. And with commodity bubbles forming all over the 'spill-over' effect will continue to add price pressures to the system.
prb

Never Has U.S. Borrowed So Much for So Little: Chart of the Day (attached)

By Brendan Moynihan - Jan 27, 2011 The U.S. government has been borrowing record amounts of money, though with little effect on interest rates. That may be about to change, according to Nouriel Roubini, the New York University economist who predicted the 2008 financial crisis.

“The fiscal problem is very serious,” Roubini said in a Bloomberg Television interview yesterday with Tom Keene from the World Economic Forum in Davos, Switzerland. “The bond vigilantes have not yet woken up in the U.S. in the way they have in the euro zone. Unless the U.S. addresses this fiscal problem, we’re going to see a train wreck.”

The CHART OF THE DAY shows total U.S. public debt outstanding soaring to record highs and approaching its $14.3 trillion ceiling, while interest rates and debt-service costs as a percent of gross domestic product fall to record lows. The average maturity of U.S. marketable debt outstanding is five years.

Treasury Secretary Timothy F. Geithner said Jan. 6 that lawmakers must raise the federal borrowing ceiling in the first quarter or risk a default on U.S. debt and a loss of access to credit markets. Geithner said it will reach that level between March 31 and May 15.

Economist Ed Yardeni coined the term “bond vigilantes” in 1983 for investors who protest inflationary monetary or fiscal policies by selling bonds and driving up government borrowing costs.

To contact the reporters on this story: Brendan Moynihan in Chicago, Illinois,
at bloomberg.net

two questions to ponder at this juncture

1) Is the current monetary policy agenda creating a ‘protectionist’ atmosphere that replays the events of the 1930’s?


2) And with the current policy activity that is devaluing the dollar to lower levels, what will happen to the level of appetite for our nation’s debt from abroad, especially Asia?

Cost of Regulation Reaches $1.75 Trillion

'Government is not the answer, government is the problem' - a very appropriate quote considering the cost that our government, at all levels, has 'forcibly' levied upon the people...and without much success I might add!


Red Tape Rises Again: Cost of Regulation Reaches $1.75 Trillion

While the revenues and expenditures of the government are budgeted and accounted for each year, the costs of regulation are largely hidden from view, paid for indirectly via higher prices, fewer choices and less innovation. The best estimates of the total cost, however, have come from a series of reports commissioned by the Small Business Administration (SBA). The latest such report was released recently by the SBA's Office of Advocacy and the results are startling, says James Gattuso, a senior research fellow in regulatory policy at the Heritage Foundation.

Rules and restrictions imposed from Washington now cost Americans some $1.75 trillion each year. That is sharply higher than the $1.1 trillion in costs reported in 2005 in the SBA's last study. Some of this increase comes from identification of regulatory costs that were not included in earlier reports, yet much represents new regulatory burdens -- including a $445 billion increase in the cost of economic regulation. No matter how you slice it, $1.75 trillion is a lot of money, says Gattuso.

It is far more than Americans pay in income taxes each year. It is about the same as the gross domestic product of Italy. Per household, the regulatory tab works out to some $15,000 -- almost as much as the average family spends on housing.

Source: James Gattuso, "Red Tape Rises Again: Cost of Regulation Reaches $1.75 Trillion," Heritage Foundation, September 22, 2010.

For text:

http://blog.heritage.org/2010/09/22/red-tape-rises-again-cost-of-regulation-reaches-1-75-trillion/?utm_source=Newsletter&utm_medium=Email

U.S. May Lose a Third of Its Banks

Another industry 'leader' giving his prognostication of fewer banks in our country as we move forward.
And here is a 'meaty' quote to chew upon as you 'carve' up this article:
“It will require people with greater experience levels and with tougher attitude toward the industry to carve out a future in this business.”


BankUnited's CEO Kanas Says U.S. May Lose a Third of Its Banks

By Dawn Kopecki and Zachary R. Mider - Sep 30, 2010

The U.S. may lose about a third of its banks as the weakening economy weeds out the least healthy institutions, said John Kanas, chief executive officer of BankUnited.

“Most of us in the business think we probably need 5,000 and think we are on our way to 5,000 as this cycle, if this is a cycle, unfolds,” Kanas, 63, said today at the Bloomberg Dealmakers Summit in New York. “We simply chartered too many banks.”

The Federal Deposit Insurance Corp. said it insured deposits at 7,830 financial institutions as of June 30. Kanas became CEO of Miami Lakes, Florida-based BankUnited last year by joining a group of private equity investors who agreed to inject about $900 million into the collapsed Florida lender. The other investors include Carlyle Group, Centerbridge Capital Partners, WL Ross & Co., and Blackstone Group LP.

“It’s not as easy as it once was when the market was going straight up and real estate values were on a straight incline,” Kanas said. “It will require people with greater experience levels and with tougher attitude toward the industry to carve out a future in this business.”