now that the rates have risen, the banks will lend

In theory banks lend to make money.  When rates are higher, they lend more.

Now examine these two graphs.  The first chart is from marketwatch.  It shows the 10 year treasury over the last 5 years.  The rates had steadily declined till recently.

 

 

rates

 

 

 

 

 

 

 

 

 

The next chart examines total debt payment / income and debt / income.   This chart  should make it clear that banks did in fact tighten their lending standards as record low interest rates were being set.

deleverage

 

 

 

 

 

 

 

 

 

The question remains if banks will operate in a converse manner as rates rise…  Ie.  Lend more as rates rise.  Rising rates may cause a greater rise in asset value.

 

D.

Predictions for 2013+

1. Carbon Tax continues to be discussed.  Ie. Global alliance between BRIC, EU, and Americas.

2. Tarrif and trade restrictions ease.

3. Banks thaw and will not hold the reserve/deposit ratio they currently have.

4. Home sales rise as interest rates rise.  (Ie. fear of locking in low rates causes households to urgently buy.)

5. Net sales in consumer  technology products temporarily peak and may decline.

 WOW! It’s WebStory!

social security and basic reasoning

It appears both republicans and democrats would like to kill social security for those people willing to pay into the system. There is a continual move towards privatization of retirement accounts, while offering minimal retirement plans to people that are near welfare status.

There is a systemic reason why both republicans and democrats are attempting to kill social security for the middle class and above. When older able bodied people choose to retire, the labor supply diminishes. With a diminishing labor supply, the cost of labor goes up.

I doubt it is coincidental that in an era which the age requirement for social security has risen, the labor supply has been relatively abundant as opposed to the era before the age requirement was raised.

 WOW! It’s WebStory!

Nothing scientific here, but the yen’s fall may be the end wage deflation in America.

Is it really far fetched to say the yen had strengthened since the dotcom bust because investors moved cash back into treasuries for both Japan and America?  Consequently, a weaker yen may be signaling the thaw taking place in between the Japan-America connection.

 

http://www.reuters.com/article/2012/12/28/us-markets-global-idUSBRE88901C20121228

Yen extends fall, Asian shares capped by U.S. fiscal worry

awsome economist chart

http://www.economist.com/blogs/graphicdetail/2012/12/daily-chart-14

 WOW! It’s WebStory!

Simple tax fix

How about just restore social security tax and lift the cap to all income.  Everyone ends up paying their fair share.

Keep all the other goodies.

another month of stead job gain and what do they say..

http://www.cepr.net/index.php/data-bytes/jobs-bytes/unemployment-rate-edges-down-to-77-percent-as-job-growth-slows

Job gains have been steady for nearly two years.  Yet pundits such as Delong and Mish continue to trash talk.  They whine and complain that the job growth is not fast enough, and that most of the job gains are coming from lower wage earners.

While I have a certain amount of respect for the people I follow in the bloggosphere, they fall prey to the same problems mainstream writers have.  They continue to whine and complain about many healthy aspects of our economy.  Jobs are increasing, budgets are stablizing, and the nation is becoming self sufficient in energy.  Much of this is occuring in a nice slow steady pace.  A pace at which businesses, governments, and households can adjust in an efficent manner.

We should be celebrating stability, yet it seems as if the blogosphere and politicians don’t want it.

Inspect voter responses.  Jerry Brown and President Obama were not elected due to their party lines.  They were elected and re-elected for their relatively conservative political stances. (ie. non radical).

 WOW! It’s WebStory!

us yield keeps approaching japan

Slowly but surely it appears our yields are converging towards Japan.

 

Image

Carbon Tax & Oil

Can anyone say that oil may have been dropping due to California’s introduction of carbon tax?

Right or wrong, it may be a step in the right direction to help limit pollution and trash.  Will the nation be soon to follow?

http://www.sfgate.com/opinion/openforum/article/Carbon-auction-levies-unauthorized-tax-4042247.php

QE4 results in lower expected inflation maybe..

Lets say hypothetically the same people that own most of the US treasuries also have a controlling stake in our banks (It shouldn’t be far fetched).  While these investors may not control nominal interest rate in the manner that the Federal Reserve does, they would control the real interest rate by tightening lending standards and limiting the money supply.

As a result, each time the federal reserve lowers the rates or gobles up assets in an attempt to spur inflation, banks simply react by lending less to counter the effect.  In essance, the federal reserve continues to force banks/investors to tighten their lending standards so they can guarantee themselves a decent return on treasuries and other fixed investments.

Conversely, imagine what banks and investors will have to do to insure a profit if the fed enters an era of selling assets and raising rates.

 

 WOW! It’s WebStory!