11 May 2009

Around the traps... Money printing, stress tests and an interim market top

Stress test BS.

"The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation’s biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining.

In addition, according to bank and government officials, the Fed used a different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits. . .

The Fed ultimately accepted some of the banks’ pleas, but rejected others. Shortly before the test results were unveiled Thursday, the capital shortfalls at some banks shrank, in some cases dramatically, according to people familiar with the matter.”


We are going to start this article with a premise, which is that the bond market and the dollar are much more important to the powers that be in the US than the stockmarket. Two months ago the stockmarket was plumbing new lows and the end of the world was nigh. Now, instead, you walk down Wall St and everything is smelling of roses. Unfortunately, however, there is a massive storm threatening to break that will necessitate the immediate sacrifice of the stockmarket, and especially those mugs who have been taken in by the recovery hype being doled out by the media and have been buying the market in the recent past.


"The Economic Crisis and Its Implications for The Science of Economics"

Sound/video from a recent conference:

The Perimeter Institute conference on economics is being organized in an effort to better evaluate the state of economics as a predictive and descriptive science in light of the current market crisis. We believe that this requires careful, dispassionate discussion, in an atmosphere governed by the modesty and open mindedness that characterizes the scientific community. To do this we aim to bring leading economists and theorists of finance together with physicists, mathematicians, biologists and computer scientists to evaluate current theories of markets, and identify key issues that can motivate new directions for research. ...


At the inflation report on Wednesday, the Bank's Governor will point towards the Bank's own internal calculations which show that the amount of cash flowing around the economy is starting to pick up. The money supply figures - M4 adjusted for the effects of complex financial market fluctuations - show a slight increase in money growth from 3.5pc to 3.9pc in Q1. Although the esoteric statistics are ignored by most City economists, within the Bank they are regarded as the most authoritative sign of whether their radical efforts to control the money supply are working.



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