Saturday, October 9, 2010

QE and the Blame Game

The idea behind QE is that the Fed crowd's out money that would otherwise have been buying Treasuries at auction, forcing that money into other assets in order to raise the prices of those other asset classes.  So far, the strategy has worked beautifully.  Or so it seems.

QE is merely the LAST KICK of the "kick the can down the road" strategy that our government has employed since the Federal Government's actuaries made clear the absolute certainty of what must occur with the government's various social programs.  When I say "social programs" I do not mean ONLY Social Security & Medicare.  I mean Medicaid, Fannie Mae, Freddie Mac, Food Stamps, HEAT, HEAP, and the rest of the alphabet soup now supporting the staggering weight of the American people.

(Yes, the AMERICAN PEOPLE.  Not just poor people, or Black People, or Hispanic People, or Native Americans, or Christians, or Muslims, or Jews... EVERYBODY.  Walmart benefits from SNAP (food stamps) at least as much as those individuals receiving this "benefit" do.  The primary vehicle supporting this ongoing ponzi scheme of social programs is the G^% D*&& F&^%*ing CORPORATIONS. And corporate securities, directly or indirectly (yes, real estate is not a "corporate security"... or is it?  It is funded by the banking system, which is part of the corporate system... and without bank financing, there would be no financial value to real estate (neither barter value nor personal production value are financial value)) make up nearly 100% what we American's define as "wealth"... and as we all know WEALTH = POLITICAL POWER.)

Our Federal Government has painted itself into a terrible corner (or it may have been painted there by phenomenon... or momentum...).  The very programs designed to "ease poverty" (and boy could I have some fun going through the machinations of trying to define that) have succeeded in increasing the number of "poor", and we have reached the terminal apogee of that orbital exponential function... the orbit of the apogee I speak of was expanded by the Zeitgeist onto the balance sheets of every government, corporation, and individual until the total debt within the system could no longer be supported by the production within the system.  And how, exactly, did that come about?

Well, there are the facts that can be supported by thoughtful analysis, and there are the opinions of the biased (and of course WE ARE ALL BIASED, including me... but we overcome that bias through the aforementioned thoughtful analysis).

I assert that it is our Federal Government that is completely dependent upon the Corporate system, a Corporate system which breeds such terrible inequalities in wealth and political power and stratify's our society as to be unsupportable - except that without it all of the social programs that have created this behemoth would dissolve before our eyes with all of that outcome's attendant effects. Think about that for a moment.  (And, please, teenager's of ALL AGES, spare me the lecture about the military budget... it is agreed that the military budget is out of bounds and must be cut deeply... but even a cursory review of the budgets of the various social programs would reveal that the these dwarf even the military's absurd budget.)

The American people have come to blame "the Politicians" when the blame is ours - and ours ALONE. We, and we alone, have tolerated a political process whereby laws are enacted even though NONE OF OUR LAW MAKERS HAVE READ THE LAW THEY ARE VOTING ON.  Ergo, we have left the legislation process in the hands of the "money" - the corporate, union, and special interest lobbyists (I despise the Left's disingenuous attack on the corporate lobbyists... when their special interest groups - feminists/abortionists, NAACP, NEA, et al puke... dominate) - "money" that derives its support from the Corporate System, a Corporate system that the Federal Government is COMPLETELY reliant upon for its continued existence.

"Cluster F**k" only begins to describe the situation.

And then you have the various "True Believers" of the Left and Right trying to make political hay out of this CF and doing everything within their power to perpetuate the ongoing control of the system by the 2H1P. 

In the end, it will be Fascism or Libertarianism.  Getting there could get very rough.  The solution is not Liberalism or Conservatism, choosing Left or Right - they are the problem, and they need to go.

More to come.


bureaucrat said...

There will be no shortages of any kind in this country for a long time. We are awash in everything, and demand for everything (due to 360% debt-to-GDP ratio) continues to fall off at every level. We are in a deflationary depression. Everything has been overproduced, and everything is for sale.

This country is overflowing in: gasoline, oil, natural gas, diesel, corn, soybeans, wheat, coffee, cocoa, cotton, houses, commercial buildings, storefronts, electric power, you name it. There is no reason to panic, for the time being. When the retail prices start rising, then worry.

For all of you hoping and praying for the destruction of the U.S. (all you old men who no one listens to anymore, with your guns and gold), it ain't gonna happen. People are piling into the Treasuries cause, for the all big wind about governmental collapse, the rest of the world doesn't buy it. Even Americans themselves are buying Treasuries.

Americans may pretend not to trust their government cause they think it is trendy and they listen to the nuts on Fox News, but in really,, the people trust government in the U.S. implicitly. Those social security checks always are despoited on time.

My portfolio of commodities, metals, a few dividend-paying stocks and lots and lots of Federal bonds is going like gandbusters. Don't choke on my smoke. :)

Greg T. Jeffers said...


We are only awash in products and commodities that we import.... which is everything...

we are no longer awash in corn... which is something we actually still export.

bureaucrat said...


1) Last I checked, the charts of corn in storage were very similar to the charts of oil in storage. There has been a fall-off in inventory over time, but it is VERY gradual. I'll check that again.

2) Also please remind everyone that 99% of U.S. corn grown is FIELD corn, with CANNOT be eaten by humans directly anyway. It can be used for animal feed, for making ethanol, and for making several products humans can eat (like corn syrup & corn oil), but the SWEET corn (the Jolly Green Giant corn,) is only ONE PERCENT of all corn grown in America. And from the looks of the supermarket, we have lots of cans of sweet corn available too.

But you are right about field corn and ethanol. It takes a HELL OF A LOT of field corn (42% you say) to make the pittance of ethanol (less than 10 billion gallons a year) we burn in our cars.

Dan said...


While you are checking the corn silage, be sure to check the second derivative, at what rate is the slope of the first derivative decreasing. In other words, at what rate is the drawdown accelerating. That would be much more informative than a static number, Methinks.

bureaucrat said...

I'll see what I can do. :) My commodities graphs are on my bulletin boards at work ...

Greg T. Jeffers said...


THe grain market's are what they are... the U.S. corn crop goes 58% to food and 42% to ethanol - or at least it did in 2009.

Now, any changes in population, oil production and imports, and crop production will affect those proportions - and it seems that the USDA thinks that production will be down. I am not in a position to counter their argument. Population did increase by at least 1.1%, and oil imports are down 3.2%, and domestic production was up 4%.

THe rest is just you and a calculator.

BTW... the USDA could be very wrong, marginally wrong, marginally right or very right. I tend to think they will be marginally right given the time of year (harvest), though we will have to wait. If you wait you can't make money (or lose money).

bureaucrat said...

Exactly. Investing is just legititized gambling, and you don't win if you dont bet. Almost all of my data and evidence, as you noticed so long ago, is anecdotal. But, you don't test every ounce of blood to find out how you are doing body-wise. You take a small smaple and hope that the components are circulating well enough that your sample will mean something.

I'm just mentioning as I have for awhile: there is no indiacation to panic, we appear to have lots of everything, any decreases in historical graphs are slight at best, and smart people will use this opportunity to the fullest. Due to the drop in overall demand (including that of money itself), I am waiting for the 4% 30 year so I can refinance and save at least $300/month.

The ones who refuse to be lazy can make money even in bad times.

Greg T. Jeffers said...

Who said panic?

Any rational analyst would have to conclude that the U.S. is handling the winding down of its oil imports, at least here in the early stages, reasonably well.

That oil imports will come to a complete end with 15 years is near absolute, and within 10 years, highly probable.... actually, I should not say "complete"... Canada will export something for at least 20 years... but that something won't be all that much.

Stephen B. said...

I continue to be fascinated with the divide we draw between field corn and sweet corn here.

I guess it comes down to how well we think that the US can handle a dwindling or under supply of field corn. Given that field corn is what nearly all of our corn syrup and a good deal of our meat animal supply comes from, never mind that ethanol that stretches our gasoline supply somewhere around 10% as Greg points out, the question becomes, how well we can live without the soda, candy, and host of other HFCS products along with all the meat we get from that field corn?

I suppose we can live with much less feedlot meat and less garbage "food" with HFCS, especially if the supply winds down in a controlled way.

Doing without that 10% gasoline boost will be a bit more painful, but so far, as Greg also points out, we've handled the crude oil shrink fairly well.

Maybe the country really doesn't "need" to farm millions upon millions of acres of field corn. But the transition back to less meat, and more locally grazed meat at that, and less gas, and less cheap, subsidized HFCS soda... wow...

"Oh, the pain" as that whiner Zachary Smith used to say!

PioneerPreppy said...

Stephen beat me to it. We can consume field corn it just isn't as sweet as people prefer. It also doesn't grind as well nor digest as well.

If there are shortages and I tend to believe there will be from the information I have. It won't be the American people who suffer from famine this year at least. All we will suffer from is increased food costs which are not worked into the actual inflation rate and therefore will cost everyone.

A poor harvest season will still provide for the US. Only a large oil shortage could cause serious issues with food distribution.

In the end it just means a slightly smaller pie yet again and more sectional division. Each season, each year brings us closer to something. I am just interested in seeing what the something will be.

PioneerPreppy said...

One other theory also crossed my mind. It is no secret China has been buying HUGE amounts of farmland especially in Africa.

What if... The US is also quietly preparing for more peak resources to come including food and under estimating the overall production on purpose.

By doing so we may have a better hand to play in any future resource conflicts and have a larger buffer to fall back on for our own people.

Just a passing thought.