Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Mishkin Slams Paul Bill (by Gary)

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Hello from Gary.  I must have woken up on the wrong side of the bed this morning.  🙂

Mishkin Calls Ron Paul Fed-Audit Bill 'Dangerous'

Yellowbrickroad

No,
what is dangerous is trotting out former Fed governors to scare the
Munchkins, keep people off the yellow brick road and attempt to quash
all questioning of the all powerful wizards. We will just click our
heels and it will all work out… 'there's no place like home'.

This is America, Mr. Mishkin. It is not Oz and it is not a place where the people have no
right to know. America's government – whose Congress works closely with
your former institution in financing all manner of debt fueled
enterprise – is of the people. And through Dr. Paul's bill, all the people would ask is to know, well after the fact, what the Fed is doing.

“The
Ron Paul bill is incredibly dangerous,” said Mishkin, who is now a
Columbia University professor, in a Bloomberg Radio interview. “It is
remarkable the kind of attacks that are occurring on Fed independence.”

Asking for limited transparency is an attack?

Paul’s
bill “would be very dangerous in terms of promoting inflation,” Mishkin
said. “If you make the central bank beholden to politicians on a
short-run basis, you get very bad outcomes: high inflation and less of
the ability to deal with shocks like the ones we had recently.”

That's
funny Frederic, I always thought inflation was what you guys do every
time the system hiccups, when new debt is issued and Federal Reserve
Notes are printed out of nowhere.

“A
number of the legislative proposals being circulated would
significantly reduce the capacity of the Federal Reserve to perform its
core functions,” he wrote. The measures “would seriously impair the
prospects for economic and financial stability in the U.S.”

If
the 'stability' exhibited in Q4 2008, which directly resulted from
years of the Greenspan Fed's policy will be seriously impaired, then
let's hear it for impairment.

“This
is not the way to do monetary policy,” he said. “There are a whole
bunch of proposals about regulatory authority and the Federal Reserve,
which are potentially extremely damaging to the economy.”

Okay then, how exactly do we do
monetary policy Mr. Mishkin? You would have to be a myopic bureaucrat
or an academic to believe that the economy is not already damaged
beyond repair and has been for many years. Yet the wizards continue to
repair it, cycle after cycle with more of what killed it in the first
place, debt. In short, it is an ongoing Ponzi scheme with an as yet
undetermined time frame on final resolution.

“You
have to make sure you are not fighting the last war,” he said. “In the
U.S. context, there have been people talking about bubbles in the
United States and saying this is a big problem and the Federal Reserve
needs to exit from its expansionary monetary policy in order to deal
with them. This is fighting the last war.”

We are not in Oz. We are in Wonderland, down the rabbit hole. You created
the last war and now you are not willing to fight it. You would create
new wars for our kids to fight. Do you have children Frederic? What
about grandchildren?

Mishkin
called surging gold a “sideshow” and said prices of the metal “move all
over the map for many, many different reasons and have very little
impact on the economy.”

“If
gold price movements are reflecting other factors that could be
important, you might worry,” he said. “For example, if gold is going up
because people are worried the Federal Reserve won’t be able to contain
inflation, that is serious.”

You are hopeless, sir.
But you have the pulpit known as Bloomberg and other major media
outlets with which to influence a few Munchkins. Keep 'em off the
yellow brick road at all costs because you know what is good for them.
But it seems more and more each day are realizing that 'hey, maybe I'd
better take matters into my own hands… this Fed policy (with my
Government's money) is crazy!'

There is little doubt that there
will be $100 down days in gold ahead, but on the big picture the price
of this monetary anchor will continue to seek out a level of value that
is in direct opposition to the level of confidence in the system that
the Fed manages so well.

FrankenMarket Lives (by Gary)

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Happy Thanksgiving to all who celebrate.  This is Gary with my first published commentary from 2004 reproduced below.  The reason I am posting it (assuming TK doesn't mind publishing a 5+ year old piece) is because everything still looks applicable today — only on STEROIDS. 

The previous guest poster, Mark, noted that well-paying semiconductor (among many others) jobs went away in the US and what I was trying to point out in FrankenMarket is the systematic nature of the US decline.  I clearly remember the day Mr. Magoo, I mean Alan Greenspan, in response to a congressman's inquiry about US manufacturing jobs said "ours is an increasingly information-based economy; if you make things in this country going forward, you may not do so well".  That is what I recall, although a few words may have been different.  I was stunned that he actually admitted it. 

Aside from running biiwii.com and biiwii.blogspot.com, I am also the owner of a small manufacturing company.  Thankfully we are 100% healthcare focused, but I am still very sensitive to the issues that Mark noted and Greenspan put a punctuation upon.  Anyway, with that preamble out of the way…

FrankenMarket Lives

Introduction
 

As we enter the
summer of 2004, our markets appear to be moving with all the grace
of Dr. Frankenstein’s creation, staggering forward, arms
outstretched and seeking sanctuary. 
Ideally, the market would find that comfortable place in the
arms of a healthy, productive and fundamentally sound economy. 
But will it find those loving arms, or will it instead
ultimately find an angry mob, ready to strike it down?

What follows is
a breakdown of the situation as I see it. 
There will be no charts of trends or statistics, but merely
what I consider to be a common sense overview of the situation. 
I will compare what was to what now is, at
least as far as the US economy is concerned.

 


A Country
That Was

The very
origins of America, at least westernized America, are rooted in
independence, self-reliance and hard work. 
A land of opportunity for anyone willing to work hard, take
chances and go for what became known as the “American Dream”. 
In short, people were free to come here and define themselves
and in so doing, define a great nation that seemed to out-work,
out-produce and out-compete most others. 
It is no wonder that as this great vacuum was filled with
productive people seeking a better life, America was built, brick by
brick and with constant sweat-equity, into such a powerful economic
and cultural force, affecting and influencing the majority of the
modern world.

From the early
days of the industrial revolution right on through two world wars
and well into the cold war, America seemed to thrive as each new era
presented its own particular set of problems. 
There were setbacks of course, notably the Great Depression
of the early 1930’s.  In
fact, many would argue that policies originating from the
depression’s aftermath would set the country on a course to a
destination we now find ourselves approaching; a predominantly
paper-based, service oriented economy and a financial system
underpinned by credit (and its evil twin, debt), speculation and
fiat debt paper, AKA the US dollar. 


 


Our Modern
Economy

Whereas a less
mature, formative America worked and produced itself to the stature
of superpower, we now find a bustling, mature society that sadly
feels entitled to its riches and stature. 
In short, hubris has set in to the American consciousness,
and it is hubris that I believe will be its downfall. 
We are simply not seeing things through the same eyes that
our great grandparents, grandparents and even parents saw them
through.  And because of
that fact, we have transitioned from production to consumption. 
Consumption being a much easier route. 
After all, why work and produce for what you want when you
can attain easy credit, and seemingly get the same results. 

This would not be so unsettling if it were only a portion of
our population going in this direction, but the scary part is that
the whole country, Uncle Sam, has gotten on board and
I would argue, has led the charge into this brave new world of Alan
Greenspan’s “information economy”. 


Meanwhile,
third world nations do the work that we have risen above as an
entitled superpower.  Why
would we need to do the “dirty” jobs like manufacturing after
all, when we are the world’s number one financial services
provider?  We will
continue to do certain dirty work, such as construction, that
can’t be outsourced.  And
if it’s construction for infrastructure, so much the better. 
Uncle Sam is hiring! 

With
your depreciating dollars.

This leads me
to the main point regarding our current economic recovery. 
This is a recovery built on inflation, not real productivity. 
This far into a recovery cycle, I would expect to have seen a
far less accommodative Fed, as growth has really picked up and
inflationary pressures are becoming apparent even to those who
believe the official massaged numbers in the CPI and PPI.  But
as a friend of mine says, we’ll probably get “tightening lite”, or the
Fed talking the talk, but in fear of short circuiting the economy it
created through unprecedented liquidity from negative real interest
rates, a credit system gone berserk, and vendor financing agreements of
massive proportions in the form of Asian central bank purchases of our
treasury paper. 


 


Frankenmarket

So where does
this leave our poor monster, sloppily stitched together and
meandering aimlessly forward?  The
market will look to the economy, and being a forward looking
monster, I expect it to see one of two things; The Fed taking away
the punch bowl for real, deciding too late that the party is over,
or more realistically, it will see a Fed doing all it can to sustain
the monster it created.  This
market was stitched together with debt, and it will require more of
the same to keep it going.  We
are knocking on the door of hyperinflation, and I believe the Fed
will choose to open that door, given that it is too late for our
economy to de-leverage in any orderly fashion. 

As entitled
modern Americans, I can envision the majority seeing this as
bullish, and Alan Greenspan gaining even more accolades as the
celebrated maestro.  Frankenmarket
will probably get an extra bounce in its step. 
A warning before you go full-bore bullish longer term though;
for a reality check on what hyperinflation means, do a little
research on what Germany experienced in the 1920’s. 
By contrast, a garden variety Japan style deflation would
have seemed very tame.  But
it is too late for that now.