Excellent criticism of Ben Bernanke and the Fed, Pro Ron Paul

[slantedview]

From Mish:

http://globaleconomicanalysis.blogspot.com/2007/08/bernanke-proves-he-is-complete-fool.html

Great article, closes with this:

THE problem is the Fed.
THE solution is Ron Paul.

[BIG_J]

I *heart* mish

Haha!

Any econ blogs out there that offer opposing views?

[slantedview]

I *heart* mish

Haha!

Any econ blogs out there that offer opposing views?

Angry bear gets into politics every now and then, but I haven't noticed any advocacy for a particular candidate.

[Lord Xar]

I am noticing certain "unions" and such endorsing other candidates.. is there an "economics" group or somesuch..???? I am SURE they would endrose Ron Paul...

[akalucas]

interesting chart somebody posted on the comment section of that blog. Notice how much more debt we have compared to right before the depression.

http://comstockfunds.com/files/NLPP00000%5C292.pdf

[Chester Copperpot]

Ut oh.. I wonder what the spies on here are going to do now...


THEY LOVE THE FED..

[4Horsemen]

I just an email last night from IAFF. They support Dodd who has no chance. Then they will support Hillary or obama, always a Democrat.

[Cowlesy]

Right now a lot of banks are raising Private Equity Funds that are going to focus on buying up all this devalued LBO debt.

Essentially what that means is that they're appealing to the private investors with incredible piles of cash sitting around to bail them out of all this crap paper they have.

I swear so many dumb money (dumb money meaning Pension Fund Managers) funds will buy into this that it will further perpetuate the problems we're having in the credit markets.

[michaelwise]

Many of the contrarian economic blogs and housing bubble blogs I read support Ron Paul. I read the Mike Shedlock blog last night that mentioned RP.

Dollar Collapse lists recent articles about RP at the bottom.

http://www.dollarcollapse.com/

Housing Panic often mentions Ron Paul.

http://www.housingpanic.blogspot.com/

Posters on The Housing Bubble Blog, often speak favorably of Ron.

http://thehousingbubbleblog.com/

I wounder if we could get an endorsement from Bill Flekenstein and Peter Shiff? These are a couple of well respected bears who would agree with Ron Paul on the economy.

[slantedview]

interesting chart somebody posted on the comment section of that blog. Notice how much more debt we have compared to right before the depression.

http://comstockfunds.com/files/NLPP00000%5C292.pdf
wow, i missed that. that is interesting, and ominous.

[slantedview]

I wounder if we could get an endorsement from Bill Flekenstein and Peter Shiff? These are a couple of well respected bears who would agree with Ron Paul on the economy.

I thought I had heard Peter Shiff announce support for Ron? I know he at least donated to his campaign. One of my favorite economists is Dean Baker. Not sure if anyone is familiar with him, but I'd love to hear his support for Ron Paul. Traditionally, he is a strong liberal supporter but his views on the economy are sound and in line with Dr. Paul's.

[quickmike]

Right now a lot of banks are raising Private Equity Funds that are going to focus on buying up all this devalued LBO debt.

Essentially what that means is that they're appealing to the private investors with incredible piles of cash sitting around to bail them out of all this crap paper they have.

I swear so many dumb money (dumb money meaning Pension Fund Managers) funds will buy into this that it will further perpetuate the problems we're having in the credit markets.

Wouldnt private investors realize, especialy after seeing all the bad home loans made to people who obviously shouldnt have been given a loan in the first place, that the fund managers are doing this, and pull their investments? Im no econ expert, but if I had money in a pension fund, I sure as hell wouldnt want my money being used to bail them out. Thats just me though.

[Cowlesy]

Wouldnt private investors realize, especialy after seeing all the bad home loans made to people who obviously shouldnt have been given a loan in the first place, that the fund managers are doing this, and pull their investments? Im no econ expert, but if I had money in a pension fund, I sure as hell wouldnt want my money being used to bail them out. Thats just me though.

Well when you think private investors, dumb money is Pension Fund Managers who typically keep tons of cash in safe (relatively) t-bills. They also put a lot of dough into Alternative Investments (PE Funds, Hedge Funds, etc). I think the Wisconsin State Retirement System (or some Wisconsin State Pension Fund) is suing Bear Stearns at the moment, as one of their structured credit hedge funds collapsed---they feel they weren't explained the risk of the fund, BSC obviously disagrees. Typically PE Funds are some of their best performing assets, because typical PE funds invest over a much longer timespan and from the get-go are known not to be liquid (you can't call for a redemption on a whim). They can resist short term or even medium term market fluctuations as the focus is generally 5-7 or even 7-10 years that capital is to be locked up.

The thing is, a lot of banks are setting up their own private equity funds. Anyone can have a private equity fund, because private equity simply means the cash used to fund investments comes from private investors hence, private equity. So a bank raises a $4 billion fund whose focus is to buy up undervalued LBO debt. Banks typically syndicate out LBO debt to other banks and private investors, however right now they're unable to do so due to the credit market being dry as a bone. So what do you do? You tell investors you're raising a fund to capitalize on this amazing market opportunity to buy up debt that has been grossly undervalued due to a phony credit market crisis. Dumb money flows in, buys the debt...the banks shift the debt off their balance sheet into a fund and don't need to record an unrealized loss on the underwater debt. If the economy continues to surge ahead, we'll survive. But if the economic growth were to slow, companies that are highly leveraged on this debt that can barely meet interest payments and were counting on increasing margins and revenues could fold due to depressed sales.

[quickmike]

Well when you think private investors, dumb money is Pension Fund Managers who typically keep tons of cash in safe (relatively) t-bills. They also put a lot of dough into Alternative Investments (PE Funds, Hedge Funds, etc). I think the Wisconsin State Retirement System (or some Wisconsin State Pension Fund) is suing Bear Stearns at the moment, as one of their structured credit hedge funds collapsed---they feel they weren't explained the risk of the fund, BSC obviously disagrees. Typically PE Funds are some of their best performing assets, because typical PE funds invest over a much longer timespan and from the get-go are known not to be liquid (you can't call for a redemption on a whim). They can resist short term or even medium term market fluctuations as the focus is generally 5-7 or even 7-10 years that capital is to be locked up.

The thing is, a lot of banks are setting up their own private equity funds. Anyone can have a private equity fund, because private equity simply means the cash used to fund investments comes from private investors hence, private equity. So a bank raises a $4 billion fund whose focus is to buy up undervalued LBO debt. Banks typically syndicate out LBO debt to other banks and private investors, however right now they're unable to do so due to the credit market being dry as a bone. So what do you do? You tell investors you're raising a fund to capitalize on this amazing market opportunity to buy up debt that has been grossly undervalued due to a phony credit market crisis. Dumb money flows in, buys the debt...the banks shift the debt off their balance sheet into a fund and don't need to record an unrealized loss on the underwater debt. If the economy continues to surge ahead, we'll survive. But if the economic growth were to slow, companies that are highly leveraged on this debt that can barely meet interest payments and were counting on increasing margins and revenues could fold due to depressed sales.

So basically what I take from what youre saying is that were screwed because the "economic growth" we are experiencing is nothing but a house of cards that will fall eventually. Am I right in thinking this ? It just seems that it will all have to be answered for eventually, even if not by the banks themselves, these companies that are leveraging this debt cant possibly keep doing this forever. Like I said, im no economics/finance expert and I only buy stocks short term myself, but it seems to me that our economy is based mostly on bullshit for the most part and the piper will have to be paid eventually.

[Cowlesy]

the piper will have to be paid eventually.

The piper will have to be paid eventually. You got it quickmike.

I won't bother typing a novel/truther length post, but here is a little food for thought. In most leveraged buyouts that have occurred recently, the deals were done on a baseline premise that economic growth would continue for at least the next 6 years, and that top-line revenue growth in the acquired company could meet or outpace it.

They'd at minimum need to always be growing, or they'd go into default due to being unable to service their debt (make interest payments). If we have an economic slowdown/recession and these companies are impacted in their revenues even to the point of contracted revenues, they will be unable to service their debt. That will mean ferocious cost cutting (labor being a first priority) or even asset sale/liquidation (everyone is boned). Everything in economics is linked, and if 800 people lose their jobs in a city, that impacts Consumption--it impacts tax revenues. It's the classic snowball effect.