Thursday, January 10, 2013


Welcome back.  Sorry I am a bit delayed in getting started again, but by this time I'm sure you realize that I'm not the most on-time guy you ever met--especially when the grand kids are in the middle.  They win every time which we didn't on January 7.  In fact it was worse than being a Republican in Washington which we will get to in a minute, but first, over there.

It's still Christmas but slowly, things are coming back to life with the realization that the three big events which will shape the EU this year will be the elections in Italy and Germany and the referendum in the UK as to its future membership.  As I had mentioned, I had overlooked the the UK for much of last year but it is now impossible to do so.  We are heading over in a month's time (a shaky date contingent on a number of things at which point I will have a better perspective) but right now, with a certain dependency on the manner  in which the question is put, one should expect the UK to leave the EU despite the now somewhat screeching implorings of The Leader and his administration.  The effect would be a sea-change and important to the readers of this ongoing plot because of the effect this would have on finance and banking world-wide.  Sadly, I am forced to admit at this time that I am clueless, but given that London is, and will probably remain, the center for international finance no longer in coalition with the Euros, any end-game one could dream up might well wind up as the state of play.  Near term, I suspect things will remain quite for a bit: now, quiet doesn't mean better--it just means...well...quiet as witnessed by Spain's 10 year auction today which went well by any standard although one should keep in mind that it was revealed about a week ago that Spain has picked the pockets of it's government pension funds to purchase it own debt.  My word, the place is looking more and more like Illinois every day.  Segue to over here.

The Leader is heady with power and prepared to pick a fight on just about anything following his victory in the first battle of the Great Tax War.  Now one battle does not a campaign make and the foreboding specter of the debt ceiling looms before us, but it is clear that the man is in no mood to compromise and therefore it remains to be seen just how much fight is left in the Republicans in the House before a total victory can be declared.  In the mean time, the new generals are being put forward, most notably Jacob Lew as the replacement for The Suit, a notorious gutter fighter as opposed to more amiable candidates such as Billy the Dud from the NY Fed and The Bair With Very Little Brain who was dying for the job.

While all of this was going on, insanity began to creep out into the open regarding what the administration might do to avoid a fight altogether.

There are two beauties out there.  One is the striking of the One Trillion Dollar Platinum Coin to be deposited with the Fed By Treasury thereby by-passing Congress and providing all the funding The Leader needs...provided we don't run out of Platinum.  The other is the tried and true issuance of script in lieu of currency with which we paid our maturing debts just like California did a few years ago.  "Hey, no problem!  As soon as we get over this little hurdle we'll redeem all that's out there but in the mean time, you can use the stuff or sell it to our banks who we will instruct to purchase the same.  After all, the buggers have been hoarding TRILLIONS!"

What seems to have been overlooked by the geniuses behind this idea is the fact that we don't have to merely refinance a trillion or eight this year but it appears that we are in need of almost $1.5 TRILLION OF NEW MONEY!  Let's have a contest:  how many of you think the amount available, outside of direct purchases by the Fed, will exceed $.50?  Love to hear from you.

Finally, after a couple of years, the first set of regs were released by the Consumer Protection Agency, you know, that piece of insanity created by Lizzy Warren, now junior Senator from Mass.  Joy at the wisdom of the thing.  It seems that if the banks play by the rules which include a repayment formula of no more than a requirement of 46% income to debt, the banks will granted "safe harbor" status whilst having been placed into a position where they can no longer make "sub-prime" mortgage loans unless they are Fanny and Freddie qualified.  Absolute genius screamed the Times and those of it's ilk.  Funny, I have always been of the view that the only really new idea that has come around in a while was the Sermon on the Mount.  Everything else is simply a variation on a theme.  This reg is no different, only in my time it was called "Red Lining;"  I guess what side of the fence you are on makes a difference.  Wonder what Rev. Jackson thinks?

1 comment:

  1. Mr James, you bring academic precision and practical expertise to your writing. That is unique to find in one person. You are one of the very few who transit to and from Harvard, Treasury, Fed, and Wall St with only the good of the country being sought, not wealth or power. You have so much in common with Beryl Sprinkle and Milton Friedman.

    Prof Ed