Comments on: Pricking asset bubbles

By: MV

MV — Tue, 03 Jun 2008 22:55:00 +0000

On " Should kids be given cash incentive to loose weight"? I could only say a flat "NO" to that suggestion, wouldn't it be more practicle to educate the parents and children at the same time about the down side of being overweight. Lets stop junk food advertising in the "Kids veiwing" time slots on TV and promote heathly community ads instead. It should be noted that children have a greater capacity to trim down before they make into adulthood, this would give them all the incentive they need to remain healthy throughout there long lives. Education and healthy eating doesn't mean they cannot have a treat or even take out, but keep it to once a week and eat only healthy foods at home. This will mean that they all can benefit and cut down on possible future health costs.

"Remain Positive" weight loss is a slow process, NO FADS, NO PILLS, NO POTIONS... onward and upwards.

By: TK

TK — Fri, 30 May 2008 07:04:41 +0000

I have been looking at the housing crisis in the US with interest. Very interesting that a superpower like the US can be so negligent in the fiscal policies. I know the US FED cannot play God but they are playing God. Playing God with money from ordinary people. With the condition of your economy and the war on terror, the US dollar is going down faster than a mafia victim with concrete on his leg. Seems like it is going to be a spiral.

What strikes me as funny is the US pretended to be a superpower. Pretended to be someone you are not. Pretended to be something that you are not. Now, the consequence is your own house is in a shamble. Please, take care of your own policies and your own people.

I used to be in the Middle East and found that their policies to be a joke. Little do I know, their policies are almost the same as the US ones, hah hah

By: Jeanette

Jeanette — Mon, 19 May 2008 15:55:10 +0000

Stop scaring the public by saying we are in a recession. What is the definition of a recession? I don't want to hear the definition of the news media looking to scare the public, but the actual definition that qualifies a recession.

Jeanette

By: Steve Mierzejewski

Steve Mierzejewski — Sun, 18 May 2008 17:09:19 +0000

This presumes that the Fed has the ability and the foresight to make the correct decisions at the precise time. It also presumes that the bubble-burst cycle is not a natural, healthy part of any growing economy. Controlling a growing bubble may simply end up curbing investor enthusiasm which would, in turn, contribute to a general economic slowdown.

By: Der GrafEFB

Der GrafEFB — Sun, 18 May 2008 06:06:37 +0000

Such nonsense. Greenspan correctly identified the "irrational exuberance" inflating the late-90's markets but claimed blindness to the housing euphoria. In the first case he did nothing until deciding wrongly to mitigate the crash, setting up the second one and fueling it with essentially interest-free money.
Nothing destroys economies and lives as does inflation. Indices which exclude housing and food and fuel are a sham. Housing which rose 20-35% annually over 3-5 years, switching categories from necessity to "investment", had to be seen as THE major inflation story. Invisible? Again, the FED refused to allow the markets to adjust themselves and the housing bubble now deflates even more slowly, extending the pain except to the speculators.
Not sure whether the FED should prick bubbles, loud hints of action might be enough; but it clearly should NOT be supporting them or the speculators whose excessive liquidity made and benefitted from them.

By: F. Huber

F. Huber — Sat, 17 May 2008 08:47:55 +0000

The most dangerous trend in the USA now is the wanton destruction of capital.

The dot.com meltdown and the subprime toxic debt disaster both originated in the US and wiped out hundreds of billions of capital, invested not only by speculators but by pension funds and ordinary folks too. It is basic economics that an economy is dependent on four elements: the input of labour, land, capital and entrepreneurship. All of these must be invested with care and managed in an honest and fair manner. None of them are available in infinite quantities and none of them are immediately replaceable.

The Fed has not only NOT learned the lesson from the dot.com meltdown, but has tolerated massive growth in leverage (up to 30 times of the original capital) in the finance sector, and has failed to develop a set of tools to deal with bubbles. Sitting at the switch and pushing interest rates up and down may spur or restrict consumer demand but has little or no effect on leverage, on speculators or on the perpetrators of financial scams.

More regulation, more severe penalties, the power to close down
a financial operation (at least for a short period) are some of the measures which – even if they do not deter the most determined fraudsters – would certainly be an improvement on the current situation where the Fed looks like a toothless tiger.

By: Satish Shah

Satish Shah — Sat, 17 May 2008 06:05:28 +0000

Todd, Central Banks should never allow asset bubbles to be created in the first place and for that they must control credit and money supply. World over politicans like to create asset bubbles to create illusion about wealth and Central Bankers willingly oblige. Central Bankers should not be allowed to create money supply beyond a preset limit linked to say GDP / inflation situation and expectation. Another important thing, inflation calculation should include retail level prices of energy, food, house, farm, etc all items which a person needs to consume/buy in a normal way of living. There are examples of reasonably good governence in Switzerland, Singapore, etc. countries. Why can not all nations do it?

By: edward sansom

edward sansom — Fri, 16 May 2008 21:27:35 +0000

Greed and fear will always win so why mess around. Always nice to buy in a bargain basement.

By: Kurt

Kurt — Thu, 15 May 2008 10:41:24 +0000

Hi Todd,
It is interesting who someone should listen to. I look at who is going to make the money from the advice (if followed). They are the one I definately DO NOT listen to. Advice can be tainted when there is an object of stimulating money flow into your own pocket.

As far as the Fed's thinking should they contain bubbles, that is like containing a atomic explostion inside a bottle. Bubbles come from greed, to make money the easy way. They are feed by the repeated advice from the so called professionals, who make statements like "This is the future", "It's value will never go down", or "It's a sure thing, now is the time to invest". and many get trapped into this Free Money metality. Sales commissions go thru the roof, but sadly in most cases, the only ones who make money are those who give the advice, not the ones who invest the money.

For the Fed's to contain bubbles from happening, guess they have to find a way to control greed (which is impossible). To change Fed policies for one instance, will only have a bad effect on others. Our Monitary system is a complete system, and you cannot bind a hand to control it, without making more work on rest of the body to function, as we see in todays financial problems. Maybe we would be better off remembering what our system is based on ... "Let the buyer beware!".

By: William Morris Young (2nd and final version)

William Morris Young (2nd and final version) — Thu, 15 May 2008 07:59:45 +0000

The FED and Pricking Asset Bubbles

The FED has indicated being interested in the phenomenon of Asset Bubbles. However, normally Asset Bubbles just rise and disappear in the air. If Banks would charge a higher interest rate, this would ofcourse have consequences for the size of Asset Bubbles.

But this does not yet explain the statements of the FED.
Why is the FED interested so much in Asset Bubbles ? Is it just because, or is this a sign of the FED allowing inflation, higher taxes and higher consumer prices ? I would advice my readers to invest rather than to just consume the Assets one owns.

William Morris Young
the Netherlands