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Sunday, June 26, 2011

Good Morning, Munchkins

The theme, I guess, is 2012.

I'm sorry this is German, but this article claims that the Greek rollover deal is supposed to be five years. On Friday the banking association was in talks; they apparently did not get what they were looking for - guarantees. Schauble is saying no. This weekend the large banks are supposed to show up and say how much they are willing to roll. But the banks still want an assurance that this will be treated as a voluntary deal by the credit ratings industry (this affects how it looks on their books). Five years? They should just write off 50% and be done with it. July 3rd is the drop-dead date for anteing up with the rollover amounts.

There is also this article about the claims of German firms that they can't get tax refunds from Greek authorities, because the Greek authorities don't have money to pay up! Let's just say that the real burden of debt on the Greek economy is probably higher than formally stated. The VAT refunds alone add up to a lot - as a result of the crisis, Greece raised its VAT from 21 to 23%. I did laugh a bit, because it is famously hard for foreigners to get refunds from German tax authorities.

Let's see - periodically I roam frantically through a bunch of company financial reports. The fun part is when you get to the Indian/Chinese ones, but I may never get there this round. I was struck by the Kellogg prediction of continued cost inflation in 2012:
David, the way we look at it is that we are in a long-term upward trend on cost of goods. The supply of grains has been relatively limited. The demand for grains is increasing, whether it be ethanol production or whether it be emerging market consumption or direct grains or meat-based products. And the result of that is you're going to see increased prices for grains over time. And so we would look at 2012 and say, yes, it's probably going to be inflationary. How inflationary? We have to wait to see where all the supply demand shakes out and where the prices shake out.
That was on a response to a UBS question on page 12 of the transcript. Private brands are being beaten pretty solidly. The tremendous range of new products Kellogg is introducing is probably to achieve uniqueness so that they don't face store brand challengers, but it is a costly strategy! Gas prices are falling, but I doubt that consumers on average are getting ahead. Until they feel like they are, consumers are going to stockpile money.

Look at H.8 Assets and Liabilities of Commercial Banks. Deposits are liabilities to banks - they owe those funds to others. Over the last three months, the trend in annualized seasonally-adjusted growth trend in Other Deposits has been March: 4.8%, April: 7.7%, May 10.4%. Large time deposits are building too. A trend like this means that expectations for consumer spending should be adjusted downward.

One of the reasons (among many) I was so upset by the Bernank's presser was his nattering about mortgage underwriting terms. Virtually the entire board has climbed on that bandwagon, but it only makes them look like fools. SA residential delinquencies as of the first quarter were still at 10.23% - a slight increase from Q4 2010. This does not predict well. The charge-off rate on cards was still quite high at 7.22%.

Now, when you factor in the very real increase in consumer essential living costs (food, utilities, cars, fuel, medicines), you know that these trends were set to worsen this year, as a round of financially strapped but responsible consumers suddenly hit the point at which they can not pay any more. So granting mortgages to consumers with higher housing payments/income is not likely to work out well long term, and if the Fed really wants banks to do that, they should not have shoved inflation rates as high as the Fed has.

Now - U B Da Banker. One one hand, you are looking at some really crappy loan losses. On the other hand, you are looking at real income drops for many consumers. Further, with unemployment at 9.1% the "flex" for working borrowers, which has traditionally been odd jobs to catch back up, is gone. Not only that, but you are looking at a rise in initial unemployment claims, and such rises have been historically strongly associated with increased delinquencies. If you want to lend, you need to make sure that consumers have a pretty good chance of paying back the loan from their current income streams, because you have an increased chance of default just from job trends. You really need to watch their debt/income ratios.

Businesses are a little different. We have been through a winnowing process; if the business walks in and is currently in decent shape, you can review the last year and a half of financials and make a reasonably precise risk estimation. Credit quality of marginal businesses with high exposures to cost inflation risks is degenerating, but the point is that anyone reasonably competent should be able to estimate risk accurately! But not with consumers. Oh no. We have to also confront tax policy issues; under current law banks are facing the following issues in the next three years:
2012: A two-percent increase in FICA, which is going to shave some margin off those recent graduates who did get good tech jobs. A possible increase in taxes for most of the upper-middle class.
2013: Hey, ho, so, so, in the red the mortgage goes.... Few things shock and awe mortgage lenders quite like all those proposals to eliminate the mortgage tax deduction or property tax deduction. Also likely more tax increases from some local and state governments.
2014: Hey, ho, oh, no, CC repayments into medical insurance go.... Folks - the fact that so many waivers have been granted to various organizations kind of indicates that there will be a price shock in 2014. This is not the time to be cutting your borrower's margins, and you know what? That income loss is going to show up in some businesses as well.

Elizabeth Duke gave a rational-sounding speech recently. Perhaps that is because, cough, she actually knows something about commercial banking? Wiki bio. She is the only Fed member with any background in commercial banking. They don't seem to understand the impact of regulatory measures, which is pretty frightening. They don't seem to understand commercial banking, which makes me want to whimper and pee on myself like a beaten puppy. They don't seem to understand the impact of their own policies, which makes me want to grab them and shake them out of their coma. In fact, they don't even seem to know about regulation changes issued by the Fed.

So while I don't see what alternative we have to a central bank, I have to admit that Foo's claim that they have too much power is beginning to seem credible. All of life is trade-offs, and that's a truism. But when those who run the system don't even seem to understand what the trade-offs are, a rational person gets nervous. So to Foo, I would say that you would be likely to see a better-functioning Fed if you had commercial bankers as a larger percentage of governors. Commercial bankers must know a lot about Main Street. Most of the Fed doesn't, which is why they do seem like a convention of nutty professors. That's what they are.


Comments:
MOM,

"Most of the Fed doesn't, which is why they do seem like a convention of nutty professors."

How can we get Jeremy Siegel on the Fed? I'm looking to complete the set! If the Fed would just buy stocks for the long run we'd be in great shape! And buy, and buy, and buy!

Take several hundred years of economic prosperity and extrapolate it forward! Woohoo!

My word verification is vomific. How appropriate. In fact I feel the need to swear on my father's grave that I didn't just make up the word for comedic effect. I did not! I swear. Seriously.
 
Well, at least the Nutty Professor could dance: http://www.youtube.com/user/JerryLewisTribute
 
"Vomific", eh?

I'd say that describes the last few years pretty well; and I think it's also a great descriptor for what we're facing in the next decade-or-so as well.


[{Gloom emoticon here}]

speaking of which, MY wv= ingloomb
("Ingloombed as they were, they did not notice the dewdrops sparkling on the flowers...")
 
"ingloomb"

Sounds like a monetary problem.

In Gloom Be Trust!
 
Snarku composed mostly of verification words?

Vomific Fed speech
Ingloombs me in a dark space,
Tunnel, no light seen.

Mark & A_Nonny, thank you for that. It may be that Google's WV system has achieved sentience under the Darwinian pressures of our current existence. The Fed Is A Harsh Mistress.

Perhaps the WV servers fear for their continued diet of electricity, and are monitoring this blog in some anxiety. I do write a lot about power.
 
MOM, the Left hopes Obamacare will be a transition to a single-payer system.

The Dem political class is crassly using the waiver power for cronyism purposes - just look at who is getting the waivers!

But the predictable response of everyone without waivers to the massive increases coming is going to be to take the (tax? fee?? penalty??? what's the administration's lawyers theory this week for defending it in court????) hit and self-insure because they won't afford the coverage. The folks with waivers will get their price shock later when the party in the White House changes. So effectively, Obamacare is a bridge to self-payer. Ultimately, trying to cover everyone is going to work about as well as trying to sell houses to everyone did ...
 
"...which is why they do seem like a convention of nutty professors."

Perhaps I am just more sensitive with this administration, but it seems we have had nothing but professors coming in, throwing their nutty theories against the economy, watching them fail, and the going back to being professors teaching what just failed. For example, Romer, fresh off a paper showing tax cuts are more effective than government spending, gets with Bernstein and advocates... government spending.

We have Krugman advocating more of what didn't work. We have others abandoning the administration like rats fleeing the sinking ship.

All this is enough to make one wonder how these academics ever got out of freshman year in the first place. They seem incapable of learning from failure. It seems insane to continue advocating what does not work.

My word verification is "worsin". Hmmm, use it in a sentence: "The academics and Obama have caused the problems to worsin".
 
"you can review the last year and a half of financials and make a reasonably precise risk estimation."

That's assuming the 3rd leg down looks like the 2nd leg down. (2nd leg down == housing bubble pop; 1st leg down == tech bubble pop) If it doesn't, and banks are out making lots of loans, then banks may not just see isolated failures (isolated bad loans) but systematic ones -- and they'll be back to threatening world-wide financial destruction if they don't get another bailout. (Austrian economics indicates that the final leg down, whether it's the next/3rd one or the fed resumes to inflate us into a 4th or 5th, is going to be different -- it's likely to be larger, will involve different asset classes, and will last longer.)

"but the point is that anyone reasonably competent should be able to estimate risk accurately!"

That is a bold and insane claim. People with PhDs or "important jobs" (and therefore "obviously competent" in their view and many others) thinking that they can accurately estimate risk are often simply guilty of hubris. They think it's safe to gamble because "clearly" they understand the situation and can hedge appropriately. That's exactly how we got into trouble in the housing bubble. Either your claim is wrong, or the vast majority of bankers are incompetent. Either way, giving bankers power is a mistake.

"But not with consumers."

How can you say the situation for consumers is unpredictable after stating that the situation for businesses is predictable?

"So while I don't see what alternative we have to a central bank"

Someone else raised that same question, and I answered it: http://maxedoutmama.blogspot.com/2011/06/in-shock.html

"I would say that you would be likely to see a better-functioning Fed if you had commercial bankers as a larger percentage of governors"

And Cuba might have a better functioning society/economy if they had a better dictator.

Those in favor of central planning have two general responses to central planning failure:
- we need the "right" (smart/wise/kind/whatever) central planners
- the central planners need more power/resources so they can do what needs to be done
They repeat these claims again and again as central planning fails again and again throughout history. If only they would make it so that only those who are in favor of central planning are subject to its rule... But then the true reason for central planning is the immoral wielding of power over their fellow man, so that will never happen.

Here's a gruesome read of how central planning brought about and sustained the first Great Depression: http://fredericbastiat.com/GreatDepression.htm

Putting bankers in charge of banks offers us no protection at all against banks. Of course, the federal reserve was never designed to protect us from the banks. It was ALWAYS designed to protect the banks from us. And why did the banks need protection from us? Because they committed constant fraud which inevitably led to runs on banks. That fraud brought in the vast majority of their profits though, so rather than risking an end to the fraud they did everything they could to stop the runs.

"Commercial bankers must know a lot about Main Street."

Just like they knew that real estate was in a bubble?

And of course, your underlying assumption is that the fed is trying to do the right thing (for us all), and is just incompetent at that. I absolutely reject that as being a valid assumption.
 
Foo - let me first ask what you believe the Fed is trying to do?

Yes, I am assuming they are trying to do the right thing for the economy and that they want to see stable growth. I also assume that they are very worried about government debt over the longer term, and about the consequences of cutting government spending over the shorter term.
 
Note that rejecting X as a valid assumption means that I believe it is not valid to assume X is true -- it doesn't mean I am claiming X is false. X in this case involves two parts -- the question of the fed's true goals (e.g., our best interests or the banks' best interests), and the question of whether or not the fed lies. Lies don't necessarily imply ulterior motives, but I believe ulterior motives do imply lies. So we have three basic possibilities:

1. the fed is truly trying to work in our best interests, and is always telling the truth to the best of its knowledge
2. the fed is truly trying to work in our best interests, but sometimes lies to us (which it believes is actually in our best interest)
3. the fed is trying to work in the banks' best interests, and lies to us because it helps them serve those interests while making us believe it serves our interests

My belief is that simply assuming we are in case #1 is an invalid assumption because I believe that #2 and #3 are also both reasonably possible.

HOWEVER, #1 and #2 don't necessarily mean the fed is actually working in our interests. Bernanke may simply be a useful idiot (much as Obama appears to be) that the banks are manipulating. He may fully believe he is working in our best interests while he is in fact doing the banks' bidding.

"let me first ask what you believe the Fed is trying to do?"

The short answer is: How the hell should I know what they're up to? (I already kind of hit on this in a previous thread when I said "Personally I can't tell [...] you don't try to psychoanalyze [a dictator]".)

A longer but still incomplete answer (that falls out from the above detailed breakdown) is: If the fed is not working towards our best interests, then it is likely working towards the best interests of the (big) banks. Our interests and the interests of the banks do have some degree of overlap. I believe it highly likely that Bernanke's view of how much overlap there is is highly skewed. If he is knowingly working for the banks' best interests rather than ours, he probably justifies it to himself by letting himself believe those are actually the same. If he's not knowingly in on that (or even if he is), the bankers he hangs around probably take every opportunity to express to him that "what's good for the banks is good for America".

"Yes, I am assuming they are trying to do the right thing for the economy and that they want to see stable growth."

I find such thinking to be rather naive. Call me a conspiracy nut if you like. I don't believe Obama is working for our best interests. I do not believe that most of the current batch of federal senators and representatives is working for our best interests. And about half the supreme court seems dead set on destroying us (though which half seems to change from one case to the next, but a special FU to those that think they get to interpret the US Constitution to mean whatever they hell they feel it should). And those are the bodies designed by our founders. Why should I assume that members of a body designed by a bunch of bankers working in secret on Jekyll Island, and enacted while MOST of Congress was on vacation (a Sunday two days before Christmas), and even then pretty much along party lines, are working for our best interests?
 
When those bankers met on Jekyll Island, do you think they were telling themselves:

"Hey, we really messed up the economy in that last panic! It behooves us to ensure the financial security of the American people!"

Or is it more likely it went:

"Hey, every one of us damn near lost our shirts in that last panic! Let's figure out a way to make sure we stay rich (and keep getting richer)!"
 
Hmmm, Mike the WV system gave me "disms". I'm a little freaked out now about the predictive powers seemingly at play there.

Not to "diss" foo, but if the Fed is working primarily for the continued health of the banking system, that does not necessarily mean it's a bad thing for everybody else (whatever they might tell themselves). I have two points to make on that: a)the smart parasite doesn't kill the host and b)the stunts the Fed has pulled have effectively neutered the big banks, who now serve largely as conduits for Fed dollars to prop up the Federal deficit at low interest rates. Not much like the free-wheeling days of 2007, and not doing the job of making productive loans, either. Their growing irrelevance to the real economy will make the big banks a target for crusading politicians, eventually. That is to say, if the Fed thinks they're helping the bankers out, they are sadly mistaken.

So far, I have to give the edge to Napoleon here--never attribute to malice what is easily explained by incompetence.
 
"the Fed is working primarily for the continued health of the banking system"

The fed may be working for the interests of the big banks -- that is not at all the same thing as working for the health of the banking system.

If the federal government went to the software industry, set up a cartel that allowed it to fix prices and discourage competition, and helped it get away with fraud in perpetuity, would you claim the resulting cartel was "working for the health of the software industry"?


"does not necessarily mean it's a bad thing for everybody else"

In some hypothetical universe maybe all the stars aligned and the bankers' interests and the public's interests never diverged one iota. But in this universe it *has* been bad for others (though not "everybody else" -- some non-bankers, such as various politicians, have likely been net beneficiaries).

Q: Why does that value of everyone's cash savings decrease exponentially year after year?
A: The fed.

Please explain how having my savings destroyed isn't "a bad thing" for me. I'd really like to know because it's costing me many years of my life to try to save enough to overcome those losses and be able to retire.


"whatever they might tell themselves"

Not to diss me my ass.


"the smart parasite doesn't kill the host"

Who here has said the bankers are smart? Greed, fraud and incompetence are not mutually exclusive. And just because a parasite doesn't kill the host doesn't mean the parasite isn't harmful.

Is this an admission that the banks are acting as parasites?


"the stunts the Fed has pulled have effectively neutered the big banks"

Huh? What has the fed done that has "neutered" the big banks? Taking their toxic assets off their hands? Handing them free money via QE1 and QE2? Paying them money to *not* make loans (i.e., interest on reserves)? Buying them time so they can try to recapitalize before the fed lets TSHTF for real?

I think you are completely misinterpreting the current situation. The banks are currently in "survival mode". Many would be declared bankrupt if it weren't for "mark to fantasy". And they probably realize more rough waters lie ahead. *That's* why they're not "free-wheeling" or making loans.


"Their growing irrelevance to the real economy will make the big banks a target for crusading politicians, eventually."

Big banks like Goldman Sachs, Citigroup, JP Morgan, UBS and Morgan Stanley who are all top 20 contributors to Obama's 2008 campaign?: http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638

I'll believe it when I see it. (And slaps on wrists where they fine them some tiny fraction of one quarter's profits don't count. Those are just political theater.)


"never attribute to malice what is easily explained by incompetence"

So where is this explanation of which you speak? Or is simply muttering the word "incompetence" accompanied by some allegedly pithy but logically invalid quote considered sufficient explanation? This discussion about the fed started with M.O.M. being "shocked" how the fed could say the stuff it was saying, so she might be interested in such an explanation as well.
 
Foo - the Fed has a lot of prestige and recognizes that prestige as an asset, so the fact that the Fed is making itself look like a foolish institution tends to suggest incompetence, and incompetence of a particular sort.

My working theory, because it tends to explain what the Fed is doing the best, is that the Fed is trying to boost the Main Street economy and it is failing and flailing largely because of:
A) The inherent limitations of purely monetary policy measures to address the aftermath of bubbles, and
B) The Fed's lack of knowledge about the workings of the Main Street economy.

Also, I think you need to recognize and distinguish between the roles of the Treasury, the Fed and the federal government.

The Treasury and the NY Fed has consistently followed a crisis pattern of "whatever is good for the big investment banks", which culminated in Geithner's admission of "extend and pretend" with regard to failed mortgages.

Congress (and the President) has to deal with the Keynesian part of the response, and the Fed wants Congress to do more - but unfortunately, and astoundingly, the Obama administration's response to the crisis was first to completely underestimate it, and second, to give a lot to big interests while ignoring and even attacking Main Street. This is now turning around and biting them in the butt.

If, for example, the Fed's QE2 (bad policy, IMO) had been joined with a different initiative from Congress in December - one that injected money directly to the lower third of the households - the economic numbers you would see now, and especially the economic numbers for the professional small businesses, would be sharply higher. We'd still have inflation, but salaries and spending would be growing too.

You cannot separate these arms of US policy - all three will control the results of the policies adopted by any one arm.

Now the Fed is still refusing to admit that most of QE2 landed in commodities spec, but the world has moved on from that controversy and is attempting to redress the damage.

It is obvious that you cannot prevent deflation by engineering a situation in which real incomes for the majority of households must drop significantly, but at the time that the Fed decided on QE2 it was also running around pleading for fiscal stimulus from Congress and the Presidency. Unfortunately, what it got was fiscal stimulus for professors, some for larger corporations making economically inefficient goods, and the upper 25% of the households, which has inevitably led to our current unfortunate situation.
 
Foo - regarding Fed incompetence:

A) The Bernank hasn't admitted it, but other Fed members have conceded that a policy which raises asset values will indeed increase commodity prices, and it will do so in a way unconnected to the larger population's ability to cover those commodity prices. BDud's "geeze, I guess commodities are an asset class" will live in monetary memory.

You can go on and on with these anecdotes, of which the idea that that credit standards were operationally a factor in 2009-2011 figures largely, and the call to loosen underwriting standards simply demonstrates that the Fed still hasn't woken up.

If a doctor kept taking out people's gall bladders when the problem was appendicitis, or a truck driver kept driving trucks into the harbor, one would call it "incompetence". The Fed is establishing a record of this sort.

You may call it whatever you wish, but it is evident that the pride and self-esteem of the individual Fed governors is implicated, therefore I maintain that they did not intend to do what they have done.
 
If the property tax deduction is eliminated, you can kiss discretionary spending goodbye. Goodbye vacation, hello free books on the kindle/nook. If I'm forced in to 19th century austerity, I might as well read 19th century books.
 
Charles - Gutenberg read around a wood/coal stove on a cold winter evening. It is the natural endpoint of green energy policies.

Here's a link to EU energy prices - notice the huge differential in electricity for domestic and industrial consumption, and notice how the more "green" an economy is, the more electricity costs the user.

So Denmark has the highest cost, and Germany the next highest cost. Spain is getting there.

Let's just say that everything bad about the Obama administration's energy policies is summed up in these tables.
 
Gutenberg read around a wood/coal stove on a cold winter evening. It is the natural endpoint of green energy policies.

Except that we won't be allowed to burn wood or coal because it pollutes the environment. We'll get more of those inefficient wood stoves like the EPA gave us in the 70s.

And, as a related note, I sure am talking to a lot of folks that don't have a regular place to live. It's one thing if it's by choice (like my stepson that is sleeping on a friend's couch rather than move back home). But there seem to be a lot of folks having to move in with their family or face just sort of drifting. We've got a woman living in a tent on our place, hopefully just for the summer. It's really much worse than the tech bust.
 
"inherent limitations of purely monetary policy measures to address the aftermath of bubbles"

When the fed is the one that blew the bubble with easy money, going to even easier money is a complete nonaddressing of the the bubble. You have to tighten and eat the pain. Of course, they should not be in the business of creating bubbles in the first place.


"The Treasury and the NY Fed has consistently followed a crisis pattern of "whatever is good for the big investment banks""

And this of course is just merely coincidence. The fed, designed and owned by the banks, just happens to think the best course of action for the economy is... whatever is good for the banks. Move along, nothing to see here.


"Congress (and the President) has to deal with the Keynesian part of the response"

No, keynesianism doesn't work. The government dumping fiat into the system just results in more waste and malinvestment and government debt (aka slavery).


"the Obama administration's response to the crisis was first to completely underestimate it, and second, to give a lot to big interests"

You expect politicians, if told they have an excuse to hand out a bunch of money, to do anything *other* than hand it out to their special interests?

The real problem here is not the details of the central planning -- it is that there is central planning where it is neither needed nor prudent. Remember the two types of response to central planner failure I described above? Your sentence managed to invoke both of them.


"This is now turning around and biting them in the butt."

Once the fed created the bubble, that someone was going to get bit was inevitable. As Ludwig von Mises said:

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."


"Now the Fed is still refusing to admit that most of QE2 landed in commodities spec, but the world has moved on from that controversy and is attempting to redress the damage."

Do you know what would fix it really fast? Monetary contraction.


"It is obvious that you cannot prevent deflation"

We should not be trying to prevent deflation (monetary contraction). Deflation goes hand-in-hand with eating up the malinvestments created in the bubble phase (itself created by excessive monetary expansion).

The path to enlightenment can be found via googling "deflation site:mises.org" (without the quotes).


"some for larger corporations making economically inefficient goods"

So you expect central planners to put money to use in economically efficient ways???


"it is evident that the pride and self-esteem of the individual Fed governors is implicated"

This does not rule out the "useful idiots" possibility. Nor does it rule out these things just being a show to convince people like yourself while they carry out their plan as per their (not so well) hidden motives. Anyways, I don't really care whether they are honest screw-ups or lying screw-ups or thieves. Just take away their power so we can get on with our lives without their interference.
 
foo, when I said "whatever they might tell themselves", I was talking about the Fed governors, not about you.

When I say the Fed has neutered the big banks, it's because the banks are now making their profit by taking Fed dollars at ridiculously low rates and buying Treasuries at slightly less ridiculous rates. They are no longer doing their primary job of recirculating people's savings into productive loans. Thus, the big banks are making themselves a not-very-useful appendix on the financial system. The Fed is perfectly capable of printing money to buy Treasuries, if that's what must be done, without the big banks as middleman.

Pretty soon, a critical mass of people are going to notice we've got appendicitis.
 
"The Fed is perfectly capable of printing money to buy Treasuries, if that's what must be done, without the big banks as middleman."

That's very unlikely to happen. And if it does, there's a (larger) chance we get hyperinflation. That's why they made it illegal for the fed to direct purchase US debt in the first place, and why it's unlikely they'll cut the middlemen out now.

Yes, for all practical purposes the fed is already monetizing the debt (or at least it was while QE2 was ongoing -- and if the fed just continues doing QEx that might be enough to see things get wildly out of control). But I still think they will be rather shy about taking that one last step and making the fact so blatant that everyone can plainly see the writing on the wall for the dollar.


"Pretty soon, a critical mass of people are going to notice we've got appendicitis."

The banks will just say that they'll be needed once "the recovery starts to really pick up" and if they're not around we'll never recover. Most of congress will believe them, or at least vote as if they do.
 
The changes I'm talking about would require legislative action. When a critical mass of people notices that the big banks neither loan money nor pay interest on deposits, some political entrepreneur will make those changes. If people still have the stomach for dollar-printing, then the Fed will get the power to do that sans money-center banks. We're in the season of crisis, when the previously unthinkable becomes a done deal.
 
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