#13: PAUL VOLCKER: THE MOTHER OF ALL CRISES

[pcuimac]

I ment morons. Sorry, I am a humble german.

[pcuimac]

Fractional reserve lending and interest will allways bring doom to your doorstep. Don't build exponential systems, as we physicists say. They always explode into your face. Like Fukushime! Atomic Bomb = Exponential system. 3-5% growth per year: Explosion after 90 years! Any mathematician or physicist knows that much. Economists are moros in my view.

[nld1960]

Thank you Mr. Fed. I am new to your channel and I am not sure what your take is on the coming economical problems that we will soon see. Did you think it will be depressive or inflationary? Thank you

[joethebowler]

What makes excessive leveraging possible? Artificial money creation by the Fed of course! Leveraging is nothing more than corporations buying on the margins. The solution to this problem is not BETTER regulation, but the abolition of monopoly money created by central planners.

[SilverRose09]

thank you Mr Fed, you really got history right and exactly the way it is.

[Crashof2008]

Thanks SilverRose. Feel free to join the discussion on my Crash of 2008 youtube homepage, left hand side....

Mr. Fed

[jmborchers1974]

I think a good part of the deflation cycle is over now. Most hedge funds are either broke or in cash. My money is now returning to the stock market. Although I thought depression was a good possibility I no longer think so for the US. Depression for Asia is probable.

[Crashof2008]

We won't know the AUDITED financial results of these corporations until they come out in January.

These are only released once a year and largely caused the sharp downdraft this January.

Current numbers are very deceptive.

Consumer demand continues to collapse worldwide.

MUCH more deleveraging to go. As the market for mid-tier CP has dried up, tens of billions of standby letters of credit are being used instead... that is all migrating to bank balance sheets. Read the FT, turn off CNBC.

[machinenation]

Great videos - it's tantalising to know what your thoughts are now with all that has happened.

There are a few more - kdenninger, vision victory, manoftruth who talk about this kind of thing and your stuff is top of the pile - high quality - please come back !

.

[RichLather]

Your videos were quite educational. Why did you quit?

[dj1897]

Mr. Fed,

What is your current outlook? We just a big sell off in the market in October. What "inning" to you believe we are in? Thanks for turning me on the to the Financial Times. Great videos.

[rarelibra]

their leveraging was almost 90:1, and still no one cared to DO anything about it. Fannie/Freddie were predicted to fail back in 2003, and NO ONE listened. Instead, Bush fired the director of the regulatory agency. And the Speaker removed the oversight from one committee to another - the subsequent chairman (Oxley) decided NOT to investigate and was awarded with 19 fund raisers from Fannie. WHEN WILL THIS BULLSHIT END!

[bigcoolviking]

USA is bust finished!!... spending money they dont have borrowing billions from china,& sudi arabia to fight wars they can never win! hollwood churns out unspeakble filth and exports it to the world, "in god we trust" yea right which god is that?? Another once great empire crumbles right before our eyes, due to corruption, evil,lies & utter debotchery, just like historic empires of the past! There is NO I repeat NO.. 'political solution' for TOTAL moral collapse!WHO IS IN CHARGE? THE ILLUMINATI!

[AirelonTrading]

I really think this sums up my feelings well.

I LOVE a free and open market. Absolutely free.

But let's not be idiots about it. We need regulations. We need standards. We need to be protected from the idiots out there.

And dear lord in heaven - how I would love to have Volcker running the Fed right now. That man handed this country decades of prosperity that have been pissed away.

AND YES! THIS IS ALL ABOUT LEVERAGE! Absolutely !!

[rarelibra]

do your homework on Volcker - he isn't quite a saint.

[coultrane]

Another point I'd like to make is that earlier, you mentioned that the fed was not bailing out these investment banks. But, you seem to have back pedaled a bit. That must be because, these investment banks are handing off there highly questionable assets for full loan amounts. What happens if the music stops while the fed is holding paper that is worth only pennies on the dollar? Of course, there is also the issue of FM and FRE. Are you aware that stock holders will still receive DIVIDENDS!

[coultrane]

Let me begin by first saying that I really appreciate your videos. Ultimately, will the rest of the world want U.S. dollars if Israel attacks Iran? What if State, Local, and ultimately the Federal Governments can't make good on their debt payments? What will the U.S. promissory note be worth then? Do economic algorithms take them into account? If not, is it not wise to suggest that gold and silver have inherent value? Have they ever gone to zero? I am not an ideologue, by the way.

[2008rdm]

Would luv to hear an update. What do you think of the Fannie/Freddie bailout and the recent bank failures?

[danesaregreat]

OMG....they must have done this on purpose and I have terrible feels why. Some heads should be cut off ,if we,Americans, ever survive this.

[rarelibra]

Buckle up, danesaregreat... and get ready for the ride of your life. America is at great risk. If America goes into Depression, who will stop another country or terror group from taking advantage of it and kicking them in the nuts? NOT good at all. We need to HANG all of those who risked our very safety and security with all of this.

[jessicamaybe]

Mr. Fed, I hope you'll update soon. Things are getting extremely interesting ... Almost too much so for the ordinary people.

[InTheSticks1881]

"The Mother of All Crisis". Thank you.

[jmborchers1974]

We are almost there. Oil has gone parabolic and I sold my oil options.

Hyper deflation is the right call. At first the market may go up as oil comes down but other commodities will come down with oil and then the stock market will everything else. It may happen fast or slow over the year but it will certainly happen.

People have gotten to the point they can't afford things anymore and without the housing bubble to borrow against they are cooked.

US Depression of 2009-2012 has begun.

[jmborchers1974]

I got this one almost completely right. unfortunately I didn't bet it all in one place. I would love to see a video update.

[jmborchers1974]

Oil is up against the trend as of recent and I think I know why. The people betting against and shorting the stock market I believe are also buying oil and raising it's price. By raising the oil price they are forcing stress on the economy going for the end result that they want, decreased equity values.

[seabassbanker]

cant wait to here about the Mark to Model Level III crapola

rock on MR FED

[jmborchers1974]

The final piece is in play IMHO. Gold, oil, metals are deflating as I expecting. The market is having a ralley because they think it's good. It isn't. It's deflation, out of control inflation after inflation was in everything for many years, including housing, commodities and corporate profits. Stay out of the stock market IMHO.

[crocop60]

More of the same Fed cuts interest rates a quarter to two percent. Looking forward to the next video.

[ALittleBitChi]

Hey Mr. Fed-- Love your videos. It's the eve of another FOMC decision.. how about some more commentary? We need another installment.

[Crashof2008]

Thanks!

This is going to be quite the meeting. So much going on! I just may provide an update.

The meeting will last two days. For those who claim that the Fed just "prints money" they should try to wade through their agenda and explain what the Fed talks about for two entire days!

In the meantime, Krishna Guha's commentary in today's FT on what is coming up is amazing.

BIG things going on!

Mr. Fed

[backfromhomedepot]

I've watched all of your videos. All signs still point toward deflation. Right now we have a consumer strike in retail and housing, along with increases in commodity prices. For true inflation to take place we would need plunging commodity prices along with high prices for finished stuffs. People everywhere here shop with debt...that'll end up being deflationary. In the 70s we had massive inflation but people paid with cold hard cash from wages instead of plastic.

[Corelian66]

Thank you for your information.

If the Fed rises rates. Do you think that the dollar will continue to fall any way?

[Crashof2008]

In an uncertain and dynamic environment central banking decisions are always framed by the the likelihood and probability of various scenarios unfolding. They are never couched in absolute certainties.

As to whether the markets would continue to be net sellers of dollars after a rise in interest rates, much would depend on the tone and tenor of the markets at the time, the accompanying Fed stance with respect to future interest rate rises and the magnitude of the rise(s) themselves.

[karetare]

As I understand it, there was over-investment in housing. So, what part of the economy has under-investment?

It seems to me that the real problem is wealth distribution. The wealthiest have more money than wants and needs. Without stronger wages, there will never be sufficient demand to support the investment. I think the economy has been supported by fools investing, and then everyone else providing leverage. Just adding regulation could lead to an ugly reality.

[codediporpal]

"There is nothing fundamentally broken on Wall Street that a little regulation and incentives for participants to be slightly more honest couldn't fix" - Bernanke

What a difference between PV and BB. Slightly honest is good enough for BB, and he's bending over backwards to keep banks from having to show what's actually on their balance sheets. Not the best way to build confidence.

[markymarkuss777]

If they do raise interest rates, will it throw us into a Depression instantly??

[daveextra]

excellent continuity matt. keep going. by the way, i think p.v. pinched my analogy about this one being the mother of them all ! and, may i add, "you aint seen nuthin yet" ! ! ! dave from england. p.s. watch out for mortgage lender bradford and bingley in england, biggest buy to let lender in britain going to the b o e as lender of last resort.

[bdc03]

Hey Matt! What's going to make the fed raise interest rates? I see them bringing the interest rates all the way down. So, what's going to be the bug that makes them crank it up?

[Crashof2008]

Please review videos #5 and #6 of this series which reviews that exact scenario in a very detailed manner.

[Crashof2008]

We clearly need to tighten up; this is mandatory.

Recall that banks are by no means the biggest players here. Investment banks (such as primary dealers) and other non-bank actors are far bigger.

We need to increase the margin requirements on futures trading as well to promote more orderly pricing. This is critical.

In terms of your specific point about 100 percent reserve ratios for banks per se, we need to have a graduated approach towards reducing leverage in that sector.

[jmborchers1974]

This will be tough. If they tighten the average person can't pay off the debt they have at any meaningful rate.

I still think we have deflation. Only reason dollar down, oil up, metals up is speculation on the weak dollar. Theplaying field will start leveling off. Banc of England has already started lowering by 25 bps. It won't take long to hit the european union also I think.

Bottom line problem, people carry to much debt.

[MaverickCentricity]

I strongly agree with you on the evils of leverage and the effect it has on the economy as a whole. It is the problem of excess money and credit that creates malinvestment and bubbles. I believe we should have 100 percent reserve ratios on demand (checking accounts) and strong regulation of investment banks.

[Crashof2008]

We also desperately need to change accounting standards for all these off-balance sheet activities such as SIVs (structured investment vehicles) and SLCs (standby letters of credit).

One of the key problems is that so much of this toxic waste has been kept off the balance sheet. That needs to change in a very big way.