"The problem with movies and books is they make evil look glamorous, exciting, when it's no such thing. It's boring and it's depressing and it's stupid. Criminals are all after cheap thrills and easy money, and when they get them, all they want is more of the same, over and over. They're shallow, empty, boring people who couldn't give you five minutes of interesting conversation. Maybe some can be monkey-clever, some of the time, but they aren't hardly ever smart."
Dean Koontz
"From a time long ago when we sold our vote to no man, we have abdicated our responsibilities. The People who, once upon a time, handed out military command, high civil office, legions — everything, now sits in craven silence, and anxiously hopes for just two things: bread and circuses."
Juvenal, Satire X
Perhaps that would better be translated for the modern mind, smartphones and reality shows.
The level of conversation amongst the touts and the analysts on bubblevision is starting to sound like the nervous reassurances one might have heard whispered in the hallways of the Domus Flavia or in a later age, the Führerbunker.
These charts compare the Nominal and Real Treasury Yield Curves provided by the Treasury Department.
The 'real' return is the return on the debt less expected inflation. A note on how the Treasury calculates this is below. Since they use TIPS the real yield are only done for notes of 5 years or more duration.
The comparison is between February 22 data from this year and last year.
As one can see, the Fed's "Operation Twist" has had a profound effect on the real returns achieved by holders of US sovereign debt.
The real yields turn positive about the 15 year mark. The real return these days on a 30 Year Bond is about .76%. And that is probably using rather optimistic assumptions about inflation risk.
What this implies is that savers are by and large paying the US government to borrow from them.
Is this an effective economic stimulus for the real economy, or a sophisticated form of seignorage being performed by the Fed on behalf of its member Banks?
Interesting experiment. I hope Benny's model has the right risk parameters plugged in. If not, as Fed policy errors go, this one could be memorable.
No wonder certain alternative stores of wealth are rallying as a haven from this soft confiscation.
"Treasury Real Yield Curve Rates. These rates are commonly referred to as "Real Constant Maturity Treasury" rates, or R-CMTs. Real yields on Treasury Inflation Protected Securities (TIPS) at "constant maturity" are interpolated by the U.S. Treasury from Treasury's daily real yield curve. These real market yields are calculated from composites of secondary market quotations obtained by the Federal Reserve Bank of New York. The real yield values are read from the real yield curve at fixed maturities, currently 5, 7, 10, 20, and 30 years. This method provides a real yield for a 10 year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity."
This is a fairly nice description of the tip of the credibility trap.
It is a description of moral hazard, of a partnership between the corporations and individuals in government. And it is a corrosive acid on the body politic. MF Global is not the end of it, but only a new beginning.
With every unpunished crime, with every successful deception, the monied interests grow more self-assured, and bolder.
The more rational in the financial system, academia, and the media wish this to stop, and know it will end badly, but a powerful few will have no restraints.
And so the dance must continue while the music keeps playing. The stewards of society, the Congress, the President, the media, the Fed, none have the moral sense and courage to merely stand up and say, "Stop. Enough. Stop beating your victims. Stop abusing the public."
Well, some may say it. Tavakoli, Yves, William Black, Elizabeth Warren, Barry Ritholz, Simon Johnson, and others have all said it, well, and many times.
And among the powerful Obama may say it. Romney, Santorum, and Gingrich may say it. But they do not mean it, and will do nothing substantial about it. And that is a national tragedy.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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