Thursday, April 14, 2011

Burning The Candle At Both Ends: Raising the Debt Ceiling, and Extending QE-2 Indefinitely

This coming May 16, the U.S. Federal government debt ceiling will be breached; that is, the national credit card—currently topped at $14,294,000,000,000—will be maxed out. (Yeah, I know: It’s one thing to read “$14 trillion” and quite another to see the actual number, written out with all those zeroes.)

It’s not like lighting farts . . .
Shortly thereafter, the Federal Reserve’s policy colloquially known as Quantitative Easing-2 (QE-2)—whereby the Fed created $600,000,000,000 of new money, and used it to purchase Treasury bonds—will end. 

These two issues seem to be miles apart—notice, seem to be. But they are as intimately related as yin and yang—Mickey and Minnie—Ritz crackers and cheese. 

Both policies aim to prop up the sliding U.S. economy, each of them coming at this effort from different directions—one from the demand side, one from the supply side. And the suspension of either policy will result in the exact same thing—government shutdown, and default on the U.S. sovereign debt.

Don’t believe me? Let’s look at them each in turn:

On the one hand, the deficit is the product of fiscal stimulus, whereby the Federal government spends and spends so that the aggregate demand of the U.S. economy does not fall because of the economic slowdown.

The rationale is, as the economy slows because of the recession, and people spend less, the Federal government steps in with more deficit spending, to prop up aggregate demand. Thus, the overall demand in the United States does not fall, as the economy recovers. And when it is finally back on its feet, the private sector in a sense takes over the spending burden that the Federal government has been carrying.

That at least is the rationale.

Quantitative Easing, on the other hand, is the Federal Reserve’s efforts to prop up deteriorating asset prices—that is, inflate prices which have fallen drastically. They do this by overpaying for assets, and thereby giving these assets price support. The first iteration of QE was Fed money-printing to help support the prices of the so-called toxic assets, while QE-2 has been the Fed money-printing to help support the prices of Treasury bonds.

Asset prices are falling because they were overpriced to begin with—overpriced for the better part of two decades, thanks to the Fed’s easy money policies. When the bubble in asset prices finally popped, not only did asset prices fall, they also dragged down the rest of the economy—this is more or less what we’ve been experiencing for the last three-four years.

So basically, the Federal government and the Federal Reserve are burning the candle—ie., the economy—from both ends: The Federal government by way of “stimulus spending”, and the Federal Reserve by way of Quantitative Easing, the one trying to make the economy “grow again” by bouying aggregate demand to the tune of 10% of GDP, the other trying to halt asset price deterioration by printing money.

Did I say “burning” the candle from both ends? Excuse me, I meant to say, they are putting a blowtorch to the economy—and whistling Dixie all the while.

Now, QE-2 is set to end in June, while the debt ceiling will be hit in mid-May. With these two deadlines looming, there have been a lot of people who think that neither will be extended—or at least hope neither will be extended.

These people are living in dreamland: The debt ceiling will be raised, and QE-2 will be extended. Both policies will continue not because I happen to agree with either one of them—in fact, I don’t. Rather, both policies will be extended because—if they are not—the Day of Reckoning will suddenly arrive:

The Federal government will become bankrupt.

If the debt ceiling is not raised, then the Federal government will not be able to issue debt and get the cash to pay for its obligations—including Social Security, the military, Federal employee salaries, etc. Most important of all, if the debt ceiling is not raised, then the Treasury won’t be able to raise the cash to pay the interests on Treasury bonds—which means that the United States will, for the first time in 220 years, default on its sovereign debt.

And if QE-2 is not extended, then the Federal government will not be able to find buyers for its debt issuance—and therefore won’t be able to get the cash to pay for its abovementioned obligations, including paying the interest on the Treasury bonds.

In other words, we are about to hit the wall. And the clowns running the circus are going to do everything in their power to avoid that splatter.

So they are going to extend the debt ceiling and extend QE-2—because that’s the only way they know to avoid hitting that wall. That’s the only way they can keep the Federal government from shutting down—and the United States from defaulting on its sovereign debt.

Many conservatives think (hope?) that the Republican party in the House and Senate will kill the raising of the debt ceiling. These conservatives are wrong, because whatever fiscal principles the Republican party might have, they do not want to appear to be the ones who forced the government to shut down.

They learned from their mistake in 1995, when Newt Gingrich forced the government to shutdown briefly. The electorate blamed the Republicans, and handed them a solid defeat in the next election.

The Republicans won’t repeat that mistake.

Furthermore, the Republicans will not put themselves in the position of being the party that forced a sovereign debt default of the United States for the first time in 220 years.

So before the May 16 deadline, they might talk tough about “fiscal austerity” and “cutting back on the deficit” and all that other sensible-sounding talk—but when the chips are down, the Republicans will vote for a raise in the debt ceiling, regardless of all the talk. Because the Republicans will not let the Federal government shut down, and they will not allow the United States to default on its sovereign debt.

And as to QE-2 morphing into QE-3?

As I have shown elsewhere—and it’s not controversial or even debatable—the Federal Reserve has been monetizing roughly half of the fiscal year 2011 Federal government deficit by way of QE-2 and QE-lite (the reinvestment of the excedents from the asset purchases of QE-1). That is, the Fed has been printing half of the deficit, and giving it to the government, the Too Big To Fail banks acting essentially as the intermediary of this unholy trade.

Between QE-lite and QE-2, the Fed is purchasing roughly $100,000,000,000 a month in Treasuries, out of the roughly $150,000,000,000 a month the Treasury Department needs to fund.

The simple fact is, the Treasury Department does not have buyers who can replace the Fed. They simply don’t, no matter how you cut it. Skipping across the globe, we see that Japan, China, South Asia, the Middle East and Europe simply do not have the cash—or the inclination—to lend $100,000,000,000 a month to the Treasury Department.

If the Fed were to end QE-2 come June, prices of Treasury bonds would collapse—regardless of what some pundits are saying, vis-à-vis the “markets have priced in the end of QE-2” and other such happy daydreams.

And they are daydreams—the markets haven’t priced in the end of QE-2. If they had, then PIMCO and Bill Gross wouldn’t have this new-found phobia for Treasury bonds. Like I've said before, PIMCO dumping Treasury bonds is like Baskin & Robbins dumping chocolate ice cream. The only reason they would exit Treasuries is if they foresee the potential for a major price dive—which is exactly what would happen if QE-2 ends on schedule in June.

Now with regards raising the debt ceiling: Fiscal year 2012 starts October 1, and it’s looking like that year will be another deficit of about +10% of GDP—in other words, a deficit north of $1,400,000,000,000.

Some people I’ve talked to expect the debt ceiling to be raised incrementally, so that the Republicans can milk every raise in the debt ceiling between now and the November 2012 elections.

That’s a shrewd analysis, but I’m not sure about it. I actually think it’ll be one big boost of $2 trillion: Enough to cover FY 2011 and FY 2012, but have the issue conveniently rear its ugly head in the summer/fall of 2012—just before the elections.

As to QE-3 (the extension of QE-2): The Federal Reserve will have to continue printing at least $75,000,000,000 a month, and probably closer to $110,000,000,000 a month. Like I said, it’s all a problem of supply and demand: The Treasury will be providing too much of a supply of Treasury bonds for the market to sop up. The Federal Reserve is the buyer of last resort. The buyer of only resort.

So! What happens after the debt ceiling is raised, and QE-2 is extended indefinitely?

Nothing.

Not immediately, at any rate.

Bonds prices will remain stable. There might even be a bump up, from shorts covering. Stocks might jump a bit, on the “good news”. Commodity prices will continue their steady, relentless rise.

So it will all seem so very, very “normal”, after the two policies are extended.

The only thing that will continue rising is consumer prices. And housing prices will continue to fall—in fact, there’ll be a continuing rise in defaults, as rising consumer prices put the squeeze on mortgaged homeowners.

And when the new debt ceiling is reached, and QE-3 ends? What then?

Why, they’ll be extended again—of course.

See, politically, it is always much easier to continue a bad policy—even a terrible policy—if it will avoid an imminent crisis.

The imminent crisis we got: The shutdown of the Federal government, the sovereign default of the United States. If the debt ceiling isn’t lifted, the government will shut down and default. If QE-2 isn’t morphed into QE-3, then the Treasury won’t find enough buyers for its issuance, so then the government will shut down and default.

If the choice is between having the government shut down and default on its debt, and kicking the can down the road, then there’s really no choice at all: Kick the can down the road! Extend QE-2, and raise the debt ceiling—full speed ahead!

Now of course, what will happen if this particular can is kicked down this path to oblivion? What will happen to the United States as it gets into more and more debt, while printing more and more money?

Guess. 
If you’re interested, you can find my recorded presentation “Hyperinflation In America” here. I discuss in detail what I would do, if and when the dollar crashes. 

111 comments:

  1. "...which means that the United States will, for the first time in 220 years, default on its sovereign debt..."

    While the US likes to boast of never overtly defaulting on its debt, it has not-so-covertly defaulted at least twice.

    First in 1933 when it reneged on its promise to redeem gold certificates.

    Second in 1971 when Nixon closed the gold window.

    Both were very clearly defaults, even if no one in the mainstream media refers to them that way.

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  2. I think the Republicans are setting themselves up for post-Armageddon America. They'll say, "see, I told you so. We should have cut spending back in 2011."

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  3. Most important of all, if the debt ceiling is not raised, then the Treasury won’t be able to raise the cash to pay the interests on Treasury bonds—which means that the United States will, for the first time in 220 years, default on its sovereign debt.

    Technically, the Treasury doesn't HAVE to borrow the interest on the debt if the debt ceiling isn't raised. The US government does draw enough income to service our current debt load.

    Practically, of course, we can't. There's no way any politician is going to slash the US Government by 1/2 to 2/3 and keep paying our debt.

    I find myself hoping that some politician will stop the insanity, even though I know they won't. The longer this goes on, the worse the pain gets when we are forced to fix it.

    I had hoped the bond market would stop the insanity first, but it looks like the Fed is prepared to monetize the entire Treasury market. That only leaves the currency market, which has the subtlety of a neutron bomb. The question of the day is: when does the currency market complete its turn on the US?

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  4. That would explain why the Chinese talking heads have been touting the meeting of the BRICS. Suppose they've got to get things in order before the big bang. Especially with the Beijing housing market going pop (h/t Zero Hedge). The people around here (Qingdao) are a bit nervous about what happens to them when the US implodes. Probably back to dirt farming.

    C deK

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  5. It is a slow day in the small Colorado town of Pumphandle and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

    A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

    As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.

    The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

    The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.

    The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

    The hooker rushes to the hotel and pays off her room bill with the hotel owner.

    The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.

    At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.

    No one produced anything.

    No one earned anything...

    However, the whole town is now out of debt and now looks to the future
    with a lot more optimism.

    And that, ladies and gentlemen, is how a "stimulus package" works.

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  6. These are the insightful words of humorist and columnist Dave Barry:

    Q. What is an Economic Stimulus Payment?
    A. It is money that the federal government will send to taxpayers.

    Q. Where will the government get this money?
    A. From taxpayers.

    Q. So the government is giving me back my own money?
    A. Only a smidgen.

    Q. What is the purpose of this payment?
    A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

    Q. But isn't that stimulating the economy of China?
    A. Shut up.

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  7. Overheard in New York:

    Guy: You're not wearing any pants. We should have taken a cab.
    Girl: We are in a recession, you can fondle me at home.

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  8. Three contractors are bidding to fix a broken fence at the White House.

    One is from Chicago, another is from Tennessee, and the third is from Minnesota.

    All three go with a White House official to examine the fence. The Minnesota contractor takes out a tape measure and does some measuring, then works some figures with a pencil.

    "Well," he says, "I figure the job will run about $900 -- $400 for materials, $400 for my crew and $100 profit for me."

    The Tennessee contractor also does some measuring and figuring, then says, "I can do this job for $700: $300 for materials, $300 for my crew and $100 profit for me."

    The Chicago contractor doesn't measure or figure, but leans over to the White House official and whispers, "$2,700."

    The official, incredulous, says, "You didn't even measure like the other guys! How did you come up with such a high figure?"

    The Chicago contractor whispers back, "$1,000 for me, $1,000 for you, and we hire the guy from Tennessee to fix the fence."

    "Done!" replies the government official.

    And that, my friends, is how the new stimulus plan will work.

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  9. Everyone can learn on a personal level from the obvious wisdom of the "QE" programs.

    If you own a company, and are losing money left and right, the correct way to remedy the situation is not to fix the problems, but to get a printer, and make more shares in the company.

    As long as the suppliers are willing to own a larger and larger part of your company, you should be fine.

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  10. My take is that the FED will end QE2 as they have said in order to give the tea party types in Congress (mad at the FED for printing money) a taste of what real interest rates for UST look like if 100% dependant on the free market. If the rates get high enough it will pull money from equities and crash the stock market making pension funds across the board even more insolvent (i.e. composed of stocks and low interest rate bonds).

    So private+public pensions will be insolvent, 401K/IRA will be in the tank, and SS+Med is still the largest Ponzi scheme ever contrived. Be careful what you ask for.

    Now obviously with the amount of new debt being added/rolled over into this free market bond market can’t continue indefinitely because the cost of servicing the debt will just cut deeper and deeper into the US tax cash flow thereby increasing the fiscal deficit resulting in a fatal debt spiral. Clearly any nation has jumped the shark well before tax revenues won’t even pay for the interest.

    Anyway the next prediction is that after this little episode of end QE2 above even the Tea Party types will get the message to stop blaming the FED for the fiscal deficit you guys collectively are causing. Basically the FED will be able to make the point that we aren’t the ones causing the problem, we are simply trying to buy you fools more time to get the fiscal deficit under control which is the source of this problem.

    As a result QE3 in some form will start up and equities + commodities will resume their ride back up. Which gives us higher and higher inflation and eventually results in a complete collapse of the currency (i.e. hyper-inflation).

    So in the end the ‘only’ solution is to drastically cut the fiscal deficit period.

    With regards to that, Gonzalo is right on the money with both the political and human physiology dimensions of eliminating the fiscal deficit quickly (i.e. less than three years).

    A challenge not helped by a generally clueless and/or complicit voter base as to the serious issues above. As a result this voter base is easily demagogue towards non-solutions that by definition require little sacrifice on their part. Even many self proclaimed tea party types don’t understand their own dependency on Uncle Sugar or think that something other than their slice of his pie needs to be eliminated. After all “I paid into to Social Security so that shouldn’t be cut”.

    Right now both extremes in their tug of war to force the other group’s constituency to bear the brunt of the pain have effectively locked the steering wheel of car we are riding. A car with no brakes that is heading straight towards the cliff.

    So my prediction is nothing serious will be done about the fiscal deficit until January 2013 at the earliest and then only assuming the Republicans have full control of Executive and Legislative branches. At which point the modest proposals along the line of Paul Ryan and the President's deficit commission will be ‘gradually’ rolled out. The problem is even with what is being demagogue as an “every grandma will die measures” (i.e. Paul Ryan’s plan) even his plan is decades too late and trillions of dollars short.

    So in the end the only difference between the various plans/paths we may ultimately follow is how far we will fly through the air once we go over the cliff at this point. It could range from a slow roll down the hill or a Duke’s of Hazard yee haw but gravity will place us at the same final elevation regardless.

    So the possible ‘near’ term scenario above (i.e. stop + restart QE) is but a bump in the road along what appears to be a predestined path.

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  11. Gonzalo ... your improvements on the Web page are good. But some of these advertisers are using servers that are WAY TOO SLOW. As a result, your Web page takes 1-2 mins to load. that's too long and a lot of people won't wait around for the final result.

    My suggestion is to drop any advertisers who are not willing to guarantee you that their adds will load in a couple of seconds.

    cheers,
    PeteCA

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  12. It goes like this ...
    The Fed - being a bunch of idealistic idiots - decides to bail out the Wall St banks. Of course the banks claim "too big to fail" (which in reality means "too rich to jail"). So the Fed transfers the losses to the US taxpayers.

    Meanwhile, the big banks follow the money trail and open officers in Hong Kong, Singapore, Shanghai, Mumbai, and anywhere else where the global economy still has some red blood. Then all the overpaid execs find new houses overseas - with foreign maids and chaffeurs.

    Finally, all that's left on Wall Street are some fancy storefronts where the big banks used to be. With just a few clerks inside. The rich boys all departed town a long time ago.

    And the American people are stuck with huge unemployment, with no viable banking system remaining, and a bunch of politicians in Washington DC proclaiming "victory in the midst of catastrophe".

    PeteCA

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  13. Gonzalo,

    You're right about the debt limit increase (duhhh). However, you're probably wrong concerning QE not ending.

    It will end, causing the stock markets to sell off, causing money to flow into treasuries as safe haven (temporarily solving the demand problem).

    After an appropriate waiting period the fed will announce QE3 as a solution to asset price problems.

    Wash, rinse, repeat.

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  14. I keep envisioning that the FED will figure out some way to "give" the government money to pay its obligations rather than "loan" it money by buying treasury bonds. I know its never done that way and not legal, and it wouldn't change the hyperinflation scenario but it would kick the can down the road even farther if they do it. Think its possible?

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  15. GL,

    When you get a chance, can you check if this is correct:

    QE expires = stocks crash - investors move to bonds - treasury rises - oil/gold down - pensions up - dollar up

    QE extends = stocks up, bonds crash, interest rate rise - debt collapse - pensions crash dollar down

    Seems like the FED gains either which way happens, right?

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  16. The damage has already been done.

    The bucket that holds our national wealth has had a million holes punched in it by special interests buying loopholes to enhance profit for multi-national corporations. All the money is leaking out. This problem can not be fixed beccause those favors were paid for and guaranteed.

    There are two options. Option #1 is complete collapse and the reestablishing of a fair set of rules (taxes/regulation) for EVERYONE. Right now, the rich and powerful are exempted and the difference is made up on the backs of the middle class and the poor.

    Option #2 is that those very same power players who run the system (merger of corporate and state power) keep patching over the problems, tryig to hold the system together until it collapses.

    Clearly option #2 will be chosen and had been chosen. There's too much national wealth being syphoned off to let go of it just yet. The COMPLETELY corrupted system will hold together via trickery and slide of hand for another 7-10 years until the imbalnaces caused by the syphoning of the national wealth evenatually craters the entire system.

    Everything that is discussed right now is bloviating. Nothing will happen other than band-aids. The status quo will be maintained at any cost. Of course. There's too much money to be made to not hold this baby together as long as possible.

    We're being scammed but the scam will eventually bring the entire system down in a massive crash. I'd say around 2020. Give or take a year.

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  17. As has been mentioned many times before, by others older and wiser than many of us here, we are down to confidence.

    Read: Con-fidence.

    That is really all that holds this melange of debt (40+ years in the making) together.

    Confidence of those who hold our debt - both domestic and foreign.

    Confidence in the Political Leadership to either 'do something' or simply make the pain go away with bread & circuses.

    Does it take much of a stretch to see that Confidence is waning, replaced by cynicism and mistrust - by both aforementioned groups of people?

    If events seem to be accelerating (due in no small part to the advent of rapid information dissemination), then do you really think it will be 'years' in the future before our debt is settled...?

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  18. Hey Anonymous above ...

    I liked your story about the $100 dollar bill. But it seems to me that the prostitute might have actually PRODUCED a real service. Everybody else did nothing.

    Maybe that says something about the actual nature of our stimulus economy??

    PeteCA

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  19. JMac, I agree that they'll kick the can just as long as it's kickable, i.e., until the USD can n longer be exchanged for goods. That the government is buying its own debt (Fed buying Treasuries) seems to me the beginning of the end (Mr. Shadowstats thinks so too). I figure hyperinflation will kick off in a year or two, then another two to four years for it to play out. So I agree with you, I just doubt the dollar will make it to the end of the decade.

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  20. There won't be an immediate QE3 - period. Just as the Fed telegraphed months in advance that QE2 was on the horizon, it's now telegraphing that there's not going to be another immediate QE (obviously, QE3 will have to come eventually).

    Recall that most Treasury auctions are well bid, even now. A typical bid-to-cover ratio is 3.0. What happens When the fed stops purchasing 70% of Treasurys? Well, the bid-to-cover falls because the Fed drops off as a bidder, but when an auction is oversubscribed by 200% or more, there are still bidders available to take the issuance - albeit at a higher rate. And that is precisely what will happen. Interest rates will go up (perhaps substantially), but the issuance will still go out the door.

    QE3 is much more likely to come after equities have lost 20-30% of their current nominal value, or if GDP tapers off sufficient to put us in recession territory.

    I repeat, no QE3 now, despite what this author says.

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  21. Love the graphic and its caption. Good post.

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  22. I think we should go back to 1950's rates of taxation. Remember when America was booming and the top tax bracket was 90%?

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  23. If the U.S. raises its debt ceiling and extends QE, then that is a tacit admission of default in itself, if it doesn't raise the limits, technically the same thing occurs.

    But there is another path, they could agree on 300 billion in cuts and get that monster under control. Just ending the wars would do it but no, the U.S. would rather spread itself all over the world fighting foreign wars than get its fiscal house in order. Its insanity squared.

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  24. Prince william was 5555 days old on his mothers funeral and more:

    http://kaldanis.blogspot.com/2010/03/prince-williams-occulted-numbers.html

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  25. swiftcall said...
    "I think we should go back to 1950's rates of taxation. Remember when America was booming and the top tax bracket was 90%?"

    Just two points:

    1) There were also tons of loop holes and only fools paid that much (marginally). As top rates were cut loop holes were eliminated.

    2) Saying 90% top tax rates were responsible for a healthy economy is like saying that war is good for the economy. Both bullshit. The main reason the US had a healthy economy in the fifties, besiudes being the most free market economy in the world, was that it was the only industrialized economy left after WWII (no competition).

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  26. Dear Michael:
    You said: "Interest rates will go up (perhaps substantially), but the issuance will still go out the door"
    If interest rates go up then the bond bubble bursts.
    The panic sale of bonds will lead to the panic buying of commodities.
    Then the demand for dollars vanishes and you have hyperinflation.
    There is no way out for the dollar.

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  27. Dear de8e8 ...
    You said: "I keep envisioning that the FED will figure out some way to "give" the government money to pay its obligations ..."
    Well, here is how to do it:
    Have the Federal Reserve"give" $14 Trillion counterfeited dollars to the Federal Government right now.
    Hey, they can then "pay" all Treasuries.
    And then have the Federal Reserve "give" $1.7 Trillion counterfeited dollars per year to the Government.
    No deficit problem anymore!
    All financial problems solved?
    NO!!
    You would then have $15.7 Trillion (brand new counterfeited dollars) chasing labor and materials.
    Immediate hyperinflation.

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  28. I enjoyed your post. I know from reading your previous posts about your belief in eventual hyperinflation. However, is there anything that could derail your belief, i.e. a real budget deficit reduction package where Congress actually comes together and creates a real deficit reduction cuts in all programs coupled with some tax increases that changes the US current business model say a VAL coupled with a lower corporate tax rate and giving a VAL rebate to Corporations for goods exported, in fact any other business model than the current one where banks charging some lower middle class goofball 25% on his credit card balance.

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  29. @anonymous (dukes of hazard guy) - good stuff, keep it up

    @peteCA - you're right about elites fleeing the country, what will be left is a hollowed out carcass, or a "Detroitization" of America if you will. Corporations eventually won't need America anymore.

    @anonymous (confidence guy) you are 100% correct, as the confidence wanes, cynicism grows, and when hard working, law abiding people(the backbone of the country) stop playing by the status quo rules (because those rules only empower the takers, not the givers), all bets are off. Most middle class Americans are extremely resilient, but they do have a breaking point. If they finally wake up and realize that they are knee deep in quicksand, they will not just stand there and wait to die. They will act.

    @GL - The politicians voting to raise the debt ceiling is like a sailor raising the limit on his c.c. while drunk at a titty bar. Of course they will raise it, that's what politicians and drunken sailors do. (At least the drunken sailor has to be approved by a sober 3rd party to get the increase. Congress doesn't even have to pass that hurdle, but I digress.) And what gets me is that the limit is so arbitrary. Why not just make the debt ceiling $178 quadrillion, and leave it alone for a few years? If they have no plans of paying it back, who cares how much it is anyways? As long as the Fed can pull money from one pocket and stick in the other, life is good. But at some point, the house of tards will come crashing down. The real question is when?

    TJ

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  30. Jack in the PhilippinesApril 15, 2011 at 6:12 AM

    I agree with Michael's comment above. I would add that, as Jim Rickards has pointed out, the Fed's bid doesn't just fall to zero if they end QE2 in June, because just rolling over the debt that is already on the Fed's balance sheet as it matures ensures a continued bid of 60 or 70 billion a month going forward indefinitely.
    Jack

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  31. How about the postmodern view on all this?

    The Debt is not real!

    That's right, it's not! Baudriilard once claimed debt would spiral out into orbit suggesting that it will build beyond earthly, reasonable limits. But it would not result in catastrophe because...well...it would not be allowed to become real. So if we consider US indebtedness to China, Greece to the EU/Germany or some other such scenario in this way, the only point at which such debt would really come crashing down on heads would be if the creditors called in their markers.

    THEN reality would step in. Then the carefully contrived kabuki dance that we are witnessing with the Eurozone or the Tea party versus Obama would be over. Then anything could happen: currencies collapsing, trade halting, war, and so forth. But that would not serve the interests of the political classes which use/manufacture these various crises to their benefit in order to show that they still have control. And they do. But only so long as they can keep the debt from ever becoming real.

    I guarantee you Merkel is not losing sleep over Greece or Ireland. The key is not ever to tip manageable crises into unmanagable in-your-face-reality, e.g. Ireland saying it will not pay. Witness the punishments that Iceland is receiving from the IMF, EU and the bond market for not playing nice, for trying to force the crisis to a head, instead of kicking the can down the road like everyone else. Keep it real? Higher taxes or lower spending to bring down the deficit? No way. Keep debt all unreal. Force it higher and farther into orbit! That is the secret.

    p.s. all of you fiat currency enthusiasts you are inconsistent if you do not also believe in fiat debt!

    p.s 2. Mr. Lira, I agree with your reading of the means but not the ends.

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  32. Ebag said...

    Dear Michael:
    You said: "Interest rates will go up (perhaps substantially), but the issuance will still go out the door"
    If interest rates go up then the bond bubble bursts.
    The panic sale of bonds will lead to the panic buying of commodities.
    Then the demand for dollars vanishes and you have hyperinflation.
    There is no way out for the dollar.

    Huh? It sounds like you're under the erroneous assumption that either the Fed's happily buying bonds or it's not (in which case we have instant hyperinflation). Sorry to disabuse you of such nonsense, but we're seeing something between those two extremes right now in profligate EU countries (think Greece and Portugal). Financing is still available, albeit on more onerous terms. Will that lead to hyperinflation? Quite possible, yes - but it won't lead to instant hyperinflation, which apparently was your point.

    We'll have financing going forward, but at market rates - which are due to go up dramatically in the relatively near future.

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  33. 1) The debt ceiling will, indeed, be extended.

    2) QE2 will NOT be extended. The prediction that it will be is yet another BS GL preditction which will go make company to his other BS predictions - like that the Irish won't pass their budget and this will lead to Europe falling apart. It is very likely that there will be QE3 - but not soon.

    Regarding the $100 bill anecdote - it's a nice story, but this method works only when the system is closed (all debts are owned only by the people in the town) and balanced (the various debts cancel each other). Since neither is true for the USA, the story is irrelevant.

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  34. Wouldn't stocks whose value is largely based on either A)commodities (like XOM, or SLW) or B) very lost cost advertising (GOOG) fare well in any scenario?

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  35. And what if the rest of the world takes the decision of "whether or not to kick the can down the road" out of the hands of the US Government by refusing to accept dollars as a means of payment?? Who says we and we alone are the deciders of our fiscal fate??

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  36. Default is already in the works. It will not be just a default in the US, but the whole western world. I'm sure there are talks going on right now(or maybe there's already a plan in place?) on how to bring it about and make the world accept a new currency for international trade. GL is just stating the obvious, and as it's obvious to him and his readers it is also obvious to those in power and they will have plans for this, you can count on it. If it will come about through wars and utter global misery or be dealt with in a mature and responsible manner, we can only hope it's the latter.. Though if history is any guide we're going to suffer and millions will die before a new system is established and accepted by the world's inhabitants(those who survive).

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  37. Nice story about the $100 bill. But in fact, the hotel owner is now out of pocket. It's his $100 that funded the round of bill-paying. So if he had any sense, he would sell his hotel and open a bank - maybe call it Moneybag Sacks - that way he could lend money into the system while charging everybody interest on their debts.

    Nice site GL, have to agree with your prognosis.

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  38. Keep in mind that the United States' perverse "diversity" experiment is bought and payed for by borrowed and printed money. For now, people accept the premise that different Races can live together in harmony. We've been bought off, given cheap Chinese goods in exchange for keeping quiet, not complaining, about how our neighborhoods are turning into violent and filthy ghettos. Along with an experimental fiat monetary system, which ultimately will fail, the US decided to swap out the European stock which built this nation with African and Mexican 3rd-worlders - who have no track record of success in anything, except for creating crime-ridden communities and social dysfunction.

    These two experiments, fiat currency and diversity are tied together. When the money collapses we will witness the disaster that was laid beneath us as while we watched football on our big flat-screen tv's. The rampant crime, gang violence, and starvation will make the first Great Depression look like a picnic.

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  39. "The Federal government will become bankrupt."---Actually, the govt is already bankrupt. It's been in Chapter 11 since 1933. Now we're going for Chapter 7. That will happen when the patient is taken off life support.

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  40. I think this is what Bill Gross is doing in unspoken (perhaps) concert with the Fed & Treasury:

    April 12 2011: Bill Gross: Master of Monetary Psy-Ops

    http://theautomaticearth.blogspot.com/2011/04/april-12-2011-bill-gross-master-of.html

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  41. There is no escape from the profligate policies of the Federal Government and/or the Federal Reserve, who is not a government entity but rather a private cartel of domestic and foreign bankers. The Constitution says we must protect our nation "against all enemies, both foreign and domestic". These people (can we really call them people?) must go! I have no faith in government. Only have faith in the 3 G's: God, gold, and guns.

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  42. Morgan Silver Dollars,

    Cryptocurrency all the way: tax free and anonymous. For example, Bitcoin.
    http://www.bitcoin.org/

    ReplyDelete
  43. The forex market agrees with you. It's going to agree for a long long time!

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  44. Anonymous above - with the piece about Bill Gross from theautomaticearth.com:

    Bravo to you Sir.

    If anyone here hasn't yet read this - please proceed there forthwith...

    This gentleman's keen observation is quite likely what is going on. Once again, Con-fidence is the key going forward...

    When I saw/heard of this from Gross a few days back, my first reaction was: 'How can he do that, without men-in-black showing up...? Seriously. The world's largest bond fund just up and dumps his positions in the U.S. Treasury market and quietly exits the building on a sunny day for dinner & cock-tails with like-minded folk who too, are all of a sudden turning their backs on arguably the most powerful institution in the financial world...?

    No, it doesn't make sense - but it wasn't meant to make sense to common-sense thinkers. It was meant just as the author postulated - and beautifully done.

    The 'Pause' as it were, is indeed the most likely scenario to play out over the summer, playing into the August time frame - perhaps just in time for another Jackson Hole moment -

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  45. I agree with anonymous (the Prostitute comment.) may have been the only Producer in the bunch. However production anymore has little to do with pick and shovel. Unfortunately. Just mostly games that people play: serious or otherwise is the new job market nobody wants to join.
    Invest in casino's. They will be rigged for your future welfare as they have been since the seventies. Casino's change the rules in the games when they loose. Just like banks,governments,and big time sports.Tracks etc.

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  46. GL has it about right about QE3, just his timing maybe a bit off, QE3 will happen just NOT immediately. It's the Rinse, wash, rinse, wash cycle all over again. QE will work until it doesn't and then Uncle Ben is screwed!

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  47. You make an interesting point in that the maturity of the QE-lite purchased securities are getting reinvested in treasuries. So could the Fed claim to end QE-2 and still receive enough maturing funds to continue funding the Gov't at an amount close to or equal to 75 to 100 billion? Does anyone know the answer to this?

    ReplyDelete
  48. "Does anyone know the answer to this?"

    Well, not the exact details, but the general theme.
    The monied power elite created debt to profit off the interest payments of their accumulated wealth.

    Insatiable greed seduced this monied class into creating too much unsustainable debt with leverage that led to a situation whereby the debtors could not service the debt.

    A domino-like implosion lead to a credit/debt crisis. The smell of sulphur-like smell of fear and bankruptcy was wafting down the dark alleys of Wall St.

    The monied/power class quickly employed their paid political pawns to have their governments assume the debt they created, and then changed the bookeeping rules to hide the fact that they are insolvent.

    The rescue worked for only a short time before the glaring fact that governments will soon not be able to service the debt they took on for the monied power elites became evident.

    The BRICS sensing the injustice of these Western monied power elites consuming the world's commodities using Ponzi debt paper initiated strategies for an alternative to the US dollar regime.

    The western monied power elites realizing that the game is coming to a close - first pump up equities and the dope of hope, the fear of deflation and inflation simualtenously, then they create chaos and insecurity as a diversion until they can formulate a new form of the same game, whereby their status quo remains secure.

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  49. With my likely lifespan being about 5 more years, I find the article refreshingly cleat, concise and true. However, it is no longer MY problem. Good Luck!

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  50. Overall I'd agree that QE or some re-branded version of it will continue

    but

    I think we'll see a trial reduction (maybe halt) in it June, if not slightly earlier.

    The hypothesis is:

    Since QE is/was supposed to be a temporary measure it's necessary to "test the waters" to evaluate if it's indeed possible to reduce or eliminate it (yet).

    Personally, I expect there to be some turmoil & pain allowed before it's hurriedly resumed at what will be, best case, some reduced level.

    Bernanke et al will then be able to self righteously proclaim how they've been right all along in implementing QE and shame on anyone who ever doubted their wisdom.

    If they do it just right there will be some uncomfortable turbulence but only for a short period.

    If it gets out of hand this could be a wild ride.

    Either way the trading desk at GS should do well enough in the space of a month to guarantee themselves record bonuses for the year.

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  51. The sample of the $100 going around the town and paying off all the debts is a sample of a healthy economy. No body owes more than they are owed. Now if one of those parties owed say 14 Trillion dollars to everyone else then that would be an unhealthy dysfunctional economy

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  52. People need to realize that QE is simply a name given to what the FED is mandated to do and has been doing since Dec. 23, 1913. That's why we have taxes. To pay the FED's interest, but equally important to delete money from the system in order to keep inflation at a level we the peons will tolerate. ALL government money since then has been created by the government, then GIVEN to the FED who loans it back at interest. Why suddenly give it a name? To make it appear to be a single event so the peons won't find out the truth. So we won't realize our taxes don't buy anything, not a single bomb, gun, tank, or even the occasional road.

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  53. "But at some point, the house of tards will come crashing down."

    I don't know if that was a typo or not, but I like it.

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  54. The analysis is correct, although QE3 may very well likely not be announced. The Bernank needs political cover to pull off QE 3. Either the Fed delays introducing QE 3 for a month or two -which induces a severe contraction in the economy (deja-vu 2010) providing the political cover, or else QE will be announced as ending, and QE3 will be completed entirely behind the scenes.

    www.silverdoctors.com

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  55. I agree with you. QE programs will continue till the US is a shell of itself. Republicans and Democrats are the same, no difference. Its all about getting re-elected in Washington, hence your scenario for endless QE programs lies on the economic horizon. Have a good one!

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  56. Jack,
    Au contraire - all money is not created by government.

    Bershares and Ithaca Hours have been in circulation in Massachusetts and New York for many years. The state government of Utah just approved creating a hard money state currency. A dozen other states are in various stages of creating their own currencies.

    Methinks the late nite pizza delivery places in the vicinity of the Fed, the World Bank, and the IMF are doing a brisk business.

    K Smith

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  57. just wanted to quote Gonzalo since you guys have so much to fucking say-

    "If you liked what I wrote—or if it at least made you think—don’t be shy about making a payment. The PayPal button is there for your convenience."

    ReplyDelete
  58. Dear Joseph:
    I don't think that it as complicated as you say.
    People in a democracy figure out that if they form Group A then they can steal from Group B.
    Example, the "Old Farts Group" get together and demand free health care, aka Medicare.
    They elect politicians that will pass the "old farts health benefits law" aka Medicare.
    It costs 100 times what the politicians said it would cost.
    But, who cares, they are stealing it from the "young ones".
    Example 2: The "Farmers Group" gets together to steal from the non agricultural states.
    Again, elect politicians that will pass laws to "support farm prices".
    Again it costs 100's of times what the politicians said it was going to cost.
    But, who cares, they are stealing from the non agricultural states.
    As you can see this goes on at infinitum.
    Eventually it gets to where we are now: the Makers are being overwhelmed by the Takers.
    Then the dollar collapses.

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  59. GL, your analysis is precise. Lesson "Debt and Deficits" completed...Tick.
    I must state that I'm not pro the Fed (Bernanke) or the govt. for that matter.
    BUT.....we all need to get a sense of realism and balance... & take a step back to look at the big picture.
    Sure the Fed created trillions from nothing to thwart the GFC from taking hold and forcing an immediate financial market shutdown by:
    1) Supporting the "too big to fail banks"
    2) Buying up worthless assets
    3) Keeping the government funded to keep the "house" working !!!
    but it also funded......
    a) Dow Jones companies...YEP that's right.
    b) International Central Banks.
    c) International Banks.
    d) International corporations.

    Folks, lets get real for just a minute. Wonderful to have the ability to criticise and analyse the day to day happenings of the Fed Reserve and the state of the Fed Government Budget and the plight of the USD and the course of inflation.
    But I put to you the scenario that may have unfolded had the Fed Reserve not acted in the way that it did.
    To simply let the Banks (as many people suggest)take their medicine and take their losses is simply naive and ignorant. Sure they gambled and took severe risks...but the ability to do such without appropriate legislation was the more relevant issue. Again I state categorically that I am not a fan of them or their practices.
    If we take what happened when Lehman Bros collapsed in Oct. 2008 as an example, the global financial system was on the verge of shutting down COMPLETELY. We had a massive loss of confidence from just one bank falling over(which by the way could have been saved with just $30BLN....that's right...a mere $30bln to keep them funded). Compare that $30BLN to the wealth destruction and the debt escalation that occurred subsequently (in the 2.5 years). Had the Fed Reserve not acted in the way it did by buying toxic assets and pushing funds into the trading/investing banks and corporations, then the pain would have spread to the other BIG Banks not just in the USA but across the GLOBE.
    We would have had a meltdown akin to the Earth losing its atmosphere and temperatures reaching 100 celcius...Damn that’s hot!!!!!
    What is forecast by all and sundry on this blog and on many others (that includes you GL) is not good I agree. BUT IMHO its a whole lot better
    than the alternative that would have prevailed...having an immediate financial catastrophe which would have been as destructive as all the world wars put together. That is ....Simultaneous DEBT and ASSET destruction. Shutdown of international trade and ALL banks closing doors.
    Don’t be blinded by analysts and experts pondering and pontificating about the just and unjust actions of those "elitists". After all they put the world in the place that it is today (albeit currently on the edge of a precipice) enjoying unparalleled growth and advancement. Giving us the comforts and wellbeing as humans deserve as the superior race.
    Unfortunately, we are now trapped in this vicious cycle of debt creation and asset support to keep the ship afloat. The analogy of the current melee is similar to someone on life support. Its a process to keep the victim alive for as long as possible to let the body heal/recover and remove all disease and infection from its system. The alternative is DEATH. That is absolute !!
    GFC Lesson .....we are all still learning.

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  60. Dear Liquid Motion:
    According to your argument, Iceland is dead.

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  61. Dear Ebag,
    Its not an argument..just taking a different perspective.
    You ..with all due respect...are not on the same page. The USA...is what this blog was about. The same, for all intents and purposes, does affect the rest of the world. Not the other way around. Take off the rose colored glasses. Then read the blog again.

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  62. Liquid Motion,

    I see you bought into the moral hazard. Bankrupt banks causing the end of the world...sheesh. It's why we have the word bankrupt anyway, because so many banks have gone bust! It's just a way companies die, and they all die eventually.

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  63. Anonymous,
    Moral hazard yes....me buying into it...NO. Just because I mention it doesnt mean I condone it. I agree all companies die eventually ...JUST that if they all die at the same time (my point), then what is left is ground zero. Nothing for you or I or them. The "Too Big To Fail" is very appropriate because banks are co-dependent. This is a not a zero sum game where the sum of the losses = the sum of the gains. Everyone loses. Its like resetting your pc. You, me & everyone starts from scratch. Total annihilation.
    OR we can have a slow painful adjustment over many years, until the toxins are removed from the system. I dont necessarily agree with that alternative btw..but we as humans tend to opt for the least painful option. We see the debt, unemployment, the cost of living, inequalities, the drunken attitude, the habitual suspicious behaviour, the theft, the counterfeiting and we live in denial. We cant change the status quo...just extrapolate numbers and pontificate and guestimate presumably unacceptable measures of economic health and state of affairs and live with it.
    Like it or not.....BANKS are more important to society than we can all admit and accept. They do have power, more than you or I can fathom. How they got it...Well maybe our dear GL can answer that (I touched on it in a previous blog entry).

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  64. Liquid Motion,

    Big banks dying do not constitute all banks dying. These were just the big ones in the US, never mind the many more smaller ones.

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  65. there will be no QE3, the people won't stand for it, and the economy will collapse even faster with rising food and oil prices.

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  66. They will...they wont....!!!
    We can ...we cant....!!!
    We do ....we dont...!!!
    Speculation of the highest magnitude.
    Toss a coin or whatever you want.

    Semantics.

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  67. Dear Liquid Motion:
    The point was that the banks in Iceland were left to go bankrupt and the country survived quite well.

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  68. Ebag,
    How many Icelandic Banks exist in the USA, Asia, Sth America ?
    US Banks are prevalent in every corner of the GLOBE. You let them fail then all hell breaks loose. THATS MY POINT.

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  69. Dear Liquid Motion:
    All hell is going to break loose.
    The crisis has just been postponed.
    There is, simply, no way to pay our ever increasing debt.
    The more the Federal Reserve inflates the worse it'll be.

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  70. Regarding Iceland, John Mauldin posted a great piece on the Icelandic election earlier this month (04-16-2011).

    http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2011/04/16/the-cure-for-high-prices.aspx

    The issue put to the voters was whether to accept the latest renegotiated terms to pay off the banks debts: They lowered the interest costs to 3.2% spread out over 30 years, and no payment until 2016.

    Result: 60% voted NO!!!

    Mauldin's last paragraph on Iceland says:

    "Basically, the voters of Iceland were being asked to take on a huge debt based on foreign currencies over which they have no control. Voting no meant that acceptance into the euro club would not be likely (though that is not a club you might wish to join today!) There are other threatened measures. But absent the British or Dutch sending in troops, there is not much you can do to force that debt collection. Iceland’s voters sent the referendum a resounding 60% no vote."

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  71. You have some strange notions, Liquid Motion.

    A collapsing currency or banking system is not the end of the world. Remember, the default began when the banks printed up the excessive money or issued unsustainable loans. Once the banks did that, the economy had to return to normal. That is what a deflation is: the wringing of bogus money out of the economy. The Central Bankers don’t want that to happen, any more than thieves want to stop stealing, so the bankers will continue to increase the money supply as long as possible. Unfortunately, it is our task to live through this crisis.

    The world’s real wealth has not vanished. Real wealth is what keeps a person alive; food, water, medicine, shelter, etc. We are infinitely richer than our caveman ancestors. But, our standard of living is due for a big hit.

    The next five years will be very hard, especially for the unprepared and trusting. The economic distortions induced by money creation must be disposed of. The people in jobs in capital goods must move to lower paying ones supplying consumer needs. The government will no longer have the funds to pay for the entitlement programs. Will people die from this crisis? Certainly, some people will starve. The inner cities of our most liberal cities will become killing fields.

    If the government intervenes to help them, then even more people will die. The ’29 banking panic would have been like the ’21 crash, except for the fact that President Hoover, and later FDR, intervened to prop up wages and prices, forced banks to close, regulates business, suppressed world trade, set up cartels, empowered Trade Unions and fomented war. The Progressives in both parties dragged a 9 month ordeal out 15 years. Every time the economy started to improve, the administration intervened to put it back in the toilet. It is anyone’s guess if Obama or his successor will have that power.

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  72. UrbanBard,

    Why is it that I get taken out of context ?

    AGAIN...The FED acted to avert an instantaneous shutting down of the BANKING SYSTEM. Massive loss of wealth in a matter of days...not weeks or months or years....DAYS !!!!

    The alternative ....which we are all privy to...
    is debt...money printing ....more debt...etc.
    Seems strange doesnt it that some 2.5 years later here we are. Some wealth restoration, some asset deflation (housing) , debt escalation, commodity inflation and stocks up with the rest of the decade and probably the one after that too, to consider the plight of the USA and its citizens.


    FYI...A collapsing currency is very different to a collapsing banking system.

    Last time I recall... the banking system suffered a lack of liquidity...that's what ultimately led to the GFC. The shutting down of interbank trade. Its only then that we all discovered the nasty little assets that banks had been dealing with esp. Lehman Bros.

    A collapsing currency is something that GL refers to with the loss of confidence in a currency...to a point where everyone wants out..this ultimately can lead to Hyperinflation... A lead up to this event is the likely substantial increase in cost of living or Inflation as we better understand it.

    Either one of these scenarios is not

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  73. Well maybe, Liquid motion, shutting down the banking system, in 2008, would have been better than continuing to kill ourselves monetarily. Going cold turkey would have been hard, but better than what is to come. The money supply, not the wealth of America, has already been inflated away; the hand writing is on the wall. The banking system is bankrupt. The FED was protecting its crony capitalist friends, not us, or the economy.

    A fiat currency can collapse slowly or quickly, but only from the same mechanism: too much money creation. A collapsing banking system is from excessive loans, too much debt or worthless assets caused by money creation. The two are intertwined, but the only way back to financial sanity is through a deflation. The banks need to fail.

    When Central Bankers refuse to allow a deflation they set the stage for a hyperinflation. The FED has already created enough money to spark one, but time is needed for events to play out. Prices must rise above 100% annually, before people will seek to avoid a currency.

    John Williams of Shadowstats says that the outside limit for a hyperinflation of the dollar is 2014, but it can start any time. Three of the five conditions for a hyperinflation have been met. Only two items remain: the U.S. dollar must lose its reserve status; the federal budget deficit and Treasury funding must spiral out of control. Both are in process.

    Trillions of dollars or T-bills in foreign hands will come flooding home. There can be a dozen triggers to a crisis, but only one cause: mismanagement of the money supply by the Federal Reserve bank.

    http://www.shadowstats.com/article/hyperinflation-special-report-2011

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  74. >They learned from their mistake in 1995, when Newt Gingrich forced the government to shutdown briefly. The electorate blamed the Republicans, and handed them a solid defeat in the next election.

    I saw David Brooks speaking on this matter, and yes, this is the moment that republicans (ex. GWB) said, Fuck It! we'll start buying votes like the Democrats.

    It was the very moment that was the beginning of the end. The electorate demanded it.

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  75. You are not being taking out of context, Liquid Motion; you just haven’t a clue as to what is going on. You are speaking out of the FED’s script.

    In 2.5 years, nothing real has improved; no fundamental corrections have been made. Trillions of dollars have been transferred to political insiders while the economy declines. The government lies about price inflation which is almost 10% now, but will be 15% by the end of the year. In 2012, prices will double. The FEDs are lying about employment figures. You are foolish to believe them.

    No, there was no liquidity crisis, there is a crisis of faith. Ben Bernanke is fighting the last war, against the great depression. Our situation is not remotely similar. There was a lack of liquidity in 1931-2 because President Hoover shut down a third of the banks.

    Those nasty little assets, you speak of, were created by the government; The Democrats passed CRA. Carter, and then Clinton, forced the banks to lend to people who were not credit worthy. The banks passed on the bad loans to Fannie Mae & Freddy Mac, who packaged bad mortgages into derivatives. A corrupt wall street sold those derivatives to the public as AAA when they were junk status. The whole fraudulent industry needed to fail, but the Government kept the villains from being punished. Who went to jail? No one. Lehman Bros was no worse than Bear Sterns, B of A or JP Morgan. The latter group was just better connected politically.

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  76. Urban Bard,
    WHO doesnt have a clue ?
    Listen up buddy.
    How on Earth can you make a statement like "Shutting down the banking system would have been better than continuing to kill us monetarily". DO YOU HAVE ANY IDEA ...???
    Shutting down the banking system puts all of us in an immediate DEPRESSION. Dont argue the point ...you are already on a hiding to nothing.

    Tell me Urban Bard..."what is to come" what is it that keeps you up at night. What is your worst nightmare ? Whatever it is...just multiply by 100....thats what you and I and everyone else around the globe would have experienced in a matter of DAYS. With your (and everyone elses')scenario ( some time in the future) ....we have time to reflect and postulate how big the debt will be, what unemployment will be, how bad is the USD , how hard it will be for everyone etc...etc. Like sitting on the sidelines watching a slow motion train wreck. Wonderful isnt it. Feel like I am so EMPOWERED...I can change the world.
    Sure I understand that what has transpired during the last 2.5 years equates to NIL. Status quo remains (except the debt and unemployment and swapping of toxic assets into public hands and the debasement of the USD and ...and ...and .....I GET IT !!!!!!!! ). Yes I see the argument for the FED being seen as looking after its crony capitalist pals. You obviously dont like reading or have a comprehension problem. GO BACK AND READ MY POST.
    BUT YOU havent even considered the scenario...if the FED didnt step up to the plate and do what it did. HAVE YOU ??? By the sounds of your argument ...NOPE...I guess thats beyond you.

    "Going Cold Turkey" OMG ..you fail..big time. Every single business would have shut down. Massive social unrest across the Globe. RIOTS in every city on every street. DO you use a credit card or debit card...bad luck..all BANK accounts frozen/no access. BANKS SHUT. Worried or concerned about lack of food on the shelves ?....what about NO FOOD, NO GAS, NO ELECTRICITY....NO PUBLIC TRANSPORT the Economy shuts down.
    Just think for a momemnt how reliant you and every other person/business is reliant on banking for everyday affairs. Dont you dare tell me that going cold turkey would have been acceptable. THAT IS JUST... CLUELESS!!

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  77. As far as "the Banking system being corrupt" well.... some more words of wisdom. Go and do some more research. Study the Bretton Woods agreement. The creation of the IMF. The creation of the FED Reserve. Dont state the bleeding obvious (something that you have only become aware of perhaps in the last few years).

    I dont argue with the Hyperinflation scenario. I dont argue with the malfeasance of the banking and political system.

    What I absolutley detest is the lack of ability to fully comprehend and appreciate our circumstances.
    I DO NOT speak out of the FED's script book..HOW DARE YOU IMPLY THAT I SUPPORT THEM.
    AND...YOU are wrong...there was a LIQUIDITY CRISES. It started with Bear Stearns....Lehman Bros failed, as the Fed needed to make an example of the "BANK" that was most wreckless. The FED underestimated the "MARKET" reaction. This in turn lead very quickly into a liquidity issue. A Crises of Confidence. Make no mistake as the next bank about to fail was Morgan Stanley (within a day of Lehman Bros) and had it not been for BOA then the show would have been over... QUID PRO QUO. They (The FED still rue that day). If I seem to remember correctly the death of Lehman Bros (just one bank) caused mayhem on every single market across the globe. It was a contagion. Another bank would have been quickly followed by all banks. That my dear friend is something you cannot comprehend.
    Bernanke is viewed by many as being the culprit for the current dire situation and for putting the US of A on the path to the next DEPRESSION and Hyperinflation.
    I dont entirely agree with that.
    He is merely part of the "SCHEME" Like his predecessors and those in political power , they are all part of the International Monetary System that has been prevalent since 1944. The fact that the USD has been the WORLD'S RESERVE CURRENCY...permitted the US Govt and US FED Reserve to do as they wish. The whole economy has been created on false growth and fuelled by debt constantly. The Leverage that was bestowed upon the USA was used to its maximum effect. No other country in the history of the world has had the power and presence that the US has had.
    That leverage and privilege( as we all have now discovered) has been abused.

    There is a wealth of knowledge out there. Sure I can read shadow stats... et all.....as well.
    What I challenge you to do ( and perhaps a few others) is look outside of the box. Put them in jail...let them fail.....sure sure sure....

    Whats the solution when faced with the reality?
    Stop the government spending , stop printing money, mmmmmmmmmmmmmmmmmmm......AND THEN WHAT ?

    GL and a few others (Urban Bard included)continue to postulate and prolifigate their awareness/expectations. Great...it helps us all.
    What's done is done...confined to the annals
    of history. What was the alternative and where would we be otherwise. Some more discussion on that would bring some balance to the understanding.
    As I say to GL....
    Go deeper into the woods.
    The path that most people dont take.
    Stretch the pain threshold.
    Stay inside the box...and you are limited.

    ReplyDelete
  78. "How on Earth can you make a statement like "Shutting down the banking system would have been better than continuing to kill us monetarily". DO YOU HAVE ANY IDEA ...???”

    Yes, I know absolutely what the consequences are; I have studied this for three decades. I know who gets hurt, and how much. I expect America’s inner cities to go up in flames. The welfare and Social Security system will issue worthless checks, so old people will starve. But, it is the only solution. We only get another GREAT DEPRESSION if the government persists in meddling with the economy.

    A hyperinflation is, at least, two to three times worse than a deflation where wages and prices are allowed to fall to realistic levels.

    You seem to know nothing about Austrian Economics, because you are spouting the FED’s Keynesian nonsense. The only solution to monetary inflation is monetary deflation. Of course, the FED will do anything to prevent a deflation, but that is what will make the dollar worthless.

    "Tell me Urban Bard..."what is to come" what is it that keeps you up at night. What is your worst nightmare ? “

    That people like you remain in control of the economy. They have endless ways of screwing up and blaming the results on others.

    You sound like a malignant narcissist. If you think I like seeing people in pain or starving to death, you are absurd. But, it is the only cure. It is the FED which has been defrauding us for a century. I merely want the fraud to stop. Waking up to the fact that they have pauperized us is no fun. Putting off the inevitable merely makes the damage worse and the pain greater.

    "You obviously dont like reading or have a comprehension problem. GO BACK AND READ MY POST. “

    Then you were very unclear in your response.

    "BUT YOU havent even considered the scenario...if the FED didnt step up to the plate and do what it did. HAVE YOU ??? By the sounds of your argument ...NOPE...I guess thats beyond you.”

    Given a choice between a deflation and what the FED did, I’d take the deflation any day. Why? Because, no matter how painful, A deflarion corrects the problem. 2.5 years later, we have no correction, an increasingly bad economy while prices rise. A horrible hyperinflation is ahead of us. We will be whipsawed. Our standard of living will drop to a quarter and Americans will starve because they have not prepared.

    As I said, you haven’t a clue of what is before us; it is far worse than anything you have imagined.

    ReplyDelete
  79. You speak like a Leftist. The Left automatically assumes that people who disagree with them do so out of ignorance. I know economic history; I have studied it for decades; You could teach me little. We merely have different conclusions.

    This information is not obvious; the public don’t know what is coming. Neither, apparently, do you.

    "AND...there was a LIQUIDITY CRISIS. “

    I disagree. That was the propaganda which the FED put out.

    "The FED underestimated the "MARKET" reaction. This in turn lead ...to a liquidity ... Crisis of Confidence. ... the next bank ... was Morgan Stanley....and had it not been for BOA then the show would have been over.... “

    We disagree on the correction. The bailouts didn’t work. An Austrian Economist says that no institution is too big to fail, even a central bank: the FED. Bankrupting the corrupt banks would have been awful, but it would have been moral and just. It would have prevented a hyperinflation.

    " It was a contagion. “

    I comprehend it perfectly. A depression would have simply been better than the ordeal ahead of us. Besides, the regional banks were not the problem.

    "Bernanke is viewed by many as being the culprit for ... the next DEPRESSION and Hyperinflation. I don’t entirely agree with that.
    He is merely part of the "SCHEME” ..., they are all part of the International Monetary System ...since 1944. “

    No, this originated in the Bank Of England about 200 years ago.

    "The... USD has been the WORLD'S RESERVE CURRENCY...permitted the US Govt... to do as they wish. The whole economy has been created on false growth and fueled by debt constantly. :

    Yes. It is fraud, so it must fail.

    " No other country... has had the power and presence that the US has had. “

    Britain, before WW one, had it.

    "What I challenge you to do... is look outside of the box. ‘

    I am in no box. If you have a case, then defend it.

    "...when faced with the reality? Stop the government spending , stop printing money, ...AND THEN WHAT ?”

    Something better. Almost anything. Perhaps, the Fractional Reserve bankers won’t get control again. We could have free banks, instead of a cartel. Maybe, we could have freedom, rather than Progressivism. The unconstitutional laws and institutions could be abolished. The power mad politicians and bureaucrats turned out on the street. Would that be so bad? At least, it would be something to struggle for.

    "What's done is done.... What was the alternative and where would we be otherwise. “

    We had a free country before the Progressive Era and could have one again. Don’t think that will be easy; many people love their chains.

    ReplyDelete
  80. "I have studied this for three decades. I know who gets hurt, and how much."
    So...when was the last time the world's banking system shut Down ? Exactly what have you studied to procrastinate about the effects of a total worldwide banking collapse?
    As far as I am aware in an Hyperinflation scenario, the economy is still functional. Besides it is widely expected that should the US succumb to a Hyperinflation, then this would lead to a Depression (as per shadow stats). Not the other way around.

    ReplyDelete
  81. Its just a case of semantics for the end game.
    Whether it was 2.5 years ago or 1.5 years into the future, the same scenario is arrived at.

    However with the later, there is some degree of allowance for "getting ones house in order".
    Under the former, there is an instantaneous obliteration. A shock so massive that nothing in history can compare. NOTHING !!!!

    Do you honestly believe that the "Government will stop meddling with the economy" ? Come on get real. Your altruistic views are not shared by myself. The UTOPIA you speak of, only exists in your imagination.

    Therefore if we assume that government meddling continues (very likely) then isnt a Greater Depression a foregone conclusion !

    ReplyDelete
  82. Once again you have taken me out of context by classing me as a malignant narcissist. I was speaking from the perspective of the way you ( and others), view this build up of debt, QE and money supply creating havoc with the economy and then pontificate and postulate about how bad it is and how much worse it will get.

    BLIND FREDDY can see what is ahead. I dont need you to remind me. I took a different perspective because too many have overlooked what was avoided. Dont class me as a Keynesian either. I detest the thought of how the governments of the world allowed such foolish economic behaviour and theory to control their economies.

    I dont, for one iota, have any disregard for the plight of millions, the suffering, the pain. But letting the so called banks take their medicine when it was appropriate, doesn't avoid the pain. If you think that a Hyperinflation is better than a deflationary depression....then that is your personal preference. We agree to disagree on the severity and implications not just for the USA, but the rest of the world.
    A Hyperinflation is only perculiar to the US, whereas the next Depression would be much more widespread. BTW...the "choice" as you put it, is not simply a deflation VS Hyperinflation. Its a DEPRESSION.

    ReplyDelete
  83. Just keep putting off reality and the fall well be that much worse.RW

    ReplyDelete
  84. "The bailouts didn’t work."

    "Bankrupting the corrupt banks would have been awful, but it would have been moral and just".

    URBAN BARD....you display all the qualities of an secondary educated economics student.

    You are living in fairy land if you think that bankrupting only the corrupt banks would have solved all the issues. What part dont you get. If they are a BANK, they are part of the SYSTEM of the INTERNATIONAL MONETARY FUND. That same system is so intertwined, complex and reliant on interbank confidence. The US banks in particular occupy a privileged position. They are in every corner of the GLOBE. Failing BANKS is a very bad thing for everyone and for every other bank.
    There is nothing that you can study to profess the likely outcome of a complete GLOBAL BANKING SYSTEM shutdown. THIS WAS AVERTED.
    Wealth destruction in that case...I couldnt even hazzard a guess (somewhere north of $20TLN perhaps a lot higher).

    SLAM DUNK !!!!!


    "No, this originated in the Bank Of England about 200 years ago".

    NO...that was the UK's attempt at world control.
    WWII saw that handed over to the USA. Which then proceeded to abuse its privilege. Which in turn led to the GFC...which now leads us to the next DEPRESSION.

    IT IS THE POWER, GREED and LOVE OF MONEY that gets political parties ..et all...into strife.

    I have no agenda here but to offer my points of view.

    All you seem to offer is criticsm and your so called defensive "expertise" about the coming Hyperinflation and why you are so right about that path and everyone else is clueless.

    SNAP .

    ReplyDelete
  85. Liquid Motion replied to my statements:"I have studied this for three decades. I know who gets hurt, and how much."
    So...when was the last time the world's banking system shut Down ? “

    You seem incapable of learning which economic school has predicted past debacles, including the ’29 crash. Thus, you are incapable of extrapolating to current circumstances. We have had enough currency crashes and banking failures to predict likely outcomes. The fact that a debacle is bigger doesn’t change the principles causing it nor change your evasive actions.

    But, this is a value judgement. Would your like smaller pain now to greater pain later? Give me the small pain of a deflation, even if this screws up my investment srategy.

    "Exactly what have you studied to procrastinate about the effects of a total worldwide banking collapse?”

    I am not procrastinating. I have invested in a future outcome. I am cynical about the FED’s management and their economics, so I am betting on hyperinflation. The banks deserve to die; it is the only way to end their theft.

    "As far as I am aware in an Hyperinflation scenario, the economy is still functional. “

    No, the economy increasingly becomes less functional. Production declines as the hyper inflation continues. No one can trust the price of anything. The society consumes its wealth; an economy going through a currency collapse is poorer than before. Worse, the speculators and the political thieves win. Middle class values of thrift, savings and prudence are punished.

    "Besides it is widely expected that should the US succumb to a Hyperinflation, then this would lead to a Depression (as per shadow stats). Not the other way around.”

    The phrase is “hyper inflationary depression.” Or as Ludwig von Mises would call it, “A crack up boom.” According to the Austrian school, increasing the money supply causes dislocations in the economy as business leaders are misled to unsustainable expansions of capital goods. The "crack up boom" is just the final stage of monetary death. The impoverishment had already taken place during money creation and the depression afterwards is the correction process. The FEd could throw us into either situation, but its inclination is to push today’s problem off on tomorrow. Eventually, tomorrow comes and we have a hyperinflation.

    ReplyDelete
  86. "Its just a case of semantics for the end game.”

    This is not about words. The FED has failed to keep its promises of price stability and job growth. They cannot be trusted. We must take evasive action. It is those evasive acts, when enough people do them, which will bring down the FED’s house of cards.

    "However with the later, there is some degree of allowance for "getting ones house in order”.”

    What order is that? No real changes in the corrupt banking system have been made, nor are any projected.

    "Under the former, there is an instantaneous obliteration. A shock so massive that nothing in history can compare. NOTHING !!!!”

    It’s always a shock to discover you have been defrauded; how big and wide the devastation is is unimportant. The question is whether the theft has ended, so a rational economy can resume. It has not, so it cannot.

    "Do you honestly believe that the "Government will stop meddling with the economy" ? Come on get real. Your altruistic views are not shared by myself. The UTOPIA you speak of, only exists in your imagination. “

    No, I expect the Progressives to try to keep meddling. I will keep taking evasive action, as will most people. The upshot will likely be a lost decade like they had in Japan from the 90s to today.

    But, more people know the truth now and will refuse to cooperate with the government. None of this is altruism; the altruist left will be starving in the future. The government cannot afford to fund the Liberal Establishment.

    "Therefore if we assume that government meddling continues (very likely) then isnt a Greater Depression a foregone conclusion !”

    Not foregone, just possible. We have no idea how stupid future administrations will be. We still have the remnants of a republic. The Thieves and scoundrels can be voted out.

    Perhaps, it might take twenty years of a great depression as the power mongers continue to defraud us, but small changes can lead to observable results. The Keynesian economists will be repudiated as will the central bankers.

    But, I’m guessing. I don’t know the future any better than you do.

    ReplyDelete
  87. If you don’t want to be seen as a malignant narcissist, Liquid Motion, then stop talking like one. This is not about you or me. It is about economic principles. This is about a future based on the likely actions of the people controlling the Central Banks.

    If you are not a Keynesian, then what economic concepts do you follow? The Keynesians excessively fear a deflation, as you do.

    An Austrian says that a depression is a correction mechanism which ends unsustainable businesses, reassigns their assets to companies producing goods and services which consumers will pay for. People must lose unsustainable jobs and go to work for other companies. The size of government must drop, its employees fired, so they can start doing something useful. None of this is painless.

    This is not about avoiding pain. Pain was created when the FED increased the money supply. It’s about correcting mistakes in the economy induced by money creation.

    The depression is guaranteed. Will the dollar and the EURO become worthless? Yes. The EU will fragment as an entity. Member states will create a local currency.

    “URBAN BARD....you display all the qualities of an secondary educated economics student.”

    Flattery will get you nowhere with me. Nor will ad hominem attacks. All you are saying is that you disagree, but won’t prove why.

    I say that the corrupt banking system must fail, anyway. So, earlier is better than later. Whether that default is in a depression or a hyper inflation of the currency followed by a depression depends on local conditions and the actions of the central bankers. I maintain that a hyper inflation is much worse than the depression you fear.

    The substitution of an international currency, such as the Amero, SDR’s, will work no better for the world than the EURO has worked for the EU. It addresses the wrong problem.

    “IT IS THE POWER, GREED and LOVE OF MONEY that gets political parties ..et all...into strife.”

    No, it is Fractional Reserve Banking which is at fault. That is what has to end. The FED must die.

    “I have no agenda here but to offer my points of view. “

    You have an agenda. Your point of view is anti-deflation, which make you a Keynesian.



    “All you seem to offer is... clueless.”

    I welcome an attack on my arguments, but you offer nothing but your substantiated opinion.

    I hope you fare well in your investments, but I believe you won’t. If you believe in a deflation, you must be holding dollars, right?

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  88. why are gas prices raising when most of us are catching HELL to make ends meet?

    ReplyDelete
  89. It’s simple, SilverMLM. Oil is denominated in dollars. If the value of the dollar drops in half, then oil must double.

    The price of wealth is increasing in dollar terms. Wealth is what you need to survive: food, gasoline, energy, etc. Many assets are not rising though. Housing and luxuries continue to fall, because they were bid up to unsustainable levels before the credit crunch. The average house will go to half or lower.

    Precious metals are being bid up, because they are a flight to safety in a chaotic world. Price increases in the items you need to survive will continue upwards. The federal government says that CORE inflation is about 2 percent, but that excludes food and fuel. Real price increases are just under 10%, but Walmart and grocery store managers project price increases from 3 to 15% by the end of the year.

    I expect prices to double in 2012. And then the price increases really get bad as US foreign debt in dollars and T-bills comes home. The choice then will be for the FED to crash the economy or trash the dollar. I suspect the latter is perceived as in the FED’s best interest. So, we get a hyper inflationary depression.

    ReplyDelete
  90. I suggest that the people here read a real economist’s , John Williams, projection at

    http://www.shadowstats.com/article/hyperinflation-special-report-2011

    You won’t find it comforting, but forewarned is forearmed. Your investment portfolio will thank you.

    ReplyDelete
  91. Urban Bard, you follow the crowd and be happy about the path you have chosen if it makes you feel warm and cosy. Do yourself a favour and stop professing to be the "GURU". You dont know any more about the facts than I do. Nor do you no more about the effects of past /current actions and the path that creates for us. Stop with the egocentric attitude.
    Dont blow your smoke up my ass. I can see whats ahead. I dont need you or any other person to confirm or re-iterate the sorry state of the US and what the future holds for all and sundry. Stating the bleeding obvious...again , again and again. Oh did you know that the sky was falling in ? Better run and hide. I have made it clear on this/other blogs.. my feelings toward the actions and inaction of the government and Fed and what the end game is.
    I dont care for the defining of my personal state of affairs on this site just for your satisfaction/interest. I dont care for your position either.
    You are full of definitions and quotes. Let me guess ..you are in the teaching fraternity. Oh yes the Scholar....plenty of practical experience. Wonder if you have ever had any. How much exposure do you have to the financial markets. Speaking from such a position of authority. What skin do you have in the game. AND the subject of History... is such a wonderful tool...but it is abolutly no guarantee of predicting future events. AND if History was of any benefit then why is it that we as HUMANS never seem to learn....WHY do we make the same mistakes? That's a rhetorical question...I dont want a response on it.
    Let me state that I have heard all the BS and cliches that one can hear in a lifetime.
    I am not an anti-delfationist like your buddy Ben. I believe a depression is unavoidable and No I am not afraid of it. Just pointed out that we would have had one earlier rather than later....BUT you missed the point.
    Have known that we are on this path for the better part of the last 5 years (unlike you ...indecisive...in your rebuttal...stop being a fence sitter). AND you were doing what 5 years ago..still teaching ? Perhaps you even professed to know that the GFC was coming and you made that valuable prediction and acted accordingly.
    I dont have an AGENDA...far from it.
    I am not an anti - deflationist and certainly dont support the Keynesian School. I offered a contrary point of view to the usual "point the finger and extrapolate the numbers" which you attempted to castigate by way of your self- absorbed, attention seeking. Your style and attitude is reminiscent of someone who believes that they are more talented/gifted than others. You are deluded about your own importance and more than likely suffer from a nagging sense of worthlessness, probably even to the point of feeling like a bit of a fraud.
    What makes you think that you are the font of all knowledge, that makes you feel superior and act with such arrogance.
    I know ...its all about you trying to impress others and standng out. You are not democratic far from being friendly and hardly collaborative. Lets face it....you are simply an attention seeker.

    "I welcome an attack on my arguments, but you offer nothing but your substantiated opinion"

    Here..right there....your words.....inviting an attack. Classical attention seeker.
    5 Mins of fame indeed..you have had more than your fair share.

    I dont wish you well in your investments....I dont need to, because you know it all.

    ReplyDelete
  92. Urban Bard....does the saying "cant see the forest for the trees" have any meaning for you ?
    YES it is Semantics. The end game is still the same. You are so caught up in the detail, you overlook the point.
    Who am I ...? Who cares ?
    What am I invested in ?
    What school of Economics do I support ?
    Hmmmmmmm...so many questions from such an educated individual such as you.
    And all along you have viewed my blog account...and yet the name on my blog entry offers no clue ?
    Go deeper into the woods Urban Bard....go Rural.

    Yes the banks are too powerful.
    The monetary system needs to be overhauled with a new world order. The removal of CB's is imperative. The same distort and manipulate for the benefit of their brethren not for the masses.
    Government needs to get back to the fundamental reason for their existence (proper order and protection of assets and defend against intuders and acts of war). They need to stop interferring and meddling with the economy. Too much Power leads to Greed. Greed leads to a Love of Money. A love of money leads to a self absorbed world where the "Poor" will remain poor, The "Middle Class" will constantly be cheated from their wealth and the "Rich" will just be a little less rich.

    ReplyDelete
  93. You are strange, LM. I can’t express an opinion around you, can I? I don’t know what to make of your response. It bears no relation to anything I wrote.

    I don’t follow crowds, nor am I a GURU. I express opinions in Austrian Economic terms because it has never failed me. But, you know nothing about that. You don’t know the facts, nor have you built a case. You sound like a Keynesian, but deny you are one. Your ego sounds much bigger than mine, but that is because you are so defensive.

    I can’t read the future. I bet on hyperinflation, although I would prefer a deflation. I know that Bernanke could throw the US into a deflation. It’s just my judgement that he won’t.

    
“You are full of definitions and quotes. Let me guess ..you are in the teaching fraternity. “

    I’m a retired engineer. I graduated in the 60s, and had money to invest. I studied the subject. Most investment books made no sense and made me no money. I lucked onto the writings of Harry Brown and “How to profit from the Coming Devaluation.” I profited from the Carter years, even though events didn’t work out precisely as Brown said. I lost much of it in my ensuing divorce. I’ve studied free market economics but got no degree in it. I’ve had thirty years of disputes with academics, mainly with family.

    “AND the subject of History...but it is absolutely no guarantee of predicting future events. “

    Only a fool looks for guarantees. A wise man looks for trends and lessons. I make investments based on Austrian economics and my judgement of what the central bankers do. I think they are fallible-- caught up in a false ideology.

    “AND if History was of any benefit then why is it that we as HUMANS never seem to learn....WHY do we make the same mistakes? “

    Thieves tend to be predictable. They keep using the same tools. Not all humans are fools as you believe.

    
“I am not an anti-delfationist like your buddy Ben. “

    Ben who?

    “I believe a depression is unavoidable and No I am not afraid of it. Just pointed out that we would have had one earlier rather than later....BUT you missed the point.”

    Was there a point you made? If so, you were unclear.


    “I dont have an AGENDA...far from it.”

    I have an agenda. I intend to survive the next five years and profit from it. Do I love a particular tactic? No, I’ve heard nothing which would change my plans. Certainly, you have said nothing convincing.

    
“I am not an anti - deflationist and certainly dont support the Keynesian School. I offered a contrary point of view ...”

    Based on what?

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  94. “YES it is Semantics. The end game is still the same. You are so caught up in the detail, you overlook the point.
Who am I ...? Who cares ?
What am I invested in ?
What school of Economics do I support ?
Hmmmmmmm...so many questions from such an educated individual such as you.
And all along you have viewed my blog account...and yet the name on my blog entry offers no clue ?”

    Is it so wrong for me to ask that you explain yourself when you make no sense?



    “Yes the banks are too powerful. 
The monetary system needs to be overhauled with a new world order. The removal of CB's is imperative. The same distort and manipulate for the benefit of their brethren not for the masses.
Government needs to get back to the fundamental reason for their existence (proper order and protection of assets and defend against intruders and acts of war). They need to stop interfering and meddling with the economy. Too much Power leads to Greed. Greed leads to a Love of Money. A love of money leads to a self absorbed world where the "Poor" will remain poor, The "Middle Class" will constantly be cheated from their wealth and the "Rich" will just be a little less rich.”

    Why are you fighting with me, LM, when I said much the same thing? What point were you trying to make? How does this tie into GL’s position that a hyperinflation is coming? I thought that you disputed that.

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  95. "Mr. Bernanke makes clear there will be no QE3. And he hopes that it will not have much impact when the purchases end: “We are just going to let the purchases end. Our view is that the end of the program is unlikely to have substantial effects on the economy or financial markets.”"
    http://norris.blogs.nytimes.com/2011/04/27/live-blogging-bernankes-news-conference-2/

    GL - are we screwed now? Is he lying? will he do it even though he says he wont?

    ReplyDelete
  96. ITS OFFICIAL.....!!!
    New motto for the Fed.....
    "Pedal to the Metal"
    applicable to the stock market (on its way up), to the CRB index (on its way up), to the USD (on its decline), to the cost of living (heading much further north), and last but not least PM's to skyrocket.
    ...and the cycle count says ??
    When all and sundry talk about the end of QE 2 with the expectation for a delayed QE3 ..the Ben comes out and does what everyone least expects.
    What's in his glass...rocket fuel ?

    ReplyDelete
  97. UB,

    If I read correctly, you attacked my post (April 17, 8.11pm) in the belief that I was siding with the FED.
    I stated categorically that I didnt support them or the govt. ( go back and read my previous posts).

    "What point was I making" ?
    GL's post is most accurate (burning the candle at both ends), I dont disagree with Him at all. Debt and deficits are bad... but this is simply economics.. a study of the numbers and their effects.

    What is posted is clearly what most (me included) on this (and other blogs) believe will eventually happen ...massive govt debt..neverending deficit..falling USD...and HYPERINFLATION leading to the next DEPRESSION. YAWN....YES I GET IT. I dont need to reiterate the coming crises (and how it was created) and detail it or rehash it or to prove my knowledge is superior to anyone elses or that I favour Austrian Economics over Keynesian style.

    What is not discussed, is what the situation would have been had the FED not stepped in. There is a lack of balance. I dont bring this point to the table to support their actions. Nor do I support the FED looking after their crony bankster friends. I bring it so that it can raise the awareness of the plight of the US and the Globe. After all we do live in a globalised world. Actions and events occuring in the USA affect the greater part of the global financial system.

    Sure a Hyperinflation is very bad....but its easy to sit iddly by and watch the series of events unfold procrastinating about "how bad its going to get".....and predicting D-Day is coming. When the alternative was IMHO, far worse. A question (again rhetorical) is the option of taking an instant massive destruction of wealth (worldwide)...without warning... and shutting down of the GFS or suffering a slow painful death (in which the educated/knowledgable/connected ) plan their exit/future as you so pointedly admitted to. So grateful arent "WE" and priviledged that "WE" can have the luxury to shift our investments out of stocks/bonds...into PM's and other hard assets. Maybe take some offshore, or shift residency to some Asian or Sth. American country. Heaven forbid to buy some real estate overseas....!!! All this is possible not because the Fed printed money...NO.....because of some other miracle that a lot of people have blindly accepted and taken for granted. Too many people are living in denial...about the state of affairs of the nation, about how these people got into government and how the state acts for the welfare of the masses.

    ReplyDelete
  98. I am absolutely convinced that a Fed injection under the guise of QE1 saved the global financial system. The consequences of which are clearly evident. But the inaction is equally as horiffic (Deflationary Depression).... as the continuation of money printing and a Hyperinflationary Depression.

    So in either case the Fed / Government is to blame. Right.....??? RIGHT !!!
    If we suffered a 1930's style Deflationary Depression then the Fed /Govt. takes the hit for inaction (as they did in the 30's).
    Only this time around its not just the USA suffering a depression....ITS THE WHOLE WORLD ! Letting "the banks" fail was not an option. Believe as you will...but the Banks are so interconnected (Big and Small) that letting them fail simulataneously would create a vacuum akin to a Black Hole. Nothing would escape the vortex.

    If the Fed/Govt prints money and uses deficits to such an extent...then the path is ultimately inflationary....even Hyperinflationary and possibly extending to a Depression. The FED/ Govt again fail...and the blame is fairly and squarely on them.

    As far as not making a point.....I did...but you didnt decipher it. Because YOU have an agenda (as you state)to espouse the virtuous world of Austrian Economics. Everything else is less important or inaccurate or soundless or meaningless or baseless. Things arent always as obtuse as most people expect. You..(as an educated person)I would expect to read between the lines or at least accept an alternative to the... They did wrong and are solely to blame.

    I dont take kindly to the insults and innuendo "havent got a clue", "Leftist",
    "Malignant Narcissist", "Make no sense". Nor do I suffer fools.
    Go ahead...plan for the next five years. You sound like a communist. They have 5 yr plans too. Fools may think the recession has ended and the economy is growing. Bigger fools think that this situation is resolved in 5 years.

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  99. LM, I’ve reread your remarks. I can’t make head nor tail of them. Perhaps, we speak different languages, or have different definitions for words. You present no concrete pattern.

    You give no clues as to what economic school you agree with. You say you are not a Keynesian and disagree with the Austrian School. Are you a proponent of the Chicago school? That is, you believe that a small amount of price inflation is desirable to promote growth? But, you don’t use their language.

    At best, you seem upset that problems in western financial systems will perturb the rest of the globe unfairly. Well ... join the club. I don’t like this, either. I am a US citizen but I never voted to allow this. How responsible am I that foreigners from London took over our banking system 29 years before I was born? Or that Fabian Socialists took over the Democrat Party in 1906?

    Your arguments are puzzling. I don’t care if QE1 saved the global financial system; I don’t want it to be saved. I want to return to rationality.

    You have misconceptions about the Great Depression. It was not a result of inaction. US and foreign governments intervened in the world economy and financial markets endlessly. Murray Rothbard has a good book on what caused and prolonged the Great Depression. He blames New York Federal Reserve bank chairman, Benjamin Strong, for inflating the money supply to prop up the British Pound, causing the ‘29 crash. He rips President Hoover for prolonging the depression by keeping prices high. He tackles FDR‘s interventions. None of this is governmental inaction. (Also, the rest of the world went into a depression before America did. Their governments interfered differently than we did, so they often got out of it sooner.)

    Where we differ is that I believe that the deflation is a correction.

    Our current stagflation has two ends: deflation or hyperinflation. Ben Bernanke believes that he can control events. He wants a run of price inflation before he slams on the brakes after Obama wins. This is highly improbable. High price inflation seems likely to occur in late 2012 favoring the Republicans.

    I prefer a deflation over a hyperinflation, because that would be easier on the US. A hyperinflation seems inescapable unless the FED deliberately plunges us into one. Hence, a dollar collapse is waiting for a trigger event which will come sooner or later. I selfishly prefer later because that allows me to finalize plans. I have no more control over this than Bernanke does.

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  100. The reason that I keep asking for what economic school you belong to, is that there is no consistency in you. What are your economic goals? What bets have you made on the future? What realistic means do you have of getting there? I see nothing in your worldview, or your statements, which is rooted in reality. You seem full of stuff and nonsense. You obsess about the wrong issues.

    The reality is that fiat money always collapses either in a devaluation or a hyperinflation. Why? Because the value was stolen from a currency long before the crisis. The devaluation is within the FED’s ability. But a hyperinflation is beyond Ben Bernanke control because that is when the public throws up its hands and disregards the Federal Reserve Note (an IOU) as money. The difficulty is that all the world’s fiat currencies are likely to collapse at the same time, since the dollar and T-bonds are the Central Bank’s major reserves.

    It seems probable that the G-7 or G-20 will attempt to impose and international currency, but what if the public refuses to bite? An international currency, even one tentatively linked to gold but not convertible to it, does not change the current corrupt banking system. All it does is keep the crooked game going a bit longer, like QE1 did.

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  101. To K Smith, UrbanBard, Liquid Motion, Count DeKuntier, Doug, Shimshon, John Ellison, california womanl, Andy Shand, and Ebag:

    Please send me your e-mail addresses. To verify it's you, post a comment on my blog with the name on your email before the ampersand (ie., as my e-mail is expat229@gmail, I'd post "expat229"). That way, I can confirm it's you.

    I need to get in touch with you guys—it's important.

    GL

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  102. Okay, GL, let me try this.
    louisgwheeler

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  103. Ahhhhhhh...finally...an appreciation of the point I was making (well sort of). It took some time. And as a bonus I got something extra out of you. I re-read my posts and nothing in that seems confusing. It is obvious the point I was making as was my understanding of the point GL was making. What language do you speak? A Few more things are pretty clear to me now from your comments:
    "I don’t care if QE1 saved the global financial system; I don’t want it to be saved".
    Tells me you are ungrateful for QE1 but appreciative of your financial position (read still intact). You live in denial. Also that you haven’t considered the position of where you would be had the system not have been saved.
    "I prefer a deflation over a hyperinflation, because that would be easier on the US".
    BUT…
    "I selfishly prefer the later because that allows me to finalize plans".
    Once again you are shameless in your admission of the US centric view and of your preference for a HYPERINFLATION. Are you so blind that you do not see the point, in spite of your own selfish behaviour.
    A Hyperinflation will do to the US what a deflation wont do. It will bring about a new paradigm. The currency will be destroyed, along with the government and the Fed. The USD will cease being the world's reserve currency. The US loses its mantle.
    Another point I made….still you leave the blinkers on ! YOU ARE BLACK AND WHITE…no areas of grey.
    How fortunate you are to be in a position to be able to "finalise your plans". You are privileged to have that ability ..not because of your education or knowledge of financial markets or that you voted Democratic and support the Austrian School. ITS PLAIN AND SIMPLE...THE FED RESERVE saved your ass like everyone else's. YES we all know about the printing and the cancer. BUT then you go on, to categorically state that you didn’t want the global financial system to be saved. WTF ??? . YOU WOULD RATHER BE IN THE POOR HOUSE STANDING IN LINE WITH MILLIONS OF OTHERS waiting for your bowl of soup and piece of bread. You wouldn’t have two dimes to rub together in that scenario....unless you actually knew the GFC was coming and parked everything in PM's. I suppose the Austrian School actually predicted that for you and you planned accordingly.
    This is not a US centric issue (although the US has some very large issues). It’s a global issue. BUT from your response you don’t give a rats/or fail to understand the effects on the rest of the world. Maybe it’s the rose colored glasses you wear. Something I learned a very long time ago….Newton’s 3rd Law of Motion (principle of Physics)….For Every Action, There is an Equal and Opposite Reaction has a lot of relevance here. What happens in the USA is felt by the rest of the world. This dire situation is synonymous with Empires. The USA is an Empire. The Empire is failing.

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  104. OUT OF CHAOS....Opportunities are created ..cannot agree more. You are an opportunist...like many others (me included). ALSO OUT OF CHAOS ...comes ORDER. In good time.
    With the benefit of hindsight..we can analyse what it is that the FED/Govt/Bureaucrats/CB's did...didnt do. We can scorn their malfeasance...and banish them all to the ends of the Earth. We can complain about the nonsensical use of Keynesian Economics and about the lies, deceit, abuse, distortions, manipulations and poor governance. But ....what then....??? Change the government...hmmm, sack the Fed....hmmmm..??...abolish deficits/debt, create a new global monetary system.....good luck with all that.
    Perhaps if we just sit back...we can all just watch it implode on itself or let the other Western/Eastern nations do the work for us.
    I don’t have misconceptions about the Great Depression..you chose to see it from the perspective of what was done...Actions...I choose to view it from the point of view of what was not done...INACTIONS. You read, ..its obvious……..but you don’t comprehend. Your mind is closed.
    This is not about what school of economics I support, so cease with the questions and basis for attacking me. You are frustrated because you can’t attack me on the grounds that you have no basis (ie I do not follow/ have a preference for an economics school). I don’t like schools ..they are just another metaphor for JAIL where you are imprisoned either emotionally, mentally or physically. You are confined and restricted, not allowed to grow.
    I am a practical thinker. I am a realist (even though you can’t see it). I am not a socialist. I am democratic in my views but not in political preferences. I stay ahead of the curve and I can prove it. I support the theory of a new world order. There is no country or religion on this planet that is so powerful or deserving of the rights that have been bestowed upon the USA. That is not being undemocratic...it merely recognises that with POWER..comes...........(you fill in the blanks).
    Yes I agree its a crooked game (engineering on an immoral level). A GAME which has been played for millennia. QE 1 may be part of that crooked game, but it is literally a pinch in the ocean compared to the history of events that brings us to the current situation. The developed world is a wonderful place, albeit with major inequalities and inequities. Like it or not, you and I are part of that GAME. In isolation, our part is meaningless. Collectively we are the essence of that game. Besides, that crooked game kept you as much out of the soup..as it did spilling it in your lap.
    I touched on “getting your house in order” in this and previous blogs. GL obviously picked up on it recently…..but YOU missed it again. The exit strategy …..the benefit of knowledge and the will to act bestowed upon the few with enough to lose. Staying “LIQUID” for opportunities that arise. The Laws of “Motion” will not change. Survival, is not so much about economic theories as it is about understanding the reaction of the numerous actions. Theory is good for one thing (explaining reality). In reality, practical experience wins, because it is practical experience upon which theories are based.

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  105. "OUT OF CHAOS....Opportunities are created ... You are an opportunist…”

    No, I act defensively. As an intellectual, I would prefer to think about something else -- anything else. This is boring, but people will die in the coming debacle. My job as a man to prevent harm to me and mine. I did not create this a situation, but I must react to it.

    " ALSO OUT OF CHAOS ...comes ORDER. In good time.”

    Not necessarily, if the bankers win through an international currency; that keeps the game going for another thirty years.

    "We can complain about... Keynesian Economics .... But ....what then....??? “

    We must allow reality to assert itself and bear the pain of disobeying it so long. This includes an intense voter reaction. The voters should take the blame for selling their votes to both parties for other people’s money. Progressivism must die.

    The voters must discard what caused this mess: big government, big labor, big business, political control by the media and the educational establishment, currency manipulation, centralization of power in an unelected elite and an obsessive avoidance of consequences which leads to a debacle. We deserve to be humbled; It is how we learn to stop repeating mistakes.

    "I don’t have misconceptions about the Great Depression...I choose to view it from...INACTIONS. ... you don’t comprehend. Your mind is closed.”

    No, you are ignorant and persist in your bigotry. You deny that the real world impels us. Bad ideas have consequences. The Great Depression was a world wide problem caused by the rise of Progressive or interventionist ideas. The European nations refused to accept a gold standard after World War One which lead to interventions which are only now being washed out. Progressivism (Fabian Socialism) and Keynesian methods cannot remotely be considered inaction.

    “This is not about what school of economics I support, so cease with the questions and basis for attacking me.”

    Then you admit that you have no principles or methodology to back your assertions? You are a pragmatist who has no understanding of deeper ramifications.

    “I don’t like schools ..they are just another metaphor for JAIL ... “

    You object to organized systems of knowledge which are tested against reality.

    “I am a practical thinker. I am a realist ... I am not a socialist... I stay ahead of the curve and I can prove it. “

    You are winging it. You want other people to trust that you are smart enough to discard 500 years of economic thought. No thanks.

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  106. “I support the theory of a new world order. “

    I support individual freedom and people’s voluntary acts. If the bankers win then a New World Order is necessarily authoritarian.

    “Yes I agree its a crooked game ... which has been played for millennia. “

    No, just since the Bank of London in the 1600s.

    “The developed world is a wonderful place, ... Like it or not, you and I are part of that GAME. “

    The bankers and their politicians make me a part of that game.

    “In isolation, our part is meaningless. Collectively we are the essence of that game. Besides, that crooked game kept you as much out of the soup..as it did spilling it in your lap.”

    The victim is always the essence of the game to a predator. The Liberal Fascism of the last hundred years has meant an endless series of thefts by the Progressives and the banking elite. That is not keeping me out of the soup. It has made me play their game, rather allowing me the freedom to pursue my own happiness.

    “I touched on “getting your house in order” in this ...but YOU missed it again. “

    I missed nothing. I saw, but disagreed. My house is in order. I am betting differently from you. Time will tell who wins.

    “The exit strategy … Staying “LIQUID” for opportunities that arise. “

    You don’t know enough to even know what the opportunities are.

    “Survival, is not so much about economic theories as it is about understanding the reaction of the numerous actions. “

    Ah. Your actions are that of a pragmatist and nihilist. Frankly, in the 1923 German hyperinflation, many people like you prospered, but they lost it all in Hitler’s rise to power. They were corrupted enough to enable that rise thinking that they could control him.

    “Theory is good for one thing (explaining reality). In reality, practical experience wins, because it is practical experience upon which theories are based.”

    No. Pragmatic people, such as yourself, will die, because the bankers have planned for everything you can do. You will not have prepositioned yourself, because that would limit your options.

    Our historical positions are that of the farmer vs the herdsman. In the sh*tstorm which is coming, you will have no cover, except for what you can steal from the provident. It is just as well that you opportunists are few in numbers, as predators always are, and that the provident are well armed against you. It is the innocent who will mostly suffer, as they always do in the game of kings. You will act as a freebooter.

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  107. I’d like you to read something, LM. I just getting started in internalizing this info. It has to do with how the Fed’s plans are falling apart.

    http://www.usagold.com/goldtrail/archives/another1.html

    The posts were written by Another: a market insider explaining how the Central Banks were able to suppress the price of Oil and Gold while keeping the Dollar high. Essentially this was happening from the Gold spike in 1980 to 1997. Another says that that the Central Banks were manipulating the markets through secret deals. They were selling off their stocks of Gold to the Oil Producers. The true price of Oil was for a market price in dollars plus an undisclosed amount of gold being shipped to the Mideast.

    Another says that the scheme collapsed because the Chinese and Indians horned in on the Gold trade forcing the price of oil and precious metals up.

    It also explains how all of this must end in a hyper inflation. There is simply too much paper Gold in existence. When the paper Gold vanishes, along with it goes the derivatives, bond markets and all the worlds currencies. But, you can decide this for yourself.

    The Central Bankers have kept this game going far longer than Another anticipated. He quit writhing in 1998. A Friend of Another (FOA) took up the writing when he quit. Later, the task was taken over by FOFOA (Friend of a friend of Another.)

    I’m interested in your thoughts.

    http://fofoa.blogspot.com/2008/08/first-post.html

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  108. Convince me how the 500 years of economic theory has stopped us from getting into this mess. Really useful !!!!As I said THEORY is good for one thing only...to be abused (ooops I meant to say to explain practical experience) . I am smart enough to know that the best so called economic minds and theories can be distorted and manipulated by authoritative powers. Again with the areas of grey.
    Opportunities..yes there are plenty..even you admitted to "PLANNING" for the next 5 years. As for me not knowing enough...well I disagree with your impetuous derogatory remarks.
    Just because I dont support a Particular School doesnt imply I shut my mind to them. I understand them very well. That my dear friend gives you the edge. Knowing the reactions to the actions. No one survives by just winging it. I have survived the whole of my life and will continue to do notwithstanding your prediction.After all, dont we all want to be protecting oursleves and everything we worked so hard for ?
    "The Game" didnt start with the Bank Of London in 1600's...it can be traced back through civilisation. The Roman Empire is a classical example.You have no choice about playing.
    You still ignore / cannot admit that your survival is not the result of good management on your part.

    The so called future is what we can plan for and YES I am acutely aware of what lies ahead. This doesnt imply that I am necessarily correct in my foresight..I'll be the first to admit that. But as long as the Fed Reserve exists and the USD is the world's reserve currency I will plan accordingly.

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  109. UB

    Response to suggested reading.

    PM's have been my interest for the better part of 3 decades.

    Fiat money systems allow banks/governments to retain power to control the masses. AND the use of Keynesian Economics has allowed them to leverage that power. Agree that all fiat money will eventually die. Dont believe in the theory that "price of gold cannot be manipulated".
    The distorted financial world in which we live is subjected to many varied financial instruments (created and used by the elitists for their own benefit). The same are used in many ways to suppress/manipulate everything that is tradeable.
    Have strongly held the view that banks have a keen interest to ensure that fiat money survives. To do otherwise would imply that if the market were left to its own forces then GOLD would be significantly higher than where it is currently positioned with all fiat currencies backed by it. Thereby limiting the power and control that they have/had. An event such as a Hyper Inflation doesnt necessarily
    imply the exact spontaneous exaltation of GOLD as the superior currency either. Hyper Inflation will destroy fiat currency. We mere mortals simply flee to Gold because that is what we have always trusted in times of uncertainty and financial/currency crises. This in itself perpetuates another bubble.
    I am supportive of the view that there will come a day when GOLD will again play a part in a new currency system. It still remains (and always will) the only valuable commodity that cannot be created out of nothing and is always seen as "real" money. I see a time in the not too distant future when liabilities will be settled in gold and other precious metals.

    I also have a theory that certain Asian Nations are accumulating in large quantities, not only PM's, but also base metals and other commodities, in lieu of holding fiat currencies. This tells me that they are planning for the time when the current system fails. He who laughs last, laughs the loudest.

    Unfortunately Gold will not be the saviour. Because even having Gold as part of some future monetary system will not work. For it is the system of government that will always work against it.

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  110. "Convince me how the 500 years of economic theory has stopped us from getting into this mess.”

    Simply because we have knowledge, doesn’t mean that we practice it. Anyone can fall to the wayside. Error is the natural condition of mankind. Redemption can be a path to truth. Our sins can no longer be denied.

    Religion and good economics returns us to the right path; no one said recovery is painless. Reality, how ever long delayed, reasserts itself. People, aligned with reality, are better positioned when the collective sins of their fellows strike home.

    The politically corrupted can delude us into error. Thomas Jefferson said that we need a revolution every generation.

    The US had two privately owned central banks before the FED., so American‘s opposed a central bank. The New York bankers were losing to interior banks; they agitated for a central bank and got the FED by stealth. It became a persistently corrupting, big government lobby. Progressive and interventionist ideas were a world wide trend which had big money behind them.

    "Opportunities..yes there are plenty..even you admitted to "PLANNING" ....”

    Planning is not necessarily opportunistic; my actions are defensive.

    ""Just because I dont support a Particular School doesnt imply I shut my mind to them. “

    Where we differ is that I don’t have a trader or hunter mentality. Mine is like a farmer preparing for a hard winter. I need to know what to put aside. Paper dollars will be good for starting fires.

    "After all, dont we all want to be protecting oursleves and everything we worked so hard for ? “

    People get caught up when they have no grasp for what events mean, People in paper gold don’t know that it must collapse.

    "The Game" didnt start with the Bank Of London in 1600's...it can be traced back through civilization. The Roman Empire is a classical example.”

    Geez, Rome is irrelevant. Besides, the Eastern Roman empire survived for a millennia after Rome fell.

    "You still ignore / cannot admit that your survival is not the result of good management on your part. “

    No, I lost it all after the hyperinflation of ‘79 did not appear. My marriage and health failed. I spent a decade sick and emerged poor. I rebuilt.

    "The so called future is what we can plan for and YES I am acutely aware of what lies ahead. This doesnt imply that I am necessarily correct in my foresight..I'll be the first to admit that. But as long as the Fed Reserve exists and the USD is the world's reserve currency I will plan accordingly.”

    Okay, we all have our path up fool’s hill -- been there, done that.

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  111. We agree on how corrupt our financial system is.

    “Have strongly held the view that banks have a keen interest... that fiat money survives. “

    That’s their intent. But, can they pull it off without returning to a gold backed currency?

    I’m torn between two concepts. First, that the central bankers are trying in foist an International currency on us. A hyper inflation in the US can help this. The EU has the Euro which could be expanded.

    And two, that the central bankers are fallible; they can make mistakes out of arrogance. Their Keynesian ideology might fail them. They can forget that currencies must be accepted by the public. If the CB’s make the pain too high, then the public will turn elsewhere.

    “We mere mortals simply flee to Gold ... This in itself perpetuates another bubble. “

    Yes, we must return to stocks and Real Estate when gold is over valued. But, many issues must be settled first.

    
“I see a time in the not too distant future when liabilities will be settled in gold and other precious metals.”

    Most liabilities will just evaporate because they were not connected to anything real. The international derivatives market is traded paper many times the value of everything on earth. It will just pop.



    “I also have a theory that certain Asian Nations are accumulating in large quantities, not only PM's, but also base metals and other commodities, in lieu of holding fiat currencies.”

    Another says that the reason that the gold for oil game of the 80s ended was because the Asians interfered. The PMs and raw materials which the oil cartel, India and China have acquired will greatly increase their net worth above the West. The question is whether the West will fight that decline. If so, this demands a political and economic sea change from us toward wealth creation.



    “Unfortunately Gold will not be the savior. Because even having Gold as part of some future monetary system will not work. For it is the system of government that will always work against it.”

    Of course, the governments will act against Gold, but that is why we need smaller, less intrusive, government. The polls say that the US public wants it, but they are corrupted by government handouts. The handouts will end in the coming, deflationary or hyper inflationary, debacle.

    We need to separate the economy from the state; the New Deal must end. This means an end to central banks and fiat money. Progressivism and interventionism must be repudiated, it’s institutions destroyed. The economy won’t recover without that.

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If you have a question or a private comment, do feel free to e-mail me at my address expat229@gmail.com.

GL