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Albert Edwards: At 500% Net Liabilities To GDP, It Is Too Late To Prevent The Collapse Of The G-7; Greece Is Irrelevant, We Are All Now Insolvent
For Greece, with on and off balance sheet liabilities at over 800%, it's game over. For the Eurozone, with the same ratio at about 500%, it is also game over. For the US, at 500%+, it is, you guessed it (sorry Joseph Stiglitz), game over, but since we have the printers, it will simply take a little longer. Following up on yesterday's popular post on prevailing delusions as captured by Albert Edwards' colleague Dylan Grice, we present Albert's latest outlook. Please don't read this if you want to keep believing there is any hope left for the (developed) world.
But first some aeral photography from Dylan Grice, indicating just how far the US government is willing to go to get the population stoked about owning fixed (shouldn't it be called broken really?) income. With British QE over, and the country still to implement the same criminal annuitizing of 401(k)s that Uncle Sam is contempltating in order to make "Buy Bonds" a "voluntary" option one can't really decline, maybe letters on modern architecture building blocks is all that would works. As Edwards says: "I'm not sure leaving man-sized building blocks around the City of London is really going to make an awful lot of difference, but I suppose when your public sector deficit is around 13% of GDP, every little bit helps!"
So back to Greece, the Eurozone, and policy response in general, Edwards places the causes (and "solutions") of the escalating problem precisely where it belongs: at the core of the Keynesian systemic outlook flaw.
A major divergence of views in the market at the moment concerns what governments should be doing with their outsized fiscal deficits. Economists seem to be polarised between those who think governments should be rapidly cutting fiscal deficits to avoid impending insolvency and/or a surge in bond yields, and those who believe this will be totally counterproductive and that deficits should stay very large. Behind this controversy probably lies the key to the economic outlook.
To Edwards, and to ever more hedge fund investors judging by the jump back in Greece Bund spreads which just broke the most recent technical resistance level of 300 bps, Greece is nothing more than Russia and LTCM (or Bear Stearns as the case may be).
The situation in Greece following hard on the heels of similar solvency issues in Dubai feels to me very much like the Russian default and LTCM blow-up in 1998. For the blow-ups that year were a direct follow-on from the Asian crisis a year earlier a different chapter in the same book. There will be more crises to follow Greece, both inside and outside of the eurozone.
The outcome of broken Keynesian policy (by definition) will be ugly, and will destroy the eurozone. We said it some time ago, and SocGen has now also confirmed this bearish perspective.
My own view of developments, for what it is worth, is that any "help" given to Greece merely delays the inevitable break-up of the eurozone. But, for me, the problem is not the size of the government deficit and the solvency or otherwise of the governments in the PIGS (Portugal, Ireland, Greece and Spain - we deliberately exclude Italy).
The problem for the PIGS is that years of inappropriately low interest rates resulted in overheating and rapid inflation, even though interest rates might well have been appropriate for the eurozone as a whole. Rapid inflation has led to overvalued bilateral real exchange rates (they do still notionally exist) for the PIGS and in most cases yawning double-digit current account deficits. With most trade done with other eurozone countries, the root problem for the PIGS is lack of competitiveness within the eurozone – an inevitable consequence of the one size fits all interest rate policy. Even if the PIGS governments could slash their fiscal deficits, as Ireland is attempting, to maintain credibility with the markets in the short term, the lack of competitiveness within the eurozone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Hence the PIGS public sector deficit will inevitably remain large as a direct consequence of this weak growth outlook.
As noted earlier on Zero Hedge, in Europe the population is a little less brainwashed by the moronic happenings on prime time TV, so while in America the destruction of the economic system, as trillions are transferred to the kleptocracy which knows fully well the end game is nigh, results in some sighs of desperation at best, in Europe the outcome will be somewhat more violent.
In my opinion this will not be tolerated by the electorates in these countries. Unlike Japan or the US, Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain. Consigning the PIGS to a prolonged period of deflation is most likely to impose too severe a test on these nations. And the political "consensus" within the PIGS to remain in the eurozone could falter in the face of another of Europe's unfortunate tendencies -the emergence of small extreme parties to take advantage of any unrest. My own view is that there is little "help" that can be offered by the other eurozone nations other than temporary confidence-giving "sticking plasters" before the ultimate denouement: the break-up of the eurozone.
And in case you were wondering why all European leaders are powerless to provide a bailout proposal that actually has a snowball's chance in hell of doing something/anything to help Greece, read on. Alternatively, if you want to find out why any plan suggested on Monday will be thoroughly useless and once digested by the market will cause another major crash, read on as well.
The pressure to tighten fiscal policy from current nose-bleed levels of deficits is not just an issue for crisis hit Greece. It is an issue for virtually all economies. It is a particular issue for the US and UK with structural (cyclically adjusted) general government deficits of almost 10% of GDP (according to the OECD)! There is a ferocious debate ongoing between those who believe there needs to be a rapid reduction in these deficits to avoid some combination of insolvency/default/rapid inflation and those who believe that there should be even more fiscal stimulus. The debate is loud and opinions are tending to be polarised.
My own view on this is that obviously we should never have got into this wholly avoidable mess in the first place. But having got here, there really is no way out that does not trigger a major market-moving upheaval. Ultimately economic prosperity over the past decade has been a sham: a totally unsustainable Ponzi scheme built on a mountain of private sector debt.GDP has simply been brought forward from the future and now it's payback time. The trouble is that, as the private sector debt unwinds, there is no political appetite to allow GDP to decline to its "correct" level as this would involve a depression. So burgeoning public sector deficits and Quantitative Easing are required to maintain the fig-leaf of continued prosperity.
And here is the topic that will dominate over all pundit round table discussions in the next weeks: the entire world is insolvent, although some are more insolvent than others. Greek total net liabilities (on and off balance sheet) to GDP are 800%! EU: at 470%, the US, at over 500%. There is no way out but default.
Edwards' poignant summation.
I am persuaded by my colleague Dylan Grice's analysis that, including unfunded liabilities, most governments are already insolvent with debt to GDP ratios closer to 500% of GDP instead of around 100% for most G7 countries . It is too late.
Nor were Dylan and I persuaded by recent comments from Nobel Prize Winner Joseph Stiglitz that it is absurd to suggest that the US and UK governments might default on their debts as they could just print money. Indeed. But a client pointed out to us that Weimar Germany did not default on its debts during its hyper-inflation. How reassuring!
I am persuaded though by Richard Koo's book about the lessons from Japan's balance sheet recession. The crux of his analysis is that governments have no option but to stimulate aggressively all the while the private sector is de-leveraging. ANY attempt at fiscal cuts simply results in renewed recession and a further loss of confidence, thus making it even harder and more costly to sustain any subsequent recovery - and hence the budget deficit ends up bigger than before (e.g. see chart below). This is exactly the outcome I expect.
The take home is very, very simple: we can delude ourselves that the game can be won (it can't), or we can prepare for the imminent collapse when delusion finally fails.
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The next shoe to drop? China's Move to Curb Inflation: Good News for the Mainland, BAD NEWS for U.S., Strategist Says
We are the last canary, and the biggest domino. But given the magic of our reserve currency, our 'downgrade' will only occur within the context of the world being downgraded first.
http://anonymousmonetarist.blogspot.com/2010/02/beware-trojan-hoax.html
A wonderful post, as always AM.
Beautiful:
I was talking with someone yesterday and apparently there's a lot of hot fuss about something with American Idol (Howard Stern is becoming a judge or something). The fact that this kind of stuff dominates what Americans are talking about rather than an unfolding crisis of epic proportions crystalizes, for me, why the US is here in the first place and why 95% of Americans won't be forceful over radical federal change until store shelves clear out or their bank accounts become inaccessible, whichever comes first--but no earlier.
+1000, Well said.
When the majority of the electorate is uneducated, illiterate and only interested in voting for people that will get them a handout you know why crap like American Idol is popular and why this country is in a death spiral.
Kinda makes ya all warm and fuzzy at the thought of that whole "trial by peers" business, doesn't it?
More self serving ramblings from a servant of the banks - take a haircut baby and then come back to us with pious wisdom.
dupe
The last thing anyone familiar with Edwards work would call him is a "servant of the banks".
If you read him on a regular basis you would know that he is wisdom personified.
When I see the bondholders getting decapitated on his agenda , then I will listen.
Who pays his wages Lizzy ?
Another nitwit heard from
The same folks who ultimately write every check that is currently honored.
Can you explain more how the issues are linked because when I look at the numbers involved with the sovereign issuers, I don't see how any "haircut" to bank bondholders is going to make much of a difference. What will it do, drop the Liabilities to GDP ratio down to 400%? 300%? I mean, those are still "insolvency" level numbers.
Something from nothing is still nothing, unless folks can be convinced that the other persons nothing is something more than their nothing....
The shadow banking system is many times greater then the sovereign bond markets.
Indeed bank bonds exceed government debt in "open economies" such as Ireland and Spain.
Even if the bank bond capital is less then government bonds the revenue extracted can be greater because of the "risk" nature of these instruments.
Rather then fiscal investments these instruments rarely increase the productive output of these economies unless you consider revenue from increasing debts as productive.
The Irish economy's output is now chiefly concerned with servicing these debt instruments - government debt is now mainly used to patch up the casualties of this policey and as the casualties are increasing so goes government debt.
The method of Tax is the Mortgage of course and this burden mainly falls on the most productive elements in society.
Zero hedge recently reported that the UK had $190 billion exposure to Ireland of which a large measure are Bank Bonds.
The system of course is breaking but the obscene solution is to reduce fiscal spending which will reduce the productivity of the economy while these vehicles which were chiefly responsible for the catastrophic over investment escape unscathed from this battlefield of ideas.
Below are some interesting graphs and figures for Ireland's external debt - these figures are distorted somewhat by the presence of hedge funds in this jurisdiction but this does not explain the full story , notice the minuscule size of government debt relative to everything else.
And yet these economists say we are facing imminent hyperinflation or sovereign default if we do not cut fiscal spending - I say take a haircut in your flawed investments which created this crisis before you can lecture citizens of proud western democracies about fiscal rectitude.
PDF]
External Debt.vp File Format:OK, so would the content of that "lecture" about fiscal rectitude change after said haircuts? Again, it seems as if the Net Liabilities to GDP ratio would still place the Western countries in the realm of insolvent, even after subtracting whatever liabilities were owed to banks. If you've done the math and reached a different conclusion, that's fine, but as it is I don't see the fact that this guy works for a bank as undermining his message, since the analysis is sound. I guess if I'm going to be told I'm a sinner, it's nice if the guy telling me isn't one also, but even if he is, if he's right, he's right.
I am sure that the ratio of assets to liabilities would remain the same in the short term but by subsidising these ridiculous investments we promote massive distortions in the capital markets that lead to such ridiculous phonomena as the pouring of mass concrete all over the edge of the Mediterranean basin in order for northern Europeans to have their place in the sun for a few weeks in the year.
And I am sure Mr Edwards is a nice guy but forgive me if I sound just a tad pissed off.
REPENT ALBERT REPENT and save your immortal soul.
Should we just short everything and wait for the inevitable collapse of the system/economy?
Buy a Farm , and move to it!
Both Biggs and Rogers are recommending it....
Read Karl Marx first!
What is now happening in Europe has nothing in common with the Karl Marx theory. Nothing. You laying blame on socialism is pointless as you have never read a single line of Karl Marks books.
Nobody should ever read Karl Marx.
He was a rotten spoiled brat who got everything handed on a golden platter with a silver spoon. He was bored and couldn't hold a job.
So there you go, that's Kar Marx for you.
A guy that should have been kicked in the ass and pounded some sense into him.
Marx was actually quite a good critic of capitalism. His prescriptions for a non-caplitalist society, on the other hand, were completely bonkers. But, by all means, don't read him. Go find a marxist, kick him in the ass, and pound some sense into him.
Jawohl, Herr Walkure!!
http://en.wiktionary.org/wiki/File:De-Jawohl.ogg
And many of the rich/elite, who are still humans beings and fully capable of being just as clueless as the lower classes at which they scoff, are being consulted to do the same - anyone paying attention knows the popsicle stand can't hand out freebies forever. The unprepared will simply take the full-force blow from the collapse - which simply means death.
The elite are preparing for war, plain and simple, and are getting ready to hunker down:
Chris Hedges: Zero Point of Systemic Collapse
We stand on the cusp of one of humanity’s most dangerous moments.
Aleksandr Herzen, speaking a century ago to a group of anarchists about how to overthrow the czar, reminded his listeners that it was not their job to save a dying system but to replace it: “We think we are the doctors. We are the disease.” All resistance must recognize that the body politic and global capitalism are dead. We should stop wasting energy trying to reform or appeal to it. This does not mean the end of resistance, but it does mean very different forms of resistance. It means turning our energies toward building sustainable communities to weather the coming crisis, since we will be unable to survive and resist without a cooperative effort...
[...]
We stand on the cusp of one of the bleakest periods in human history when the bright lights of a civilization blink out and we will descend for decades, if not centuries, into barbarity. The elites have successfully convinced us that we no longer have the capacity to understand the revealed truths presented before us or to fight back against the chaos caused by economic and environmental catastrophe. As long as the mass of bewildered and frightened people, fed images that permit them to perpetually hallucinate, exist in this state of barbarism, they may periodically strike out with a blind fury against increased state repression, widespread poverty and food shortages. But they will lack the ability and self-confidence to challenge in big and small ways the structures of control. The fantasy of widespread popular revolts and mass movements breaking the hegemony of the corporate state is just that – a fantasy.
+1
I do feel that even the most pragmatic plans for national salvation are dust in the wind at this point.
This is a proof that everything is rotten.
How can you make a buck when everything is collapsing?
How much value has those money made through destruction?
You have all the time to ask yourself this question before you short all as you said.
Pretty much. You have to have a place to live.
....back to the caves, bitches.
Curious as to the real opinions (and even typical sarcasam) from ZHers on what to do if this scenerio is true. What does play out if most major governments are bankrupt and the ponzi scheme collapses?
we wake up and everyone that actual does real work still does it and all the shammers move on to normal crime
+1
Unforunately, I don't think they go gracefully. When economic policy doesn't work it's who has the biggest stick and the fight begins...
The fact remains that the stick in world society is actually wielded by those drawn from society, not by the money. Here is the crux of the current situation. The money owns just about everything, the weapons and those who operate them excepted.
+1
Business as usual - the problem with history is that most humans never realize they are in it.
"...the problem with history is that most humans never realize they are in it."
A wonderful statement of fact. The incredibly narcissistic capacity of the average Joe (and of course those above and below average) to believe that they (and often they alone) are above the fray, are better, smarter, more aware, new and improved, not tainted by past mistakes made by lessor peons who were either misguided or just plain stupid, is both humanities greatest asset and its ultimate self destructive tendency.
We will never progress until we accept that the truth begins within. Man spends incalculable energy avoiding this realization and will do anything, regardless of how absurd, to avoid looking within. Because we're rushing headlong into the night, away from ourselves, we are always and forever open to and available for manipulation and exploitation. The easiest and most profitable prey for the con man is the dishonest person and the ultimate dishonest person is one who isn't honest with himself.
...which points out the exquisite irony that it is often the con man who is the only one being honest with himself.
Nothing but net!
http://www.youtube.com/watch?v=2xAJVri2a1U
a con man is not being honest with himself. because the stress of staying ahead of the con (being found out) outweighs any pleasure derived from the con. the trouble is most people have become con men by degree because of the system and so have rarely experienced the joys of a win/win transaction.
CD you just became one of my heroes. There is an inner world, or another side of us that most will never see , as their ATTENTION is always on the outer world with little awareness of the thoughts in their own mind. Seems most folk are merely human responding to the desires of the mind.
There is so much to learn , yet most do not wish to learn. Fear/Ego have been the biggest obstacles in my adventure in self awareness.
The other is a total lack of support from society. Everyone wants to remain a believer whilst i think we should all truly KNOW from experience. My present life reflects who i am.
For me life has been and is good tho i am well aware of our countries distress.
The difference , why my life is good is in the understanding of it. I really think all the suffering during my years on the road gave me the strenght to overcome the human aspect.
you're not alone mate. more and more people are becoming aware of the inner reality.
Until enough of them actually do realize that they are in history. After all, most of those that have previously faced their own mortality can see similar threats much more clearly having been there.
Not if gas cost $25/gallon available every other day to get to your "real" job. At the grocery store, a can of soup is $10., hamburger is $30/lb and you have to wait in line to get let into the store. Plus, those on social security, disability payments, retirement, welfare, unemployment, etc... are starving or rioting in the streets when the checks stop.
There is no "normal" in hyperinflations or deflationary depressions. When your local McDonalds closes, you will know life has changed.
The number of people in the United States and the Eurozone who depend either wholly or partially on transfer payments from their government in order to even live is gigantic. Now either deflationary default or a hyperinflationary collapse both ultimately end the same way - those who receive transfer payments will no longer receive "enough" to enable them to live.
Now I suggest you look at the French riots not so long ago, or look at riots in the US over a single city winning a basketball championship and do your math. When the transfer payment recipients can no longer buy even enough food to live on, they will not go quietly into the night.
When, not if, the system collapses, I fully expect the vast majority of American and European cities over 500,000 population to burn. I expect vast destruction of infrastructure, purely out of rage and malice. I expect a complete collapse of the JIT food distribution system, meaning those supermarkets that have just 5 days or so of food on the shelves will rapidly be empty, just like before a hurricane or a blizzard. But this time when they empty, they will remain empty for months or years.
The United States stopped storing grain years ago. The United States does not possess the food stores today to withstand even a single year's crop failures. What do you think is going to happen when the economy comes to a complete standstill and the dollar and every other fiat currency is worthless? During Katrina, firemen and policemen abandoned their stations to protect their own families. Do you expect civil order to be maintained by people who are being paid in worthless scrip while their families remain in harm's way? I certainly don't expect that.
Something will arise from the ashes, but first there will be ashes, lots and lots of ashes. And anyone who thinks that the end of this game has some "playable" financial angle is completely delusional. While you and I can play the game as it is in progress, your ultimate goal must be to have a physical place of retreat, a support group who thinks the same way you do, and the resources, supplies, defensive structures, and weapons to ride out a social collapse.
Imagine Somalia on global scale, at least for several months, if not for a few years. Then plan accordingly. Yes, literally people like Biggs and Rogers are advising clients to prepare for a mini-Dark Ages. That is really what the end of this entire Ponzi scheme will mean. And it won't be until we reach that end that the fools like Stiglitz will finally be thrown out and ignored.
How F'd up is it that I agree with you but anyone I know who I say things much milder than this to looks at me like I'm insane?
Maybe you need a image consultant ,that paper bag on your head does nothing for your gravitas
That is the way we see it Greyzone and we are almost finished preparing for it.
Farms
Gold
Guns
Training
Food
Sustainability
Best...
post...
ever.
Also, who will stay to guard the millions of federal, state, and local prisoners in our vast nationwide network of penitentiaries?
Look, I respect your opinion, I just don't see things happening that way.
The government and other powers know that if they let things slip that far, their jig is up. In addition, they have stealh bombers, and a big army that is trained to kill whoever they say.
Our society will not degenerate that far, and if it did, there isn't much that the people will be able to do about it. We'll be shot dead before we fire our second shot.
I just don't see that kind of end game transpiring in the first place. If it did, it's not like there's much we can do anyway.
The Government and other powers already have a bug out plan
and are essentially stateless.
Remember that without real money, no bombers, no armies.
read "Emergency" by Neil Strauss for detailed real data
on what the "elites" will do when the SHTF
That's a good book...to go further toward the primary source of that info, research the "Perpetual Traveler" phenomenon. Some texts: Harry Schultz and Bill Hill (”Perpetual Traveler” by W.G. Hill, aka The Red Book); Harry Browne “How I Found Freedom in an Unfree World”; “Bye Bye Big Brother” by Grandpa et al (aka The Black Book).
For those of us who haven't read it, anyone that has care to give the gist? Thanks in advance.
The Billionaires\multi-millionaires interviewed by Strauss, all have
acquired dual citizenships and bugout bags.
When the shtf, they are off to little island nations.
Some of them have built extensive compounds here in the
US and hired private security forces to guard them
Then there are quite a few folks like myself, worth 5
million or less, who have acquired 10 to 100 acre farms,
in sparsley located areas and equipped them to be as
self sufficient as possible. 100 percent self sufficient
on a two year time frame. Our goal is to hide, but if
discovered, have the capabilty, eq, skills and training to
defend against an attacking force....
I agree with both points - comes down to this point...
This is a war to control 299 million American taxpayers.
http://www.marketwatch.com/story/how-to-invest-for-the-debt-bomb-explosi...
And obviously....its just not Americans but the whole shooting match!
Totally radical man, let's all live off the grid, smoke weed, and farm all day, man. Grow up, wake up, stopping drinking the tin-foil kool-aid.
Someone's been watching too much Apocalypse Now...
And someone hasn't watched it ENOUGH....Actually about 200 million havent, and will be like deer in the headlights when the shytt goes down.
At least I will have plenty of donuts and weed.
Anarchy, resemblance to dark ages, people forming groups, gangs or cults whatever to organize together. Humans have herd mentality.
Just read a history book. We've been here before probably many times. Civilizations come and they pass. Why should we be excluded from what the Egyptians, the Romans, the Greeks and whoever else had to endure.
It's human nature for the most part. The systems we create only work as long as the deception holds up.
That's pessimistic. Systems can hold up. They just need to be built and maintained.
So what does that mean for asset prices within the eurozone...france say?
It depends. If the money that they print actually makes it into the economy, inflation.
If not, deflation.
It's like the situation we have now. All the QE isn't making it into the economy and we're stuck between deflating and inflating at less than normal.
Sort of. I don't think we are experiencing inflation and deflation because money isn't entering the system I think it is because money exists in the hands of fewer people making for greater volatility as each entity with larger pieces of the money pie get to the move the market with greater force.
So in short we will experience both inflation in some things and deflation in other things until the all the mony in foriegn countries hits the US market or foriegn countries stop exporting to us. Another way to cause inflation is reduce the supply of goods and services.
Right on, Burnbright. So few seem to understand that such is the nature of stagflation. Areas that experienced inordinate growth in the gross amount of monetary aggregates allocated to them will suffer price depreciation, whereas central bank reactionary policy will drive real capital to those sectors NOT formerly inflated by easy money. As such, we suffer deflation in things we once financed and inflation in everything else. Given the direction of most credit flows over the last 30 years, autos, luxury goods, homes, and most consumer durables are likely to depreciate in price, whereas food and other raw materials subject to relatively-inelastic demand are likely to appreciate. PMs behave based upon their own quasi-currency characteristics, often rising as fiat currencies draw universal doubt.
ahhh I have never heard anyone explain stagflation to me so thanks for clarifying that for me.
It is a strange monster is it not?
As the fog of losses suffered around the periphery of the "great recession" gets burned away by the harsh sunlight of sovereign & systemic limitations.
http://news.goldseek.com/PeterCooper/1265899248.php
Dubai Proposes Gold Coins As Legal Tender In The UAE
There's nothing like a site called "goldseek" to give us unbiased news about gold! GOLD bitchez!
hahahah I like silver but even I see news at those sites for what they are.
Why, you must mean completely unbiased pieces of journalism. The MSM just lies to me, so now I have sites like goldseek to tell me the truth. I've been thinking about a gold tin foil hat to be the envy of my friends.
On a side note, be careful for a couple of weeks buying silver! SLV has a treacherous chart right now! Probably beginning of March the correction should work itself out.
You must be deeply insecure that the goldbugs are right, Master. The lady doth protest far too much.
It's easy to just go see a bullion dealer, you know. Maybe you'd be less fearful for your stocks and bonds after you did that.
Jim Sinclair’s Commentary
I agree.
Gold price will surge to $5,000 in two years
Published on February 12, 2010 06:55:00 IST
Gold Prices will climb to $5,000 within two years due to US dollar weakness and significant buying by players in the hedge fund industry looking to preserve the value of their funds.
oh thats who jim sinclair is, a goldie.
he understands gold .. is more than a goldie ,, has written books ,, has operated trading houses on both continents,, selected by volker to unwind hunts silver deal
called for 890 gold in 1973 sold gold at 880 in 1980
called the exact bottom of gold 260 ,, a business man . started in the market at age 16,
http://jsmineset.com/
you might pay some attention ,, of course using goldie terms as a way of showing your misunderstanding ,,
his site is filled with more than gold ,, it is a commentary of our economic condition ,
IMF explicitly forbids any asset-backed currency.
I guess they could do it, but they'd be on their own.
Honestly, Dubai can just go fuck itself.
The sky is falling. Buy canned hamz, creamed corn, and wear your tin foil hat to Rosland Capital to buy GOLD bitchez!!!
Dollar to zero tomorrow, gold to 6000 by summer, and riots and havoc in the streets!
stocks gong back up!
Fiscal and monetary policy have become irrelevant. Deflation spiral, here we come.
How can you say that? It's going to be hyperinflation, Zimbabwe style!
Why, there's no difference between Zimbabwe and the United States! I've been wearing my tin foil hat to buy physical gold for a few months now, ever since gold got to its peak and I decided it would double from the peak.
Inflation, bitchez! Gold bitchez!
Minsky, bitchez!
I never read about him before, but I did just now.
Apparently overleverage in asset bubbles causes deflation.
But what am I going to do with all this gold when the price goes down?
Gee I don't know. Nobodies ever done anything with gold. I bet it would make nice jewelry though. But then the value of it goes up. It's wierd having a currency that you can add value to it with labor. I think we should all start doing dollar oragami and make all our currencies go up to the next denomination.
http://www.lisashea.com/japan/origami/index.html
Here make an origami shirt so you can tell people that dollars are more valuable because they can clothe you.
i think that is amazing, gifted friggin fingers.
You're going to play with it when you have time between shoving next load of paper dollars to your marble fireplace for heating purposes and preparning van load of them to buy bread. At night you'll have time to think what to do next to improve your anyway very high investing skills and build your immense wealth.
You're going to play with it when you have time between shoving next load of paper dollars to your marble fireplace for heating purposes and preparning van load of them to buy bread. At night you'll have time to think what to do next to improve your anyway very high investing skills and build your immense wealth.
as per your comment you own none .. so why ask the question .
just live and learn ,, and what makes you think it will go down .. all your 25 years of experience ,
pure mouth rattleing
There is fuck all fiscal spending in these turd economies - all that bank created debt is bringing everything crashing down.
Read your Minsky IKEA there is only one solution for the west - inflation is inevitable so we might as well do something productive NOW - massive government spending on new less oil dependent infrastructure is the only solution as the revenue and wages from such endeavors may overpower the loss in spending power from inflation.
Love these feel good stories in the morning! TGIF! Can we get an analysis of the developing world so us rats deserting the ships know where is the best place to run? I also enjoy that Spain on that chart doesn't look quite as bad as I expected, good on them.
gonna have to mix up an even stronger batch of kool-aid for the masses...
thank God the only ones who are really freaking out are the few of us who haunt these kind of blogs...imagine if this were to go mainstream!
If it went mainstream it would be met with denial, ridicule, and suggestions of naive solutions (like just spending less will fix it Until the day the extend and pretend ends.
See Master Bate's posts for a point in case.
Actually, as Reinhart & Rogoff demonstrate, over the last 700 years, Greece today (and eventually everyone else) is nothing more than every other country in the world. Since market players know exactly how this is going to play out, there is plenty of money to be made by those who understand basic economics.
Serial Default 1350–2006
When one looks carefully, virtually all countries have defaulted at least once and
many several times ...
The Early External Defaults: Europe, 1300–1799
Austria 1796
England 1340, 1472, 1594
France 1558, 1624, 1648, 1661, 1701, 1715, 1770, 1788
Germany (Prussia) 1683
Portugal 1560
Spain 1557, 1575, 1596, 1607, 1627, 1647
Source:
This Time is Different: A Panoramic View of Eight Centuries of
Financial Crises
Carmen M. Reinhart, University of Maryland and NBER
Kenneth S. Rogoff, Harvard University and NBER
Terrible comparison. All of these defaults were on the gold standard and it is very easy to experience a default on the gold standard. With a non convertible currency and one where the sovereign borrows in its own currency, there can never be a default. A shrinking in the value of the currency a possibility, but not default.
Then roll it back to Rome as your model. They coin clipped and eventually debased their silver coins till there was basically no silver in them. Got so bad that the barbarians were welcomed in some places as liberators from the crazy fiscal, monetary, and ruling decision coming out of Rome.
The Roman debasement was the result of the high cost of policing the territory, constant incursions by barbarian and other powers with the eventual loss of gold mines. In addition with over time, The general population was less and less Roman, with many tongues , costly to police and garrison, even as the Roman system attempted to bring law and order to what was a world of Kings and small city states. States that had know hundreds of years of war and slavery.Latter during the East Byzantine era much of the destabilizing troubles were directly due to the policies of women and enuchs in power.
Wow starting to sound a lot like America. High cost of policing the world, more and more tongues spoken, costly police, military, and government employees.
But you also have to factor in the HIGH level of corruption of the Roman leadership. Also very American. Their citizens at least in Rome received subsidies food and cheap entertainment, also like America. I think Rome is a better analogy to America than most other historical examples.
beat me to it shameful
Well yes, the United States was actually founded on the same principals as Rome. That is the Farmer and the militia. On many of the same Republican ideas from SPQR. Unfortunatly , the US is also following many of the same political and ideologal traps that eventually saw the demise of the Roman world.
.
Stiglitz? ...Stiglitz? ...Stiglitz? Anyone? Anyone? LOL
How about a little Shakespeare:
"What's in a name? That which we call a default
By any other name (devaluation) would smell as sweet."
There CAN be a default under these conditions, but why bother? If you're a dictatorship, you just keep borrowing and command your people to lend. If you're a democracy, you just keep borrowing and your central bank arranges things so your people will lend. If you're the U.S. people fall over each other for the priviledge of lending to you. If all else were fail, you can print money. The Curcuitists (what a name!) currently advocate government spending via direct printing, skipping taxes and debt as an unecessary fiscal process.
The U.S. will never need to default as long as fools keep lending to it.
USA 1971.
How do I feel? Hmmm.... Words don't seem to do it for me. Let's try this.
"I love the smell of napalm in the morning."
http://www.youtube.com/watch?v=TbLv_GtQYLE
Future's So Bright I Gotta Wear Shades
http://www.youtube.com/watch?v=meRgT5Nmogw
Bombtrack
http://www.youtube.com/watch?v=1-qcVbD4dRk&feature=PlayList&p=11C262CD4B09DC30&playnext=1&playnext_from=PL&index=8
All awesome.
Monetary policy cannot address a constitutional crisis. A new constitution is required to engage those individuals capable of creating economic profit. That’s the only way to gain access to the required voltage.
The big non-profits scream for monetary expansion, while Wall Street laughs, all the way to the bank. Wall Street is currently measuring the accounting drain, economic activity created by monetary policy. At the end of the day, however, someone has to do the actual work of filling up the bathtub, and there is no point in working on the American Enterprise System, because it is consuming economic profit faster than it can be generated under the existing constitution. Tollbooth builders come and go; that’s History.
Once breeding patterns cause economic losses to exceed economic profits, an economy will discharge. The non-profits are saddled to a dying horse, trying to whip it back to its feet.
The old economic motor can’t hold that $500T in global unfounded liabilities, let alone pull it back up. Relative tax receipts will continue to decline, regardless of tax rates, social demand will continue to increase, regardless of political decrees, and monetary expansion to keep issuing the checks is running its natural course. That sucking sound is the pensions going down the drain.
It’s not just Toyota; it’s not just cars. The old technology system is crashing, because it is no longer being maintained, and the corporations can no longer afford to replace entire production lines. They have rolled out biofuel, solar, wind, and now trains, none of which can remotely pull the load, and the GE nexus has all its chips on the table.
An economy doesn’t get released until the one to follow is already on the shelf, and by the time the tollbooth builders are busy on the latest release, the economy to follow the one on the shelf is already under construction.
Wall Street can only control what it sees, and it sees very little. The universe is a big place, and getting bigger all the time. The power of the Internet is negligible compared to what is next, and the current global economy is a drop of water in the ocean.
You know there is going to be a new public education system, a new job certification system, and independent access to the communication stream, before the new motor delivers the required voltage.
DARPA is currently betting on a dying horse to die, which is fine in the short term, but it will require a transformer to realign the efforts of participants over the medium term. The guns are moving into regional banks, which you know are smaller caps with the same problems, and you know the community banks have the commercial real estate problem.
Wall Street plays both sides against the middle, and respects nothing less than a gun to the head. A government dependent on Wall Street is not going to reform it. It's a catch-22 situation. Jump the gate. The days of simple market investment are over, for now.
Tick-Tock
(oil at $65 is still the domestic tipping point, due to global contractual integration mechanisms; it’s the holding current.)
(The point of circuit analysis is decision management; life is a circuit of circuits. Some float downstream with the current, to the warm pool, where capital controls breeding, creating discharge, economic losses, through the various loads. Some swim upstream, against the current, to breed, creating economic profit, voltage potential. When discharge is excessive, some of the upstream swimmers jump the gate switch, to another stream, to begin the next economy, accelerating discharge in the old economy. That’s evolution.
Discharge is excessive, strong swimmers are jumping the gate switches, and capital is adjusting down its various potentiometers, rather than reducing discharge, the economic loss to economic profit ratio, leaving capital with no access to the emerging economies, which are producing quantum gains, unrecognizable to the old system, and expending its remaining resources trying to prime a dead pump.
When the upstream swimmers have their choice of current capital sources, the economy will right itself, and not before. If old capital wants to completely discharge itself, that’s up to old capital. Wall Street will be happy to help. The universe always provides an alternative ground.)
Interesting indeed.
Really? It reads like a rambling bunch of nonsense to me.
-1
@anonymous #228642,
We love you guy, wish you could stay, here's your hat.
We don't need a new constitution. We need to go back to following the old one... Shit in one hand, wish in the other, I know.
I can't tell you how important it is that every person that truly desires freedom needs to understand this concept. Most of the Amendments past 10 were redundant, twisted to serve centralized power, or were outright slaps to the face of Liberty. Now we don't amend at all: The mercenary lobbyists, er, Congress can do whatever it wants because the Supreme Court has, like Sarah Palin, "gone rogue", and the White House issues Executive Orders as if they were decrees.
Even if we cloned Thomas Jefferson and put him up for election he would still probably lose in our current state of affairs. It's over folks. Reset.
I guarantee Jefferson would lose. There are plenty of people now who think the founding fathers and the constitution are obsolete relics. Sad.
relatively speaking, the original constitution seems like it would be a new one if proposed today...
translation:
take the pension money before Wall Street pisses it away.
the path of induction is job certification, public education, breeding, new motor
pick any market controlled by job certification, and directly capitalize those who have actual skills that are actively bypassing the certification process, and work your way toward the motor.
you have an example analysis of the elevator market, where $200B is sitting on the table.
Wall Street has locked itself into discharge, because the finance mafia did not make a clean break from its middle class roots when it entered capital. That’s the economic demand.
Constitutional Crisis:
Embedded codicils written by GS are driving global industrial policy, on autopilot, rendering all nation/state economies subservient. The US Supreme Court was bought off a long time ago, when the “founding fathers” mythology failed, creating a permanent Congress. The younger generations are just waiting for the older generations to die off. The agency nexus has locked out small enterprises from backfilling the economy. The debt is unpayable. That is a constitutional crisis.
Big agency – public, private, and non-profit, reduces liberty, which disables science, which contracts the economy. Big agency is not the answer because big capital, big government, and big unions all reside on the same side of the fulcrum, liquidating the economy.
How to migrate from big, ineffective agency, to small effective agency is the problem. Agency is the net sum of responsibility not taken by individuals. Individuals must become self-regulatory in order to reduce the overhead of agency to bearable levels, but global populations have been specifically bred to be dependent on agency.
That’s the problem, restated, which is why bigger government is only accelerating economic discharge.
(C’mon, GW never told a lie … how stupid (stubbornly ignorant) is public education? With propaganda “education”, why would anyone expect the economy to function?
pretty damn funny.
should be interesting watching where this goes.
how many kevinearicks will there be?
as many as the variations that the DC circuit chooses to replicate itself into?
"But a client pointed out to us that Weimar Germany did not default on its debts during its hyper-inflation." Which is why the US market will probably remain "strong," whilsts the country continues to crumble.
But from the ashes, may rise a fresh Phoenix.
The next shoe to drop? China's Move to Curb Inflation: Good News for the Mainland, BAD NEWS for U.S., Strategist Says
Don't click the above link. It is an iamned link.
Don't think that Americans will sit passively by when they discover has lost over half their purchasing power in order to enrich the elite. Europeans don't have guns like we do.
Historically, isn't that what alway happens? When governments give up on economic policy it devolves into each country protecting what they have through military force and superiority.
Iraqis have lots of guns too. Much good that did them.
the war is still going on, it won't be over until they kick out the us and uk.
Why shouldn't I think that? It has been going on for 70 years and Americans have done nothing but help accelerate it. The revolutionaries and patriots are gone from America. They have killed themselves over the last 50 years. They abandoned ship when politics went mainstream (and the lying intensified), when reality TV appeared. They gave up on us and left us on our own when 70 million people voted weekly for American Idol...
all the ones i knew are dead.
The system has been insolvent, why do you think humans came up with borrowing from the future? The system was/is insolvent and has been since the beginning, it's when humans can no longer supply the equation what it demands that it starts to collapse. The battle against compounding interest is never won, the equation always wins in the end.
Mako, I love your posts because they cut right to the heart of the matter. What is occurring today has happened repeatedly throughout (recorded) history. Which is why the most important & essential reference book on the subject of economics is the Bible.
While many of the passages in the Bible are simply alliterations used to illustrate certain philosophical points, the financial mechanics are identical. It doesn't matter if it's the Old Testament Jubilee or Jesus throwing money changers out of the temple - the underlying principles are exactly the same.
And so here we sit, modern man with all of our wonderful technology, and we still can't beat death or the exponential function. That's why it's so easy to predict how this is all going to end; and no, this time is NOT different.
Damn... and there I was thinking that after what you said to me, I'd find your posts to be so enlightened.
And there it was... "Which is why the most important & essential reference book on the subject of economics is the Bible"
Yes, we must use a ficticious work to explain the nuances of modern finance.
the buddha couldn't get rid of it, he tried at every juncture throughout his life and that is why he dropped out.
" Neither a borrower nor a lender be ".
+ bring him into it to.
wisdom
Duplicate.
More delay = more time to prepare.
+OMG. Bless Ben.
+exactly
I got flagged as junk for recommending GOLD?
Why, recommendations to buy gold ARE junk. Good eye, somebody.
Wasn't me, but your sarcasm is getting about as
annoying to have to scroll through as Leo's arrogance.
Well, it's a good thing I'm on a site that welcomes opposing views!
Oh wait, there's that sarcasm again...
Gold is a bubble. Gold is going to fall. It's not an opposing view. It's a parroted view of people who don't want gold to deflate all fiat currency from it's bubble.
It's an opposing view on this site though.
So what you call a "parroted view" I call common sense and rudimentary economics. What you would call the common sense view, I call wishful thinking by the holders of an asset.
If you ask "normal" people, most will say that gold is the way to go. Most people have no idea about deflation, or currency. They just heard gold is the poo on tv, and now they're all about it.
Your shit is getting old. Too many posts, not enough information and/or insight. Think more, post less.
Maybe I should post more like you. Offer absolutely nothing at all.
Classic troll move.
it's gotten boring...mine eyes glazeth over.
Boring Bates...
Don't make me do any more Capcha's for yu.
You won't like me when I Captcha
Most normal people will get hurt and hurt bad. But they will eventually look for some way to defend themselves from it. Just because we know how to handle a currency meltdown and how to spot it and you don't doesn't mean you won't learn. I told my uncle to buy gold. He said no. It's a terrible investment. I've told everyone in my family to buy gold. None of them have. When their money market funds get locked up and turned into social security money market with super small payments maybe next time they'll listen. The point is if people won't listen to you. STOP TRYING TO FUCK THEIR EAR OFF. Everyone has the right to choose and live with the consequences.
+10
my constant problem is not appreciating the friggin momentum of the current system.
I have little doubt about the 'if', but am constantly burned by the 'when'.
Greece should have happened last year(s), so does that give USA 20 more years? days?
theory: printing presses are also time-machines?
The point is if people won't listen to you. STOP TRYING TO FUCK THEIR EAR OFF. Everyone
so you humped away ... got into every ones ear,, now you are the voice of experience ,, duh
rudimentary economics
buying a macdonalds and fries for 1.99
True...oh so true dat!
Nobody's even bothering to read what nonsense masturbatory garbage you have to write---they're just automatically punking your nasty junk comments. Asshole.