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Deep Thoughts From James Melcher Of Balestra Capital - Must Read
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"we think that the unknowns are
looking pretty grim"
Those knowns aren't a bed of roses either!
There is only one thing to read about Japan and their economic crises:
Tokyo Underworld - Chapter 7 by Robert Whiting:
http://books.google.com/books?id=XZgm8E3cWR8C&lpg=PP1&ots=vPPfkVcnbr&dq=...
--Crack_Smoke_Republican
--CrackSmokeRepublican
Destroy the Jewish Fed to live Free...
How is "Destroy the Jewish Fed to live Free..." approved for posting by an anonymous poster, or consistent with this site's policies?
But thanks for having a signature that effectively transmits the message "what I just posted is a bunch of shit because I'm a conspiracy-theory prone hateful dumbass." It does save time.
Someday the Jews Sh*ts will remember their scamming days in the USA fondly... after they go to their Talmudic usurious Hell... Idiot Jew Dumbass
"Chinese stimulus money has been leaking from the government/bank/corporate pipeline into speculative investing in equities, real estate, and commodities."
Sounds like the explanation I gave my landlord 40 years ago when my "unauthorized" water bed flooded my downstairs neighbor.
Ah, the water bed. They always made a drunken lay much more interesting.
Great read.
I would take it he's not the guy getting his clients into AMZN today.
The normal clearing function of recessions was aborted by an over-reactive monetary intervention in every case, while fiscal irresponsibility at all levels of government mounted unimpeded
Which is precisely why central banking must be dismantled. Central banks are the handmaidens of the welfare/warfare state, enabling this very fiscal irresponsibility to grow and grow until the ultimate correction it is big enough to destroy everything.
Exactamundo. Some historical data points to consider to support your contention:
* 1694 - Creation of the Bank of England 6 years after the Glorious Revolution in 1688. Crazy conspiracy buffs think there's a Jesuit/Jewish link, but it's actually much simpler: the GR wasn't about Catholics vs Protestants, rather it was a dispute between Parlimentarians (democrats) and the monarchy.
* 1832 - Reform Act introduced wide-ranging changes to the electoral system in the UK (democratization). Peel Act of 1844 formalized BofE's central banking monopolistic protections.
* 1893 & 1907 - Widespread financial panics drove the conclusion that a "sensible system" must be installed in order to "protect" the People from financial calamity. Federal Reserve Act passed in 1913.
In all cases, the rationale for central banking is perfectly logical. Smooth, inter-bank transactions (checks), uniform currency (bills & notes), etc.
But problems always arise because man himself is fallible. We are only 500k years out of the trees; 10k from any kind of communal living. The drive for safety & comfort is second only to sex and food, even if it's an illusion based on inflationary expansion.
The bankers know and understand all about the human condition. They're smart; it's why they scored 1600 on their SATs. While normally smart people were studying calculus in college, they had already passed all their APs and were busy studying history (liberal arts).
By the time average smart guys have figured out what the hell is going on, the bankers have already made a bundle selling that sweet drug of inflation. The politicos get elected not through devious means, but by the clamoring of their consituents for more "spice".
Once addicted, a society can never break free until it dies. We are locked into this ride until the whole shabang comes crashing down. Maybe USA 2.0 can avoid some of our mistakes.
BKniner, great points. The is no way a room full of self-important academic blowhards, basing their theories on our short financial history, can stop the coming tidal wave of defaults.
Of course they know it, but like a successful surgeon, it's nothing really personal. They try their best, but if it fails anyway, well, at least they gave it the old college try, no? It's not like they just walked on by without offering any assistance.
It's why an MD will refer a family member in need of medical care to another practitioner. Unlike what is portrayed on TV, doctors dispassionately view patients as a piece of meat. It's all about delivering care in a competent, professional manner. If they ever saw you as a "person", they simply couldn't deal with the emotional baggage. Shit, people die in the thousands each day, day after day after day.
So that's where Ben is at; he knows the score. Gotta put up good appearances, however. The MSM acts like a hospice center, readily assuring the dying with a "There, there, everything will be ok. Would you like another shot of morphine to ease the pain?"
Both Denninger & Mish are regular, smart guys. But unlike Claude Rains, they really are surprised at what they've discovered. I guess that's why Midwesterners are so readily mocked - they really seem to have swallowed the whole "we're #1 bunkum".
The US was a great idea. Fresh new continent, diligent hard workers, legal framework crafted by philosophers. Too bad it started decaying the moment it was ratified - the smart guys immediately begin to work the system.
I mean, who wants to sweat & struggle when it's so much easier to corrupt & addict stupid 'Mericans?
Great analogy but you just ruined the next season of Grey’s Anatomy for me.
bagavad ghita mahabarata epic of gilgamesh we've been out of the trees quite a bit longer than 10,000 years, even if we've periodically been driven back by collapse.
Your examples are 5,000 years old tops. Hell the Ghita is what, 3,000 years old max?
He stated 500,000 years out of the trees, 10,000 since communal living was started.
won't repeat mistakes?!? Clearly NOT a Battlestar Gallatica re-make fan. Thats ALL we do. Over and over and over again. (See your history timeline).
Not sex and food, I'd go with the thesis on "Territorial Imperative" Robert Ardrey. Territory...why do you think the land grab with the housing bubble had such an appeal.
"We were not foolish enough to try to make a currency [backed by] gold of which we had none, but for every mark that was issued we required the equivalent of a mark's worth of work done or goods produced. . . .we laugh at the time our national financiers held the view that the value of a currency is regulated by the gold and securities lying in the vaults of a state bank."
- Adolf Hitler
The question remains, are central banks formed to smooth the waters of their nations’ economies or are central banks formed to benefit their organizers? It is clear it's the latter: the Wall Street financial class works together to transfer public money to itself. Therefore, I must take exception to your statement regarding “conspiracy.”
When men work together to form an alliance, i.e., a Cabal, the dictionary defines it as “A conspiratorial group of plotters or intriguers.” The same secrecy that surrounded the men meeting on Jekyll Island to centralize control over America’s financial resources in a central bank power, the Federal Reserve System, also surrounded the Cabal that met in Mercer’s Chapel in London to form the Bank of England—the world’s first central bank.
The circular distributed to subscribers to the Bank of England's initial stock offering explained the nature of a central bank: “Paterson hath benefit of interest on all the moneys which it, the Bank, creates out of nothing.” (William Paterson, the organizer and spokesman of the group, however did not benefit, according to Carroll Quigley in Tragedy and Hope; he withdrew from the Bank in a few months over a policy disagreement.)
In the Bank’s first official act, as Fed historian G. Edward Griffin has pointed out, “can be seen the grand pretense that has characterized all those that followed. The Bank pretended to make a loan but what it really did was to manufacture the money for the government’s use… By creating money through the banking system, however, the process became mystifying to the general public. The newly created bills and notes were indistinguishable from those previously backed by coin, and the public was none the wiser.” In short, it became a hidden, politically safe, money machine, not understood by the people.
It wasn’t until1833 that the Bank of England fully developed as a central bank when legal tender status was conferred upon the bank’s money--“paper money decreed legal tender, not backed by gold or silver” (The American Heritage Dictionary)—fiat money, requiring everyone to accept it in commerce.
In short, then as now, the actual plan of these monetary scientists is to control the levers of finance to their own benefit, newly creating bank notes out of thin air since there are not enough private savers or taxpayers willing to finance their deficits, derivative schemes, government debts and bailouts. With no audits and no questions answered. That is conspiracy against the people. That is why we are in this mess. There is no question it has to do with greed and power and formed alliances working together to control the politics of this nation in order to manage the legislation that helps Lloyd walk in and out of the public treasury and put the money in his private estate. If that’s not conspiracy then the word has no meaning.
It’s time to call a spade a spade. This kind of power is not achieved by one individual competing against another individual; it’s collective power, partnered power, a secret brotherhood of criminal international bankers partnered with government competing against the individual. It’s time to call it what it is. A conspiracy.
On page 7, Melcher says "nobody knows the true condition of the banks' balance sheets..."
This is absolutely correct, but we do know plenty. We know, for example, that the true condition of those balance sheets is significantly worse than is being reported because if it wasn't there would have been no need to relax M2M reporting requirements. So we can be sure that the banks crappy balance sheets actually paint a much rosier picture than reality. We also can deduce, without much of a stretch, that this means that the entire system is insolvent and has been so since at least last March.
That's what we know, if we actually stop and think about it. Someday soon, the lie will be laid bare and everyone will know it. It shouldn't be a surprise if one is capable of connecting a few dots.
That was a very good read. The guy clearly understands the world today, unlike most of our peers.
For those in the inflation bandwagon, I would like to hear your explanation of the "household borrowing" graph on page 5 of the article, and explain to me how we are going to see velocity. TIA
The sooner you accept that inflation is monetary in nature and that rising prices are a result of money supply expansion, the sooner you will see that inflation is already here. Richard Bernstein was fond of saying that capital will go to where it is treated the best. Perhaps the stock market is inflating at this very moment due to easy monetary policy - I'm not sure, but I do know that money is looking for yield. The more money the Fed prints - the more we debase the dollar, and people are looking to preseve purchasing power of what little capital they have left. This is one reason gold is going higher and higher and higher. Are we witnessing another bubble being created? Most likely. How and when it bursts? Stay tuned.
I was so glad to see this! I remember he saw the credit crisis coming and profited handsomely from it. I think he was up way over 100% last year. Melcher is really worth listening to.
Nothing in that peice that did not ring 100% correct.
And as stated in the end, it's just a matter of when and not a matter of if.
I'm not a gambler. Never play cards or slots. Because I know that they will get all your money, not if but when. That turns me off right there. The only ones that go at gambling as if it were a business are the ones who think they can beat the system. They can't; the system has already factored them in. All they can do is lose, eventually. The streets are lined with homeless people who thought they could beat a larger system.
When this economy in it's current incarnation blows itself to ratshit we'll all be headed down. And it will not have mattered how high anyone got before the blow up, because everyone is going down. How far down will depend on a lot of factors including luck. We're already gamblers just by getting out of bed in the morning, but I suspect we have more control of our positions on the way down than on the way up.
As the pilot might have said to the co-pilot as the last engine failed on the plane... the trick now is not to curse the engine but to manage the descent. Because son we are going down.
cougar
An interesting note is the nod to the effects of the China/US love fest with respect to those nations who must deal with the effects of these two nations policies regarding their monetary, trade and pegged currencies.
he covered some good basics and is certainly playing in the right ball park but i get annoyed every time someone spouts that tired crap about smoot hawley protracting and deepening the depression.....
the policy had some detrimental effect but that is no more intelligent that attributing correlation with causality....the primary casues for trade decline were the economic contraction itself, contracting credit and high real interest rates, and most importantly the removal of the gold standard....
i know the usual buffoons will howl in disbelief by the last statement but it must be remembered that the major clearing method of international settlements was removed by the flourish of a pen stroke and replacements were not available....in fact trade never recovered to its 1914 level until c. 1995....
the usa definitely needs trade tarrifs and other protections for domestic business....global and free trade is a total crock of shit especially when competing with a gaggle of 3d world countries having mostly slave wages....pursuing such a policy is suicide intended to benefit a very small sliver of elitist oligarchical assholes....
i am sick and tired of providing welfare for indians and chinese when americans are suffering....the indians and chinese can grow up and develop there own means of economic support....
I'm going to join you in the blasphemy camp and agree with you whole heartedly. Give me the tariffs and the trade barriers because the rest of the world has proven that they have no interest in free trade - just varying forms of mercantilism. Take away currency manipulation and government intervention in the export markets and I return to a free-trade enthusiast.
You also bring up an interesting point about gold and trade. I can readily see where exporting nations would be wary of accepting currency in trade not backed by gold, especially in the 30's when everyone was devaluing. But I still believe you go too far when you imply it was the primary reason - trade barriers and weakening economies were probably the primary factors.
As a proud American, I share your concern for Americans first. I also have no use for those who actively seek the end of the so called "American Empire" since I firmly believe that a weaker US will invite all sorts of global mayhem. Great post!
Good stuff guys. I almost gave in to joining you with protectionist thoughts but I feel that the main issue facing America's future is a crippled, scammy educational system and a lack of awareness of a lack of perspective: as B9K9 posted earlier: "We're number one!" 'Mericans..." We are deer in the headlights as a society - bickering over talking head soundbytes, on and on, left vs right - when it's actually top vs bottom.
So we have 70% of our population emptying garbage cans, changing the oil, or giving advice to other adults about what they should do with their money, for a percentage of their money.
Meanwhile the corruption continues to bleed the system dry as we increasingly 'entitle' our citizens to subsidies instead of telling them they have to sharpen their pencils.
WW,
Protectionism would destroy the rotten system and force us to start over. It's going to happen anyway, so why not get a fresh start. I agree with you regarding the rotten education system.
OK, see your point. But then how do we avoid the
kind of c**p that we now see in the sugar import biz?
now hat the IRS has notified me of my audit, i can write about the gov't to my heart's content...
actually, Smoot Hawley was bad for the USA b/c we were the world's excess mfg capacity in the 30's. By shutting off trade we had to absorb the world's need to reduce to capacity internally.
We lack mfg today so a trade war would not be as bad for the US. There should be normalization of environmental and labor standards with big protections for US production. We should move to a trade credit system, forcing all foreign dollar holders to purchase US goods instead of assets. Rather than trade paper, each country's should exchange goods and services. It would be a painful adjustment, but would rebalance production and consumption.
It is clear to everybody here that the engine's screws are loose. We cannot agree if it will blow up or fall apart... but we all agree the engine will fail in short order.
The guy has compounded at roughly 30% for the past 10 years.
...personally, I'm kinda rooting for the recession, not the central bankers.
http://anonymousmonetarist.blogspot.com/2009/10/long-finger-of-instability-from-hand-or.html
But there are also unknown unknowns. These are things we do not know we don’t know.
What we do not know we don't know is what the long finger of instability from the Hand will ultimately do to the markets and the economy that are still the home of the brave but alas are now a different land.
What we do not know that we don't know is how the continuing liquidation of Main Street and bifurcation of America will interact with the bankrupt ideology of the rich that had greatly succeeded in drafting the inner monologue of regular folks so that they would vote against their self interests and are trying to do it again.
I found it odd that no one ever talks about the affect that rising inflation will have on entitlements such as Social Security and other programs that have to pay out increases when inflation rises.
No one talks cause everyone knows. The 'Gubmint' will
pay off dollar for dollar. And if 'you' vote for the
right puppet he will raise you ~1/2 what the current
adjusted inflation rate happens to be. Welcome to the
end of the '70s. But that's OK. Medical marijuana laws
are on the way. Ramann and organic rice aren't too
bad. A couple of heavy tokes and the world is fresh and
new again. I wonder how long before the old folks group
together in 'communes' to make the money stretch?
Great read, thanks ZH.
I still don't know if the market is topping but who does?? (Giant Squid)
Social Security has only been inflation corrected since the 70's. Gold has only been legal to own since the 70's (all private gold confiscated in 30's). Argentina took over all private retirement plans recently.
The "unknown unknowns" covers a wide variety of possibilities. When the unthinkable happens, unexpected responses become the norm. Stay tuned for some surprises.
I agree that protectionism is probably inevitable and necessary. Always been a "free trader" but that only works with the other guy is also a free trader. The US is hardly blameless but compared to the rest of the world we are saints.
It was a good run that covered most of my life but it is over and we need to figure out how to survive, a little poorer, but (hopefully--a desperate but sincere hope) still free. It will be up to you yung-on's to make that happen. I'm willing but the body gets weak.
Remember that we can be a lot poorer and still live better than 99% of humanity ever did. Good luck!
Thanks for the "deep thoughts," Tyler. Nothing new here for regular ZH readers, though.
my "deep thoughts" about his and about the posts I read
Ya but – habit plays a role in the money scenario that we need to factor in – the habit of working Joe to put food on the table – the habit to buy our loved ones what they think they need to live – the habit to keep our 401k increasing in value through matched corporate funds which invest in the market – the habit to buy apples and wii s for our children – the habit to be “good” fed by the media – the habit to supplement our income by growing our own food – the habit of having faith in the value of money – the habit of children dreaming good dreams about a good reality they want to participate in – the habit of wanting the best for others as well as ourselves.
Even if there are power control freaks at the top sucking the system for all they can get, the grass roots of society can still survive in a barter system of increasing influence. There is a story of a finance manager who vacations on a remote island who approaches a fishermen with an idea to buy boats, charter fishing trips , franchise , make a ton of money and be able to do anything he wants to because he would then be rich. The fishermen responds with “ya but I am doing anything I want right now because I love to fish - And I don’t have to do any of that other crap to make it happen and besides if I had a bunch of money it would make me a target for people like you to control” – I would recommend people find or define a culture they can be happy with rather than focusing bitter anger on control freak economics.