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Deflationists Take Note: Bernanke Succeeds In Offsetting Shadow Banking Collapse
The biggest piece of news in Thursday's Z1 statement was not that consumers continue to deleverage, that corporate cash levels are at $1.9 trillion (of which $1 trillion is financial and half of the rest is held offshore: maybe instead of copying Zero Hedge charts, the WSJ could have actually focused on the story behind the headlines) or that the stock market continues to be the only manipulated delta in household net worth (even as wealth in real terms is dropping). A far more relevant and important data highlight has to do with the only thing that actually matters for the reflation of the monetary bubble: namely the fact that the contraction in the shadow banking system is continuing. Or so was the conventional wisdom. As of September 30, Bernanke has successfully stopped the net decline of monetary aggregates even when including the massive shadow banking system.
As we have long claimed, every action by the Fed, every attempt at reflation, every bond purchase directly, and ES purchase indirectly courtesy of Citadel, have had the sole goal of counteracting the impact of the the collapsing shadow banking liabilities. Compared to shadow liabilities, which topped out at $21 trillion in March of 2008, all other monetary aggregates are irrelevant: this includes both their representation in bank balance sheets, such as traditional banking liabilities and the broadest representation of money stock tracked by the Fed, M2 (since as of 2006 M3 is no longer tracked due to the egregious costs of keeping track of this data). And the biggest, and so far most credible, argument that deflationists have had, is that the shadow banking system, and its reconstructed M3 proxy is plunging far faster than Bernanke is reflating other parallel aggregates. Well, that is now over. As of Q3 2009, the sequential change in shadow and traditional bank liabilities was net positive by $3.8 billion: this is the first time this number has posted an increase since December 2008! This fact should send a wedge of terror into the hearts of all those, both deflationists and inflationsts, who realize the significance of this inflection point: it appears that Bernanke has finally succeeded at offsetting the drop in the shadow banking system.
Up until now the one and only defense that those who anticipate continued asset price declines was that on a net basis, the monetary system was still contracting. That is now no longer the case. And now, ironically, all that remains is for a very much cornered Ben Bernanke to convince people that the economy is getting better, resulting in a surge in net borrowings, and a spike in monetary velocity, and... hello Weimar.
But don't shoot the messneger: here are the facts.
Evidence A: total shadow banking system liabilities:
Evidence B: sequential change in actual components to shadow liabilities:
Evidence C: comparison in levels of traditional and shadow bank liabilities.
Evidence D: Overlay of M2 and Shadow Liabilities
Evidence E: most importantly, the sequential change in the combined liabilites represented by both the shadow and traditional banking system. As the arrow indicates, it is now positive to the tune of $3.8 billion: this is probably the most important fact for monetary policy in the past two years.
Of course, all of this is possible only because the state is now the ultimate backstopper of all risk. And now that the monetary inflection point has been reached, and the negative convexity event has passed, we expect that the debasement of the US currency will now start in earnest.
Source: Federal Reserve Flow of Funds and H.6 Statements
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true. often times i myself have been rendered powerless by the little abstract guy controlling my actions. the next morning i usually regret it.
In regards to TMosley;
My life savings are broadly diversified. Basically market neutral although my income is derived from the operation of my lifetime collection of metal fabricating machinery geared to the ags and such. Yes I'm a metal fabricator, hands-on kinda dude with a hard-on for beating cherry red steel and tearing shit up.
Nice and easy to just sit back and watch you all rebroadcasting your interpretations of the lie which was planted for you supreme clowns to stumble across.
It's really irrelevant to me which way the markets move. Whoever loses the least, wins. May the best man win.
Basically the US economy is about $6T short and you idiots are screaming hyperinflation from the mountaintops because a whopping $4B was created...or whatever. Basically it's all irrelevant, you're not even looking at things in absolute perspective.
Look up Total credit market debt obligations (google is your friend) and tell me what you see...?
The money supply is less than 2008 which is called contraction. M2 etc are farts in the whirlwind.
$2T+ a day goes thru the NY Fed.
Ben Bernanke is religion to you.
"something one believes in and follows devotedly"
2002...Ben S Bernanke tells the greatest lie ever believed.
http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm
ZH has become a one way trade, used to be a place I would hear both sides of the story laid out...not any more.
Prices are basically lower than they were in 2008, but that never seemed to cross anyone's mind.
What kind of person writes shit like this? You really think Ben Bernanke controls this fucking game? Of course, it's all part of the religion.
Honestly, your posts sound a lot more like those of a religious zealot than anyone else's around here.
Tell me, exactly what evidence will you require before you acknowledge that you were wrong?
Mine is simple--a sustained downturn in the price of gold and silver that lasts for more than three years. You see, I fully expect there to be lots of deflation in terms of gold and silver. The inflation/deflation in terms of the dollar will be 100% reliant on the amount of printing by the central bank, which has, as of late last year, printed enough to FILL the deflation hole you keep talking about. This makes sense, as now, a year later, we are starting to see signs of massive inflation at home and abroad in our prices, unless you are still eating overstocked electronics.
what's the big deal? All those little old ladies out there scrubbing toilets for yacht and ferrari money have nothing to worry about. Its only milk and bread that are going up in price.
Ding, ding, ding! All the deflationists could join the winning team if they redefined their terms of deflation in gold and silver terms as opposed to fiat FRN's. It's so simple it escapes otherwise brilliant people. 1930's deflation was possible and caused by the conditions brought on by deleveraging AND (the key) gold back dollars. Period.
GREAT point, fellas.
"If all the bank loans were paid, no one could have a bank deposit,
and there would not be a dollar of coin or currency in circulation.
This is a staggering thought. We are completely dependent on the
commercial Banks. Someone has to borrow every dollar we have in
circulation, cash or credit. If the Banks create ample synthetic money
we are prosperous; if not, we starve. We are absolutely without a
permanent money system. When one gets a complete grasp of the picture,
the tragic absurdity of our hopeless position is almost incredible, but
there it is. It is the most important subject intelligent persons can
investigate and reflect upon. It is so important that our present
civilization may collapse unless it becomes widely understood and the
defects remedied very soon."
-Robert H. Hemphill, credit analyst; Atlanta Fed. 1937
There's no money, only credit.
It's the oil that is doing us in, ultimately. I see it all day, every day. The oil supply is ultimately what we are up against. Dollar growth is limited by the ability of consumers to manufacture them who are limited by the availability of cheap energy inputs to maintain the illusion of wealth. Everything is an oil derivative. Prices going to collapse for lack of demand/availability of credit. It's a virtuous cycle very few of you can seem to grasp the logic of.
It's not financial...it's energy deflation as described as the brilliant Economic Undertow blogger. What he sez is the nuts and bolts of it.
http://economic-undertow.blogspot.com/2009/11/finance-deflation-or-energ...
You've changed your mind, then. Previously all you could talk about was bank liabilities and debt destruction. Now it's all about oil?
That is more realistic, but not completely. Contrary to the assertions of many, oil is not the be all end all of energy, anymore than firewood, charcoal, or whale oil were ever the be all end alls of their respective times. There are other sources of energy that are coming, and they look to be about as cheap to make and deploy as newspaper.
In addition to that, I just read about some new progress in nuclear physics regarding the fission of certain isotopes of mercury into unexpected products. This means that we have more to learn here as well, which could certainly lead to new fuel sources.
It's a big world out there. We aren't going to die because we've run out of oil anymore than we are going to die when bananas go extinct. Sure, life will be a little crappier than it might have been for a while, but newer and better things will come along. They always do. This is the nature of invention. Sometimes necessity is required.
Well, I do think Peak Cheap Oil will have huge impacts and will at least cause a dip until something very creative comes on line (Some say it was Peak Cheap Oil that caused the limit situation in 2007).
There have been some successes in Cold Fusion per that 60 minutes a couple of years ago. Certain Palladium lattices seem to create more reliable results building off of the long discredited Pons & Fleishman experiments. Sounds like lattice quality is key to repeatability. Also their are always rumors of the Buckminster Fuller type Zero Point Energy machines. Not much meat there that I have found, but the rumor is strong.
The point is solar, wind, Geo-thermal and nuclear (fission) combined can't bring energy online on a large enough scale. Coal can perhaps do what we need in time, but Coal is one of the least environmentally friendly solutions available and not just the carbon but mercury, sulfur and other contaminants. Power Down is a good read on the subject.
I believe we will solve these problems and if you believe in energy solution suppression (seems plausible given the suppression of PM markets etc.) then we may have the solutions next to the proverbial Ark of the Covenant in some government or private wharehouse somewhere.
TLDR version: Peak Cheap Oil is a real problem, solutions will be brought to bear but not without significant disruption/restructuring of society IMO.
It IS all about debt destruction caused by liabilities incurred at a time of cheaper inputs being needing to be extinguished with liabilities able to expand at the same rate but in an energy/resource constrained environment.
Banks aren't liable legally...it's the people (who have extended their own credit to the banks) who have assumed liabilities for the very credit which they actually issued to the banks to begin with.
There will be a lot of death, everything is an oil derivative. You contract the oil supply by 10% and watch ho people who live on the edge of starvation will be gladly sacrificed so we can continue to drive cars.
There is no replacement for oil with the exception of possibly hemp. There are no outs really. Everything is a laughable pipe dream. Yes I hate to break it to you but people will be dying and suffering because of the backside of the slope
Cool avatar stuff - thanks for the explanation.
Edit the avatar so that the eye is more visible (G.I.M.P. is your friend).
It is a bit washed out. Thanks for the idea.
Yow, I have a vision of Gallagher brandishing a sledge hammer. "You want that economy to go?" BAM... "It's gone!"
Deflationists are funny people. Do these people think Bernanke will stop his printing press one day? That he will accept deflation and thus default? You can dream.
Bernanke just has to push a button to fight deflation. I can't imagine him saying to the Nation one day: "Sorry, the fight against deflation has been lost, we accept our failure".
He will fight it tooth and nail... and he will inevitably print a bit more than needed. Because he is a sailor in an ocean with no visibility.
Bernake is getting removed from the Fed Res. If Ron Paul does not do that both Ron Paul and Benny are dead men walking until someone takes their heads off.
Pretty simple that this infinite fiat creation cannot continue. Some Patriot will end it even if it means becoming a martyr.
Why?
Why would Ben go? He's doing what he's told. I expect the congressional hearings to be a lot of stonewalling and if needs be for Zimbabwe Ben to sit there in total silence waiting the clock out. More likely he will pontificate on his academic days studying the Great Depression and wander into topics as his leisure. You say the infinite fiat cannot continue, history says you are wrong. Even if some guy got all dumb and martyred Zimbabwe Ben another flunky will get tossed in to rev the presses.
True. If Ron Paul gets too far out of line there will be problems. You don't rock the boat when it is already taking on water.
your comment caused me to confirm that paul was just appointed head of the domestic monetary policy subcommittee of the house financial services committee. imo if paul gets too far out of line he may be elected president.
oh great, that would render him powerless
As much as I like RP and admire his positions, he's impotent.
David was not impotent. He just happened to also be a crack shot with that sling. Will enough people realize that Dr. Paul is fighting for them? For their very lives?
And shameful is right: The Bernank is not the problem, the Fed is.
"Nothing good can come from the Federal Reserve."
http://www.youtube.com/watch?v=-zbrRYOXl1U
But what if after hyperinflation is a lock JP Morgan, Goldman and the FED are sacrificed as scapegoats and conveniently pave the way for a global currency centered on the IMF/BIS?
http://www.globalresearch.ca/index.php?context=va&aid=13239
Just a thought. Remember the FED, Goldman and JP Morgan are just entities. Those who pull the strings on them can just create new legal structures to hide behind. Nothing special about those three other than brand power which has been under assault for years now. What better way of creating a false sense of justice served then to knock down a few straw men? Just an out of the money call on reality. ;)
Yes. What if. Surely the dollar cannot last - the miseducated masses would probably welcome such a transition. We can only hope, for the sake of all things virtuous, that their plan fails.
The USA is finished. We can only hope for regional strength - were the wisdom of the imperfect Founding Fathers can thrive - pick a good region.
[You say the infinite fiat cannot continue, history says you are wrong.]---Shameful
Hi Shameful. Why do you think our (any)fiat currency will continue indefinitely? What is history telling you?
Ok correction it will continue into hyper inflation then a few months past that. And then they will try a new system. Maybe another fiat maybe not. But it will not end until the dollar is a flaming wreck no one will take. I think the idea was that the printing would stop and the dollar saved. The dollar is already dead, it just doesn't know it yet. And the oligarchs will not stop, why would they? They are winning.
I'd add two things:
- If he doesn't print, history books will remember him as "the man who could have printed, but didn't". If he prints, he will just be someone who did everything he could.
- Most people assume that hyperinflation is a bad thing that will cause people anger. Temporarily, yes, if the food shelves are empty. But socialists and keynesians view hyperinflation as a totally sane and just event, which targets the poor less than the rich, and which for sure lightens the State debt.
hyperinflation may be more just than deflationary depression, but they are both bad. You ought to read the book "when money dies."
To my mind, as a libertarian, hyperinflation is far worse than deflation. But to the mind of people who govern us, to the mind of keynesian teachers, and to the mind of ABC and CNN, it is better.
Hyperinflation is a fast wealth aggregator. Why would they not use it to rapidly shift out he last few % out of the hands of the bottom 99%. The could care less if the little people "own" their homes. After all with taxes even home and land owners are simply renters.
"After all with taxes even home and land owners are simply renters."
Hallelujah!!!...+++++ from the sky above, to the core of the earth below (old land title lingo...LOL)...someone else gets it.
"After all with taxes even home and land owners are simply renters."
You know, this one fact alone, once truely thought about and internalized, was the complete illusion destroyer for me...it was the single most devastating (among many devastations) economic enlightenment, causing many dark night of the soul and gnashing of teeth (and much alcohol consumption). The anger at the childhood/young adult programming and indoctrination, marketing, advertising, etc...
All the rest fell into place after this fact was fully realized.
"You know, this one fact alone, once truely thought about and internalized, was the complete illusion destroyer for me..."
Myself as well.
Of all the transgressions and indignities foisted on a "free people", this lie stands out as the boldest ever told.
It's right up there with debts incurred by the parents (deceased) passing to the heirs (the living).
At some point justice will prevail. It always does.
I'm optimistic that the tide is turning...there is a lot of evidence that it is...the statists are being pigeon-holed into untenable positions everyday by the circumstances of their actions.
Here's something I came across today in my readings that I thought well reasoned;
"Right now, too many intellectuals try to turn this into a left/right debate rather than one about the past and the future. There is a liberal case for the radical overhaul of our knowledge industries as well as a Tea Party one. People who want to extend government protections to more groups need to be thinking how government can be radically restructured so it can be more effective at a lower cost. People who want more education to be available for the poor need to think about deep reform in primary and secondary education, and they need to think up ways to reduce the spiraling costs of university education. Those who like the public services provided in troubled blue states like New York, Illinois and California need to redesign state government and find alternatives to the tenured civil service bureaucracies built one hundred years ago. Those who want more access and more equal access to education, to legal services and to medical care need to think about how we can use technology to radically restructure the way we organize and deliver these services — and the more you care about the poor the less you can care about the protests of the guilds."
http://blogs.the-american-interest.com/wrm/2010/12/08/the-crisis-of-the-american-intellectual/
I don't like being played, because taking the barbed hook out of my lip really is unpleasant....and I got played for 30 years...ouch.
And if those "Guilds" are precisely the one that spout off that they "care" about the poor? Guess we'll find out how much they truly care, heh?
Stycho - Your comment brought this to mind and I ask it as I do not have the answer:
What is the purpose of the Buffet/Gates tax free charitable organization?
-Obviously the tax free thing helps, but what is at the root of this organization? How are they convincing these billionaires to give away their life savings? It smells.
Marx is famous for saying that "Religion is the opiate of the masses." The new opiate is political parties and notions of left and right. Put gay marriage and abortion in the left hand, and rob the country blind with the right hand.
Great find. ++
"All professions are conspiracies against the laity."
George Bernard Shaw
You don't really 'own' property, only the State provides the legal basis, based on military power of continuing possession...
FYI .... Hitler fought an aggressive and rational war to obtain 'land' with/without developement - in the "East" the policy was like USA Sherman, total annilation of the peoples/houses/livestock...in the "West" in Vichy France, existing property claims were respected...at least until AFTER the sucess of NAZI expansion... "My Battle" 1924 was a near blueprint for NAZI program, well beyond 1946..
You are "granted property", revolkable at any time for National Requirements, such as the Interstate Hiway system, or State/local governmental needs,......
Now, there is a 'rationale' for keeping 'working class peoples' in ONE place, it is usually more 'efficient' overall, net gain...Soviet Russia and NAZI Germany pre 1946 had a lot of paperwork/ID papers etc.
After WW2, the Iron Curtain countries, continued that policy using police force, hence, finally the Berlin Wall...to prevent the Brain Drain to the West, etc...
BUT also the USA, created a voluntary program doing the SAME, keeping people PLANTED in one place by making their 'owned HOUSES' cheaper, relatively than rentals...by the CAPITAL GAINS and subsidized loans, including the Interest Rate deductions..
During THIS current Political Economic Era, MOVEMENT of the works to the NEW JOBS is needed....i expect to see a lot of literal permanent Ghost Towns, like central Detroit where the houses are bulldozed, the loans totally written off..
You nailed it dude.
Very thought provoking. Thank you for the insightful comment.
yeah thanks for that - a highly interesting take.
plus, I really am digging the freudian anglo-german slip that works on so many levels = )
Oh, good catch.
Heil.
LOL
After all with taxes even home and land owners are simply renters.
DING! DING! DING!
Especially now with Diebold. Happened in our bankrupt small town. Little industry left, everything moved to Mexico or China...only people making $$$ are school employees or hospital/health care. And diebold voted new multi million schools to be built. The fukks (state contractors with the $$$) brought in a ringer administrator to undermine the school stability and he did his job. The rubes are clueless as to what went down.
New schools in a bankrupt town with 50% unemployment, youth on drugs and the rest on welfare and foodstamps ???
Houses for sale EVERYWHERE, yet my property assessment went up 25%. And the new school taxes haven't yet kicked in.
I recently bought this from Amazon and am looking forward to it.
But, in an abundance of caution, I decided to first read "When All Hell Breaks Loose."
I thought we were all boycotting Amazon?
All you have to know about deflation is that bankers abhor it. They will institute any policy necessary to stop it. While we may experience a deflation in the prices of some assets, the system will never allow real deflation to correct the malinvestment we presently hold.
Bankers and corporations can only make money in an inflationary system with the power of the police state to threaten force.
Printing money is one thing. Increasing credit is another thing. The Bernank is printing money in the efforts to increase credit growth because it's the credit growth that's the key to the game. People need to sign on the dotted line. Raising commodity prices without a corresponding increase in credit growth will only kill the economy as margins get squeezed. We're so far from hyperinflation it's a joke. If anybody doesn't want their "worthless" dollars they can send them to me, thanks.
Well, every sovereign crisis since the abolishment of monetary standards led to hyperinflation. There might be a pattern in that you might want to look closely.
If the Chilian/Argentinian governement managed to "increase credit" sufficiently to create hyperinflation, the FED can do it too.
I really don't think credit is the key to everything in monetary events. You say the margin squeeze will kill the economy, I say it doesn't matter because hyperinflation does kill the economy. The end result is the same. An hyperinflation happens when there's more money than value in the world, and when people start to spend this money in anticipation of raising prices. As I said on a previous thread, hyperinflation in Weimar germany started when the average family mom bought 100 canned beans instead of 10, because she realized the price of these canned beans was doubling every 3 months. There's really no credit thing in that. It started on commodities, and the money used to purchase them was essentially salary, not credit.
Yes, but all it is doing is taking from the general population's assest value and stripping them of value and putting that inot the reduction of shadow inventory.
It might look good on a graph, but that kind of shit, if it is indeed happening will start a Civil War and a bloody one at that.
Does the blood start flowing ... before or after the next American Idle installment?
The next American civil war will occur when 50% of the population loses cable/DirecTV and not a minute sooner ...I've explained this to my wife and friends and her friends 100x ... about 1 in every 1000 even understands that there is a FED and we're no longer on the gold standard (I kid you not).
that is so true. I sometimes go around asking people what a dollar is worth or why we place value in the dollar. I have received many responses that indicate a belief in gold backing.
American IDLE (not Idol) - Freudian slip or intentional joke. Either way, very apropos.
-
Then we need a DIY satellite killer drone rocket thingy. Or hack the ones the Chinese sent up.
Do you have a better idea than the political consensus? What is the alternative that doesn't involve catastrophe? I've thought for a long time that Bernanke couldn't pull it off, but as I thought more and more of the implications of failure (crack up boom or deflationary depression) this morally conflicted muddle through seems about the best option.
Why the belief in an alternative that doesn't involve catastrophe?
And for that matter... whose catastrophe? The "best solution" for the Fed and the government sure as hell isn't the best solution for ME. Fuck those guys. I could care less what happens to them - the Fed and the government exist for the benefit of the Fed and the government, not for me.
When you're getting mugged, pulling out a gun and shooting the guy in the face isn't a catastrophe - shit already went sideways, you're just trying to minimize the damage to yourself.
Billions of people are getting screwed. When large groups of people figure out they're being screwed, or simply decide that they are - even if they don't understand how - things tend to get a bit rowdy.
Catastrophe? Fuck yeah, bring it on!
THANK YOU! There are many people finally "getting it".
But there are way way too many people that are asleep. You sir are not one of those alseep.
Quote of the decade:
GOOODDDD POST! Now we need to turn that logic on Benny and the Ink Jets and Golsman Sucks.
Why so serious? The Bernank doesn't hate you, in fact he probably doesn't even know "Everyman" (which is why "Everyman" is being ground up for cannon fodder in this financial cold war).
Another good post.
You are enlightened as well.
One quarter does not a trend make. This just may be smoke break and munchie time before another round of jello shots...
Hi Miles!
Greetings agrotera! The best of holidays to you & yours.
Happy Holidays, all you good minds out there.
Best to you, MK.
Holy shit . Dont know where you got the info Tyler don't care but this is "THE" story . I give it 9-12 months for the shtf
These two comments, back to back, are priceless
At tortfeasor, Did you used to post on the old Kitco board?
There was a Tortfeasor there about ten years ago.
Try the Federal Reserve website under statistical data.This is all publically available data.
This just proves my point from yesterday. Lots of people posting on this website junking anyone who posits that the stockmarket might not be about to crash & we're not about to slide into a 'deflationary' greatest depression etc. But so few people even bothering to go to the source.
Makes me think people are to lazy to even try & learn.
Then learn:
http://larouchepac.com/node/11319
http://larouchepac.com/node/11296
Things aren't gonna end well, expotential functions take no prisoners!
Don't spout your Larouche shit at me. That guy is a bigger fuckwit than you.
Looks like the presses nearly infinity ability to spit out new money has turned the tide. Hello (hyper)inflationary depression!
How could anyone doubt Zimbabwe Ben? Any deranged madman running a currency can print nearly infinite fiat. I figure the dollar limit to be around 1.1897 × 10^4932 dollars (assuming quad floating point), which is enough to fill nearly any black hole of infinite debt. In practice the ability to print is infinite if Zimbabwe Ben is willing to just let it rip.
Ben is hoping the economy will sputter back to life right before inflation gets out of control. If so he can easily mop up any excess liquidity. It is easier to stop inflation than to stop deflation. I can easily scare you into not spending money. I can't easily make you spend money if you don't want too.
"can't easily make you spend money if you don't want to"
True, but that is what taxes are for. :)
Kinda hard to turn to your starving children and say: "Sorry kids, we can't eat today, 'cause the Govt decided that some Granny needs her Medicare and a soldier needs to shoot someone overseas!"
Good setup for a Tax Strike, I'd say.
Still misses the Big/Real Picture... removing all taxes will not create the physical resources necessary to feed ourselves. I'm guessing that the tax rate in Haiti might be fairly low yet, they're trying to live off of mud pies?
No, the real issue is overshoot. That's what's the elephant in the room that no one wants to admit is there.
Given the the system is predicated on growth this isn't a good sign.
Ding ding fucking ding!
Hyperinflation is a psychological event, a loss in faith in a currency. In this type of event, it will be impossible to "mop up the liquidity". The only solution historically, is a new currency regime.
Deflation on the other hand, would be a godsend. After a short period of unemployment, the vast majority of the population would enjoy lower prices, real interest on savings, investment inflows and more production. They would no longer be robbed by inflation.
What money? that's the whole problem. the underemployment and undercompensation become greater and greater after every bubble cycle. I completely agree we are staring at a hyperinflationary depresssion. Looking to add to my AGQ with what few fiatscos I have left.
Ben is hoping no suck thing. His only concern is the health and future of the banks. The past few decades have been amazing for wealth aggregation, why would we expect to to change? Indeed it will rapidly accelerate. That freshly printed money spends like the original money on the all important first spend.
The economy could be a blighted 3rd world and he would not care, so long as his bosses own it all.
well, that and the ability of goverment (federal, state, and municipal) to keep up with their insane liabilites and to continue spending. the US has $14T in debt without even counting stuff that would be on its balance sheet were it to report like a corporation (SS, Medicare, Fannie, Freddie, etc) -- simply a 50 basis point increase on only that $14T amounts to $70B more a year in interest. god forbid the rates return to their average over the last 10 years, which would mean maybe another 350 basis points.
and every local/state pension fund is counting on absurd 8% returns in order to pretend they're solvent. so Ben has exactly two choices when viewed from a political angle. either boil the frog slowly, with masses bitching about (hopefully smoothed) price increases and their loss of purchasing power going largely unnoticed over the next several years, or opt for deflation and fiscal sanity -- which results in catastrophic failures (mass layoffs, pension defaults, etc). the former at least gives GDP growth a chance to outpace debt growth, the latter results in blood in the streets.
there's absolutely no way the dollar does not get debased further.
To carry your Interest on the Debt scenario on step further. Imagine if rates went as high as the stagflation days of the Carter administration. Wasn't it over 15% on 10 year Tbills at the height? Then on $14T of Debt, the annual interest would be near $2.1T. Obama will have to send troops off to his hobby wars in bare feet.
so lets make it clear that 10^4932 will go by the name of "a Bernank"....!
as it seems theres only a name for the 10^100 (Googol), plenty of names are still to be assigned to numbers with many zeros, so my next would be: 10^1000 = "a Krugman"
AAaaaaaaaaaaaaaaaaaaaaaaaaaaaaahhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!
The number of the BEAST!!!
[deep breath]
AAaaaaaaaaaaaaaaaaaaaaaaaaaaaaahhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!
We're DOOOOOOOOOOOOOOOOOOMMMMED!
Another scotch please.
If the grocery store is any indication, lots of new bills. Lots.
If the grocery store is any indication, prices are rising in a hurry. The inexpensive bread is still cheap, now cheaper with cheaper ingredients. The good bread is much more expensive and costing even more.
Prices are rising slowly and steadily. What used to be a sale last year, Lays Potato Chips at 2/$4 is now a sale at 2/$6. Coffee is higher. Good Domino's sugar...much higher. The cheap sugar stuff goes on sale and people don't really know the difference. Organic is very expensive, and that's for the factory farmed "organic' by Earthbound Farms. Meat is very high pricesd as is good ham.Whew last week there were so many fodstamp purchases.One day it was 7 out of 10.
Well there you go, I won't be able to sleep tonight.
hey george, put on some Lipstick it will make you sleep better !
T-Bond Yields will come down again this coming week
with huge POMO session coming up according to the Bernank Operation Schedule:
http://www.newyorkfed.org/markets/tot_operation_schedule.html
It is true what they say out here in the free world:
Americans have all gone completely Bernankers !
http://www.usdebtclock.org/
Still doesn't work for me, but thanks for the tip. But I'm sure the reassuring words of the NY FED will make my slumber much easier.
the NY FED will be whispering sweet words,
more reassuring than a rattlesnake hiding in your sleeping bag...
I sure hope that the Fed has the tools to play this just right. Five percent official inflation for two years, ten year treasury yields staying fairly tame. However those who have thought Bernanke might allow deflation I believe are off base a little here. There is a chinese saying that if you find yourself riding a tiger you should not dismount.
everybody is going to jump ship on the ten year train . Watch as the retired or about to retire get the rest of their savings taken from them in the next 6 months
It is lonely here in the Deflationists lounge. Our administrative assistance left so we have to take our own notes. I just realized someone took our pencil and paper too.
ha, ha. THAT was funny!
This week's chart pack with the new, updated Investor's Business Daily Top 100:
http://clearstation.etrade.com/cgi-bin/bbs?post_id=9581368
Lot of strong stocks in here.
PAAS and GFI were added this week, the gold sector is gaining popularity among the momentum investors.
Get onboard the soul train, ain't no stopping us now.........lol
http://www.youtube.com/watch?v=fVKjC_simy8
Thanks.
M2 increasing. real inflation already at 6+%. bond prices collapsing. We are headed for a hellish inflationary depression
ECONOMIC THREAT LEVEL
Harmonious. :)
Content. ;)
Indifferent. :-
Discontent. :/
Almost fucked. :( --------- YOU ARE HERE --------
Totally fucked. :0
great stuff!
Bernanke can flood the world with liquidity but can't constrain to drink!!!
The deleveraging continues and none can't stop him...
Like Tyler say...we need a spike in monetary velocity.
And this graph from the Fed of St.Louis don't show it, so deflation is the future of United States just like the Japan!
http://research.stlouisfed.org/fred2/data/M2V_Max_630_378.png
Issued debt in Japan is bought by domestic savers. This is not inflationary.
Issued debt in the US is bought by the Federal Reserve, and added as reserves to the balance sheets of banks. This IS inflationary.
Only if the money leaves the banks in the form of credit or equity/commodity purchases. Right now there is no one borrowing. We still have a long line of foreclosures pending and another crapload of defaults behind it. Once its all over, then you might see borrowing again at the lower prices. Problem is the bernank will not allow price discovery.
Of course, if he convinces the Americanus Sheeple Semi-Erectus that everything is peaches and cream, we might get some dangerous velocity.
Despite these reserves being added, bank reserve ratios have not gone up substantially. Meanwhile, "someone" pumps liquidity into equities, and on the days of the open market operations. A cynic would suggest it would be the banks themselves, but then a cynic is what an optimist calls a realist.
EscapeKey - you seem like you really know this shit inside and out. I know just enough to be dangerous, so my question to you is how does the market crash as TD suggests (in any scenario) with an inflationary environment. Is it an interest rate hike that kills the beast, commodities on fire, what? Full disclosure - I really want to know what what happens (and in what order) to PMs and most volatility indexes. Thanks - always enjoy your posts, smart and to the point.
What will kill the beast is physical reality. Energy is the key. Why should oil be near $90/bbl*? Every time that there's an uptick oil/energy prices will flatten things back down. Consider that the DOW is about where it was back in 1999 (http://stockcharts.com/charts/historical/djia1900.html) DESPITE the trillions of near zero-rate currency being made available.
* Yes, devaluation of the USD is the primary reason; but, this perfectly explains why printing will fail. The more useless the USD appears the more likely that energy exporters are going to retain more of their energy: internal pressures will win out over supporting the USD as the world's reserve currency.
As I'd been arguing in energy groups years ago, it's not about price, it's about affordability. The US won't be able to afford the energy required for growth; and without growth the system will collapse (just read here where people are chasing around "gains" by NOT producing anything- those "gains" won't exist in the face of zero or negative growth [well, only for the very top insiders who control things, such as is the case now]).
Er... very good question, and almost impossible to answer as it could be just about anything. A margin call, a collapse of faith, the collapse of a small but sufficiently interconnected bank, a natural disaster, or as Seer points out, a decline of marginal return on investment though more expensive energy.
That's what keeps economics interesting.
In reference to Seer's point, I can recommend this exceptional book. (Tainter: The Collapse of Complex Societies)
http://www.amazon.com/Collapse-Complex-Societies-Studies-Archaeology/dp/052138673X/ref=sr_1_1?ie=UTF8&s=books&qid=1292147329&sr=8-1
A terrorist attack? That's what worries me. Another 9/11- type event could cause it to unravel. We have no dry powder left to fund picking ourselves up.
PS. This would also provide us our Archduke Franz Ferdinand moment, and we'd have our shooting war.
Thank you, ordered it.
Fascinating book. Merci. Just might help tip friends and family off the fence about where the USA is headed.
Yeah, I agree. If it would increase the velocity of money, Bernanke - following Paulson's example - would fall to his knees and fellate Pelosi.
QE4EVER is the Fed putting an inflation-gun to the heads of all economic actors sitting on cash while effectively saying "use it RIGHT NOW to consume or invest because I am 100% confident in my ability to increasingly devalue it going forward." Rational economic actors will take the threat seriously and act (ostensibly, they have - investors at least. The jury is still out on all but consumers at the upper end), and eventually a tipping point will be reached and money velocity will pick up.
One nagging question I have pertains to the producers of commodities. Would not a rational producer of a commodity, knowing Bernanke is pushing an inflationary regime at-gunpoint, horde their stock in anticipation of receiving more for it at a later date? If you are a widget farmer or whatever and believe Bernanke will be successful in reflating the economy would it not behoove you to sit on your widget yield as prices for them continue to rise?
That, I think, is where the hyper inflationary risk exists. On one end you have consumers and investors pushed and conditioned by positive reinforcement to put cash to work immediately and on the other end there are the producers of commodities who benefit from withholding their output as prices for it continue to rise.
Bernanke says he is 100% confident that he can control this by raising interest rates in fifteen minutes (perhaps foreshadowing an intermeeting "emergency" rate hike somewhere down the line?). What that portends of is the risk of increased price volatility as a poorly telegraphed response by the Fed to undesirable inflation would likely cause our theoretical commodity producers to dump their stockpile en mass.
This seems to simple so what am I missing?
"If you are a widget farmer or whatever and believe Bernanke will be successful in reflating the economy would it not behoove you to sit on your widget yield as prices for them continue to rise?"
Businesses have expenses to meet. Those expenses are also subjected to inflation, in which case they'd come under pressure to pick up the pace (sell products). The result will be to FORCE unsustainable growth.
Just look at China's growth and ask if you think that that can possible go on for much longer. Clearly, because we're on a finite planet, something has to give.
All the pension programs and other things hinged on wild growth projections are going to freeze up (as they currently are- even happening in Canada). Pensions handle large sums of money, they are, in my opinion, the canary in the coal mine telling us that we can't continue. Everything's programmed for growth. It's all going to go unstable; that which you cannot touch (bits representing bank accounts) will be of little importance...
"fellate" Pelosi. Are you implying Ms. Pelosi is capable of pitching a tent?
Come to think of it, I haven't seen her birth certificate either...
JUST LIKE THE JAPAN!!!
There you go, Tyler! You've been calling it from the very start. Congrats on predictng the worst from our Overlords.
Of course, there was that pressing threat of destructive melt-down with pronounced and unambiguous deflation--destructive, at least, if you have no appreciation of the creative destruction essential to capitalism's better nature.
Happy days are not here again.
Capitalism just represents the fastest car in the race to the edge of the cliff. That we cannot see that the general direction leads to doom has been our biggest shortcoming.
i disagree, Seer. 'capitalism' in its purest form is peaceful, free trade. However, when capitalists engage in purchasing lapdog politicians then they become fascists. Further, our debt-based fiat money has been the impetus for continued artificial demand at nearly everyone's expense.
there is a war taking place:
savers, conservationists, and lovers of liberty versus borrowers, consumers, and oligarchial fascists.
right now, the latter are winning, and this is entirely due to our monetary system.
http://www.zerohedge.com/forum/plot-enslave-you
Am having trouble understanding why there was ever even an argument, deflation vs inflation; Bernank on the record: will sacrifice dollar to not let deflation come. Now, if a sudden, total fucking collapse would be defined as "deflationary" I think I get it. Just arguing over rate of decline, timing and whether it occurs before or after hyper-drive..... I think probably a black swan will interrupt whichever is the "natural" course of events. All bets off, then.
The Black Swan will be that other historic hyperinflations had run away wages. There is no chance of that here. When prices soar and wages do not you get a stall with no consumption and bare shelves in the stores. People then get ugly quickly and change fundamentals by radical means.
The Black Swan took a dump on my SUV just as the repo man was towing it out of the driveway of my repossessed house.
I guess picked the wrong day to give up serial killing.
the wrong week.
http://www.youtube.com/watch?v=VmW-ScmGRMA&playnext=1&list=PLCABEFB0A256...
Africa 2010 - The Future of Zimbabwe
http://www.youtube.com/watch?v=h-TNC3nQvWA
These slaves will save the USA consumerism via Walmart integration. Long live globalisation & central bankers.
walmart is a disgusting company. I can tell you what America will look like in 30 years: You'll live in housing financed by walmart, you'll work at walmart, you'll shop at walmart, you'll be educated by walmart, and there will be nothing resembling a society or culture outside of anything "walmart."
Wal-Mart's business model will die with the Chinese currency peg. It can last only so long as exchange rate and wage arbitrage coupled with expanding productivity are accommodative to "stable prices", and stable prices in China are increasingly non-existant. I don't care how powerful anyone thinks Wal-Mart is. Like all non-TBTF's, they still require a positive margin to continue their existance. Maybe they can source from other economies that aren't experiencing cost-push inflation but even then, that'll only last until hot-off-the-presses US fiat starts flooding in and the cycle starts over.
Walmart does in a "mixed market" what everyone would be doing in a free market, ie working every possible angle to bring down prices while maximizing quality.
Free the markets and you would have 20 more "Walmarts" within three years, and they would all be selling American made goods within five-ten years (as manufacturing returned, as free markets treat capital well).
Walmart is about as good a company as you can get in a mixed economy--more than we deserve honestly.
Could anyone seriously believe this? Sarcasm perhaps?
The reason why WalMart exists is because of cheap transportation (oil). Go ahead, flip over the bottoms of those goods- "Made in China."
BIG = FAIL! Mother Nature says so, and Mother Nature bats last. To put it all in perspective: http://www.bigskyastroclub.org/pale_blue_dot.html (ALL of Mother Nature's domain! Can you spot WalMart there?)
So you think that markets should not take advantage of available resources?
Big does not mean fail. The oldest organisms in the world are all gigantic (generally trees and fungi), and the longest lived animals are all much larger than their shorter lived counterparts.
Those that adapt are the ones that survive, and Walmart has certainly done that. Our nation drove our factories out of business with high cost regulations and taxes, and Walmart, being adaptive, sought out and found a cheap alternative. Are you really saying we would have been better off with no industry AND no goods? Or do you think that higher prices would have made the psychopaths in office change course?
In a free market, we would indeed use far less oil, as goods would be sourced from factories in the US, as that is cheaper than adding transportation costs. Walmart, in such a situation, would definitely source from the US, rather than China.
Or do you just think deytukrjbs, and the government had nothing to do with it?
in an asset-backed monetary system we would use much less oil. debt-based money and fractional reserve counterfeiting create pressures to rabidly consume at an unnatural rate.
there is a war taking place:
savers, conservationists, and lovers of liberty versus borrowers, consumers, and oligarchial fascists.
right now, the latter are winning, and this is entirely due to our monetary system.
http://www.zerohedge.com/forum/plot-enslave-you
Exactly. I am of the opinion that freedom leads to the urge to become self reliant. Self reliance generally means that you do not need external energy inputs from unreliable sources.
If we had freedom, our housing developments would look a lot more like this: http://earthship.com/communities/the-greater-world-earthship-community
these folks are great. Sadly, Rome must be fed, and we see the tentacles of government taking every step to reach into our home gardens (under the guise of 'public safety') and further levy taxes, penalties, and fees upon once free properties.
Many times the weapons of choice in order to bribe local officials are "federal grants" and other counterfeited funds. ...disgusting.
A bear mkt rally temporarily halted the decline..Nothing goes straight down, the long down trend is clear. Bernank has done more harm than anything else, & Greenspan was a Hero as late as 2006! Remember his artist portraits?
A rising mkt has a way of hiding the warts.
http://www.erincrowe.com/Artwork/Irrational-Exuberance/index.html
Slinkys don't go UP stairs, but they DO have upward projections...
td,
nothing goes straight up, and nothing goes straight down.... the question is, can the fed continue with its digitizing efforts moving forward or will the new congress make it much more difficult for him to continue...... is this is blip up in shadow banking liabilities, creating a lower high in a downtrend???
While your reading your handy internet/TV MSM media sites.. All is well, economy is booming.
The real truth that hasn't reared its ugly head.
Special Drawing Rights IMF plan
http://www.youtube.com/watch?v=gerjpQg7rSA
SDRs are dollars. An SDR is composed of like 50% USD. It is just another clownish attempt to keep dollars in circulation because the IMF is the US government.
"The Euro is the strongest because of Germany has the most Industry backing it."
Pass this along to our representatives. Ohh too late.
Anti outsourcing bill killed by Repugs in September, even though they said this was a priority. To Pass. Thanks. We're Fucked! These crackwhores doing moneygrabs in plain sight.
If all the jobs leave, there will be No Future. Must bring industry back. Miti style, revoke Nafta, all the other "free trade" agreements, Yes, Protectionism.
It is not that complicated. So, this means they are selling out their country? Their Heirs? For What? Exactly? This was to kill a tax break for outsourcing American jobs! Encouraging corporations to destroy US jobs and valuable tax revenue.
How does this benefit America? What happened here? I don't understand Republicans. Clearly bought and paid for. Clearly.
The problem is, the Democrats losing union cash, and only getting worse, as more union jobs are exchanged for slave labor, for the grateful multinationals.
There may come a day when only the corporate admin and distribution jobs will remain.
Come to Detroit. Cleveland. Youngstown. Allentown.
Oh, haha, those rust belt losers.
Now picture a national rust belt. Is this the giant sucking sound we heard about? I know families with 3 generations under the same roof. 42 million on food stamps.
And the tax break for under $250,000 only, must pass. Mr. Clinton exposed himself (no pun intended) yesterday pitching for the boys again. In Obama's Howse.
I empathize with your rants, but your "solutions" cannot work. Brining back industry? What industry? Automotive sector? Great! US citizens making cars for the Chinese while they themselves (US citizens) are unable to afford those cars? Individuals, private and public sectors in the US are massively in debt. Further, consider that amount of energy require to build these things, and further consider that roughly 40% (and this is conservative) of the US trade deficit is energy-related, well, it would be like trying to get ourselves out of a hole by digging FASTER!
The current paradigm is failing because there's not enough growth medium. And the problem is that there's no way to generate the wage imbalance that previously existed that allowed the US to dominate. 2/3 of the world's population lives on $3/day or less; with increasing population and decreasing physical resources this statistic will only worsen. A reduction in population won't be controllable; meaning, it could affect TPTB adversely (they wouldn't approve of being subjected to what everyone else is being subjected to), and the more standard approach of war is becoming hard to keep from causing disruptions in global systems. It's really a stalemate position; we're firmly in the hands of Mother Nature (or God if one prefers).
Thank You Alan Greeeeenspannn.
Here is an analogy for you. Lets say that the US, say for fear of peak oil, instituted a one child policy, which was sternly enforced. Now, at the same time, China realized the damage being done by their one child policy and abandoned it. Would you look at this situation twenty years down the line and say "Hey, those Chinese bastards STOLE American children!"?
This is exactly what happened with our industry. Sealing the borders wouldn't help with either problem. The only problem is the policies of the government that destroyed our industry.
The Bernank: Yes. We. Can.
And ya gotta admit, there is nothing to stop him.
Even when he goes, there's not much chance of change. One dim bulb can easily replace another.
You guys are in a sealed room with an antfarm and are analysing with great care the intricacies of what tunnel in the sand is to be excavated by which ant and what they do after that and whether ants are idle or not.
Then I tell you I will drain your room of oil . . . errr . . . oxygen in 15 minutes. What do you do?
You ignore it and just keep looking at the antfarm.
No, the more apt analogy is that you stop putting sugar on the surface.
There are other sources of energy for ant that sugar, just like there are other sources of energy for human civilization. Taking one away isn't necessarily devastating. It just means we have to search farther afield. In the end, it may be positive, as we might find a new, more versatile and plentiful energy source.
But hey, you death worshippers don't really think about things like that. All you want or understand is decay and inevitble death, and you would have thought the exact same thoughts were you born in any other time period in history, whether it was peak timber in ancient Sumeria or peak whale oil in colonial America.
And I though Obama supporters smoked the most hopium!
Your thinking is sure to doom us all. Good thing that it's mostly preoccupied here in this little space...
My thinking will doom us? Says the guy who says we should just "give up"! Your thinking dooms us by default! If you were in charge of that ant colony, you would have them simply conserve the sugar, and not "waste" any energy by looking for new food sources until you were all dead!
PEAK WHALE OIL! PEAK CHARCOAL! PEAK TIMBER!
All these "peaks" of energy supplies failed to end civilization, and those were all renewable resources! Why would you think that the peak of a non-renewable resource would be the end of civilization? A method for producing cheap, perfect graphene, with perfectly spaced doping sites has been developed. This means that solar panels with efficiencies like those of today can be had for approximately the same money and energy input as a newspaper, and that is just ONE quantum leap in ONE are of energy production.
"death worshippers" WOW - Insightful, I have never looked at it that way. Thanks for the bolt of understanding.
You guys are in a sealed room with an antfarm and are analysing with great care the intricacies of what tunnel in the sand is to be excavated by which ant and what they do after that and whether ants are selecting what grain of sand or not.
Then I tell you I will drain your room of oil . . . errr . . . oxygen in 15 minutes. What do you do?
You ignore it and just keep looking at the antfarm.
Well, in all fairness, ant farms are kinda cool...
Agreed!