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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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At least you could see What's Going On in an ant farm.
So Yes, the Ant Farm Analogy is apropos. Good Job.
Or maybe you will flood the farm with more oxygen, or more ants, or more sand...or crack cocaine!
Four Loko
you're comparing the biggest cock of the walk when it comes to central planning to that of an artfarm?..and then mocking those who watch and call them on their intricacies and utter "I can turn shit to wine" bullshit for what it is? next you'll say watch what the homeless person on the street and follow their investment strategies.
I just realized all you guys missed the point in my Ant Farm Analogy.
I said you were outside staring at the antfarm and analysing the whichness of what about it. Then I said I was going to drain your oil . . . oxygen from the room.
NOT THE ANT FARM. THE ROOM. You, sitting outside the ant farm, are about to suffocate, but you're still looking at the ant farm.
Oxygen is the opposite of oil, guy. Energy is contained in the oil, and is harnessed when electrons are transfered to the oxygen. This is the basic process that is required for all life AND most industry.
Taking away the oil is like taking away the food. They can get other sources of food, they can't find another electron dump (well they can, but they would need millions of years of evolution to do so).
To the moon, Alice!
However, let's not forget that through the miracles of FASB157, trillions of assets are valued where ever the banks want them to be. Bank liabilities may simply be rising to disguise the insolvency in the system....
Obviously we need to print more money.
But... what good would it be if all these fuckers were all placed on a small island with all their fiat dollars and other worthless shit?
I really do believe that most of them believe that they can fix all of this. After all, all they know is The System, that they have been appointed to keep The System going. We who aren't so heavily programmed by The System are able to see outside of The System, but... because we don't believe that The System can be fixed we're labled/treated, basically, as terrorists. But yes, there most certainly are shitty players out there, but they're there because we allowed them to be (by playing The/Their Game).
Nature will declare insolvency, and there's little that the high rollers are going to be able to do about that.
First, Bernanke can print a quadrillion dollars and it won't make any difference unless banks lend the money into the credit system.
Second, how long do you think Bernanke can print $$$ before this congress pulls the rug out from under him? Why do you think he announced QE 2.0 right before the midterms?
After the midterms.
One Day After. Wednesday. Spooky Eh?
Housing lost 1 Trillion in Value in the Last Half of the Year!!!
"value"? really?
The value is the same. The price has dropped.
But, but... what IF people are starting to alter what they value? Think about it. SUVs, McMansions, fast food crap, Dancing with the Clowns (yes, popular, but I'm sure that eventually it'll lose its attraction), this is stuff of a culture that's collapsing. I'm sure that some here were born seeing all of this, but for myself, it took a while, I once thought that having a great "productive" (not in food, shelter or water) job, a nice house, nice cars, a mapped retirement plan etc. was the right thing. I slowed down and started to question it all and, well, I'm here... The point is, that the "American Dream" is being called out for the BS that it is. Price in The System IS dropping, but I'm willing to argue that value is also dropping, and that the dropping in value is the result of people becoming less believers in The System and its mindless, spiritually empty crap. The trinkets and the man behind the curtain are becoming less and less meaningful given that people are starting to stare the real fundamentals in the face: food, shelter and water; something that most of the world's inhabitants have been aware of. TPTB want us to believe in the man behind the curtain...
Looks to me as if that has always been the concern.
Resources to access to these fundamentals are oddly distributed all over the world. The game has been for long to redistribute the resources to stash the benefits in one corner of the world.
It is obvious that from now on, food, shelter and water will be of higher quality in the US rather than in a place in Africa whose direct environment has been turned radioactive by on purpose careless extraction of uranium.
The troubles come with the very idea that US citizens consider that because they participate through generations to the redistribution of wealth on a global, they have a right to the final product.
Or that because they were born in the US, they have an inherent right to live in the US.
This delusion is one of the major causes of tension today in the West.
Pharaohs used to build impressive shelthers for their afterlife. Contracted labourers participating to the process of accumulating resources under the pyramid form knew they would have not shared in the final product and would be invited to leave the pyramid area.
US citizens have participated through generations into building the US pyramids. Time for some of them to be invited to go and leave in the places they deprived from resources in order to build the US.
Horse feathers. Any fool can make a graph. Try peddling this crap to small business, or anyone trying to get a mortgage. The money will stay locked in the banks until they are again solvent, which means long after a cold day in Calcutta.
If the cash ever flows through to wages and loans, we won't need economists or graphs to tell us.
Hyperinflation does NOT originate from demand. The people of Zimbabwe did NOT get 100 Trillion Z$ notes by borrowing them from banks, similar with Weimar.
The graphs above mean one thing and one thing only: deflation is a myth, and those who invest expecting it are going to lose EVERYTHING.
Deflation is a myth? Have you tried to sell a house lately? Do you know anyone who is looking for a job? Have you been watching state and local budgets? How about small business?
You and I are both feeding deflation by taking fiat out of the system as fast as we can, are we not? Bernanke desperately wants inflation, and is printing as fast as he can find fed debt to buy. I would like to see inflation, but it won't be easy to get there from here. Try this thought experiment.
Two years from now, the dollar has lost 50% of its purchasing power. What are the consequences? Crooks hanging from lamp posts, but what else?
The 10 year interest rate would have to be at 20% or better, still sharply negative in real, after tax terms, but I think based on the 70s experience that's about right. That destroys the bond market, which kills banks, insurance cos., pension plans, state and local budgets..., by now you see the pattern.
The first hint of serious inflation kills the bond market and that's depression time.
In the long run, I think you are right. They will give up all pretense and just print fiatscos, but it won't be pretty between here and there.
Deflation means lower money supply. Just because the prices of some bubblicious assets are down does not mean we have deflation. Hell, real estate prices fell or stayed steady for all but a couple of months in Weimar. Does that mean they didn't have hyperinflation, but deflation?
When you and I buy gold and silver, that does NOT take money out of the system. There is not any magical machine or hole where you dump dollars and metal comes out. It goes to the people who owned the gold and silver previously, and goes to pay their bills. Buying gold and silver has little net effect on inflation.
We lost 50% of our purchasing power in the last ten years, but rates are lower now than they have ever been in history. Deflationists are under the mistaken assumption that we have a free market of some sort. Guess what? The market doesn't set the rates! The Fed does. Now, they are trying to set ALL rates buy buying EVERYTHING! 50% loss in purchasing power is going to look like a bargain in two years.
Come on, pay attention. POMO is 100% printing. Every other story for the past six months on this website has been about out and out printing. Deflation is a myth. ANYONE caught holding dollars is going to get wiped out, PERIOD. Get ya ass to Mars, or short of that, get ya ass into gold and silver. If you are looking for deflation, think about it in terms of gold and silver, and you will have it in spades. You already have it, and it is only going to get more extreme as time goes on.
o/t
Madoff's son hung himself.
ZH posted it.
It would seem he had more character in the end than his dad or 99% of politicians.
Shit. I didn't see it.
The amount of info on ZH can be overwhelming. I work, so sometimes I come home and post something thinking it's new only to find it's been brought up as a stand alone post or in a comments thread somewhere...these people are sharp.
Don't let it stop you posting.
No harm, no foul ;-)
I could consider that possibility if he left a box of info for taking down the banksters behind him. If you're gonna kill yourself, we don't have to debate whether fear is an acceptable excuse--fear is then no longer is a relevant issue.
That would be a very simple and easy measure of character, imo.
"I could consider that possibility if he left a box of info for taking down the banksters behind him."
Good point...I stand corrected.
About 80% of white American males who kill themselves, use a gun. Yet most high profile suicides seem to be hanging or throwing oneself from a balcony or other high place.
What makes high profile suicide victims in the U.S. act so differently from regular Joe suicides?
Hmmmmm?
Even in death...they still have a high opinion of themselves? ;-)
Less bloody, plus they hang escaped slaves, criminals, cattle rustlers.
So, I would say guilt, less of a mess, and being suspended where the family can't fall over the body and cry until a couple of strong guys come to take it down.
No loud bang either, or blood and brain matter on the furniture.
But I'm just guessing....
You still crap your pants though...
Thanks for the reminder. Dorothy was a stand up broad. (a phrase she loved)
My favorite Parker - This novel should not be tossed lightly aside. It should be hurled with great force;)
Good point. Specific to this case, were his pant pulled down?
Good point. Specific to this case, were his pants pulled down?
Hanging is what makes it so suspicious in the case of rich and powerful guys. The last thing they would want to do is leave an ugly picture--they're consumate narcissists.
I'm inclined to regard virtually all of them as executions. There are much more peacefully idylic yet just as effective means by which to kill yourself.
No, JPM or another bankster outfit suicided him.
They did this to protect themselves from what he knew.
Note the lack of a suicide note. This was murder for hire.
And hung by dog leash. Symbolism is powerful.
Pure mafia psychopath shit.
debasement of the currency + money velocity = zero.
people are hoarding worthless and scarce money. (insert inverse supply demand curve here)
sounds like a depression to me.
TD, Housing is in Crash Mode..reality hasn't set in yet for the former 'wealthy' home owners.
This is good, no? Everyone pulled their money from equities in 2008, and now the government is pumping it all back in for us.
From Doug Noland, www.prudentbear.com;
"The Fed may not be running the currency printing press around the clock, but Fed policies have certainly been instrumental to the unending expansion of Treasury borrowings. And, clearly, any meaningful definition of contemporary “money” must include government debt instruments. Indeed, with bank (and, more generally, private-sector) Credit suffering from post-housing mania stagnation, never before has government debt so dominated system “money” and Credit creation.
Importantly, the Federal Reserve’s zero-rate policy and massive monetization program have been instrumental in maintaining the perception of “moneyness” in the face of unprecedented Treasury debt issuance. I can’t envisage a more powerful Bubble Dynamic: The Fed intervenes and manipulates the Treasury market – the predominant debt market underpinning fixed income and securities markets more generally."
I'll add that Treasury debt issuance here in Australia has also been unprecedented. It is probably unprecedented in many countries. If indeed 'shadow' bank liability aggregates have stopped contracting there is a unprecedented amount of 'money' that will be looking to move to where the 'money' is.
And c'mon Durden, how about at least providing a link to prudentbear.com. Mr Noland needs to to read more widely. He understands the nature of money, or at least he understands the dynamic nature of the 'moneyness' of credit.
minus one junk, Noland is top notch, read him all the time
At least you understand the predicament we're in then. Seriously, govt debt issuance is out of control globally. This "expanding gulf" between market perceptions of moneyness and the true underlying state of sovereign credit is unprecedented, that is, it's a bubble of truly unprecedented proportions. Mr Noland talks about the US, I see the exact same thing here.
"Seriously, govt debt issuance is out of control globally."
This seems like a small statement, but I believe that it's central to understanding what's really occurring.
What it tells me is that it's a global issue of over-pledging future (ability to do) work. All created by excessive demand (which was programmed). Yes, there were scams, but this has always been the case. How come it's gotten to this level? I'm quite comfortable in stating that it's due to a lack of exploitable resources, levels sufficient to continue our exponential growth on this finite planet.
Bernanke is printing replacement money, not dilutive money. The housing price collapse continues and each day of it is another default. My calculation says about 686 billion of defaults are due over the next 12 months. Ben is printing 600 billion. He's actually lower than he needs to be.
As for how he is removed, there are two new Fed governors due in January and they are at least likely to be anti QE. They are NOT fully chosen yet and the new Senate may decide much on this. If they are anti QE, I don't think he can get a majority vote for another round, and if housing turns down further, he won't be able to counter it. He'll resign.
What a strange analysis. You claim the crazy-insane-fictional increase in housing prices in 2001~2007 were "real value", right? And therefore they money BoneheadBennie prints now is just "replacing the loss of that value".
ERROR... ERROR... ERROR.
The "increase in value" of those homes was totally bogus farse. The houses purchased in ~2001 did not become massively more valuable by 2007. How stupid can a human get? If anything those houses built in 2001 were aging, falling apart, consuming wealth to keep them livable. To claim that the house --- the actual thing that you claim has "more value" actually GOT more valuable... is just pure insane. Just open your eyes and look with your eyes and brain. The house did NOT get more valuable.
Therefore, replacing the fall in price from the peak with newly printed money is... what, exactly? The fact is, every analysis like this is performed on a purely fraudulant, fictional basis.
The money Ben Bernanke prints has zero value --- no matter how much he prints.
The FederalReserve and Bernanke create nothing of value.
Therefore, and obvious to everyone with their heads not shoved up their butts, is that all these monetary games only shift value from one person to another. They cause dislocations that feed the predator class at the expense of the producer class.
Modern economics is pure fraud.
honestann -> I agree.
We wouldn't be having this sort of discussion in 1900, when fractional banking didn't exist, and when fiat paper was backed by gold/silver.
People should realize that economics in the last century, and the growth associated, are an hallucination, virtual value, virtual money, just numbers on paper. People live with money that exists without the value associated. That's why the global private and government debt is so high. That's why derivatives and shadow banking represent hundreds of trillions of money that will blow up. That's why everything can't last an eternity.
Bernanke isn't replacing value that got destroyed. He's replacing money that got destroyed.
Dispatch: Chinese Influence in North Korea and the World http://www.youtube.com/user/STRATFORvideo
Keep buying stocks is what this tells me.
Yep. Stocks , pillories, and guillotines should all do well.
Cheesy Bastard FTW!! :>D
Yes, you please keep buying stocks.
You'll be one who gets into the following trap.
2010/2011: gold == $1400 : buy stocks for $100,000.
2012/2013: gold == $5600 : sell stocks for $200,000.
You will brag to everyone that you earned 100% profit in 2 years. You will pay 20% (or whatever) in taxes on those gains, leaving you with $160,000 after taxes. You will imagine you ended up with $60,000 in profit, and like many naive fools, be happy you were screwed over.
You will ignore the fact that the dollar is worth 1/4 as much as when you bought those stocks. You will ignore that the value of the $160,000 in fiat toilet paper you received in 2012/2013 is only worth $40,000 in the 2010/2011 dollars you invested. You will ignore the fact that the money you invested in 2010/2011 was worth 2.5 times as much as the money you hold in 2012/2013.
And so, you will have happily funded the predators-that-be, and the entire predator class, thereby making them richer and stronger.
Congratulations, master investor.
[You will imagine you ended up with $60,000 in profit, and like many naive fools, be happy you were screwed over.]---honestann
Thanks for your post, honestann. Fiat currency is insidious.
I believe the pitfalls of fiat currency are not beyond the intellectual capacity of "naive fools." Curious, these pitfalls are not required learning in public schools.
@
Deflationists Take Note: Bernanke Succeeds In Offsetting Shadow Banking Collapse.
so, does this mean that the american taxpayer has been fucked twice
during his/her dream filled slumber? oh my! can we do it again?
the "public" now being in debt on the books for the first go round and
now in debt off the books, (soon to be on the tax bill) for the second
go round and the banks are financed indefinitely and blameless both
ways and will be the recipient of all tax receipts going forward as "they",
not the taxpayer/serf are financing this master orgy of fucking working
and productive entities. what can we call this? i know, an historic and
horrific and laughable mistake for the history books and tombstones of
millions with misleading and poorly written epitaphs.
ps.
end the fed, buy silver
ppss .. more bonuses, higher, harder and faster and sooner.
bigger BONUSES NOW! more, mmoroeoo mmooooororororrrrreeeee
aaahhhhhhh!!!!! now moooooorororororoeoeeeeoooororooeoe
ppppsss.
@
Deflationists Take Note: Bernanke Succeeds In Offsetting Shadow Banking Collapsedoes this mean there is an end in sight to QE^infinity? fuck NO! ?
"legal stealing is way too profitable to respect any rational limitation".
Agenda 21-- Eugenics And Depopulation
http://www.youtube.com/watch?v=tSbriZsHV8k
Yes, keep buying stocks as above lemming tells you.. winks
In recogntion of the efforts of Rupert Murdoch and the entire team at NewsCorp and DowJones/Wall Street Journal, Dave would like to acknowledge that imitation is still the sincerest form of flattery. Tyler, would having your charts copied AND recognized in the Wall Street Journal feel sincere and flattering? ZeroHedge seems to have lost track of its priorities as it has become hugely popular and successful, but lost sight of how Media-Mogul-Murdoch measures "quality online journalism."
“I think people will start paying to read quality journalism online.” NewsCorp Staffer, March 2010 commenting on the construction of new paywalls.
I've got to run... I'm giving paid subscriptions to Murdoch's online properties to all my friends for Christmas gifts. I'm also makng some of those wooden plaques where you carve sayings in the wood using a woodburning tool. This year's slogan... "Relax... Hope Is Once Again A Strategy."
Dave Harrison (aka former Comcast subscriber)
www.tradewithdave.com
P.S. For a link to the video interview where Team Murdoch proclaims "Our websites aren't worthless" click here: http://tradewithdave.com/?p=256
Preventing deflation ensures there won't be any growth, ever again, because debt service takes up disproportionate amounts of all earnings generated by an enterprise.
Because growth will remain stagnant, there won't be any new lending, since qualified borrowers, and reasons to borrow, will remain scarce.
Also due to stagnant growth, there is no reason to invest in a business enterprise, so unemployment will remain high, perhaps even continuing to increase.
The only ones benefitting in this environment are bankers. Even creditors don't benefit with no lending and a flat yield curve.
The only demand in this environment is being created by government spending, which is forced to borrow further and further into the future. Once the government enters austerity mode, either voluntarily or by force, look out below.. that's when the crisis happens.
I suspect that defaults on RE will continue to for some time even as RE continues deflating, considering the unsustainable house value/income ratios. If rates move up, defaults on unsecured debt would accelerate in tandem with secured.
This along with the diminished jobs related to a healthy RE environment will not allow the GDP to grow above the 3% rate necessary for the unemployment rate to decline.
RE is the Alpha asset that will make any recovery feeble, and the reason the Fed feeds the dysfunctional banks with market to fantasy support.
Hyperinflation/deflation combo, as oil, gold,stocks bonds etc... have been rising while the alpha asset declines. How long can the big dog be ignored before the dogs follow tne leader? Maybe for a long time, even with an economy with its tail between its legs, making believe it is healthy.
You really have to wonder why they're doing it if they're forced to print money just to keep the debt service payments happening. Preventing deflation is the worst possible outcome that can happen. It ensures a miserable future for everyone, indefinitely, with nobody paying their bills, nobody buying anything, and continuous, ongoing, defaults and bankruptcy. It's complete insanity, care of shred the Constitution but save the banks Bernanke, Great Depression expert and friend of bank.
Your last sentence answered your first. The torturers need the elite system in place for their wealth =happiness model of life, along with their superiority complexes of knowing whats best for the masses.
Its a rigged 3 dimensional monopoly board game. Go outside the game to the fourth dimension and help tip the game over by refusing to play by the their rules, or better yet, if possible, don't play.
You, sir, are almost, not quite, correct.
The alpha asset is oil. The beta asset is, indeed, housing, and there is nothing that can be done about that. Housing defined the workforce and it defined national wealth and that is not going away.
Everything Bernake is doing is to try to counter the smashing of money in the universe known as mortgage defaults. You can make a case for that being global.
It was and is the source of US wealth. While it declines, and oil disappears, there is no solution.
housing and it's associated workforce aren't going away at all...while the abstract and related econmic elements go negative, the people associated remain..they're quite present actually, BLS has some fancy hokus pokus that makes them magically disappear..how you like them centrally planned statistics...magical..mark-to-unicorn like!
"The alpha asset is oil. The beta asset is, indeed, housing, and there is nothing that can be done about that. Housing defined the workforce and it defined national wealth and that is not going away."
OK folks, I'm sure that by now you'd figure out what I'd say... Food, Shelter and Water! Yup, check, housing ("shelter") is still meaningful, though the McMansion/Keeping-Up-With-The-Joneses housing will fall by the wayside.
And, YES! growth happens only via work, and, in this industrial/post-industrial robotic world, work is increasingly done more and more with direct injections of energy (electricity, fossil fuels) rather than indirect energy via food consumed by humans. Increasingly, however, this work paradigm will revert as fossil fuel extraction becomes more difficult. Result: peak growth, followed by de-growth (an unwinding of "economies of scale").
So true. Hope adds honey to what is perceived as a "bad" death cycle. The cycles of the economy must be allowed to boom and bust in normal fashion; otherwise the quality of existence is ratcheted down but kept going with intravenous fiat hope.
Everything is born and dies over and over. Fear, greed and hope will not change this. For the death cycle to be less traumatic, it must be accepted for what it is- death for a re-birth to something new.
Nobody knows how long it will take. refuse to be the slow tortured or the torturer. An enlightened consciousness of the cycle allows one to do what must be done to not be tortured by the debt system. If you are not a fiat torturer- bankster, than free yourself from the beast by any means possible.
as someone said? austerity is self imposed disciple, poverty
is other imposed usury. or something like that. it was that banker
in the keiser 1-6 parts video previously posted. that excess labor pool
has a price that goes unpaid , for a while. very valuable/exploited in
certain circles.
The policy of the US Government for as far as the eye can see is:
There is no constituency for austerity.
http://maxkeiser.com/2010/12/10/max-keiser-global-financial-crisis-ptv-05-dec-2010-1-of-4/
maybe part3? or 2
.
the constituency is a follower ship, looking for direction. the universe
and its manifestations providing those signals to be interpreted by
leaders. government is not government but the fungal mat of consensus
ignorance, expounded as policy. only the individual can see and integrate
these dynamics and then incorporate these insights / sights. so on...
And the fungal mat is incapable of cooperatively establishing sustainable existence.
Let us not confuse poverty with being destitute. One can be cash poor and still live fine. Most who worry about poverty are least able to live more sustainably. And, it's primarily they who put extra pressure on those at "poverty" levels in order to try and keep their excessive existence afloat.
And here we are, sitting on our asses burning up electrons (well, pushing electrons), producing exactly NOTHING while wondering why other folks who aren't producing anything are taking meaninless crap from us. Each one of us should look in the mirror and ask: What am I doing about the fundamentals (food, shelter and water), am I a producer?
we're all being pushed in that direction by a thousand factors
and failings. the systems way of righting itself or clearing out
the dead wood. ? ongoing. nice to hear from you. i'm currently
in a coffee shop / lost losing access at the residence? sheesh..
location location location .....
Thanks Tyler. Hope the flu don't get ye...I am down for the count.
Nasty, nasty, nasty.
@ the end of the day my friends, it is how you manage your deltas. teach peace
Is this the "Event Horizon?"
i gasp for breath -- cognitive dissonance is stubborn/
cognitive dissonance...
I find if I put on my pink eye-shades and some pink Lipstick,
play soft pink music on the pinkano,
Psyche vibrates perfectly with pink cognitive harmonic resonance ;)
The shadow banking system (the financial intermediaries), i.e., its lending, is reflected in the transactions velocity of existing deposits, whereas lending by the member banks, is reflected in the expansion and turnover of newly created money.
The transactions from both the money creating depository institutions, & the financial intermediaries, all clear thru the commercial banks.
The magnitude of these transactions is reflected in "The Federal Reserve’s 2010 study of noncash payments has revealed that in 2009 more than three-quarters of all U.S. noncash payments were made electronically".
And contrary to economic theory, & Nobel laureate, Dr. Milton Friedman, monetary lags are not "long & variable". The lags for monetary flows (our means-of-payment money X's its TRANSACTIONS rate-of-turnover), i.e., the proxies for (1) real-growth, & for (2) inflation indices, are historically (for the last 97 years), always, fixed in length. However, the FED's target (?), seems to vary widely.
I.e., the rate-of-change in long-term (MVt) bottoms in JAN (as will be demonstrated by bottoms in core inflation & housing).
So the deflationist argument extends to JAN - when aggregate monetary purchasing power, as measured by the flow of money, will finally show a new peak in real-gDp - finally exceeding the 2nd qtr of 2008's figure of $13,359T.
Paging Robert Prechter--
Your crow is now ready...
http://www.bankofcanada.ca/en/fsr/index.html
This is one of the most explicit statements by a central bank I have read recently.
Go forth, and download December's pdf.
Canada is going to feel a big thud soon. Yes, they managed their banks well, but they're still highly dependent upon out-of-control export countries (US being key). They're hooked into the global system which was rigged by the US. Even honest thieves are still thieves...
I feel the same way. I have been a deflationist, based on the collapse of M3, but if Bernanke has really succeeded in stemming that collapse, then I may have to rethink things.
If he has truly succeeded, then we should see an explosion in velocity soon. That's a very scary thought.
Just got this in an email ...
It is a slow day in the small Montana town of Circle, and the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A rich tourist visiting the area drives through town, stops at the motel, lays a $100 bill on the desk and says he wants to inspect the rooms upstairs before selecting one for the night.
1. As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
2. The butcher grabs the $100 and runs down the street to retire his debt to the pig farmer.
3. The pig farmer takes the $100 and heads off to his supplier, the Farmer’s Co-op.
4. The guy at the Farmer’s Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her services on credit.
5. The hooker rushes to the hotel and pays off her room bill with the hotel owner.
6. The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.
At the moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves town.
No one produced anything. No one earned anything. However, the whole town is now out of debt and looks to the future with a lot more optimism.
And that, ladies and gentlemen, is how Stimulus works.
I've seen this email about half a dozen times now, and it is massively flawed.
Each and every player in the email is NOT in debt. They have a flat balance sheet with $100 debt and a $100 credit from someone else.
That's not the real world. In the real world, 90% of the people have NET debt, and the other 10% have hold all of those chits.
Bet you're real fun at parties, too! :>D
Massivley flawed? You, Sir, are a bad accountant. Each person in town actively owed $100 debt but could not offset it on the books with uncollectable debt. You cannot put uncollectable debt into the assets column.
So, if the deflationist lounge is empty, then Peter Schiff was right all along?
yes.
Deflation was looming, per the M3 plunging, but I never thought it was a real threat
Deflation is too hard to hard to tax. Inflation is stealth robbery and too easy to do
Besides, The Bernank already told us he would helicopter drop money. He's a crook not a liar.
No, the Bernanke is both a crook AND a liar... that should be utterly obvious. Also note how often Bernanke, who coined the "drop money from helicopters" idea, repeats "we are not creating money", "we are just buying bonds"... ignoring the obvious question "where did the money come from to buy the bonds". Duh.
I believe the deflation versus inflation argument is designed to take our eyes off the most important issues... like "manipulating the economy is central planning, which is overt, criminal, totalitarian dictatorship, and exactly what destroyed the USSR". Say goodbye to the USSA.
that pretty much sums it up.
I'm intrigue by the post that said the FED refunds the interest it is paid on US bonds back to Treasury. How long have they doing this? What is the legal authority? Why is this just not considered the same as if the FED simply canceled/retired the notes?
This tends to undermine claims of deflation, in much the same way that a birth tends to undermine claims of virginity.
Got chickens and a little garden?
I will fall back and protect my six in the deflationists' lounge.
The one thing rarely spoken around here is that the biggest creditors are the biggest losers in an inflationary, let alone a hyperinflationary environment.
Inflation destroys creditors and boosts debtors.
The same people telling me that the biggest creditors control the Federal Reserve and U.S. Congress (et al.) are also telling me they're going to not only allow, but accelerate, inflation of troubling proportions - for any significant period of time.
There's some contradiction in that.
Now, the argument would be more sellable, to me at least, if one were to add the caveat that this isn't about a wealth creation/destruction/transfer event, but a political/social power play.
***Just because Bernanke MAY HAVE (and let's look at true market asset prices, folks, rather than fairy tales ones) have stemmed one index of this crisis, doesn't mean further asset devaluation to come doesn't make his efforts for very vain and max pain.
*****Also not going to happen with the U.S. having the reserve currency - good luck to the rest of the world figuring out HOW to cobble together a replacement, assuming it's even politically possible - bodies in motion, tend to stay so, as do bodies at rest. Hell, the EU can't even figure out how to construct a stable competitor after 20 some years, and no, just because the Euro has maintain relative value for some time does not mean there aren't massive fireworks behind (and in front of) the curtains that make the Euro far less stable and viable than where it's priced now.
;-)
If you wanted to be conspiratorial about it, they don't need our "money" any more, as they already have all of the gold. As such, the transition to a gold standard would leave them with all of the capital. The new hard money regime means that the debts held in that currency will be much harder to repay, theoretically leading to a new feudalism.
Of course, the simpler explanation is that it is NOT the creditors who have control of the government, because the banks ARE NOT CREDITORS. They are only able to lend the money given to them by the Federal Reserve. They didn't save to get that money. In reality, the people in charge are a bunch of debtors. We have a huge national debt. The banks are all beholden to the Federal Reserve, and the Federal Reserve is just creating money out of nothing, so they have no skin in the game. This is a recipe for destruction of real capital, and that is exactly what is happening.
I'm glad you gave that response.
I wasn't trolling for it as a flame baitor as some may have done, but I did want to see that particular rebuttal made.
First, who is "they," with some specificity?
Also, you are claiming that some big movers and shakers who are owed lots of fiat currency, whether banks or not, and who have influence over U.S. monetary policy (but may not have such influence in China or Germany or Russia), would somehow trade off the debasement of the debts owed to them, in exchange for a upswing benefit in gold valuation or elsewhere?
And if this is an attempt for the U.S. to pay back its debts with debased fiat, and I think that's pretty much what you're saying (correct me if I'm wrong), what particular interest would the Federal Reserve have to debase it's only trump card, to wit, the fiat currency of the U.S?
In other words, wouldn't the Federal Reserve simply be marking itself for extinction by losing control of the one thing that allows it to control some of the most influential and immediate levers of the U.S. (and global) economy?
If the U.S. Dollar is debased to the point where it can no longer serve as the reserve currency of the world, then does the Federal Reserve really have a foothold in other safe havens, where the next reserve currency may arise?
Is the Federal Reserve part of a much larger enterprise, knowing no allegiance to any nation-state?
More importantly, have the Federal Reserve & its constituents really amassed a supply of gold? I had always thought that the claim was that they U.S. Government has that amassed pile of gold, and that the Federal Reserve Bank is private in the sense of having private shareholders, and that it is not a part or arm of the U.S. Government?
Oh right... what a wonderful argument! Why would the FederalReserve want to debase its own "money"?
Hahahahahahahahahahahahaha. Hahahahahaha.
Fact: 1933 dollar == 1/20 ounce of gold.
Fact: 1971 dollar == 1/35 ounce of gold.
Fact: 2010 dollar == 1/1400 ounce of gold.
Yeah, right. The federal reserve would never debase its "dollar".
Hahahahahahahahahahahahaha. Hahahahahaha.
(1933) 20 / (2010) 1400 = 1/70.
So the dollar today is worth 1/70th of it's 1933 value.
1/70th = 0.0142857 = 1.42857%
So the dollar has lost 98.57143% of it's 1933 value.
Last time I checked a couple years ago it had lost 97% of it's 1933 value.
In two years it has lost half of the last 3%.
How many people have received a 100% after-tax raise in the last two years to make up for it?
"they", for example, are our Shadow Government, including David Rockefeller (Fabian Society, Council of Foreign Relations) and extended members of the International Banking Cartel who indirectly own the private Federal Reserve Bank through LLCs in Upper East Manhattan, specifically.
http://land.netonecom.net/tlp/ref/federal_reserve.shtml
the 'big movers and shakers', while not always in agreement, are collectively moving in the direction of a feudal oligarchy evidenced by such political organizations as the G20 which includes China, Germany, and Russia.
http://en.wikipedia.org/wiki/G20
Perhaps the current debasement of the private Federal Reserve Note is in efforts to temporarily continue the monopoly over American 'legal tender' and buy time in order to allow other debt-based currencies to run their course towards collapse and consolidation under the IMF in the form of debt enslavement.
Perhaps when America's inevitable debt-based currency collapse comes, the IMF will be ready to offer "Special Drawing Rights" or the "Bancor" in order to 'save' the United States.
http://en.wikipedia.org/wiki/Special_drawing_rights
http://en.wikipedia.org/wiki/Bancor
Perhaps the private Federal Reserve Bank has already siphoned a great deal of gold upwards to itself in the form of interest payments from a once gold-backed debt-based currency with the actual proceeds now sitting protected deep below the Federal Reserve Bank of New York.
http://www.zerohedge.com/forum/plot-enslave-you
http://img.chan4chan.com/img/2010-03-24/29qfo2f.jpg
"what particular interest would the Federal Reserve have to debase it's only trump card, to wit, the fiat currency of the U.S?"
The system works on a high transaction count. Taxes on each transaction. The Fed would NOT exist if not for the Federal Govt, therefore it is in the Fed's interest to continue to foster the system that allows it to rule. What was the worst fears when everything locked up? Velocity of "money" (currency)! If people don't use their system they cease to exist. The theory wasn't so much to debase the currency so much as it was to try and ram enough of it into the system that it would move; and while there may be movement, the fundamental cancer still exists, it's just that we're still in denial that pumping more shit is a solution; at some point we'll tire of the shit, that's a certainty; but in the mean time the continued attempt will be to push more and more shit around in the hopes that we start to accept shit (again, it's shit, in which case it will fail).
Regardless of whether there's overriding evil or benevolence, the problem is that it's all based on perpetual growth, EVERYTHING. People yaking about interference with "capital" miss the fucking point of the System, that no matter how purified they'd like it to be (something totally impossible in reality), it ain't gonna be that way, which means, ultimately, FAIL!
Just Roll It Over!
See you in 6 months.
"They" would generally be those in charge of the monetary policy, those on the FRB. When people talk about conspiracy theories, they generally stop here. But it does NOT stop there. The reality is that it is the politicians who hold the power here. The thing is, politicians are dumb, and have exceedingly short time horizon goals, but they also have the guns.
The bankers, through the FRB, own a HUGE amount of gold, and they have the ability to issue an unlimited amount of fiat currency. If they wished to, they could easily trade against the fall of the dollar by taking possession of the gold, and then printing money stealthily to buy up more gold, and other assets. This is what has happened historically, most recently in Zimbabwe. You can see that this is happening (if not in a totally blatant way) by observing the increasing concentration of wealth in this country, even as total wealth is destroyed. Those with "pull" are becoming fabulously wealthy, while everyone else is getting poorer (including those whose wealth came through honest means).
I sort of think of the people in charge, both politicians, and the FRB, as being similar to Azathoth, the Lovecraftian god. He is absolute and all powerful, but not sentient. That is the power of the state. What we have are a bunch of lesser beings attempting to use that power to their own ends, and in so doing have brought about a situation that is likely to be catastrophic for all involved. Sure, some might remain relatively wealthy, but their absolute standard of living will go down, as though they were able to become the King of England, but only in 1200AD.
Those in control of the Fed think they can win. They look to ZImbabwe, where the central bank still operates, and think they can make it, but the reality is that this situation is more or less without precedent in the history of the world. The closest thing we have to precedent is Yuan China, where they had an unconquerable imperial hegemon that controlled the "entire" world, and held a fiat reserve currency. That case saw widespread civil war, with a loss of about 20% of the population prior to the establishment of the next dynasty 25 years later. The addition of rifles and nukes in the modern world makes things a bit different, though. We don't yet know what effect these developments (taken together) will have on civil wars. Will nations be willing to use nukes on their own soil against their own countrymen? Who knows?
The Federal Reserve DOES owe allegiance to the US, specifically the politicians, but they certainly don't respect them, as they violate their laws left and right. But they do supply them with funding, so they retain enough "pull" to operate above the law. The coming of oversight from a non-corruptible, knowledgeable congressman (Ron Paul) is certain to upset this balance. I don't know what the effect will be. If conspiracy theorists are to believed, he will likely be assassinated at some point, an act which will likely be the trigger to a civil war.
But yes, they DO have gold. Many have seen it, felt it, and picked it up. Unlike the Treasury, they allow tours of their gold hoard, because the bars are too large to steal without being obvious. Whether they could make off with it or not, well, we all know what the last official act of any government is.
Technically, isn't it true that the U.S. Treasury, via its ability to tax and raise revenue, and to issue treasuries to raise revenue, is the entity that funds the government?
That is the way it is supposed to work. The Fed is supposed to control the money supply and keep inflation and deflation in check, but now their prime directive is to monetize the debt so we can keep that spending going.
Google Beardsley Ruml. He gave a famous speech to the ABA c. 1946 that explained why taxes are not necessary to fund the government, but rather to maintain the credibility of the dollar.
It's a mess, and has been for a long time.
Certainly important, but isn't it still premature to predict major inflation instead of/before further deflation on this basis? Looking at Evidence E, it seems that Bernanke's managed the feat of reversing a decline in shadow + traditional bank liabilities once before, but his triumph was short-lived and so not very inflationary. (True, the decline in liabilities was still only small the first time it was stamped out, but the second derivative made it a wild ride.)
So the Fed can helicopter-drop bundles of dollar bills on top of the rubble-heap of bank liabilities, but it seems that will only cause the pile to go higher unless and until the internal dynamics of the pile produces another rockslide. That's an incomplete analogy, because this pile can fall upwards (through renewed optimism leading to increased lending) as well as downwards. But the example of last time round suggests that while a sustained releveraging is possibly coming next, it's by no means inevitable. Which suggests that the inflation/deflation question will be settled less by the macroeconomic dollar-bombing air war than by the continuing ground campaign to stave off every possible future deleveraging crisis - US commercial and residential RE, US municipal and state debt, China, the PIIGS, etc. etc. - until some unpredictable point when irrational exuberance takes off again. Another quarter? Over twenty years?
Speaking of which, would the comparable graph for Japan show any periods of increasing financial-sector liabilities in the post-bubble decades?
(Disclaimer: I don't know nuthin' about anything.)
What, really, was taken care of?
We've had a bunch of balance sheets altered. It's been no more than a repackaging of "risk." Actually, it's been a repackaging of promised future work. We're still continuing to lie to ourselves. Anyone here really believe that our aging demographics and declincing energy sources can take care of this, without severe reductions in standards of living? And declining standards of living will likely place more claims on future work in the form of health care services.
Poeple can perform these mental masterbations about inflation and deflation all they want, but as a civilization we're in decline. And for what it's worth, decline seems to side with deflation more than inflation does, but that's just semantics...
Looks like Ben really has saved us from the Second American Depression. Bless his soul.( I don't bank at TBTF)
2011 shaping up to be a great year. We have a ways to go before the consumer can deleverage more meaningfully. Taking everything into account (reading all the charts posted up here on ZH, Market Watch, Market Ticker and IBD... We are going to grow out of this, no question about it. (after all, who is going to come collect on US federal debt?) lol!
The worst is behind, folks. We won't lose another 8 million jobs. Maybe 300 billion or so (municipals). but not enough for the DOOMSTERS to get theire way (Total Collapse & System Reset)
Gold is looking to be a great short right about now. Should plunge to around 1,100 or so by March 2011. It is definitly overheated, bull market is fading fast. Bonds are NOT a bubble like so many here believe. US Bonds > Gold.
Thanks for the work Tyler and ZH! (Can't wait to see what Denninger and Mish have to say about this, I value you their opinion on par-but not as good as Tyler)
I dare you to short gold and silver now. I dare you.
Bernanke is pretty much running out of time, IMO.
If really brash inflation DOES (I am assuming 'brash' hasn't happened yet) start to hit, isn't Bernanke guaranteeing his own resignation or ouster?
How long would a Congress in today's U.S. political climate allow voluminous and increasingly angry senior citizen 'sit/cane/wheelchair-ins' within offices and the halls of Congress if the big I really did to start to cost them a 10% to 20% (not selective, but averaged/smoothed out) real inflation haircut.
I do not think our system is designed to allow for a politician wishing to be re-elected to tolerate this.
You may say in response: "But so what, because there's nothing they can do stop inflation."
Answer: Paul Volcker.
History may not always repeat exactly, but it sure does rhyme strongly.
Don't worry about the Debt. 90% USA. 200% JAPAN. We will come back in a decade and talk about a US soverign debt crisis.
GET OUT OF GOLD! I have beaten the Markets every year and made most of my money in 2008. Gold is a giant bubble! Please do it folks, it is going to crash!
Peter Schiff "was right" but lost most of his money during the 2008 crash.
i disagree.
http://www.zerohedge.com/forum/fiat-paper-bubble-run-your-lives
Well, if you've done so well, then why the fuck are you here? I mean, if had all the money that you'd like us to believe that you've made I think that I'd be off enjoying it.
Do people really believe that they're safe gloating about shit that they have really little control over? Seems pretty stupid to me...
Listen, I'm not fucking flagging you! If you're running around flagging me (I see that everything that I've been posting in response to your posting seems to get flagged) then fuck you you childish fucking idiot! If not, then the ignore...
i'm flagging him. he has shit for brains.
NO, NO, NO, NO, NO. IMPOSSIBLE.
That statement sounds good on the surface, but you really must take a look at the numbers before you say this. Do you have any idea how much interest the USSA would need to pay on its debt at this point if it raised interest rates to 20% or higher? Assuming the tax scheme is passed that Obama and the republicrats have agreed to, the new debt becomes about $3,000,000,000,000 to $4,000,000,000,000 every year... and that doesn't even count the additional $4,000,000,000,000 or so for shortages in SocialSecurity/Medicare/Medicade and other "locked in" expenses.
So, what happens when they have $8T in additional debt every year that they finance at 20% interest? Huh? And since they now finance most government debt with shortish term bonds (to hold down their interest payments), what happens when $20,000,000,000,000 is financed at 20% interest rate? That's $4,000,000,000,000 interest per year, which is far more than tax revenue... just for interest (no programs).
This would happen very fast in your scenario... because they actually make it happen on purpose in your scenario. The fact is, the interest rate "death spiral" would happen almost instantly in your scenario.
This is not the early 1980s. What you're saying should happen, but it won't happen.
In fact, the FederalReserve and government of the USSA have now locked themselves into a completely and inherently impossible situation. The FederalReserve must (and therefore will) leave interest rates at [near] zero forever... where "forever" means "until the system completely collapses".
Anyone with half an eye open can see that the predator class has now officially given up. How? Well, the debt commission just offered a report with some extremely modest debt-reduction suggestions. What happened in response? The commission itself could not even accept the suggestions. And Obama immediately decided to let everyone (at all incomes) retain the "Bush tax credits" for another two years (at which time they will be extended again). In fact, every move the government makes increases the debt further and faster. Which means, they have totally freaking given up. They know the collapse is coming. They know they can't stop it. They know they can't even do much to delay the collapse any longer. So they're just beefing up the TSA++ police state as quickly as possible while they pretend to give every interest group whatever they want to keep riots from breaking out today.
In other words, game over. They know it. Anyone awake should know it. The entire system will collapse in 2011 and 2012... and they very much intend to make the world a rock solid police state during those two years. Just watch.
that pretty much sums it up.
Yeah, this isn't the Volker era.
I've been telling people that I didn't expect any possibility of signficant interest rate increases until after all the big rash of ARM resest were over. But now, seeing as unemployment is only getting worse, I don't think that rates can be increased even after the ARM resets.
Further, it is more than clear that there needs to be a signficant shift in the use of capital, one that's far more focused. That ain't going to happen with inflation.
I DO believe that The Bernank and others DO want deflation, but the trick is in not allowing it to get out of control. They just can't teletgraph it, lest it be defeated by other forces. Deflation will keep the system going, inflation, as PM holders believe (and I support this belief) will kill it. Those wishing to clean up the system promote deflation. As we all know, the numbers that we're presented with are generally distortions. The greater measure is what we actually see.
+$14T. You are absolutely correct, sir. Thank you.
This statement:
"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!"
is pure rubbish. One quarter is not a trend.
I suppose these analyses have utility. But frankly, I believe they mostly serve to take many eyes off what matters, the fundamentals. That is the inherent corruption of "fractional reserve banking" and fractional reserve practices of all kinds.
Think about it. Assume you work long hard hours diligently for years. You live a frugal life and save 30% of your income for "later" (to send kids to college, to give kids a starter home, to travel the world for two years, to start your own business, to enjoy retirement, whatever). This pretty much describes Chinese workers... and prudent westerners.
Now, you need to decide whether to just bury the gold coins you earn to save them... or... lend some/much/all of your savings to others to hopefully help others develop viable endeavors and improve your own savings results... an overall beneficial and benevolent alternative, but with very real risk (if those who borrow your savings cannot repay the loans).
This makes you very careful. You either decide to forego the potential benefits of being a creditor, or you are very careful to lend wisely. Either you personally choose who to lend to and the terms of the loan (and require very reliable collateral), or you very carefully personally choose an agent that pools funds from many savers and lends to many borrowers, thereby diluting the impact of bad loans.
What you would never do is... make loans without very carefully considering risks. Why? Because you are risking 30% of your entire working life, and that's a huge.
Now consider the essence of fractional reserve banking. Now you save your gold (or federal reserve notes) in some bank. You don't give a damn which bank, because they are all insured by the FDIC, so you will definitely get your money back. So you might as well just choose the bank paying the highest interest rates.
Now look at your bank. Your bank doesn't lend your money to anyone, it just sits inside its computer as a pattern of bits. However, due to fractional reserve banking, that bank can lend money to others. What money? Doubly-fictional money, of course. Not only is the "money" you deposited fictional (fiat, fake, fraud, fiction, fantasy federal reserve notes... and debt notes to boot), but every penny your bank lends out is created out of thin air. Your bank simply credits the account of the borrower. POOF.
Now, isn't that special? Your money is "safe", because the bank did not lend it out AND because the FDIC will cover any losses the bank suffers and make sure you get your savings back. No problem, since the cabal who creates fiat credit money out of thin air will always "lend" the FDIC more money.
So your bank has every incentive to lend the money. They know perfectly well the only risk they have is... that the obscene profits and salaries and bonuses they receive might end someday if most of the borrowers can't pay back the loans. So, worst casesenario? They retire early with $100,000,000 instead of normal with $250,000,000 or so (reduce a zero or so for smaller banks).
What if a bank only makes prudent loans? Well, quite possibly they will not have any customers. After all, why would someone borrow at a higher interest rate from a bank that requires 30% down payment when most banks offer a lower interest rate and 3% down payment?
How can any honest, ethical human justify a system in which the most utterly non-productive people on earth "earn" massive riches by creating fiat-debt-money out of thin air, at [near] zero cost, and entice poor, clueless fools to become life-long debt-slaves? Answer: no honest or ethical humans can or does justify such a system. They either don't understand how inherently corrupt the system is, or they consider it revolting.
The problem with this system does not end with the absurdity of making working people the slaves of utterly non-productive (actually destructive) people. On the more general viewpoint, we have a system that inherently misdirects resources towards non-productive and/or riskier places and thereby weakens an entire society (and world). It completely destroys the relationship between productivity and reward, and in fact inverts the relationship. Over time, this makes everyone but the most thoughtful people become more corrupt and less productive, and convinces honest, productive folks to "give up". Call this the "USSR phenomenon" if you wish, where the system literally ground to a halt for lack of any real incentive to be honest or productive.
Today, the "fractional reserve culture" has reached what must be a "peak" (let's hope so, at least). The predator class who run this system have figured out endless ways to massively jigger the system to enrich themselves beyond absurdity, and totally dislocate the world economy. For example, they have found ways to effectively "multiply the fractions". They know a bank is allowed to create out of thin air 20x to 50x as much as they hold in deposits. So, in effect (albeit slightly more obscurely), they realize they can loan 50x their assets to a collaborator, who deposits that into their "bank", who can then loan out 50x that amount via the same fractional reserve scam, and control 2500x the fiat wealth they collected from their slaves (depositors). These schemes are endless when fiat is allowed, because nothing is real, and multiplication is free.
The only solution is get real, which also requires remove multiplication. Eliminate all forms of fiat money. Eliminate debt money. Eliminate all fractional reserve practices. Return to an honest system. Which is?
People who produce trade the real physical goods they produce for other real physical goods. For convenience, most people will choose to receive gold coins as the real, physical good they receive in exchange for the real, physical goods they own and trade. People will then save or carefullyloan their assets to others on the basis of their history of personal honesty, ethics and reliability, plus the wiseness of their plans, plus their collateral.
Simple. Honest. Ethical. And no need for a predator class. Today, we can clearly see what happens when a scam as obscene as "fractional reserve practices" exist. The predators know a good scam when they see one, so they take control of this system. Predators have no ethics, so soon they learn how to buy (and become) politicians and bureaucrats. Now they can totally control everyone, and everyone becomes enslaved in their police state.
One very rarely identified, but horrific problem is how high prices become in fractional reserve systems. Before such systems are created, goods are cheap... for several reasons. First, prices must be low, because sellers will find very few people who can afford their expensive products. Second, prices are low, because the bulk of wealth is available to producers and not sucked away to fund the predators in the fractional reserve [financial] class.
For example, a house today would cost 8x to 12x less if no fractional reserve practices existed. In effect, what tends to happen is this. The price of a house (or other asset) that is affordable in an honest system, is replaced by the "required down payment" in the fractional reserve system. In other words, a house that costs $50,000 cash in an honest system ends up costing $50,000 down payment and $500,000 total (including mortgage interest) in a fractional reserve system. Today, this absurdity has been pushed even further, to the point that zero down payment is required... and presto --- one more life-long debt-slave is created.
Yes, fiat money must end. But even more important, fractional reserve practices must end. This is the most egregiously corrupt system imaginable, which is why the banksters have been pushing it so hard for hundreds of years. They love being the most unproductive people on earth, at the same time they are the richest. This must end.
End fiat.
End fake.
End fraud.
End fiction.
End fantasy.
End fractional reserve practices.
sorry had to junk you only because I disagree, respectfully.
Without Bernanke and his actions, we would be in the thick of a CRUSHING Deflationary Depression, as we speak.
I believe Ben deserved Time's Man of the Year. SO far, he has done absolutely stellar.
We can agree to disagree. Will see who is correct. I am more confident than ever that Bernanke "killed it off"... (take that for what it is worth)
Okay, let me ask this. If not for the actions of Greenspasm and Bernanke and the FederalReserve in creating bubbles and encouraging absurd types of mortgages and derivatives and other actions... would events have occurred that REQUIRED his actions to avoid a CRUSHING deflationary depression?
I hate to even ask "practical" questions like that, because it seems to accept the notion that "central planning" and "authoritarianism" and "elitism" are acceptable forms of organizing human interaction.
You also say "we will see who is correct". No, we won't. You seemed to conveniently miss the main trust of my message. Whether Bernanke can engineer a "non fatal crash landing" of the economy rather than a "fatal crash landing" has nothing whatsoever to do with the question of whether some favored bunch of non-productive predators should be allowed to hold strings that manipulate the lives of all productive individuals. The answer to that is NO, regardless of how well Bernanke happens to fly his helicopters.
fair enough. I don't disagree with what you say in the context of history. I am merely pointing to the context of the current global financial system.
Essentially the US' main threat are the BRIC nations. They are ultimatley the bond vigalites calling the shots. Include Japan in there, fine.
Japan has a debt to GDP of 200%. Who is the cental banker of Japan? Chicago school monetarist. Same as Bernanke a monetarist- not a keynesian. I studied Bernanke for extra credit. Milton Friedman, Paul Craig Roberts, Paul Volcker, Karl Brunner, etc...
I don't see any COLLAPSE/BIG EVENT/BREAK DOWN/DRAMA playing out. Very very very very slow grind. "Fall of Rome" scenario. When most of us are supposed to be collecting social security maybe.
The curreny system can last for at least another decade, pending no "BIG event".
I agree with the "Peak Oil" theory to the extent growth is not infinite. Credit cannot expand forever. I do not believe we have seen "peak credit" in terms of Soverign Debt.
All else equal (no black swans bank failures etc), credit aggregates and the status quo can be maintained right on out through 2015...perhaps significantly longer...
good luck to all
So, just because you don't SEE any black swans means that there aren't any lurking? That's absurd logic!
Further, studying history means squat in the face of a totally new/fresh scenario, that of the global economy grinding to a halt. Yes, you too might believe that it's slowing down, but to categorically state that it can NOT hit upon a big unforseen tipping point is wreckless prognostication, one overflowing with hubris.
All systems fail. And big systems fail big.
As far as your prognostication that the status quo will hold through 2015, how is this to be measured? A lack of massive riots? TPTB are still in power (perhaps through a full proclaimation of a state of emergency)?
Remember: 1) tipping points don't happen at half-way points, they can happen much sooner; 2) economies of scale can also operate in reverse (most people just can't get their heads around this one; typically the same types of minds that said that housing prices could never go down).
so the Constitution is, in point of fact, a "Living & Breathing" document, after all.
Thankfully, Glenn Beck reality check didn't come in (2 junks for that)
I don't beat off to Hilary nor Keith Olbermann either...yikes
I think that you misplaced your reponse...
junking is so much fun! It's a junk party!
There is a myth that somehow we can live in a libertarian world full of sunshine and unicorns. There will always be a bunch of favored non productive predators. However in a meritocracy all of us have the chance to be a predator. Look at lloyd Blankfein or whatever his name is. he grew up poor didn't he? The current head predator at Goldman? Most of those goldman worker bees were hungry lower middle to middle class guys growing up.
What a putrid pile of slime you are.
I had to junk you because I believe you honestly don't know what honeststan is talking about. Ergo, you are junked for being ignorant.
Next?
I see your junk and raise. Every gold standard has failed. Sure every fiat standard has failed too, but every gold standard in history has failed. If you read about the people who lived during a gold standard it did not help the little man. The gold standard imposes horrendous costs. We see all the disadvantages of fiat because we live in a fiat system. Those people who lived during a gold standard thought, and wrote, differently.
WRONG. The gold standard did not fail, the politicians and international central gangster banksters murdered it.
The "gold standard" imposes ZERO costs. Sure, I am certain the international central gangster banksters have written endless piles of lies in gold standard times to justify installing themselves as masters of the universe. Those arguments are pure lies and deceptions.
Everyone who wants something for nothing will surely hate any form of "gold standard". No kidding. Just like every thief just hates high quality alarm systems and vaults.
However, every honest, ethical, productive, liberty-loving human benefits from a pure solid gold standard.
You are an apologist for the predator class... period.
The Vampires are 40% of the economy?
This will go to 50% , then 60%, then what?
Oh, , "Privatize" All Government Services.
Parking meters, tolls, prisons, so far.
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.
*******************
Why would anyone use M3 to measure Money-
M3 also contains MZM and MZM has no effect on the increase or decrease of Money Supply-
Large time deposits-travellor checks-etc.
Money moving in or out of MMMF's in large amounts would effect direction of M3
http://research.stlouisfed.org/fred2/categories/28
i'm enjoying the banter 2 nite chaps.
i like the well crafted debate and the points are well made.
but
1) will inflation be exported around the world, such as in china just now perhaps?
or will it be like wiemar germany and be mostly in usa
2) i get the feel the weak politicos have given up - but system collapse and anarchy, i dont see that.
if u r still up i'd be interested to hear ur thoughts
my personal thoughts are bernanke intends and has always intended to inflate away the debt.
history shows us its that or default.
default = end of the dollar
because the private Federal Reserve Note has been the 'world reserve currency', with such commodities as oil priced in this fiat, it is possible that we could see hyper-inflation without other fiat currencies being entirely destroyed. The number of Federal Reserve Notes in circulation (including digital entries) is unprecedented in human history. A run on the bond market, for example, could be the event which creates the final push for The Fed to print even more before a complete flight out of all Federal Reserve Notes and into PMs and those other national fiats not so widely printed.
http://www.zerohedge.com/forum/fiat-paper-bubble-run-your-lives
Remember that only 3% of U.S. fiat currency exists in physical form.
It may or may not be a small or very large point at a time when mark to fantasy valuations are tagged on every asset imaginable.
did yothanks i'll look at that.
did u know the real chopper read still goes about australia doing the odd show here and there with his wicked tales and thoughts on life?
he lives in tasmania but flies to areas to do one or two nights at small selected venues
then its back to the quiet life.
the guy is still living life his own way.
best-selling author who is "semi-bloody-illiterate". gotta love it.
The key to a shift from deflationary deleveraging to inflationary debasement is monetary velocity. Money being created is not enough; money must be spent, and spent again and again to create inflationary pressures.
Wages are still falling for the vast majority of non-C-level workers. An increasing proportion of wage packets is going to the basics of fuel, food, healthcare and education. Unemployment is high, and staying high for the foreseeable future. Non-financial sector corporate profits are being squeezed by commodity spikes. Taxes will rise because the deficit is otherwise uncontrollable, particularly as interest rates rise on government debt. As a result, the risk of an inflationary expansion of economic activity sufficient to get velocity to the critical level for hyper-inflation is near zero.
I'll believe in inflation when real wages for real workers show strong, sustained growth.
Well said, I quote! Remember this chart:
http://research.stlouisfed.org/fred2/data/M2V_Max_630_378.png
The phrase "Pushing on a string" comes to mind :-)
Yep, never more appropriate phrase!!!
Hey old chap, good to see you again!
And it's really as simple as you state.
I think that people are placing their emotions (financial positions/bets) and their literal interpretations too much into this. The world is experiencing full blown contraction, how much is yet to be seen, but everyone has backed off of the throttle. Hardly a case for inflationary scenario: yes, in patches there's inflation, but on the whole it's contraction.
Since energy = work, and since oil is the greatest energy source, one need only look to world crude oil production to test whether the global economy is expanding or contracting: http://www.eia.doe.gov/aer/txt/ptb1105.html
I'm hedged for just about any outcome, in which case I've got no clear reason to push a particular point. I'm long physical realities and logic.
Ok! I always appreciate new points of view as your, but how we explain this?
http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=lin...
If we read the last "Flow of Funds Accounts" (http://www.federalreserve.gov/RELEASES/z1/Current/z1.pdf) released by FED, we can see at pag.111/125 the continuing loss of value for householders and the deleveraging in act especially in the financial sectors at pag.17/125 (line n.10).
In other words...deflation.
Lucy, I wasn't arguing against deflation. I'm trying to cut to the real chase, that of the relationship of physical resource extraction, esp energy, to growth, and that for all purposes the real issue is whether the world's economy is expanding or contracting: it is, after all, a global economy (set up and driven by the US).
Someone here recently posted the following, which I found rather interesting/telling:
http://www.inscc.utah.edu/~tgarrett/Projects/Economics.html
If you are intersted on this issue, you can found many articles on internet (example: http://userwww.sfsu.edu/~ciotola/beta/PHE_synop_v06.pdf or http://metapatterns.wdfiles.com/local--files/members:tylervolk/Volk.CC.t...) but in general I prefer read about Nicholas Georgescu-Roegen's works which fall within the Thermoeconomics (http://en.wikipedia.org/wiki/Thermoeconomics) or better the Ecological Economics (http://en.wikipedia.org/wiki/Ecological_economics).
In my opinion, it's important reading also about the idea of degrowth (http://en.wikipedia.org/wiki/Degrowth).
On the de-growth front, one thing that I haven't had much success in is getting someone to acknowledge the impact of reverse economies of scale. It's my belief that reverse economies of scale will signficantly push up the tipping point.
I was, as far as I know, one of the first people to talk about peak oil exports. I think that the first person I heard mention this angle was Jeffrey Brown: I had a brief exchange with him.
Why poeple don't get the energy = growth (potential) connection is beyond me. You'd think that after the Bush administration that this would be pretty clear: they were desperate to hold control over Iraqi oil; that administration wasn't stocked with energy idiots.
This is an important point. The government can hire people and pay them, and to some extent it is doing that, but at the price of increased deficits, which call other things into question.
Out in the private economy, nobody's paying anybody. They could, but that's a wealth transfer reversal, even as private debt is maxed out, too.
The debt has to be reduced but within the current system that is impossible. It can only go up.
That leaves only one thing.
Bens made holding dollars, CD's, etc. nearly yield nothing attempting to force a flight into risk.
• But real estate (RRE and CRE) is the foundation of all...and credit expansion here is the key. But up to 30% of homes are being bought for cash...the rest are generally being financed with 10%, 20%+ money down. CRE likewise moving on cash and strong financing. Lack of leverage expansion and outright credit contraction is BB's worst nightmare. Likewise, personal credit growth down. Only expansion is in student loans that will be a net drag on housing and the economy once these poor kids graduate into a "new normal" lower income job market with this education debt anchor immediately round their necks. US real estate prices will continue falling on flat wages, rising interest expenses, increasing lender requirements, and oversupply for a while (people don't usually lever up on a depreciating asset).
Look at the economy, wages, and credit expansion -
• The U.S. economy (GDP) grew by an average of 3.8% from 1946 to 1973 while real median household income surged 55% (or 1.6% a year).
• US has had slower GDP growth since 1973 (averaging 2.7%), and nearly stagnant living standards, with household incomes increasing by 10%, or only 0.3% annually.
• Ahhh, but look at credit growth from late 80's onward. Stupefying what was made up with credit growth for what was not made in wage and GDP growth.
• BB's attempt to start inflation only seems capable of debasing the dollar (rising inputs) but incapable of creating jobs, raising wages (due to the globally competitive labor market), nor creating credit expansion. Can't have proper inflation without wages increasing (at least somewhat) and/or credit expanding. The faster BB debases dollar, the sicker the US economy becomes (higher unemployment, etc.) due to higher inputs not offset by higher wages or credit expansion.
• BB can and will print until someone or something stops him but I only see stagflation and BB needs outright inflation for one more go round on the bubble machine.
It's deflation and stagflation on the back of dollar devaluation but just don't look for it in the stock market - the direct recipient of printing (money has to go somewhere...there's an upside to every downside). Fiat will go there and commodities to offset the ultimate expected loss of dollar buying power. The US economy is set to have a stagflationary depression but many S&P500 corporations are global (inexpensive workforce and global consumer), lean (replacing people w/ tech / automation), and cash flow producing providing services at a profit and in dollar terms their stocks could? rise nicely. US consumer dependent / US staffed business of the Russel, that's a whole other story and looks like the next great short.
THEN AGAIN - MAYBE BOND YIELDS ARE SUDDENLY SAYING BULLSHIT TO EVERYTHING I SAID?
I can't beleive that we have gone through 230 comments (OK, I didn't read the last hundred) and no one has tied this revelation to the coincidental spike in bond yields. Cummon, guys, just because its the weekend, don't get lazy...