Four Letters To Rosie

Tyler Durden's picture

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Mako's picture

"global deleveraging cycle"

There is no deleveraging in the system.   Individuals can deleverage if the population increases at a huge rate but the leverage of the system does not go away it would just be spread over a larger population.   The deleveraging of the system is called a collapse.

There isn't too much debt, if debt were $45T instead of $52T and you were not producing more credit/debt, you would be collapsing at that level.

You can't pay interest on $45T just the same as $53T(now $52.4T) with negative credit creation.  Humans are playing a game they will never ever win, the appearance of winning can go on for a while though... in this case over 6 decades.


etrader's picture

They'll end up having two dollar pegs. T1 for general circulation & T2 for pre existing debt before a set date.

T2 debt will be pegged at say 25 to 50% of general circulation T1.

Would have the same effect of  Roosevelt Gold Confiscation Order.

anarkst's picture

Mako, you must have had a brutal weekend.  That's some seriously incoherent thinking going on there.

Spitzer's picture

So with Ron Paul as president after Clinton, with Volcker at the Fed and Schiff as treasury sec, you claim that the system would still collapse in the next 5 years ?

Keynes that fag fucked it all up, the system is not self defeating.

Under sound money, the supply of capital is finite the price of capital, the interest rate, must rise as the supply dwindles making it harder for businesses to borrow.  This checks credit expansion at a level where the growth in the economy generates enough wealth to at least service said debt.  We can then deduce that any further lending of capital beyond this point results in a loss as the growth rate will at some point become smaller than the interest rate.

jdrose1985's picture

Read chapter 5 of the grapes of wrath.

What don't you understand about human nature?  It corrupts "sound money" the same as credit money. The system we choose time and again consumes us without fail.





monmick's picture

So now we have a State government that is acting exactly like the ostrich...

Is that what they mean by the Ostrich-ian School of Economics?

PS -- Sounds better in French: l'école Autruchienne. I believe Ben Bernanke is from that School...


Paladin en passant's picture

Interestingly, Austria is referred to as "Österreich" in German.

seventree's picture

New York State probably won't pass a budget this year at all. The politicians are afraid that the cuts will be so severe that the government workers' unions will make sure they are all defeated in the elections in November.

Once the November elections are over, a lot of desperately hidden bad news will come to light. The winners can enjoy a moment of triumph before reality comes down on their heads. (For a preview, see Greece.)

Snidley Whipsnae's picture

Florida has done a remarkable job of keeping their financial skeletons in the closet. Once Gov Christ is gone a lot of new about Fl will be coming out...None of it good.

Muir's picture

"will be coming out"


The biggest "unsecret" about Charlie.

Mitchman's picture

If the underlying theme over the next 3-5 years is deflation, then is the run-up in gold delayed for that period of time also?

breezer1's picture

the run-up in gold will only be delayed by the price suppression scheme. gold and silver are political and must be suppressed to keep support for the paper stuff, and there will be a whole lot more paper real soon.

Leo Kolivakis's picture

Hmm, Rosie forgot the 4 Ds:

Demographics, Deficits (especially pension deficits), Debt Deflation.

Hyperinflation? Yeah, maybe by 2030!!!

GlassHammer's picture

Oh good someone finally mentioned demographics.

Does anyone notice an increase in upside down American families?

(Where you have 4 Grand Parents but only one or two grand children).


TBT or not TBT's picture

More so in blue states than red states.   No kidding.    The DNC knows this, whither the high interest taken by the Obama White House in making the results of the 2010 census favorable.  Conservatives breed slightly faster than lefties do, and the numbers in red states get bucked up by the influx of blue state residents who got tired (or fired) of high taxes, heavy regulation, and assholes.

Crab Cake's picture

"...and the state will pay them at some point in the future, they don't know when."

I think I'm about tell the same thing to my mortgage company and the IRS.  If anybody has any problem with it, maybe I'll just go out like Butch and Sundance. 

It's a free for all, fuck'em all.

"One firm is owed over $8 million on one job alone and has been told that if they quit, the State will sue them for breach of contract, even though the State will not pay them in the near future."

Welcome to the police state bitches.

anony's picture

From my experience with contractors who have donated handsomely to both partys to get these cushy state contracts, I'd say they have been living off welfare for as long as they have been involved with the state.

Police state my fanny.  They laid down with dogs and now they wonder why they have fleas?  Please.

Blues Traveler's picture

The beatings will continue until moral improves

Kimo's picture

Yes, bubble gum may cost more, but real estate, equities, wages....they're all going down.  Still, many are screaming, "INFLATION!"

Spitzer's picture

Everything is going down way faster when priced in gold. That is  inflation.

Crab Cake's picture

This country ain't got 3-5 years before TSHTF, and people start getting strung up, beat to death, and shot.  I mean quality people now, not the bottom 90%.  It's really that simple.  You guys want to rev up your calculators and run the numbers on the economy, the finances, and monetary policy; well you ain't look'n out your god damned window.  People are desperate, and they are a powder keg that could go off any month now.  Years, that's funny.

GlassHammer's picture

To quote Gerald Celente "People who lose everything, lose it!"

SWRichmond's picture

With you; 3-5 years, no way.

mynhair's picture

All is well.  Just take the unspecified job I offered you! - OSquirrel.

glenlloyd's picture

One of the reasons I subscribe to the past "doomsday" post where the author suggested selling any / everything (junk assets) you can before the end of the year. If prices continue to fall it will setup an expectation that they might fall further. If you don't need it then get rid of it. Excess cars, antiques, junk etc. Turn it in to cash, what do you need that storage locker for anyway?

If anyone ever needed a sign that America has a consuption problem look no further than the storage facility. These have sprung up as big business everywhere, and for what? So people can store the stuff they no longer use but don't want to get rid of. Maxed out credit cards on junk stuffed into a u-store it.

Temporalist's picture

People have been caught living in storage units.  They will become the new "public housing."


New York State of Mind

"This past year saw the highest level of homelessness since the city began recording such numbers in its history."

Belrev's picture

So we should all run out and buy as much real estate on leverage as we can. It will be the best protection in hyperinflation. Right?

rapier's picture

On the 3rd letter and " in The Depression: A Diary, Benjamin Roth feared inflation which never happened, but that debt was never really paid off, we grew our way out of it, basically."

No the debt was defaulted on, liquidated, we didn't grow our way out of it.

This flation stuff will drive you nuts.  Whatever happens the new boss will be the same as the old boss.  In any case the future will be much more authoritarian, so libertarians can be free.

DormRoom's picture

TD, et al analysises, and selective data are usually biased,  since its clear most of ZH contributers are Austrian school ideologues.  The fundamental assumption in all your analysis is that Keynesian/neo-Keynesian theory is inherently wrong, when empirical data proves otherwise.  So, if Keynesian theory does work, thus implying an expanded role for government in markets, which I'm sure mindfucks your bromance libertarian ideology, causing you a bro-me existential crisis.  I will hand you a bro-tissue.


p.s. A  group that comes up with a cultural meme called 'bros icing bros' should never be trusted with other ppl's money, but they are, cuz it doesn't take much creativity to make money by circulating money around a byzantine financial apparatus. 

You guys are no different than circus carnies looking to take nickels from suckers.

akak's picture

Could you translate that into Logical please?

I happen to have left my pro-Keynesian-Goobledygook-to-Logical dictionary at home today.

taraxias's picture

I'd settle simply for an english translation myself.

Canucklehead's picture

You don't get many dates do you...

Dread Pirate Roberts's picture

Oh great collegiate abode.  Please explain to us simpletons how Keynesian theory works when a country already has a national debt-to-gdp ratio of 90% and must borrow all the funds to "stimulate" private demand. 

Note, the average increase in a country's debt after a crisis is 86% (credit: "This Time is Different").  After our debt increases by (at least) 86%, how much of the country's gdp will be required just to service our debt?

Please show your work.

dryam's picture

Most of the money supply comes from debt in a fractional reserve banking system.  The system inherently needs to always move in the forward direction.  When the banks are lending a $1000 deposit can expand the money supply 20-30x. When the banks stop lending a $1000 deposit can shrink the money supply 20-30x (negative multiplier effect).  Real estate is the worst asset class for a bubble.  It's typically the biggest purchase in everyone's life.  People buy real estate with a lot of leverage.  Banks are inherently leveraged; it's leverage upon leverage.  The losses have been huge to say the least (no one really knows because the government wants to keep it secret).  It only takes a small % of bad loans to put an over leveraged bank out of business (in the real world).  The banks have not recognized most of their losses.  They are still marking-to-fantasy.  By all accounts the real estate has another 20-30% to drop.  25% of home "owners" are underwater.  We haven't started talking about CRE.  So, this all tells me the overall money has dropped an unthinkable amount.  I'm on the side of people that think that Bernanke has actually underestimated how much money he thinks he needs to print (btw, no matter how much money he prints, you can't push on a string).

Who is borrowing from the banks?  I see the fractional reserve banking system clearly moving backwards.  I own a lot of gold, but I'm also holding a lot of USD's for the deflation that I see coming in the money supply over the shortrun.

I think this why Hugh Hendrey recently said there would probably be deflation before hyperinflation.

SWRichmond's picture

I own a lot of gold, but I'm also holding a lot of USD's for the deflation that I see coming in the money supply over the shortrun.

I think this why Hugh Hendrey recently said there would probably be deflation before hyperinflation.


zen0's picture
by DormRoom
on Wed, 06/02/2010 - 16:20


TD, et al analysises, and selective data are usually biased,  since its clear most of ZH contributers are Austrian school ideologues.  The fundamental assumption in all your analysis is that Keynesian/neo-Keynesian theory is inherently wrong,.....




Economic theories are not essentially wrong or right, but beneficial or not, depending on what one's goals are. If one is of a totalitarian mindset, with government diddling from cradle to grave, Keysianism is for you. Just don't be shy to accept the consequences, or complain that you didn't know....

zen0's picture

I asked my dog about animal spirits and he looked at me like I was insane, then he crawled into his bed and went to sleep.

Not a Keynsian, I'd guess.

akak's picture

I suspect that Keynes first got his inspirations about "artificial stimulation" and "pump priming" by watching his dog lick his own balls.

zen0's picture

The problem I have with a hyperinflation talk is this: When does high inflation become hyper inflation? I lived in a time when we got regular 10% wage raises for a few years, got almost 20% in a savings account, and was paying off a 13.5% mortgage!


 And we didn't die! (thank you Mr. Volker)





akak's picture

"The problem I have with a hyperinflation talk is this: When does high inflation become hyper inflation?"

I asked this to somebody who had experienced repeated bouts of Latin American hyperinflation in the their life, and his answer was, when you seriously start worrying about the loss of value in your wages from one paycheck to the next.

Matto's picture

"when you seriously start worrying about the loss of value in your wages from one paycheck to the next."


Hence you stop hoarding and start spending ASAP, driving velocity and hence the broader measures of money supply through the roof!! Welcome to the the hyperdome.

Mark_BC's picture

What I don't understand is why Bernanke can't just print like there's no tomorrow to offset the deflation to maintain the appearance of price stability, until the final debt default crunch comes at which point the currency is the hyperinflated away within a few weeks. Felix Zulauf on KWN talks about this transition with deflation followed by a rapid death inflation at the end.




SWRichmond's picture

Persistent deflation, as has been pointed out by innumerable deflationists here, raises the buying power (value) of dollars, while crushing bank assets (loans) and accelerating bank closures.  A little too much bank fear = bank runs, so persistent deflation = bank runs.  Where will the money come from to pay off depositors?  It will be clicked into their accounts.  Whether this new money actually shows up in any accounts is debatable once the situation gets that far.  If it does, this could be the last straw for the currency.

There's no physical limit to printing; the limit is practical.  After a certain point, the market says "no mas."  Bernanke was getting away with it until the Chinese started to complain; the Europeans saw through it immediately.

Bernanke will print IMO, but this time around he will wait until he is "forced."

RunningMan's picture

We are actually getting both deflation and inflation togther right now. We are seeing the massive amounts of cash dumped into the financial sector spilling out in bank earnings and traders bonuses. Some of that is making its way into the services sector that supports these segments. But at the same time, unemployment is persistently high (alleged, massive census-driven positive job print tomorrow notwithstanding), and people's spending continues to be constrained and erratic. I think the government believes the money continuing to flood into the banks like oil into the Gulf will eventually wash up on the shores of the rest of the economy and stimulate job growth and prevent further price erosion. I tend to think it will just make one big sticky mess.

jmc8888's picture

stagflation was the result of switching to floating rate, taking us off the gold/silver standard, and the effects of deficit war spending under that new dynamic.  the concern over the value of what the oil sheiks were getting, among other geo-political events gave us our oil shocks.