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This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied

Tyler Durden's picture





 

When Henry Paulson publishes his long-awaited memoirs, the one section that will be of most interest to readers, will be the former Goldmanite and Secretary of the Treasury's recollection of what, in his opinion, was the most unpredictable and dire consequence of letting Lehman fail (letting his former employer become the number one undisputed Fixed Income trading entity in the world was quite predictable... plus we doubt it will be a major topic of discussion in Hank's book). We would venture to guess that the Reserve money market fund breaking the buck will be at the very top of the list, as the ensuing "run on the electronic bank" was precisely the 21st century equivalent of what happened to banks in physical form, during the early days of the Geat Depression. Had the lack of confidence in the system persisted for a few more hours, the entire financial world would have likely collapsed, as was so vividly recalled by Rep. Paul Kanjorski, once a barrage of electronic cash withdrawal requests depleted this primary spoke of the entire shadow economy. Ironically, money market funds are supposed to be the stalwart of safety and security among the plethora of global investment alternatives: one need only to look at their returns to see what the presumed composition of their investments is. A case in point, Fidelity's $137 billion Cash Reserves fund has a return of 0.61% YTD, truly nothing to write home about, and a return that would have been easily beaten putting one's money in Treasury Bonds. This is not surprising, as the primary purpose of money markets is to provide virtually instantaneous access to a portfolio of practically risk-free investment alternatives: a typical investor in a money market seeks minute investment risk, no volatility, and instantaneous liquidity, or redeemability. These are the three pillars upon which the entire $3.3 trillion money market industry is based.

Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets." You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA's latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen. Bank runs have become illegal." This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous "extraordinary circumstances" arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well - sorry, you are out of luck. It's the law.

A brief primer on money markets

A very succinct explanation of what money markets are was provided by none other than SEC's Luis Aguilar on June 24, 2009, when he was presenting the case for making even the possibility of money market runs a thing of the past. To wit:

Money market funds were founded nearly 40 years ago. And, as is well
known, one of the hallmarks of money market funds is their ability to
maintain a stable net asset value — typically at a dollar per share.

In the time they have been around, money market funds have grown
enormously — from $180 billion in 1983 (when Rule 2a-7 was first
adopted), to $1.4 trillion at the end of 1998, to approximately $3.8
trillion at the end of 2008, just ten years later.
The Release in front
of us sets forth a number of informative statistics but a few that are
of particular interest are the following: today, money market funds
account for approximately 39% of all investment company assets; about
80% of all U.S. companies use money market funds in managing their cash
balances; and about 20% of the cash balances of all U.S. households are
held in money market funds.
Clearly, money market funds have become
part of the fabric by which families, and companies manage their
financial affairs.

When the Reserve fund broke the buck, and it seemed like an all-out rout of money markets was inevitable, the result would have been a virtual elimination of capital access by everyone: from households to companies. This reverberated for months, as the also presumably extremely safe Commercial Paper market was the next to freeze up, side by side with all traditional forms of credit. Only after the Fed stepped in an guaranteed money markets, and turned on the liquidity stabilization first, then quantitative easing spigot second, did things go back to some sort of new normal. However, it is only a matter of time before the patchwork of band aids holding the dam together is once again exposed, and a new, stronger and, well, "improved" run on the electronic bank materializes. It is precisely this contingency that the SEC and the administration are preparing for by "empowering money market fund boards of directors to suspend redemptions in extraordinary circumstances to protect the interests of fund shareholders."

A little more on money markets:

Money market funds seek to limit exposure to losses due to credit, market, and liquidity risks. Money market funds, in the United States, are regulated by the Securities and Exchange Commission's (SEC) Investment Company Act of 1940. Rule 2a-7 of the act restricts investments in money market funds by quality, maturity and diversity. Under this act, a money fund mainly buys the highest rated debt, which matures in under 13 months. The portfolio must maintain a weighted average maturity (WAM) of 90 days or less and not invest more than 5% in any one issuer, except for government securities and repurchase agreements.

Ironically, the proposed change to Rule 2a-7 seeks to make dramatic changes to the composition of MMs: from 90 days, the WAM would get shortened to 60 days. And this is occurring at a time when the government is desperately seeking to find ways of extending maturities and durations of short-term debt instruments: by reverse rolling the $3.2 trillion industry, the impetus will be precisely the reverse of what should be happening, as more ultra-short maturity instruments are horded up, leaving a dead zone in the 60-90 day maturity window. Some other proposed changes to 2a-7 include "prohibiting the funds from investing in Second Tier securities, as defined in Rule 2a-7. Eligible securities would be redefined as securities receiving only the highest, rather than the highest two, short-term debt ratings from a requisite nationally recognized securities rating  organization. Further, money market funds would be permitted to acquire long-term unrated securities only if they have received long-term ratings in the highest two, rather than the highest three, ratings categories." In other words, let's make them so safe, that when the time comes, nobody will have access to them. Brilliant.

The utility of money market funds has long been questioned by such systemically-embedded financial luminaries as Paul Volcker (more on this in a minute). After all, what are money markets if merely an easy, and 401(k)-eligible option to not invest in equity or bonds, but in "paper" which is cash in all but name (maybe not so much after the proposed Rule change passes). And as money markets account for a huge portion of the $11 trillion of mutual fund assets as of November (per ICI, whose opinion, incidentally, was instrumental in shaping future money market policy), $3.3 trillion to be precise, and second only to stock funds at $4.8 trillion, one can see why an administration, hell bent on recreating a stock-price bubble, would do all it can to make money markets extremely unattractive. In fact, the current administration has been on a roll on this regard: i) keeping money market rates at record lows, ii) removing money market fund guarantees and iii) and even allowing reverse repos to use money markets as sources of liquidity (because we all know that the collateral behind the banks shadow banking arrangement with the Fed are literally crap; as we have noted before, we will continue claiming this until the Fed disproves us by opening up their books for full inspection. Until then, yes, the Fed has lent out hundreds of billions against bankrupt company equity, as we have pointed out in the past).  Money Markets are the easiest recourse that idiotic class of Americans known as "savers" has to give the big bank oligarchs, the Fed and the bubble-inflating Administration the middle finger. As you will recall, recently Arianna Huffington has been soliciting all Americans do just that: to move their money out of the tentacles of the TBTFs. In essence, the money market optionality is precisely the equivalent of moving physical money from TBTFs to community banks in the "shadow economy." Because where there is $3.3 trillion out of $11, there could easily be $11 trillion out of $11, which would destroy the whole concept of Fed-spearheaded asset-price inflation, and would destroy overnight the TBTFs, as equities would once again find their fair value. It is no surprise then, that the current financial system, and its political cronies loathe the concept of Money Markets, and have done all they could to make them as unattractive as possible. Below is a chart of the Net Assets held by all US money market funds and the number of money market mutual funds since January 2008:

Obviously, attempts to push capital out of MMs have succeeded: after peaking at $3.9 trillion, currently money markets hold a two year low of $3.27 trillion. Furthermore, the number of actual money market fund operations has been substantially hit: from 2,078 in the days after the Lehman implosion, this is now down to 1,828, a 12% reduction. At this rate soon there won't be all that many money market funds to chose from. While the AUM reduction is explicable through the previously mentioned three factors, the actual reduction in number of funds is on the surface not quite a straightforward, and will likely be the topic a future Zero Hedge post. Although, the impetus of managing money when one can return at most 0.6% annually, and charge fees on this "return" may be missing - the answer may be far simpler than we think. Why run a money market, when the Fed will be happy to issue you a bank charter, and you can collect much more, risk free, courtesy of the vertical yield curve.

Yet what is strange is that even with all the adverse consequences of holding cash in Money Markets, the total AUM of this "safest" investment option is still substantial, at nearly $3.3 trillion as of December 30, a big decline yes, but a decline that should have been much greater considering even the president since March 3 has been beckoning his daily viewership to invest in cheap stocks courtesy of low "profit and earning ratios" (that, and the specter of President's Working Group on Financial Markets). Could this action, whereby investors will no longer have access to money that historically has been sacrosanct and reachable and disposable on a moment's notice, be the last nail in the coffin of money markets? We believe so, however, we are not sure if it will attain the desired effect. With an aging baby boomer population, which would rather burn their money than invest in the stock market again and relive the roller-coaster days of late 2008 and early 2009, the plan may well backfire, and result in even more money leaving the shadow system and entering such tangible objects as deposit accounts (at community banks, of course), mattresses and socks. And speaking of the President's Working Group...

The Group of Thirty

When discussing the shadow economy, it is only fitting to discuss the shadow decision-makers. In this regard, the Group of 30, is to the traditional economic decision-making process as the President's Working Group is to capital markets. Taken from the website, the self-description reads innocently enough:

The Group of Thirty, established
in 1978, is a private, nonprofit, international body composed of very senior
representatives of the private and public sectors and academia. It aims to
deepen understanding of international economic and financial issues, to explore
the international repercussions of decisions taken in the public and private
sectors, and to examine the choices available to market practitioners and policymakers.

The Group's members meet in plenary sessions twice a year with select guests
to discuss important economic, financial and policy developments. They reach
out to a wider audience in seminars and symposia.  Of most importance
to our membership and supporters is the annual International
Banking Seminar.

Sounds like any old D.C.-based think tank... until one looks at the roster of members:

  • Paul A. Volcker, Chairman of the Board of Trustees, Group of Thirty, Former Chairman, Board of Governors of the Federal Reserve System
  • Jacob A. Frenkel, Chairman, Group of Thirty, Vice Chairman, American International Group, Former Governor, Bank of Israel
  • Jean-Claude Trichet, President, European Central Bank, Former Governor, Banque de France
  • Zhou Xiaochuan, Governor, People’s Bank of China, Former President, China Construction Bank, Former Asst. Minister of Foreign Trade
  • Yutaka Yamaguchi, Former Deputy Governor, Bank of Japan, Former Chairman, Euro Currency Standing Commission
  • William McDonough, Vice Chairman and Special Advisor to the Chairman, Merrill Lynch, Former Chairman, Public Company Accounting Oversight Board, Former President, Federal Reserve Bank of New York
  • Richard A. Debs, Advisory Director, Morgan Stanley, Former President, Morgan Stanley International, Former COO, Federal Reserve Bank of New York
  • Abdulatif Al-Hamad, Chairman, Arab Fund for Economic and Social Development, Former Minister of Finance and Minister of Planning, Kuwait
  • William R. Rhodes, Senior Vice Chairman, Citigroup, Chairman, President and CEO, Citicorp and Citibank
  • Ernest Stern, Partner and Senior Advisor, The Rohatyn Group, Former Managing Director, JPMorgan Chase, Former Managing Director, World Bank
  • Jaime Caruana, Financial Counsellor, International Monetary Fund, Former Governor, Banco de España, Former Chairman, Basel Committee on Banking Supervision
  • E. Gerald Corrigan, Managing Director, Goldman Sachs Group, Inc., Former President, Federal Reserve Bank of New York
  • Andrew D. Crockett, President, JPMorgan Chase International, Former General Manager, Bank for International Settlements
  • Guillermo de la Dehesa Romero, Director and Member of the Executive Committee, Grupo Santander, Former Deputy Managing Director, Banco de España, Former Secretary of State, Ministry of Economy and Finance, Spain
  • Mario Draghi, Governor, Banca d’Italia, Chairman, Financial Stability Forum, Member of the Governing and General Councils, European Central Bank, Former Vice Chairman and Managing Director, Goldman Sachs International
  • Martin Feldstein, Professor of Economics, Harvard University, President Emeritus, National Bureau of Economic Research, Former Chairman, Council of Economic Advisers
  • Roger W. Ferguson, Jr., Chief Executive, TIAA-CREF, Former Chairman, Swiss Re America Holding Corporation, Former Vice Chairman, Board of Governors of the Federal Reserve System
  • Stanley Fischer, Governor, Bank of Israel, Former First Managing Director, International Monetary Fund
  • Philipp Hildebrand, Vice Chairman of the Governing Board, Swiss National Bank, Former Partner, Moore Capital Management
  • Paul Krugman, Professor of Economics, Woodrow Wilson School, Princeton University, Former Member, Council of Economic Advisors
  • Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Economics, Harvard University, Former Chief Economist and Director of Research, IMF

and, of course:

  • Timothy F. Geithner, President and Chief Executive Officer, Federal Reserve Bank of New York, Former U.S. Undersecretary of Treasury for International Affairs
  • Lawrence Summers, Charles W. Eliot University Professor, Harvard University, Former President, Harvard University, Former U.S. Secretary of the Treasury

and many more. Given the choice of being a fly on the wall at a G7 meeting or that of the "Group of 30", we would be very curious to see who would pick the former over the latter. These are the people, whose "reports" and groupthink determines the financial fate of the world: their vested interest in perpetuating the status quo is second to none. Which is why we read with great interest a recent paper from the Group of 30: Financial Reform, A Framework for Financial Stability, released on January 15, 2009, deep in the heart of the crisis. While the paper has enough insight for many, non-related posts (we are already working on several), we will focus on the policy recommendations presented for money market funds.

Money Market Mutual Funds and Supervision


Recommendation 3:

a. Money market mutual funds wishing to continue to offer bank-like services, such as transaction account services, withdrawals on demand at par, and assurances of maintaining a stable net asset value (NAV) at par should be required to reorganize as special-purpose banks, with appropriate prudential regulation and supervision, government insurance, and access to central bank lender-of-last-resort facilities.

b. Those institutions remaining as money market mutual funds should only offer a conservative investment option with modest upside potential at relatively low risk. The vehicles should be clearly differentiated from federally insured instruments offered by banks, such as money market deposit funds, with no explicit or implicit assurances to investors that funds can be withdrawn on demand at a stable NAV. Money market mutual funds should not be permitted to use amortized cost pricing, with the implication that they carry a fluctuating NAV rather than one that is pegged at US$1.00 per share.

The phrasing of "with no explicit or implicit assurances to investors that funds can be withdrawn on demand at a stable NAV" should be sufficient to whiten the hairs of every proponent of money markets as a "safe" investment alternative. Yet what the SEC has done, is to take the Group of 30 recommendation, and take it to the next level: not only will funds not have explicit assurance of any kind vis-a-vis funding, but in fact, the redemption of said funds would be legally barred upon "extraordinary circumstances."

Rule 22e-3

From the SEC:

Proposed rule 22e–3(a) would permit a money market fund to suspend redemptions if: (i) The fund’s current price per share, calculated pursuant to rule 2a–7(c), is less than the fund’s stable net asset value per share; (ii) its board of directors, including a majority of directors who are not interested  persons, approves the liquidation of the fund; and (iii) the fund, prior to suspending redemptions, notifies the Commission of its decision to liquidate and suspend redemptions, by electronic mail directed to the attention of our Director of the Division of Investment Management or the Director’s designee. These proposed conditions are intended to ensure that any suspension of redemptions will be consistent with the underlying policies of section 22(e). We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares. Accordingly, our proposal is limited to permitting suspension of this statutory protection only in extraordinary circumstances. Thus, the proposed conditions, which are similar to those of the temporary rule, are designed to limit the availability of the rule to circumstances that present a significant risk of a run on the fund. Moreover, the exemption would require action of the fund board (including the independent directors), which would be acting in its capacity as a fiduciary. The proposed rule contains an additional provision that would permit us to take steps to protect investors. Specifically, the proposed rule would permit us to rescind or modify the relief provided by the rule (and thus require the fund to resume honoring redemptions) if, for example, a liquidating fund has not devised, or is not properly executing, a plan of liquidation that protects fund shareholders. Under this provision, the Commission may modify the relief ‘‘after appropriate notice and opportunity for hearing,’’ in accordance with section 40 of the Act.

Lots of keywords there: "fiduciary", "impose hardships" but most notably "permit us to take steps to protect investors." Uh, SEC, no thanks. We can protect ourselves. Your protection so far has resulted in the Madoff scandal, the BofA fiasco, billions in insider trading profits and not one guilty person, who did not manage to escape unscathed with merely a wrist slap in the form of some pathetic fine. With all due respect, SEC, any proposal that involves you acting to "protect" us should be immediately banned and any further discussion ended.

Especially in this case: what the SEC is proposing is simple - the entire market structure has been converted to a hedge fund. When investors hear the word "suspend redemptions" they envisioned a battered, pro-cyclical, leveraged, permabullish hedge fund, that suddenly "found itself" down 30, 40, 50 or more percent, and to avoid instantaneous liquidation, had to bar redemptions. Forgive us, but is the SEC confirming that the entire market is now one big casino, one big government subsidized hedge fund, where as long as things go up, all is good, but the second things take a leg down, just like any ponzi, nobody will be allowed to pull their money? Maybe Madoff should have created the same redemption suspension: his fund would still be alive and thriving, now that the government has become the biggest ponzi conductor of all time. And nobody would have been the wiser. But instead, the Securities and Exchange Commission, in discussions with the Group of 30, Barney Frank, and any other conflicted individuals who only care about protecting their own money for one more year, has decided, in its infinite wisdom, to make money markets a complete scam. And this is the gist of regulatory reform in America.

Conclusion

At this point it is without doubt that even the government understands that when things turn sour, and they will, the run on the bank will be unavoidable: their solution - prevent money from being dispensed, when that moment comes. The thing about crises, be they liquidity, solvency, or plain-vanilla, is that "price discovery" occurs all at once, and at the very same time. And all too often, investors "discover" they were lied to, as the emperor, in any fiat system, always has no clothes. Just like in September 2008, when the banks were forced to look at each-others' balance sheet and realize that there are no real assets on the left backing up the liabilities on the right, so the moment of enlightenment occurs are the most importune time: just ask Hank Paulson. Had he known his action of beefing up Goldman's FICC trading axes would have resulted in the "Ice-Nine'ing" (to borrow a Mark Pittman term) of money markets, who knows- maybe Lehman would have still been alive. Perhaps risking the cash access of 20% of US households and 80% of companies was not worth the few extra zeroes in Goldman's EPS. But we will never know. What we will know, is that now i) the government is all too aware that the market has become one huge ponzi, and that all investment vehicles, even the safest ones, are subject to bank runs, and ii) that said bank runs, will occur. It is only a matter of time. And just as the president told everyone directly to buy the market on March 3, so the SEC, the Group of 30, and Barney Frank are telling us all, much less directly, to get the hell out of Dodge. Alternatively, the game of "last fool in", holding the burning hot potato, can continue indefinitely, until such time as the marginal utility of each and every dollar printed by Ben Bernanke is zero.

h/t Geoffrey Batt

 


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Sun, 01/03/2010 - 12:20 | Link to Comment bugs_
bugs_'s picture

Way to go TD.

Our dollars in MMF have been "virtualized"

and are no longer really ours.

Sun, 01/03/2010 - 12:44 | Link to Comment Rainman
Rainman's picture

Our Masters have concluded that puny returns are insufficient to unwind the sheeple's newly found cash saving habits. Therefore, it is necessary to impose risk on the timid and skeptical.

Get out there and buy a Kindle, a house or a car.....or else.  

Sun, 01/03/2010 - 13:40 | Link to Comment Anonymous
Sun, 01/03/2010 - 14:06 | Link to Comment ATG
ATG's picture

Try getting gold through a metal detector,

or suffer the haircuts and frauds on paper gold.

Non starters both.

Cash just beginning to awaken as king...

http://www.jubileeprosperity.com/

 

Sun, 01/03/2010 - 14:23 | Link to Comment Anonymous
Mon, 01/04/2010 - 12:49 | Link to Comment Ripped Chunk
Ripped Chunk's picture

"GOLD IS AVAILABLE ALL OVER THE FUCKING WORLD."

Must be watching one of those "limited edition gold coin" infomercials at 3:00 AM. (personally, I was tuned into "riches in real estate" myself)

MORON

Mon, 01/04/2010 - 21:56 | Link to Comment Anonymous
Sun, 01/03/2010 - 14:26 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

You're an idiot.

Sun, 01/03/2010 - 17:57 | Link to Comment nicholsong
nicholsong's picture

I agree. But there are interesting stories out there regarding gold. Like this one: Pak has gold reserves worth trillions of dollars

Sun, 01/03/2010 - 18:11 | Link to Comment Careless Whisper
Careless Whisper's picture

 

@ATG  The Federal Reserve was created in 1913 and one of its "missions" is to influence monetary conditions in order to stabilize prices.

LOL

Compute for yourself, inflation since 1913;

http://www.usinflationcalculator.com/ 

Mon, 01/04/2010 - 14:32 | Link to Comment DosZap
DosZap's picture

This was a bit of a shocker, the comment...............

Trillions?, how about using some of it to come out of the Stone Age.

In HIS times,

"Silver, was as plentiful as stones in the streets"..............similar sounding.

On the Topic, are these dudes TRYING to start a RUN?.

Personally TD, I appreciate the heads up................

Anyone here????, your opinons on Perth, as a vehicle to offshore it, legally, allocated only.

Sun, 01/03/2010 - 19:16 | Link to Comment Anonymous
Sun, 01/03/2010 - 23:14 | Link to Comment MsCreant
MsCreant's picture

It's like they are hemming us in and corraling us, isn't it?

Fri, 06/17/2011 - 20:13 | Link to Comment carbonmutant
carbonmutant's picture

I'm reminded of the Aesop's fable of the Lion and the Lamb.

"I see many tracks going in, I see none coming out"

Sun, 01/03/2010 - 14:41 | Link to Comment chumbawamba
chumbawamba's picture

Another bullshit FUD turd.  You seem to drop a lot of them around any discussion of gold.  You're so obvious it's painful.

Have fun wiping your ass with your paper monetary instruments when your heroes pull the plug.

I am Chumbawamba.

Tue, 01/12/2010 - 22:54 | Link to Comment Anonymous
Sun, 01/03/2010 - 15:30 | Link to Comment Rusty Shorts
Rusty Shorts's picture

@ATG,

 

Try getting cash through a metal detector dip-shit... it has to do with the metalic filament in the security strip inbedded in the larger bills, get enough of them together in one spot and the signal that is returned from the detector can be picked up.

 

I am not Chumbawamba.

Sun, 01/03/2010 - 23:42 | Link to Comment Anonymous
Mon, 01/04/2010 - 11:34 | Link to Comment WaterWings
WaterWings's picture

Very interesting.

Mon, 01/04/2010 - 14:40 | Link to Comment Anonymous
Mon, 01/04/2010 - 11:37 | Link to Comment Anonymous
Mon, 01/04/2010 - 15:50 | Link to Comment Anonymous
Mon, 01/04/2010 - 14:39 | Link to Comment DosZap
DosZap's picture

Just don't try getting anything close to 10 Lge thru............

Their is a legal way to get Gld out  anyone noticed how hard it is to find Krugs of late?.

They are not legal tender..........so, I see no reason / way they can stop you from carrying out what you want.(if I am incorrect, pls correct me).

Sun, 01/03/2010 - 15:48 | Link to Comment mnevins2
mnevins2's picture

ATG, I see that "the usual suspects" are irate and attacking whenever their "holy grail" of G-O-L-D is questioned.

I've given up with this crew in regard to this subject. They never provide "light," just heat, profanities and insults.

In truth, I indeed enjoy their wits and comments. They are a bright group of individuals. But the rage and personal attacks upon those that question the deity of gold leaves me shaking my head and cold.

Perhaps my comments will engender the typical reply, but I hope not. I'd appreciate, from them, their using words and intellect to enlighten and educate.

I'd REALLY appreciate a "how-to" on their plans. Who are they (I don't want names, but generalities regarding age, family structure, income, geographic region, employment, approx holdings in pm) and how/why, in their specific predicament, they believe that their "plan" would benefit all of us.

Me? 50, two teen-age children, $100,00+, midwest suburb, finance - and have more than a little in regard to assets.

ZH provides me (and thousands more) with provocative, extremely intelligent and informative information. I am grateful. I then turn to the comments and find a lot of trash.

Sun, 01/03/2010 - 16:11 | Link to Comment MsCreant
MsCreant's picture

I am having a hard time behaving, but you are right, I should. Curious, is that your income, or you and your significant other. For instance you ask me and I am 60+, but then, I would not think to answer my husband's income as my own, but if I did, that jacks "us" up some. He earns his, I earn mine, I don't need him for that. Maybe some day. Hope not.

Here is the other one. Are you better than me if you earn 100+ and I only earn 60+? Is that the point of getting this info? Does that mean you have some greater authority than I do in thinking about these things?

What if I have benefits too? Should I go over to the side and calculate those too and scurry back over here with that total? And will you then go to the side and do the same?

I bet I sound ugly, and this seems to be some of the trash you don't like. But I am honestly curious. What if I am unemployed and living off my PMs? Am I not entitled to have a voice in this conversation?

I mean to confront you like I'd confront a friend.

And I am open to it that I have missed something and that you are not acting classist with this post.

Sun, 01/03/2010 - 17:43 | Link to Comment mnevins2
mnevins2's picture

Dear MsCreant, I believe that age is important because it provides a lot of perspective and context.

For instance, if one is 28, with kids, works at a major bank - versus someone at 60+, no kids, then, yes, I think that comments regarding "heading for the hills" (as a silly example) or "refusing to pay the mortgage" or whatever - then the difference in circumstances is important.

Regarding income, to simplify, my wife and I are indeed one unit. Always have been and, I presume, always will be. This maximizes efficiencies and simplicities.

Income in this thread can also relate to pm holdings - sort of. Many posters say "buy gold" and then talk about taking the next paycheck and picking up a couple of more ounces. This differs from someone who has personally stockpiled hundreds of ounces (or more).

I don't personally care about the "next paycheck" person and their ideas and motivations (no offense), but I absolutely wish to know what "Chumbawamba" or GK. They appear to have a serious conviction about pm's and I'd very much like to know their thoughts and plans - with some context.

Bottom line, we benefit (I believe) from the wonderful research, insight and prose of ZH. Many of us are quite concerned with what we perceive to be a financial house of cards - which, we believe, is benefiting a few over the many. I know finance and I know history, but my ignorance is also vast. I wish for enlightenment from ZH and the many posters, who, collectively (and, of course, individually), are at level much higher than mine.

We truly DO NOT know what the future will bring, but let's challenge and educate rather than insult and trash. Thanks. MsCreant - I WANT your voice - and others.

 

 

 

Sun, 01/03/2010 - 17:49 | Link to Comment Anonymous
Sun, 01/03/2010 - 22:11 | Link to Comment hayleecomet
hayleecomet's picture

good grief

Mon, 01/04/2010 - 23:43 | Link to Comment Anonymous
Sat, 01/23/2010 - 12:46 | Link to Comment dark pools of soros
dark pools of soros's picture

+ 42/6^[(766*45-(87+9+(-9/88))/9222)+.2255*666]

 

Sun, 01/03/2010 - 18:52 | Link to Comment chumbawamba
chumbawamba's picture

In a nutshell (because my education took years, so you can't expect me to give you the important background to my argument in one posting, or even several) this system is fucked.  Our debt-to-GDP ration is well beyond what other empires experienced just before their collapse.  Our central bank is monetizing thin air to pay off the financial blackholes created by unregulated/out-of-control over-the-counter derivatives that are valued at well over $600 trillion globally, and our government is planning to borrow every last unit of currency under the moon in order to keep from falling into a fiscal abyss.  How the hell does anyone expect this is going to turn out anything but very, very badly?

There are now literally tens of trillions of dollars of liabilities stretching from here on decades into the future.  Our debt-based monetary system means these liabilities will only increase in cost and interest as time goes on.  From where are the revenues going to come?  The pace of productivity and wealth creation in this nation will have to inflate accordingly.  How is this going to be accomplished?  Do you have any answers?  Does anyone?

We took a quantum leap from billions to trillions--a thousand-fold increase--in our economic discourse.  It follows then that our GDP will have track this increase to keep up with the new normal.  Again, from where are the revenues going to come?  Are they going to be conjured up again like magic, so that we go from trillions to quadrillions as the new new normal?  Or are you going to be expected to magically increase your productive output 1000 times to make up the difference, along with every other American (including children 1 and older, since we’ll also be needing more manpower for the job, way more than we have even if you include the illegals)?

WHO IS GOING TO PAY FOR ALL OF THIS?

The answer never comes.  Oh yeah, this is simple to solve, they say.  They'll just "add liquidity" to the market, then "drain it", as if this was just a matter of doing the dishes, and all the complaining and fussing and fearing and loathing and hemming and hawing was all just a matter of no one wanting to pony up to the sink to actually do the deed.  But no, that’s just a cheap distraction.  So the question remains:

WHO IS GOING TO PAY FOR ALL OF THIS?

I’ll tell you who: Us.  As in you.  And I.  And MsCreant.  Or at least those of us that are silly enough to file and pay taxes (I don't know about you two, but I do not submit to extortion, otherwise known by the letters I-R-S).  And how many people like me do you think there are now?  Probably just a relative few.  We're the "out there" nutballs.  We're the ones that make wild-eye predictions of economic collapse and social chaos to follow.  We're the ones who get pooh-poohed.  Until the government keeps pulling shit like this.  Then we grow in numbers.  The disgusted; the disenfranchised; the disaffected.  We find each other, learn from each other, and spread the wisdom.  We watch as the government creeps upon our God-given freedoms like a depraved predator, one after the other, picking them off until one day we’ll be left naked and defenseless.  But we prepare, and in the meantime we keep introducing new people to the mouth of the rabbit hole.  And if you’re courageous, and intelligent, you’ll go in.  And the deeper down the rabbit hole you go, the more you realize that real money—gold and silver—is the answer.

As more people discover the answer, the dollar takes one step closer to irrelevancy.  Once it reaches that point, you have hyperinflation.  Once the dollar enters hyperinflation the game is over; or rather, it just begins.  But then that's a matter of perspective :)

Will the dollar cross that line of confidence?  After all of my study, I sincerely believe it will and am convinced beyond a shadow of doubt about that conviction.  I’ve been waiting for someone to come along and explain how I’m wrong about this.  Despite my rhetoric, my eyes and mind are open.  Convince me.  Anyone?

In short: follow Austrian school of economics.  I'm not saying they have ALL the answers, but so far it seems they have pretty damn nearly all of them.

I am Chumbawamba.

Sun, 01/03/2010 - 19:33 | Link to Comment dogbreath
dogbreath's picture

Chumba,

 

In regard to other failed empires:

I noticed that all of them; Rome, Byzantium, China(1910) had bloated, disobedient, corrupt bureaucracies of eunuchs. Thios contributed to their downfall.   Britian(1945) differed perhaps in that it was broke and could not maintain it extensive colonies.  I have never gotten the impression they were corrupt but if they aren't eunuchs they are queer. 

Sun, 01/03/2010 - 22:17 | Link to Comment David449420
David449420's picture

Eloquent, and said far more concisely than I could.  And I am not an American, but a close neighbor.

The only thing that I am not 100% clear about is if precious metals are the be all & end all solution to weather the coming GLOBAL storm.  And it IS going to be GLOBAL, not just the US.

 

 

 

Mon, 01/04/2010 - 10:22 | Link to Comment chumbawamba
chumbawamba's picture

Gold, Guns, Garden.

Self-sufficiency.  Self-respect.

Self, Family, Community.

Damn, it's almost a haiku, but not :)

I am Chumbawamba.

Tue, 01/05/2010 - 15:03 | Link to Comment WaterWings
Sun, 02/06/2011 - 21:24 | Link to Comment web dizajn
web dizajn's picture

Democracy legitimizes this government aggression because the violence is sanctioned by a majority of voters web dizajn

Sun, 01/03/2010 - 22:28 | Link to Comment merehuman
merehuman's picture

Damn it CHUMBAWAMBA,   you write nice. Good flow, like straight from the heart.   Meanwhile we wait

for the shoe to drop , and the axe to fall

and i know its gonna hurt us all. Already has. At 59,this grown man has tears in his eyes. Empathy so sucks

 

Sun, 01/03/2010 - 23:21 | Link to Comment MsCreant
MsCreant's picture

merehuman rocks!

Sun, 01/03/2010 - 23:36 | Link to Comment Anonymous
Mon, 01/04/2010 - 02:46 | Link to Comment MsCreant
MsCreant's picture

Projecting some issues ya got with mom and dad?

Mon, 01/04/2010 - 12:23 | Link to Comment merehuman
merehuman's picture

Let go he says, having no idea who I am . I let go years ago. 

By the way, growing up is the ability to encompass a larger view. From my perch i see many tent cities and a people with little hope of a positive future.

I see hunger amongst many and recall how ones teeth chatter uncontrollably.  At night many keep walking as they literally cannot sleep.  Been there, done that and well remembered it is.

Having been poor repeatedly I have a ton of sympathy. This is not about us old fucks. We had ours and our glad of it. But age has taught us and so has  suffering. Its not for us we cry ,fear or worry, its our children and you and yours.

If, at our advanced age we have no sympathy or empathy then we havent lived

Mon, 01/04/2010 - 16:39 | Link to Comment Anonymous
Sun, 01/03/2010 - 23:38 | Link to Comment Anonymous
Mon, 01/04/2010 - 10:49 | Link to Comment SWRichmond
SWRichmond's picture

You and anon181711 just above (you?) sound just like my best friend's son, who is all sniping from the shadows, intergenerational bitching, and no answers.  Chumba has answers in his post(s), you just don't see them.   

As for the hyperinflation, try this: what happens to the currency when the credit deleveraging is so massive that it takes the sovereign debt with it?

Mon, 01/04/2010 - 15:57 | Link to Comment WaterWings
WaterWings's picture

Funny thing about most critics! It's easy to take swipes when you have nothing unique to contribute to the conversation.

Mon, 01/04/2010 - 10:25 | Link to Comment chumbawamba
chumbawamba's picture

Hyperinflation is a psychological event.  Credit de-leveraging is a derivation of the direct cause of hyperinflation, which is confidence--or rather a lack of it--in a currency.

I am Chumbawamba.

Mon, 01/04/2010 - 17:23 | Link to Comment Arco
Arco's picture

So you ignore the excess capacity argument? 10% + unemployment. And rather than gold, wouldn't you suggest we just leverage up on fixed debt to purchase inflation adjusting assets? I mean isn't that going to help us more than gold which you really can't do much with but store somewhere...

Mon, 01/04/2010 - 21:54 | Link to Comment dark pools of soros
dark pools of soros's picture

if everything goes to hell then the wasteland will be all gold guns and garden - but there still will be very rich enclaves that will keep the game going.  You can see it now..  the Detroit's will spread and the Silicon Valley's will shrink and become even more inclusive.

 

This game can go on a while but we all know from history that this stuff usually leads to wars but now seems a bit different.. it seems that there is a chance that it will be a global oppression where the people are not cast versus each other but rather all cast off together into their own country's abyss 

Mon, 01/04/2010 - 10:51 | Link to Comment iinthesky
iinthesky's picture

AMEN!

Mon, 01/04/2010 - 20:13 | Link to Comment Anonymous
Wed, 01/06/2010 - 14:00 | Link to Comment Anonymous
Sun, 01/03/2010 - 19:06 | Link to Comment WaterWings
WaterWings's picture

Here is a hardcore view:

If you have that much gold to protect I suggest you move to Wyoming. If you have a lot of wealth to protect, you have to decide if relocation to protect your life is part of your plan. This isn't paranoia, this is preparing for the worst. All it takes is for one person to ruin your day; strength in like-minded numbers.

Think of silver as your checking account and gold as your long-term savings. Many believe that silver is historically undervalued in relation to gold, so loading up on silver shouldn't be a mistake - there are many that recommend silver over gold. And find a place to stash the majority of it without any other human being the wiser - you will not be needing it anytime soon after a crash anyway - focus on sustaining life and adjusting to a new reality.

If you store your precious metals under the watch of someone else don't count on it being there. The old school method of burying it in the woods is the only way to be sure of 'guaranteed safety' if it gets real chaotic. Safety-deposit box raids are common in the US. Nothing is sacred, and really, nothing is guaranteed. What have human beings always done when they find out about gold?

Have 1 - 3 years of storable food, get weapons training, learn gardening and small farm animal care - and get to know which neighbors you can rely on, in Wyoming. Seriously. With society potentially coming off its hinges you can never be too prepared. "You can't eat your gold." If you don't have a lot of money move to Idaho. In my opinion, your location is the most important part of a plan X investment scheme.

Sun, 01/03/2010 - 23:23 | Link to Comment MsCreant
MsCreant's picture

I have looked into chickens and rabbits a little (you know how surfing can go, shopping is more like it). I had not considered that I need to get the info somewhere since I am not yet doing it.

Thanks.

Mon, 01/04/2010 - 00:33 | Link to Comment milbank
milbank's picture

So it's safe to assume you live in Wyoming?

Mon, 01/04/2010 - 11:40 | Link to Comment WaterWings
WaterWings's picture

If you look at a rack and stack of all states for relative security, availability of wildlife, lack of population density, 'pro-freedom laws', etc, Wyoming is at the top of the list, if you can afford it. I do not live there, although it would be ideal to live in the western portion if my resources allow it in the future. 

http://www.survivalblog.com/retreatareas.html

Mon, 01/04/2010 - 12:03 | Link to Comment SWRichmond
SWRichmond's picture

I wish Wyoming had a deep water port.

Mon, 01/04/2010 - 14:13 | Link to Comment WaterWings
WaterWings's picture

Plus, if they ever tried to go independent they would be invaded for their coal, if not just for the sake of usual control. "No one leaves the party!"

Mon, 01/04/2010 - 14:28 | Link to Comment chumbawamba
chumbawamba's picture

The only problem with Wyoming is that when they come to get Cheney it's going to be one hell of a firefight.  Make sure you add "Level III (or better) ballistic vest" to your inventory list.

I am Chumbawamba.

Mon, 01/04/2010 - 15:23 | Link to Comment WaterWings
WaterWings's picture

He better have a couple of these, because you can bet there are more than a couple Cowboys with one:

http://www.youtube.com/watch?v=TWJp14tkBlU&NR=1

Raufoss rounds turn just about everything into concealment instead of cover. But you already know this Chums.

I can't think of a better example a 'domestic enemy', as our oathkeepers have promised to eliminate. Maybe Rahm. Cheney's a real good one. So many of the others are clueless, like the free drugs more than the job, or just too narcissistic to accept the reality of their actions.

Mon, 01/04/2010 - 16:59 | Link to Comment cougar_w
cougar_w's picture

Indeed, all the sustained action for 8,000 years past is on or near the water. I live in the Calif Bay Area. Piracy will likely be our largest industry in 20 years, and I don't mean music piracy but the maritime kind. Perhaps I'll open an ocean-side pub around then, though I'll have to learn Chinese or Korean to make any sense of the conversation at the bar.

Drink up ye hearties yo ho!

cougar

Tue, 01/05/2010 - 07:50 | Link to Comment Anonymous
Mon, 01/04/2010 - 14:39 | Link to Comment tomdub_1024
tomdub_1024's picture

Excellent post! btw, why Idaho if you are "not so endowed financially", so to speak?...just curious as to your reasoning...I moved to Idaho 6 years ago from SoCal for some very specific reasons, Montana was my first choice (lived there before, love it and the liberty attitude), Wyoming and Idaho were close seconds in consideration.

Mon, 01/04/2010 - 15:34 | Link to Comment WaterWings
WaterWings's picture

I'll let this old duffer explain:

Wyoming is not recommended for a survivalist with a small to moderate budget. However, if you are someone who is wealthy and who can stand the cold, Wyoming should be bumped up to your top choice. Taxes will be a big issue for you—and Wyoming has no income tax. As someone “of means” you will be able to afford lots of food storage, voluminous fuel storage, and a large greenhouse to make up for the severe climate.

Scroll all the way to the bottom:

http://www.survivalblog.com/retreatareas.html#StateData

I prefer Idaho because of the more obvious qualites over many other states, plus I have family there now. I miss it - and as someone else posted further down in the comments, [I'm ready for the next stage so this everyday misery can end.] I 'heart' Idaho.

Mon, 01/04/2010 - 15:54 | Link to Comment tomdub_1024
tomdub_1024's picture

I love it as well, and haven't ever looked back on my decision to move the family here...:)

Sun, 01/03/2010 - 20:08 | Link to Comment Anonymous
Mon, 01/04/2010 - 01:39 | Link to Comment Anonymous
Mon, 01/04/2010 - 22:30 | Link to Comment dark pools of soros
dark pools of soros's picture

i guess they could property tax everyone outta their homes but a fixed loan stays fixed.. 

Mon, 01/04/2010 - 15:02 | Link to Comment tomdub_1024
tomdub_1024's picture

"I don't personally care about the "next paycheck" person and their ideas and motivations (no offense)"...as a "next paycheck person (po' white trash (PWT))" by choice (starve the beast), none taken. I can assure you that there may be a thing or two you could learn from those not so endowed as you, but you aren't interested...that's fine, we'll save our precious time for someone who is. Everyone has some wisdom, I try to learn whatever I can from whoever. But then again, I talk with homeless people and learned how to placer mine from an unemployed person...so what do I know.

Mon, 01/04/2010 - 14:42 | Link to Comment Anonymous
Sun, 01/03/2010 - 16:29 | Link to Comment chumbawamba
chumbawamba's picture

You may not realize or even understand, but we're trying to save peoples' live.  In time it'll all make sense.

In the meantime: lead, follow, or get out of the way.

I am Chumbawamba.

Sun, 01/03/2010 - 16:39 | Link to Comment Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Agreed.

 

Fight, Fuck, or hit the Fence.

Sun, 01/03/2010 - 23:14 | Link to Comment Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Heh, heh, I got junked by someone who never read a Sidney Sheldon novel I guess. (thats where that line is from). sigh ;)

Sun, 01/03/2010 - 23:24 | Link to Comment MsCreant
MsCreant's picture

Getting junked can be a badge of honor. I get honored all the time!!

Mon, 01/04/2010 - 02:26 | Link to Comment theadr
theadr's picture

Agreed.  Junk = antiJunk

Mon, 01/04/2010 - 10:31 | Link to Comment chumbawamba
chumbawamba's picture

I junked you because you deserve all the honor you can get :)

I am Chumbawamba.

Mon, 01/04/2010 - 14:16 | Link to Comment WaterWings
WaterWings's picture

I junk thee, because I love thee.

Mon, 01/04/2010 - 18:29 | Link to Comment Amish Rake Fighter
Amish Rake Fighter's picture

nothing wrong with a little junk in the trunk

Tue, 01/05/2010 - 13:49 | Link to Comment MsCreant
MsCreant's picture

From you, I had this coming, you and your rakier whit!! :-)

Sat, 01/23/2010 - 05:13 | Link to Comment Hephasteus
Hephasteus's picture

From the heart of hell I junk at thee!!!!

Sun, 01/03/2010 - 16:57 | Link to Comment merehuman
merehuman's picture

True. Reading Zerohedge has saved me and mine. Because of all of your inputs to the conversation, I learned and prepared.  Food, seeds,silver.

Did a reverse mortgage just in time! No rent to pay at a time when my business died. Very good. Am educating neighbors and relatives, the guy at the store, and i even ask the customers if they are ready for the dollar to fail?

I have convinced some to buy silver and food. It means to me that I wont have to feed them, and our country has some collateral (silver) to rebuild after the fall. I also relay info over Utube and reccomend this site steadily as the very best source of truth.

Truth and honesty is like gold. A good base.

Sun, 01/03/2010 - 19:08 | Link to Comment WaterWings
WaterWings's picture

I can add nothing. You complete me, Chummers.

Sun, 01/03/2010 - 21:46 | Link to Comment anarkst
anarkst's picture

Once you get yourself "saved," let the rest of us know how it went.

Mon, 01/04/2010 - 21:01 | Link to Comment Anonymous
Tue, 05/17/2011 - 01:54 | Link to Comment Karston1234
Karston1234's picture

Thanks for sharing quality content and interesting facts!
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Sun, 01/03/2010 - 17:38 | Link to Comment Anonymous
Sun, 01/03/2010 - 18:36 | Link to Comment mnevins2
mnevins2's picture

Dear ANON #181425,

Thanks for the laugh. You have three paragraphs of absolute nonsense in attempting to "profile" me!!!

First, I'm considered to be quite conservative and athletic. "Loser?" Interesting.

Minnesota? Guilty of a little projection here? I'm 50 years in Cook County, IL. I'm fairly certain that "Minnesota Nice" would not describe my upbringing nor my outlook.

I DO like MOST of the comments, but desire that they a bit more civil and informative. I started this thought in defense of someone being trashed because he was not in the "Gold is King" camp and I wish to know why many bright and articulate people (rhetorically speaking) trash and profane those not of this belief? I figured that I had nothing to lose by TRYING to establish a dialogue.

I guess that I failed with a certain former resident of MN - ya betcha?

BTW, I don't drink, don't eat fish, no brat's, either (referring to the MN/WI food groups!). I'm a city boy from Chicawgo and prefer pizza and beef sandwiches! I even have a scar or two to prove it!!!

Again, thanks for the unintentional humor!

PS - FYI, my wife ALSO escaped from MN (Burnsville - hardly Eden Prairie or whatever hamlet you despise. How about Edina, too?) in 1988 and fell for "down in the boondocks" boy. I guess that I didn't fail with every "former MN resident."

Sun, 01/03/2010 - 18:56 | Link to Comment chumbawamba
chumbawamba's picture

I will be the first to proclaim my guilt in opening up the gas valve for full flamage, and being a hypocrite in lieu of my recent calls for civility on another posting, but it's because this ATG douche has a long history of posting ridiculously misinformative messages about gold and the dollar and he's going to cause people lots of pain and misery if he isn't checked forcefully.

Anyone who knows what they're talking about knows that what he says is complete tripe, and I feel it's important to sufficiently point this out.

I am Chumbawamba.

Sun, 01/03/2010 - 21:54 | Link to Comment WaterWings
WaterWings's picture

Just watch this guy every once in a while:

 http://www.youtube.com/watch?v=uCdib3GVZx4

Mon, 01/04/2010 - 01:59 | Link to Comment TheGoodDoctor
TheGoodDoctor's picture

Good old Bob. I forgot how truly funny his rants are.

Mon, 01/04/2010 - 10:36 | Link to Comment chumbawamba
chumbawamba's picture

The best part is the pro-obama comments.

High-larious.

This guy is great.  This is basically my words in video form.  Always wanted to do my own rage videos.  Hmm...

I am Chumbawamba.

Mon, 01/04/2010 - 18:48 | Link to Comment WaterWings
WaterWings's picture

We should get Bob and walstreetpro2 together.

If you want another laugh turn on four different tabs of Bob at the same time at work, or at home, or the public library, and crank up the volume. That's the sound you hear in America when you turn off the printing pre$$.

Here, try it today. Hold CTRL and click on each link once:

http://www.youtube.com/watch?v=-hR665hmglk

http://www.youtube.com/watch?v=uCdib3GVZx4

http://www.youtube.com/watch?v=V73jIgu5qPU

http://www.youtube.com/watch?v=BvhM2WzoJes

Just don't do it at an airport kiosk. You'll get tackled by TSA sadists.

 

Mon, 01/04/2010 - 13:47 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Fucking right on. Put this through a 1 trillion watt PA system (we only deal in trillions these days right)

People need to wake up.

 

 

 

Mon, 01/04/2010 - 16:04 | Link to Comment Shocker
Shocker's picture

That guy is too much, Definately worth a watch.

Sun, 01/03/2010 - 23:50 | Link to Comment mnevins2
mnevins2's picture

C-,

Thanks. We ARE on the same team!

Mon, 01/04/2010 - 14:49 | Link to Comment tomdub_1024
tomdub_1024's picture

"you're chiming in from Eden Prairie or Wayzata" ...ROFLMAO !!! PS, you forgot Minnetonka....:)

Mon, 01/04/2010 - 23:40 | Link to Comment Anonymous
Sun, 01/03/2010 - 18:01 | Link to Comment pikledbill
pikledbill's picture

I rarely post...but this is good.  I am $110k, two household salary (split nearly perfectly between myself and wife).  I am not sure what to do...I have cash on hand, no savings in TBTF (recently moved to a local bank), actively trade the market (short/long hedge right now, own stocks in a few companies, SKF, SRS, and SDS as hedge against long positions - this has taken considerable effort to average down (and stay even) over the last 3 months).  We own five retirement accounts - my Roth, my IRA, Wife's IRA, my 403b, wife's 401k.  Recently moved my IRA and Roth, and my wife's IRA into an account where I have more control - currently all sitting in money fund.  Living with a $180k mortgage, no other debt.  we were paying off the house with my salary, but starting in 2008, we put my entire salary into savings, hence, living off a single income (wife's) for past three years.  We have a lot in money funds...so I am now concerned.  I am now considering taking the tax hit on cashing out IRAs, Roth, and hide the cash...what the hell are honest hard-working Americans that live well within their means supposed to do?

I have been angry...recently told a friend that voting is a waste of time, and that I would get involved again when the pitchforks and torches come out.  I do not hold physical gold...but intend to begin buying sometime over the next 1-2 years.  I am currently in the deflation camp, looking for inflation maybe 2-5 years from now...hoping to begin buying gold well before then.  Admittedly, I have been behind the curve with PM's...however, I think there is credence to the idea that cash is king...if/when the whole BS system collapses, will Gold, or beer/scotch be worth more money?  Will anyone with 10k in dollars be "wealthy" or able to buy what they need to get by?

I don't pretend to know the answers, but I enjoy the conversation very much.

If my timing regarding deflation/inflation is way off, I brew my own beer, garden and preserve, bow and rifle hunt, can work leather, build furniture, and make just about anything...hopefully, I can provide for my family when TSHTF.

Cheers,

average middle-class guy trying to traverse the obstacle-course of life...for now anyway.

Sun, 01/03/2010 - 19:13 | Link to Comment chumbawamba
chumbawamba's picture

Pikledbill,

Ask yourself these questions:

1) What system is collapsing?  The one in the US?  I.E. the dollar?

1a) If the dollar collapses, what does that mean domestically?

1b) What does it mean internationally?

2) If the FDIC solvent?

2a) If not, how safe are your bank accounts?

3) Are the firms in which you have your various retirement accounts solvent?

3a) Really?  Are you sure?  Did you check their balance sheet?

3b) Including all their hidden liabilities?

3c) If not, how safe are you accounts with them?

4) Does America strike you as a financially strong country?

4a) If not, do you think America will remain the world's sole superpower indefinitely under these conditions?

4b) If not, what does that mean for the dollar, the world's reserve currency, and the unit of account upon which all other world currencies (except gold) are based (again, domestically and internationally)?

Mull that over.

But here's a spoiler.  The answer to all the above is:

Buy gold.  Buy silver.  Buy guns.  Don't forget the bullets.  Buy seeds.  Store food and water.  Buy tools.  Good ones.  Not the cheap Chinese shit.  Learn practical skills.  Buy a safe.  A good one.  And bolt it to a concrete slab.  Put all your valuables in there.

You have most of this covered.  You are woefully deficient in the precious metals department.  Do not wait "1-2 years".  Supply is limited.  Sure, anyone can buy shares of GLD, but GLD is not gold.  You want to buy physical metal, and you want to store it yourself.  Do not put it in a bank safety deposit box.  Do not put it in a bank safety deposit box.  Do not put it in a bank safety deposit box.  This is partly why you buy guns (don't forget the bullets).

Don't wait until inflation eats away your savings.  Every day you wait is like an ounce of silver slipping out of your hands, lost forever.

History is your teacher.  All others are substitutes.  Including me.

I am Chumbawamba.

Sun, 01/03/2010 - 21:51 | Link to Comment pikledbill
pikledbill's picture

Pondering rhetorical list...thanks.

Sun, 01/03/2010 - 23:46 | Link to Comment Anonymous
Mon, 01/04/2010 - 15:29 | Link to Comment DosZap
DosZap's picture

Chum,

As one who (in your words) evidently am to be considered Soylent Green by your age group..........I agree w/100% of what you have laid out.

Why?, because of my age, because of my view, and knowledge of our History as a country. And by the absolute dead nuts facts, that we are screwed as a nation.

We have a 650% Debt to GDP Ratio, and we have a NEW style government easing in at a brisk clip.( I call it Fascism). As for the PM sector.................Gld & Slvr, have BEEN money for over 6000 yrs. Always has been , always will be.

Paper assets...............are in our scenario,worth what their printed on.Personally, I plan/am far into process of liquidating paper, all kinds (except TP).

You cannot eat it, but in light of it's history, compared to fiat currencies.......it has no equal.

And the Nations that have traveled the road we are, also are  FAR along, what has lasted?.For those that choose to sit and fiddle when Rome II burns, and have not INSURED themselves, woe unto them.

We have an obligation, and a duty, to take care of our own, and as many other numb nuts, as we can.

When the Ball goes up.

 Another point, that's stopping people here from our views,WE, some of us older, dumber,wiser, etc., have been used to our country as THE best on the planet ( because as the rest of the world has gone,during our lifetimes, it IS, and has been).

We physcologically, cannot, do not, want to believe what has happened, what is happening right before our eyes. But, Denial, is not a river in Egypt.

They speak about pandemics...............the one coming is truly THE Pandemic.

When you have done all you can, and boxed yourself ( and the rest of the world into a corner),there is NO way out.Over a lifetime of living, one learns at an early age, that sooner or later you WILL have to man up, and pay the piper, face the demons, fight or die.

We are closing in on that point.........

There is nothing hidden that will not be known.In light of life NOW, how's your plan to handle it?.

You had best have one (better to have one, and never need it, than to need one, and never planned)............Pray to God, you/we never need it, and PM's go back to $4.00/$256.00 an oz.( Uh Huh).

Because that would mean a miracle had occured, and we time warped back, to a place where there was some  stability,and honesty, and the thought WE had a great future ahead..........

Sadly, I do not see it, and the evidence to the contrary is overwhelming.

Sun, 01/03/2010 - 19:26 | Link to Comment WaterWings
WaterWings's picture

If my timing regarding deflation/inflation is way off, I brew my own beer, garden and preserve, bow and rifle hunt, can work leather, build furniture, and make just about anything...hopefully, I can provide for my family when TSHTF.

You sound like someone I will be trading with. Most folks don't realize they need to guarantee the important parts of the survival hierarchy of needs (food, shelter, force-protection) long before transferring funds into the most guaranteed form of wealth protection: precious metals.

I say guaranteed as if we are in a vacuum and our plans hold together perfectly.

if/when the whole BS system collapses, will Gold, or beer/scotch be worth more money?

They will be worth more 'value'. That is, you will receive more value if you find the person most desperate to buy what you have. If you offer a shot of scotch to a Mormon that has run out of food storage it is worthless. But to a guy that has an addiction and values the flavor of scotch over feeding his family you have a winner. I will let you decide what the moral context is. Tampons will make you quite popular in the second month after a hard crash. It's more important that you know what they want in barter. Once you are on the 'need' side you'll be ready to hand over your gold for services and big-ticket items like a hunting rifle (if you were stupid enough to not research and purchase at least one beforehand). To readers that don't envision themselves tracking down Bambi and Thumper I ask you, "You or them? How exactly do you plan on fighting the calorie-deficit battle each day?"

Good luck!

Sun, 01/03/2010 - 18:23 | Link to Comment janchup
janchup's picture

The "Holy Grail of Gold." Uttered with sarcasm which dents not a whit my 300%+ gain this decade.

Yes, I know, there is a 28% collectables tax.

Sun, 01/03/2010 - 20:06 | Link to Comment MagicHandPuppet
MagicHandPuppet's picture

mnevins2, I made 100K+ in 2009 on my gold holdings alone.  I am not encouraging you to buy gold every month, and if you don't, as the dollar continues to fall, it is you and the wealth of all holders of fiat whose wealth gets transferred to, amoung the friends of the fed, those who own gold and silver.

Sun, 01/03/2010 - 16:06 | Link to Comment Anonymous
Sun, 01/03/2010 - 17:58 | Link to Comment tewkatz
tewkatz's picture

Worth noting too: Every HELOC since the housing bubble began is 'printed money' as the value of the house (and thus, the HELOC) is false.  This is inflation that has already happened, and as those mtg/heloc's go bust, that money disappears...

Just noting it...no need to waste time hurling insults at me...I am an unwashed mass.

:)

Sun, 01/03/2010 - 19:18 | Link to Comment chumbawamba
chumbawamba's picture

The money used to build that house came from wealth.  That wealth is now in the house (the house itself).  The money used to buy that house came from wealth.  That wealth went to someone else.

Someone got paid for it.  That money is out there.  It's in the system.

I am Chumbawamba.

Sun, 01/03/2010 - 23:53 | Link to Comment MsCreant
MsCreant's picture

I keep thinking about this. Have not had the guts to bring it up, ego did not want to look stupid (I may still anyway but here goes). The banks are holding money so that they have reserves, and while they are lying about the value of the loans they hold (ie assets) the loaned money for the house is still in the system. Some one experiences being "under water" on their house. The bank experiences a depreciated asset. But the money the bank loaned the homeowner is out there, NOT LOST.

The asset is deflated, no doubt. Until the house is sold, or walked away from, defaulted on, etc. the devaluation has not happened for those folks. When it happens, everyone loses and this is the point of mark to fantasy rather than mark to market. But the money is still out there, the one who sold the house (got the money from the homeowner who got the loan) put it into the economy-- invested, bought stuff, or saved it somewhere in a mattress.

I guess what I am trying to say is that it seems like deflation is a local or individual level event and inflation is systemic and macro because the so called "lost" money is dispersed somewhere in the system.

You know how money changes hands and there is a multiplier effect? I wonder if there is a reverse thing, not just that it slows down and we do not have the multiplier, multipling as fast.

My ignorance of terms is showing but here goes again. The bank counts it as a devalued asset once the loan stops performing. The home owner counts the same default as a loss on their balance sheet too. If the home equity was put up as collateral for something, say a second mortgage, they count the event of the default as a loss too.

Do you see what I am getting at? It is like a negative multiplier or something. Not just that the exchange of money is slowing.

So I guess this post has two issues I am wondering about:

1. The so called lost money is not lost, but in the system. This says inflation.

2. The defaulted assets (house, commercial real estate building) seems to have a negative multiplier effect.

What I really want to say is the system failed by allowing too many entities to call this house, building, whatever, on their list of assets.

Try this, it is a double, triple, quadruple, exponential, globe wide, counting/claiming of money THAT NEVER WAS REALLY THERE.

Am I lost? Or found? And what have I found?

Mon, 01/04/2010 - 10:55 | Link to Comment Anonymous
Mon, 01/04/2010 - 22:54 | Link to Comment MsCreant
MsCreant's picture

Thanks for your answer and sorry I did not see it sooner. I think posting Anon, they show up a little later.

So it sounds like some of my head scratching is I am trying to apply rules for a free flowing system to a system that has been "intervened in" and I will suffer until I give that up.  Check!

I keep hearing people say money is "disappearing" from the system, but it is not. A poster below was helpful in this regard. Monetized objects (houses, CRE) are losing their monetization. But even as that happens, other objects are being monetized in response to this (the vehicles that held those mortgages) by fiat (mark to fantasy), but corralled outside the system, where their value will not be debated.  Intervention like the planet has never seen before. Computers made this level of both mistake and intervention possible. No price discovery, no healing.

I've not thought about the effect of welfare before. Does welfare thin out the value of a dollar? At first blush it seems obvious it would. But I am not confident in this. Being on a seperate "track" and only usable for food...would this drive up food prices only? Or thin out all dollars?

Then again, don't they act like a "commodity" in the underground economy when they are exchanged for cash or other barter items?

We don't know their exchange rate in the underground economy... no published exchange rate... :-)

This looks like an interesting question that gets complicated quick (or I don't have a solid understanding of certain structures firmly in place, yet, to track this one to the next logical place).

Tue, 01/05/2010 - 15:36 | Link to Comment Anonymous
Wed, 01/06/2010 - 02:38 | Link to Comment Anonymous
Thu, 01/07/2010 - 13:48 | Link to Comment Anonymous
Mon, 01/04/2010 - 11:16 | Link to Comment chumbawamba
chumbawamba's picture

You were lost but then you found yourself :)

This financial stuff is easy.  But like any language, knowing the vocabulary is 90% of the game.

In the second scenario, the money of the original selling price is still in the system.

But why should the house be necessarily devalued?  If the price has gone down and the bank repos the house then yes, they "lost" money.  And the buyer lost their down payment and all the payments they made on the loan (which the bank got).  But that money or (wealth) is still out there in the system.  It might be circulating as currency (inflation) or being stored as wealth (deflation).

This is the stuff that inflation and deflation are made of.  Hyperinflation is a whole different bask of eggs.

I am Chumbawamba.

Mon, 01/04/2010 - 13:58 | Link to Comment bruiserND
bruiserND's picture

"counting/claiming of money THAT NEVER WAS REALLY THERE."

You are mostly correct on this excellent post.

There was an attempt to monetize real-estate.It worked for a while creating temporary wealth based on a universally acceped paradigm that the collatteral would always  go up or at least not go down.

Things changed, not only did realestate go down and destroy the monetization game but it took the system with it.

Time to adapt or die.

 

http://www.npr.org/templates/story/story.php?storyId=122125016&sc=emaf

 

As I've been saying for 15 months , sheer evil has deliberately destroyed America.      http://www.google.com/search?hl=en&ei=c50-S5nXOYewswORuPS8BA&sa=X&oi=spell&resnum=0&ct=result&cd=1&ved=0CAYQBSgA&q=OneWest%3F+George+Soros,+Michael+Dell,+Steven+Mnuchin&spell=1
Mon, 01/04/2010 - 18:18 | Link to Comment MsCreant
MsCreant's picture

The concept that real estate was monetized helps with the flow of money traffic as I try to map it in my head.

Your One West link has me speechless.

IndyMac is a Zombie that won't die because the mad banksters keep reanimating it.

That word you used, deliberate...when enough people figure this out (IF)...

How can I discover something new that makes me speechless every day?

Why I just visit ZeroHedge of course!

Thanks for your post (and the validation too!).

Wed, 01/06/2010 - 02:22 | Link to Comment Anonymous
Sun, 01/03/2010 - 20:50 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

If the person who took out the HELOC put the money in an account, and then decided to use it to now pay off the HELOC, yes, it would then "disappear". 

However, this NEVER happened.  Every HELOC that was taken out was then SPENT in the economy buying PS3's, iPhones, etc. 

 

It's out there.

Sun, 01/03/2010 - 20:37 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

Not to pile on, but what would getting gold through a metal detector have to do with anything?

 

If you can't figure out a way to secure and transport your gold you suffer from a real lack of imagination.

 

 

 

Mon, 01/04/2010 - 02:25 | Link to Comment Anonymous
Mon, 01/04/2010 - 11:17 | Link to Comment chumbawamba
chumbawamba's picture

Not yet at least.

But what about this gold not setting off airport metal detectors thing?  Source?

I am Chumbawamba.

Mon, 01/04/2010 - 12:46 | Link to Comment trav777
trav777's picture

I walked through the last metal detector, in a high-security airport, one of the ones most likely to be the "victim of a terrorist attack" with 5 krugerrands in my pocket, one on a chain around my neck and a gold Rolex daydate with the President band and did not hear a beep.

Cash is a joke...you talk about paper gold, wtf is cash, paper paper?

Do you HONESTLY think they cannot seize your eDollars, dude?  WTF is cash other than electronic paper?  And wtf is paper other than something that could be revalued with the stroke on a pen.  Your FRNs can be rendered utterly worthless at any time.

 

Mon, 01/04/2010 - 16:07 | Link to Comment sethstorm
sethstorm's picture

That problem can be fixed.

Tue, 01/05/2010 - 19:47 | Link to Comment Anonymous
Mon, 01/04/2010 - 17:03 | Link to Comment Anonymous
Mon, 01/04/2010 - 20:18 | Link to Comment Anonymous
Wed, 01/13/2010 - 07:25 | Link to Comment MarketTruth
MarketTruth's picture

Cash as King? Tell that to the folks in Korea who suddenly saw their cash devalued by a factor of 10 or the guys in South America who had their currency value cut in half overnight by Chavez.

Cash is king, what a maroon! Gold is King and i bet you the above two country's citizens wished they had gold instead of FIAT paper currency.

Mon, 01/04/2010 - 11:01 | Link to Comment Anonymous
Mon, 01/04/2010 - 16:08 | Link to Comment sethstorm
sethstorm's picture

I know of wealthy people who are disposing of assets, closing businesses and patriating all their $$$ to gold. They plan to live very simply, travel, declare their income to the IRS at what it is (just barely below the taxable rate which extracts from them), and live on savings until this thing either collapses or sorts out.

Fine, act as if you're beyond the reach of the government, and create the unintended consequence of killing a nation.

Do not think that ordinary people will not know who you are and what damage you have done.

Tue, 01/05/2010 - 01:18 | Link to Comment Seer
Seer's picture

And what of a corrupt and evil nation?

Sun, 01/03/2010 - 17:17 | Link to Comment darkpool2
darkpool2's picture

and if they dont go out and purchase more unwanted "things", they will inflate away the value of the remaining "savings" of the recalcitrants.

Mon, 01/04/2010 - 00:15 | Link to Comment Anonymous
Mon, 01/04/2010 - 20:45 | Link to Comment Anonymous
Mon, 01/04/2010 - 19:50 | Link to Comment DosZap
DosZap's picture

Agreed, great info.............Danka.

If there was one thing on which to hang your hat, that this entire fiasco was/is not contrived it's the Head Knocker, not listening to, and slapping this dog down........

  • Paul A. Volcker, Chairman of the Board of Trustees, Group of Thirty, Former Chairman, Board of Governors of the Federal Reserve System.
  • He knows how to turn a crap economy around.

    If it was supposed to be turned, then Big Hoss would not have stepped on him.

    Shut him down, does not take his advice,...............but still keeps him  around.

    Tue, 01/05/2010 - 01:28 | Link to Comment Seer
    Seer's picture

    Volker is like a broken clock, he was correct once.  Not sure if he could be correct again... this is a whole different ball game today.  He didn't have the mortgage situation back then.  Raising interest rates today would be instant death to the system (which is why they aren't raising rates).

     

    Sun, 01/03/2010 - 12:23 | Link to Comment Cindy_Dies_In_T...
    Cindy_Dies_In_The_End's picture

    Thats why I don't have one frickin "cent" invested in this shitinfested country.

    Sun, 01/03/2010 - 18:17 | Link to Comment Anonymous
    Sun, 01/03/2010 - 19:08 | Link to Comment DoChenRollingBearing
    DoChenRollingBearing's picture

    Diversification is smart.  You are wise to have some dough quietly overseas.  Gold is smart too.

    But, if you live here in our shitinfested country, you should also have assets here.  You might need them in a hurry!  And having something here is diversification as well.

    Sun, 01/03/2010 - 19:55 | Link to Comment Cindy_Dies_In_T...
    Cindy_Dies_In_The_End's picture

    Indeed, DoChen, I am a Rawles fan and am reasonably okay in that department.

     

    Anon-

    Why don't you go invest in GM and anywhere else where the Obamabots don't grasp the concept of the rule of law you brainless flagwaver? Have fun with that, clownfuck. 

    They really need to make these captcha questions more difficult.

    Mon, 01/04/2010 - 04:34 | Link to Comment Anonymous
    Mon, 01/04/2010 - 16:11 | Link to Comment sethstorm
    sethstorm's picture

    If that's what you call China, so be it.

    But the military can find you nonetheless no matter what part of the globe you and yours are.  Don't give them any motivation to pursue.

    Tue, 01/05/2010 - 01:32 | Link to Comment Seer
    Seer's picture

    The US military?  The same one that cannot beat its way out of a paper bag? (thanks to its horrible mission/leadership)?  The one that relies on funding from defaulting US taxpayers?  LOL!  I'm sure that Romans once thought the same way...

    Tue, 01/05/2010 - 03:22 | Link to Comment Anonymous
    Sun, 01/03/2010 - 12:25 | Link to Comment Rainman
    Rainman's picture

    Bank runs become illegal and the ultimate government takeover begins.

    The makings of the Great Revolution, for sure. 

    Sun, 01/03/2010 - 14:33 | Link to Comment Anonymous
    Sun, 01/03/2010 - 20:54 | Link to Comment Rusty_Shackleford
    Rusty_Shackleford's picture

    Sniff... Sniff..

     

    Do you smell something burning?

    Sun, 01/03/2010 - 23:56 | Link to Comment MsCreant
    MsCreant's picture

    I like the hollowed out honeycomb metaphor. Ever play Jenga?

    Sun, 01/03/2010 - 18:05 | Link to Comment SWRichmond
    SWRichmond's picture

    Yep.  Wait and see what happens when people are told they can't have their money.

    Blackwaterredrum is hired to do security in the Hamptons (if they haven't been already).

    Mon, 01/04/2010 - 16:17 | Link to Comment sethstorm
    sethstorm's picture

    There are only so many Blackwater/Xe employees and contractors.  There are many more pissed-off citizens for whom have no moral issues with taking them on.

    Their few numbers would guarantee a bloodbath followed by Xe's defeat(and any further objectives in the Hamptons taken care of).

    Do NOT follow this link or you will be banned from the site!