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Guest Post: Fuck The Deficit (Or Will The Deficit End Up Fucking Us?)
Fuck The Deficit (Or Will The Deficit End Up Fucking Us?)
Submitted by Gonzalo Lira
Currently, the United States is conducting one of the most remarkable experiments in fiscal finances in world history.
The
American economy is in a severe recession. Coupled with that—as both
partial cause and partial effect of the recession—the United States'
banking system crashed in the Fall of '08, a crash which in many ways is
still ongoing as I write this, nearly two years later.
American economy is in a severe recession. Coupled with that—as both
partial cause and partial effect of the recession—the United States'
banking system crashed in the Fall of '08, a crash which in many ways is
still ongoing as I write this, nearly two years later.
What
the recession and the concomitant banking crisis have caused are,
essentially, a fall in aggregate demand levels, as well as a fall in
aggregate asset value. In other words, the population is spending less,
and asset values have deteriorated, both nominally and as compared to
any basket of hard commodities.
the recession and the concomitant banking crisis have caused are,
essentially, a fall in aggregate demand levels, as well as a fall in
aggregate asset value. In other words, the population is spending less,
and asset values have deteriorated, both nominally and as compared to
any basket of hard commodities.
These are the
two metrics which the two principal camps of current American
macroeconomic thought consider vital. “Saltwater” economists look to
aggregate demand levels, while “freshwater” economists look to aggregate
asset value—each of these camps view their fetish-object as the
cornerstone for economic growth, development and prosperity. Naturally,
when either of these camps see their juju slide, they freak out. They
declare the economy to be “in crisis”—and further declare that
“something must be done”.
two metrics which the two principal camps of current American
macroeconomic thought consider vital. “Saltwater” economists look to
aggregate demand levels, while “freshwater” economists look to aggregate
asset value—each of these camps view their fetish-object as the
cornerstone for economic growth, development and prosperity. Naturally,
when either of these camps see their juju slide, they freak out. They
declare the economy to be “in crisis”—and further declare that
“something must be done”.
Something has been done: It's called The Deficit.
To
combat the fall in aggregate demand levels, the Federal Government has
embarked on a massive spending program. This spending program has been
financed by debt issued by the Treasury. The way things are looking,
another big spending package is in the offing some time soon—that should
keep the “saltwaters” happy.
combat the fall in aggregate demand levels, the Federal Government has
embarked on a massive spending program. This spending program has been
financed by debt issued by the Treasury. The way things are looking,
another big spending package is in the offing some time soon—that should
keep the “saltwaters” happy.
On the other
hand, to combat the fall in aggregate asset value—and keep the
“freshwaters” happy—the Federal Reserve Board has embarked on an asset
purchase program that is also massive and unprecedented.
hand, to combat the fall in aggregate asset value—and keep the
“freshwaters” happy—the Federal Reserve Board has embarked on an asset
purchase program that is also massive and unprecedented.
Through a
fairly complex scheme that seems to be deliberately opaque, the Fed has
relieved the Too Big To Fail banks of their deteriorated assets, and
given them cash, in an ongoing process. The Too Big To Fail banks have
turned around and used that cash to purchase Treasury bonds—which are
being used to finance this massive Federal Government spending. Whether
there has been collusion between the Treasury, the Fed and the TBTF
banks is for the courts and the historians to decide—but prima facie, it would certainly look so.
fairly complex scheme that seems to be deliberately opaque, the Fed has
relieved the Too Big To Fail banks of their deteriorated assets, and
given them cash, in an ongoing process. The Too Big To Fail banks have
turned around and used that cash to purchase Treasury bonds—which are
being used to finance this massive Federal Government spending. Whether
there has been collusion between the Treasury, the Fed and the TBTF
banks is for the courts and the historians to decide—but prima facie, it would certainly look so.
This
two-sided scheme—more Federal Government spending on the one hand, and
more propping up of asset values on the other—adds up to The Deficit.
two-sided scheme—more Federal Government spending on the one hand, and
more propping up of asset values on the other—adds up to The Deficit.
When
I refer to it as The Deficit (it is too majestic for the lowercase), I
am not referring to a mere fiscal shortfall—I am referring to a policy
mentality. This policy mentality—shared by both “saltwater” and
“freshwater” economists—effectively amounts to a suspension of the
notion of opportunity cost. In the realm of The Deficit, the
macroeconomic policy questions cease to be “either/or”—they become
“both/and”. All policy options can be achieved because—according to the
macroeconomic policy known as The Deficit—the American fiscal shortfall
can never bring the United States to bankruptcy. As Dick Cheney so
memorably phrased it, deficits don’t matter—so The Deficit as a
macroeconomic policy can continue indefinitely.
I refer to it as The Deficit (it is too majestic for the lowercase), I
am not referring to a mere fiscal shortfall—I am referring to a policy
mentality. This policy mentality—shared by both “saltwater” and
“freshwater” economists—effectively amounts to a suspension of the
notion of opportunity cost. In the realm of The Deficit, the
macroeconomic policy questions cease to be “either/or”—they become
“both/and”. All policy options can be achieved because—according to the
macroeconomic policy known as The Deficit—the American fiscal shortfall
can never bring the United States to bankruptcy. As Dick Cheney so
memorably phrased it, deficits don’t matter—so The Deficit as a
macroeconomic policy can continue indefinitely.
In
a historical sense, The Deficit is unprecedented: Never before in world
history has a reserve currency provider gone into this much debt, with a
currency that floats on nothing but air. This is the key issue: The
dollar is a fiat currency. The Roman, French, British, Austro-Hungarian
empires, all of them world-historical empires in their times, all might
have gone way into the red on more than one occasion—but none has ever
done it on a purely fiat currency before.
a historical sense, The Deficit is unprecedented: Never before in world
history has a reserve currency provider gone into this much debt, with a
currency that floats on nothing but air. This is the key issue: The
dollar is a fiat currency. The Roman, French, British, Austro-Hungarian
empires, all of them world-historical empires in their times, all might
have gone way into the red on more than one occasion—but none has ever
done it on a purely fiat currency before.
America is the first to do so (“U!! S!! A!! WE’RE!! NUMBER!! ONE!!”). Hooray.
The Deficit is the policy that the United States is implementing, and it has had several effects:
1.
The most obvious, it has allowed the Federal Government to finance
every last one of its spending programs, in an effort to boost aggregate
demand levels. No need for Obama’s vaunted talk of “tough choices”—the
Federal Government has officially been renamed the Great American Teet.
The most obvious, it has allowed the Federal Government to finance
every last one of its spending programs, in an effort to boost aggregate
demand levels. No need for Obama’s vaunted talk of “tough choices”—the
Federal Government has officially been renamed the Great American Teet.
2.
It has prevented the TBTF banks from acknowledging the plain fact that
they are broke. Indeed, the Fed asset buy-back has effectively kept the
banks solvent in a practical sense—they have money to pay off any of
their liabilities. But more importantly from the Fed's point of view, it
has sustained deteriorated aggregate asset values in the overall
economy, at least on a nominal basis.
It has prevented the TBTF banks from acknowledging the plain fact that
they are broke. Indeed, the Fed asset buy-back has effectively kept the
banks solvent in a practical sense—they have money to pay off any of
their liabilities. But more importantly from the Fed's point of view, it
has sustained deteriorated aggregate asset values in the overall
economy, at least on a nominal basis.
3. It has created a fiscal shortfall of staggering proportions—currently about 100% of GDP, and growing without end.
4.
Finally—and most importantly—it has created the generalized impression
among policy makers that fiscal shortfalls indeed do not matter, and
that liquidity and stimulus simply mustbe provided whenever there is a crisis, the rationale being that the economy is too “fragile” to withstand the “shock”.
Finally—and most importantly—it has created the generalized impression
among policy makers that fiscal shortfalls indeed do not matter, and
that liquidity and stimulus simply mustbe provided whenever there is a crisis, the rationale being that the economy is too “fragile” to withstand the “shock”.
This
is a key effect of this policy, I would argue the most important of all
of the effects: The fact that the fiscal shortfall has crossed the 100%
of GDP mark, and nothing bad has happened has given everyone a false
sense of security—the sky has not fallen, the world has not ended.
is a key effect of this policy, I would argue the most important of all
of the effects: The fact that the fiscal shortfall has crossed the 100%
of GDP mark, and nothing bad has happened has given everyone a false
sense of security—the sky has not fallen, the world has not ended.
Therefore,
as a practical political matter, the people with decision-making
authority in American public policy have effectively said, “Fuck The
Deficit, let’s keep on truckin’.”
as a practical political matter, the people with decision-making
authority in American public policy have effectively said, “Fuck The
Deficit, let’s keep on truckin’.”
But what if
the sky does fall? What if we are simply living in the lull before the
fall? I mean, it can't be that this enormous fiscal shortfall can
continue growing indefinitely, can it? It has to lead to some kind of
ruinous effect, right? Like drinking a bottle of scotch in a single
sitting—you feel good while you're doing it, sure, but you know you’ll
feel like death warmed over soon enough, right?
the sky does fall? What if we are simply living in the lull before the
fall? I mean, it can't be that this enormous fiscal shortfall can
continue growing indefinitely, can it? It has to lead to some kind of
ruinous effect, right? Like drinking a bottle of scotch in a single
sitting—you feel good while you're doing it, sure, but you know you’ll
feel like death warmed over soon enough, right?
I mean, The Deficit will eventually come back and bite us on the ass—right?
Lately, there have been an awful lot of clever people explaining how, in fact, The Deficit will not harm us in the long term.
Very sensible-sounding words, and seemingly-sophisticated arguments, are deployed to make precisely this point. Others further argue
that The Deficit, because of its sheer size, will become its own growth
engine, and hence will grow the economy to such a point that The
Deficit will essentially pay for itself—a bit of financial magic that
almost seems believable.
that The Deficit, because of its sheer size, will become its own growth
engine, and hence will grow the economy to such a point that The
Deficit will essentially pay for itself—a bit of financial magic that
almost seems believable.
And to any talk that
The Deficit and the stealth-monetization going on might lead to
hyperinflation, these clever people are scoffing and saying, in effect,
“Haven’t you heard the news? We got deflation, pal—forget about
inflation, let alone hyperinflation: We gotta spend-spend-spend, in
order to whip that deflationary monkey. After that’s taken care of, and
the economy’s growing again, that’s when we’ll be able to bring down The
Deficit.”
The Deficit and the stealth-monetization going on might lead to
hyperinflation, these clever people are scoffing and saying, in effect,
“Haven’t you heard the news? We got deflation, pal—forget about
inflation, let alone hyperinflation: We gotta spend-spend-spend, in
order to whip that deflationary monkey. After that’s taken care of, and
the economy’s growing again, that’s when we’ll be able to bring down The
Deficit.”
Recently, I had a private
exchange with a financial blogger, about precisely this point. This
blogger—who should have known better—argued that since we were in a
deflationary environment, there were currently no inflationary
pressures, and none in the forseeable future. Therefore, she argued,
since the economy was experiencing a deflationary trough and inflation
highly unlikely, then hyperinflation was an impossibility. Nay, an
absurdity, or so she claimed.
exchange with a financial blogger, about precisely this point. This
blogger—who should have known better—argued that since we were in a
deflationary environment, there were currently no inflationary
pressures, and none in the forseeable future. Therefore, she argued,
since the economy was experiencing a deflationary trough and inflation
highly unlikely, then hyperinflation was an impossibility. Nay, an
absurdity, or so she claimed.
She's clever, but she made a common mistake—she confused inflation with hyperinflation.
Granted,
they do seem to look alike—both of them are essentially money losing
value against wages, commodities and goods-and-services over time.
Commonly—and mistakenly—hyperinflation is viewed as simply
inflation-plus, inflation-XL. After all, the name seems to imply it: Hyper-inflation. Inflation’s big brother. Inflation with an extra bit of kick.
they do seem to look alike—both of them are essentially money losing
value against wages, commodities and goods-and-services over time.
Commonly—and mistakenly—hyperinflation is viewed as simply
inflation-plus, inflation-XL. After all, the name seems to imply it: Hyper-inflation. Inflation’s big brother. Inflation with an extra bit of kick.
This is a dangerous fallacy.
Inflation
is indeed the economy “over-heating”, in Neo-Keynesian parlance—wage
pressures, say, dragging prices up across the economy, or perhaps raw
commodity prices doing the same. Inflation can gallop up to 25% a year,
but still remain a distinct animal from hyperinflation. Ordinarily,
inflation is simply the economy eating up commodities—be it raw
materials or labor—so as to meet demand.
is indeed the economy “over-heating”, in Neo-Keynesian parlance—wage
pressures, say, dragging prices up across the economy, or perhaps raw
commodity prices doing the same. Inflation can gallop up to 25% a year,
but still remain a distinct animal from hyperinflation. Ordinarily,
inflation is simply the economy eating up commodities—be it raw
materials or labor—so as to meet demand.
Hyperinflation,
however, is the loss of faith in money. It is not that prices are
rising because the economy is moving forward—it’s that prices are rising
because nobody believes that money is worth a damn anymore.
however, is the loss of faith in money. It is not that prices are
rising because the economy is moving forward—it’s that prices are rising
because nobody believes that money is worth a damn anymore.
Hyperinflation
is not simply money-printing: Rather, it is when no amount of money
will get you what you want. Zimbabwe-style hyperinflation is an example
of government money-printing run amok. The Zimbabwe example gives us the
mistaken sense that hyperinflation only happens in “disorderly
printing” regimes. But that’s not the case.
is not simply money-printing: Rather, it is when no amount of money
will get you what you want. Zimbabwe-style hyperinflation is an example
of government money-printing run amok. The Zimbabwe example gives us the
mistaken sense that hyperinflation only happens in “disorderly
printing” regimes. But that’s not the case.
Chilean
hyperinflation in 1973 (which led to the September 11 coup), or Weimar
style hyperinflation (which led to you-know-who), are more indicative of
what I’d call “scarcity” hyperinflation: Both are examples of when the
scarcity of basic commodities suddenly and abruptly leads to a complete
loss of faith in money—the belief that no amount of money will get you
what you want or need.
hyperinflation in 1973 (which led to the September 11 coup), or Weimar
style hyperinflation (which led to you-know-who), are more indicative of
what I’d call “scarcity” hyperinflation: Both are examples of when the
scarcity of basic commodities suddenly and abruptly leads to a complete
loss of faith in money—the belief that no amount of money will get you
what you want or need.
That’s hyperinflation.
2008
Deflationists (of which I am a member) argued that after the credit
crisis, there would be a deflationary trough. The reasoning of the 2008
Deflationists was, credit should be considered as part of the money
supply—so when credit contracts sharply, as happened following the
banking crisis in ’08, then that’s the same as if total money supply had
contracted. A constriction in the money supply obviously leads to
deflationary pressures: Less money is available for the same or more
goods. Hence prices fall to meet lowered demand. Hence wages fall as
business incomes fall. Hence less money. Hence downward spiral.
Deflationists (of which I am a member) argued that after the credit
crisis, there would be a deflationary trough. The reasoning of the 2008
Deflationists was, credit should be considered as part of the money
supply—so when credit contracts sharply, as happened following the
banking crisis in ’08, then that’s the same as if total money supply had
contracted. A constriction in the money supply obviously leads to
deflationary pressures: Less money is available for the same or more
goods. Hence prices fall to meet lowered demand. Hence wages fall as
business incomes fall. Hence less money. Hence downward spiral.
As
the 2008 Deflationists predicted, today the U.S. economy is in a
deflationary trough—I am certainly not arguing otherwise: The evidence
is all around, and too obvious.
the 2008 Deflationists predicted, today the U.S. economy is in a
deflationary trough—I am certainly not arguing otherwise: The evidence
is all around, and too obvious.
But what I am
saying is, our current deflation can trip over into hyperinflation at a
moment’s notice. The stumbling block—the thing that could trip us over
from deflation to hyperinflation literally overnight—is The Deficit.
saying is, our current deflation can trip over into hyperinflation at a
moment’s notice. The stumbling block—the thing that could trip us over
from deflation to hyperinflation literally overnight—is The Deficit.
Not just the Federal shortfall itself, but the policy
implicitly embodied by The Deficit: The belief that all you need to do
is throw money at the problem—open up as many liquidity windows as
needed, or expand Federal spending as much as necessary, to prop up
those twin aggregates I mentioned before, aggregate demand and aggregate
asset value.
implicitly embodied by The Deficit: The belief that all you need to do
is throw money at the problem—open up as many liquidity windows as
needed, or expand Federal spending as much as necessary, to prop up
those twin aggregates I mentioned before, aggregate demand and aggregate
asset value.
The pernicious sense among
American macroeconomic policy makers that fiscal shortfalls don’t
matter—and don’t matter especially in a financial or economic crisis—is
what I believe will lead to hyperinflation. Policy makers—who have lost
any fear of providing as much liquidity and stimulus as necessary to
steamroller any problem—will have no compunction about adding to The
Deficit at the next crisis.
American macroeconomic policy makers that fiscal shortfalls don’t
matter—and don’t matter especially in a financial or economic crisis—is
what I believe will lead to hyperinflation. Policy makers—who have lost
any fear of providing as much liquidity and stimulus as necessary to
steamroller any problem—will have no compunction about adding to The
Deficit at the next crisis.
That’s when hyperinflation will kick us in the teeth.
If
I had to make a prediction, I’d say that the immediate trigger for a
hyperinflationary catastrophe will be a sudden and unexpected commodity
spike. It won’t necessarily be big, but it’ll be flashy—enough to cause a
panic.
I had to make a prediction, I’d say that the immediate trigger for a
hyperinflationary catastrophe will be a sudden and unexpected commodity
spike. It won’t necessarily be big, but it’ll be flashy—enough to cause a
panic.
This will be the opening stages of hyperinflation: It will be a market panic, and it’ll be fast.
At
the next panic-inducing crisis, American public-policy makers will once
again turn to The Deficit, providing more liquidity and more
stimulus—and this will make the financial markets realize that the
fiscal shortfall is unsustainable: It will be obvious that all those
Treasuries cannot be repaid—or if they are ever to be repaid, it will be
done by the Fed via surreptitious monetization. In other words, a
dollar with lesser value.
the next panic-inducing crisis, American public-policy makers will once
again turn to The Deficit, providing more liquidity and more
stimulus—and this will make the financial markets realize that the
fiscal shortfall is unsustainable: It will be obvious that all those
Treasuries cannot be repaid—or if they are ever to be repaid, it will be
done by the Fed via surreptitious monetization. In other words, a
dollar with lesser value.
Thus, everyone will
want to be the first to get out of the dollar—and everyone will want to
be the first out the door all at once.
want to be the first to get out of the dollar—and everyone will want to
be the first out the door all at once.
Markets
turn on a dime, and they are not rational in the short term—they’re
rational like a herd of thundering buffaloes hopped up on crystal meth.
turn on a dime, and they are not rational in the short term—they’re
rational like a herd of thundering buffaloes hopped up on crystal meth.
As
everyone gets out of the dollar in the financial markets, there’ll be a
cascading effect, as everyone—both Wall Street sophisticates and Main
Street naifs—try getting out of their dollars, and into hard assets:
Gold, land, food, whatever.
everyone gets out of the dollar in the financial markets, there’ll be a
cascading effect, as everyone—both Wall Street sophisticates and Main
Street naifs—try getting out of their dollars, and into hard assets:
Gold, land, food, whatever.
In other
words, hyperinflation as I have described it above: A loss of faith in
money. The belief that no amount of money will buy you what you want.
words, hyperinflation as I have described it above: A loss of faith in
money. The belief that no amount of money will buy you what you want.
The
Deficit—that’s the demon’s name. The Deficit. Not, as I have argued,
the fiscal shortfall, but the macroeconomic mentality that fiscal
shortfalls in a reserve fiat currency do not matter. The sense that as
much liquidity and stimulas must be and can be provided to maintain
aggregate demand levels and aggregate asset value.
Deficit—that’s the demon’s name. The Deficit. Not, as I have argued,
the fiscal shortfall, but the macroeconomic mentality that fiscal
shortfalls in a reserve fiat currency do not matter. The sense that as
much liquidity and stimulas must be and can be provided to maintain
aggregate demand levels and aggregate asset value.
Policy
makers are not exactly known for being prescient timers of the
markets—at the next market crisis/panic, they will without hesitation
provide stimulus and liquidity, adding even more to the fiscal
shortfall. But it will be the market’s and the public’s loss of faith
that that fiscal shortfall will ever be repaid that will lead them to
abandon the dollar.
makers are not exactly known for being prescient timers of the
markets—at the next market crisis/panic, they will without hesitation
provide stimulus and liquidity, adding even more to the fiscal
shortfall. But it will be the market’s and the public’s loss of faith
that that fiscal shortfall will ever be repaid that will lead them to
abandon the dollar.
Once they lose faith in
the dollar, hyperinflation will ensue, as public policy officials
continue providing “stimulus” and “liquidity” which the market will
interpret as nothing but worthless paper.
the dollar, hyperinflation will ensue, as public policy officials
continue providing “stimulus” and “liquidity” which the market will
interpret as nothing but worthless paper.
Actions
have effects—it is stupid to think that massive deficit spending of a
fiat currency won’t have consequences. The policy embodied by The
Deficit has brought the U.S. economy to the brink of oblivion—with no
way to pull back from that brink. So at this point, the only question
is, what will finally tip it over, and when will that tip-over happen,
and what will the . So at this point, there are only two questions that
need to be answered: One, when will the economy finally tip over the
brink, and two, what will give us that final push.
have effects—it is stupid to think that massive deficit spending of a
fiat currency won’t have consequences. The policy embodied by The
Deficit has brought the U.S. economy to the brink of oblivion—with no
way to pull back from that brink. So at this point, the only question
is, what will finally tip it over, and when will that tip-over happen,
and what will the . So at this point, there are only two questions that
need to be answered: One, when will the economy finally tip over the
brink, and two, what will give us that final push.
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The only one to survive without regime change was Zimbabwe. I happen to know a monster that looked of Charlie Chaplain was the result of the Wiemar incident.
But hey feel free to not be concerned. I'm sure with the united cultural and spiritual values of our multicultural nation that we will all come together and sing after economic ruin and a standard of living reduction of 80% (my guess). Good thing hyperinflations don't damage the culture...oh wait that's right they do. Shucks.
Kumbaya!
Applause for Mr. Shameful!
Your recent posts have been of excellent and thought provoking quality.
As always, I look forward to your comments and your thoughts as to whether we should STAND AND FIGHT or RUN LIKE HELL (to somewhere else).
If I thought there was a ghost of a chance of even 5% of the population being awake and ready to resist I would stay, coward though I may be. Not only do we have to contend with the oligarchs sucking the life out of us, but our fellow Americans to worry about.
The simple fact is this is not the America our (grand)fathers left us. This is a culture problem as much as anything. America has a culture of greed and death, from bottom to top. So when the chips are down and we are dealing with a hot tyranny and real harsh in your face need can we rely on those around us? Is it more likely that they will take advantage? Soon the holidays will be upon us and we will see the stampedes at Wal-Mart, perhaps even shopping related deaths. I'll repeat that, shopping related deaths. Americans willing to trample each other to death for the chance to buy goods from China, in good times no less. Contemplate what these people will do when things are bad, or when there is a food/fuel panic. I fully expect mass shootings. We are a culture of sociopaths, molded in the likeness of our oligarchs.
Perhaps in 20 years of hardship the culture will be more like it was in the past, but now the smart money is leaving. I may be a man of limited intelligence but when the smart money is leaving or building remote armored compounds that should tell you what you need to do. There is a storm brewing and it will at best shake this country to it's knees and at worst leave a shattered husk.
I appreciate your comments and I can tell you're a good hearted guy. Trust me you don't want to be here for this. I'm going to try to leave but I'll need to find work outside first and finish out 1 more year of school. Anyone who is not willing to face the worst humanity has to offer should think about their options elsewhere.
The new American motto "i need only run faster than you"
I'm going to strongly agree with Do Chen here - your posts of late, and this one in particular are spot on truths.
raised and trained to see each other as competition for what "desire" wants, invented "scarcity," lack of compassion as a cultural trait - the list goes on. . .
every day I watch the skinhead, tattoed dudes racing up and down the highway in their monster trucks, or honda civics, bass speaker boosts full volume, thumping boom heard half a mile away, whooping and yelling as they go. . . and I know, in my heart, that this will end badly, because what have they (more) to lose? mix in a few guns, some hormone stimulating, enraging drugs. . .
yeah, I'm outta here too.
You make a lot of fine observations, but let me correct one thing. Your reference to a "monster that looked of Charlie Chaplain was the result of the Wiemar incident"
is incorrect. Get both sides of the story, not just the non-stop propaganda shoveled down your throat hole by the people that benefit from such. This man arrested and quarantined a problem as his people wanted. You're right about one thing, Germany had a lot of the same problems we have now, like the same people controlling banks, media, and thus politics.
Not just Empire but also country. Regionalized control. RIP USA.
OK, so everyone needs a "Plan B" and it would be prudent to have a "Plan C" ... maybe "D". But when the contingency plan becomes the main plan and the necessary precursors do not happen... the you are not necessarily F'd, but you are underutilizing yourself and what YOU can contribute.
Uh huh. Check my avatar Barthero. Homer in a Bond suit trumps the Bartster. As to alternative plans, it is hard to beat the Boy Scouts program as background. Be Prepared and all of that. You learn how to burn things and blow stuff up too, and that's not even in the Scout Handbook.
It could go anytime now (Rubicon passed a little more than year ago, big motion set a few months ago), but I'm guessing Summer 2012. We won't make it to 2013 (for a lot of reasons).
First blows the EU, then the US. Worldwide reboot, lots of bad, but some good will come.
Why last year? I would have thought the Rubicon was passed in the early 2000s, and we have been going through the motions. After the derivative casino was fully set up it was all over but the crying. But that's just my opinion.
Not sure EU blows first. It could, but the US states are a nightmare fiscally so it will be a horse race. Would love to see the EU die first, give us a little more room to breath. Every day it doesn't cost a paycheck to gas up my car is a good day.
EU has some potentially very large internal issues. The monetary union might not survive another test. Spain would probably blow it up. But even another round of Greek-style fiscal theater might unhinge the thing.
The problems in US states are massive, but the US doesn't have to worry about them. Unemployment my hit 15% average (20% in the worst-off) and still I don't think the US falls apart, simply because people are too far gone to know what to do, or to care. The US putters along for another year or two while things get worse.
I've been thinking for a while -- with no real evidence, just a gut sense -- that we make it through 2010 with a few scares, suffer a really ugly election cycle, and then mid 2011 the wheels start to come off. 12 months from today, those who have been paying attention will see the cliff not too far off. 2012 will dawn, and no sane person will question that it's over.
Maybe there will be another election cycle come 2012. Not sure it will even matter.
Just my $.02 worth.
The only real fear I have in 2010 is the possible attack on Iran. I'm sure the outgoing congress will pass some whoppers but the impact won't be till 2011. If no war with Iran I agree more then likely will be a slow bleed out not a pop this year.
Agree about Spain, but really California or IL is much the same for the US. There are no rules for a state bankruptcy so it's all new ground. The options for US and EU are the same, monetize (ideally on the sly) the debt of the member states or risk open currency exposure. I just don't know what bomb will go off first. It may be the EU as the US propaganda system appears to be superior.
I expect 2011 to be a wild ride and a lot of bad times for 2012. Think the whole Mayan thing is hogwash, but it will feed into the paranoia and possibly aggravated problems coming down the pipe.
"The Mayan thing" is merely that we will move into uncharted celestrial space. What it means for things is not direct.
not quite uncharted, just since August 11, 3114 BCE or thereabouts.
I toured Mayan ruins first in 1967. Been to dozens of ruins since. Tulum before condos was really something. Until recently I had a home in southern Mexico. Love the place.
How'd those bastards know the EOTW would be hundredth birthday of the Fed? [head scratch]
Bwwaahhhahahahhah!
solstice / equinox conceptually preceeds even nation states. . . ^^
cardinal points beyotches.
"The only real fear I have in 2010 is the possible attack on Iran. "
Nuance. There is zero risk, or nearly so, of an attack on "Iran" in general. Attacks that might occur would be on nuclear facilities, assets threatening shipping, anti-aircraft batteries, specific command and control facilities, AND, if we and the iranian people are lucky, certain elements of the regime and the backing mullahcracy. The persians, liberated from the awful system of control, wouldn't need any occupation period to get it together. They are not arabs.
An air strike on Iran will not be taken kindly by Iran. It will push the current regime into a fight. Their whole stance is one of not backing down to the West so if they allow themselves to be bombed and shelled with no retaliation they lose power. Sure if they fight back they lose power as well, but they may chance it and try to spike oil prices to drag the West down with them. I'm sure that's what Russia would like to see.
I have no love, or even like nor ties with the Iran regimen, but there is a history of the Anglo-American trying to dominate their country. We really can't take any kind of moral high ground historically. Your right they are not Arabs. You know this, I know this, J6P does not. To him Muslim = Arab. I'm convinced that if it was explained to random J6P that Indonesia was a Muslim nation he would think they were Arabs automatically.
I'm anti war in general and this could be ruinous for the USA. Sure we will "win" but a big oil shock on the economy will not be good, and opening up another war/police action to bleed out of only speeds up the inevitable.
Sure we will "win"
Would people be so kind as to actually describe what they mean by "win" when they use this word/term? And keep in mind that there's a time element: overthrowing Mosseddegh was viewed as a "win," yet...
In loose terms, I think we agree: Rubicon was passed in the early 2000s, the $700Bn bailout in 2007 sealed the deal (mostly because of the way it was "spent"), then dwarfed by Fed printing and central bank currency swaps in 2008, then dwarfed again by Fed MBS crap buying through 2009. Further, that doesn't even address the Fed overtly buying S&P futures through all of 2009 and 2010 -- they are not just the entire MBS market, they are the entire S&P. So, we agree the ponzi has finally come to an end (we merely debate the "final blowout", which could be somewhat random, but anytime.)
People will be amazed in the archeologic dig when they realize how many Greek bonds the US owns, and how many currency "swaps" (e.g., toxic crap) the Fed exchanged with the UK, which is itself months (or even weeks) from detonation. Literally, the Fed is handing the UK dollars for the UK to use in buying US Treasury bonds. It's a massive circle jerk, but possible to hold together until the UK hits "lights out" (anytime now, months or weeks).
However, I specifically see the December 24, 2009 (Christmas Eve) explicit backing of Fannie and Freddie by the US Treasury as a pivotal event -- on that night, the Treasury literally cut a $5T check on the taxpayer (you could argue it was as small as $2-3T, but I would disagree). On that date, we went insolvent beyond the point where even fraudulent reporting could pretend otherwise (and we are *good* at pretending, since SS and Medicare are north of $100T in liabilities).
In theory, they could try to "undo" that Fannie&Freddie buy, but it doesn't matter anymore. The buy merely triggers the day of reckoning because F&F force cashflow problems onto the treasury (and nations are only brought down as a result of cashflow problems). Now, even if you were to pretend to "undo" that buy, you still have those cashflow problems.
I agree with you that the US states will start the dominoes rolling, and no, it is not guaranteed that the EU will fall first. However, I think it's a 60/40 that the EU goes first (mostly for political reasons, since they do riots right, and because their fraud was so much worse than the US fraud, which is itself astounding). The nation-states in the EU are starting to stretch their cultural and national identities. Things will get exciting when that comes to a head (and it will, since the cultures are *fundamentally* different). So, we agree it's a horse race, I just put odds on the EU (summer 2011) before the US (summer 2012).
My biggest question is whether it is a
...or a
For example, if you want a New World Order, you'd just force the US to do a <Ctl><Alt><Del> at the same time you do that for the EU. Of course, if those nationalistic EU buggers keep whining about their national sovereignty, then it might be good to make them suffer a little bit, at which point you'd need the semblence of prosperity across the pond until they "got their mind right". In that case, the US could skate on for a little bit before everyone unites behind a new ponzi.
But, hey, we could get in on the "ground floor". ;-)
Have to agree with most everything you said. Though don't think we will ever find records of what the Fed did. If Zimbabwe Ben has a brain cell in his head then he has industrial shredders and magnets on standby if not active right now. If the docs are gone he himself is somewhat safe as he knows where bodies are at.
I would make sense to me if they crashed close, say a few months apart. The run from the blast in the Euro would help the dollar but the system is so interconnected I have a feeling the black hole of infinite debt would suck in pretty fast. I would LOVE a Dollar holding out till 2012.
Yes, we're together on that: The dollar holding out to 2012 is my "outside", and I would actually be pretty impressed if the dollar held up more than a few months after the EU goes toes up. But, I was pretty impressed they pulled off what they did through 2009 (not very impressed with 2010 -- that's pretty simple brute force buying of S&P futures and raw monetization of Treasury auctions, they are currently very clumsy and desperate, out of options).
Sadly, I probably agree with you that Ben is shredding and burning, and we won't ever find records of (most) of what they did. My only hope is that the mess is so big that the stuff that fell behind the file cabinet is enough to show everyone his public betrayal.
I tip my hat to the both of you (with an assist to cougar_w) for this fantastic exchange.
Cheers -
That was refreshing -- I will sleep soundly tonight!
docj, completely agree with you re mikla and shameful most excellent exchange.
Maybe a time to buy more gold?
...
ZH community. Please consider our idea of pulling $500 (or your local currency outside the USA) out of the ATMs on Thursday August 12. We would send a message that a vanguard of us ARE PISSED OFF at .gov and the banksters! And that WE can ACT.
Hope to see some of you on Aug 12 in line, get there early!
I am looking at QE being the final squib of the controlled demolition that brings the building down. If no QE happens, well, it will be the same except that the final few floors are left standing; and this was a hell of a building!
But then, who will notice, and how quickly will it be recognized in the cloud of debris that will and has already enveloped us? I think by the coming election, there will be tell tale signs (a large gold price surge through the winter coupled on the back of a weaker dollar for one). This while no one can sell their houses (investments?) People will be clawing their hair out in private, and as they will be dirt broke, they will not be able to buy their honies ipoduhs for Xmas and this will be the next phase of recognition. This all while gold prices continue to surge into the $2000 range going into the new year. Then in the beginning of 2011 I think it will begin to click for most that the old way is not coming back, and this is indeed, as the Dinosaur Kings have said, a New World Order. By the Summer of 2011, peak oil production will most likely have contracted growth to such a large degree, that all hell will break loose.
I have silver doubling every 3 months from here on out until it is at a 13:1 ratio with gold too, if that helps you with asset price comparisons.
That is a bold prediction on silver sir! Can I get your reasoning behind it?
Of course. First above silver holdings are very small, and when people and Banks (Central as well) begin hoarding it in mass due to the ongoing currentsea crisis, I think it will spike the price. I also want silver at a 13:1 ratio to gold so that would put it at $92 to begin with. Then the next stage should have not only CBs hoarding, but backing currentseas with silver. Then, once its production peaks, which could happen anytime, it will have another spike. This and with peak oil, silver's value as a DIRECT medium of exchange is sure to rise.
So it will hob nob with gold while FIAT gets flushed in the face of peak oil. That is a rough edit for you.
Should I assume that you're intentionally misspelling "currencies" with "currentseas"? Some kind of inside joke or something?
Because otherwise, I'd find it hard to follow the financial advice of someone who can't spell basic words.
Pull up a chair.
LMAO
current= money must "flow" Sea where it ends up with the elite?
Small point, but a hunk of silver will still be velow the $600 threshold for 1099s... I think that will add some support
Great point.
Oh, forgot something....the Majors will lose their shorts........
I think the ratio is a little out of wack and I'll be the first to say that silver is underpriced consider supply and demand but there are negatives. In a big crush the industrial demand will lighten up. Also depending on madness of governments we might see more mining. New mines will take a while to come online, but at a high enough price junk silver of all types will be salvaged so that will provide some relief.
I'm simply not sure it will make that ratio, particularly if gold really starts getting legs. Would like to see it, my silver holdings are comparatively small but my best friend moved all in at 14 and my parents have a large amount. I'm keeping mine to a bit less then what I can take in a carry on bag. The TSA will love me if/when I pull up stakes.
"Yes that is silver and my pockets are full of gold coins what of it? It's my coin collection..."
Now that you brought it up, mining during peak oil will be difficult too. So there is another one. I also can not stress enough that I think silver will have the highest velocity of trading over gold and platinum, as I think those two will be used on large pruchase items and held mostly as a direct store of value. I think silver will be used for food, clothing, supplies, etc.
http://www.myvideo.de/watch/3070675/JOE_WALSH_The_Confessor
rusty call you B I N G O
i saw joey walsh A L O T @ the world theater, H I G H street
columbus, O H iiiiiiiiiiii O
My cousin, the wild man of our family, has more silver than my friend, his friend and I do all together!
Disclosure: I am an owner of Au, Pt, Ag, and Pd in that order! I also keep around enough of FRNs to keep me through 6 months of agony.......
Pretty much the same kook reasoning you're using for your predictions.
An opinion is one thing; care to share your theories?
My theory is that kooks don't like to be called kooks, as evidenced by the 5 people who chose to mark my comment as "Junk".
So I guess a bunch of these libertarians are just fascists in disguise, eh?
How many ways and how many times do we need to repeat simple truth: if money is a store of real value, then the simple act of printing more of it without backing it with (putting aside, saving) something real must decrease the amount of value that it stores. Otherwise, we can print enough to make everyone billionaires and no one on planet earth will ever have to work again.
And if money is NOT a store of real value, then you can print all you want but all you are printing is valueless tokens; what "value" have you created? Nothing. And if you have created nothing of real value, then haven't you just caused to be questioned the value of all the money that existed prior to that? If your solution to this dilemma is to have men with guns enforce the value of the money, then its value is doubly questionable.
Doesn't money work this way anyways? Isn't it just a global delusion that anything has a 'value'? Let's just scrap currency and make believe ourselves into a Star Trek economy.
Yes. Think about it. Definitionally everyone who gets paid without creating value (and I am not talking about TAKING VALUE or money from others) is devaluing the currency by accepting payment. Bankers are the worst. They take payment with money created out of thin air.
No, bankers lend money created out of thin air. Its called fractional reserve
So what, you're anti-money?
Money is a very valuable tool for efficient commerce. That's why it's existed, in myriad forms, for thousands of years.
I'm all with you about how we shouldn't be piling up insane deficits, but I see no reason to throw out the practice of using currency for economic transactions.
This is bullshit. The "value backing" money is the fact that it is the only way you can pay your taxes. That alone gives it real value and everything else springs from there.
No, you cannot print enough to make everyone billionaires, this is what would cause hyperinflation. But while you have enough slack in the economy like you do now, you can print a lot more than is currently occurring.
People need to act like this is a law of science that if you print more, you automatically devalue the currency. Sure, maybe if currencies were valued intrinsically but when you have currencies valued against other currencies the relationship is not as simple. Those values are determined by a hell of a lot more than simply what the govt is printing. This is another flawed paradigm people cling to.
I'd also like to add, we need to stop the term "printing". This is all done using numbers on a screen. That alone also blows up the "print more you devalue your currency" nonsense.
always found the use of the word 'printing' quite funny, considering that it was the technological advances of the digital revolution leaping over the gutenberg bible as the kickstart which has led to this current situation.
Doesn't that mean our "money" is worth even less if it is just a digital posting? You can't eat electrons. ...or wipe your ass with it. At least a printed dollar has that intrinsic value.
Rocky, if nothing else FRNs have at least an intrinsic value, LOL!
you can wipe your virtual ass. you know the one, the one with the barcode stamped on it.
++ quelle wit!
Guys,
The definition of "fiat" money is declaratory value. It has value because men with guns say it does. It actually includes a warning that it is "legal tender for all debts", so you fail to accept it at your peril. "Money" is supposed to be a store of value; do not conflate "money" with "credit", which is not. Printing up (or clicking into existence) more "money" must devalue all then-existing money. Math says so. You cannot create value from nothing without the legal tender laws backed by guns. You can wave your money supply definitions that your learned in B school all you want, your heads were filled with horseshit.
Why is counterfeiting illegal? Because it calls into question the relationship between the quantity of money versus the quantity of goods and services, a relationship we call "price." Why is it OK when the Fed does it? Because they have PhDs? The Fed is the counterfeiter of last resort.
Great post. I just wish people would wake up. THIS DOES NOT END WELL
It can end well. Diluting a currency is not the end of the world. It is JUST F'N MONEY. It is not anything important.
I've often thought the same thing. You can dilute a currency very honestly if you want to. Since late 2008 we've added $10,000 per person to the deficit, but what if you went on TV and said, "look we've got to devalue the dollar or bad stuff is going to happen, so we're mailing $10,000 per person out to each household....
Pay down your credit card debt
Go buy a car
take a vacation
Use it as a down payment on a house
Invest it
if this isn't enough to save you, start making other plans..."
No bailouts. no deficit financing. no other government stimulus - just a weaker currency and some inflation. Would that have been so bad? and wouldn't that have worked better than trying to get people to borrow their way to prosperity?
Oh, we are getting closer. I am at least convinced it will happen in my lifetime. I feel it's around the corner, but people take a while to catch on.
People know something is up now; however, and that's the first step. When it hits - a herd of buffalo like the man said.
Jesus H. Christ people! Cheney was right. Deficits don't matter. We're borrowing for zip and have no intention of paying it back anyway. Imagine you are the bank except you can print your own money. That's why we have the Federal Reserve. We can write all the checks we want because we're the bank. Brilliant. Thank you J.P. Morgan.
The day is soon where you will eat your own words... and lots of crow because you can't afford anything better.
GMO food is not food. You want real food, you pay real money for it. Simple.
The only problem is that the Federal Reserve Bank has no (ZERO, ZILCH, ZIP) loyalty to the US, the US government or the US people. The only entities that it has loyalty to are the banks who own it and the BIS whish manages the ownership of everything.
The sideshow of the stock markets will be carried on until ultimately we have a major default.Whether the default will be allowed to actually happen remains to be seen.I personally think the figures for repayment will be seen to be unobtainable,at this point the lenders will see that the debt is being payed in a currencies that loose value by the day as costs to live increase.Lenders will then rush to sell debt which will flood the market,at the same time Gold will rise into oblivion,physical not paper.Then we will see how much backs the system as certificate holders demand physical,defaults will be happening regularly by this time.Good will ultimately come out as the system falls apart and is replaced by new money backed by physical,the stranglehold of debt will be removed and the world will move on.
Notwithstanding the numerous questions GL is asking, who was I watching earlier this week or last who talked about this very thing it would have been Bloomb tv or radio...
The lenders will end the game when they rush to sell unpayable debt.As the system is overwhelmed the central banks will collapse,the ripples will spread into Investment,Domestic, and Local banks.No one will buy the debt which will make financial institutions insolvent worldwide as they all owe each other,the pack of cards will fall,probably happen so fast that damage cannot be limited or repaired,it has to happen to move on.
Yes ... it has to happen to move on AND TO REDUSTRIBUTE POWER (which is why it will not happen).
Yes it will. Mother Nature will see to it...
Correct.
:)
At the moment deficits don't matter just like one human being doesn't matter....I mean, what good does fretting over global warming do if it's going to unemploy a million people? This is where I agree with capitalism: individuals don't matter, mankind matters.....most people are relegated to being worker bees and their demise is meaningless as long as the hive survives.
You should just re-frame your post as 'things any selfish dictator would say.' Yes people are going to die. Yes from global warming, from governments having the hubris to spend into their grave and yes somewhat from capitalism. You better just hope you are not one of the worker bees to be sacrificed. Although as of now, I would vote your ass out of the hive.
I am just being a realist, I put my republican hat on......here's an example.....We know smoking cigarettes kills.....We need to lower healthcare costs, especially in the last weeks of life....Do we do the obvious and outlaw smoking?.....Nope.
Ok, we are in agreement. However the 'republican' hat would be tainted by social issues that do not matter. All of the sudden you are 'killing the old' and want 'grandma to die'. That is why I hate discussing politics with die hard republicans, they frame every issue the same a child would.
I hate republicans, but I hate Democrats too.....I am libertarian and would love to see Ted Nugent running the country.....Kill it and grill it....wang dang sweet poontang.
I'm a Republican and I don't hate you.
Maybe I should just give it some time...
That's the spirit.
Outlaw smoking to lower healthcare costs? From a macro perspective, the gov't. should encourage smoking. Tobacco taxes are a windfall throughout the smokers' lives, and by the time smokers are ready to retire, they're not far from death's door and won't draw as much from the SSTF. Healthcare costs will partially offset those savings, but those costs will taper off quickly. With a 5-year survival rate of only 15%, lung cancer is one of the most deadly of all cancers.
Wow, this is a great view from up here on Mt. Olympus! The people look just like ants!
My friend Serge recently died of cancer, perhaps from smoking.
But it still sucks! I have seen the wikipedia article re 14% survivable rate re lung cancer.
My friend and his (now widow) have whatever to live on...
....
So much pain we Americans have to live on...
God spare us all what e have to live on...
I think any announcement of further QE will be the final squib. Then it will be everyone sifting through the rubble. The smoke will blind, if not choke, many, as it has done all along, and so I do not think the registration will happen at once. I think it will be a couple months before people realize how worthless their doelarrs are.
Grateful Dead - Truckin':http://www.youtube.com/watch?v=vPNgjA4i6gM
Would you like to buy a monkey?:http://www.youtube.com/watch?v=WbCc2jeEQdY
Not saying that this is it, but you start to wonder how close we might be getting.
http://www.marketskeptics.com/2010/08/2010-food-crisis-is-here.html
Or the fact that russia has temporarily banned grain exports..
Great article. Few in finance/economic circles have any idea how fast 'supply' is actually collapsing as, for instance, oil wells go into depletion, and vital infrastructure in energy and manufacturing becomes worn out and unable to continue operation. There's so much focus on the demand side, but none on the supply side.
Compounding this is massive capacity overbuilding in certain areas of the economy (ie: retail, CRE, housing, etc.), which has led economists to delude themselves into believing there is rampant overcapacity. There most certainly is not, since CRE, retail, and housing are not exactly useful when there is, for instance, an oil shortage.
If $80+ barrel oil, $3 copper, etc., isn't making this abundantly clear...then I think people are just hopeless. Plan accordingly.
It's all about bucks, the rest is conversation.....When things eventually get tight, we'll go the France route and go 80% nuclear....but until then, we'll keep lining the pockets of the Saudis...>Can you imagine the shit we'd be in now if the Saudis were forced back to live in tents in the desert?
Do you have any idea what the lead times on building a nuclear power plant are these days? First of all, America doesn't have trained engineers (most of the working-age engineering workforce has been replaced by foreigners who will simply jump ship as soon as things turn tough), so think 10 years to get them in place. Another 5-10 years to acquire the permits, begin the engineering designs, etc. And in the meantime, the grid has to be massively augmented and refurbished to handle the added output of a nuclear power plant.
The country simply won't last that long. And keep in mind that the competition overseas for the same scarce resources (people, raw materials, nuclear fuel and processing) will be intense as well, so unless America offers a compelling value proposition to 'the rest of the world', America will simply be outbid in its quest for such valuable resources.
First of all, America doesn't have trained engineers...
That's not entirely true. There are almost certainly a sufficient number of engineers (Nuclear, Mechanical, some Civil) with the necessary training and experience to form the "cadre" for the engineering force we would need to make this happen. They're not working in that field now because, for the last decade or more it's been percieved as a dead end. But the human brain power is still there.
And there are plenty of capable, underemployed people who would jump to that field if it were realistically percieved as having a honest-to-goodness future.
There's also plenty of ex-Navy nuke folks (enlisted and officer) who would probably pitch in on the operation, maint and tech sides as well.
As to the rest of your statement though, you're sadly perfectly spot on.
". . .so unless America offers a compelling value proposition to 'the rest of the world', America will simply be outbid in its quest for such valuable resources."
When the U.S. fiat currency fails as adequate consideration for the acquisition of the needed materials, I presume the U.S. military will be called upon to step in and make an offer that cannot be refused.
"It's all about bucks, the rest is conversation.....When things eventually get tight, we'll go the France route and go 80% nuclear....but until then, we'll keep lining the pockets of the Saudis...>"
Dear Chartist, this is a false trade off. Saudi oil is used to run transportation, mostly, and secondarily for other purposes such as heating and chemical feedstocks. Oil is not used to generate electricity, mostly. Nuclear plants are mostly used to make electricity, which is useful for many purposes, but nearly useless for powering transportation.
This meme about alternative energy (fill in the blank which type) "replacing our need for foreign oil" is subretarded most of the time, and yet it passes muster of speechwriters for national politicians. Wind and solar don't power cars. Corn ethanol increases use of traditional fossil fuels. Nuke plants don't power cars. Oil isn't burned to provide air conditioning or lighting, just heating in certain colder areas, for part of the year, and to drive pistons to push cars and tractors and trucks around.
Execellent rebuttal!
Also, the oil trade with the House of Saud helps the US via petro-dollar recycling. And, This might be the real trigger (that's why Iraq was invaded- a hedge against the inevitable collapse of the House of Saud).
Speaking of the desert, that's where you intend to dump the nuclear waste, right? Well, believe it or not, some of us who live out in the desert haven't signed up. I will support nuclear energy as a solution when a waste retention facility is built in midtown Manhattan for spent nuclear rods. Until then, consider me the opposition.
Bingo. Oversupply of housing, massive undersupply of energy, soon to lead to undersupply of food. Government response? Let's make creating electiricty twice as expensive, so that we can't even afford to build windmills (windmills need electricity for the steel, diesel to be moved into place, copper to connect them to the grid). No electricity, no electric cars. Maybe if we increase the electric car subsidy to $50,000 per car, people will buy them to live in them! Naw, the price of an electric car would just increase to $90,000 per.
How about instead, see if C+I+G, if we bring G monotonically down to zero, will C and I expand to fill the gap? Maybe it will cause some other malinvestment, but at least it would be different.
the latter
As Dick Cheney so memorably phrased it, deficits don’t matter—so The Deficit as a macroeconomic policy can continue indefinitely.
Tyler,
I kindly request that you remove this sentence from your post, as it will certainly anger many of the Repugnicants that slither around this forum.
The cornerstone of the modern Republican agenda is to portray the Democrats as dangerously indifferent to our growing deficit and debt, despite a mountain of evidence that suggests otherwise. A post like yours might provoke an identity crisis for our local conservative wing-nuts.
Snakes might like airport bathrooms, but they avoid the mirrors.
I was under the impression that there is no difference between repuGlicans and demoCants. Aren't they really the same party, with the weak among us arguing the difference? (Hint: There is NO FUCKING DIFFERENCE. They serve a different master from the people.)
I agree. That's all I got.
This is the best post I have ever read on ZH (in my oinion) since I started ZH 101 almost a year ago. I have finally crossed the event horizon on the debate about hyperinflation. I think the fact that gold is still hovering around $1200/ounce (give or take) is a clear example of the lack of faith in fiat currencies.In my opinion I still give it a few years before the world bails out on bucks. In the computer game "Master of Orion", humans are the best politicians. We are good at lying to eachother, very good. It will only be a matter of time before the vortex sweeps us all in.
Is there any currency that will hold it's value if and when this hyperinflation theory occurs? Europe is a dead continent walking - The Euro is Fu*%$#.
Can one really believe in any other currency?
Perhaps, and perhaps the greatest irony might be that it be the Loonie! I mean, what a better currency name for what it's all come down to?!
Canada, while fucked up in its own right, isn't massively in debt and it does have LOTS of physical resources, more than its own population needs (translation: more exports = more wealth). And Canada is the US's main supplier of energy.
Disclaimer: I have investments in the Loonie.
mmmm. . . how's that "Security & Prosperity Partnership of North America" going?
I'm sure it's undergone a name change since Dubya was moved on, but I doubt it has "disappeared", eh.
Well said.
As a little homework I looked at US debt to GDP levels increasing and decreasing from creation to today. Clear surges in debt spending and then subsequent paydowns over decades to acheive stability.
Interesting to note we entered 1929 w/ 16% debt /GDP ratio and barely exceeded 40% during the entire decade of the 30's. WWII saw a jump to 121% in '46 but this was worked down through restrained spending and GDP growth to a low of 32% in '81. We doubled to 67% in '95 and then pulled back to 56% by '01...then things got interesting and this year looks something like a 95%'ish debt / GDP. This would seem to signal that spending restraint and austerity would be on the way now and actually even worse that the Fed would look to unload their bloated "assets" from their books. All these would be net negative in the short term and highly politically negative. The stock market would sense this and look for safety. However, something has changed and America is no longer willing to voluntarily pay our bills, slow down w/ 2 steps back so we may ultimately take 3 steps forward.
As you note, w/ no impetus to slow the government borrowing due to a lack of ramping interest rates; the government is conversely only encouraged to borrow more at these nearly free rates. The Fed is encouraged to buy more assets out of circulation and replace them w/ "money". This only makes it more unlikely these "assets" will ever come back into the market as they would displace new creation of homes or CRE or MBS or whatever. Basically, what is sitting on the Fed's balance sheet will never come off it and are essentially 100% losses. This is de facto destroying inventory to allow new inventory to be created. Simultaneously, nearly free money continues to be created from the many to be handed to the largest among us to buy T's w/ unearned returns and also loaned at usurous rates to the smallest among us. Losses are born by the many and resultant "profits" will be "won" by the few.
This was once a country w/ ideals worth dying for but I question how many feel that way any longer...I think this loss of faith in the underlying ideals may dovetail w/ the loss of faith in the currency.
In order to follow leaders we must TRUST THEM. Ask yourself: "who do you trust?". Who will you follow?
- Will you follow the president?
- Congress?
- The military?
- The bankers?
Tell me who is deserving of trust!
Maybe Fla Fla Flunky. Or Fa Fa Fohi. Possibly Ra Ra Retard.
Ta Ta Toothy is organized, though. Yeah, I'd trust him.
only those who earn it.
Does any other country have a separate instutution like the Fed?
I'd been meaning to bring this thought up for some time now... What IF the plan is to have the Fed suck up all the poison and then have it die? Could the US basically state that the Fed is independent and that it takes the fall? We'd be able to clean up a lot of the books while also getting rid of a very corrupt entity!
Great work ZH staff.
I feel a little dirty tonight. A little soap & water will make us feel cleaner.
Good posts. Now a little information to see thru the forest.
The IRS is not a U.S. Government Agency. It is an Agency of the IMF.
The IMF is an agency of the UN
3. The U.S. Has not had a Treasury since 1921.
4. The U.S. Treasury is now the IMF.
5. The Attorney General of the U.S. is not employed by the U.S. But is an Agent of INTERPOL which is head quartered in Lyons, France
6. The United States does not have any employees.
7. Social Security Numbers are issued by the UN through the IMF.
8. There are no Judicial courts in America and there has not been since 1789. Judges do not enforce Statutes and Codes. Executive Administrators enforce Statutes and Codes.
9. There have not been any Judges in America since 1789. There have just been Administrators.
10. According to the GATT you must have a Social Security number.
11. You are an "Institutional Unit" in which your body and labor are pledged to the UN through the IMF
12. We have One World Government, One World Law and a One World Monetary System
13. Your Social Security number is your slave number. Just about everyone in the World has a Social Security number from the UN through the IMF.
14. The UN is a One World
15. No one on this planet has ever been free. This planet is a Slave Colony. There has always been One World Government. It is just that now it is much better organized and has changed its name as of 1945 to the United Nations. Super Government.
16. New York City is defined in the Federal Regulations as the United Nations. Rudolph Gulliani stated on C-Span that "New York City was the capital of the World" and he was correct.
17. Social Security is not insurance or a contract, nor is there a Trust Fund.
18. Your Social Security check comes directly from the IMF, which is an Agency of the UN
19. You own no property, slaves can't own property. Read the Deed to the property that you think is yours. You are listed as a Tenant.
20. The most powerful court in America is not the United States Supreme Court but, the Supreme Court of Pennsylvania
To verify the facts in the preceding paragraphs see (5 U.S.C. 903, 12 U.S.C. 95, 18 U.S.C.A. 914, 22 U.S.C. 263, 285, 286, 287, 288. Public Law 89-719, Public Law 94-564, Public Law 101-167, Public Law 91-151 Public Law 103-465, House Report 103-826 T.D.O 150-10, T.D.O. 92, 41 Stat. Chap 214 pg. 654, Emergency Banking Act 48 Stat. 1, Articles of Agreement 60 Stat. 1440, 20 CFR chapter 111, subpart B 422.103 (b) (2) (2), United Nations Secretariat Revised System of National Accounting, Diversified Metal Products v. IRS et al. CV-93-405E-EJE U.S.D.C.D.I., Cromelin v. United States, 177 F.2d 275, 277 Tomalewski v. United States, 493 F.Supp 673, 675 Foster v. Bork, 425 F.Supp 1318, 1319-20 FRC v. GE 281 U.S. 464, Keller v. PE 261 U.S. 428, United States v. LePatourel, 571 F2d 405, 410, Respublica v. Sweers 1 Dallas 43, INTERPOL Constitution Art. 30, Executive Order 10422, Papal Bulls of 1455 and 1493. 42 Pa.C.S.A. 502. General Agreement on Trade and Tariffs.
Well, thats it for now.. everyone have a good evening.
Front 242 - Headhunter http://www.youtube.com/watch?v=lPpUFBVSyWsThis isn't a philosophy of logic problem/exam, is it?
;)
ZeroHedge just seems to attract these tinfoil hat types.
If only they were actually interesting rather than repeating the same old conspiracy theories.
Yea they need to come up with some new stuff. We need some guy to come on here and convince people that the CIA is running their agents out of flea circuses in eastern Europe.
Cramer: “"You know what, the Bavarian Illuminati, the Trilateral Commission, Goldman Sachs, & The Queen of England are not all bad!"
http://www.blacklistednews.com/news-7249-0-29-29--.html
I almost choked on my own saliva from the irony of your post. A troll asking for some original flavor.
tho' I rather think you wear your *junks* with pride Atomizer, as a point of principle, I dejunk you.
helluva post. . . I wonder how many here are prepared to learn from it.
appropriate musical accompaniment, mmm, anton corbijn. . .
Maybe we should have more respect and call it "Mr Deficit" or "Senor Deficito"
“This policy mentality—shared by both “saltwater” and “freshwater” economists—effectively amounts to a suspension of the notion of opportunity cost”
Does it really?
I was thinking it begged the question?
If the USA and Europe “owe” money to someone?
Exactly whom do they owe it to?
Their own elite class surely?
After all they can tell the Chinese/Russians/Islamists to go fuck.
No?
But you suggest a different “policy mentality”.
Tell me what distinguishes you from the elite scum?
@ Guest Post.
“It's called The Deficit”
Is that a deficit internal to the USA?
Or is it some sort of unpaid external debt?
He's talking about the US National debt. Basically, every Treasury Bond in existence.
jakoye
I get that.
So is every Treasury Bond in existence going to be paid by the USA?
It's not a (diffi)cult question.
Can the USA pay it's debt.
Another way of putting it is.
What idiot lent the USA the dollars?
And where did they get them?
Sure it can. This is all #'s on a computer screen, not physical items being moved anywhere.
No one lent the US a thing. The US provided holders of dollars the means to earn interest. This is what govt "borrowing" does.
“Can the USA pay it's debt.” / “Sure it can. This is all #'s on a computer screen, not physical items being moved anywhere.”
Indeed it is all “computer screen”.
I must disagree with “not physical items being moved anywhere”.
“No one lent the US a thing”
I think you are right.
However, the fact that US debt will never be repaid leaves a rather large hole in the economies that the US didn’t borrow from.
No?
LW,
2/3's is debt owed externally (outside our borders). It has no multiplier and is just money taken out of circulation. We never pay it off and only pay the interest, something like 200 to 300 billion /yr now. However, no GDP multiplier for America as this debt payment is a boost to some other country (unless said interest is plowed back into more T's or US investment).
This is a major differentiation from WWII when we had a high debt / GDP but nearly all debt was owed internally. This money was turned back into the US economy and had a nice knock on effect.
That's why this debt is unlike any debt we've had before coupled w/ massive Fed book that I don't believe we've ever had before (fed shrinking it's book to recoup the "money" given out would be a net negative to the market slowing new growth and formation.
hambone,
Thanks.
You get it.
2/3rds?
If I were China I'd think I was going to get two turds back.
But then I'm not China.
If I were China and "thought" about it for a while?
I'd take the two turds and raise you five.
But then I'm not China.
The formatting of this article leaves something to be desired. It is very hard to read without spacing between the paragraphs.
hear me bitchez
G O T it‡
@ Atomizer
“I feel a little dirty tonight. A little soap & water will make us feel cleaner.”
“I feel a little dirty tonight”
What you fell is of no concern.
“A little soap & water will make us feel cleaner”
Would that be freshwater or saltwater?
Left or Right?
Which cleans better?
IMF site is down for me at moment.
"Bancor” Global Currency
http://nxy.in/psrxm
http://www.google.com/#q=IMF&hl=en&prmd=n&source=lnt&tbs=rltm:1&sa=X&ei=T1pbTPvNE8L38AbB1JX6Ag&ved=0CAcQpwU&fp=f2517a3b07f36e0c
No work for me.
http://www.imf.org/
Grow up before you die.
nice argument.
*eye roll*
"10. According to the GATT you must have a Social Security number."
Is that "left" soap or "right" soap?
Is that "left" soap or "right" soap?
Your right where this administration wants you by divide & conquer technique's. Wake up friend. Based on your scenario, I promise to mark the trees so you can find our way back. If we should get lost, skittles will fall from the skies to get you home. If that fails, I will make a rainbow in the sky.
"Your right where this administration wants you by divide & conquer technique's."
I thought I just explained that to you.
What you "allow" "your" "admistrators" to do to you is you concern not mine.
Hang-on, what's stopping QE2.0 from triggering Hyperinflation then???
Printing money affects market perception, so even that's a trigger.
That's why it will be QEII lite.
It won't work either.
The debt must be destroyed.
Be patient.
It will happen soon.
And you will be poorer.
Someone else will have your money (whatever that is).
"Whether there has been collusion between the Treasury, the Fed and the TBTF banks is for the courts and the historians to decide "...
really? what courts and when? a day for us all to wish for, but that wish looks like a pipe dream.
Good PostHyperinflation, however, is the loss of faith in money. It is not that prices are rising because the economy is moving forward—it’s that prices are rising because nobody believes that money is worth a damn anymore.
Hyperinflation is not simply money-printing: Rather, it is when no amount of money will get you what you want.
However, to get the full flavor of hyper-inflation don't look at is as "no amount of money will get you what you want" it is rather
"you would rather have anything except money - everyone would rather have ANYTHING other than money"
And by everyone i mean, China, Japan, England - think imports and exports.
No offence.
You neglected to include the USA.
Thought about usa - but the initial wave would come externally - there may be some uptick in usa - but most likely, Some policy decision will be buried on a Friday afternoon about closing, it'll impact over the weekend and you'll check the internet on a Monday morning and it'll be over. You wont be able to buy anything because everyone is desperately trying to dump their dollars and no one wants them.
Apologies.
Your inclusion of the USA was implicit.
Beg pardon.
“You wont be able to buy anything because everyone is desperately trying to dump their dollars and no one wants them.”
And I think you will agree that everyone will dump all fiat at exactly the same time?
No?
Lira makes a good point.
The inflation/deflation relationship should be thought of as two men of almost identical strength arm wrestling. They can go on for a long time and it seems as if nothing is being accomplished. But stress is building and fatigue approaching. One fails, and the other wins. Suddenly.
I could picture hyperinflation panic in ag commodities which get right down to the guttural level of survival.
http://www.marketskeptics.com/2010/08/2010-food-crisis-is-here.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarketSkeptics+%28Market+Skepticism%29
Look, the US is now faced with a Mega Fork In the Road and a choice will have to be made:
-Cut costs and let people starve in the streets in neo-Darwinian fashion
-Turn to socialism (maybe without actually saying so) and accept less casino capitalism in return for a package of public services like healthcare, education and pensions
The time is drawing nigh. The day of reckoning is closing in as the deficit clock ticks faster and faster each day with every new bailout and a hemorrhaging tax base.
Strange.
You said a lot but managed to say nothing at all.
Interesting.
Perhaps you're missing the fact that this is such a huge fork in the road for this country. There has been an assumption for a long time that persists today that NOTHING is the best policy. That laissez-faire capitalism is the default modality, that social problems get dealt with every 30 years but that the US will remain the bastion of staunch laissez-faire. Well I'm saying that the gig is up. There will be some hard choices lying directly ahead. The nation is still in a denial period, trying out all sorts of outlandish economic experiments in how to revive a corpse, how to beat a dead horse. There's a denial that for 3 decades we have been on this path, yet the policy was to sweep issues under the carpet. That time period is drawing to a close. The deficit along with it's partner in crime, the hemorrhage of jobs and the associated shrinking tax base will precipitate choices. Parties on the right will agitate for stopping all extensions of unemployment insurance, state bailouts, mortgage cram downs and GSE bailouts, and rescues of social security, medicare and pension funds. If these policies prevail there will be mass unemployment, and people will starve. There are major social/political risks to this. Those on the left will clamor for a socialist style democracy with a basic package of public services for all including healthcare, education, retirement and transportation to prevent having millions of economic refusenicks on the streets and because the burden of debt service will become intolerable.
The fork in the road is here. We'll try to put the deciding off, but we do so at our peril since choices will therefore be thrust upon us.
Caviar Emptor
“Perhaps you're missing the fact that this is such a huge fork in the road for this country”
I am not.
Bye the bye. What is the huge fork? Anarchy or Communism?
Why is there even a question of “huge fork”?
What happened to “America”? “Dream”?. “Freedom”? “Choice”?
Has it been replaced by a “huge fork”?
“There has been an assumption for a long time that persists today that NOTHING is the best policy.”
No. That is not the case. The “NOTHING” you speak of is precisely the political nihilism you exist in.
No?
That is, they want you to believe in “nothing” until they can provide you with “something” to believe in.
Yes?
Hehe.
Bye the bye. What is the huge fork? Anarchy or Communism?
I guess you really don't see it coming. Pity. I'll make it simpler. The topic is Will The Deficit End Up Fucking Us?
Answer in short: YES. If we don't respond to the situation constructively and instead drift toward being marginalized as a world power and a viable economic force.
My first post was simple and clear (which you didn't get and I tried to clarify): We will be faced with 2 choices (The FOrk in The Road)
-Neo-Darwininan Capitalism or Socialism. We will be forced into this choice and it's inescapable thanks to the infinitely rising twin deficits and the infinitely shrinking tax base. Both of these will make the consequences of inaction no longer viable. No more sweeping under the carpet and extend and pretend.
In the case of Neo-Darwinina Capitalism, the proponents will advocate just letting 25% of the US population starve. If that's what it takes, so be it because bailouts and rescues will no longer be tolerated. In the case of Socialism, proponents will advocate some form of safety net for all which will ensure that the impoverished US population will not be deprived of education and healthcare and that we won't have a large underclass. In return, taxes will be higher and billionaires won't be minted as frequently.
As you yourself have illustrated by your reaction, most Americans are afraid to face these hard choices. Extending deficits, unemployment, state bailouts, cram downs, US ownership of auto giants and suspending the rules of accounting all are just ways of sticking our heads in the sand. For now. THe Fork in The Road is here.
Darwin's theories actually indicated more of a socialistic tendency (within a species) than not (check out Peter Kropotkin's Mutual Aid).
The fork in the road isn't one of politics, it's one of physical resources. Socialism will not solve anything. Don't get me wrong, I think that cooperation is great and all, it's just that holding hands and singing kumbaya isn't going to get us out of this mess; only a massive down-scaling will, and then for how long I don't know (the current inter-glacial period is about up, so we're pretty much guaranteed to be toast anyway).
What the fuck does it take to get junked here?
I am the turd.
If I wasn't the turd I would have been the fourth.
I can junk myself.
I am the turd and fourth.
I am alpha and omega.
I am the beginning and end of my turd junk.
Let us all go forth and junk the turd.