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Guest Post: It's The Debt, Dummy

Tyler Durden's picture




 

Submitted by Jim Quinn of The Burning Platform

It's The Debt, Dummy

I think charts tell a story that allows you to disregard  the lies
being spewed by those in power. Below are four charts that tell the
truth about our current predicament. The first is from http://www.mybudget360.com/.
The austerity and debt reduction storyline being sold by the MSM is a
crock. The total amount of mortgage debt outstanding peaked at $14.6
trillion in 2008. The total amount of consumer debt (credit cards, auto
loans, student, boats) outstanding peaked at $2.6 trillion in 2008.
Today, mortgage debt outstanding stands at $13.8 trillion, while
consumer debt stands at $2.4 trillion. Therefore, total consumer debt
has declined by $1 trillion in the last three years. The MSM and talking
heads use this data to declare that consumers have been paying down
debt. This is a complete and utter falsehood. The banks have written off
more than $1 trillion, which the American taxpayer has unwittingly
reimbursed them for. Consumers have not deleveraged. They have taken on
more debt since 2008. GMAC (Ally Bank) is handing out 0% down 0%
interest loans like candy again.

Never has a chart shown why the country is such a mess, with no easy
way out. It was the early 1980′s and the Boomers were between 23 years
old and 40 years old. Seventy six million Boomers were in the work
force. Was it the chicken or the egg? The financial industry peddled
debt as the solution to all problems. But, it was up to the Boomers to
take on the debt or live within their means. Boomers chose to live for
today and worry about tomorrow at some later date. There is no doubt
what they did. The chart tells the story. Boomers can moan and blame and
point the finger at others, but they took on the debt in order to live
at a higher standard than their income would allow. This is why 60% of
retirees have less than $50,000 in savings today. This is why 67% of all
workers in the US have less than $50,000 in savings. A full 46% of all
workers have less than $10,000 in savings.

In order for this economy to become balanced again would require
consumer debt to be reduced by $3 to $4 trillion and the savings rate to
double from 5% to 10%. This will never happen voluntarily. Americans
are still delusional. They are actually increasing their debt as credit
card debt sits at $790 billion, student loan debt at $1 trillion, auto
loans at $600 billion, and mortgage debt at $13.8 trillion. The debt
will not decline until an economic Depression wipes out banks and
consumers alike. America will go down with a bang, not a whimper.

Household net worth peaked at $65.8 trillion in Q2 2007. Net worth
fell to $49.4 trillion in Q1 2009 (a loss of over $16 trillion), and net
worth was at $58.1 trillion in Q1 2011 (up $8.7 trillion from the
trough). So, household net worth is still down by $7.7 trillion from its
2007 peak. The really bad news is that the real estate portion of
household net worth dropped from $22.7 trillion in 2007 to $16.1
trillion today, a $6.6 trillion loss. Real estate continues to fall.

You can clearly see who benefitted from the monetary and fiscal
stimulus implemented by Bernanke, Geithner, and Obama. If household net
worth is up $8.7 trillion from the trough in early 2009, but real estate
has continued to fall. This means that the entire increase in net worth
came from stock market gains. As you may or may not know, the top 10%
wealthiest people in the US own 81% of all the stocks in the country.
The other 90% own virtually no stocks, so they have been left
with depreciating houses and inflating bills for energy and food. The
top 10% are about to take another multi-trillion dollar hit in the next
six months as QE2 ends and the stock market implodes. This will knock
the country back into deep recession. 

The most amazing chart of all time is the one below showing home
equity since 1952. In a normal non-delusional world, people pay down the
principal on their mortgage month after month, resulting in their
equity in the house methodically rising. National home prices doubled
between 2000 and 2005. One might ask, how in the hell could home equity
drop from 60% to 58% between 2000 and 2005 when home prices went up
100%? Equity should have risen to 75%. Well the delusional Boomers
struck again. The banks made it as easy as hitting the ATM to get equity
out of your house and the Boomers jumped in with both feet, as usual.
Americans withdrew $2.8 trillion of fake equity from their homes between
2003 and 2007. They lived the lifestyles of the rich and famous. BMWs,
Mercedes, cement ponds (pools), new kitchens, Jacuzzis, home theaters,
exotic vacations, hookers, facelifts, size DDs, and putting a little
more in the church basket abounded.

This astounding level of stupidity and hubris left millions of
Americans vulnerable when the bubble popped all over their faces.
Millions have lost their homes. Almost 11 million more are underwater on
their mortgage. There is years of pain to go. Household equity is now
at an all-time low of 38.1%. What makes this number even more amazing is
that 33% of all homes are owned outright with no mortgage. This means
that the 50 million houses with a mortgage have far less than 38.1%
equity. The people who sucked hundreds of thousands out of their houses
to live the good life deserve to get it good and hard.

The last and most humorous graph shows how home price gains are
fleeting, while the debt stays wrapped like an anchor around your neck.
The greatest bubble in history was clear to Robert Shiller, John Mauldin
and many other people with their eyes open. Ben Bernanke was not one of
those people. He thought we had a solid housing market in 2005. Real
estate values fell from 170% of GDP to 110% of GDP today, headed down to
90% or lower by 2015. The mortgage debt behind this real estate has
declined by $634 billion, from 75% of GDP to 65% of GDP. Most of this
was due to default, not payment.

It should be clear to anyone that we have a bit of a debt problem.
The government solutions jammed down our throats since 2008 have added
$7 trillion of debt to the national balance sheet. The only thing
keeping this house of cards from collapsing immediately has been the
extremely low interest rates put in place by the Federal Reserve. The
end of QE2 potentially could result in interest rates rising. If
interest rates were to rise 2%, this country’s economic system would
implode. Time is not on our side. The debt cannot be repaid. The debt
cannot be serviced. The debt has destroyed this country. Years from now
when historians ponder what caused the great American Empire to
collapse, the answer on the exam will be:

IT WAS THE DEBT, DUMMY.

 

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Sat, 06/11/2011 - 22:02 | 1362174 I am Jobe
I am Jobe's picture

Tyler,
need to cover this one

 

Illinois Insanity: State Spend $365K Taxpayer Dollars to Teach People How to Fish; Hands Out $4 Million in Free Tuition to AFSCME Public Union Workers

http://globaleconomicanalysis.blogspot.com/

Sat, 06/11/2011 - 22:22 | 1362196 swissinv
swissinv's picture

fishing may be a very useful skill in the near future...

Sat, 06/11/2011 - 22:58 | 1362243 johnnynaps
johnnynaps's picture

sure, if only the commercial fishermen didn't destroy the supply

Sat, 06/11/2011 - 23:01 | 1362247 HungrySeagull
HungrySeagull's picture

They cannot get thier boats that far up the navigatable river system. Flat bottoms rule in our area. I am a ocean going man myself and retain faith in the big fish, if your line is strong enough to reel em.

Now where did I leave that damn VISA to get the boat chartered and provisioned for that run?

Sun, 06/12/2011 - 10:31 | 1362909 Alpha Monkey
Alpha Monkey's picture

I suggest you check this out: http://www.ted.com/talks/jeremy_jackson.html

Esp. around the 5 minute mark about sport fishing champion fish sizes, now and then.

Then come back and tell us about that faith in big fish, VISA or not.

Sun, 06/12/2011 - 09:48 | 1362847 ibjamming
ibjamming's picture

I can see it now...everyone in Chicago previously on food stamps fishing every day for their supper along lakeshore drive.

Sun, 06/12/2011 - 13:16 | 1363158 mr. mirbach
mr. mirbach's picture

Sure but the waters in the Illinois area are so polluted that the fish are not safe to eat. 

Sat, 06/11/2011 - 22:40 | 1362210 anynonmous
anynonmous's picture

no, it's not the debt nor is it the fish

it's the diapers

 

http://www.myfoxhouston.com/dpp/news/national/TSA-Admits-Bad-Judgment-Af...

 

and toddlers too

http://www.youtube.com/watch?v=ba030UmbkCo

 

Sun, 06/12/2011 - 16:06 | 1363407 FIAT_FixItAgainTony
FIAT_FixItAgainTony's picture

sick freakin bastards.  i'd have a real scene going on if that was my child.

that was completely uncalled for.

"Refuse to participate in the charade"

Sat, 06/11/2011 - 22:04 | 1362176 CoolClo
CoolClo's picture

Can we say "Deflationary Depression"....

Sat, 06/11/2011 - 22:23 | 1362198 Rational Psycho
Rational Psycho's picture

Only if they stop printing. My gold's on helicopter Ben and QE3.

Sat, 06/11/2011 - 22:38 | 1362209 CoolClo
CoolClo's picture

Not barely enough private Federal Reserve Notes  available in the world to cover the tremendous debt pile denominated in said FRNs.

Sat, 06/11/2011 - 23:12 | 1362272 Rational Psycho
Rational Psycho's picture

Which is why I'm betting they'll print more. I expect falling prices measured in gold and rising prices in FRNs.

Sat, 06/11/2011 - 23:48 | 1362321 Sam Clemons
Sam Clemons's picture

Very true.  That is why they loan more "money" into existence in the form of FRNs.

Debt ceiling will be raised.  Just wait.

Sat, 06/11/2011 - 23:20 | 1362283 Caviar Emptor
Caviar Emptor's picture

Make that "Inflationary Depression" aka Biflation.

The Biflation meme got lots of coverage this morning in financial blogs. It's growing. Because it's real. 

Sat, 06/11/2011 - 23:41 | 1362311 DoChenRollingBearing
DoChenRollingBearing's picture

Caviar, you always have interesting things to say.  If you would like a link to my blog send me a gmail.  130 Zh-ers (so far and counting) can't be wrong!

Sat, 06/11/2011 - 23:52 | 1362327 Sam Clemons
Sam Clemons's picture

Nice.  Yeah, I don't see why people always think that each current situation will look like something of the past.  Maybe it is the desire to assume one understands something enormously complex by stamping a word on it.

Hasn't the Shadowstats guy been saying this for years now?

Sat, 06/11/2011 - 22:10 | 1362179 I am Jobe
I am Jobe's picture

Beyond deflation. Is there a word for that?

 

Sat, 06/11/2011 - 22:22 | 1362195 CoolClo
CoolClo's picture

Deflation= The destruction of capitol (wealth)...

Sat, 06/11/2011 - 23:10 | 1362265 False Capital
False Capital's picture

Paper money is not wealth. An accounting ledger at best.

Sun, 06/12/2011 - 00:04 | 1362347 jeff montanye
jeff montanye's picture

u.s. paper money was pretty good 1934 to 1945 and not bad 1985 to 2000 but yours is the way to bet it.

Sun, 06/12/2011 - 05:41 | 1362638 Matto
Matto's picture

Wealth destruction + rising prices. The paper/digital money in existance is not eradicted by default but is now representative of a smaller economy.

Sat, 06/11/2011 - 23:01 | 1362240 The Limerick King
The Limerick King's picture

Deadflation!

Sat, 06/11/2011 - 23:07 | 1362252 bigwavedave
bigwavedave's picture

implosion

Sat, 06/11/2011 - 23:34 | 1362299 Michael Victory
Michael Victory's picture

infression

flashback: 100 Years of Government vs. The Economy

 

Sun, 06/12/2011 - 15:12 | 1363332 Zero Govt
Zero Govt's picture

Hyper-Deflation . . . . . Vall Haller

Sun, 06/12/2011 - 09:25 | 1362812 snowball777
snowball777's picture

Beyond deflation. Is there a word for that?

Collapse.

Sun, 06/12/2011 - 13:23 | 1363167 mr. mirbach
mr. mirbach's picture

Profligation = the destruction of an economy through .gov/banker corruption.

Sat, 06/11/2011 - 22:10 | 1362182 Pure Evil
Pure Evil's picture

Does one need a better reason to hold PM's?

Sat, 06/11/2011 - 22:26 | 1362193 Fancy Bear
Fancy Bear's picture

Shorting the market is much higher yield near term.

Burn baby burn!

Sat, 06/11/2011 - 23:13 | 1362256 The Profit Prophet
The Profit Prophet's picture

Don't be a fool!!!  Prepare for the end....which does not involve paper in any form except currency "in hand". Trying to profit from this tragedy is of the same moral fibre as Goldman's Timberwolf play. I expect better from this community......(except for the paid shills of course!!!!!)

T.E.I.N. everyone!

Sat, 06/11/2011 - 22:17 | 1362185 FullFaithAndCretin
FullFaithAndCretin's picture

Ah thats a bit more like it Jimbo. Another red faced tirade against the boomer generation has been long overdue. I had started to think you were going soft.

Sat, 06/11/2011 - 23:49 | 1362318 RockyRacoon
RockyRacoon's picture

I guess I missed the demographic graphs.   It's comforting to know that nobody under the age of 50 has a mortgage.

Sun, 06/12/2011 - 01:40 | 1362494 FullFaithAndCretin
FullFaithAndCretin's picture

Well its all my fault I guess. Climate change is my fault too. And Fukushima.

Sun, 06/12/2011 - 11:26 | 1362991 Misery Index
Misery Index's picture

Can I junk someone more than once?

 

Just sayin', I have a whole bunch of Gen X'ers that would say that "Yes, you are the problem".

Sun, 06/12/2011 - 13:06 | 1363144 Misstrial
Misstrial's picture

Agree, please see my post below.

~Misstrial

Mon, 06/13/2011 - 03:14 | 1364185 Ben Dover
Ben Dover's picture

Awesome. You manned up and took responsibility. :D

Sun, 06/12/2011 - 03:10 | 1362565 Mec-sick-o
Mec-sick-o's picture

Good catch.  Boomers, sons of boomers and grandsons of boomers are about to go BOOM!  Each generation sieged under its own debt burden.

Sat, 06/11/2011 - 22:25 | 1362188 Bazooka
Bazooka's picture

DEFLATION!!!!

Credit implodes because debt becomes too heavy and needs to collapse. The above graphs point to a deflationary tsunami that's dead ahead. The March 2009 to present rally was a temporary relation, a natural rally (ABC form) following a huge collapse in S&P 500.

The next leg down will be left translated and hard and fast! Debt destruction (bankruptcy, foreclosures, etc) will make credit disappear. Credit not being available, many transactions will resort to becoming cash transactions. Can you imagine the house price if mortgage credit is decimated and cash is the only transactional medium? An average American has what....$2k in the bank....can you imagine the resulting price? I believe housing will fall 90% from current levels. This will probably piss alot of people off but once house purchases become cash mediated....price compression will be like never before.

However, physical dollar bills will be hoarded and in great demand. Because, again, without credit, many transactions will become cash. Since there is only $900 billion of USD bills in circulation, you can only imagine the stampede for hoarding once deflation hits the Prechter point of plunge. So, grab all the cash you can now before its too late.

All you Gold and Silver holders....have you noticed that gold and silver move near syn to the equities? Would you consider that if you sell now, better prices could be ahead? Like MUCH better prices: GLD at $490 and Silver at $2.50

Do you realize the most transactions are credit mediated and not physical cash? So, once credit card companies elevate their requirements to get credit cards, force credit limits down ($5,000 to $500), increase interest rates, etc....more and more transactions will become cash and away from credit.

Price decrease on goods is not deflation, it is the result of deflation. So, yes, by 2016, $1 USD can probably by 10x what it does not...perhaps 20x. That means you can buy a mansion ($1 mil today) for $100k or less!

Disclosure: Long VXX, FAZ, UUP

Sat, 06/11/2011 - 22:29 | 1362201 CoolClo
CoolClo's picture

+100.

 

 

Deflation= The destruction of capitol (wealth)...NOT falling prices which is price disinflation.      Long VXX and SPXU.

 

Sat, 06/11/2011 - 23:00 | 1362239 InconvenientCou...
InconvenientCounterParty's picture

buy SPXU and hold your breath. When you exhale, sell that MF'er.

Buy physical silver and sleep right.

Sat, 06/11/2011 - 23:10 | 1362266 CoolClo
CoolClo's picture

I agree that SPXU is not for everyone, but with the use of stop-loses and/or option hedging  it can be a very powerful shorting tool. 

Sun, 06/12/2011 - 10:54 | 1362942 Roger O. Thornhill
Roger O. Thornhill's picture

The only problem with the deflation thesis is that it implies the government will let it all fall down. As we have seen, they will counter every situation with some ridiculous countermeasure to insure cash availability. They also have a bad record with following their own laws - you really have to understand that they will do anything - and I do mean "anything!" That is why there was no reset in 2008.

Inflation is their best way out, it is the stealthiest form of robbery and it is how they will play it, because that is always how they play it. Inflation gives the best money to those at the top and screws everyone further from the discount window.

If there were the rule of law and honesty, I would believe in deflation - but that is not the modus of who we have running the show. Expect inflation - be it bi, stag, or some other ghastly form.

 

Sun, 06/12/2011 - 00:23 | 1362384 QQQBall
QQQBall's picture

I read somewhere recently that like 50% of people  polled could not come up with $2000 WITHIN ONE MONTH! Not to worry, another 25% said they probably could... Talkk about a lack of liquidity? Brutal. Zombies. Walking Dead. Whatever - that was an amazing and scary poll.

Sat, 06/11/2011 - 22:34 | 1362204 Gunther
Gunther's picture

In your scenario, how is the governent paying expenses? If nobody has a lot of money, taxes must sink and the current government debt becomes unpayable.

In case of default the dollar bills will be useful to generate heat or as wallpaper.

 

Sat, 06/11/2011 - 22:37 | 1362213 Bazooka
Bazooka's picture

As I've said in past posts, i believe ultimately the dollar is doomed to hyperinflation.....its coming, but we must first cross the valley of deflation because the great credit bubble unwind is fast at hand. Once this proceeds, then jump into Gold which will be at or near $490; buy up all physical assets (houses, rolex watches, valuabl art, collectibles, vintage wine, Silver coins, etc) as these will all be a pennies on the dollar.

Sat, 06/11/2011 - 22:51 | 1362228 taraxias
taraxias's picture

Under the existing monetary system deflation is a myth.

Sat, 06/11/2011 - 23:04 | 1362246 CoolClo
CoolClo's picture

Really? Just take a look at the destruction of wealth (deflation) that is occuring in the housing market. No amount of printing has helped it. Soon it will spread to ALL markets.

Sat, 06/11/2011 - 23:54 | 1362333 ffart
ffart's picture

If borrowed money is wealth then is it a debt crisis at all? Any contraction in the money supply would lead to mass default and would kill the currency even faster than QE has.

Sun, 06/12/2011 - 20:49 | 1363801 Cleanclog
Cleanclog's picture

Debt does not equal wealth.  It just was thought to for the past 30 years.  Yet another reason we have debt saturation.

Sun, 06/12/2011 - 09:41 | 1362839 Smiddywesson
Smiddywesson's picture

"Really? Just take a look at the destruction of wealth (deflation) that is occuring in the housing market. No amount of printing has helped it. Soon it will spread to ALL markets."

Yes, if the system doesn't spontaneously collapse.  Unfortunately, this is not going to progress in a linear fashion.  It will be game over before you see the all markets event that demonstrates pure Prechterian deflation.

Prechter bases his Elliott Wave Theory on the markets representing human emotion.  Want to try to push that argument in this corrupt market?  He is a dogmatic thinker and will ruin you.

Sun, 06/12/2011 - 21:37 | 1363426 akak
akak's picture

Really? Just take a look at the destruction of wealth (deflation) that is occuring in the housing market. No amount of printing has helped it. Soon it will spread to ALL markets.

Like those of all contemporary deflationary flat-earthers, your analysis is hopelessly confused.

There has been absolutely NO "destruction of wealth" taking place, whether in the housing market or in any other.  What we have seen is merely the fall in valuations --- a very different phenomenon, and absolutely NOT equivalent to a fall in wealth, nor a decline in the money supply.  This is where the deflationary flat-earthers go amiss --- conflating paper valuations AND credit with actual money.  Keynesian redefinitions and obscurantist propaganda have so poisoned the financial and monetary debate, and perverted its very terminology, that it is almost impossible at this point to try to rationally and logically discuss the absurd premise of a fiat currency deflation with the many who are mislead and misinformed on this subject.

Sun, 06/12/2011 - 01:39 | 1362492 Peak Everything
Peak Everything's picture

Maybe, but I think not. I do not buy the argument that gold is like any other debt supported speculative asset that will drop in a deflationary crash. People who buy gold do so because they understand the risks of debt and speculative assets. Thus the majority do not buy gold with debt. In addition, gold is a much smaller market than real estate or equities. As people exit real estate and equities for safety it will only take a small percentage of these funds to support and increase the price of gold. On the other hand, because the gold market is relatively small and purchases are driven by fear, we can expect high volatility in gold prices. You should not buy gold if you are unable to handle large price swings.

Sun, 06/12/2011 - 09:37 | 1362829 Smiddywesson
Smiddywesson's picture

Appologies, Bazooka, I didn't know you were theorizing deflation first, and then hyperinflation and collapse.  

I would have agreed two years ago, however they held it all together for too long and the pressures of collapse have buit up to such great extent that I believe we will skip over most of the deflationary period.  

In the end, I think you will be proven right, but only in theory.  I definitely do not believe that gold will plunge when the end comes.  We may see some deflation in some areas, but panic will set in in other markets.  Deflation will never counter the effects of a panic, and the level of spontaneous panic should be biblical.  So while housing prices will continue to deflate, any store of value will skyrocket. 

Sun, 06/12/2011 - 15:23 | 1363343 Zero Govt
Zero Govt's picture

Bazooka

you're clearly a slavish student of Robert Prechter of Elliott (Idiot) Wave with your delfationary writings. He will ultimately be proved right the problem is he's been so bloody wrong for so long nobody cares.

Prechters market timing is so far off you've got to be a loony to listen to any more of his claptrap ...clearly you've got no skin in the game (money invested) because if you had you would stop quoting him almost verbatim

i speak from bitter experience at his market predictions which throughout 2010 into 2011 were complete and utter bollocks as was all his Idioticians at Elliott Wave International

Sun, 06/12/2011 - 15:52 | 1363389 Confucious 222
Confucious 222's picture

You seem to be in some synthetic universe where your economic theories play out in a vacuum, badzooka.

Unsupportable debt and the fantastic destruction brought by overleveraged financial institutions would bring about price disinflation and deflation were it not for one simple fact:

The Fed and other central banks exist in our actual universe. They need to print to stay in power. Print they will. Electronically and on paper/linen. Your contrived notions won't stop them.

Are you some disinfo agent from the Fed?

You sure sound like one - telling everyone to SELL PM'S NOW, because as their friend you are advising they could buy them back much cheaper. Bullshit. Just put .gov on your badzooka handle and migrate over to Huffpo or dailykos where the sheeple might listen to you.  

 

Sat, 06/11/2011 - 22:50 | 1362232 Mad Marv
Mad Marv's picture

I tend to agree.  We're getting either inflation (but I don't sense the economy is heating up - too soon to tell what rates will do), or defaltion.  In the meantime, we have reduced our lifestyle and hoarding cash.  I guess I'm betting on Deflation.  It's tough to know for sure where to park wealth with fucktard manning the printing press. 

Sat, 06/11/2011 - 22:53 | 1362235 eddiebe
eddiebe's picture

Sorry Mad Marv. Fucktard knows what he is doing, better get it!

Sun, 06/12/2011 - 09:53 | 1362853 Smiddywesson
Smiddywesson's picture

The inflation/deflation argument is only important if the currency is not destroyed or if you are just trying to profit from the process.  

The evidence of currency destruction is incontrovertable, so the issue of what one should do is clear, protect what you have.  I can invest based on a delation or inflationary prediction, but I know there is no way out of this mess for the USD.

Normally, one could flee to a different currency, but thanks to globalization and central banking system, there's nowhere to hide in paper.  

If deflation is the answer, it is likely to unfold slowly and sqeeze us to death.  If hyperinflation hit, it will set in with a vengeance.  Gold is therefore the safer play, because if you are wrong, and deflation drives down the price of gold, you still have a chance to change positions.  Not so with US dollars.  If the USD collapses, it will be fast, and with very little warning.

The title of the article is "It's the Debt, Stupid."  I think we should all remember that the continued existence of the USD is much more important than whether inflation or deflation will be the mechanism for our self destruction.  The dollar is going down, so I am sitting in PM, it's that simple.

Sat, 06/11/2011 - 22:58 | 1362242 SilverDosed
SilverDosed's picture

Selling Physical now in order to buy it cheaper in the future is not a risk I'm willing to take. I'd rather hold the three things most americans right now dont have, physical cash, physical PM, and good credit. The last one is probably worthless but why blow up my credit now if I can just do it for a better reward in the future? My hope is that the  banks will get extremely desperate to let me borrow money to buy their PM's from them, knowing full well I'll never pay them back, so desperate in fact, that they pay me to do it, wait, they're already doing that.

Sat, 06/11/2011 - 23:30 | 1362294 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1530

+ $$$$$$$

SilverD is exactly right.  It is always a good idea to have a stack of $100s and a stack of $20s close at hand.  How much?  Depends, but I would shoot for at least three months of expenses.  Six months or longer even better.

But, hide it from the predators!

Sat, 06/11/2011 - 23:53 | 1362325 longorshort
longorshort's picture

Yah you got burned, should have sold at 49 lol.

Sat, 06/11/2011 - 23:05 | 1362248 swissinv
swissinv's picture

"hidden inflation" will come to light - happens when the market realize that some assets prices were surpressed and wrong inflation expectation conveyed

Sat, 06/11/2011 - 23:08 | 1362251 HungrySeagull
HungrySeagull's picture

We are already working our way to that point. No one wants mansions anymore and real estate agents starve waiting for that foreign sugar daddy and 10 kids to immigrate legally to buy it. At a exchange rate in his favor to boot.

 

TINY Houses dot com might be the next big boom. When one has spent decades in a 18 wheeler sleeper truck one knows how to live very well in limited spaces. (In luxury too.)

 

Disclosure, I hold physical silver and got it by the tiger tail. I intend to ride it up or down. Always buying at a price lower than my first core holdings.

Sun, 06/12/2011 - 01:19 | 1362281 Threeggg
Threeggg's picture

But the fractional lending system does not work in your scenario therefore they will print and print and print.......................................!

You said:

"The March 2009 to present rally was a temporary relation, a natural rally"

But yet every day here on ZH "everyone" is refering to POMO. Around 8 Billion per day, is that natural.?

"However, physical dollar bills will be hoarded and in great demand. Because, again, without credit, many transactions will become cash"

Credit is the only thing that makes the debt based system (fractional lending) work. Your scenario only considers the continental US in a cocoon. What about the countries that hold dollars (debt) in "electronic" form ? You are telling me that the Chinese and all other countries are going to throw their T/bonds away and demand paper dollars instead ?

"Without credit, many transactions will become cash"

Without credit, the reserve currency status of the United States is gone. Again every country holding our T/bonds will "demand" physical dollars. ?

"All you Gold and Silver holders....have you noticed that gold and silver move near syn to the equities? Would you consider that if you sell now, better prices could be ahead? Like MUCH better prices: GLD at $490 and Silver at $2.50"

I will ask the same simple stupid question again.....All countries holding our electronic dollars will demand paper printed dollars ?

Number 1

You dont understand the real term, or "what is money".

Number 2

You assume everything is priced by the discovery mechanism in a free market environment. It's not.

Please answer my questions the same way I asked them. One by one

Sat, 06/11/2011 - 23:20 | 1362289 blunderdog
blunderdog's picture

There's no production cost for debt, so I think this ends up being a huge load of nonsense.

All the historical fiat-currencies which have undergone major deflation fail to prove your case.

Sun, 06/12/2011 - 05:50 | 1362648 Matto
Matto's picture

Bazooka - please take the time to read FOFOA on inflation vs deflation before spouting off here. Digital credit dollars are not destroyed by default! LEARN IT LIVE IT KNOW IT!

Sun, 06/12/2011 - 09:13 | 1362800 Greeny
Greeny's picture

"I believe housing will fall 90% from current levels."
absurd IMHO. I bet you live in the trailer park.

And if you going to rent I'll charge you 3 times more.

If that event happened your Silver will worth $10/oz again.

Gold more likely to stay somewhat high.

And btw, You think Bernank such idiot, to start Q1-Q2

and let everything collapse in deflation spiral again.

The only way to see housing picked up is to devalue

dollar domestically, by say 30-40%, then everything include

houses will cost more Dollar wise.

IMO today is nothing to trigger

events of 2008. Just a correction. So, stay in cash

and while I'm going to trade this Market anyway, no where

to park the cash. 0% Interest and Gold and Silver? I got

some won't buy more at current levels. We'll wait and see.

Hopefully Monday, markets will go back up.

Too early for collapse.. USA can take twice as much Debt

as it has now. FED balance sheet represents 18% of GDP,

Japan for example have been in 36%. Lot's of room

for further QE. Good luck there under you rock.

Sun, 06/12/2011 - 09:31 | 1362819 Smiddywesson
Smiddywesson's picture

Bazooka,

 

Your argument assumes they don't destroy the currency, and you offer no information to support that assumption.  On the other hand, we already know that the amount of USG debt far outstrips our ability to pay that debt.

Deflation vs. Hyperinflation and default 

Ex.  Deflation:  One US Dollar may well equal 10x purchasing power if the dollar isn't broken.  We have no examples of this but Japan, and Japan was a special case with plenty of domestic savings and a healthy international financial community to aid it.  Today, virtually every country is swamped with debt, so who's going to bail out the US and save the dollar?  Nobody.  

Ex.2 Bankruptcy, hyperinflation, and debasement of the currency:  The dollar is already broken, and there is nothing to keep its purchasing power from continuing to fall.  Globalization has put every country at risk at the same time.  There are no other currencies to flee to.  When the rubber hits the road, it's every country for itself. We are well past the deflation scenario.

You are standing in the pumpkin patch with Bob Prechter waiting for the Great Pumpkin of Deflation to arrive.  I would buy the argument, but we decided to go all-in and bail out the world in an attempt to save the system.  It didn't work.  This has turned the tables on the USA.  We are now more vulnerable than anyone else.

$400 gold, yeah right.  If the central banks could have brought back $400 gold, they would have done so already.  The ability of the central banks to manipulate gold is manifest.  But they are buying gold, as are the rich.  The Chinese are urging their people to buy gold because they know the system is about to fail.  However, in the West, where the sheeple are ruled my the MSM, very few own gold.  Is it your experience that the MSM tells the sheeple the correct thing to do, ever? That USD is looking real strong, not!  Short gold, I dare you.

Sat, 06/11/2011 - 22:45 | 1362211 taraxias
taraxias's picture

@ Bazooka

Worse garbage ever posted on here.

Sat, 06/11/2011 - 23:08 | 1362254 tyler
tyler's picture

I concur, its not even worth junking.  The most shocking thing about debt that Quinn left out by choice is the fact that 23% of people don't even have a job.  Throw that into the mix and if Americans weren't so zombiefied by the tap water or the Casey Anthony trial there would be some serious riots going on.

Sat, 06/11/2011 - 23:12 | 1362260 Manthong
Manthong's picture

Summer officially starts June 21.

Could be a hot one.

Sat, 06/11/2011 - 22:40 | 1362212 Hulk
Hulk's picture

And for the sake of brevity, in case this subject comes up in this thread,

SAR (suspicious acivity report) is different than the requirement to report transactions (or a series of transactions) of $10k or greater. That is all for now...

.

Sat, 06/11/2011 - 23:09 | 1362255 HungrySeagull
HungrySeagull's picture

It matters not anymore. Anything can be traced these days with due diligence.

Sat, 06/11/2011 - 23:34 | 1362298 DoChenRollingBearing
DoChenRollingBearing's picture

Hey Hulk and HungrySeagull, if you guys would like to look at my blog please send me an email at gmail identifying yourself(ves).  130 ZH-ers have been let in...  And 130 ZH-ers can't be wrong, ask Rocky R!

Sun, 06/12/2011 - 00:26 | 1362389 RockyRacoon
RockyRacoon's picture

Oh!  My cue.  Yes, right, it's a fun spot to hang out.

Sun, 06/12/2011 - 01:36 | 1362489 Hulk
Hulk's picture

OpSec breech DoChen...

Sat, 06/11/2011 - 22:44 | 1362220 Kokulakai
Kokulakai's picture

Have no fear.

Ben "no deflation" Bernanke is here.

http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

Unless he's in on it.

Sat, 06/11/2011 - 22:54 | 1362234 CoolClo
CoolClo's picture

Like always the Private Central Bank will be late on the printing press trigger, but once it begins on the path of all-out printing (sometime after the summer of 2016) no one will want their Federal Reserve Notes which will lead to a hyperinflationary environment..

Sat, 06/11/2011 - 22:48 | 1362221 zaknick
zaknick's picture

In case of bankster induced pandemic, use nano colloidal silver to kill bacteria and virii. The German e.coli has bubonic plague pathogens in it and was lab created to withstand 8 different types of antibiotics (ergo all the deaths). Silver: the all around bankster slayer.

www.utopiasilver.com

The banksters' GMO strategy:

http://www.engdahl.oilgeopolitics.net/GMO/gmo.html

Kissinger: Control oil & you control nations. Control fodd and you control people.

Not effing kidding.

Sat, 06/11/2011 - 23:34 | 1362297 HungrySeagull
HungrySeagull's picture

Oil = Gasoline.

A Reel Mower of old = No gas needed. Just a touch of lube now and then. It still mows the grass without the noise and gasoline and engine work required to cut same grass.

The labor required of the reel mower will reduce your obesity and make you somewhat fit for the bad times to come.

Sun, 06/12/2011 - 08:23 | 1362755 Dugald
Dugald's picture

The very best mower has four legs, and you can eat it....

Sun, 06/12/2011 - 09:26 | 1362815 snowball777
snowball777's picture

Why does he only have 3 legs?

That's my favorite goat!

Sat, 06/11/2011 - 22:46 | 1362225 anynonmous
anynonmous's picture

OT

bilderberger stuff - including Google's Schit running (actually laughing at ) a gauntlet of protesters

http://www.youtube.com/watch?v=aM8op48aruA

 

Sun, 06/12/2011 - 14:50 | 1363301 Things that go bump
Things that go bump's picture

I doubt if he'd laugh if he got hit in the face with a good-sized rock.  

Sat, 06/11/2011 - 22:50 | 1362226 eddiebe
eddiebe's picture

Sorry to call bs. on a couple of points made in this post.
First, I highly doubt that Ben Bernanke thought we had a solid housing market. He couldnt possibly be as dumb as he plays it. Anybody that thinks so should re consider and wonder why Ben is playing dumb and is doing what he is doing.

Second: 'The debt cannot be repaid.' Does the author really think that the bankers that are lending any capital at all are doing so out of the goodness of their hearts?
I don't think so. What they are lending us is our own blood and sweat, while they take their cut off the top and give us I.O.You's.

We have to get the fundamentals right or all the looking at charts and writing about what supposedly is going on don't amount to much at all and it certainly won't make us any money, or worse yet won't save us any.

Sun, 06/12/2011 - 13:39 | 1363189 mr. mirbach
mr. mirbach's picture

I'm inclined to agree that Beernapke had to have known what was going on in the mortgage industry with the Clinton Administration's easy mortgage policy (suspension of underwriting reqs.) however, TPTB were trained that real estate always appreciates ergo they firmly believed that the Ponzi could go on to infinity. What I question is the practical math skills of TPTB regarding infinite exponential growth within a finite system.

As for the majority of consumer debt, especially mortgages, the banks have already been paid (mulitple times) from MBS tranches as well bail outs from us taxpayers.  The big banks aren't lending to the little guy becuse they are too busy manipulating the markets with the handouts from Uncle Ben.

The figures on the charts may not be accurate to the billion, but they do serve to illustrate the point that we're all fucked.

 

"In the long term, we'll all be dead." - John Maynard Keynes

Sat, 06/11/2011 - 23:02 | 1362250 AUD
AUD's picture

The end of QE2 potentially could result in interest rates rising

I think he has this backwards. Any attempt at prudence by the Fed or other central banks will see a speculative rush into Treasuries & other government backed junk because the speculators know that the central bankers will not hold out indefinitely. Speculators will bid up 'benchmark' debt.

There is still plenty of room at the long end of the yield curve for risk free profit on any debt with a government guarantee. Credit spreads may widen but in general interest rates will fall, or as Antal Fekete has long said; The black hole of zero interest.

Call it deflation if you want, I follow Doug Noland & call it monetary disorder or inflationism.

 

Sat, 06/11/2011 - 23:07 | 1362257 RobotTrader
RobotTrader's picture

The debt levels can go into Outer Space, but the 10-yr. yield is still going towards 2% if we get another 2008-style stock crash.

Sat, 06/11/2011 - 23:16 | 1362273 AUD
AUD's picture

The debt levels may go into outer space but that just means a bigger fall when the debt no longer trades as money.

Sun, 06/12/2011 - 09:28 | 1362813 Greeny
Greeny's picture

Robo, name me at least 1 event which is similar to 2008?

Corporates balance sheets never been better, profits

skyrocketing, lot of cash on the balance,

I'd even say

too much cash CSCO, MSFT, AAPL, pile of cash, Banks

making profits too, BOF, Goldman JP Morgan, fine.

Consumer spending is in good standing. Imports are booming

due to the cheap Dollar.

What else? Jobs? well we need more time to check further

data. So Why you think Market should collapse? There is some

worries over Greece/Debt sealing few more perhaps, but

nothing compare to 2008, not even remotely close.

No double deep, sorry, not buying that, at all.

More chances for QE3, then back to recession.

Sat, 06/11/2011 - 23:07 | 1362258 HungrySeagull
HungrySeagull's picture

They cannot raise the interest rates. If they have the balls to do it and raise the rates, then alot of weak sheep will be left in ruin while the strong few will be able to amass a fortune... possibly able to raise standing armies of old medevial times.

Sat, 06/11/2011 - 23:08 | 1362259 Alcoholic Nativ...
Alcoholic Native American's picture

I see Downslope.

Sat, 06/11/2011 - 23:08 | 1362261 rsnoble
rsnoble's picture

3 years ago I owed 120k on my house, had 30k in credit cards and 2 auto loans and I made $40hr.  I had no money.

Today I have on job, only owe 25k on the house, one card with 4k on it, no auto loans and 20k cash in the house.

I don't care to explain how I did it, I seen this shit coming and put the hammer down.

Unfortunately im still way underprepared.  But I definetely feel like im better off than many people I know that are still going on like nothing ever happend.

It's the best I could do.  I'll either make it or I won't.

Sat, 06/11/2011 - 23:11 | 1362269 rsnoble
rsnoble's picture

"no job"

Sat, 06/11/2011 - 23:31 | 1362288 HungrySeagull
HungrySeagull's picture

I had tens of thousands in obligations including the home. We have managed to pay them off with tons of overtime, sweat and tears. The student loans matter not what with cancer and all we dont expect to have a life span to see it paid off. So we service it each month with a jot in the checkbook.

The credit card though is unsecured. We use it as one used a club to break a coconut or solve a problem while there is time. We do try to pay it off. That time will come.

We are broke, but are rich in other ways and hope that if the time comes, we will be able to work with other like minded folks to try and make a better situation for all.

Unfortunately there are thousands more running about self absorbed in thier selfish little greed and want of trinkets and materialistic stuff that they can never use in bad times.

Those are the ones I worry about if they come for the crops and other resources we worked so hard to learn. I think Home owners associations and such are experimenting with laws to ban, make illegal the growing of food in one's own home or lands.

 

It's a bitch to get through the debt paying off, and don't think we will ever live long enough to see a day where we owe nothing to no one. As I speak I have a revenuer tax bill for the year's property that shows a 40% increase in the amount allocated to the school district which is building huge new buildings not far from us.

I hope that our children in the area are good children. After all they are our future.

Sadly my idealistic lying eyes are already seeing signs of big urban gang type activity and it continues to motivate both of us to continue with training and classes associated with the weapons, fitness and combat defense while we are able.

However the home is paid free and clear, and we intend to do what we can to maintain it and defend it along with paying the just and due taxes to the Government from local on up as we ought to until we find a way to sell out and get the hell out of this bubbling stew pot of a county that is going downhill already.

I suppose we are also blessed with dozens of contractors that come running for a bid for electric, water etc if we need these things to be done. They will do very good work for cash or equivilant. We are happy to hire them when we are able.

I grew up holding coins of silver and other good metals. And silver certificates greenbacks. Today I hold base metal coins plated in a touch of something that passes for money. That is probably a reason that I have gone cashless. To a point.

 

Maybe some pounds of silver currency minted in 1964 and earlier will allow me to feel a moment of what it was once and what is possible in the future if necessary. A dime by weight can buy a tank of gas. It did once and may do so again.

 

There are people willing to take bullion in trade or other goods for valuable consideration in return for goods and/ or services. The issue at hand is finding them. That is the rub.

Sat, 06/11/2011 - 23:31 | 1362300 rsnoble
rsnoble's picture

Sorry about the cancer ordeal, what a bitch.  I got 3rd degree burns on 35%, wifes a diabetic, both lost our insurance.  If we go to the hospital ill just file bk, despite the equity(for now lol) they can't touch this place in this state.  We have no kids so I won't worry about what happens to it.  If they really piss me off, when the time comes im just gonna torch the motherfucker to keep the state from getting it if im not able to pass it on to someone I choose.

Yep, the bastards that refuse to join the depression via living off our property taxes need to be 'dealt' with.  I pay almost $300 a fucking month rent to these motherfuckers that is bullshit and i've had it.

I'm also trying to get hold of like minded people, even though I live in the country many who are out here are complete idiots.  People like those that moved in from the city down the road on 40 acres and have hanging tomato plants on the back porch???  I contacted the state militia im looking at joining.

Sat, 06/11/2011 - 23:35 | 1362307 DoChenRollingBearing
DoChenRollingBearing's picture

Well done both of you.  Paying down debt is very hard.  You are to be congratulated and honored.

Sat, 06/11/2011 - 23:58 | 1362337 longorshort
longorshort's picture

This brings up one important point.  Keep health insurance.  Did you know its one of the major reasons people file for bankruptsie.

Sun, 06/12/2011 - 00:17 | 1362370 rsnoble
rsnoble's picture

Actually something like 70% of the medical bankruptcies are people that have insurance.  80/20 copay.  Got a 200k bill?  Thats a hang nail these days.  That's 40k.  Can you pay that?  Who the hell can?

I can get my wife on state pool for around $400mont in a couple months.  Or I can continue to get free meds because of no income from the drug companies and file bk in either case with or without insurance it makes no difference.

I'm actually looking for a job that provides it and will take it when I find out.  If that ever happens im really starting to doubt.  40 years old, hands are all fucked up, diability says im fine, been outa work 3 years, yep im sure something will come along tommorow lmao.

But then again we get back to the debt situation......im still better off than a lot of my friends.  Some who are still making $40hr.  One of them just got laid off, has had a constant job for 10 years, is only going to be off for a month, and they're litterally living on hot dogs right now.  That's pretty sad, if I could get back my $40hr job I could live like a king.  Right now id be happy with ten.

 

Sun, 06/12/2011 - 00:18 | 1362374 rsnoble
rsnoble's picture

btw when you have as much time on your hands as I do you begin to look at things differently and the status quo is a freaking joke.

Sun, 06/12/2011 - 08:01 | 1362739 Seymour Butt
Seymour Butt's picture

Hope you get it soon. 

Several companies will start dropping medical coverage. Eventually they all will stop. It's just a matter of time.

Sun, 06/12/2011 - 19:06 | 1363643 Prometheus418
Prometheus418's picture

Lots of luck finding insurance you can afford, job or no.  My employer offers it- but it's $400 a month for individual coverage, with a $6000 yearly deductable.

So if I use it, I'm on the hook for $10,800 a year.  If I don't, it still costs $4800. Thanks, but No Thanks.

Think I'd rather take my chances doing surgery on myself- at least then, I have a fighting chance of not being killed.

 

Sat, 06/11/2011 - 23:10 | 1362264 rsnoble
rsnoble's picture

And you're right, the banks are right back at it I get countless credit card offers these days.  Not that it makes a difference but I have a form that I print and send to every one of them in the reply envelope stating how I will NEVER BUY ANYTHING ON CREDIT AGAIN.  Ever.

Sun, 06/12/2011 - 00:13 | 1362360 BlackholeDivestment
BlackholeDivestment's picture

well that's just ''it'', is it not? ''I will NEVER BUY ANYTHING ON CREDIT AGAIN". ''Ever''. ''It'' is not your choice, you can not ''buy sell or trade'' without the mark of the beast/debt. That mark of debt upon labor is now a global virus. Everything is touched by it and there is no escaping the contempt of it but by war and death. Same as it ever was, so  long as Babylon's want ruled above all flesh. The darkness of the black hole defines the reaping whirlwind that has caught up labor into the clouds and cast down the beast in the field. The currency of Wormwood has made the people bitter and the delusion has risen as an army which crossed the Euphrates on it's way to defend the Corner Stone of The Contempt of The Nations and Israel.

http://www.youtube.com/watch?v=YUxZRJxNrMI&feature=related

''No job'' is the most violent act one can do, it starves the beast and quickens the correction. It is time for the judgment of fools and evil bastards to render the reward. Watch, see the mad cow rise in the coming months and it's cry for peace... http://www.youtube.com/watch?v=nGjLpf5QA3A

Sun, 06/12/2011 - 00:19 | 1362380 rsnoble
rsnoble's picture

Interesting, i've had similar thoughts to your 'no job' comments.  I said I was looking for one.....yeah if it was close and had benefits.  Otherwise ill get by on odd jobs.

I've thought a lot about what im doing will help collapse the system faster and am proud im doing my part.  I'm trying to disconnect from the crazy crap as much as I can.  You can't completely, not unless all you want to own is  your backpack.

Sun, 06/12/2011 - 05:20 | 1362622 Traprock
Traprock's picture

Been reading your posts. All power to you, mate.

Don't look too hard for that job, unless you can make big money for short time. Your time is too precious to rent out for a pittance, better spent with one(s) you love, self-education, etc.

I know I am preaching to the converted here, you're doing it, and well. And your strong enough to not need vindication of others, or you wouldn't be where where you are. But for what it's worth you have mine.

Sun, 06/12/2011 - 06:01 | 1362649 BlackholeDivestment
BlackholeDivestment's picture

The day has ended, the darkness is upon us, in which no one can work. The laborer of Babylon cannot return to the field because, the laborer is fallen. Do not fall for being taxed on your labor, like an idiot IRS employee that filed their income tax while Treasury just looted labor. Babylon is fallen and it will not rise again. The only thing labor is now doing is feeding the self devouring beast, the black hole. Labor is not a logical attempt to prevent corruption at this point, it is an act of manslaughter by suicide dipshits or murder suicide for those that know the short term gain and have aborted life. The system is out of order and the new world order version of global labor is in contempt. Nobody can escape that fact at this point but, the strong delusion of this weak and pathetic evil generation is laboring to prolong the false claim of dominion ...as they are totally hell bound to perish outside the harvest field, in the 666 Citi. The weakness has now risen as a delusion but, the madness of the beast will come before it is fallen dead. Labor has no right of return to the field, debt has claimed the right and sealed the nations.

Sat, 06/11/2011 - 23:13 | 1362274 BlackholeDivestment
Sat, 06/11/2011 - 23:13 | 1362275 monopoly
monopoly's picture

Totally disagree on the premise gold moves lower to 500 or so. Not gonna happen. We have stagflation. The worst possible case, with prices rising, wages flat or lower and quality jobs non-existent. There is no way out of this without the dollar headed towards Rome burning. May have a correction for a while in the metal with miners getting trashed, but at some point not too far down the road, game over and we rule.

When you move from one worthless currency to another to make sure you are the last one at the bottom there will be lifts and bear rallies. Housing has another 10 -20% down then will languish for years. There will not be a housing recovery. You need a cave, and want to own, put a bunch down, fixed mortgage, no ATM machine and man the ramparts. Gonna get ugly down the road.

Long physical a bunch, small miners, FAZ QID a trade in ZSL. Could see another 10% lower in silver as correction winds down.

Sat, 06/11/2011 - 23:14 | 1362276 eddiebe
eddiebe's picture

Cool Clo, sure housing has been deflating, the reason 'all the printing' hasnt helped is because the money hasnt been going to people so they could pay for the houses, but to the banks to cover losses and get interest off the .25% loans from the window. Ben hasnt even started to actually print in the sense of the helicopter Ben. He's been propping up the financial sector by doing swaps. Swapping FRN's for treasuries and Stocks to keep the ponzi going. And you better believe it won't be the bankers he's working for that wind up loosing on that or any other deal.

Sat, 06/11/2011 - 23:22 | 1362286 tony bonn
tony bonn's picture

"...American taxpayer has unwittingly reimbursed ..."

hold on there young man....i was screaming at my bankster-bestfriend-douche bag congressman tom price about the tarp and other implicit bailouts in aug/sept 2008...of course the banksters got their way....and it is not news that consumer-slaves are paying down their debts but we always need to be reminded of the criminality of the banksters and the rockefeller-rothschild axis of evil's machinations....

Sat, 06/11/2011 - 23:55 | 1362315 Caviar Emptor
Caviar Emptor's picture

Since I started posting about Biflation here on ZH nearly a year and a half ago, the word and the concept have gone meme. If you doubt it, Google Biflation. You may be surprised by what you find: it's being talked about, blogged about and it's even in the mainstream MSM. For a term that was considered not to exist (and still is considered a transitory blog delusion as opposed to reality) it has been catching on fast. This morning, the phenom was discussed in an article titled "Introducing...biflation" in an article by Reformed Broker syndicated in Business Insider. Doug Kass again wrote about "Screwflation", which is the same concept. 

Dudes we have entered into the pre-viral phase. And there's a good reason for it: Biflation is real. Every day in every way economic data has supported it, as I've been relaying here. Yes deflation is here and it never really left the economy. Housing, real incomes, job and advancement opportunities, social mobility continue to spiral down. The pace has picked up. And that's why I contended since 2009 that we're in a depression and we never left it. But we all know there's inflation everywhere in the cost of living, the cost of working and doing business. And here's where emotions obscure some stark realities: yes Helicopter Ben has stoked it up with his trillions. But there's an ocean of dollars that's been sloshing around the globe since the Tricky Dicky days when money printing became pathological, added to through every subsequent administration. Yes, there's speculation. But that doesn't account for the rise in spot prices for raw materials. Global demand is outstripping production capacity in energy, food and key minerals. The global central bankers set out to "Reflate" the economy in 2009. And in so doing they succeeded only in disconnecting the supply/demand relationship for essential items, and averting the necessary creative destruction that would have been followed by an era of strong growth. They kept banker's pay high despite their business dropping off. They favored Wall Street over Main Street. 

Sat, 06/11/2011 - 23:54 | 1362332 swissinv
swissinv's picture

biflation = stagflation -> the world knows very well this scenario

Sun, 06/12/2011 - 00:04 | 1362345 Caviar Emptor
Caviar Emptor's picture

Sorry. Stagflation is not the same at all. During stagflation housing prices were rising fast. So were incomes. Rising incomes were considered a root cause of the inflationary spiral and supply-siders did all they could to prevent rising incomes. They succeeded. And as far as being in a depression? The growth the US had during the 1970s would delight us now if we could get it.  The point is that we need an entirely different set of responses this time. The old ones would kill the economy even more, as we see today

Sun, 06/12/2011 - 09:38 | 1362830 snowball777
snowball777's picture

It's funny how things like the Phillip's curve are completely applicable to an economy based on a particular income distribution (i.e. the existence of a middle class) and yet completely break down in the face of another distribution (haves, have nots, and a chasm between). When the economy functions correctly, high-prices should generate jobs...down this road lies the virtuous circle of domestically supported American growth..., but these are supply-shock induced spikes coupled with speculation, not natural aggregate demand rising for goods. When it is based on a tiny subset benefitting from the process, and a sea of shitty service jobs at the bottom, there's nothing on which to hang the beginnings of a recovery for lack of aggregate demand. If we made things like we used to (even in the 70s), we'd have jobs and aggregate income to support demand to justify more jobs. Showering businesses and banks with capital in the face of no demand and poor lending opportunities seems futile beyond belief, but it keeps the golf-course conversation civil, I guess.

Sun, 06/12/2011 - 00:24 | 1362382 blunderdog
blunderdog's picture

With all respect given for the popularization of the term, the term itself pretty much sucks.

It doesn't make sense from an etymological perspective, but what's more disappointing, it doesn't do a good job of describing what's happening.

The problem has been recognized for a long time.  Although I personally think Larouche and his adherents tend to be full-on whacko, the guy described the economic process that causes these effects more than 10 years ago...

http://www.larouchepub.com/other/1999/bankers_math_2612/bankers_math_261...

As the financial constructions collapse, the actual productivity of the society goes down, resulting in growing share of expense maintaining the "real" economy--a system of exchange and goods and services.  The magnitude of financial transactions increase asymptotically while the relative "value" controlled by the financial system is destroyed.  Presumably productivity and monetary flows eventually come back into alignment, but only at the cost of social upheaval.

It'll be interesting to see how close the folks controlling the greatest share of money can bring us to extinction.  They don't actually wield any power we don't grant them. 

No one has to accept a job selling out his own species.

Sun, 06/12/2011 - 01:18 | 1362470 Hulk
Hulk's picture

I remember clearly when you first spoke of biflation caviar. At that time it wasn't entirely obvious, but now even a Hulk can see it...

Tue, 06/14/2011 - 11:21 | 1367709 swissinv
swissinv's picture

a hulk may be well surprised when the time comes that even house prices will arise (in USD terms)

Sat, 06/11/2011 - 23:47 | 1362320 New_Meat
Sat, 06/11/2011 - 23:52 | 1362322 zaknick
zaknick's picture

Boomers can moan and blame and point the finger at others, but they took on the debt in order to live at a higher standard than their income would allow.

The same intergenerational thing you guys got going here again. I truly tell you that human nature never changes and this credit heroin was used to drug you while the banksters (with the help of the KKK rednecks posing as drug warriors and their political representatives) stripmined AmeriKKKa.

Jesus h Christ you ppl are dense.

See A Brief Comment at:

www.scribd.com/zaknick

Sat, 06/11/2011 - 23:53 | 1362324 Tedster
Tedster's picture

My epiphany came about in 1995, with 20k in student loans, 10k in CC debt, no decent job, etc. Went back in the .mil and paid everything off in a
couple years and started buying I series saving bonds, gold, and silver. The internet was young, but there were plenty of sites with writers opining about what's to come. Thought they were nuts, but the arguments were just too compelling. In the last decade, I would load up a bit more whenever some new government policy would insult my intelligence.

Today don't know what to think. It's almost surreal seeing the fringe stuff go mainstream, though it is absolutely astonishing how clueless so many people are. And they will remain clueless, or worse - they will respond to the coming shitstorm in the very worst possible way, by hysterically clamoring for the usual suspects to "do something" and greenlight the removal of whatever few rights they at least pay lip service to now. And obviously that is exactly how they are expected to respond - because they have been trained to respond this way. Some years back tried to explain and convince friends and family what the deal is on some of this stuff. With some, the education seemed successful, but at some later date were soon spouting the same spoon fed nonsense as before. It does look lately
though, that some of the folks out there are starting to get nervous, though
my preaching and proselytizing days are over, if they don't "get it" by now, forget it.

Sat, 06/11/2011 - 23:57 | 1362328 swissinv
swissinv's picture

removed

Sun, 06/12/2011 - 00:00 | 1362339 Caviar Emptor
Caviar Emptor's picture

People may not be as dense and clueless as you fear: cab drivers in every single city I've traveled to in the last year all will tell you we're still in a depression from the altered spending habits of their clients. They also know first hand about rising costs despite the downturn. Same goes for many shop and restaurant owners, but there you're less likely to get straight talk. At the high end, things are rosy. But therein lie the seeds of collapse. Not just in the price of shares of Lululemon and Netflix. I mean a collapse of the current version of economics as it applies to capitalism. Supply-side was just a big denial, a giant stall tactic. Rather than adapt, it encouraged denial through debt. Yes, for a while, debt can make poverty go away. But it rots out the core by discouraging enterprise. 

Sun, 06/12/2011 - 00:01 | 1362340 Sizzurp
Sizzurp's picture

Anyone who thinks Bernanke and TPTB will allow a debt implosion is kidding themselves.  They have already said they will do whatever it takes to keep that from happening.  Look for the presses to get fired up again soon.  This debt will be paid with increasingly worthless paper.  Count on it.

Sun, 06/12/2011 - 08:14 | 1362751 Withdrawn Sanction
Withdrawn Sanction's picture

Anyone who thinks the central bankers can stop a debt implosion have an almost child-like faith in the abilities of the rich and powerful.  Powerful they may be; omnipotent they are not.

Sun, 06/12/2011 - 00:04 | 1362348 Akrunner907
Akrunner907's picture

QE3 is already in the works.  There is no turning back, the money game must go on.  It is like a game of musical chairs, only when the music stops there will be only one chair to transform the world into a one world government.  Corporations need to have that change in order to more ably exploit the various population centers of the world.  One world currency, one world government, one world to control.  Good luck......

Sun, 06/12/2011 - 00:12 | 1362359 Caviar Emptor
Caviar Emptor's picture

You and many here see order at the end of the economic disaster road being paved by more QE: one world government and a fascist-style political climate. But there's the real possibility of the opposite: complete chaos for years or decades while competing powers struggle against each other for domination over what's left. Political systems can collapse and never recover. 

Sun, 06/12/2011 - 00:10 | 1362356 Gyro Gearloose
Gyro Gearloose's picture

I can't help but wonder if Mr. Boomer Blamer has some pent up antagonism towards his boomer parents.

Sometimes it pays to dig deeper.

I know plenty of so called "boomers" that never even went in debt and plenty others that only did prudently to grow their business.

Sun, 06/12/2011 - 00:15 | 1362364 Caviar Emptor
Caviar Emptor's picture

Most boomers will end up the victims of a system that was devised by others when they were young adults. Boomers are getting crushed now

Sun, 06/12/2011 - 00:33 | 1362397 Gyro Gearloose
Gyro Gearloose's picture

Exactly, those behind the curtain that have been continually designing the system is where much more focus should be.

Sun, 06/12/2011 - 00:47 | 1362421 RockyRacoon
RockyRacoon's picture

I think you've hit on it.  And for those who are blaming the old farts for all of this, just remember that it's the same old Democrat/Republican political divide and conquer routine.   If one still wants to hang on to the resentment of the old folks then you'll rest easy knowing that many of them will end up having cat food dinners.   Happy now?   Or do you just want to go ahead with mass genocide and leave 'em rotting in the gutters?   Either way, they are your parents, aunts, uncles, and others who breast fed, clothed, and educated your raggedy ass.  If one can call what you know an education.

Sun, 06/12/2011 - 01:35 | 1362485 Almost Solvent
Almost Solvent's picture

The only thing I blame my parents' generation for is snatching defeat from the jaws of victory.

Legitimate protests that could have grown and overthrown TPTB during the late 1960s were highjacked and eventually forgotten since the late 1970s.

Now the police state is ready for mass protesters and they will prevail, at least until the cost of oil stops the beast.

Sun, 06/12/2011 - 15:32 | 1363362 Things that go bump
Things that go bump's picture

They may very well prevail if we fight by their rules and do the expected, but have you considered the virtues of a disorganized resistance?  

 

The Virtues of a Disorganized Resistance

Stephen DeVoy

Break Your Chains

American opposition movements have always focused on the notion of organization. It has always been their goal to organize the people. Their hope has been to wield the collective power of the disaffected, downtrodden, and exploited as a single unit against the concentrated power of the ruling class. While their hope has been noble, their methods have been foolish. Organized resistance has many drawbacks. These drawbacks have seldom been discussed by the opposition. We believe that the only effective resistance is a completely disorganized, decentralized, and leaderless opposition.

While, on the face of it, this claim may impress you as absurd. Of course it seems absurd! It is counterintuitive. Never the less, it is the ONLY method of resistance that will work within American society. We will explain why organized resistance has never worked in the United States. In addition, we will promulgate a new formula for effective resistance.

Why has organized resistance failed in the United States?

There are many reasons for the failure of organized resistance. The two primary causes of failure are intimately connected to the culture of the United States and the political system laid down by our nation's founding fathers.

The Cultural Cause

Americans, culturally, are anarchists. Few Americans realize this. Most Americans have a false understanding of the term "anarchism." However, upon examining the beliefs of your average American, you will find that most Americans: do not trust leaders, do not trust government, wish to be left alone, value their privacy, think of themselves as independent from society, do not believe that there is a systemic solution to their problems, believe that others should be free to do what they choose, provided they do so in private and do not harm others

While it is undeniable that political culture in the United States often speaks to the opposite of the above list, it is also undeniable that most Americans register as neither Democrat or Republican and most Americans do not vote. Thus, despite the political culture, most Americans choose not to participate in it. This is not only due to their belief that the American political system is hopeless, but also is due to the cultural clash between the wider culture and the political culture.

Any attempt to organize large numbers of Americans into a single political movement will fail. Any attempt to create an organization led by a strong group of leaders will fail. Americans reject submersion into the collective. In a sense, Americans are anti-collectivists.

The Political Cause

American political culture is not ideological. Politicians attempt to draw ideological distinctions between the two major parties, but these distinctions are a matter of splitting hairs. The only significant difference between the two political parties is the degree of compassion represented by the rhetoric of the two parties. Compassion is not a political concept. Compassion is an attitude. Thus, the two parties differ, primarily, in attitude and not ideology.

Despite this, there remain two political parties. One is prompted to ask "why?" If each party is basically the same, with respect to ideology, why do they not merge into one party? The answer to this question is best found in viewing each political party according to its true nature. American political parties are, for all intents and purposes, organized crime units. American political parties have more in common with the Mafia than they have with their counterparts in more democratic societies. Like Mafia, each political party competes for control of territory in order to maximize the benefit to their business constituency. Like Mafia, the political parties attempt to mold the system to maintain their positions and access to resources. Like Mafia, the political parties force the average citizen to pay "protection" under the threat of violence (taxes). Like Mafia each political party uses the "protection" money collected for its own advantage.

By defining our political system in terms of the "majority" and the "opposition," our Constitution enshrines this two mafia system into law. Each Mafia passes laws to exclude new comers from the game while focusing the rest of its energy in destroying the other Mafia.

Thus, any resistance movement that chooses to become an organization is in competition with these Mafiosi. The deck is stacked and the power of the state, wielded by these organized crime units known as the Democratic and Republican parties, will waste the time and resources of any newcomer. A newcomer can only succeed by rejecting the political system, draining its resources, and undermining the rule of the state.

How is disorganized resistance superior?

In some societies, dissidents become heroes. In American society dissidents are systematically slandered, libeled, harassed, and villainized. If they become successful, they are murdered (e.g. Martin Luther King, Malcolm X). In the American experience, movements that look to leaders are decapitated. Leaders are a liability, not an asset. Organizations can be (and are) infiltrated. Organizations can be taxed. Organizations have legal responsibility. Organizations have membership lists and lists are wonderful tools for the oppressor. Organizations take on a life of their own. They struggle to exist and their continued existence takes priority over their mission. Organizations attract opportunists, power mongers, and attention seekers. Organizations tend to exploit their rank and file for the benefit of their inner circle. Disorganizations share none of these defects.

Bureaucracy cannot comprehend disorganization. Disorganization is invisible. The asymmetry of the relationship between organization and disorganization favors disorganization. Organization depends upon planning. Planning requires predictability. Disorganization cannot be predicted. This leaves organization at a disadvantage.

Organization requires a supply chain. Supply chains can be disrupted. Disorganization depends only upon the resources of its members. Supply chains that do not exist cannot be eliminated.

Disorganized movements rely upon swarming. Swarms are difficult to defend against. If you cut a swarm in half, you have two swarms. If you eliminate one of the resulting swarms, you still have a swarm. Disorganization breeds. Organization grows. The many and dispersed are a more difficult target than the large and concentrated.

Organizations takes their steps by design. If the design is flawed, the organization fails. Disorganization relies not upon design but upon evolution. The motivating notions of disorganization are memes. Memes evolve and memes compete. This process improves the motivating notions of disorganization. This process produces multiple courses of action. While some may fail, others are likely to succeed. Taken as a whole, disorganization is more likely to succeed.

The important thing to remember is that it is easier to destroy than to create that which is designed. Thus, the cost to those who lose the manifestation of their design outweighs by leaps and bounds the cost it takes to destroy it. That which evolves is cheap and when an effort is created to destroy the evolved entity, it merely mutates and evolves again, adjusting to the new conditions. As a process that fosters evolution, a movement based on disorganization will continue to survive, evolve, and expand without cost. The resource constraints placed upon the designed (e.g. government and corporate) and those absent from the evolved (a decentralized and disorganized opposition movement), favor the later.

The limits of disorganization

We do not propose a complete absence of organization. Instead we propose a disorganization of units. Units can be as small as a single individual, or as complex as cell of individuals working together. Cells may be internally organized, but they should not be statically organized cell to cell. The movement should have no commander. It should have no central committee or governing body. No global plans should be made. The modus operandi of each unit should be to think globally and act locally. Ideas, strategies, and tactics should float freely and compete as memes within the medium of the collective conscious.

Conclusions

We need to construct a disorganized movement. You need not apply to join. In fact, it might be better if you did not contact anyone except those with whom you wish to form a unit. Your ideas, strategies, tactics, and lessons learned should be spread anonymously or by word of mouth. When you act, should you decide to act in resistance, attribute your actions to "the Resistance." The growing din of disorganized disruption will be felt as an earthquake. There will be trembles. There will be pre-shocks. The tension will mount and, in time, there will be an earthquake. When that earthquake strikes, the organized edifice of the oppressor will fall like a house of cards.

 


Thu, 06/16/2011 - 00:06 | 1373553 RockyRacoon
RockyRacoon's picture

Sho' nuff. Any hint of organization and politicians will try to position themselves in front of the parade.   Weasels.

Sun, 06/12/2011 - 00:12 | 1362365 bankonzhongguo
bankonzhongguo's picture

The debt is owed to the banks.  There are more citizens than banks.

The reset is simply telling the banks "sorry" it did not work out.

The main difference between this country and the raped 3rd world is that the middle class owns lots of guns.

And now the limousine liberals in Hollywood want to save Wall Street by taking your guns.

Its time to begin rethinking nationalizing the "bad" banks and cancelling the debts owed to them.

Just as the GM bondholders were so conveniently wiped out, so too can the shareholders of the Federal Reserve.

The Fed likes to talk about the strength of money being perception and how its the simple happiness machines that are sold mountains and oceans of debt-bondage that make the world go 'round.  Well, if you send all the jobs out of the country over several decades you do not have a population to service that debt load.

Game over.

Sorry banks.  Cancel the debt owed to the banks.  The mortgage debt, the UST, the car loans, the student loans and the like.  Everything.

Sorry.  It just did not work out.

A few hundred million Citizens verses Too Big Too Fail.

Pick a side assholes.

Next year you and your families will be swinging from the lamp posts.

Sun, 06/12/2011 - 18:04 | 1362368 DavidPierre
DavidPierre's picture

SmokeyQuinn:

It's The 9/11, Dummy !!!

'9/11 tells a story that allows you to disregard the lies being spewed by those in power... it tells the truth about our current predicament.'

Quit drooling over all your fancy charts and graphs and slobbering on your keyboard about in/deflation, debts and economic trivia. 

Best you prepare your sons to march off to The WWIII.

............................................................

And still you fucking mass of morons believe…

Nonsense... Fairytales...Propaganda... Crap

http://www.youtube.com/watch?v=JYPqN7bbxaA

...........................................................

SmokeyJimQuinn says:

I believe the 9-11 Commission report, the Warren Commission report, that Iraq had Weapons of Mass Destruction, and the QE1 and 2 are good for the economy.

I believe government reports that jobs are growing, that CNBC consistently gets it right, and that Lloyd Blankfein is indeed “doing God’s work.”

Clearly, anyone who does not believe in the wisdom handed down from the Legally Constituted Authorities can state with confidence, “I Hate America! I am a Traitor!” Because we know that they are all men and women of probity and honor. And that their Sacred Trust cannot be bought.

Pass the marhsmallows so we can make s’mores around the fucking campfire.

Like or Dislike: 2  1

Anonymous says:

At least DP knows what went on with 911 whereas the Administrator, who’s a government lickspittle on this issue – probably because to stand up to the State would jeopardize his website and job – ridicules those, like Washington’s Blog – a favorite of the Administrator except on the 911 matter, and others. Jim Quinn you’re a foul-mouthed, follower, and a fraidy cat.

Like or Dislike: 2  5

 

Sun, 06/12/2011 - 00:43 | 1362420 stateside
stateside's picture

Have a gander at slide 42/42 from a 1998 presentation by Martin Armstrong.  This is when no one was talking about a debt crisis. 

http://www.10sigma.com/files/1998%20fall%20Seminar%20Tour.pdf

Sun, 06/12/2011 - 01:12 | 1362465 RockyRacoon
RockyRacoon's picture

So, 2015 is D-Day.  That leaves me a little more time to consolidate and stock up.

That is one amazing time line considering it was composed in 1998.

Sun, 06/12/2011 - 00:50 | 1362425 Peter_Griffin
Peter_Griffin's picture

I don't understand the rush to pay down debt.  Would consumer debt last through a major economic crisis?  I wouldn't think so if deflation was the case, and in the case of hyperinflation, sell a couple oz. of gold to pay off the house.

 

I'm doing the opposite of you guys.  Heaping it on.  They don't do credit checks for student loans. 

Sun, 06/12/2011 - 02:28 | 1362529 HungrySeagull
HungrySeagull's picture

Cash Flows to YOU.

 

NOT to Creditors.

 

The have turned Tech into a ground work for mining data about you in near real time. I stick with voice only cell and those are hard to find these days as providers shove ever more advanced crap into marketing.

Sun, 06/12/2011 - 11:40 | 1363014 MachoMan
MachoMan's picture

The reason why you pay down debt is to be able to better withstand an extended biflationary term.  If you are confident we are on the precipice of a credit event that will render gold/silver vastly higher than their present values in dollars, then place your bets accordingly.  Personally, if I have $3 of discretionary spending each month, I think the following would be a logical solution: $1 to savings, $1 to PMs and other inflationary hedges, and $1 to paying down debt that rewards you from paying it early (student loans, credit cards, etc.)[get out of all debt that does not reward you for paying it early, e.g. mortgage (sell your house), because the value of the asset secured by that debt is heading for zero].

Sun, 06/12/2011 - 01:04 | 1362445 bid the soldier...
bid the soldiers shoot's picture

THIS LEAVES ABSOLUTELY NO DOUBT THERE WILL BE QE3 AND QE's AFTER THAT AS FAR AS THE EYE CAN SEE.

OR UNTIL THE MOTHER-IN-LAW OF ALL DEPRESSIONS DECIDES TO MOVE IN.

Sun, 06/12/2011 - 01:28 | 1362477 g
g's picture

No credit card debt, ever, no credit cards, no student loan debt (paid off long ago), no car loan debt (pain cash after saving for five years, and bought I car I could afford), no debt what so ever. Only debt we have ever had, in our whole life, was student loan debt. I do not believe in owning a house, especially in this state. Cheaper to rent, without all the hassels of ownership, by the time you add the mortgage, taxes (rent to the state), and home owners insurance it is cheaper to rent, plus I like having a fluid life, not being tied down anywhere. Never bought anything I could not save for ahead of time, there is nothing I ever needed that bad. I credit my parents, who were frugal and poor, but wise, and taught me good financial principles. Going into debt has never occured to me, I am glad my wife has the same frame of mind, she is a rare find for sure.

 

Realistically it turns out that people like us are punished for not joining the debt game. By this I mean the shit that we get right now in our savings accounts. Not to mentioned if we had bought a mansion we could be living in it for free. The list could go on, but what is the point. At least we have our integrity and self respect.

Sun, 06/12/2011 - 01:55 | 1362511 blunderdog
blunderdog's picture

Don't be a whiner.  You could just as well be getting punished because you're Jewish or black or stupid or crippled. 

And no one wants to hear the bullshit from those assholes either.

Sun, 06/12/2011 - 03:09 | 1362560 bid the soldier...
bid the soldiers shoot's picture

Speaking of the Jews
"And he passed in front of Moses, proclaiming, “The LORD, the LORD, the compassionate and gracious God, slow to anger, abounding in love and faithfulness, 7 maintaining love to thousands, and forgiving wickedness, rebellion and sin. Yet he does not leave the guilty unpunished; HE PUNISHES THE CHILDREN AND THEIR CHILDREN FOR THE SIN OF THE PARENTS TO THE THIRD AND THE FOURTH GENERATION" Exodus 34:6-7

You think?

Sun, 06/12/2011 - 11:27 | 1362994 blunderdog
blunderdog's picture

Nah.  No justice, divine or otherwise.  Retribution exists, but there's nothing at all holy about it--it has nothing to do with "God."

Sun, 06/12/2011 - 16:13 | 1363422 bid the soldier...
bid the soldiers shoot's picture

Phew. That's one less thing to worry about.

Sun, 06/12/2011 - 02:39 | 1362537 skepticCarl
skepticCarl's picture

Like Author Jim Quinn, we Boomers blamed the previous generation (now regarded as the "greatest generation") for all of the nation's ills: racism, poverty, the Vietnam war, homophobia (gay sex was a crime in many states, and grounds for firing in almost any case), and wasteful, fraudelent government borrowing and spending.  We didn't trust anyone over 30.  Why?  Because they hadn't solved any of these ills. Therefore, they were responsible.  And maybe that's valid, because if the adults of society can't solve problems, who can?

So, Generation X'ers, Y'ers, and millenials, you will have to clean up after us, since we failed, or are currently failing, in our prime years.  But don't be suprised when you hear the blame of your offspring for leaving them with injustice, debts, and a crony economic system favoring the greedy and the hucksters.

Sun, 06/12/2011 - 03:16 | 1362567 bid the soldier...
bid the soldiers shoot's picture

Gay sex at the office was never cool. For that matter straight sex at the office still can get you fired.

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