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Guest Post: Par Value During the Black Plague: Treasuries are Financial Teflon. Silver Makes Pretty Spoons
Par Value During the Black Plague: Treasuries are Financial Teflon. Silver Makes Pretty Spoons, Submitted by JM
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Off Topic (interesting reads from financial blogs and news)
Here's Rachel Uchitel, The Woman Tiger Woods Is Rumored To Be Having An Affair With (Clusterstock)
Wells Fargo Chief Economist: "There is no clear, easy way out for housing" (Mish)
An Economist's Invisible Hand (WSJ)
We Don’t Know How Black Friday Sales Were Yet (Ritholtz)
Dubai – The First Credit Crisis Since March Market Recovery (Ritholtz)
The Geopolitics Of The Dubai Debt Crisis: It's Iran vs. The United States (Clusterstock)
Blogonomics: Some Random Thoughts (Econobrowser)
Dangers of an Overheated China (Economists View)
Home Prices May Be Nearing a New Dip (NY Times)
Sorry, I just couldn't help myself.
http://www.youtube.com/watch?v=jGQ-ISsDm8M
LOL
Hey!
Well, um.
Yeah.
It's funny.
Author confuses me on several points. First is that he seems to think people are hoarding government coins that are being debased without their knowledge. The US hasn't had silver in its coins since '64. ???? I see people buying bullion that is easily verified as to silver content; effectively fleeing government script that they know is being debased for a real currency that they *know* they can trust.
Treasuries as "financial Teflon"? As long as you live in a world without inflation, then maybe. My combo meal at the local burger drive through cost me over $8 yesterday. It cost me under $5 less than two years ago. Things may get cheaper during "going out of business" sales, but that's not really what I'd call sustainable lower prices.
I suspect many commonsense fools who don't get it would be happy to take this man's silver spoons off of his hands. I'm one of them...
The author is confused. His basic argument seems to be that Hitler made the trains run on time so buy Nazi war bonds. But Hitler still lost, and how did his bonds, or confederate US bonds work out?
Inflation destroys bond yields, but silver sticks around. Judas didn't work for govvies.
The author is confused. His basic argument seems to be that Hitler made the trains run on time so buy Nazi war bonds. But Hitler still lost, and how did his bonds, or confederate US bonds work out?
Inflation destroys bond yields, but silver sticks around. Judas didn't work for govvies.
judas worked for 30 pieces of silver. he didn't work for bonds, treasuries or any worthless paper. for what he did, he wanted to be paid with something that had weight and felt good in his purse...
and I think he threw the money away and was dead in a few hours.
Judas never understood the Kingdom.....he never really caught on to the fact that it was all about the spiritual world and not the physical world....
The author is referring to hard-working Ventians saving in silver coin only to have it debased with lead by their government.
Debasement is how currencies work, metal or otherwise.
Treasuries have staying power to withstand TREMENDOUS adversity.
Only if you have faith in the government.
I am Chumbawamba.
what is the alternative?
Gold.
I would say land, yet Americans do not really own their land free and clear due to constant taxation.
Keep em coming JM. Useful information a rare commodity. Thanks.
"The worst historical stress-test I could find shows that in extreme deflation, cash (read: $) can beat even the best credit. It doesn’t matter if cash is silver or goldfish or pancakes. Nanosecond maturity on the yield curve is king when the system is in complete meltdown."
Interesting. Thanks.
So we can summarise this as: if there is deflation, USDs will be worth a lot.
Ok. At least he isnt calling for deflation AND a rise in gold AND a crash of the US dollar somehow occuring all at once as I have read.
The FRN/USD is not cash.
Cash to the venetians was silver or gold, not government paper.
The FRN is a zero-maturity bearer bond, and it is only as good as the gov'ts ability to pay its debts. Sovereign default by the USG means the FRN goes kaput
Gold and silver coin get debased by governments. Just like inflation debases paper currency.
History shows that reserve currency treasuries have very small credit risk that can be hedged.
ROTFL
Yeah, they can debase a .9999 Maple Leaf? How long would that last?
Token coinage gets debased, my friend; the gov't is powerless to debase the pure metal
Actually, his point is well-taken: coinage can be debased (evidence: the tokens we mistakenly refer to as "coins" that is otherwise known as the US Quarter, Dime, Nickel, Penny, etc.) Read Martin Armstrong on Roman coin debasement.
.9999 Maple Leafs can be debased if the juicy center is filled with W.
But as for his claim that "history shows...", well, let's see the history, JM. I'm not buying it.
I am Chumbawamba.
Here's how they do it (in this order):
1.) confiscate private metal holdings
2.) mint debased coins with confiscated metal
The FRN is only as good as the confidence that a majority of potential users would place in it. When that confidence is lacking or waning, that's when hyperinflation occurs.
I am Chumbawamba.
Thank you for posting this, my thoughts exactly.
As usual we should also thank our excellent US education system for creating a public so ignorant of history this comes as news to them.
I would like to add that throughout history only a tiny minority of the elite had access to gold coins, the common people used the barter system.
Just like people with past lives are all royalty and Egyptian princesses, the Gold bugs imply everyone used gold for 6000 years. In reality probably 0.01% of the population ever touched a gold coin.
Morgan
Thank you for a logical comment on gold. The only place to be when you gold bugs get your total collapse is on some agricultural island where is there is no wind so a sail boat can't reach you. Since that is hangout is at low latitudes you wouldn't need clothes - oh hey did I mention that the soil on your nifty paradise is salty so you better figure on bringing radish seeds with you, good luck on second year crop.
we are depression-proof. bernanke told me so.
So... treasuries are safe because the US government will do everything in its power to stay in power. And that is the reason to buy treasuries from the evil empire? WTF?
OP's Logic is piss poor at best.
The US already defaulted twice on its obiligations (FDR and Nixon) but the author doesn't discuss that. It doesn't fit his narrative.
Let go of emotional biases and make nice with the biggest dog on the block.
Pretty logical.
"If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your counsel nor your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen.”—Samuel Adams
Yeah, fuck dignity and liberty. Just buck up, shut the fuck up, and try your luck up in the Federal Reserve Casino.
I am Chumbawamba.
OR, as we were indoctrinated by Bugs Bunny as children (No accident, methinks):
If you can't beat 'em, join 'em!
I want to throw up, when I think of the repercussions of telling all children that line, repeatedly, for their entire childhood.
We can actually see the tangible effect in jm's above post.
You seem to think that we live in North Korea. We do not. There is opportunity for peaceful change.
Believing Treasuries are safe investments, and that we do not live in Mad Max movie, is based on fact.
"Negligible caveman risk" is the phrase in his article that shoots it all down.
He doesn't understand oil depletion and what happens if trucks stop delivering food to grocery store shelves in cities.
It will kill far more people than the Black Plague. "Depopulation" by a factor of 80%. How do bonds do if there are no banks to trade them?
So, if there is deflation, will this mean healthcare will get cheaper?
Health care in a nutshell.
Russia got its FIRST and only GE high res CT scanner the other day.
We have hundreds or even thousands of these things. They ain't cheap.
So that's why it costs 100 grand to have a 4 hour surgery. A GE high res CT scanner... I was wondering why health care was such a colossal ripoff.
And obviously, we need hundreds and thousands of them. Just like we need hundreds and thousands of billion dollar stealth bombers.
I see...
What a fascinating piece. Makes me really start to wonder why I ever thought history was so boring and stopped taking it in grade eleven. Some fabulous quotes that really lend a perspective ..... some great research, though I suppose maybe only to those that would absolutely no clue where to find this kinda background, excellent work, great post!
we need to flog 3.5 TRILLION$ worth of treasuries next year "So Treasury paper credit risk shouldn’t be a worry to anyone RIGHT NOW"
ok
That's the rollover. Then, of course, new debt...? It seems there is nothing to worry about provided two conditions are met. The Fed keeps buying at least half of all the action in Treasuries; and, the world stands by and does nothing while we print the money to do so. This article seems to proceed on the Cornucopian Theory of Public Debt - it can never go wrong if we close our eyes and say we still have money.
This is why even in deflation treasury yields will go up. Treasuries will still be around.
If yields go up, why are they "teflon"?
Nothing is going to come out of the whirlwind unscathed. U.S. Treasuries will do best.
Good article. 80 years ago, J.B. Lovelace could have made similar observations. JB preserved his clients wealth and built income portfolios from the ashes.
ASSUMING PEOPLE STILL HAVE FAITH IN THE GOVERNMENT ISSUING THAT DEBT, JM.
I am Chumbawamba.
...close our eyes... Was readin bout German 20's hyper. They decided to bring in a new mark; the Rentenmark. It had the same backing the worthless mark had. But...hyperinflation stopped! It was the psychology, the public believed it!! Maybe cuz they really wanted to. Like mentioned in post: "End of Empire- Propaganda.
Within a few months it did all blow up again. Proves that tptb can fool most of the people, but not forever. Paul, Cucinich, and the red pill of ZH will prevail!!!
TIPS?
no...no...No...NO...NO!
Since when did Tyler fail US history? Okay, I could imagine him a puppy pooping on the carpet once or twice...but WTF!
Sure, your average American didn't learn nuthin' about the real history of US government finance in sheisty public schools but this is a big red flag! The United States gov't has consistently defaulted on debt throughout its supposed goodly reign (233 years as of 1776) of equitable equality for all with justice, peace, and love of humanity as promises.
There was some discussion a little while ago about when we (the proverbial we?; us commentators) would take a hint that some serious scheisse was about to hit the (proverbial) fan and 'secret' signals were to be given; such as a glowing article about the GS squidies. Red flag! Abandon ship!
The fall of every empire comes with the debasement of their currency. It's easiest when done with a microchip - love, luv, luff technolgie! Fiat paper is next for ease of manipulation (uh, Tyler, this is where you need to come in and defend yourself when it comes to US history and the string of highly profitable, wealth-transferring, fiat-paper successes of scheming banksters; banksters = 'money changer', 'swindler of olde', fraudulent finance experts, also see: 'dynasty')
And this in the recent context of the 'benefits' of new taxes. If taxes are so great why doesn't the gov't just withhold every single stinking ounce of sweat its citizens produce and in a benevolent, Utopian fashion save us the gddmn time and redistribute the excess to those most in need, like the banksters. The banksters are very good at deciding what is best for us. Forget all those pesky limits the founding fathers contrived for that dead document called The Constitution - get it over with and freaking take all my money!
... The worst historical stress-test I could find shows that in extreme deflation, cash (read: $) can beat even the best credit. It doesn’t matter if cash is silver or goldfish or pancakes. Or in our case, cash will be gold, ammunition and canned goods.
This along with Bernmonkey making #1 in FP list of Best Thinkers????
Let's award the arsonist for saving victims from house fire he started!!!
When the pay the boys at GS in gold, maybe then ...
, a good read full of several interesting historical twists and shout
but im sorry i remain unconvinced
JMs research into sovereign debt of venice going back to 1285 is noteworthy but so are the data points which indicate like hard PM content currency, the paper traded, often at levels subpar to face value...sometimes discounted 20% to 60%
and the missing data points...dont they have a story to tell too?... well those periods for which record keeping are absent are likely the historical periods of greatest chaos and destruction, and present the least favorable evidence to JMs thesis
i for one do not accept that the world of middle ages and even renaissance banking was anything near as complex and derrivative driven as the markets today
i appreciate the insight of observing cycles and the repetition of history, but banking of those days bears as much resemblance to modern financial machinations as do the nina pinta and santa maria to the largest ocean liner, the oasis of the seas or the apollo spacecraft
that was then... and this is now...and i agree there are many lessons to be learned form the past but lets remember that when venice was closed for business in the late 18th century her bonds were dust
reminds me of people who quote the inexorable rise of the dow industrials over the century but then neglect to add that the components have all changed but for one... GE... and conveniently the failed corporations of the dow were discarded like jetsam from the index when it suited the greater purpose
i for one will diversify as we are in uncharted waters... im heavily invested in land, i till, on a parcel i "own",paid for, away from the big city... sure,i hold physical PMs.... and a large pile of chicken manure fertilizer, for the gentleman farm out back
im hopping between currencies and yes i do own bonds, but, until the maelstrom clears and the seas stop boiling i wont be "all in" for gold, RRE, equities, bonds or anything...the world has become unhinged
one thing i believe to a near certainty...the dollar is toast
I'm not a historian. I'm a quant.
Land debt-free is fantastic. It is how the rich survive. But you need a continuous state to guarantee title.
The dollar is toast in time. But I don't think this is the time. Even if the dollar were toast, US Treasury holders would get very good recovery value.
Unless *sigh* we all die, of course.
But you need a continuous state to guarantee title.
Wrong. You need fire power. And lots of it.
The State is the problem, not the solution. The State may have been the solution in a previous era, but no more.
I am Chumbawamba.
Anarchy will certainly not guarantee your title or your life, sit down on your cases of ammo and eat a gold sandwich.
Thank you very much for the post, this paper is thought provoking and certainly goes in the right direction: let us have no doubt our future can be found in some record of the past.
Argentinas sovereign bondholders disagree that bonds are financial teflon. Default happens.
Argentina? I remember the tune, catchy it was. Who the hell owned Mr. Argentina's bonds?
Don't cry for me, Argentina. Your bonds were supposed to be immortal (teflon?).
The disciplined use of logic and reason employed in the service of a paradox is the same thing as saying take something fake, stupid, and full of cap and just take it more seriously. That'll fix it.
Bernanke would engineer an equities "correction" along with a "scare" and people would flock to US Bonds again. But when do we get to have a normal, functioning market ?? Just wait until the $3 trillion roll overs next year hit the markets..
http://themeanoldinvestor.blogspot.com/2009/11/problem-with-bonds.html
Lets look at your statement:
"Bernanke would engineer an equities "correction" along with a "scare" and people would flock to US Bonds again."
Two points:
1) Ben Bernanke is a student of the Greenspan school of; Equities = the Economy. At least when they go up.
The reality is that equity trading, by itself, does not necessarily increase economic output. The market serves a function to capitalize corporations through offerings, but beyond this its mostly just exchanges of paper between separate parties. And of late, if you are a big enough broker, you can front run the spread using trading speed to increase income, above what you normally make from fees.
If Ben shot down equities, he would lose his biggest PR point.
2) If you look at P/E ratios, equities are overpriced. Putting financials aside for the moment because of Gov involvement, something else, rather than fundamentals, is driving share price. Also, I think a lot of big bank short term "cash equivalents" are in equities.
Based on Ben's track record so far, my guess would be the FED would start another "Long Term treasury buy" before somehow tanking equities.
He could have raised the Fed Funds rate by 0.25% if he wanted to send a message. But, the FED left them unchanged.
----------
So to answer your market question:
"But when do we get to have a normal, functioning market ?? Just wait until the $3 trillion roll overs next year hit the markets."
There is a lot here. First what do you see as normal. Next what do you mean by functioning?
Gov/FED involvement in the private sector is so pronounced that we will probably never see normal again. Also, normal relies on a strong economic foundation which, based on fiscal and monetary actions, will not be returning.
In regards to functioning, until the SEC regulates HFT and investigates obvious violations, the market will be dysfunctional.
Finally, to address Treasury Auctions:
The real question for Treasury auctions is who will buy all of this debt and at what yield? If there is no intervention by the FED, then the market will dictate the interest rate. And here in lies the problem in scrubbing existing debt. As yields go up to attract buyers, so does your interest expense. The shorter the maturity the greater the scrub expense effect for increasing yields. Also, you can reach a point where buyers lose confidence, because you cannot indefinitely fund increasing debt. At some point you must show willingness to pay through fiscal responsibility, or no one will buy.
Mark Beck
" power always finds a way" lol. its nice while ya got it
Sorry, the debasing going on is in the dollar. Pure silver can be obtained by competent people. And it will outperform in an environment of government induced crisis. This author is highly confused.
Agreed. For several reasons of which I will keep mum on, SILVER is going to rocket..
Go ahead and think it wont, while I keep stacking! Your paper dollars are what will be worthless you fools.
If they'd just let silver go to 28 to 35 they could chain it back up. But they won't and it'll never chain back up again.
Who and for what do you intend to sell your silver to?
The OP says some similar things I am saying...esp WRT OTC derivatives and leveraged borrowing.
Economic activity now is marginally profitable due to the energy supply and EROI curve. Therefore, it has to be made up with leverage. This is distorting the interest rate and yield curve.
Yields on bonds are reflecting competitive rates with REAL activity. The best that can be expected at this point in the economic cycle, with peak supply in energy, gold, and a few other essential materials is to preserve, not to grow.
So either you borrow a zillion dollars and drill 20,000 crappy wells at the bottom of the gd'd ocean, and attempt to make a .1% profit margin into 30% with leverage or else you sit still. There are no elephants or gusher fields left. This is all an artifact of asymptotes on returns and real systems. At some point you just peak out and all the liquidity in the world cannot make more activity occur. You incentivize bacteria in a bottle with sugar...eventually they fill the bottle. You can pour a bag of sucrose into it and you cannot get more growth. The real system has achieved its growth ceiling.
That is where we are. This is not like Venice. There are no colonies out there waiting to be discovered.
Failed article. I guess no money is any good if the Mongol hordes are on the loose. Gotta fix that problem first.
Exactly. It's like telling your loving, treasured wife of 75 years that yes, in fact, in deed, you were not faithful the entire time.
Once again, repeated thousands of times, in countless groupings of humans (over God-knows how many years), the
sitchy-ationz 'bout to get ******.
Annie, get yer gun.
My problem with the article is the fact that the Venetian Republic didn`t have to contend with the internet making it so its citizens were fully aware of what was happening. The internet is allowing even the most uneducated US citizens to be made aware of what is going on.
While the internet IS "allowing even the most uneducated US citizens to be made aware of what is going on", unfortunately, the dumbed-down masses are not taking advantage of the information that is so readily available.
Plus, the few that are remotely aware, dismiss the facts and accept the MSM's rosy outlook. It is too painful for them to do otherwise. I talk to anyone that will listen about the upcoming collapse, and that is what I get get from them.
There are less than a million people in the USA that understand what is going on and are making preparations for the inevitable...
".......less than a million people in the USA are making preparations for the inevitable." Ammunition sales have reportedly topped 18 billion rounds since the election. Would not be surprised if a million people is a tad too low for the uneducated masses who know the history of fascism.
A debasement of a nations currency starts with a general debasement of that society. A debasing currency is a 'Red Flag' so to speak, of poor leadership having found the means, having themselves empowered .That poor policies are now law. Danger... Danger Will Robenson!!!!
When a currency begings to be debased, we can know a general decline of that nations civil population has been well underway and a decline in the general well being of the civil fabric has been compromised . A debasing currency shows that the leadership has not the power to lead, to set the ship of state on the correct course, the US has defaulted more than once and this is what must be done again. .A new course must be set or the ship of state will fail. A failure to accept a host of failed policies is a measure of more debasement. ... a sinking ship.............Failed article.
Tyler I feel I could write as ill informed and myopically limited propaganda piece as this, no I could do a LOT better by simply lying like the dickens.
I could make stuff up..make it look rosy all over.
Or I could use the truth like a weapon, selectively 'truthing' when it helps my cause.
Yes I could write much better propaganda than this.
This is second rate. It assumes the level of good willed gullibility on the part of the populace that they simply shan't entertain in a day and age when goat boffing porn is readily available via the "intarwebs" and apparently a lot more commonplace than anyone had imagined.
If this truly is the information age then the magnitude of the lies necessary to affect large wave social outcomes must be of equal grandiosity.
-MobBarley
'Jeah Bwoi!'
Somehow I've always suspected ZH was one of Goldman's more diabolical, strategic (think Chess, not Checkers) disinformation devices. This, as so many are referring to it, "failed" article supports my primary position (doubt everything), and it suggests Goldman is ready to dump its bond holdings... We know they've been buying gold.
See below for reasonable definition of "failed":
http://www.youtube.com/watch?v=Z1Jk2kPwUj0
Their failure = Our misunderstood/misdirected perception of intent...
So you know... I do not work for Goldman Sachs. I do not like that Goldman Sachs cooks their VaR (VaR is a crappy construct anyway)and owes the government millions.
To think that I become a Goldman agent because I present a differetn opinion. Pretty weak.
This isn't fair. I don't know how they calculate VaR, so I'm sorry I said anything about it. Hopefully they use expected shortfall instead.
Like a baby in the womb, poised to grow ever bigger, my silver shorts gave a kick of approval to this article.
This is where I leave ZeroHedge... why the hell would you post this?
What a childish attitude! The OP bothers to dig the past to find indications of what lies ahead, you do not like what he finds and so threaten to put your head in the sand as retaliation :-) !
Bias confirmation will do you no good, it might do you more good to open your eyes and try to enhance or refute the analysis.
W
It's more than just the internet "allowing even the most uneducated US citizens to be made aware of what is going on".
The New York Post is now an educational tool.
Look inside:
http://www.nypost.com/p/news/business/hi_ho_silver_up_and_away_ZgJ0FaYux...
http://www.thestreet.com/author/1005630/JamesAltucher/all.html
Any questions?
Since Goldman Sachs, JPMorgan Chase & Morgan Stanley financed ELX Futures (exchange for US Treasury interest rate futures trading), one might surmise there is something to Treasuries longevity?
http://pilotsfor911truth.org/american_77_hijack_impossible.html
Why not buy OTHER countries' bonds instead of US Treasuries? Won't EVERY country be trying to keep its government bond market alive? Why put all your eggs in one basket? Also, if the USA caused the global market bust (which it did), why reward the USA by buying its bonds?
This is a true, and I think highly of a number of other sovereign credits.
The dollar is low right now, and to put a fine point on it, Treasuries have more aircraft carriers than anyone else backing them up.
Finally down to nation building fundamentals. Thank you
Treasuries have more aircraft carriers than anyone else backing them up.
Those carriers, their submarine screen and some of the escorts are nukes, the rest need oil for fuel. If we destroy the currency, how are we going to buy fuel? We've just proven that the mightiest army on earth can't subdue an area the size of Texas if it doesn't want to be "make nice with the big dog". Sustaining that army overseas requires an economy that is producing tax revenues. Are you suggesting we can transition to an almost completely military economy? Are you related to Dick Cheney? What are we going to do, threaten Saudi Arabia with nukes? Just how would that work?
I'd really like to hear this.
Small Correction.
USN hasn't had nuclear-powered surface escorts since the early 1990's.
Too expensive to refuel - for the price of one mid-life overhaul plus nuclear refueling for CGN-36 class of escorts you could buy TWO CG-47 Aegis ships which were far more effective.
Fuel situation is worse today than anticipated. Gas turbine surface ship propulsion is horribly fuel-inefficient, to say nothing of reduced radius of action.
With modern stand-off weapons (SM-2, Harpoon, Tomahawk) you don't necessarily need high speed in a surface escort but rather good radius of action, endurance, and sea-keeping qualities.
USN way behind Kriegsmarine in this respect.
KptLt. laughing swordfish
9er Unterseeboote Flotille
I hadn't been following the D2G ships, but I am surprised to learn they are gone. Anyone out there remember the "Brain Damage"?
Sounds like Tyler is fighting Tyler. :^)
Silver is going to skyrocket. Why do you think the mints just stopped selling it? They need to keep it out of as many small investor's hands as possible, but it's too late.
1. First of all gold can be confiscated. Load up on gold and try using it without sounding alarm bells. The only ones who will be safe with gold are the ultra rich powerful.
2. The day no one shows up at an auctions, is the day the Fed gets instant permission to pick it up injecting fresh new money into the system. In such a case, yields can be at the level government wants (close to 0% obviously) until all debt is converted into long term treasuries.
Once the conversion is finished, all government needs to do is wait for inflation to take off, its dream scenario.
In such a case, hyperinflation is a possiblity but...
why could the US actually get away with it? Because for the last 30 years all countries in the developed world have been straight-jacketed into transforming their economies into either mini Americas or servants of America. If the US prints, nearly every country will be just as worse off as the US if not worse.
When you think about it, the ones who NEED gold are the ones with no skills or better yet, the ones who have nothing much to offer in a world run amock.
As opposed to you, who have nothing much to offer in a thread run AMOK. The US confiscating gold? HA! Try to use it? Ooh... boogety boogety. They do such a bang up job with drug interdiction, and goldbugs are so much easier to profile. You have a cartoon worldview, and the tide of history will drown you as you watch your teevee. Will Canada outlaw metal possession too? Will the Government go back on a gold standard because they are having trouble devaluing a fiat currency? HA! Or will they merely confiscate it because you don't like it, and waited too long to pull your head out of your fundament.
Interesting reply.
In 2004, when I googled "real estate bubble" all I got was a couple of hits and they mostly were theoretical definitions or just about Japan.
I found 1 single blog which just skimmed the subject and I was bullied every time I mentionned real estate was in a bubble mode.
I've noticed over the last couple of weeks that I am starting to get bullied again so either I am plain stupid or onto something.
Anyway, I do think that hard currencies like gold and silver have the potential of soaring; I am just not sure how people with a net worth under 1 million (or even more) can own it without getting killed in the aftermath of a currency collapse.
You can't eat gold so you'll have to trade it if you don,t have enough ammunition and preserves. But if you try to exchange it during the collapse, you better hold your breath and do it with someone you trust because surrounded by 300 million people, someone will be around to check if you have some more.
I have enough life experience to know that you don't know if you can trust someone with your life until you have done it.
LOL at all the people hating on 'TD'.
This article was written by Mr. jm
The author fails to acknowledge the fact that U.S. Treasuries are no longer backed by physical precious metals, which have been considered real money for thousands of years. The U.S. also no longer has a manufacturing base, making its debt riskier to hold than ever before.
Add to the mix the simple fact that the U.S. Dollar buys 95% less than it did in the early 1900s. I like to use a shopping cart analogy to explain this to the sheeple. I tell them, "Imagine going to a grocery store in 1910. $120 would have enabled you to buy several shopping carts full of food. Now, you can only buy one shopping cart full of food for that money." The Federal Reserve engineered a stealth robbery through currency debasement.
We have a manufacturing base. We make very expensive healthcare devices like robot surgeons, radiological tools, etc. We make complex, hi-tech, heavy value-added manfactured goods that the rest of the world can't possibly make.
Dumbass Obama wants you to believe that there is no manfacturing base, because it allows him to bail-out GM and other has-been auto producers when capital could be allocated so much better elsewhere. Socialism appeals to him because it keeps him in power. I have a feeling form the Jersey election that the lot of them will be out on their ass as soon as is possible.
Read my other replies about the currency stuff.
Imagine how long it took to earn 120 dollars in 1910, and that several shopping carts better not have been fresh meat or veggies cause you had no place to store it. So just what did you buy with your $120. My grand father was apprenticed for three years around 1902, nickel an hour the first year not paid out but kept on his account and then a dime for the next two years with his dad getting some if it - that was five and one half days a week so say 50 hours a week for 52 weeks - $250 bucks for round numbers - his trips to the grocery store (what ever that was in 1910) were two per year. He spent the other ten bucks on booze.
When he was graduated from high school he made an address on the future of the telephone.
You want a 1910 car? How about insulation for your house? Primary use of petroleum was kerosene. Whale bones were the plastic of the day. And then there is 1918 flu epidemic, life in the good old days.
jm
you took some harsh criticism here
this is a tough crowd and i too took issue with some of your findings
but your article was very interesting and thought provoking and i thank you for publishing it
No worries. If I wanted zombies moaning "I agree", I wouldn't come to ZH.
Besides, what else is there for a guy to do over the holidays.
Why don't people understand that a t-bill is future dollar value and the dollar is a rare commodity when it's all fully invested in the present for delayed future income? What the fixed income market is saying is that dollars will be more valuable in the future than the present, however DXY value will remain static in the present since that's the only variable the Fed can control via printing. God I could go on, shame I'm so lazy.
It is a good article, the only thing I'd really point out is that the historical precedents cited still had economies largely base their currency on precious metals or commodities. Now, they're backed by the proverbial "credit tree".
Phaesed!
Hope you saw the reply to your dollar comments on the gold and treasuries piece. They came a day after the dust settled.
Agreed on your criticism. But it was the worst time in history for absolute, unequivocal, hellacious deflationary collapse. I think social systems have changed very little from Ur and Athens.
Actually JM I'd argue that they haven't changed at all in theory, just in application.
We're currently in the middle of a 2,600yr old war between the followers of Plato and Aristotle, or in a similar vein, David versus the neighboring kingdoms. You're absolutely on the right track. So many people are arguing the technicalities of the fundamentals but not the theory of them, which is how the Fed is winning this war. Everyone is looking for the dollar to rebound and treasuries to fall, problem is the dollar is at its very essence is just another treasury bill just with zero duration. In this way the Treasury shorts are squeezed and dollar shorts are letting money sit idle until they get squeezed out on the longer portion of the curve.
Didn't see the reply... actually I'll go look for it now, need to download the pdf for the treasury reference... thanks for putting that data out there :)
Good work man, keep at it.
ps... I really suggest you look at Krugman's Hicksian IS-LM patch, it's quite literally the playbook for the moment.
Amazing post. Thank you. I always look to history to help guess the future a little more clearly.
Mark Twain:
"It is not worth while to try to keep history from repeating itself, for man's character will always make the preventing of the repetitions impossible."
Interesting article, JM.
In some respects, very little has changed.
Silver is my favorite investment now, but I would rather read well formulated contrary opinion than get "worldview confirmation." I am guessing many of the bashers did not give it a fair read. Many thanks for your work TD and others.
I actually own silver ETF myself.
It, along with copper and nickel, are highly correlated to equities... just less impaired fundamentals.
It is a basic part of my risking position. I bought so low I can afford to just surf these choppy waves.
It was a good article, and well written. I am curious if you have read any of the Martin Armstrong offerings from prison, and if so, opinions? I have a feeling that the Government has such confidence in their bonds that Federal employees of all stripe will/shall be moving 100% of their retirement funds into them soon.
I only know of him through a article posted here on ZH. He appears to be a cycle guy using precise mathematical relationships to him what is going to go down.
This means he believes everything is a deterministic dynamical system, which means he believes in predestination.
I don't believe this, although I believe there are laws of motion which drive all events. I part company with prophets and fortunetellers because of noise and ergodicity.
Noise means that you can't predict anything within an arbitrary tolerance because of random screw-ups and measurement errors and such.
Ergodicity means that systems with large numbers of moving parts reach a state of behavior independent of how they began.
You or I or anyone can get lucky. The wise can hedge, the brilliant can hedge well. I don't think anybody can predict the future, though.
Bonds? Oh, you mean those things you get 3% interest on with a 2 year note yet have already lost over 15% of it's value in the past year alone? And if you say TIPS, then you actually believe the government's inflation numbers?!?!? Good luck with that LOL!
Oh, and that is provied the USA does not default on the bonds, and you do not want to know that it costs more to INSURE a USA bond over McDonald's debt now do you?
It is true! ROFL!
I believe that chronic moderate deflation is coming near term. The whole premise is based on that.
IG over sovereign is not common but not new.
It almost always happens just before corporate/personal/tax rates rise and kill off any euphoria. It has nothing to do with banana republic scenarios.