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Guest Post: Preserve and Protect: Mapping The Tipping Points
Submitted by Gordon T Long of Tipping Points
Preserve and Protect: Mapping The Tipping Points
The economic news has turned decidedly negative globally and a sense of ‘quiet before the storm’ permeates the financial headlines. Arcane subjects such as a Hindenburg Omen now make mainline news. The retail investor continues to flee the equity markets and in concert with the institutional players relentlessly pile into the perceived safety of yield instruments, though they are outrageously expensive by any proven measure. Like trying to buy a pump during a storm flood, people are apparently willing to pay any price. As a sailor, it feels like the ominous period where the crew is fastening down the hatches and preparing for the squall that is clearly on the horizon. Few crew mates are talking as everyone is checking preparations for any eventuality. Are you prepared?
What if this is not a squall but a tropical storm, or even a hurricane? Unlike sailors, the financial markets do not have the forecasting technology for protection against such a possibility. Good sailors before today’s technology advancements avoided this possibility through the use of almanacs, shrewd observation of the climate and common sense. It appears to this old salt that all three are missing in today’s financial community.
Looking through the misty haze though, I can see the following clearly looming on the horizon.
Since President Nixon took the US off the Gold standard in 1971, the increase in global fiat currency has been nothing short of breath taking. It has grown unchecked and inevitably has become unhinged from world industrial production and the historical creators of real tangible wealth.
Do you believe trees grow to the sky?
Or, is it you believe you are smart enough to get out before this graph crashes?
Apparent synthetic wealth has artificially and temporarily been created through the production of paper. Whether Federal Reserve IOU notes (the dollar) or guaranteed certificates of confiscation (treasury notes & bonds), it needs to never be forgotten that these are paper. It is not wealth. It is someone else’s obligation to deliver that wealth to the holder of the paper based on what that paper is felt to be worth when the obligation is required to be surrendered. It must never be forgotten that fiat paper is only a counter party obligation to deliver. Will they? Unfortunately, since fiat paper is no longer a store of value, it is recklessly being created to solve political problems. What you will inevitably receive will be only be a fraction of the value of what you originally surrendered.
In the chart above, we see that just when the exponential expansion seemed to have run its course during the dotcom bubble implosion, we subsequently accelerated even faster. Cheap central bank money; the unregulated, off-shore, off-balance sheet increase in securitization products; a $617T derivatives market; and the domination of the credit producing Shadow Banking system then took us to even greater levels. Bubble after bubble continues to propel us, as more recently the Bond Bubble replaced the Real Estate bubble. Similar to trees not growing to the sky, something always happens which creates a tipping point, a moment of instability or a critical phase transition. Suddenly what worked no longer works.
I have written extensively in a series entitled “Sultans of Swap” and another series entitled “Extend & Pretend” the growing and clearly evident tipping points that are unquestionably now on the horizon. You can ignore them at your peril, but when the storm swells hit, don’t say you were never warned and no one saw this coming.
Consolidating the trends and distortions outlined in these two series, we arrive at the following ‘large brush’ death spiral leading to a failure of fiat based currency regimes.
The above cycle is well supported by recent and still unfolding developments. These have been mapped onto the cycle.
MAPPING THE TIPPING POINTS
Let’s now list the Tipping Points which have become abundantly evident over the last few years and which are continuously expanded on our web site Tipping Points. We track each of these on a daily basis on the site. The rankings shown below, though they do shift, we have found to stay relatively stable on a quarterly basis. Each Tipping Point has the capability of individually being a catalyst to advance the sector marked in red above.
SEQUENCE & TIMEFRAMES
We can never be sure of the sequence and time frame of any particular Tipping Point. Like a house of cards you never know which one, or what movement will precisely bring the house of cards down. What you know however, is that it will happen – you just need to be patient and prepared. Unfortunately few have the patience or think they can time it for even more profit. The greatest trader of all time, Jesse Livermore, wrote after a life time of trading, that his best gains were made when “he bought right and sat tight!”
Our current analysis on Tipping Points reflects the following:
DETERMINING MORE GRANULARITY – We are in the 2010-2011 Transition Phase
In my articles EXTEND & PRETEND: A Guide to the Road Ahead and EXTEND & PRETEND: A Matter of National Security I outlined even more granularity to the virtuous cycle turning vicious spiral.
We can now overlay the Tipping Points onto this map. We arrive at the following.
A – EXIT FROM ECONOMIC CRISIS STAGE
- Commercial Real Estate – Finally forced to account properly for mark-to market valuations.
- Housing Real Estate – Option ARMS come due and FHA / FNM / FDE / FDIC are seen as insolvent.
- Corporate Bankruptcies – Unfunded Pension impacts and debt loads (gearing) on reduced revenues.
- State, City & Local Government Financial Implosion – Non Accrued Pension Obligations, falling tax revenue and years of accounting gimmicks come home to roost.
- Central & Eastern Europe – The ‘sub-prime’ of Europe will soon erupt on the EU banking network as evidenced recently by Hungary and the Baltic States.
TRANSITION:
HIGHER INTEREST RATES
Significantly Increasing Interest Rates – A Major Global News Focus
A $5T Quantitative Easing (QE II) Emergency Action
It will likely be triggered by a geo-political event or false flag operation.
B – ENTER POLITICAL CRISIS STAGE
- Entitlement Crisis - The unfunded and underfunded Pension charade ends
- Credit Contraction II – Credit Shrinks Violently
- Banking Crisis II – Banking Insolvency no longer able to be hidden through Extend & Pretend.
- Reduced Rating Levels - Falling Asset Values and Collateral Calls on $430T Interest Rate Swaps
- Government Back-Stopped Programs - FHA, Fannie Mae, Freddie MA, FDIC go bust
C - HITTING ‘MATURITY WALL’ STAGE
Lending ‘Roll-Over’ – Game Ends
CONCLUSION
A recent Zero Hedge contributing author summarized the current environment nicely:
“There is an entrenched insolvency problem in the United States, and a picture is worth a thousand words. Insolvency is not illiquidity; insolvency is about income that can’t service debt burden. Notice where things fall off the cliff: I believe we are getting close to this point. Just need a catalyst. Sequential bond auction failures here, a sovereign default there, massive liquidity drain all around, worse… whatever. The fumes running the engine (QE, or credit easing) are dwindling.”
There is an old sailor’s saying:
Red sky at night, sailors delight.
Red sky in the morning, sailors take warning!
Every morning the next batch of economic numbers is released and the indications are consistently red. Of course the market initially drops, and then miraculously rises on no volume. Since 2007 we have potentially constructed the largest head and shoulders topping formation we have ever seen.
This doesn’t mean the markets are imminently headed down. What it does mean is you should be meticulously battening down your financial hatches and checking your options for every eventuality.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain
Gordon T Long
Tipping Points
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Thanks for the good word. It means a lot to me. More are in the pipeline. Add your voice and spread them around. Hoping for better productions from bands. Free, hard hitting music, what a deal. Ps my real name is on the site there (dude, for the record, and longtime songwriter and student of the economy)!
Big flaw in Tectonic Shift
Obama will not be in office in 2013.
I seriously doubt there will be enough Democratic power after the fall election to parse much of anything.
You will see no major shifts until after the new guy takes charge.
Inauguration day 2013 will be the day we all will look back on with regret.
Dems are out fund-rising R's by better than 2 to 1. The R's aren't running anyone who isn't a crazy from the teaparty. America has different and better values that those the crazy's stand for. For example, hate is not a family value. These days, culture war issues lose votes and fact-based issues have a liberal bias.
Now "this" post by "Navigator" is worthy of being flagged as junk
If you keep your left eye open and your Right eye shut you have no depth perception.
No junking from me. I've read your comment several times now. I just can't find anything to add to or criticize. Not that I agree 100%, it's just tough to find a place to start in political views. Ain't no future in it.
I junked him, Rocky.
There is little difference between R and D, IMO. But, there IS a little. If the R wins the House and does not stop spending, and it WOULD take Tea Party types and Libertarians to do that, then we're doomed.
Doomed anyway.
Navigator,
<sarcasm>Gotta hate those wacko Tea Party types. All those calls for limited Constitutional government, individual responsibility, balanced budgets, no bailouts. It's disgusting, really. Many of them even support that archaic idea that the 2nd amendment is an individual right and was written specifically to allow the people to protect themselves from tyranny.</sarcasm> Either you are a mindless, uncritical follower of the screeching, biased left wing media (hint... Huffington Post is NOT about objective reality), or you know what the reality is and you are one of those unscrupulous, low life types who throw out the "hate/racist" card at the drop of a hat because you know you can't win the argument on its merits. Liberals are so scared of genuine, grass roots activity in the Tea Party movement that they are trying to plant agitators into Tea Party events to spout "hate" so the left can try to discredit the movement. Anyone who has actually BEEN to a Tea Party event knows that your statement is totally bogus.
+ 1 Dukk
I have been to Tea Party events, and they are very typical and level-headed Americans. Much more connected to what is going on than various "highly credentialed" types I run into now and again.
Tea Party people I've met are mainly Libertarians who want our Liberty back and to stop .gov spending and its 1984-ish actions of late.
I wish I could junk Navigator twice, so out of touch.
+1
I was at the original Seattle tea party (4/15/2009) and there were dems, repubs, & plenty of Libertarians there. Folks were well behaved and well spoken and they were upset at the high level of government spending primarily. Not your typical "protestor" demographic.
When Palin started trying to co opt the movement, I bailed. Didn't go this year.
If I could post pics, I do have a rather amusing photo of some local color holding up a counterprotest sign: "I shaved my balls for this!?"
ETA: I meant this in reply to Dukk
+1
You are sooo right about the co opt. There will never be a peaceful change from our current power structure because those in power have the resources to co opt any popular movement that threatens that power. Neither Party will voluntarily give up their place at the trough.
Unrelated: Anyone think we should/could have thumbs up/thumbs down as well as Junk flag? Agree/Disagree doesn't necessarily need an explanation. Junk could be reserved for utter stupidity or incomprehensible crap that takes up valuable space and time. Anyone know Tyler well enough to suggest it? Or would that just become a popularity contest?
Beavis: "Politics suck worse than anything has ever sucked before!"
Butthead: "Yeah. Hehe Hehe. Let's blow something up!"
The so-called "fund raising" is actually bribery from biggies. As for Democrats vs Republicans it's just the World Wrestling Federation for clueless peasants. The Republican and Democrat biggies all have a good laugh about silly, deceived peasants when they get together at their Bilderberg meetings. Don't believe me? Just turn on CNN and watch the live feed from they next Bilderberg meeting.
PS: 911 Inside job
As if presidents decide macro trends. lulz
I am curious why you got junked here. Folks, it works better to leave a note as you junk if you are using it as a way to strongly disagree and no one else has already "said it for you."
One of the interesting things about reading here regularly is watching people's internal logic systems at work as they post in the comments section. Often I do not like what Gully Foyle has to say. But make no mistake, Gully is smart and sometimes funny. Even when I don't agree, I often benefit from reading the opinion, to check out how the logic flows from the belief system. I'd love to hear from the 2 junkers why they junked this. The post above included some stuff about political crisis. Gully voiced an opinion regarding that. Junkers, tell us what you see as wrong about this. Please.
Edit: 2 people have now left notes. Thanks. Navigator looks optimistically naive. Internet tough guy, Yep! So true. But if you were both junkers, I have an understanding of you now.
Junkers are high on testerone. Thank you for a needed estrogen boost.
Just watch that you don't develop man boobs ITG.
Ms-
Now that's +10.
and a good reason to check my own thinking, logic, understanding (OK, OK, lack of all of the above).
Like the use of beer and whiskey mash after it has done its most important job, then (yum) pig-slops.
- Ned
With good debate, you get good rebate.
MsC, I have never junked Gully even though, like you, I disagree with much of what he writes. But, exactly what you said about thought provoking! Gully is yet another treasure here at ZH.
I did junk Navigator for his hateful and ignorant remarks.
Clinton, Dubya, Obama- same prostitutes, same brothel.
"Ya want me to do what ? Oh, that's quite a large offshore bank account ya got there, sir. Yes, sir, I will do it with relish. "
Remocrats or Depublicans- long ago sold their tiny little souls to the pimps on Wall Street.
It's a super summary and analysis article.
But I think there's no way this system survives until 2013. If we can all see the end clearly, maybe it's right now.
All those words just to say "we're fucked"??? What happened to the laconic?
I guess brevity really is the soul of wit.
I prefer brewvity. One bourbon, one scotch and one beer.
Coming right up.
http://www.youtube.com/watch?v=ISmgOrhELXs
Seriously.
I'm glad ZH is posting stuff from Gordon Long. He has a lot of interesting things to say on topics from Greece to gold. His Tectonic Shift graphic, above, certainly provides food for thought. If 2011 brings a wave of corporate bankruptcies, and 2012 brings a pension funding crisis, a currency crisis, and the collapse of commercial real estate, where should one invest now? Shares of Campbell's soup or cases of Campbell's soup? Mentally I'm overlaying the Mayan calendar onto the graphic and concluding that the Mogambo Guru is probably right: we're all freaking doomed...
I see QE++ continuing without any real repercussions until the USD is not accepted for oil trading. There will be state, pension, union, wall street bailouts continuing until the world says USD no longer accepted. We know plenty of counties are working behind the scenes of the US to enact this, leaks every now and then come out.
I wish I was kept in the loop on timing of it, whenever that happens it is good riddance amerika.
It's a good article. I wonder about the timing he charts. The currency crisis may hit right after the markets collapse. If enough agile money runs to gold, the paper is toast.
Treeplanter
i wanted to plant and grow trees.
After dollar gone, world may use Gold paper or Gold certificate as reserve currency in 1/100 oz, 1/20 oz, 1/10 oz..................
It's possible that the Fed decides to back a new FRN by paper gold. However, this will just be a stop on the way to a new currency that is backed by PM's. Paper gold currency will fail since they already have a lot of practice scamming down that road. They have shown they can't handle the responsibility of handling a non-physically backed reserve currency.
However, I am guessing the world will give them one more chance after this. If only because there will be no real alternative available. I consider the Euro to be FRN jr. They have tipped their hand that they are all for bailouts and dismissing their own charter, if it suits their needs. China can't be trusted and everyone knows it. Japan is a train-wreck that will go down with the current FRN. No other country has the clout to even consider pulling it off. I don't think a country like Switzerland would attempt to usurp the reserve currency status on their own(they would through the BIS, though).
Finally, some organization like the BIS will maybe be able to have the means to put out a physically-backed currency program. I am guessing the IMF will be completely discredited by that point to be an option. I think IMF may be involved on whatever transition currency might develop if the current FRN implodes. They may facilitate the paper gold backed currency.
It may well be that more two-way currency swaps occur without the USD as the denomination. The USD, in and of itself, is not necessary as the world reserve currency.
As the U.S. shrinks as a percent of total trade, it will only be countries that need the U.S. military for protection that will be brow-beaten into continuing to use the USD as the medium of exchange. Say, the Saudis and Japan.
There is no critical need for China to purchase coal from Australia with USD, except of course, the need for China to dump as much USD holdings as possible onto other parties that are still willing to accept them.
Greenspan and Bernanke- how to destroy the wealth of a nation in one generation.
+ 1/1000, 1/10,000, 1/100,000, etc, etc, etc.
I've wondered about that. Will we see small coins with 1 gram of silver in them?
Yes. When our Chinese overseers give us our year's pay.
http://www.channelingreality.com/Digital_Treason/trojan_triangle_The_CORE.htm
20-22 September 2010
With only five years left until the 2015 deadline to achieve the Millennium Development Goals, UN Secretary-General Ban Ki-moon has called on world leaders to attend a summit in New York on 20-22 September 2010 to accelerate progress towards the MDGs Visit the Summit website!
http://www.un.org/millenniumgoals/
2010 Fall Pilgrimage
Sept. 9-20, 2010 Oberammergau, Germany
This event is SOLD OUT!
http://www.legatus.org/public/index.asp
Smart money exits the stage
Most of what I own is in Rental Real Estate. Granted it can go down in value and the Rents can go down which both have happened in recent years. Yet, somehow I feel protected. I do not think that the properties will vanish off the face of the earth. People will still need a place to live.
I agree that the Property taxes are a bummer as the States are in effect trying to tax you out of your property but still I think that the only place for your money is in Real Estate.
Although, Wall Street for the first time since 1930 has caused Real Estate to deflate by about 30%, they also caused the value to go up by 50% during the boom. So, anyone that bought and held long enough say about 20 to 25 years is in great shape. I do not like to get lower rents but the rents are certainly higher than when I bough the properties.
So, yes I like to complain a lot about higher Property Taxes and lower Rents I still am ahead of the game and at the right price I can find Tenants. Plus, I appeal the tax assessments every time they come up for renewal (every three years) and usually get the assessment lowered.
Remember that most of the Wealth in the Country was built on Real Estate not the Stock Market. Just look at Donald Trump, Richard Frack, etc.
Real Estate is not a get rich quick situation. It takes a generation to aquire properties, rent them and pay them off. Most of the time when you buy them if in a good area they have a negative cash flow. Yet, over time they pay for themselves and help you to buy another property and then another. It take years but well worth the effort.
Will Rogers always said buy land young man, they are not making any more of it. This still applies today.
Donald Trump's wealth was created based on leverage backed by real estate. And onmore than one occassion, he has stiffed his creditors. For Trump, real estate is indeed a get rich quick situation based on turning over the property (i.e., selling condos) as quickly as possible.
Why anyone would loan money to Donald Trump is one of life's great mysteries.
The fiatsco will not die. As the US is the largest food-producer, fiatscos will always be needed to buy food.
Well, at least until the rest of the world is on food stamps, too.
Where to put non speculative savings when currency crisis arrives and financial system collapses? For me this is the big question.
Bank of Serta.
Iridium and saffron are also good.
cigilo,
If you wait for that, your screwed already.
Do you not mean BEFORE?.
Why do you think folks are forking over $1200.00+ for Gold?
Because they do not want to end up with ZERO.( they may break even, or they may become super wealthy,without a miracle, I see no way to lose on Gold,or Silver at any price,in the next 12-36 months).
Long term, even less chance, 48-60mos.
This train is off the tracks now, folks just refuse to believe it.
Go to FOFOA, and read the article written by "Another".
IF the world were to go on a paper/gold backed currency,( and I believe they will) just how much do you think ONE single ounce will have to be valued at?.
With above ground totals, there is less that 3/4's of an ounce for everyone on the planet.
Why is China, PUSHING like crazy for their citizens to buy,and invest ASAP in Gold & Slvr?,why are Russia, India, and several other Soverigns, grabbing all they can get?.
Think just maybe they know something most here already know?.
I think YES.
Dos-
I was in Shanghai, two years ago, visiting our office. Talk about financial stuff (before the fall mess). Many mentioned "maybe I should buy some more gold." Didn't flash until your comment. They are buying for CB reasons but also to cushion the local economy when SHTF.
Wow.
- Ned
DosZap nails it again.
+ $1225
All y'all,
There seems to be great surety that the currency comming out of the looming crisis that we are discussing will be backed by PM of some kind.
We can't see into next week, yet inevitably this will be the outcome of the larger/world-wide system?
I can/do understand the wealth preservation aspects, although coming out the other side seems to be more interesting than many would wish to endure. Getting to the other side as well.
Why is there such assurance that the final-next system will be that way? What are the alternatives? I smell universal ID, electronic credit chips or better future equivalent.
Thoughts appreciated,
- Ned
Ned,
My $.02's,there is no FINAL assurance, but it is only reasonable.
Every swinging wiener is going to be FIAT shy.
So, Trust will be an issue par excellance.......since Gold & Silver have been REAL money for 6000yrs, it only makes sense in dealing with something of real value.
Fiat is strictly a CONfidence game...............after this meltdown, Confidence in the literal sense, will be tough to find, when it comes to currencies.
As far as the CB's statement yeah, that was then, this is now.
China wants it's people to HOLD PM's, if their economy tanks, their people will have REAL money left over, not IOU's, and rage.
They will feel upset, but they will not have lost IT ALL.(as the sheeple here will have, if not all a severe devaluation of buying power.)
This serves two purposes, keeps them from rioting, and allows them to purchase things they need...............
Dos, I hear all of above, esp. trust, fiat, etc. Finishing Lewis's "Big Short"-nothing reasonable is "reasonable" imho. That is the challenge.
but only reasonable? that is my question. I doubt reasonable--too many manipulators putting a prospective "new" system together. If everything is reasonable, then, well, manipulation ensues.
1. look at all of the transaction costs going in: Here--well at least that is considered.
2. look at all of the courage it takes to go through the "bad times"--how does one time that market?
3. look at all of the transactions to go from Au to current "wealth".
just an Ops guy going through the phases, gaming alternatives, knowing that the bastards on the other side are, well ... bastards and attempting to be more-bastard than they are.
Also, here we're in MiniMax game theory zone-minimize your maximum loss (On Topic-Johnny Von Neuman was on the real bomb project). (We Need An "On Topic" symbol as well).
China wants its people to hold PM's? I did a Wow at that realization, from my visit. I'll question further.
Thanks,
- Ned
Nothing is a sure thing. But history tells us people respect gold and silver as money because almost everyone else respects it. The card deck is about to get reshuffled.
I was going to comment, but the advertisment featuring Jim Cramer on the previous page has resulted in a spontaneous and uncontrollable bowel movement which I must now attend to.
Jim
FDR stopped the holding on gold......gold held by a second party...safety deposit box......FDR never went door to door for the gold
GLD....????....LOL
Where are his facts to support? lol
What a mind dump that was.
Tipping point will be reached when a big player flinches. Up to now, Fed has been able to use Reflation to keep creditors from calling in underwater debts of all kind. As confidence recedes, and palms get sweaty, the trigger is more hairline. Finally someone flinches and it all crumbles. Think not? Just remember what happened to Bear Stearns' subprime funds, when everything still looked rosy and the sky was still blue.
Are the big players all sitting at a poker table, or are they all at the men's club slapping each other on the back?
Al
They are in the steam bath, dropping the soap.
Intellectual Property is the source of all our development from the Rennaisance forward. We are not much more than smarter monkeys who keep good tricks coming to make our environments more comfortable and provision for our needs and cravings achieved with less effort than previously. As this culture continues to pollute the source relying on its back-door funding need with the trillions diverted through media piracy, counterfeiting and prohibition, we all lose big time. Gold does nothing for those who have been fortunate to get over ourselves.
+1, and I'd extend to personal property rights. - Ned
Whatever that means. Gold does nothing for those who have none.
Useful Capital buried in gold builds nothing; we need to be building something to get out of this place..if it's the last thing we ever do....repeat, repeat with Eric Burden.
Seriously WTF is going on? Everything was going good( at least for us westeners,) sure there was 9/11 and a fucked up war or two we were involved in but other than that all seemed to be sweet. And now it's like "um yeah all your money is fucked, no one knows what's happnin tomorrow"! I feel like I'm watching a bad B movie that's still playing when I Ieave the cinema. I was always told buy low sell high, by that rule shouldn't we be buying real estate and not gold? Which bunch of fuckwits has allowed this mess to come about in the first place? It's impossible to know who to trust... Max kaiser? Alex jones? This website?
do your own research and trust that .with an 'open mind' ,'commen sense ' and your bullshit detector on you won't go far wrong.
Trust yourself. Keep reading. Watch this 45 minute cartoon called Money as Debt.
http://video.google.com/videoplay?docid=-2550156453790090544#
It was always going to collapse. The concept of interest assures this. It happens every 60-80 years. There is little memory of it so we repeat the same mistakes through history over and over.
I am not an advocate of the "solution" offered at the end, but you will get a heck of a lesson in a short amount of time.
Good luck.
When you're up to your ass in alligators, it's hard to remember that the initial objective was to drain the swamp. As the swamp gets drained though, all sorts of ugly truths hidden beneath the surface of the water become visible, such as FDR's confiscation of US gold, the viper known as the Federal Reserve, etc. Wake up, get educated, and stay alert.
Develop a mind that clings to no thing whatsoever. Diamond Sutra. In the meantime trade your paper for a gold and silver stash.
Pamp,
"Seriously WTF is going on?"
A Worldwide Political coup d'état ............bloodless thus far.
It will not stay that way.............
The political coup d'etat occured a long time ago, they just collecting the big money now is all
Your intensity "trigger" (Tipping) graph is much like mine. Except mine has the following:
2nd round of residential mortgage losses ARM and ALT-A. More downward pressure on real estate price.
Social Security negative cash flow.
FED MBS market liquidation, reverse repo market pressure, which is now omitted.
Low net tax revenues.
Magnitude of debt issuance relative to outside buyers.
----------
Meaning no disrespect, but could you breakdown the exact cause and effect for, lets say, economic collapse. Your stages are interesting, but it would be helpful if you could focus on the exact mechanism of collapse. For example, what happens first lets say after the elections to initiate economic collapse.
----------
The assumption for me, from a market dynamics standpoint is that rates will rise during monetization. But, I see evidence that this is perhaps not the case. The FED will control issuance to keeps rates low, even as it becomes the majority buyer. The realization is that the market dynamics are no longer in play.
For investors in Treasuries how do they reconcile the inherent risks (signs) when the FED under takes its strategies. Where does the confidence come from? What is to prevent the FED from destroying your bond investment? I would then ask people like Mish for example, what does it really mean to have rates collapse towards zero? Why is this not a risk?
So if we look at the yields all converging to zero. Isn't this the same as saying the currency is in collapse. Yields at zero would then mark the start of the end game.
Mark Beck
I wish people would broaden their horizons about how wealth is created. While I accept the idea of "synthetic wealth", as society advances from creating value by primarily manipulating materials and things it starts to create enormous wealth by manipulation of ideas. The wealth created by Apple via the iPhone and iPad is mostly via intellectual property.
Here is another example from a different angle:
In terms of profits, at an estimated $1.6 billion, the movie Titanic made more money than most of the Fortune 500 companies especially those involved in mining, manufacturing or agriculture. For example, Peabody Energy (coal) had a profit of $953.5 million in 2007. Newmont Mining has14,450 employees and is one of the largest gold mining companies in the world. In 2007, it had $853.0 million in profit. The largest processor of agriculture products in the country, Archer Daniels Midland had $1.802 billion in profits. It also has 28,200 employees, compared to the few thousand who worked on Titanic.
proLib
1. the wealth created by Apple is mostly Chinese slave labor
2. the movie business is a lot like gambling, one big score does not a business make.
Nothing to see here..move along.
If that is the case, then why does my ipod touch (a gift from my employer) say "designed in US" on the back?
I won't disagree with 2) but without IP, I'm afraid there would have been nothing worth leveraging cheap labor for...
Question. In Long's "Don't Go chasing Waterfalls" chart, he says "Sovereign Bond Yields go Parabolic. Profits and Income Collapse. Asset Deflation. Default and Deleveraging on Multiple Scales." Does "Sovereign Bond Yields go Parabolic" mean the Yields get parabolically smaller or parabolically larger?
Right now, bond yields are getting smaller. Sometime in the future, the bond yields may reverse and get larger. But which trend is Long talking about... parabolically smaller yields or parabolically larger yields?
I'm not speaking for Long, but when I read that, my brain said to me, "bond PRICES" rather than "bond YIELDS". It's the PRICES that have gone parabolic! You made a good point! Taken that way, it makes sense!
As a treasury futures trader, when I see prices rise, I know that yields are dropping. That's probably why my brain translated it that way.
Perhaps this perspective helps! Or not!
sbenard -Thanks for the reply. Yes, bond PRICES going parabolic makes sense, particularly because Long is talking about deflation in that part of his chart.
WOW!
Today one thing is clear. The liquor needed to get through the ZH comment section now takes more dollars than the liquor required after a day of trading multiple leveraged ETFs.
Well done folks.
We're all gonna need new livers before this is all over.
Hopefully they'll come with a bulk discount. I'm probably going to need more than a few.
+++ dirtt and tmosley!
Needed the laugh, thanks!
I love Gordon Long's articles because he shows us a clear path where we're headed and what signs to look for.
They forgot the part about rioting,,, Oh, it won't effect me. Sure,,,
The forbidden zone was once a paradise.
Your breed made a desert of it... ages ago.
http://www.youtube.com/watch?v=cdUA3__EhCg
Gold coast slave ship bound for cotton fields
Sold in a market down in New Orleans
Scarred old slaver knows he's doing alright
Hear him with the women just around midnight
Brown sugar how come you taste so good?
Brown sugar just like a young girl should
Drums beating, cold English blood runs hot
Lady of the house wonderin' when it's gonna stop
House boy knows that he's doing alright
You shoulda heard him just around midnight
Brown sugar how come you taste so good, now?
Brown sugar just like a young girl should, now
Ah, get along, brown sugar how come you taste so good, baby?
Ah, got me feelin' now, brown sugar just like a black girl should
I bet your mama was a tent show queen
And all her boyfriends were sweet sixteen
I'm no schoolboy but I know what I like
You shoulda heard me just around midnight
Brown sugar how come you taste so good, baby?
Ah, brown sugar just like a young girl should, yeah
I said yeah, yeah, yeah, woo
How come you...how come you taste so good?
Yeah, yeah, yeah, woo
Just like a...just like a black girl should
Yeah, yeah, yeah, woo
http://www.youtube.com/watch?v=Rx07A9LWBJA&feature=related
Cinnamon girl
http://www.youtube.com/watch?v=aAdtUDaBfRA
i always felt something was wrong with the world economy .....some people were having it tooo easy...i mean though there was a lot of poverty ..u would also find too many people working far less to earn what they got.....that inddustrial production V/S credit expansion graph tells it all......there will be a violent credit contraction and it will effect the middle class more ......
INDIA seems to have caught the last 2 decades of this WORLD WIDE BUBBLE thats has grown since 1971........i m scared to think about what will happen to this country with this huge population...........many banks and industries willsimply be wiped out like airlines ....IT operations of these anks n industries will be cut back drastically.....i mean INDIAN IT depends severely upon US (80%) and the next major is EUROPE....
Higher education is already in a bubble ....so is real estate ....the last time when world economy contracted we were having serious problem ...plenty of students placed in campus were not called up to join the companies...people who fired ....salaries were cut ...people left JOBS , took up MBA course thinking that the conomy would be much better after 2 years...the real food crisis hasnt even HIT and we r seeing sky high food prices....
i often hear many economist predict that after this crash INDIA n CHINA will lead the world economies....dnt know about CHINA ...but i have huge doubts about INDIA....where will the spending come from .. to match the PRESENT LEVEL of spendings the comanies are doing in IT applicatons and call centers..... i know there will be some outsourcing of JOBS from west ....but theres gonna be a massive CUT..(job and CREDIT)........theres no GROWTH n DEVELOPMENT here .....move on ...its all greed , corruption , Fraud....EASY credit...u must have already heard of the COMMON wealth games....
My hunch is India has a brighter future than China. Largely because it's a much freer society with a representative democracy and provides some degree of equal justice before the law. I just wish I could locate a source of pakora masala out here in the boonies of Okla.
India will sgruggle due to lack of resources, even water will be a problem for them. They already have to go very deep down to reach their water table. Their energy needs for something like this will be a back breaker.
Treeplanter & ORI
I have not been to India, but some of reading I do supports Treeplanter's assertion that India will likely do better than China in the long run. China has LOTS of problems that most of us don't see (sometimes covered up over there).
And the reason is that India DOES have a freer society.
Good luck ORI! And stay with us, I read and like your comments.
Ok...this thesis may occur in the very long run. I think the timeline for this can be extended for a long time. America may have a high deficit, but like many countries, if you compare it to Denmark, it has also a huge capacity to extract more taxes.What Denmark teaches us is that played well, you can tax your citizens nearly 70% of their income when all is said and done and they will still consider themselves "the happiest people on earth".
. So we have have to factor in a big buffer of tax tolerance for each of the countries and that could make this go on for a number of years if not decades. Danes have been happily paying out since the 70's and when asked today state that if the demand was reasonable that they would pay more !!???. Maybe they put something in their water.
For me, timing is the question. Funneling freshly printed money into the markets worked for a while. Maybe that little trick is played out already, the negative sentiment may be too great. Maybe the scramble for physical metal is about to over ride the huge shorts in the paper markets. Do GS and JPM go broke in the dust? Pride of Man, Quicksilver Messenger Service.
What works for a family, which is all that Denmark, Norway, Sweden, Cuba, Japan, and a few other single gene countries are, will not work in the disparate, perseverating, multi-cultural disUnited States.
Break it up, into 30 regions, and maybe we stand a chance of each region being able to be governed thusly, but as it is, 70% taxation will result in a massive emigration by anyone who can manage it and you can count on that including those who have amassed most of the wealth, who possess most of the 21st century skills, leaving the rest destitute and unable to extract the income they need without printing it.
With looming defaults in Greece, Portugal, Spain and then Japan...unfortunately the dominos seem slated to fall with great precision which means we wouldn't be too far behind.
Great article, some nice supportive data as well. Hate being long bonds and net short S&P right now but only thing that seems to make any sense.
Make hay while the sun shines I guess...and make coffee when you run out, which I need to do now.
For the last 5 years there has been a veritable tsunami of Californians inundating Texas. They bring their bizarre worldview along with all the other uniquely California attributes. It is changing the face and tone of this great state into something unfriendly, arrogant, elitist and otherwise inappropriate for what Texas represents.
For years Texans have been referred to as little more than "hillbillies" and a host of other derogatory references by Californians. Californian urban refugees have destroyed Austin (once one of the best cities in the U.S.) and think they will californicate the rest of the state. They won't, they will become assimilated and wonder what took them so long.
If you are coming to Texas, leave your attitude behind and be welcome. Bring your bad attitude with you and be...well, I hope you get the point.
Thirty years ago they began Californicating the state of Washington. Sad, very sad.
I understand that Texas legislature only meets every other year and that these state reps and senators are part time jobs.
They make $7,500.00 a year as well.
Is this true?
And if so, how did you guys make that overwhelmingly sensible governance happen?
We export those that don't belong..didn't know what to do with them either, mate.
Sarah Connor Palin to the rescue..
Some interesting commentary being tossed around here.
My position is to hold only enough fiat to get more PM's and pay recurring obligations such as utilities, groceries etc. Food, gold, silver, lead and high speed lead delivery devices are currently the best investments out there. The clear and present economic dislocations world-wide [as caused by the banking cartels and their insatiable greed] and the separation of the middle class from their remaining money through confiscatory fees and taxes, will cause the greatest social upheaval this world has ever witnessed.
It is a slow motion nightmare, where you are trying to get away from the bogeyman, but can't make your legs go any faster. This pathetic excuse for a leader we have in the White House is fiddling while America burns. November is the only chance we have to remove those who would destroy the remainder of our economy.
The situation has become deadly serious. Does anyone really believe that the unfunded pensions can simply be rolled in to the PBGC?? Do they really think the American Taxpayer is going to suck up the promises made by municipal and state governments, under threat of strike by unions?
We are so completely screwed that it is entirely possible that the damage done is irreparable, but we can not just roll over and let it happen. We have to continue to try, and do the right thing by voting the collectivists out of office.
So we can replace them with a different flavor of collectivist? Ooh I can't wait.
Crap math. He doesn't even show axes for his cusp catastrophe sheet. This tipping point stuff just keeps percolating into the bizz-speak circles. Just another hard assets guy trotting out the old jalopy with a new paint job.
Can't wait for the implosion. People everywhere will be going, wtf just happened? Dancing with the Stars will be pre-empted by Mr Wunnerful on a beach somewhere. I will be shooting hobos in the front yard. Good times.
Suit yourself! Oops!, I mean shoot yourself first.
That's not even funny - you know, the last time I had a hobo come to the door asking for a meal was in 1976, in Zanesville, Ohio.
I think you've got it backwards. The reasons should be the root of the problem. And the reasons can be explained by inability to generate wealth withought the corrency exchange. This is one of the oldest scams. As to equity, some of it will contribute to the wealth preservation, while the rest will run it down to the ground. I think Buffett got it right, although he is still struggling with the timing.
how pray tell can this be? over above the house. then it was a water storage tank,
not a well.
Rebel - also check the voltage coming into the motor and make sure it is not brown or surging.
Marching Towards a Yo-Yo Depression
Great Max Keiser interview.
http://www.chaostheorien.de/interviews?p_p_id=101_INSTANCE_rAD9&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-3&p_p_col_count=1&_101_INSTANCE_rAD9_struts_action=/asset_publisher/view_content&_101_INSTANCE_rAD9_redirect=/interviews/-/asset_publisher/rAD9/content/america-a-walking-dead-zombie-country&_101_INSTANCE_rAD9_type=content&_101_INSTANCE_rAD9_urlTitle=america-a-walking-dead-zombie-country&page=1
What a website; what an interview. Thank you, Hulk!! (Here’s just a tiny sample…to whet the appetite...)
Mr. Keiser, in your initial email you wrote to me:
“The key to understanding the current situation is to understand that house prices, jobs, wages, and pensions in the US are all being attacked with original-issue debt dollar junk.
This will continue until the middle class has been completely wiped out.”
Can you elaborate on this, please?
Yes, it’s a Financial Holocaust. It is designed to destroy the American middle-class. We face an original-issue deflation, if you will. It is as if Michael Milken ran the Fed. If you look at the work of Steve Keen (http://www.debtdeflation.com/blogs/), an economist in Australia and one of a very few economists who got the crisis of the past three years accurate, you understand that the banking system does not work on a system where deposits are the basis for fractional reserve. The banking system works on the basis of loans used as the collateral for more loans.
That means that the origination of all the fractional reserve lending that is going on is just more debt. There are no retail deposit reserves or wholesale deposit reserves, just original issue dollar based junk debt. And when you understand that debt is at the bottom of the pyramid and that there’s no equity at all, or capital as this term is usually understood, then you understand that the banks and the policy makers are continuing a programme at the behest of Wall Street to commit a Financial Holocaust to eliminate the majority in America, which is the middle-class. Wall Street banks with their CDS's, High Frequency Trading and bogus market making are injecting the equivalent of financial Zyklon B into the American and world economy.
With regard to the U.S. economy, would you agree with Paul Krugman, who wrote not a long time ago that the lights in the U.S. are about to go out?[1]
Paul Krugman is a salon monkey. You can quote me on that.
ditto,
.
"Do you share my opinion that the United States belongs to the least places in the world, where a revolution has to be expected right now?
America died two years ago. It’s a walking dead-zombie country, and anybody who still lives in that country should get re-familiarize themselves with cotton-picking, because once the dollar crashes, the only crop that America will be able to export, is cotton. It will be King Cotton again. It will be 1840 again. The only job available will be as a cotton-picker working on a Wal Mart or Goldman Sachs plantation. This is the reality of the situation. There is no turning back at this point. The die has been cast. The American experience lasted from 1776 to 2008. Those were the years it was kicking ass and taking names. But the second Obama took office, who took Larry Summers and Timothy Geithner with him – it died. That was the end. Every day since then has been Post-America."
.
comment:
He says america died in 2008 but it contracted the fatal disease in
1913. imo.
b l i n d m a n your back.
i think i have cotton picking in my ancestry. i am sure of it, cause i have an old picture from my families past generations, of woman picking cotton and putting into their dresses. and these are white woman, my great great great somethings . so i could probably be a manager of cotton picker's†
and this...
Related to the deflation in the U.S., many pundits compare the United States with the deflationary Japan of the early 1990’s until today. Do you agree with this analogy or do you rather share the opinion as it was expressed by Egon von Greyerz, the co-founder of “Matterhorn Asset Management AG” in Zurich, who said that the U.S. is in a very different situation than Japan was and is?[3]
When Japan started their deflationary spiral, they had huge savings. America has no savings. The best comparison for me is to compare the U.S. in 2010 with Argentina in 2000.
Why so?
Because the problem in America is that the bankers and the politicians conspire to loot the country of whatever money they can yet steal. We see a kleptocracy in action and the people will be left homeless and starving.
This is done by design?
People steal money on purpose (laughs). The kleptocrats steal money, because they want to steal money. They don’t accidently steal money. It’s done on purpose. It’s premeditated. Thieves steal money, because they want the money.
well if you think what you just wrote is depressing read this.
Wyly: ‘I love BP’ Billionaire entrepreneur and part-time Aspenite Sam Wyly. “I think they’re really good guys,” Wyly said, defending BP.
“I love British Petroleum,” he spouted, “because they were there with big bucks when I needed ’em!”
Pickens urged Bush to take Iraq’s oilk,
i never left, or right.
M A X K E I S E R
for president
no wait
m r A M E R I C A 2010
MAX IS AS CUTE, AS HE IS BRILLANT.
long salon monkeys, anyone?
All this bad news, and on low volume, the market claws its way toward a “death spiral,” and “failure of fiat based currency regimes.” In short, a fake foundation masks the rotted timbers and real truth underneath. A great job! Gordon T Long.
The unprecedented increase in fiat currency has put America on fast track abuse.
This increased speed toward imminent collapse began, IMO, when the plutocrats began to use the Treasury in tandem with the rise of Goldman Sachs, now serving as the central bank’s government personnel director.
Goldman Sachs, of course, has been plagued by scandal and corruption throughout its history, but nothing like this. Yet, for whatever reason, the financial oligarchs passed the torch to Goldman. It began in earnest, it seems, with Robert Rubin and the Clinton Administration. Now, they not only pick and place public officials, they dictate the terms of all policy, domestic and foreign--healthcare, financial regulation, TARP-type bailouts, open border corporate labor, mergers and acquistions and offshoring…
Even under the Bush presidency it was the Democrats who helped carry the bailout largesse for the the “Too Big To Fail” bankers, who now enjoy a "TBTF" divine right to rule, accountable to no one. And the tyranny march was seamless, with the Rubin boys and Obama.
This racheting up in abuse isn’t going to last, IMHO. This public display of criminality can’t continue. But while it does, the identity of these foot soldiers for the Rothschilds--the Warren Buffetts, the Katherine Meyers and the Soroses who only get to sit at the table if they are connected—will continue.
Congress and the politicians such as Pelosi aren’t important in the story anymore. The public is disgusted with them; they are so drunken with power they can’t resist grabbing everything they can get their hands on; they’ve turned out to be maniacs who think the only way they can stay in power is to support the people who put them there.
They no longer have any standing with the public; the public doesn’t trust them anymore.
"Those who make peaceful revolution impossible will make violent revolution inevitable." -- March 12, 1962, John F. Kennedy
Well said, JR.
really good post. thanks
Sorry, having trouble logging in.
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
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