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Guest Post: Prove Mayans Right: Address Structural Economic Problems With Chicanery
Submitted by Davis Sherman Okst of Financial Sense
Prove Mayans Right: Address Structural Economic Problems With Chicanery (Part 2 of 2)
Monetizing Governmental Debt AKA Money Printing or in Bernanke’s Vernacular - Quantitative Easing
Here are some realities on Quantitive Easing:
- If
Bernanke stopped QE, the United States of America would default, the
government would close down, there would be massive interruptions in all
Federally assisted programs (Medicare, Social Security, etc.), debt
service to China et al would be impacted or stop totally - We
take in about 2 trillion in tax revenue, we borrow about 1 trillion and,
like drunken sailors, we spend about 4.5 trillion. 80% of our deficit
is entitlements and debt service. Make all the cuts we want, that stuff
can't be cut. QE is a fancy term for counterfeiting the 1.5 trillion
dollar difference we have NO possible way of paying - QE is debt
monetization that IS increasing the size of the money supply. Since that
money has been spent, there is no way in hell Bernanke or anyone else
can “shrink” the money supply at the right time - the horses are out of
the barn, every POMO auction is just money created out of thin air to
cover the Treasury's checking account
There are those who
would point out that without “velocity” we can’t have hyperinflation;
and with 23% employment we aren’t going to get people spending,
therefore there will be no velocity and thus no hyperinflation. I’d
advocate that this argument be looked at again. First, the government
is spending “funny money” that is, to some extent, creating some
“velocity.” What is more important - money is a
commodity as described in Part 1 - and therefore the more of a commodity
that there is the less its value. Since the inception of the Fed in
1913 the dollar went to a value of .04 cents, 80% of that devaluation
happened since Nixon took us off the gold standard. So if our dollar
goes to a value of less than .04 cents, lets say .00000001 cent - we
will have massive hyperinflation. Printing money is the road to
.00000001 cents.
I’m in the camp that gold hasn’t gone up, silver
hasn’t gone up and the stock market hasn’t gone up. Graham Summers of
Capital Research did a fantastic short piece titled “While I Love Gold” at ZeroHedge.
Stocks Priced to Gold
Like
I said, gold hasn’t “gone up” stocks haven’t “gone up” and food prices
haven’t “gone up.” The value of all currencies have gone down. People
who compare one currency to another won't see what is happening until it
is too late.
It is all how you look at it. We are playing an
entirely idiotic game because no president (other than Andrew Jackson)
had the guts to fix the real problem - money.
About the only
thing gold and silver will do is act as a true store of value and pay
off any fixed debt when things get totally out of hand - which, in my
never so humble opinion - is the obvious unstoppable trajectory we are
on now.
Lastly, on the subject of Ben Bernanke’s path to making the USA Zimbabwe I’d like to address the “We can raise interest rates
in 15 minutes” BS. Sure he can. But the rest of the “We can raise
interest rates in 15 minutes” sentence goes like this: of course 80% of
the deficit is unfunded liabilities and debt that is rolling over, so
doing so will bankrupt the country with impossible to pay interest on
debt. Estimates are that higher interest rates
will add TRILLIONS to our debt. Higher rates will be another nail in
real estates coffin, another nail in high unemployments coffin and
another nail in state and local debt burdens.
In summary: The
biggest lies about Quantitative Easing are: It isn’t [governmental] debt
monetization, we can raise interest rates, it isn’t causing inflation,
it won't cause hyperinflation, we aren’t increasing the size of the
money supply, we can contract the size of the money supply when the time
is perfect, we can stop it [QE] at anytime, it is creating jobs, and we
can sell stuff no one else is now buying and the money is just sitting
there, i.e. there is no velocity.
In short: It is QE or America
defaults. A.) Hyperinflate the absurd debt away or B.) Default. If
Bernanke thinks he can secretly devalue the dollar and reduce our debt
to some payable amount by reducing the dollar’s value by like 10% per
year (thus reducing our 128 trillion dollar debt to half over 5 years)
then he is really an utter and absolute moron.
The Maestro of
Disaster came right out and said that debasing a currency is American
robbery. Covertly stealing - even if it is for some lame unworkable
plan to save the economy - is not leadership, nor is it ethical.
Lies are the hallmark of a leadership deficit. Lies don’t fix problems, solutions do.
The Fix
The
fix is simple: Admit that things got out of hand over the past 4
decades and overtly do what they are covertly doing. Stop prolonging the
agony - it is abolishing the middle class. The only trick is to make
the monetary system as sound as possible. I have no false dreams that
we will ever wind up with a better system (read: something that isn’t
debt-money IS debt) but I do know we can do better.
We supposedly have 10,000 tones of gold.
According
to Greenspan’s own 1960 article this country has been and is a welfare
state that is robbing its citizens through taxation and inflation:
“Stripped
of its academic jargon, the welfare state is nothing more than a
mechanism by which governments confiscate the wealth of the productive
members of a society to support a wide variety of welfare schemes. A
substantial part of the confiscation is effected by taxation.”
So
we can put 2+2 together and be reasonably sure that we have 18,000
tones of gold - since it is a given that a country that would steal from
its own people wouldn’t blink twice at “borrowing” 8,000 tones of gold
from other countries to save its own rear.
Again, I do hate gold,
but re-valuing a failed currency without anchoring it to something will
consist of a few failed takeoffs and crashes. Doing it this way would
ensure we remain the reserve currency.
Right now we are at a competitive advantage - we have more gold than any other country (even if it is unaudited).
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It is four cents, not .04 cents
Ultimately what kind of thinking is the author promoting??? "I hate gold"?
He doesn't believe we will end debt money. And he thinks the gold thats in the vaults is not only there, but America has the right to take ALL the gold, because it wants to retain world reserve currency status? Sorry, it is too late. America had the world reserve currency for the better part of 70 years, look where it got us. A bunch of oligarchs and feudal (corporate) overlords ruling the world.
There will be no reserve currency when this all comes crashing down. No bancor, no SDR, it will be money convertible into silver, gold and oil. No point in trying to hold on to the world reserve currency, it is best to move forward, and plan for a MUCH more honest system, for our children's sake.
Check out the Capital Research Institute
http://www.capitalresearchinstitute.org
I love how you can react to a doomsday scenario with more doom.
I love how you, in common with most cowardly, shallow and blinkered citizens today, would apparently prefer to bury your head in the sand rather than face reality.
And I also love how any realistic, if less than Pollyannish, future scenario is immediately dismissed by those desperately bound to the status-quo as "Doomsday".
Well said all round, HR. This author is sadly deceived.
A fundamental system change is required. The banksters have one planned .. and it's not what anyone here on ZH thinks it will be. BoE's King let the cat out of the bag in a speech Oct 2010. I suspect most here will greedily welcome his "radical solution". And leave their descendants locked in perpetual slavery.
More in adjacent thread -
http://www.zerohedge.com/article/boes-mervyn-king-surprised-anger-direct...
Tapeworm: Calling out typos and grammar for someone who is writing this amount of content is really a pussy move.
How is confusing a dollar with a penny considered a typo? I would classify it as someone who was careless with their math (unit conversion), and thus, consider it relevant.
Also, this author doesn't understand hyperinflation. The velocity he talks of is a result of hyperinflation, not its cause. Hyperinflation is a loss of confidence in the value storage function of a currency that causes everyone to want to get rid of it while it is still tradable for tangible assets. Eventually, velocity hits zero as nobody with assets will accept currency for them (prices go to infinity in the currency unit).
There may not be a scramble for assets yet... oh wait, take a look at commodities will ya.
Now you are being a pussy. We all knew when we read the article what the .04 meant. People like you are why we have friendly fire.
People like you, 10kby2k, are why we have mental institutions.
Charlie Bravo
I am a big fan of the FED and do not look kindly on denigrating their record of monetary prudence.
Joke or not I HAD to junk for even saying you are a fan of the FED.
Either you are Timmy Geithner or Benny Boy himself.....or you are an idiot.
No matter what, I was more than happy to JUNK YOU.
I'm a BIG fan of the FED to!
The more they fuck it up, the more my silver stash goes up in value! :)
BENNY B. IS MAKING ME RICH! :)
You are on the wrong site, but stick around. Harry and the others don't show up much anymore and I occasionally enjoy ridiculing stupid people or people who cannot project sarcasm correctly for that matter..
With the way the government is and has been lying to us, do you really believe that all that gold is there? Wake up and smell the roses.
Tungsten doesn't smell like roses...
Agreed. Audit Ft. Knox.
oh goodie, now we can all watch one egg sell for 500,000 douchemarks..
Is there a point to this article? The mistakes are all over the place. 10,000 tons? since when? Hyperinflation is a loss of confidence in currency- big difference. I hate gold? but, anchor it and steal 8000 tons of someone else's gold? The entitlement figures are wrong, the cost of the military is more than 20% and is cuttable. What a mess.
Yeah, it is sad to see an idea with promise be completely misinterpreted, as the author has, in this article. The idea is that we need a sound, honest system, so he wants to kick it off by stealing gold, assuming the gold is even there to steal???
'Defense' spending, interest payments, and entitlement programs make up most of what is pulled in. But really, the entitlement programs are more like a 'Bread and Circuses' expense for the government, to keep the bottom 25% of society (which has a LOT of free time on their hands) from rebelling, rioting, causing mischief, or upsetting the system in any way.
We need to start calling it the Ministry of War, and the Empire budget, immediately, if we want to be honest with ourselves.
The only reason the author wants a gold backed system is because it will prevent what he perceives as wealth distribution because he thinks under that system he will be able to retain more of his own money through the inability to deficit spend.
Oh the irony. He could give a rats ass about sound money and what that entails overall. He probably thinks that inflation is good.
+1
with solutions like these....
I watched Bernanke's reaction after one panel member asked him about creating money without interest. After that he really changed his demure. He appeared to be concerned and more withdrawn.
I think that question worried him that the handwriting is on the wall about the real solution and the solution does not include him.
Nice, do you know who asked him the question?
From the Bernank thread earlier, I'd guess it was Mark Kirk.
Edit: Who has an interesting bio.
http://kirk.senate.gov/about.cfm
An MS from the LSE! In the US Senate, no less.
whodathunkit?
Local guy to us here.
Part of the machine sorry to inform us all... China believer, globalist. I had hopes for him which were dashed by comments given to me by people closer to him than me.
yes, every answer you get from a politician, bankster should be followed up by the question: At what cost?
i love this guy -- "i do hate gold".....well, dave, i love it....it has saved the value of my savings for me for the past six years,
and kept me safe from the thieves at the major banks.
he probably hates it because he doesnt have any. now it is expensive in his feeble mind and it is obvious he is hoping for a fiat reset to drive down pm prices so he can try to get in to BTFD. I hate this guy..he sux
Pity the Mayans, who never did nothing more than have a calendar with very long periods one of which ended within a couple hundred years or so of now (nobody's sure exactly when, or what Mayans thought might happen at the end of the period, if anything).
And now everytime a bunch of modern losers threaten to wreak havoc on the world, some other losers blame it on some supposed Mayan prophecy, which doesn't actually even exist anywhere except in cheap dime store pulp so-called non-fiction.
That was the calender they had just started when the Spanish conquistadores arrived.
For your (and Buzzard's) information, the Mayan calendar actually goes back around 16.8 billion years. That's well before the Spanish crossed the Atlantic. And it doesn't exacty "end" next year; it merely rolls over. Unlike the calendar that you are used to, which gets tossed out and replaced every 365 days or so.
It really is a fascinating topic, and few seem to understand anything much about this complex and even spiritual topic. It's so much easier to take the lame way out - end of the world and all that hogwash. Suffice to say that the Mayans would have laughed at the thought...
Dec 21, 2012 is just the end of the long-count (around 50,000 years).
December 2012 in the Mayan calendar, marks the end of the Fourth Age. I believe this will prove to be as significant an event in world history as the Dawning of The Age of Aquarius in 1967.
A little Mayan mythology:
"In Mayan mythology each Long Count cycle is a world age in which the gods attempt to create pious and subservient creatures. The First Age began with the creation of the Earth, and it had upon it vegetation and living beings. Unfortunately, because they lacked speech, the birds and animals were unable to pay homage to the gods and were destroyed. In the Second and Third Ages the gods created humans of mud and then wood, but these also failed to please and were wiped out. We are currently in the Fourth and Final Age, the age of the modern, fully functional human. Is it possible that these Ages referred to evolutionary change? What might occur when the current age finishes on December 21, 2012?"
We don't have 10,000 tons of gold. I'd be surprised if Ft. Knox had 10,000 tons of Cheez-Wiz.
No way out. Only a certain number of lifeboats.
Buy a house with a dirt basement.
dig bitchez!
Well, based on the current cost of Cheez Whiz, that 10,000 tons is worth a whopping $94,043,859.65.
That could buy a lot of gold.
http://www.foodservicedirect.com/product.cfm/p/185870/Cheez-Whiz-Origina...
IOU 8000 tons of gold (signed) Richard Nixon.
Visuals from "Detroit in Ruins"
http://www.guardian.co.uk/artanddesign/gallery/2011/jan/02/photography-d...
Someone spent a lot of time "optimizing" these in PhotoShop for maximum effect.
Funniest thing is that many of the pictures are places like ballrooms and orchestra theatres, places _obviously_ deserted by the middle class and totally not the wealthy fleeing the poverty-stricken hellhole they deliberately created.
We've been using the $0.04 figure for a while now. Someone needs to take a closer look but I'm guessing we're closer to $0.03 than $0.04 by now.
Futures are getting blowtorched, Dow under 12,000, SPX under 1,300
Fire in the hole!!
DXY up. Not sure why, although it might have something to do with Bernanke's strong Dollar poolicy.
well old catfish mouth robo uber bull bear wannabe why not regale us with how you saw it coming, and shorted at the top. because afterall it's so easy to make a fortune just like rosie ought to have done by buying at 666 as you did.
care to remind us once again with commentary that the rally in gold and silver is over, caput, done, get over it and deal with it. ditto oil.
I laugh at that every time!
But I prefer simply "RoboMomoDodo"
Blowtorched is limit down or close to. You are in need of attention, here's some of mine.
Bernanke has found his scapegoat and that is oil. His comments today alluded to the fact that inflation is under control, "however" the increasing cost of oil could undermine his carefully constructed house of cards, leading to greater inflation. He fully expects this economy to auger into the mountainside and when it does, he's going to point his finger at the Middle East and say "it's their fault".
the oil scapegoat is almost as good as the war scam.
prolly going to fire up the earthquake machine to finish it
That's funny! Apparently we've just given in to the military-industrial complex as the entitlement it so clearly is. I'm surprised to hear you arguing against them, though.
These "I hate gold" people, will be the same ones blaming people who bought it for the downfall of the economy and will be the same ones cheerleading taking it away from 'speculators and hoarders'.
We are about to come full circle, back to the realization that gold is wealth.
Actually buying physical gold instead of speculating in commodities such as cereal grains and food stuffs, oil, and base metals is better for the world economy. The slosh money spent on physical gold does not drive up the commodities used for feeding people, transportation, or manufacturing.
Think about it...
What the azz hats 'hate about gold' is that it makes their fiat currencies look like worthless paper... which they are.
This would make gold the appropriate thing to serve as a universal store of value, meaning it would have to trade at its true price, free of any currency constraints.
I think if this were true, you wouldn't worry about your government debasing currency, because you aren't forced to avoid inflation by seeking investments in risky paper, unless you wanted to by choice. You can preserve wealth by holding physical gold, not dollar denominated paper gold, and if you want riskier investments, you can do other things.
.
.
I'm with you on gold. Rickards has said so, too. The Fed is cornered. Inflating their way out is just default by another name.
Fix Starters: Get the gold away from the FRBNY to West Point and revalue it to $6000-10,000.
Or, better yet, if the Federal Reserve merely announced they were suddenly buyers of gold on the open market the discovery price of gold would skyrocket to it's real value and we'd be on a de facto gold standard. (Rickards)
I think the Fed is just killing the dollar so TPTB can trot out an IMF fiat SDR to 'save the day'. The USD dollar will disappear from the basket over time. US Gold will be 'transferred' to the IMF to secure our debts.
Common wisdom says we ran out of gold to back up the banking system and that's what caused the Great Depression. Nope. The Fed simply refused to revalue it until they confiscated it. They're just playing the same games.
Good point on that nagging question on the valuation of their/our gold. Makes perfect criminal sense.
not going to work in the internet age this time. the power slippage is obvious. maybe a few wienie armed whimps will give in to consfiscation, but if they want a full fledged shooting war in usofa that is a good way to accomplish one.
the money the fed is QE'ing is debt. when the SHTF that debt will be zero, all gone, finito...it isnt cash money in circulation. it is a circle jerk between the fed and the banks...back and forth and back and forth....so it isnt money. when the market collapses, all that debt will be gone in a flash....QE is driving prices of some items higher thru speculation but that isnt the end game...the end game is MASSIVE DEFLATION and total collapse.
these hyperinflationistas act like we will have super high prices for decades...more like 30 days and then we tank hard......s&p500 at 300 (if we are lucky) and at zero if we arent.
And 10K in cash will let you live the rest of your life in luxury!!! Yeah, can't wait for the crash!! Thanks for the tip Hannah!
Not all prices rise and fall in concert. If When there is another collapse, some commodities could fall (softs like wheat, corn, etc.) due to demand destruction (read: genocide), others could rise (PMs), benefitting from a huge flight to safety. The simple fact that nothing is falling price right now except for that which is financed completely through debt (housing) is the tell-tale of a massive inflationary period manifesting. Commodity prices tanked in 2008 because people weren't concerned about the health of the dollar (relatively speaking compared to today) and people weren't afraid their treasury holdings could be defaulted upon or monetized in the near future. This is a reality to many now, so whats left as safe haven for cash that gets pulled out of the market in a panic? Euro sovereigns? Unless the Chinese allow people to freely buy up Yuan and Renminbi after a collapse (hugely appreciating their currency and killing their export surplus in the process) where will people have to turn? Commodities. Then you have a positive feed-back loop in which the flight into commodities makes doing business that much more expensive, which erodes profits that much more, which makes the commodities even more attractive to investors.
You can see a scenario with hyperinflation in one sector and preciptous deflation in another. System-wide, long term deflation can only occur if massive amounts of debt are issued and the currency exchanged for that debt is destroyed (deleted from the computers) and the debt repaid in the future with tax receipts. Thats not happening right now. Debt is being issued to pay out money thats already been spoken for by various government programs. Money is being printed and sent out into the system without being taken back in and kept there. If the money creation continues like this and the debt burden is too great to pay without monetization, all faith in the currency is lost and your deflation scenario along with it.
hannah ---> +
I would disagree with this very black and white approach to solving the situation we are in. There are many more options to consider, but all roads do go down one path eventually and that's to replace this country's policymakers and politicians. No more of the Clintonites, Reaganites, Bushes, Rubinites, Geithners, Bernanke's of the world-- no more coporate controlled crony capitalism, and no more of the same bullshit in congress. Until we rid ourselves of this rot we will never start anew or on more sound foundation.
The perfection of this piece exists in a vacuum; the reality in five years. I disagree with the punchline, but I refuse anyone the premise.
Sheesh. I wish people could perform simple math.
The dollar is worth 1.4 cents.
10,000 tons of gold is a lot more than 94 million bucks (earlier poster)...
10,000 tons = 20 mil lbs.
20 mil lbs. = 320 mil oz.
320 mil oz x $1435/oz. = $459 billion dollars.
Now hang on a sec, Mister.
Not only did you misread the numbers above, you took the 10K tons at face value. I had thought the total US inventory was *supposed to be* in the neighborhood of 8,133 tons and it has not been verified nor audited in my lifetime (and I was born when Ike was President.) Nothing I have heard from central bankers or politicians has been the truth, and I tend not to believe that we have - as a public - any idea what's really in the US Treasury (our public coffers?) to designate the Country's wealth. If the author has information to the contrary, I'd sure love to hear it. The Mayans had a clue; they used gold and silver for decoration - and money.
$94 mm for 10k in Cheez Whiz. Nice calc on gold however.
Gold is the only true metric.
I hope every trader that uses technical analisys won't waste its own time on graphs priced in dollars
What he missed is that the stated un-audited US gold reserves don't exist. You think the the criminals that have come and gone in the last few decades that steal everything covertly hasn't stolen the one real financial asset (gold reserves) the gov has which is just sitting around for the taking and which has not been audited or seen in over 50 years? Ha!
Its more lithium and flouride induced sheeple thinking that government is a bunch of honest people.
Tungsten and gold spray paint bitchezz!