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Guest Post: We're All In A Race To The Bottom

Tyler Durden's picture





 

Submitted by Mr. Practical of Minyanville

We're All in a Race to the Bottom

The political and economic environment is unfolding much as we discussed several months ago.
Markets are being socialized and the government/central bank policies
are meeting the problem of too much debt with more debt. But investors
are beginning to see risk in a different light: The only "growth" is
from stimulus, and how long can that last?

A good example is the discussion of the 2-year-10-year treasury spread from Zero Hedge:

The 10 Year continues to burrow ever deeper inside 250 bps, last seen
at 2.46% or eight bps tighter on the day, as now the Greek-Bund spread
has blown up: Did the fake stress tests buy Europe all of one month of
time? A country fully backed by the faith and credit of the ECB is once again imploding -- what can we say about the "faith
and credit" of the ECB then? The only thing keeping the EUR from
plunging at this point is the expectation that the Fed will (soon
enough) print another cool $2-3 trillion. And the kicker, for Julian
Robertson and whatever the macro hedge fund rumored to be liquidating
(aside from the TRS, which we pointed out yesterday), the 2s10s has just
crossed inside 200 bps, the tightest the spread has been since April
2009. Since at least half the market players are still stuck holding on
to steepeners, and are now about 30% underwater from the top four months
ago, add 10 times TRS-based leverage, and you can see why whatever fund
is blowing up now won't be the last.

This illustrates the unwinding of risk, or in better terms, the
fear of inflation, which is prevalent given the Fed's implied threat of
further monetization (QE2). The government can't print enough money to
make up for the destruction of it (foreclosures, bankruptcies). Not even
close. It can talk about QE2 all it wants, but that's just buying
treasuries and keeping already non-existent treasury rates near zero.
It's essentially printing money and buying US treasury debt through
dealers, which is making them tons of money on the "carry trade" at taxpayers' expense but gets stuck on the Fed's
balance sheet as excess bank reserves and only increases the monetary
base (currency and reserves from banks at the Fed) with no multiplier effect (demand
deposits being lent out on a fractional basis). To free up bank
reserves, the Fed has to buy risky paper from the banks that's
mis-marked; only that would free up banks to lower some of their lending
standards (what a freak cure/objective). Ben Bernanke talks a good
talk, but does he really have the nerve or the stupidity to buy
trillions more in bad assets from insolvent banks?

People's conception of deflation is false, created by sophists in government. Deflation corrects all the imbalances and debt loads of the massive inflation (excess bank debt) that's occurred for
30 years (really since the inception of the Fed). Deflation lowers
prices, just what the average guy would want. But sophists in media and
government cry "it will create mass unemployment" to scare the general
public about deflation. This isn't correct. As prices come down,
including price of labor (the government gets out of the way of
supporting artificial labor prices through extended benefits), labor
will increase faster than anyone thinks.

Most will blame the
banks. Fine. But don't forget the Fed/government/corporate complex that
created and used the excess credit to create massive imbalances and
great wealth for a small segment of the population. But also don't
forget the US consumers who for years has lived beyond their means.

We're all racing to the bottom. There will be no winners, only
non-losers as the government "spreads the pain." The non-losers will be
those who have prepared: no or little debt and some savings for a rainy
day (or decade). This was my only real advice for years.

I'm
still in the US on extended vacation. It's obvious I left Japan early as
the yen strengthened even further than I expected (or was willing to
risk) from increasing delfationary forces. I'll probably leave the US
early as well, but not yet. The dollar will strengthen further against the euro, but I'll leave early because being late is a lot worse than being early.

Stay strong. Take care of your neighbor. Risk is high.

 


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Wed, 08/25/2010 - 14:06 | Link to Comment Sudden Debt
Sudden Debt's picture

Marianah Baby!

Wed, 08/25/2010 - 14:42 | Link to Comment curbyourrisk
curbyourrisk's picture

The Bottom......bitchez!

Wed, 08/25/2010 - 14:07 | Link to Comment NOTW777
NOTW777's picture

good stuff

Wed, 08/25/2010 - 14:14 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

That is what I have tried to do is to pay off all of my debt.  I have Rental Properties and still have a few small mortgages I would like to pay off.  That way if the bottom falls out at least you are debt free and have less to worry about.

Wed, 08/25/2010 - 14:58 | Link to Comment DosZap
DosZap's picture

Water,

the less to worry about is Property Taxes, and new taxes, from Big O, and removal of GWB's lowered tax rates.

Capital Gains goes up a full 5% Jan 1st.

 

Wed, 08/25/2010 - 15:43 | Link to Comment Amish Hacker
Amish Hacker's picture

Right, but it's probably better to look at it like this: If the capital gains tax goes from 15% to 20%, it means a 33% rise in your CG taxes.

Wed, 08/25/2010 - 21:10 | Link to Comment dark pools of soros
dark pools of soros's picture

you have capital gains??

Wed, 08/25/2010 - 21:44 | Link to Comment economicmorphine
economicmorphine's picture

Cap gains tax is irrelevant unless you're selling.  If he's paying them off, he obviously plans to hold them for cash flow, thus, no cap gain, no tax.  

Wed, 08/25/2010 - 16:49 | Link to Comment septicshock
septicshock's picture

If the bottom falls out, you don't have to worry about bills anymore.

Thu, 08/26/2010 - 00:12 | Link to Comment Douglasnew
Douglasnew's picture

Right you are Waterfall. No debt and rental property, positive cash flow is good. I only fear the local governments will one day target evil landlords with higher taxes to pay for their bloated worthless existence. You think you'd find sympathy from the general public? Think again. And Gold horders will be taxed to the point of pain on their gains with no sympathy as well. Can't you see a 50% Cap Gain on the stuff after it takes off? They would tax it to the point that people stop buying it and kill those sane enough to seek refuge from their mad QE experiment. Get a farm and a gun (or two).

Wed, 08/25/2010 - 14:17 | Link to Comment gaugamela
gaugamela's picture

Spoken like a true disciple of the intransigent Austrian School. At least Austrians will acknowledge that deflation will lead to money hoarding. That will pave the way for renewed economic growth . . . for our great-grandchildren. Too bad we can't enjoy it if we follow their advice.

Wed, 08/25/2010 - 21:46 | Link to Comment economicmorphine
economicmorphine's picture

After a 30 year party you're going to complain about not enjoying it?  Spoken like a true self indulgent westerner.

Wed, 08/25/2010 - 21:46 | Link to Comment economicmorphine
economicmorphine's picture

After a 30 year party you're going to complain about not enjoying it?  Spoken like a true self indulgent westerner.

Wed, 08/25/2010 - 14:22 | Link to Comment Mako
Mako's picture

Another confused author.   What spirals up will spiral down.  Yeah, deflation is great... as long as you are not the one being deflated.  Last time 100+ million got deflated, it was wonderful. 

A bunch of rat's looking to pass the blame, not wanting to accept the Truth, not wanting to know what their choices have led to.

"The non-losers will be those who have prepared: no or little debt and some savings for a rainy day (or decade)."

You can have zero debt and you there is a good chance you are going to be deflated this time.  The author is really going to be upset when he figures out choices already made have sealed his doom.  Oh they attack me all they want, you are given choices but that is not to say you will like your remaining choices.

"The Architect - You are here because Zion is about to be destroyed. Its every living inhabitant terminated, its entire existence eradicated"

 

Wed, 08/25/2010 - 14:22 | Link to Comment Sudden Debt
Sudden Debt's picture

and in those days, a lot more people had gold teeth!

Now it's all ceramics teeth!

 

Wed, 08/25/2010 - 14:31 | Link to Comment Mako
Mako's picture

The non-performing liabilities are worth less then the last time.  Unfortunately, many more then last time will have to go.

The author has failed to realize why they call them a Death Spiral.

"labor will increase faster than anyone thinks."

Hahaha, yes and 99 virgins are going to show up at every guy's door. 

This guy is a real hoot.

Yeah, a system based on the REQUIREMENT of more will just magically keep running when given less and less.  Welcome to Fantasy Land.

Wed, 08/25/2010 - 16:56 | Link to Comment Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

Wait.....is that why all the aspiring rappers have gold teeth?  They will be the ones buying up whats left of America for pennies on the dollar?  NOOOOOO!

Wed, 08/25/2010 - 14:53 | Link to Comment cougar_w
cougar_w's picture

I came to the same conclusion about half way in. Deflation will certain solve a lot of problems but mostly through destruction, the same way that fire can "solve" problems with termites in your house. Not really worth it, in the end.

I do not see how deflation helps the common man. Deflation fixes balance sheets? Maybe, after everyone defaults I guess. And that helps me personally .... how. It's not all abstractions, ya know. Somewhere in there I need to work an hour for an hour's pay and buy something to eat.

Oh wait I get it, in deflation everyone becomes a farmer/producer because supplies are suddenly cheap.

Yeah like it works that way in reality. How many people alive today can farm or produce anything at all by any means? I can I'll tell you that, but I'm not so sure about all those pasty pencil-necks and blobby fatties munching Doritos stuck in traffic on the 101 every morning. Those folk I worry about, I am not confident they are going to see it as a "chance to man up" and so I don't think even one of them will find a deflationary spiral at all pleasant or rewarding. And when they start feeling self-righteous and entitled regarding their former sacred-american-way-of-life and come after my garden patch, there goes my only attempt at productivity. Nice dream you had there bud, for about a month. We get to see how far down "bottom" really is.

All this sucks, if you ask me. I can't stop it but I'm not going to celebrate it either. Not even if all the balance sheets on the planet are made pretty.

Wed, 08/25/2010 - 15:05 | Link to Comment Mako
Mako's picture

Yeah the author is very confused.  Has no understanding of how "money" in the current system comes into being.  He would do himself a favor to read "The Modern Money Mechanics" by the Federal Reserve. 

The author has no understanding that once the global system peaked you are not going have this 20 year Japanese flat or slightly down phase.  They are called Death Spirals for a reason, unfortunately this is something our parents or grandparents should have thought about after defeating Hilter. 

Deflation fixes balance sheets?

The books never balance in the system, what you are witnessing is lemmings not wanting an accounting of the books because the books don't balance and never could.

Wed, 08/25/2010 - 16:27 | Link to Comment Alexandre Stavisky
Alexandre Stavisky's picture

Woman: What makes saloonkeepers so snobbish?
Banker: Perhaps if you told him I ran the second largest banking house in Amsterdam.
Carl: Second largest? That wouldn't impress Rick. The leading banker in Amsterdam is now the pastry chef in our kitchen.
Banker: We have something to look forward to.

Wed, 08/25/2010 - 15:12 | Link to Comment hugolp
hugolp's picture

I do not see how deflation helps the common man. Deflation fixes balance sheets? Maybe, after everyone defaults I guess. And that helps me personally .... how. It's not all abstractions, ya know. Somewhere in there I need to work an hour for an hour's pay and buy something to eat.

This is actually good. The people that has been responsable and has not gone into excessive debt during the boom gets rewarded while the people that has been reckless and has gone into excessive debt goes bust and defaults. So now, you have the resources in the hand of the more responsable and productive people of society, and away from the more speculative and reckless ones, that learn a lesson and will tend to behave better next time. Now the productive and responsable people can put the resources to good use and restart the economy.

Wed, 08/25/2010 - 15:38 | Link to Comment MachoMan
MachoMan's picture

If the playing field was remotely flat or, in other words, we were in an academic vacuum, I would be inclined to agree...  however, you have that pesky wealth gap to deal with.  Through our deflation, as government is eroded and liquidated, who are the "productive and responsible" people with "resources"?  I'll give you a hint, not you.

Yes, some of the golden children did not get to the life rafts in time.  But many did and have handsomely prepared.  If we have the controlled, prolonged deflation as some are predicting, then the newly productive will only be playing for a reduced pie...  the remainder having been siphoned off through the "good" years.

If we have mako's scenario (which is obviously incredibly likely, if not certain), then your concepts of fairness and justice will be given all new meaning...  the notions associated with a traditional deleveraging blip (the productive are rewarded) will have no necessary correlation to our future.  In that case, you'll be playing russian roulette instead of playing on the field of dreams.

Wed, 08/25/2010 - 16:03 | Link to Comment hugolp
hugolp's picture

The japanese style recession is not really a deflationary correction, since the government did not allowed for the liquidation of bad business, but instead created zomby companies.

And I am sure you wont get a real price deflation scenario. It would be the best solution, and it is what would happen if the government did nothing. But I am 100% sure that it will intervene again and again to avoid price deflation at all costs. It showed in 2008 that it can stop price deflation, and will do it again now if necesary. And it will lead us to stagflation (or even hyper-inflation, but I think this is less probable).

Wed, 08/25/2010 - 16:13 | Link to Comment MachoMan
MachoMan's picture

First, this isn't much of a response to the allegation that in the post collapse economy, our overlords will be able to unmask themselves and directly crack the whip into our backs.  In other words, how, specifically, are we rewarded in this deflationary scenario?

Second, what in the fuck are you talking about?  Price deflation has been happening everywhere...  moreso in...  california...  for example, but I'm confident there is a mcmansion with your name on it if you want.  If credit contracts, so does the ability to prop up asset prices that are purchased with credit...  Think tens of thousands of homes in detroit getting bulldozed...

Third, the FED is impotent to deal with a contraction in credit caused by a lack of willingness to take on new debt.  Period.  End of story.

Fourth, we already have bi-flation...  I agree there may be some largely semantical arguments that we do not have stagflation...  but we're already there...  the FED's actions already caused that...  now the excesses that caused the increase in commodity prices and input costs can give way to the larger deleveraging (deflationary) cycle.

Thu, 08/26/2010 - 03:43 | Link to Comment hugolp
hugolp's picture

First, this isn't much of a response to the allegation that in the post collapse economy, our overlords will be able to unmask themselves and directly crack the whip into our backs.  In other words, how, specifically, are we rewarded in this deflationary scenario?

I did not say this, dont know where you are getting it. You are rewarded because prices fall, and that is equivalent to a wage raise. Also, the bad companies fail, and the reckless go bankrupt. For example, Goldman Sachs, GM, etc.. would have been bankrupt by now if the government would have not save them.

Second, what in the fuck are you talking about?  Price deflation has been happening everywhere...  moreso in...  california...  for example, but I'm confident there is a mcmansion with your name on it if you want.  If credit contracts, so does the ability to prop up asset prices that are purchased with credit...  Think tens of thousands of homes in detroit getting bulldozed...

Price deflation is defined in macroeconomics as a decrease in the general price level, meaning the CPI. If you want to use your particular definition you should specify it, because otherwise its impossible for me to understand what you are saying. Using the mainstream macroeconomics definition of price inflation neither Japan neither the USA has had strong price deflation. There has been a stock crash, a housing crash, etc... And the most important part, neither the USA nor Japan allowed their bad companies to fail and rescued them. That is not allowing for the correction to happen (and is one of the main reason why there has not been significant price deflation).

Third, the FED is impotent to deal with a contraction in credit caused by a lack of willingness to take on new debt.  Period.  End of story.

What you are explaining about the banking system is true. Lending has been weak (because people does not want to borrow and because the Fed is paying interests in the excess reserves), and that creates deflationary pressures . We agree in that part. But if you are looking at only that to make your analysis you have an incomplete view. If you think that is the only issue to take into consideration, why has the CPI not gone down big time like it did in the 1929 or 1921 crashes? Government spending through monetized bonds injects the newly "printed" money directly into the economy, independently of what the banking system does. So you have to take that part into account as well. And if you take that into account you can see that a government collaborating with its central bank can and do stop the price deflation pressures that happen after the bust of a credit bubble.

Bear in mind, that I am saying they can affect prices, but not create real production, real wealth, so they are just manipulating the prices upward, not healing the economy.

Fourth, we already have bi-flation...  I agree there may be some largely semantical arguments that we do not have stagflation...  but we're already there...  the FED's actions already caused that...  now the excesses that caused the increase in commodity prices and input costs can give way to the larger deleveraging (deflationary) cycle.

I know you dont know me and will have to take my word for it, but I have been saying for a long time that there is going to be a second deflationary correction (the one starting right now), that the government wont allow for it to run its course, and that the end result will be stagflation for several years (with a small possibility of hyper-inflation). It is my educated guess that we will start to see the first signs of stagflation in 1 year, although this kind of timing is impossible to do accurately.

Bi-flation is just a fancy word to include non CPI assets in the inflation-deflation debate, when everybody agrees that non-essential goods are going to go down in price. I really dont care about definitions as long as everyones understand what is going on.

Thu, 08/26/2010 - 11:07 | Link to Comment MachoMan
MachoMan's picture

We are in agreement that the common metric used for pricing has remained relatively flat due to governmental spending to offset deflationary pressure...  (leading to a double whammy for consumers as their homes, etc. decrease in value, while the cost at the pump and grocery stores go up...)  I get it...  we all get it...

What I want you to address are these comments:

This is actually good. The people that has been responsable and has not gone into excessive debt during the boom gets rewarded while the people that has been reckless and has gone into excessive debt goes bust and defaults. So now, you have the resources in the hand of the more responsable and productive people of society, and away from the more speculative and reckless ones, that learn a lesson and will tend to behave better next time. Now the productive and responsable people can put the resources to good use and restart the economy.

I would agree with your hypothesis if we were in a standard downturn or in an academic bubble.  However, how do you account for the wealth gap in the rebuilding of america?  Who has these resources?  How are they concentrated?  How do the "reckless" get to rebuild?  What does our political landscape turn into?

What you're suggesting only works in specific situations...  what will happen in our future deflationary environment will be an outright and open usurpation of rudimentary human rights.  That the internal political and other pressures built by the wealth gap will not only fail to be corrected in the downturn, but will be exacerbated.  And, sadly, this process is largely complete.  Yes, the "reckless" get cast aside...  but so does everyone else save a select few.

Your theory also fails to acknowledge the intricacies of the rise of corporations...  in which the entity can die, but its principal actors live on through the siphoning of the spoils of "production".  Killing the "reckless" can actually be by design of the reckless...

In short, the traditional notion of a deflationary environment to purge bad things will take on a completely new meaning in our future environment...  the intensity of the necessary purge will be vastly greater than traditionally contemplated.  And because of the potential risks involved in the degree of intensity, it is going to take an approach vastly more creative than "leave everyone to their own devises".  (Some have too good of head start, often times through immoral means).

I'm not saying we ultimately have a choice in the matter...  I don't think we do...  but we're in uncharted waters without a risk in trying. 

Thu, 08/26/2010 - 12:31 | Link to Comment hugolp
hugolp's picture

Yes, we agree. In my ideal solution to this crisis the government would not bail out anyone, and would let banks fail, etc... Also corporations and its government granted limited liability would not exists (there would be enterprises, just not enterprises with government granted privileges: corporations). Etc...

And I also agree that previously we have not seen a correction like the one needed for the size of the bubble paper currency has created.

But I dont get why you attribute the wealth gap and loosing human rights to a deflationary correction. That is going to happen anyways and even worse if they inflate their way out like they are doing. The system is rigged. In reality, the problem is the bubble. Once you are at the top of the bubble all the options are bad. There is no magic solution to clean the malinvestments and the descoordiantion in the market.

In reality, the only way the system has to keep functioning is to inflate its way out of the bust. A deflationary correction would send the banks and the USA government bankrupt, so its not going to happen. Maybe that's the real reason I advocate a deflationary correction as solution ;)

Thu, 08/26/2010 - 21:09 | Link to Comment MachoMan
MachoMan's picture

It all depends on the timing.  If we have prolonged deflation, it will likely mean there is some semblance of central control.  Which, could possibly be good.  The problem, however, is that not only will the private sector have to deleverage, so will the public.  Police, fire, medical, teachers, all will be jettisoned along the way...  just trimming the fat.  (it's already happening).  In a nutshell, the size and scope of state and local governments certainly, but also likely necessarily the federal government, will contract.

My question is who gets to fill the power vacuum.  In a period of prolonged deflation, we will see those squirrels who amassed large piles of nuts before winter gorge themselves on their spoils.  After winter, they'll have free roam of the land...   as their other squirrel brethren have succumbed to the cold.  The problem, how did the squirrels get all those nuts?  Was it fair?  Was it honest?  Was it moral?  Should it be protected?  Would capturing the spoils prohibit the future freedom of those who desire to be productive? 

You're right in the conclusion...  we either get a refusal to recognize the dollar as a medium of exchange now or a treasury sell off later when we default, causing the same thing.  I haven't decided which fate is better...  I just think that through a prolonged deflationary period, we will be more likely to be corralled and beaten into submission...  whereas with a hyperinflationary jubilee, I'm thinking there is the possibility it becomes so chaotic and foreign that we're incentivized to truly fix the situation.  We won't...  we'll do the same thing again...  we always do... 

I don't think a lot of people are calculating that we will attempt austerity through defaulting domestically on every imaginable thing prior to international default...  this could push the timeline much further along than commonly thought.

 

Fri, 08/27/2010 - 02:54 | Link to Comment hugolp
hugolp's picture

Let me remind you that present money (meaning dollars) its not the only way for people to save. If you go into assets and the government inflates, you are getting richer compared to the people that earrn a wage, because your assets are going up against dollars and the wages are being devaluated.

Its a common mistake to think that "rich people" (whatever that exactly means) keep their fortune in dollars, and then inflating is bad for them. Rich people have their fortune invested, in different classes of assets, therefore inflating its great for them since makes their assets go up measured in dollars. Price deflation is bad for them since it makes their investments go down, and if they are leveraged they are in a bigger problem. Meanwhile, the majority of poor people earn a wage. Inflation devaluates their wage, while deflation appreciates it.

So under the present situation price inflation is good for banks, government and "rich people" (specially if they know what kind of assets to buy), and its bad for working people and middle class, while the opposite happens with price deflation.

But apart from this considerations, we should think what is better to get out of the crisis and get an economy where people can make a life for themselves. And that is allowing for the correctin to happen, accept any deflation that may cause, because its the only way to get out of the crisis quick, as has been proven by history again and again. If the USA would have done that the crisis would have been over by now. This two years would have been tougher for sure, but now unemployment would be going down, and the structural problems of the economy would be gone. Probably the government would have had to default and a lot of banks would have failed, but I really think getting rid of GS, BoA, City, etc.. is a good thing for the USA.

Anyway, this is daydreaming since that would go against the status quo and will never happen. You and I know that they will inflate their way out of this like they have done always, even if that means 10 years of stagflation like in the 70's.

Wed, 08/25/2010 - 16:05 | Link to Comment granolageek
granolageek's picture

I'll cut you some slack because you write as if English is not your native language.

 

Still, you are parroting Austrian talking points while giving no evidence that you rea d asingle word that you quoted.

 

Wed, 08/25/2010 - 15:16 | Link to Comment Siggy
Siggy's picture

That blobby fattie has a federal job coug, don't worry about her, worry about yourself.

Wed, 08/25/2010 - 16:27 | Link to Comment augmister
augmister's picture

Stop worrying about "Dorito Bill" and concentrate on your own survival...you'll live longer!

Wed, 08/25/2010 - 16:41 | Link to Comment cougar_w
cougar_w's picture

Ah, you might have missed the nuance of my "worry" re Bill.

I am not so concerned about my fellow man having a hard go of it, as much as I am worried about my fellow man not manning up and taking care of his own him self. There are a lot of lazy and crazy people out there who are not worried that they cannot cope because they know someone out there will provide for them. And they are perfectly capable of destroying someone out there to make sure that happens, when the time comes.

In other words Burrito Bill with an empty stomach and a gun. Except a couple million of them.

Wed, 08/25/2010 - 22:14 | Link to Comment chindit13
chindit13's picture

That is how I read your comment.  The sense of entitlement does not go away simply because the means to provide have disappeared.  Woe to those who dare to "have" in public.

Wed, 08/25/2010 - 15:00 | Link to Comment DosZap
DosZap's picture

Mako.

He's getting da hell outa' dodge............he will not feel the pain of the rest of we schmucks caught here, due to familial obligations.

Wed, 08/25/2010 - 15:09 | Link to Comment Mako
Mako's picture

getting as far away as possible from the rest of the wackos is not a bad idea at all.   It does increase your chances of survival IMHO.

Unfortunately, we are all basically stuck on this floating rock.  :)

This is going to be a very dark journey this time I suspect.

Wed, 08/25/2010 - 15:33 | Link to Comment merehuman
merehuman's picture

our island is tipping.

Wed, 08/25/2010 - 23:05 | Link to Comment StychoKiller
StychoKiller's picture

Kali is licking her chops, waiting for the blood to flow...

Wed, 08/25/2010 - 15:20 | Link to Comment Eternal Student
Eternal Student's picture

Agreed. I especially liked this quote "labor will increase faster than anyone thinks."


I'm looking forward to seeing that happen. When credit implodes, business stops. And that's not a positive thing for employment.

Wed, 08/25/2010 - 15:42 | Link to Comment MachoMan
MachoMan's picture

Exactly.  Somehow deflation is always presented with prices necessarily decreasing faster than wages...  I'm not convinced that's a certainty from our current position.

Wed, 08/25/2010 - 16:11 | Link to Comment Alexandre Stavisky
Alexandre Stavisky's picture

He never looked back at the fire. He just ran. He ran until the sun came up and he couldn't run any further. And when the sun went down, he ran again. For five days he ran like this until every sign of man had disappeared.

Wed, 08/25/2010 - 16:19 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Then he realized he was only in Nebraska

Wed, 08/25/2010 - 16:43 | Link to Comment cougar_w
cougar_w's picture

"Fahrenheit 451" if I am not mistaken.

Wed, 08/25/2010 - 17:23 | Link to Comment RSDallas
RSDallas's picture

Mako,

Please go away.

Wed, 08/25/2010 - 21:48 | Link to Comment economicmorphine
economicmorphine's picture

Rather bizarre rant.  If you're debt free and holding investments, say a rental house, for cash flow rather than to find some sucker to take it off your hands, you're going to be fine.  Take a deep breath.  Deflation is only a bad thing if you're mortgaged to the gills.  

Wed, 08/25/2010 - 14:20 | Link to Comment JLee2027
JLee2027's picture

Buy Gold and especially Silver.

Wed, 08/25/2010 - 15:02 | Link to Comment DosZap
DosZap's picture

As "I" failed to do at $17.38 Spot yesterday, even though I planned on it all weekend.If I drank, I would have my face at the bottom of the pitcher.

$18.99/$1240.80...........2:00 CST

Wed, 08/25/2010 - 15:39 | Link to Comment Dr Emilio Lizardo
Dr Emilio Lizardo's picture

even Jim Sinclair's site is noticing the wanky behavior in silver

 

http://jsmineset.com/2010/08/25/extraordinary-action-in-silver-helping-p...

Wed, 08/25/2010 - 20:32 | Link to Comment RockyRacoon
RockyRacoon's picture

What part of "silver will outperform gold" have people not been hearing?

Sheesh.

Wed, 08/25/2010 - 16:30 | Link to Comment augmister
augmister's picture

When it "flushes", everything will go down the crap hole....plenty of time to buy.  Keep your FRNs safe in the Bank of Sealy and Bank of Whirlpool.

Wed, 08/25/2010 - 14:22 | Link to Comment CashCowEquity
CashCowEquity's picture

the new normal !!!

jobless recovery !!!

political circle jerk !!!

CNBC is gay !!!

Bulls are braindead !!!

 

Wed, 08/25/2010 - 15:08 | Link to Comment DosZap
DosZap's picture

Fear not Oh great Cash Cow!

The POTUS EL SUPREMO GRANDE!, had a phone meeting w/ 2 of his Ecomomics team.

Summers, and the calorically challenged lady that's leaving, today.(smart Lady!).

USA's Economy is Job 1.

After next weeks taking credit for the Victory in Iraq, and the SURGE, they(esp O was dead set against), and Foreign Policy meeting w/ Izzy, and Palestinians..........

Then Economy is Job 1.

Does that seem to be correct?,my math skills are limited, but seems like that makes it 2.

Wed, 08/25/2010 - 23:38 | Link to Comment Fred Hayek
Fred Hayek's picture

Reminds me of the scene in the first Naked Gun movie where Leslie Nielsen and George Kennedy visit Nordberg (O.J. Simpson!) in the hospital and Nielsen tells his wife that nobody on the force will rest for a moment until the scum who did that to Nordberg are brought to justice.  At the end of this rousing little monologue, he immediately turns to George Kennedy and says, "Now, let's get a bit to eat."

Sometimes, Marx has it backward and, through art, something is first experienced as farce and then actually happens as tragedy.

 

Wed, 08/25/2010 - 14:23 | Link to Comment Anarchist
Anarchist's picture

Of course there will be winners. The US is 5% of the worlds population burning up more than 25% of it's resources. That was never going to last. The elite have been actively planning a crash that will benefit them. The standard of living for 95% of Americans is going to drop. The elite will end up buying everything for pennies on the dollar.

The US is in a decline that cannot be stopped. The US will need fewer workers than now and those working will get lower pay and benefits. There will be civil unrest as the safety net and entitlements fall by the wayside.


Everyone needs to look in the mirror and decide if they are a useful asset to the elite or a useless eater. The majority of people have worthless or redundant skill sets. The future is clear for the majority, you are unneeded. The elite will decide if you are worth feeding.

Wed, 08/25/2010 - 15:12 | Link to Comment Oswald Spengler
Oswald Spengler's picture

As an elite myself, I am glad you understand the program. No more food for the worthless. No more free health care for fat people. No useful skills, no food. Let evolution decide.

Wed, 08/25/2010 - 15:40 | Link to Comment merehuman
merehuman's picture

Dear Elitist, beware of wearing suits in public. In fact stay in your house to be safe. Strike that, chances are anything over 3000 sq ft will be burned.

You think the little people have emotional control, heard of lynch mobs? just sayen

Wed, 08/25/2010 - 16:33 | Link to Comment augmister
augmister's picture

Who said you couldn't eat a BIG McMansion.... first target on everyone's list!  Biggest boxes to keep stuff will be the first to pillage...."I pity the fools."  Mr. T

Wed, 08/25/2010 - 15:28 | Link to Comment DosZap
DosZap's picture

Anarchist,

You are close to correct, I have always found it somewhat ironic, how the U.S.,and it's people have been haranged for doing just that.

5% of the Pop, 25-35% of the resources.

But, how CONVIENENT it's always been that no one remembers WHO has always been at every disaster, and fed the world, for FREE.Fought their wars, and gave them hope.

All on the backs of our productivity.....and hearts of charity, and love.

NOT one nation , hell, ALL the rest combined have not given as freely, to all in need, anything like WE Americans, that are the useless eaters, and consumers.

It would be in the Trillions of dollars.

But, no, we are just the most selfish, and arrogant useless  bstds on planet earth.

As for the elite deciding on who is of worth, and their disposition, that's a two way street............and there are a hell of a lot more of US, than them.

Before they start making that move, they need to remember, NO ONE is so important, or guarded, that they cannot be gotten to.

NO ONE.

WE also have a say in WHO get's to stay around.

 

Wed, 08/25/2010 - 16:02 | Link to Comment JLee2027
JLee2027's picture

Exactly.

And we will recover when the socialists are removed and currency repaired. You can count on that.

Wed, 08/25/2010 - 16:35 | Link to Comment augmister
augmister's picture

Open hunting season will take on new meaning in the "new normal".

Wed, 08/25/2010 - 14:31 | Link to Comment B9K9
B9K9's picture

@CogDis wrote:

So if a ZH'er has a 9 to 5 (or not) and a roof over his or her head (or not) and not much more (or even less) meaning they can't leave country to do recon on where to move the family fortune, can they still kvetch, moan, groan and complain and ignore the MSM lies or must they submit to the brainwashing because they aren't one of the fortunate few?

CD, what I'm saying is that if one truly believes what they are seeing, and understands the logical end-point to the series of events that are playing out right now in the here & now in real-time, then they would no longer place any value on their current job, home and/or perceived stability of their present way of life.

Rather, they would act out rationally, as in getting the fuck out of Dodge. It still wigs me out that they are still digging up the bodies of kids my exact age when I got caught in a Fallujah-type of situation overseas. (If it hadn't been for a combined UK/US evacuation, who knows if I'd even be here?) Why were kids taken out & shot? Tribal revenge baby, scores being kept & settled on families & generations.

For those who are still plugging away, or feel trapped in some fashion, then it's obvious the heightened alert meter is either not functioning properly or they don't truly believe what they are seeing.

Here's the funny thing: there's probably not 1 person out of 10,000 whose ancestors didn't emigrate to the USA with anything more than the clothes on their backs. What type of balls does it take to pull up stakes and pull off that type of re-location? Answer: not much. Why? Because life has a wonderful way of reducing petty concerns to nothing when you just gotta do it.

Wed, 08/25/2010 - 14:46 | Link to Comment Mako
Mako's picture

The problem is the sudden shift of production vs. expectation and prepareness.

There is no way to feed 7 billion without a functioning global credit system, and that system is going bye bye.

Heck, I seen people walking down the stree begging for water in La. after the Hurricane, all covered in mud.  The funny thing is they were surrounded by water.  Wait till you see what is coming down the pike on a global scale.

Basically, a rather large portion of the population is going to have to go this time.  Oh they are going to be hacking and hacking at each other this time.

 

Wed, 08/25/2010 - 16:41 | Link to Comment augmister
augmister's picture

You ain't gonna see as much as you think.  Electricity will be coveted.   Better get a hand pump for that well that is runnin' on AC.   Most of your electrically appliances will be rusting on your front yards, just like somethin' you'd see down South, 'cept that will be the norm.   Oh yeah, kiss the NET g'bye, too!   The elite will control all the mass media to increase mass hysteria and mass control.   We'll be going back to Tom Paine and handbills, just like the olden days....

Wed, 08/25/2010 - 14:54 | Link to Comment Treeplanter
Treeplanter's picture

Yeah, some of my kin got sprung from debtors' prison when James Oglethorpe traded the King's bad debts for land in Georgia.  They thought they got a good deal, even if a lot of them were Scots and demanded TARP money. 

Wed, 08/25/2010 - 16:37 | Link to Comment seventree
seventree's picture

there's probably not 1 person out of 10,000 whose ancestors didn't emigrate to the USA with anything more than the clothes on their backs.

True, but they were admitted because back then the US needed cheap labor. Try showing up in any advanced country today with an American passport and ask about immigration. You will be tossed back on that plane with your return ticket (and you probably won't be admitted without one). Unfortunately there is no burgeoning land of opportunity today ready to take in economic refugees, no matter how ballsy. Americans in particular are unwelcome in Canada, UK, most of Europe. Overstay your 3 or 6 month visa and you will be deported.

Canada in particular will be a surprise for people daydreaming of "retiring" there someday. Unless you have major bucks to get around the system, no US citizen can stay over 6 months out of 12, and this is enforced. As for the immigration route, all applicants are subject to the same criteria, which means being under 40 with proven work skills in specific areas. You just want to buy a retirement cottage, and can document ability to support yourself and keep up medical insurance? Doesn't matter, their is no immigration category for "retiree", only for potentially productive workers.

What's left? Developing nations? Not where you want to be a stranger if there is political chaos or rebellion. Or "beach cottage" destinations like Belize? Better check out the facts before heading out; ex-pat communities might not be so safe as conditions worsen and banditry rises.

If I have missed something promising, please tell me. (But don't tell anyone else!)

Wed, 08/25/2010 - 21:56 | Link to Comment economicmorphine
economicmorphine's picture

Very amusing post.  Of course, the difference between my ancestors and me is that it was sort of obvious to them where they should go.  Where should we go, Chief?  England?  Italy?  Spain? Ireland?  Iceland?  Don't tell me Brazil or Uruguay.  I've been.  Have you?  Nice places to visit, both but the cold hard truth is that the last thing they want is the wretched refuse washing up on their shores.  The same of Australia and New Zealand.  Candada eh?  Sure, maybe for the first 10 million or so, but after that?   And if you go to any of those places, Uncle Sam's coming after you.  It's not like the good old days when Grandpa booked steerage to Ellis Island.

 

 

Wed, 08/25/2010 - 14:30 | Link to Comment bmwmc
bmwmc's picture

Strange though: Everyone who relied on debt, grew debt, and owed more than they were worth got bailed out or walk out without consequence.  The ones with cash, equity, and savings paid the debt holders.  So is debt bad?  Not from were I'm sitting.

Wed, 08/25/2010 - 14:57 | Link to Comment Treeplanter
Treeplanter's picture

Mostly big shots got the good deals.  The programs for mortgage failures didn't work out. More gov't smoke and mirrors generated by incompetents.

Wed, 08/25/2010 - 21:59 | Link to Comment economicmorphine
economicmorphine's picture

I'm debt free.  Most of my friends are swimming in the stuff.  I don't care if I get a raw deal.  I wouldn't trade places with them for all the tea in China.

Wed, 08/25/2010 - 14:32 | Link to Comment rc whalen
rc whalen's picture

Well said.  People do not seem to understand that net interest margin requires duration.  When the Fed takes all of the duration out of the markets via QE and transfers it to the TBTF banks, investors of all types are getting killed.  I see a migration becoming a full scale run out of dollars as more and more sophisticated people connect these same dots. 

Chris

 

Wed, 08/25/2010 - 15:31 | Link to Comment JR
JR's picture

Thanks for this succinct second from as an institutional risk analyst; I’ve followed your articles for several years, including this latest from Jesse’s Café Americain on August 8 that he introduces thusly:

Chris Whalen: Nothing Has Changed Because It’s the Fraud and Corruption, Stupid

“Chris Whalen provides a devastating analysis of the Financial Reform legislation, and then goes on to eviscerate the Federal Reserve as regulator.

‘Even as the big banks make a public show for the media of implementing the new Dodd-Frank law with respect to limits on own account trading and spinning off private equity investments, these same firms are busily creating the next investment bubble on Wall Street -- this time focused on structured assets based upon corporate debt, Treasury bonds or nothing at all -- that is, pure derivatives.’ …”

with this riveting example you give in a “ recent key supervisory officer appointment by the Federal Reserve Bank of New York (FRBNY [of] Ms Dahlgren… the center of many of the Federal Reserve's most embarrassing failures in the area of bank supervision and in particular with respect to the failure of American International Group (AIG) under the subhead:

Shall We Reward Incompetence? The Case of Sarah Dahlgren and the Fed of New York

http://jessescrossroadscafe.blogspot.com/2010/08/chris-whalen-its-fraud-stupid.html

A powerful article for every retail investor, who sooner or later, if things are not changed, will become a hapless vicitim of the “predators.”

Wed, 08/25/2010 - 14:33 | Link to Comment ShowMeTheTime
ShowMeTheTime's picture

Race to the bottom of the see....Atlantis dude...not the cool one with the water slide through the shark tanks either.

Wed, 08/25/2010 - 14:34 | Link to Comment Henry Chinaski
Henry Chinaski's picture

Time to take a break.  First the wikileaks BS, now a  guest posts quoting ZH posts?  C'mon TD. Talk about a circle jerk. 

I'm outta here, but will be back tomorrow and look forward to better content.

Wed, 08/25/2010 - 14:38 | Link to Comment What_Me_Worry
What_Me_Worry's picture

I am going with the idea that it is better to carry the debt than pay it off.  I'd rather have gold/silver than erase an equal amount of debt.  As long as you have the cash flow to manage your debt easily, then it might be better to risk your debt being easier to pay back in the future.

I would not go to the point of not paying any bills in anticipation of it all imploding, anyways.  As much as I can see how I think this will play out, I must account for my own ignorance to know for sure.

The entire financial world is on the alpha train and headed right into a brick wall.  No one knows what time the train will arrive, though.  However long it takes, the final stop for what's left will be the physical gold/silver depot.  Of course, there could be a stop at paper goldville.  A very short stop, though, I don't recommend getting off there.

Wed, 08/25/2010 - 15:37 | Link to Comment Paper CRUSHer
Paper CRUSHer's picture

What_Me_Worry

"I am going with the idea that it is better to carry the debt than pay it off".

Fortunately i'm debt free.

Yes,i know ya call yerself What_Me_Worry but would you not consider paying all of your debts in advance even if you had capital to spare? Or would you rather continue to hope/pray your future cash flows will remain uninterrupted in servicing that debt load?.Still,its best to get all the debt load off your shoulders I reckon,and fast.

Oh,just one mere detail concerning your chosen avtar,nothing personal bro,not to slander/offend ya in any way but i gotta say......

....Ya is one ugly ugly kid ya know that.

I'll end on a sweeter note........."here's looking at ya kid".(Humphrey Bogart)

Wed, 08/25/2010 - 16:05 | Link to Comment JLee2027
JLee2027's picture

I am going with the idea that it is better to carry the debt than pay it off.  I'd rather have gold/silver than erase an equal amount of debt

That's what I concluded as well. The banks I owe to all received huge bailouts. I figure they'll go poof at some point. Until then, I pay minimum on the debt and keep the Gold/Silver.

Wed, 08/25/2010 - 14:38 | Link to Comment PicassoInActions
PicassoInActions's picture

DJ MARKET TALK: Another Canary, Another Coalmine

 

1834 GMT [Dow Jones] The folks at Zero Hedge highlight developments with the Illinois Teachers Retirement System, and, given the state of state pensions, it seems like something worth paying attention to. The fund, badly underfunded and performing poorly, was betting on rallying stocks and plunging Treasurys. But that hasn't happened, and it's been forced to begin selling assets to pay benefits. But that's not the worst of it: the fund was trying to make up the losses by using, ready for it? Derivatives. "The only thing missing is for Goldman to raise its overnight variation margin requirements and it's game over, as we get a brand new AIG on our hands." (paul.vigna@dowjones.com) (http://www.zerohedge.com/article/has-illinois-teachers-fund-entered-death-spiral-aig-wannabes-go-broke-strategy-fails-pension)  

Wed, 08/25/2010 - 14:38 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Devalue Bitchez.

Wed, 08/25/2010 - 14:39 | Link to Comment TooBearish
TooBearish's picture

AAAAAAACK  Cramer recommending Gold right here!

Wed, 08/25/2010 - 15:01 | Link to Comment GFORCE
GFORCE's picture

Cramer Bitchez

Wed, 08/25/2010 - 15:35 | Link to Comment DosZap
DosZap's picture

Remember the DOORS?.

THE END

When Cramer advocates GOLD, you know it's close.

Wed, 08/25/2010 - 20:39 | Link to Comment RockyRacoon
RockyRacoon's picture

Cramer advocated gold as an allocation of assets.  Actually, he said, "Gold is not a trade, it is an asset allocation."  You know what they say about blind hogs or stopped clocks.

Wed, 08/25/2010 - 21:00 | Link to Comment Hang The Fed
Hang The Fed's picture

I sure do know...if you jam a stopped clock between the ears of a blind hog, you get Cramer.

Wed, 08/25/2010 - 14:39 | Link to Comment apberusdisvet
apberusdisvet's picture

The corporate fascist corruptocracy is alive and well for a few; at least until the 2nd American Revolution.  Do we have the balls of our forefathers?  Doubtful.

Wed, 08/25/2010 - 15:46 | Link to Comment DosZap
DosZap's picture

ap,

As a nation, we have far more training, firepower, and  sheer numbers.Well trained, and bad mofo's,both in the SERVICE, and OUT.

Balls, when it comes to your family, and your children,your country and your lives......what do you think?.

Had a talk w/ a Ret lifer Major.............I asked him his opinion IF the worst case scenario hit.

What would the Military do,(Since their FIRST Obligation is to the Const, not the POTUS).

He said,if the PEOPLE moved, then the Mil would most likely STAND DOWN.

They took an Oath, and they take it VERY Seriously.As all who ever have do.

But, most people have to remember, Ex Military, are people like us, with families and homes, they are NOT Mercs.

Wed, 08/25/2010 - 16:52 | Link to Comment Anarchist
Anarchist's picture

Bull$hit.

The elite will always make sure the active police, military and paramilitaries get a paycheck, food, school for their kids and a safe place to live for their families. Those getting a paycheck will destroy anyone the elite target as being an enemy of the state. Retired military and police will never be able to collect in large enough numbers to take on local paramilitaries but if they could they would be slaughtered by the military.

If city folk cause trouble the government will send troops from the country.

If blacks cause trouble the government will send white and hispanic troops.

If whites cause trouble the government will send blacks and hispanic troops.

During the depression the US military mowed down hundreds of WWI verterans and labor unionists when they decided they wanted bonuses, unemployment or better pay. They were all labled communists. Today they would be called terrorists.

Wed, 08/25/2010 - 20:57 | Link to Comment jakoye
jakoye's picture

Don't try to talk sense to an anarchist. They are much too far gone.

Wed, 08/25/2010 - 14:40 | Link to Comment hugolp
hugolp's picture

I am glad to see someone pointing out that price deflation is not the monster that government and banks want us to believe it is. Price deflation after a credit bubble cleans the economy and allows for real growth.

But I dont see how monetized government debt does not increase the money supply. That money goes to the government that spends it in the economy. Someone will receive the money and put it in the bank, but it will have been spent, increasing the money supply. If the multiplier was higher, it would have had a bigger effect, but nevertheless it has effect. On the contrary QE money goes directly to the bank and does not go into the market.

Wed, 08/25/2010 - 14:45 | Link to Comment gaugamela
gaugamela's picture

"Price deflation after a credit bubble cleans the economy and allows for real growth."

 

Never thought of that before. I guess 1982-2000 was fake growth considering it followed a period of high inflation.

Wed, 08/25/2010 - 15:04 | Link to Comment hugolp
hugolp's picture

"Never thought of that before. I guess 1982-2000 was fake growth considering it followed a period of high inflation."

Well, 10 years of stagflation can produce the same "cleaning" effect as 1 or 2 years of price deflation. Its just than 1 or 2 years of crisis is better than 10.

But you have a point when you say that it was fake growth. The growth of this last 30 years has been bubbly. There was the Loans and Savings crisis in 1987, that came mainly from housing bubbles. The Fed did not allow for the correction, but inflated its way out. That led to the dotcom bubble, that went bust a decade later. The Fed again did not allow the correction and inflated away, inflating the housing bubble that is going bust now.

Right now the capital structure is so distorted that even with the Fed being extremely agressive, it can not inflate another bubble. The market needs to correct the imbalances, and it will happen quick if the Fed allows for deflation to happen, or it will be slow and painful if it doesnt. And the Fed will choose the later because its the only way to save the banks and avoid a USA government default. Its going to be a lot of fun the next years.

 

Wed, 08/25/2010 - 15:13 | Link to Comment gaugamela
gaugamela's picture

I was being sarcastic. Ask the Japanese if deflation "clears the way" for economic growth.

Wed, 08/25/2010 - 15:20 | Link to Comment hugolp
hugolp's picture

I was being sarcastic. Ask the Japanese if deflation "clears the way" for economic growth.

Because the japanese did not really have price deflation. Check the CPI during the lost decade. It did not went under -2 or -3%. The japanese central bank and the government intervined in the economy, holding up the bad companies, creating zombies. Its obvious that they did not led the correction to happen.

If you want to check a crisis where the government allowed for the correction to had its course, check the 1921 crash in the USA, after the bubble inflated to pay for IWW. The crash started stronger than the 1929 crash, yet nobody remembers it. The government instead of spending more, cut spending and taxes. The Federal Reserve did not had the power yet to do open market operations (it got the power to do them just after the crisis) and did about nothing. The crisis bottomed after a year and a year and a half later the recovery was starting, leading to the roaring 20's.

Wed, 08/25/2010 - 15:55 | Link to Comment DosZap
DosZap's picture

hugo,'

the Depression of 1920, was a separate event from the lete 20's-30's.

Harding got the hell out of the way, and allowed Market Forces to take care of the issue.

It was over damn near before it strarted........Hurt like hell, but was fast.

FDR's policies, and this current Dog n Pony show, are EVIL TWINS.

BOTH followed the same damned policies, and spread the pain, WAY longer than if they had done what Harding did.

Wed, 08/25/2010 - 16:05 | Link to Comment hugolp
hugolp's picture

DosZap, exactly my point. I was just comparing both crisis to show that the first crash was even bigger than the 1929 crash, but because government got out of the way it was over quick.

Wed, 08/25/2010 - 20:55 | Link to Comment RockyRacoon
RockyRacoon's picture

What's with all the goddam junking? 

I say all non-posting junkers are pussies!

Junk that....

Wed, 08/25/2010 - 21:21 | Link to Comment Dr. Sandi
Dr. Sandi's picture

What's with all the goddam junking? 

I say all non-posting junkers are pussies!

Junk that....

The problem is that people like me are all over this place now. Sorry.

Wed, 08/25/2010 - 14:40 | Link to Comment DarkMath
DarkMath's picture

Larry Summers just moved us Green everybody. Yee-hah.

One of the worst news days in recent memory, durable goods down, housing down and guess what Mr Market just got a hard on!

Wed, 08/25/2010 - 14:43 | Link to Comment william the bastard
william the bastard's picture

AGQ silver 3x rocking. Gold/silver 66:1

Hyperinflation is the cure

Wed, 08/25/2010 - 15:56 | Link to Comment DosZap
DosZap's picture

And it's COMING Wm.

Wed, 08/25/2010 - 14:47 | Link to Comment Oswald Spengler
Oswald Spengler's picture

Death to the parasites,military industrial, corporate fascists and their political lackeys. String them up with piano wire and watch their flesh rot.

Wed, 08/25/2010 - 16:53 | Link to Comment augmister
augmister's picture

What ever happened to peace and love???  (You'll have a hole between your eyes before you get twenty feet near them!   they're waiting for you.... )

Wed, 08/25/2010 - 18:09 | Link to Comment zaknick
zaknick's picture

Jesus H Christ! WHY JUNK???

Wed, 08/25/2010 - 14:57 | Link to Comment DR
DR's picture

"Deflation corrects all the imbalances and debt loads of the massive inflation (excess bank debt) that's occurred for 30 years"

Only a default on debt will correct the imbalances. There is no enough income growth to support the current debt load-deleveraging won't work.

 

Wed, 08/25/2010 - 15:00 | Link to Comment GFORCE
GFORCE's picture
"...as long as the music is playing, you've got to get up and dance. We're still dancing."
Wed, 08/25/2010 - 21:24 | Link to Comment Dr. Sandi
Dr. Sandi's picture

 

"...as long as the music is playing, you've got to get up and dance. We're still dancing."

I thought I was dancing. Then somebody stepped on my hand.

(Thanks to Ben Colder)

Wed, 08/25/2010 - 15:24 | Link to Comment Beard of Zeus
Beard of Zeus's picture

The question is,

 

Whose bottom are we racing toward??

Wed, 08/25/2010 - 20:58 | Link to Comment RockyRacoon
Wed, 08/25/2010 - 21:26 | Link to Comment Blano
Blano's picture

Thank you Rocky.

Wed, 08/25/2010 - 15:24 | Link to Comment Miles Kendig
Miles Kendig's picture

To free up bank reserves, the Fed has to buy risky paper from the banks that's mis-marked; only that would free up banks to lower some of their lending standards (what a freak cure/objective). Ben Bernanke talks a good talk, but does he really have the nerve or the stupidity to buy trillions more in bad assets from insolvent banks?

Absofuckinlutely.  And so does his new vice of vice.

Wed, 08/25/2010 - 15:55 | Link to Comment MachoMan
MachoMan's picture

If yes, then by design the FED was meant to implode upon the first purchases of troubled assets.  Who gets to buy the assets when the FED is liquidated and at what price?  (nonperforming assets are nonperforming assets regardless of who owns them)

Wed, 08/25/2010 - 20:34 | Link to Comment Miles Kendig
Miles Kendig's picture

Since conventional wisdom suggests "in house" paper can be rolled ad infintum does it really matter to Ben & assoc.?

Wed, 08/25/2010 - 22:08 | Link to Comment MachoMan
MachoMan's picture

Depends on if ben is in the know.  My guess is that he is a patsy more or less.  But yes, it's of incredible importance given the death of the FED will be the fuel for our future masters' fire.  They know better than "conventional wisdom".  You can see it in ben's frustrated face in front of congress.  He is purely for show at this point given their ability (or lack thereof) to reflate the credit bubble...   

Wed, 08/25/2010 - 15:30 | Link to Comment 1100-TACTICAL-12
1100-TACTICAL-12's picture

oops

Wed, 08/25/2010 - 15:31 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

the winners may turn out to be the ones with a lot of debt

Wed, 08/25/2010 - 15:58 | Link to Comment DosZap
DosZap's picture

Bankster,

Been true thus far............

Thu, 08/26/2010 - 22:10 | Link to Comment Hamsterfist
Hamsterfist's picture

In a hyperinflation scenario, yes.  The losers would be the banks.  Or do I misread how a hyperinflation scenario would play out?  Let's say I owe $200k currently on my house, and hyperinflation comes a knocking.  All of the sudden people at McDonalds are earning $50Mil a year, but it is worthless.  I could easily pay off my debts, and eventually die with a smile on my face knowing the banks get a big fat dick in the end.  So am I wrong to say bring on hyperinflation, followed by deflation?

Wed, 08/25/2010 - 15:39 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

as long as the Fed is what it is, the USA is doomed to collapse and exist no longer

Wed, 08/25/2010 - 15:54 | Link to Comment seventree
seventree's picture

OT: I was surprised to find that gas here in southern KY has dropped from 2.69 to 2.55 in just the past week, after holding steady for at least a month. I understand that pump prices are subject to the supply/demand seesaw etc., but is there more going on here in the larger economic scale? And is this happening all over?

Wed, 08/25/2010 - 16:01 | Link to Comment MachoMan
MachoMan's picture

Happening here in Arkansas too.

People think that bi-flation will persist in perpetuity.  A necessary assumption of the theory is that the actual money, money in circulation (1-5%) will continue to withstand the bombardment of the dramatic decline in the credit aspect of the money supply (95%-99%).  My guess is that the depressionary forces (through deleveraging) will have their way with commodities, et al. and that bi-flation is simply a temporary phenomenon.

Wed, 08/25/2010 - 16:29 | Link to Comment JR
JR's picture

Central Coast California:

Gas prices in a station near me just went from either $3.25 or $3.35 (I don’t remember in that they’ve been changing so rapidly lately) to $3.39 a gallon yesterday. 

Thu, 08/26/2010 - 00:13 | Link to Comment Uncle Remus
Uncle Remus's picture

$2.46 down from $2.54 here in central OK. I've got kin up KY way 7tree - Looavull.

Wed, 08/25/2010 - 16:14 | Link to Comment tony bonn
tony bonn's picture

ben bernanke is not stupid. he is evil.

Wed, 08/25/2010 - 16:38 | Link to Comment Huxleys Greatniece
Huxleys Greatniece's picture

the winners may turn out to be the ones with a lot of debt

 

When things get really bad, who will be collecting the debt, the military? Will they criminalize debt, and put debtors in prison?  Why not just declare bankruptcy, and eat all the supplies you bought with the VISA that's now cleared - so what if you have no more credit when there are no shops?  

Wed, 08/25/2010 - 18:04 | Link to Comment lucasjackson
lucasjackson's picture

You can't have the PB without the J!  The inflation leads to the boom/bust which leads to deflation.  Savers will be punished with paltry savings returns, the spendthrift will be punished without lack of access to easy credit and default/foreclosure/repossession.  The saver will be rewarded with deflating costs of assets after the bust, while spenders will be rewarded with the ability to repay their debts with devalued currencies.  Thats why I save like a mo-fo while my wife spends like a drunken puerto rican on crack in vegas after winning the powerball.  How did ya get the beans above the frank???

Thu, 08/26/2010 - 22:06 | Link to Comment Hamsterfist
Hamsterfist's picture

Wouldn't hyperinflation be better for the 'common' man?  Sure I am $200k in the hole, but after I start making $10Mil a year, since a trip to McDonalds now costs $100k, aren't I better off?  Debt free at that point bitchez!

Thu, 09/30/2010 - 03:39 | Link to Comment Herry12
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