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M2 Update
The "M" is there. Now all the Fed needs to get is to find the velocity that goes with it. However, with GDP now realistically declining, the latter is proving to be quite problematic for the Chairman.
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mm mm good.
Ding Ding Ding, I think we have a plot for Mission Impossible 4.
Yeah, but first you haffta "dig" up Peter Graves. (Pun intended)
http://www.youtube.com/watch?v=k55NuWQCh78
http://www.youtube.com/watch?v=LHcP4MWABGY&feature=av2e
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M2 or M3 don't even matter, we don't need any money printing to have hyperinflation or hyperdevaluation(if the deflationists understand that better)
There will be more then enough dollars around in the event of a bond bubble bursting.
I guess this kind of data is going to lead the crowd to the bursting of the bond bubble but I don't need to see this data to know that bonds are the riskiest place to be at this point.
Why would the government bond bubble ever burst in nominal terms if the Fed is setting a high price floor?
is that serious question?
The Fed has infinite money. If it wants bonds to trade at a certain price, then it can do so.
In the process, the Fed can cause hyperinflation - but the asset bubble can be propped up indefinitely if need be.
The Fed needs to keep the yield as low as possible, or the government will have major cash flow problems (to say the least).
Do you think the government will cut the deficit? They're grilling Roger Fucking Clemens right now. I mean, truly...
Ding, ding, ding. We have a winner, for now. There will be a point in time when it cannot be supported, IMHO, but for now there is no bubble. You nailed it for the most part. 30 year goes to 2.5%, IMHO, at least 3%. Bond bubbles, God, these people could not see one bubble in the past now they see bubbles EVERYWHERE except in stocks even though the Fed needs to liquefy the market every few months, please.
Rosenberg says the US will never default and calls it obnoxious that people would say such a thing with the taxing power of the government, etc. I disagree with him, pure and simple. There is simply no way we could pay off this debt without destroying all private capital in the process. We devalue, people lose confidence, dump treasuries and even the Fed cannot stop that when it happens. When will it happen? I dunno.
There's no way that THIS government will default. It would be a major admission of failure if they did so.
We can't have that, now. Can we?
Inflation via the creation of money out of thin air to pay your debt is default.
Infaultion.
Soft defaults, yes. Like gradually reneging on social security and medicare, cutting back on services and foreign expenditures. They'll never call it soft defaults, but that's what it is when you promise something in return for payment and then don't provide it as promised.
Right, and if we favor international creditors over domestic, what does that do to our ability to continue refinancing our debt? If I was china and you told me that you were cutting medical care in an effort to make sure I got paid, I would be really fucking happy...
We have a LOT of domestic fat to trim before we have to start flipping the bird to our international creditors (moreso than we usually do).
I think the feedback loop is going to take a while to come full circle.
soft defaults starting already...http://online.wsj.com/article/SB1000142405274870447610457543979228725537...
soft defaults starting already...http://online.wsj.com/article/SB1000142405274870447610457543979228725537...
Soft default, exactly. Need to wait out the current generation that have been paying in since they were 15. Once they are dead they can really usher in the NWO.
"Rosenberg says the US will never default and calls it obnoxious that people would say such a thing with the taxing power of the government, etc"
That was already discredited. Rosenberg needs to read the book "This time is different". Which is appropriately named, as far as that statement goes.
As long as the central bank of a country has the ability to buy government bonds - monetize it's own debt, a country cannot defalut. Greece is different, they can't print their own money since they relinquished this right to the ECB.
Take Japan for instance, it's been 20 years and still has not defaulted.......as long as hyperinflation is concerned, if history is any guide, hyperinflation was historically most of the time coincident with periods of war, except for the OPEC shock back in the 70s.
Guess where we're heading........
I suspect capital has already been substantially destroyed.
Capital destroyed? By a socialist? Surely not.
"In the process, the Fed can cause hyperinflation - but the asset bubble can be propped up indefinitely if need be."
Like all things in financial alchemy, it works until it doesn't work.
The BOE and George Soros might not agree with your above statement.
One such example is if the world says "enough is enough" the dollar loses it's reserve status, and we pay $20 p/gallon for a gallon of gas. Interest rates stay at whatever level of stupidity they are, unemployment goes to + 20%, and Ben Bernanke wins Time Magazines Man Of The Century.
Don't forget...Tulip bulbs will never go down in value.
I'm not sure we're actually in disagreement. The bonds would go down in value relative to other assets - crash, in fact - but the nominal price can be held up.
That's the thrust of my statement. People who are actually short treasuries over the long run will get hammered - as they have been.
The Fed will do everything to keep those interest payments down. Even a moderate increase by historical standards could cause political chaos. So the Fed will avoid it.
The dollar will lose its reserve status, but the Fed can keep the presses running longer than you can stay solvent.
Soros has the ammo to take down the pound. Certainly more ammo than you do.
Had the BOE not caved and continued intervention...Soros would have been fucked.
The Fed cannot avoid anything, they are backed into a corner.
So reprogramming the computer to make the challenge doable like in Star Trek isn't going to work?
http://www.youtube.com/watch?v=FTeWGD4Q9T4
Have you seen Trouble with Tribbles?
http://www.youtube.com/watch?v=rQ6LC-olw9Q&feature=related
Like multiplying debts.
You don't make sense to me. It seems you are saying the Fed can keep nominal UST prices stable at the cost of debasing the currency. Isn't that what shorting a currency is all about?
In other words you don't take your short proceeds and keep in in the $US...
And which currency do you use to short the dollar?
Loonie? Aussie? Lease your Gold? It has to be something...
you be pretty brave to short US against AUD or CAD in my opinion. This isnt just "US" thing. its going to go global, de coupling is for fools. Once China falls over those 2 resource currencies / economies are going to get hit hard i would think. They are a play on risk, always have been, always will be. if risk appetite evaporates you dont want to be long AUD or CAD
Yes...and with the leverage the risk/reward just isn't worth it.
The only real way to short the USD is to go long gold in USDs. Wether this is the right thing to do or not depends on the deflation / inflation, USD devaluation urguments. Inflation, USD devaluation : long gold will work well against the USD. Deflation: cash is the only thing you want to be holding.
Yes, sir. I would agree with you. However, I have physical gold which I can use to trade in whichever currency of my liking.
You could be right about that. But one definition of inflation is too much money chasing too few goods. I wonder if raw materials = goods. But given all things trade together these days you have at least a short-term point, and maybe just a good point. Thx.
yes RB i agree this needs to be taken into consideration. If PM's soar on inflation, USD devaluation do investors seeking hard assets go after copper, nickel, zinc and other hard assets? I dont know. But im not sure it would be enough to offset the decline in price dues to a collapse in natural end user demand.
I totally agree with you... the Fed will TRY to do this. And I think the strategy will work for awhile, as Europe and Japan both suck at Keynesian economics.
It may work longer than most people think.
The Obamas just want to kick the can long enough to get the hell out of DC by the end of 2012. I'm thinking they need about $3 trillion in additional Treasury debt to pull it off. Can the Fed expand their balance sheet that much?
Yes they can!
But I bet we have one helluva currency crisis well before then.
Exactly. Many economic systems appeared "eternal" and "self-perpetuating" until the very day of the collapse. Many collapses are gradual, however, almost invisible at first until they accelerate.
Roger's deffered comp must be in gold bullion.
First super exclusive NY club to accept gold only from its elite clients. It could happen as a status statement/stunt to attract the hyper elite customers. Then it could become a way to market the super high end.
They gotta take down Clemens because without the white knight doing time when Barry Bonds gets taken down for the same actions it will be called racist. Perjury is perjury unless you were a Governor of Arkansas or have victim-hood genetics.
"The Fed has infinite money".
Sorry, that's wrong. The Fed only has infinite dollars when it leaves the International Financial System. Until then, it's subservient to the Bond Markets and not the other way around. Do you honestly have any idea how big the Bond Markets are, or the history of them?
Wrong. The Fed has infinite money. In fact a dollar is nothing other than a receipt that a transaction of debt has occured; Money = Debt, Debt = Money. I am assuming you have a dollar in your pocket, please read toward the upper left corner "This Note Is Legal Tender For All Debts Public And Private"
That is how it works in a fractional reserve banking system.
The Fed has the infinite ABILITY to print money... well... until the dollar is rejected as a medium of exchange. You know, like that time Zimbabweans rejected their own currency and actually used the USD as the adpoted currency of choice in the black (pardon the pun) market? Because Zimbabwe Bob printed to infinity?
That is how a fractional reserve banking system collapses.
There are practical limits to what the Fed is willing to print... because... history has shown on numerous occasions, there are nasty consequences for infinite printing.
You really have no idea of how the Fed monetizes its debt, do you?
No. Explain.
Basically by selling Treasuries. Physical cash is a very small part of the money supply. Here's one starting place; perhaps someone else can do better:
http://en.wikipedia.org/wiki/Monetization
But where I'd really start first is this:
http://www.youtube.com/watch?v=vVkFb26u9g8&feature=search
This is the "Debt as Money" video series, and it's pretty enjoyable. Ought to be seen by everyone before they graduate High School.
Finally, this also is really required reading:
http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
It sets straight many past misconceptions, which unfortunately Economists still work with.
I hope that helps.
The Fed sells Treasuries?
I don't think so.
School up son.
Where did you get that idea? Yes, they do indeed both buy and sell Treasuries. It's one of the purposes of their Open Market Operations. They also buy and sell Federal Agency Securities. Arguably they buy and sell anything they please, whether constrained by law or not, but the issue of what they purchase outside of the law is a separate one. The point is, in their most widely recognized function, they do indeed buy and sell Treasuries.
What does the Treasury sell?
What does the Fed sell?
Does the Fed have any form of legal consideration?
Now you're being deliberately obtuse. Clearly my mistake in thinking you were serious.
My word, that didn't help at all, student. Just start with the Wikipedia reference and read very... slowly. You might want to use a highlighter.
Monetization is the process of using printed money (credit) to PURCHASE assets of varying types. In the current version of "QE Lite", the Federal Reserve is exchanging "created" money for Treasury debt of various durations. The Fed buys the Treasury notes to put on it's balance sheet, and the Treasury gets the cash (credit) to payz des bilz for the US Gubbmint. And not long ago, the Fed monetized a whole lot of MBS... of which it's "losses" will be eventually guaranteed by the U.S. governement, and the obligation sent to the Treasury-- who will then issue more debt to finance that obligation... that the Fed will likely monetize. Nice. Circle. Jerk. Huh?
In ordinary open market operations, the Fed PURCHASES Treasury securities from the banking system (via dealers) to create incremental demand securities and lower yields. The exchange for those securities with "money" can go through the banking system for fractional lending-- or as currently the case sit on the banks balance sheet as excess reserves. When the Fed wants to take liquidity out of the system and raise interest rates, they will SELL Treasuty securities and take money out of the system.
As a central bank, the Fed has an infinite ABILITY to monetize Treasury debt buy purchasing it and letting it sit on it's (expanded) balance sheet. But the more money it creates to purpetuate the process, the more people question the "full faith and credit" of that currency. The "money is debt" moniker in a fractioanl system is useful only if those using it beleive that the debt is "good". Which is most of the time. Money IS NOT DEBT when the fractional system collapses. In such cases, sometimes GOLD is MONEY. Or the WORLD's RESERVE CURRENCY is MONEY. And yeah... $h!t like that does happen. And that was pretty much my underlying point. There are practical limits.
Perhaps you didn't need that education, being a student of the Interwebs and all. But I figured I had to put my decade of employment at the Fed put to practical use somehow. Consider yourself a victim.
Thanks for taking the time to write up what I didn't have the patience for. The only part I disagree with is in your categorization of money at the end. Federal Reserve Notes are debt, regardless of whether the fractional system remains. It might be uncollectable debt, but it still represents debt, nonetheless.
What people recognize for exchanges is a separate issue. In times of collapse, I agree, it won't be FRNs.
Sorry did not read far enough down the post but the examples murpy gives help visualize the process.
Bingo. You see, that's EXACTLY the problem which I constantly see. How in the world does one explain how the Fed monetizes debt to the average person? My original example, while admittedly simplistic, is the best that I can do which still keeps people's attention. When one goes off on a more complete description, people start to lose interest.
I think your experience is a common one. I would love to see a way which gives a more complete description, and yet keeps people's interest. I'm at a loss as to how to do this better.
I saw that money as debt video two or three years ago, great starting point and started me on reading 3 or 4 hrs a day trying to figure out how they got away with it ( still not sure about that except there must be a bunch of us that are really not educated enough).
This guy gives one of the better primers for money and where it comes form and where it gose to if you are interested, go to his archives and you can pick out more on the subject.
http://mises.org/daily/4631
OK, neoclassical theory says: we increase M so we get inflation.
Theory of endogenous money says something completely different:
1. Private economy has no marginal utility of more debt (as pointed out in ZH before, both in private e.g. 'Give me customers not credit' and in public e.g. 'Death of Keynes 2010')
2. Private economy doesn't want/need more debt (simple marginal utility reasoning)
3. Banks cannot create credits (since they can't force lending)
4. Inactive reserves rise (since M rises)
5. Organic cash flows dry up
6. Distressed private sector selling continues to avoid itself going bankrupt
7. The motive for deflation remains
8. Prices continue to fall
Thus velocity of money remains slow as a turtle. Ouch, that hurts banks.
So, now they need some pretty wild imagination to figure out a reason to grow credit in such a context. As Marc Faber suggests, the US will go to war. But in order to grow debt fast enough, it will need a lot of war. QE1.1 fed purchases, check, QE2, Afghanistan, check, Iran QE3, soon check. When will this madness end?
"The Fed has infinite money." - nope, they have the illusion that they can apply infinite money to the problems at hand. In actual fact they can not apply infinite money as CONfidence would fail way before they apply that amount.
Do they have a ways to go before CONfidence fails? Yes. How long is that? Anyone's guess.
correct! the fed can do what ever it likes, as it has done, to no effect.
Its what 300 million people do that matters, not what 7 physcopathic Fed governers do.
If everyone decides to save and pay debt and refuse to spend and borrow the game is up regarless of QE2,3,4 whatever.
This is why the Fed controlled MSM is so hell bent on maintaining confidence regardless of how many lies they tell and how ridiculous they sound to those here on ZH.
Economies are primarily confidence based. Once confidence goes its all over.
the US government does not have "cash flow problems". They do not deal in "cash" when they spend, or when they make entitlement payments. Rather, they deal in "credits" to bank accounts. They have an unlimited supply of those credits as they are simply coordinated streams of electrons. The Treasury bond market is not used to "fund" the government, it is used to manage the money supply and the interest rate.
You know bonds are a fucking facade when you get questions like this.
Heh. Ok, that's funny. To say nothing about some of the attempts at answering it.
What I also find funny is how the Chinese were eagerly buying up our Bonds, until they realized that historically Bonds were originally created for, and used, (extremely successfully) solely to finance wars. I.e. the Chinese were funding our Military to hedge them in. Then they tried dropping the T-bills, only to realize that they were screwed either way.
There's a lot that people don't understand. And even more that they don't want to understand.
ya you will go bankrupt shorting them right now... have you heard of Japan?
That's funny. I just heard Kudlow say that there is no bond bubble. ;)
Kudlow couldn't spot a bubble if it blew up his nose.
It may only take one country to default. The CDS casino will have to pay out, and that could cause the first domino to fall. Then one by one down they all go.
This time is different all right....all this crap wasn't "insured" before.
We're insured?
Oh thank god.
Just give the populace an instantaneous monetary nuclear bomb scare. Make them believe that month-over-month prices will increase in double digit percentages, that it is int'l government policy and to be as sustained as ZIRP. Then every wage earner, hoarder, saver will blow their hard-earned stashes right away. They will exchange to hoard for something more stable. Flour, canned goods, future contracts. Borrowing will commence in earnest as all with try to make assets liquid in order to procure some (ANY) means of purchasing power preservation.
It will be the ugly stepchild of central planning and the ruination of most. But think of the velocity...
Can anyone explain how you get hyperinflation when people have no jobs and no money? This is a tale of two economies, the rich and everyone else. The rich already have inflation in their asset prices, including commodities, but for everyone else it is deflation on balance and it will only get worse. Plus, you forget that all these dollars are spread across the world. As asset prices collapse, bank balances will rise dramatically, but like the reserves at the Fed, that money will stay there until the banks themselves collapse and then the money will be extinguished.
And then there is credit, plenty for the rich, very little for everyone else. That isn't going to cause hyperinflation. Unless the USG prints up large checks and mails them to the people, I see no chance of even "normal" inflation. The velocity just won't be there. Remember that the great Weimar inflation was caused by printing cash and putting in the hands of the people, mainly the trade unions. That is not happening now.
when the real economy cannot service the debt, the debt and th dollar it backs get sold off.
The dollar is relative my friend. If they will dump the Euro (not the reserve), u think the Dollar will fall- ha
a market is a market, the dollar will fall for the same reason the Euro did.
You, jonny bravo and CALPERS dont have enough capital to stop the dollar from falling
"As asset prices collapse, bank balances will rise dramatically"
So as my house drops in value, my bank balance rises to compensate? There seems to be a few hitches with the system. Should I contact my bank?
I think so, hyperinflation was imported in Wimar, it did not start at home. Other countries lost confidence in the currency because people had no jobs and no money, and it became obvious there was no real way for Wimar to pay its debt short of printing. Our gov is printing money to prop up our economy, so we can service our debt through taxation, and it is becoming more and more obvious that we will not be able to service our debt! Our tax base is shrinking (no jobs or money velocity at home) as our debt load is rising, its a bad combination. Its a vicious spiral that if we cant break soon, it will signal the end of our reserve currency status, and that will re import inflation here in a big way. At some point the fed will over compensate for our unwillingness to take on more debt, they can not let deflation win. There are two reasons for this, Asset depreciation shrinks tax levies, and shrinks banks already weak balance sheets, its not going to happen. The people will starve to death as their money becomes worthless, first asset deflation (now), and then runaway inflation. We have some advantages though, we are alot bigger economy than Wimar, and Saud takes our dolears for crude. I fear Iran getting nukes may put a strain on that though. Between that, our spiraling debt and emerging world economies, its starting to look like the perfect storm may be brewing?
sorry about this comment but, does anyone know what happened to Bruce Krasting's blog??
No, I just looked and no BK.
Yes there is...you have to access it through a se.
Here is a post from today:
http://brucekrasting.blogspot.com/2010/08/hello-we-lost-track-of-25-billion.html
Is there any proof the Japaneese households are actually buying bonds, you know, like American households surely are?
20%+ savings rate for years.
Their nationalism is admirable if that truly is the case. Growing up here in greed central, it just seems so out of touch with reality. I hope somehow commodities prices will stay subdued for the foreseeable future. It reminds me of an old song, "hanging on in quiet desperation is the English way, the time has come, the song is over, thought I'd something more to say..."
I can tell you that Bonds are selling like hotcakes down here in the South. <sarcasm off>
Our insurance is looking pretty good too.
Precious Bitchez...
yes like all bubbles, the said asset sells like hotcakes.
Veiled dig at the precious?
Now that I think about it, those hotcakes were beautifly lite.
Does M2 include all of the reserves the banks deposit at the Fed and earn that .25% on? That money is pure printing press product. Inflation powder if it ever escaped the banks.
Do we have a new category, MZV?
and seriously, ;-O, when does the uncertainty that will allow markets to clear, well... clear?
No time soon.
- Ned
lol I love comments assuming Zimbabwe Ben wants velocity. Hmm it seems like if he wanted that he could open up the discount window to J6P. Who here wouldn't load up at 0% on trash assets as collateral? Only people with some power are going to get the printing press' largess. For us serfs we, once again, will be left holding the bag.
He has opened the discount window to JSP. That is the purpose of buying the long end of the curve.
refi, refi, refi, lower mortgage payments/higher discretionary cash.
However, if those people aren't using the cash...no velocity. You can lead a horse to water...
You should never invest other people's money. Trust me on this...
Why is that?
Because the broke in broker is what you'll be.
I am giving you a hard time because your posts read like you are sure you know everything. Second guessing yourself is the best survival trait I have discovered in my humbling business...
not sure about that RB plenty here on ZH do exactly that for a living
However, if those people aren't using the cash...no velocity.
Exactamundo! Other than actually dropping the money from helicopters (which he might yet do) there is really no way for him to get the money into the economy. That is why bonds will be good for at least a year as we continue to de-leverage and/or deflate. Eventually, IMO our inflation will come as the rest of the world starts repatriating our dollars back to us which can quickly lead to hyperinflation.
The inflation is inevitable.
The employment is not.
That is nasty.
TD you are smart human, ZH is amazing, but what i do not like is this idiot cramer picture every where
TD and ZH can't control adsense words -- the more we type Cramer, the more we'll see his stupid mug. But be sure to click it...
Which is why we should make a code word for him, such as "Breasts".
+1
When throwing good money[?] after bad[?] went quantum? Never fear CDT will save the day see:
http://en.wikipedia.org/wiki/Causal_dynamical_triangulation
Skippy....how many economic universe's can we create and still believe to understand_all_their interactions...eh? Got stasis pods Bitchzes!!!!
You mean to say all these record food stamps ain't helpin'?
By subsisting on transfer payments via WIC, Sec. 8, SSI, Medicaid, 'free' cell phones, food stamps, 'free' transportaion to their drug rehab centers by taxi, and other 'free' money, many millions are living well and have been for generations considering they find there is no work for which they are qualified and the available work they find demeaning and a dis in their lives, the fact that 3 generations have been doing it cradle to grave proves that one does not have to do a lick of work to survive, just play the system for all it is worth.
In a world where the 60 year vision of a future that gets progressively better has atrophied, there is to be more and more of this as we need less people year after year to do the work that needs to be done.
Until we recognize that new work has to be invented and likely compensated for in an entirely new way, the nation and the world will continue to degenerate.
where do we find the above chart?
It's not deflation, it's not inflation it's a YO-YO!
Marching Towards a Yo-Yo Depression
if you go to bullandbearwise.com and see money stock h.6 weekly you'll see that M1 is growing faster than 2 or 3. the point of that is dubious, as in Japan, the lost generation, the BOJ parked money in MM accounts routinely, when it just wasn't enough to bolster reserves with something other than hard cash. and routinely they would sweep up those MM balances. looking at M2 without any other measure is like looking at the moon against a sheet of white paper. the point is, well hell, there is no point, this is the lost century.
It's going to be much, much worse.
FED will keep bummer fucking the pinball economy until the TLT goes TILT!
I am no economist. How do we guess at M3 given:
...the FED has stopped publishing information on the M3 money supply as it had been deemed no longer useful. Skeptics have argued however, that by no longer reporting the total amount of money in circulation the FED is hiding a huge amount of money creation which is being used to fund the US trade deficit.
Williams publishes his M3 charts here:
http://www.shadowstats.com/alternate_data/money-supply-charts
REALLY nasty looking.
+1. What I haven't seen discussed anywhere though is that M3 has flatlined from an incredible fall, and even bounced up a little lately.
Any way you look at it, we're at a lower level of economic activity right now.
Thanks for the link. A.Evans-Pritchard claims that
U. S M3 is trailing down on a 10% annualized rate.
How come 5000 economists cannot hand Bennie
the only chart of importance for monetary policy ?
So many shoes, so few places to hide.
This is yet one and probably one of the longest out.
Long before (or not, once crashes start they sometimes snowball very fast) the bond market blows, I fear we are going to financially eat it for a myriad of reasons.
Kick the can, extend and pretend, for the masses and their handlers.
Prepare for those of us that see the writing on the wall. I fear things are going to turn bleak, fast within the year. But odds favor it not being caused by the bond market - yet.
"problematic" bitchz
the Ms dont Matter. Without credit depression persists. Banks lend to the treasury and the treasury prints IOUs and the mouse in the wheel never catches the cheese. Whoever said "the cheese is always free in the middle of the mousetrap" didn't take into account the wheel. In other words, the monetary base can increase exponentially( those M&Ms) but w/out that cash finding its way into the money supply rates continue downward, the dollar becomes the true bubble and dearer!. As Bright Eyes declared "You Maniacs!(look another M )You blew it up! Ah, damn you! G-d damn you all to hell!"
Ben is thrashing for sure.
Anyone thought of a 'long trees, short dollars' trade?
by trees would be 'timber, pulp'...
ha...
The dollar is made of cotton and linen.
Fidelity finally reports what Tyler has been reporting for many many weeks regarding massive outflows out of 401k funds. They claim hardship withdrawals, but we all know its alot more than that. People are getting out of the scam that is Wall Street. Stop trading with these crooks, put their asses on the unemployment line. Let them feel the pain. Close your brokerage accts, get your cash and put it in a local community bank or credit union. Stop feeding these lying bastards commission money to steal the rest of your money with. Let them kill each other. Obviously, our regulators are turning a blind eye to the casino operation, and Bernanke is fueling it. Stay away, or get what you deserve. That simple. This market does not trade on fundamentals, technicals, or reality anymore. Only a fool puts their money in this market buying worthless stock or even more worthless ETF's.
What's happening is Wall Street's nightmare: becoming shunned, marginalized and irrelevant. For a while during the 1970s this happened. Wall Streeters need status and attention as much as money. Their egos are fragile. Once "Masters of the Universe" and "Gurus" is off the table, they'll start hollering that it's the government's fault.
I agree with taking your money out and putting it into community banks and credit unions, but I would also add buying physical gold and silver
- would be a run on the globalist banking ponzi scheme
vote for real money with your dollars, by swapping them for gold and silver
Two things need to happen :
1) Banks have to begin finally offer a solution for the principal part of real estate loans.
2) Bank balance sheets have to be deleveraged.
3) Free money will burst into economy through losening credit standards.
4) Bond market will collaps at first sight of small businesses hiring again.
Good luck deflationists.
Uh... trader... that's FOUR things, not TWO.
Perhaps that truly makes you an inflationist. ;)
2=4 I like it.
good luck
OK, so lets recap.
There's plenty of money, but it's not getting where it needs to go, leading to unemployment.
Hmmmm.
I've got it!
Can we not all get jobs delivering money?
That was a job in Weimar.
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Thank you once again for the one sided reporting on this site. Baltic Dry Index jumps 36 % this month and you guys are still debating the "Hindenburg Omen". I know what will happen next :
I will call it the "Zero Hedge Omen"...:=)))
.DXY up large this morning. Been long since 80.2. Chart looks great. Starting minute (iii) of minor 3 of Primary 3. Will explode through the Jan-09 high of 89.6 before this is over.
Equities down
Dollar up
Bonds up (although a retrace down is coming)
Gold? I don't know. Should retrace down, should decline with deflation, but larger trend so persistently bullish. I would never short it.
This notion of loosening credit standards to "allow" small business to borrow, which it is "clamoring" to do, is a lot of propaganda noise. Businesses are not looking to borrow, as nothing pencils out. There's no reasonable basis to forecast quantity and quality of demand - it's all guesswork, unjustifiable risk. Ask too high, bid too low. Reality and fantasy colliding, creating an economy in "stall" mode.
Everyone thinks they have a feel for what is happening in bonds and inflation/deflation. Most everyone is talking his or her book, and on ZH that mostly means gold.
Here is a layout.
1) At 14 trillion dollars of debt, every 1% increase in interest rates would be 140 billion dollars of budget smash. If you believe that Bernanke can control these things (and he can on the short end) then rates are not going up. Period.
2) It is hard to raise the prices of things no one wants to buy. It is even more difficult to raise the prices of anything at all, necessity or not, if economic activity is declining. IOW, to get "hyperinflationary" prices of something, some things, those prices have to rise by definition and it's hard to see how that happens when the recession is forever and people have discovered that their discretion on spending has two directions and their chosen direction is down. Only food and oil, not in that order, are not discretionary, and problems with those do not cause hyperinflation -- they cause wars.
3) US government bonds will never default because the intertwining of swaps globally precludes it. The US govt is too big to fail for reasons you folks have not fully embraced. The entire world would bail out the US govt to avoid the swap explosion.
4) In the end, the debt will be dealt with in a non economic way. The bond holders will be killed in war and estate tax will erase it (if they are US citizens).
The TBTD (Too Big To Default, i.e. US, Eurozone and China) will probably seek to rewrite the rules should the Black Swan US default-event approach. So the question is, who is going to be the turkey and who will be the butcher when the knife falls? It is not entirely certain which end of the tail is fat, there are lots of tails.
Regardless, the exponential function continues to raise the stakes.
A frightening way to depict the diminishing velocity of money (or the increasing ineffectiveness of debt) is the change (in dollars) in GDP/change in debt.
http://i34.tinypic.com/wb31p4.jpg
source: http://bit.ly/cVVwka