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On The Mean Reversion Of America's Luck, And Why Interest Outlays Are Really 30% Of US Revenues

Tyler Durden's picture


When discussing central planning, as manifested by the policies of the world's central banks, a recurring theme is the upcoming reversion to the mean: whether in economic data, in financial statistics, or, as Dylan Grice points out in his latest piece, in luck. While the mandate of every institution, whose existence depends on the perpetuation of the status quo, is to extend the amplitude of all such deviations from the trendline median, there is only so much that hope, myth and endless paper dilution can achieve. And alas for the US, whose 3.5% bond yields are, according to Grice, primarily due to "150% luck", the mean reversion is about to come crashing down with a vengeance after 30 years of rubber band stretching. The primary reason is that while the official percentage of interest expenditures as a portion of total government revenues is roughly 10% based on official propaganda data, the real number, factoring in gross interest expense, and assuming a reversion to the historic average debt yield of 5.8%, means that right now, the US government is already spending 30% of its revenues on gross interest payments! And what is worse, is that the chart has entered the parabolic phase. Once the convergence of theoretical and real rates happens, and all those who wonder who will buy US debt get their answer (which will happen once the 10 Year is trading at 6% or more), the inevitability of the US transition into the next phase of the "Weimar" experiment will become all too obvious. Because once the abovementioned percentage hits 50%, it is game over.

Below Grice lays out the framework for the disinflation delusion that has permeated the minds of all economists to the point where divergence from the mean is now taken as gospel:

What drove the disinflation of the last thirty years? Politicians would say it was because they granted their central banks independence. But the pioneering experiment here didn’t take place until ten years into the disinflation, when the Reserve Bank of New Zealand Act 1989 gave that central bank the sole mandate to pursue price stability. Macroeconomists would site breakthroughs in our understanding. Except there haven’t been any. Today’s hard money/soft money debate is identical to the Monetarist/Keynesian debate of the 1970s, the US bimetallism agitation of the late 19th century, and the Currency vs Banking School controversy in the UK during the 1840s.

Was it the de-unionisation of the workforce? The quiescence of oil markets since the two extreme shocks of the 70s? The dumping of cheap labour from Eastern Europe, China and India onto the global labour market? Technology enhanced productivity growth? Or maybe it was just because the CPI numbers are so heavily manipulated?

Maybe it was all of these things. Maybe it was none of these things … for the little that it’s worth, my theory is that no-one has an adequate theory, other than it being down to the usual combination of luck and judgment on the part of policymakers … or about 150% luck. The problem is luck mean-reverts. The mammoth fiscal challenges (see chart below) currently being shirked by the US political class suggest that mean-reversion is imminent.

Ireland is probably the best example of an entity for which the cognitive dissonance between an imaginary desired universe and a violent snapback to reality has finally manifested itself after a 30 year absence:

Ireland provides a good illustration. Today it’s going through a real and wrenching depression - there is no other word for it and it is heartbreaking to watch – partly because the terms of its bailout are so onerous. And what may well be the seeds of a future popular backlash against the euro can be detected in the election of Fine Gael on a ticket of renegotiating the bailout terms, which currently require them to pay a 5.8% rate of interest.

Unlike Ireland, the US still has the luxury of being able to stick its head deep in the sand of denial.

Look at the following chart showing two hundred years or so of US government borrowing costs. Two hundred years is a lengthy period of time. There have been economic booms and financial panics, localized wars and world wars, empires have risen and empires have fallen, technological change has made each successive generation’s world unrecognizable from that which preceded it. Yet government yields have remained broadly mean-reverting (and the US has been one of the best run economies over that time – other governments’ bond yields demonstrate an unpleasant historic skew towards large numbers). Coincidentally enough, the average rate of interest over that period has been around 5.8%, the rate which the new Irish government today says is ‘crippling.’

And here is the math that nobody in D.C. will ever dare touch with a ten foot pole as it will confirm beyond a reasonable doubt that the US is now well on its way to monetizing its future (read: not winning)

In other words, Ireland is so indebted that it is struggling to pay a rate of interest posterity would barely yawn at. But Ireland isn’t the only one.Take the US government, for example, which currently pays around 10% of its revenues on interest payments. This doesn’t sound too bad. The problem is that those federal government interest payments are calculated net of the coupons paid into federally run programs (e.g. social security) as these are deemed ‘intragovernment transfers.’ Yet those coupons to social security are made to fund a real obligation to American citizens and as such, represent payments on a real liability. On a gross basis the US government pays out 15% of its revenues on interest payments, which makes for less comfortable reading. So the net numbers remain the most widely quoted.

And where the figure gets downright ugly is if one assumes that in order to find buyers for the $4 trillion in debt over the next two years (once the Fed supposedly is out of the picture after June 30), rates revert to the mean. Which they will. What happens next is a cointoss on whether or not we enter a Weimar-style debt crunch.

Suppose the US government had to pay the 5.8% yield it has paid on average over the last two hundred years? The share of revenues spent on gross interest payments would be a staggering 30% (see chart above). If it had  to pay the 6.9% it’s paid on average since WW2, those gross interest payments would account for 37% of revenues. So it’s not difficult to see the potential for a dangerously self-reinforcing spiral of higher yields straining public finances, hurting confidence in the US governments’ ability to repay without inflating, leading to higher yields, etc.

Lastly, Grice makes it all too clear why we are now all screwed, and no matter how many Bernanke dog and pony shows we have, the final outcome is not a matter of if but when.

America’s political class might arrest the trend which threatens their government’s solvency (chart below). They might find a palatable solution to the healthcare system’s chronic underfunding. They might defy Churchill’s quip, and skip straight to doing the right thing. But if they don’t, such a spiral becomes a question of when and not if. And what would the Fed do then? Bernanke says the Fed “will not allow inflation to get above low and stable levels.” He says it has learned the lessons of the 1970s. He’s read the books. He can recite the theory. Yet a lifetime reading books about the Great Depression (and writing a few) didn’t help him spot the greatest credit inflation since that catastrophe any more than reading “The Ten Habits of Highly Successful People” would make him successful. It’s the doing that counts. So before lending to the US government for 3.5% over ten years, bear in mind that when it comes to a real inflation fight, not one of the Fed economists you’re betting on has ever been in one.

Our advice to the good doctor and his minions (not to mention all readers), is instead of reading multitudes of history books on the depression, on Japan, or on midget tossing (for those from the SEC), is to read one book. Just one. Link here.


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Sun, 03/06/2011 - 00:19 | 1022968 Michael
Michael's picture

Universal Bankruptcy Act of 2011. Book it!

Sun, 03/06/2011 - 00:32 | 1022979 Oh regional Indian
Oh regional Indian's picture

Universal reversion to the mean. Book that. And while you are at it, look at that word.

Mean. I mean, how mean, eh? The balanced center is the same as :



offensive, selfish, or unaccommodating; nasty; malicious, small-minded or ignoble



Global reversion to the mean implies the following, to me:

1) Drastic reduction in population

2) Drastic reduction in availability (of most things), our current state of a-Bun-Dance is fake. An oily fake at that.

3) Purchasing power parity? Hah! That will be a tough one to swallow. So mean.

Personally, I say good. 

Better mean than late. or sorry. Than never. Or some such thing.





Sun, 03/06/2011 - 00:49 | 1023017 asdasmos
asdasmos's picture


Greenspan on Gold's Rise - CNBC 4/3/11


Sun, 03/06/2011 - 08:02 | 1023259 Snidley Whipsnae
Snidley Whipsnae's picture

To paraphrase Greenspan... 'This economy is on the move (he means improving I assume) and the rise in oil prices are going to cripple US economic improvement'...

This is exactly what I expected the Fed/US Gov to say. They will claim that they had the economy on the mend and that the dust ups in the Mid East caused oil prices to increase and derail economic improvement in the US.

I call bs on this claim. Central banks around the world are printing fiat as fast as possible which is in turn causing commodities to rise...oil is a commoditiy and without oil the world as we know it stops.

As for Greenspans comments on gold 'some are uncomfortable with the problems with the Euro and Dollar'... No kidding? If some were not 'uncomfortable' with the fiat printing would the price of gold have increased 4 -5 times priced in these fiats? Do we need Greenspan to tell us the obvious? And his comment that 'this society is not ready for a return to a gold backed currency' ... disingenious at best. Those of 'this society' that are driving the price of PMs up are definitely ready for a return to a currency, PMs, that are a store of value. The remainder don't have a clue.

Sun, 03/06/2011 - 10:28 | 1023363 Backspin
Backspin's picture

Right on, right on, and right on, Snidley.  Greenspan is as full of crap as he ever was.

About the dollar and the Euro, about all he could say was that they both had problems, and he tried to paint that as a good thing.  They are relatively stable vs. each other!  Woohoo!  What a joke.  How stable are they against a loaf of bread, Al?

And he said it would be incredibly complicated to return to a gold standard.  Wrong!  All we need to return to a gold standard is for the government to do nothing.  PM will emerge as the standard automatically.

And when Greenspan is asked about gold, he spends two minutes talking about Brent vs. WTIC spreads.

To think that I revered this guy at one time.  Glad the scales have fallen from my eyes.

Sun, 03/06/2011 - 14:02 | 1023727 RockyRacoon
RockyRacoon's picture

Looks like you are viewing things correctly.  With this:

And he said it would be incredibly complicated to return to a gold standard.

What Greenspan meant, of course, was that returning to a gold standard that the Fed/Gov't could manipulate and control is complicated. 

Sun, 03/06/2011 - 11:48 | 1023455 Pool Shark
Pool Shark's picture

Well Played Snidely. This will be the party line:

"Don't blame the Fed; we had everything working perfectly until those darned unstable ME countries threw a mokey wrench into it."

Sun, 03/06/2011 - 13:33 | 1023658 Old. No. 7
Old. No. 7's picture

Perhaps the expiration of quantitative easing by June 2011 meme offers a clue as to when they expect  oil prices to cause the wheels to come off. I doubt it will take that long. Seems they've discovered a new tool to corral the long bond.

Sun, 03/06/2011 - 14:54 | 1023841 chinaguy
chinaguy's picture

The best things Economists do is explain the "unforeseen reasons" that caused their estimates to be 180' degrees wrong.

Sun, 03/06/2011 - 09:42 | 1023330 Meme Iamfurst
Meme Iamfurst's picture

Greenspan is an imbecil, a charlatan, a fake, a liar and cheat ( in my opinion).  Another emperor with no clothes.  Another Goldman consultant incase you didn't know.

His interest in Gold is a rue to make himself look important.  You don't need to be smart to see the sun rise.

Sun, 03/06/2011 - 10:18 | 1023358 Michael
Michael's picture

Has everyone seen these UFO videos from Jan 28, 2011 filmed by tourists hovering over the Dome of the Rock in Jerusalem?


2nd UFO Jerusalem Dome of the Rock Temple Mount UFO video surfaces from 01/28/2011.

Jerusalem UFO - 4th Video Synced with 1st and 2nd

Cool Huh?

Sun, 03/06/2011 - 11:36 | 1023435 gmrpeabody
gmrpeabody's picture

Too cool.

Have forwarded to all my tin foil friends.

Sun, 03/06/2011 - 11:38 | 1023439 Michael
Michael's picture

They only make aluminum foil these days. Tin is too expensive.

Sun, 03/06/2011 - 12:24 | 1023507 snowball777
Sun, 03/06/2011 - 11:42 | 1023444 Sean7k
Sean7k's picture

Google it. It was exposed as a hoax. All kinds of camera mistakes and lighting mistakes. (I have a pretty big tin foil hat already, but you need to research this stuff)

Sun, 03/06/2011 - 12:21 | 1023505 Michael
Michael's picture

Yes the authorities are working feverishly to debunk this, but the reflection on the dome from the object is conclusive proof. Look closely as the ship goes up. That detail would take a lot of expertise to fake that.

5TH Video Witness of Jerusalem UFO over the Mount Zion and the Dome of the Rock-Temple

Sun, 03/06/2011 - 12:31 | 1023524 Sean7k
Sean7k's picture

Sorry, it is blatantly obvious.

Sun, 03/06/2011 - 12:46 | 1023540 Spalding_Smailes
Spalding_Smailes's picture

• Link • Youtube Video • Technology - DragonFly Robot Micro UAVs


A life-size, robotic fly has taken flight at Harvard University. Weighing only 60 milligrams, with a wingspan of three centimeters, the tiny robot's movements are modeled on those of a real fly. While much work remains to be done on the mechanical insect, the researchers say that such small flying machines could one day be used as spies, or for detecting harmful chemicals.

INSPIRED by the biology of a bee and the insect’s hive behavior ...we aim to push advances in miniature robotics and the design of compact high-energy power sources; spur innovations in ultra-low-power computing and electronic “smart” sensors; and refine coordination algorithms to manage multiple, independent machines.

Micromechanical Flying Insect (MFI) Project The goal of the micromechanical flying insect (MFI) project is to develop a 25 mm (wingtip-to-wingtip) device capable of sustained autonomous flight. The MFI is designed based on biomimetic principles to capture some of the exceptional flight performance achieved by true flies. The high performance of true flies is based on large forces generated by non-steady state aerodynamics, a high power-to-weight ratio motor system, and a high-speed control system with tightly integrated visual and inertial sensors. Our design analysis shows us that piezoelectric actuators and flexible thorax structures can provide the needed power density and wing stroke, and that adequate power can be supplied by lithium batteries charged by solar cells.

Sun, 03/06/2011 - 12:38 | 1023534 Spastica Rex
Spastica Rex's picture

One of the videos was a fake.


Oh - and I don't believe in aliens, ghosts, or bigfoot, just accuracy.

Sun, 03/06/2011 - 12:39 | 1023538 Michael
Michael's picture

The UFO enthusiasts are debunking the fakes they are showing on TV. I defer to the enthusiasts expertise.

Sun, 03/06/2011 - 13:05 | 1023595 Woppopotamus
Woppopotamus's picture

For the love of god, please stop posting useless junk in the comments.

Mon, 03/07/2011 - 00:17 | 1024175 Goldilocks
Goldilocks's picture

How about something on organized crime ...

Here’s the new David Duke video … (it’s quite good) enjoy.

YouTube - Israel- The Promised Land for Organized Crime - 1

YouTube - Israel- The Promised Land for Organized Crime – 2

YouTube - Israel- The Promised Land for Organized Crime - 3

Sun, 03/06/2011 - 12:03 | 1023476 velobabe
velobabe's picture

i left you a reply on one of your blogs. not your driver, YOU†

Sun, 03/06/2011 - 12:56 | 1023576 Oh regional Indian
Oh regional Indian's picture

Yep Velo, just saw your response. ;-) Bad ass indeed. I am.


Sun, 03/06/2011 - 00:26 | 1022980 Careless Whisper
Careless Whisper's picture

the US is now well on its way to monetizing its future (read: not winning)

correction: (read: a scam)

here's how it works:

the gov runs a defecit and then borrows money by issuing bonds. the federal reserve bank creates money out of thin air and uses it to buy the bonds, thus loaning money to the government. the government pays interest on the bonds to the federal reserve. at the end of the year, the profits (interest income) that the federal reserve earned, gets paid to the u.s. treasury. the government, in effect got an interest free loan and the money borrowed was created on the printing press. 

this is just a type of legalized scam and debases the currency.

Sun, 03/06/2011 - 04:04 | 1023177 wintermute
wintermute's picture

Correct. The Bernank is prepared to buy the entire bondmarket. Then net interest will be zero.

He will plan yet another "exit strategy" to somehow sell all the Treasuries at a future date.

That date will never arrive as the buyers will never return.

Sun, 03/06/2011 - 08:17 | 1023266 Snidley Whipsnae
Snidley Whipsnae's picture

+1... If Ben believes that he can continue to pay interest on bonds that is less than the rate of increase in commodity costs he is in for a shock. All FRN/US Bond holders that are receiving no return on investment over inflation will join in commodities speculation. The end game for this printing is a FRN that is worthless as a transaction currency for commodities. The dollar might be used for local US transactions, until it isn't, but will not be accepted for commodities purchases from abroad.

Precisely the reason that the US majority owned IMF is attempting to introduce the SDR as a world currency. The US would be allowed to trade dollars for SDRs and use the SDRs to purchase commodities from abroad...specifically oil.

Will this ploy work? Not if China/SCO introduces a competing gold backed currency with which to purchase commodities. The fireworks have yet to start...get PMs, popcorn and watch the show.

Sun, 03/06/2011 - 10:36 | 1023372 Backspin
Backspin's picture

I'm wondering how long it will take this to play out.  6 months?  6 years?

I remember Marc Faber saying he thought the dollar was doomed "in 5 to 10 years".  That was a year ago.  More recently I heard Faber say four years, and Niall Ferguson say 2 to 4 years.

Personally, I'm surprised it has lasted this long.

I'll load up on some popcorn...


Sun, 03/06/2011 - 08:55 | 1023291 smlbizman
smlbizman's picture

after the fed removes about 6% {they do get paid for their service} than the rest is not quite interst free.....

Sun, 03/06/2011 - 08:57 | 1023293 Charlie Brown
Charlie Brown's picture

In fact, it's even worse.

As interest rise, the trade value of the Fed's bond holdings will fall, giving the Fed MASSIVE trading losses (it already has something like -$80 Billion worth of red ink in their most recent adventure). In fact, I say that the Fed is bankrupt at roughly 4.6% on the 10-year (it's hard to get really precise, although I do believe that my spreadsheets are close). This doesn't even count the Maiden Lane problem(s) -- (I don't even know how many Maiden Lanes there are anymore, I think the Fed is now up to ML4) -- and the rest of their toxic book is utterly incalculable.

One of these days, Tyler is going to post here that the Fed is, in fact, bankrupt -- and he'll be able to prove it by showing the actual trading losses for the Fed's Treasury holdings.

In other words, the Fed will eventually be forced to PRINT ITSELF SOLVENT.

I know most of you believe that I'm blowing smoke up your ass, here.

The sad, tragic, hopeless truth is that I'm not.

The fed will, ITSELF, end-up upside-down on their Treasury holdings.

Literally, the Fed itself will have a negative book value.

Sun, 03/06/2011 - 11:12 | 1023409 bugs_
bugs_'s picture

too big to bail out

Sun, 03/06/2011 - 14:29 | 1023786 DoChenRollingBearing
DoChenRollingBearing's picture

FED delenda est.  (H/T mick_richfield)

Show us the gold.

Sun, 03/06/2011 - 09:55 | 1023338 Meme Iamfurst
Meme Iamfurst's picture

 I know that you know that money is an IOU. So are bonds.  So we are printing IOU's to pay off IOU's, with IOU's.  No doubt in the very near future the Fed and government will proclaim a net profit on IOU's....of course it will be an illusion, but why worry about details.

Since Social Security is the whipping boy for having lent money ( IOU's) to the Treasury, I suggest that the Social Security Administration start buying Canadian bonds instead....sure fire way to hedge the dollar anyway.

Sun, 03/06/2011 - 14:02 | 1023725 Dr. Porkchop
Dr. Porkchop's picture

Dollars were derivatives of underlying value, now FRN are derivatives of 'the full faith and credit' of the US Treasury. The important thing to remember is that the value of the dollar and the value of the full faith and credit are not determined by the FED or Treasury. The market will speak.

Sun, 03/06/2011 - 00:36 | 1022990 Seasmoke
Seasmoke's picture

all good things must come to an end........they always do

Sun, 03/06/2011 - 09:06 | 1023297 three chord sloth
three chord sloth's picture

Well, so do the bad things.

Sun, 03/06/2011 - 00:39 | 1022997 Dantzler
Dantzler's picture

Still the top goog hit searching on

"Universal Bankruptcy Act of 2011":

care to enlighten us ?

Sun, 03/06/2011 - 11:08 | 1023407 SubjectivObject
SubjectivObject's picture

Careful there, Ooogle's reading you.

Sun, 03/06/2011 - 00:39 | 1022998 Misean
Misean's picture

We just need another bubble.

Sun, 03/06/2011 - 01:11 | 1023057 Misean
Misean's picture

Alien USO's use these to down planes and ships in the Bermuda triangle.

Sun, 03/06/2011 - 11:33 | 1023428 snowball777
snowball777's picture

That Cthulhu, such a kidder.

Sun, 03/06/2011 - 12:42 | 1023542 Spastica Rex
Spastica Rex's picture

Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn!

Sun, 03/06/2011 - 06:21 | 1023230 Bicycle Repairman
Bicycle Repairman's picture

Good thing we have burnt up all of our easily accessible hydrocarbons.

Sun, 03/06/2011 - 10:42 | 1023376 snowball777
snowball777's picture

In a just world, you'd be gasping for oxygen like the invertebrates at the PT boundary too.

Sun, 03/06/2011 - 00:46 | 1023008 Jasper M
Jasper M's picture

I just might take the under in that trade, for the intermediate term.

I agree with the author in the longer term. But, like so many Cassandras nowadays, he wants vindication Right Now. WHich may be a little early. 

Our financial house of cards is somewhat sturdier than the rest (e.g., Europe, Japan, China), if only due to the security guards. I think US Treasuries will likely get a bit of a reprieve.

I am think of SHY: The base 1% is actually competitive nowadays. 

Sun, 03/06/2011 - 00:47 | 1023013 Turd Ferguson
Turd Ferguson's picture

The Law of Compounding Interest will get you every time.

Sun, 03/06/2011 - 01:17 | 1023064 Careless Whisper
Careless Whisper's picture

and if that don't get ya some scam on the street will.

everywhere i look someone is saying something about ishares silver trust (SLV) and it's not nice. here is one guy's analysis of their prospectus. any comments?


Sun, 03/06/2011 - 08:27 | 1023276 Snidley Whipsnae
Snidley Whipsnae's picture

"The greatest shortcoming of the human race is our inability to understand the exponential function."


Everyone should take a minute to comprehend what Bartlett had to say...

Sun, 03/06/2011 - 10:06 | 1023349 umop episdn
umop episdn's picture

And, if you can't take a minute to read what Bartlett said, take some time to watch him give a lecture:

You don't have to listen to him for very long to get the idea. Exponential growth on a finite planet will end, voluntarily or involuntarily, and sooner than it 'seems.'

Sun, 03/06/2011 - 00:52 | 1023021 wkwillis
wkwillis's picture

I'm not worried about debt the government can default on, I'm worried about pensions as interest cost on social security, etc.

You don't think social security debt is senior to tbills, just ask the next ten wrinklies that walk past you on the street. You don't think military and police pensions are senior to tbills, just ask the next ten uniforms that you see.

Sun, 03/06/2011 - 08:33 | 1023279 Snidley Whipsnae
Snidley Whipsnae's picture

"You don't think social security debt is senior to tbills, just ask the next ten wrinklies that walk past you on the street. You don't think military and police pensions are senior to tbills, just ask the next ten uniforms that you see."

The citizens of the US were coerced into paying into the Ponzi Social Security and Pension schemes forced upon them by the US Government. No one asked the citizens if they wanted to pay into SS...payments were/are deducted directly from pay each pay period. I say that the SS recipients claims ARE senior to those of bond holders...the bond holders were not coerced into purchasing US Treasuries...their purchases were voluntary.

Sun, 03/06/2011 - 14:36 | 1023809 DoChenRollingBearing
DoChenRollingBearing's picture

wkwillis, Snidley,

While I agree that Social Security and military & police pensions SHOULD be paid first (vs.  Treasuries), I do not think that's how it will pan out.

I think we may get it all: higher taxes, lower payouts as pensions and more inflation.

Hey it was my banker who said, years ago:

"Don't worry, they'll just print the money."

Sun, 03/06/2011 - 01:08 | 1023049 Sean7k
Sean7k's picture

Sometimes I wonder about what we "buy" with "currency". How many things have any lasting value? How much is empty consumption, bought with empty dollars?

We sell our labor and productivity for "dollars" and buy products and services that never add to or accentuate wealth. We build little that is designed to last ten years, much less generations. 

Fake money for fake goods? Value is now a slippery concept that is subjective, rather than objective. What do you own that you can pass on to your children, that is not going to be taxed to death, they will actually want?

Yes, I understand the gold, silver,knowledge, rare stones or collectible art and antiques exist. Who owns the items having transgenerational value?

We all can see the destructive system before us and the inevitable result of it's conclusion. What do we possess that made all our labor worth it? What will we carry away? What do our children yearn to invest in? Electronics? 

We can complain, plan around and continue to write about the consequences of criminals- what are we doing to circumvent them? They live to steal our wealth- what are you doing to defeat them?

Sun, 03/06/2011 - 03:56 | 1023173 nufio
nufio's picture

wait a minute! who is selling labour and productivity for dollars. people in china maybe, and the arabs their oil maybe. not many people in the US are selling much labour and productivty.

Sun, 03/06/2011 - 11:46 | 1023454 Sean7k
Sean7k's picture

We are the largest economy in the world by half. People are still selling labor and productivity.

Sun, 03/06/2011 - 09:40 | 1023326 Snidley Whipsnae
Snidley Whipsnae's picture

We are born, live a span of years and then die. During the span of years our objective (hardwired into most of us) is to pass on our genes through our children...if we have children.

Accumulation of wealth and passing it on to children is supposed to give the children an opportunity for a good education and a comfortable life, free of menial labor. Sometimes it does. Sometimes passing on wealth is detrimental to the children and society in general. Conspicuous consumption is the Joker in the deck.

If you believe that your life, or anyone's life, has some deeper meaning than the above then you probably need to sign up on a site that is discussing philosophy or comparative religion...not that I have an axe to grind with philosophy or comparative religion.

Listening to the ideas of others and Juxtaposing them against various philosophys is as good a way as any to pass idle hours...but I doubt it will lead you to a deep, previously unknown meaning to human life...and of course it might lead you into the normal condition of intelligent humans... confusion. 

Only the sociopaths are unconfused...their objective of conspicuous consumption, at any cost to society, is perfectly clear, unconfused and normal in their minds. The only thing that a sociopath wonders about is why the rest of society is not comprised of sociopaths.

Sun, 03/06/2011 - 11:35 | 1023430 Winisk
Winisk's picture

A sociopath's deeper objective is to acquire attention, thus the conspicuous consumption and other childish ploys to show off to others why they are so special.  Without an audience they are nothing. 

Sun, 03/06/2011 - 12:14 | 1023493 snowball777
snowball777's picture

and always they're amazed
when I show them round my house, to my bed
I had it made like a mountain range
with a snow-white pillow for my big fat head

Sun, 03/06/2011 - 11:34 | 1023431 B9K9
B9K9's picture

Good question. ZH has always been ahead of the curve - old timers can recall the heady first months when TD was posting incredible, literally unbelievable, types of information that are now acccepted as the norm.

So, in the continued tradition of being at the forefront of change, perhaps it is time to consider what happens after the crash. By way of example, during WWII, the Allied powers begin planning the postwar reorganization 1943.

As you asked, what are we going to do? How will the criminals be prosecuted? What kinds of tribunals will be organized? What will be the charges? Will US criminals be extradicted to foreign countries? There's a lot on the plate - it's not everyday a global empire + an international monetary/credit standard come to an end.

This one is for the record books.

Sun, 03/06/2011 - 12:24 | 1023510 Sean7k
Sean7k's picture

Good morning B9,

I was wondering what direction this could run. You have brought up an interesting idea. I would love to see some people run with it.

Sun, 03/06/2011 - 14:41 | 1023816 essence
essence's picture

What makes you think justice will prevail after a fiat implosion.

As stated earlier by Snidley, The (U.S. directed) IMF with its SDRs is positioning itself as the successor to the status quo. In reality, the IMF is just the FED in another guise,
with the important exception that it has increased (read trans-national) scope.

The move toward implementing a police state in the U.S. is meant to enforce the will of our bankster controlled federal government onto the population after the car goes off the road. Goldman,JPM, etc then sell SDR bonds, so they're happy. U.S. debt defaulted so Congress is happy and it's big social programs (Medicare & S.S.) get gutted.
Granted SDRs are fiat too, but the U.S. has its internal/external thugs to force compliance both within and outside the U.S.

In brief, the most likely scenerio I see is  --- USD death --> major confusion/turmoil --> G-20 conference resulting in SDRs.

The king is dead, long live the king.


Sun, 03/06/2011 - 15:20 | 1023897 arby63
arby63's picture

You are a defeatist. What makes you so certain that about 20-million Americans don't have the balls to make a big entrance onto the stage in the near future?

I will tell you that I think the only "missing ingredient" is NEED. They have not yet been required to respond to the chaos that besets the nation.

Soon. Watch. Do not be so confident in your predictions.

A notice to others: Do not be so certain that guns and ammo are not worth 10-fold in gold.

Mon, 03/07/2011 - 00:48 | 1025298 essence
essence's picture

Don't shoot the messenger.
Personally, I hope for the best ... but I prepare for the worst.

As it happens, I am disassociating myself from the 'system' and attempting to 'starve the beast'. That doesn't mean I believe ZeroHedge minded folk will gain the necessary traction to counteract the momentum of the masses.

Currently I am not quite prepared to immolate myself in front of the white house to kick off the revolution.

Besides, my post was meant to alert you all to the danger the IMF presents.

Don't you get it. It's the Fed 2.0, the Fed on steroids.


Look at Ireland today. New goverment that (surprise,surprise) immediately turned on those that voted for it by caving in to the banksters.

Other than Iceland, no one has stood up to the banksters and said bug off.
And fat ass yuppie americans .... they're going to show the back bone to do it.

In your dreams.




Sun, 03/06/2011 - 12:10 | 1023488 snowball777
snowball777's picture

What I'm looking for 
Cannot be sold to me 
I wish they all would stop trying 
What I want, and what I need

is and will always be free

Sun, 03/06/2011 - 12:21 | 1023506 Sean7k
Sean7k's picture

Very nice choice Snowball. 

Sun, 03/06/2011 - 01:08 | 1023054 holdbuysell
holdbuysell's picture


Totally OT, but Kleiner Perkins' Mary Meeker recently published a 266 page report entitled, 'USA, Inc.'

Can you post here?

Link to pdf is:

Sun, 03/06/2011 - 12:13 | 1023492 DeltaDawn
DeltaDawn's picture

Looks like a good report. I am going to buy hardcopies and pass them around.  Next I would like to see a report on key inflection points where we messed up and the names of all the politicians who voted to do things like tap into S.S., go off gold standard, form federal reserve, etc.  Amazing that Obama is considering a second term. This is a game of pass around the steamy bag of shit and hope it does not break over your lap. No politician is willing to suggest what needs to be done and they would need to go into hiding Rushdie-style if they did. My guess is the powers-that-be will have a republican win this time and crap will hit the fan between election and inauguration so that we can all fight over who is to blame, new guy or old guy.




Sun, 03/06/2011 - 12:31 | 1023526 Sean7k
Sean7k's picture

CFR propaganda alert.

Sun, 03/06/2011 - 01:11 | 1023056 pointer
pointer's picture

the politicians in "power" have no desire to fix this system - it's FUBAR - so they get in and get what they can to provide for their families - can you blame them?  Greed has fueled this nation - just listen to Gordon Gecko.

An elected official won't fix anything - but maybe personal responsibility will.  You know, the kind of personal responsibility that reminds all of the jobless to go get their food stamps once a month.

The poor won't riot because they're fed and housed - using tax dollars from the working class - and the working class with any brains and recognition of what's going on won't riot because they have too much to lose.  The rest are just plain ol' stupid and cluess with no desire to comprend any of what's going on - "it's just the way things are" - "what can you do" - "football is on TV & the beer is cold"

I tell ya - the "powers that be" are damn smart when it comes to running a nation.  Somehow I have about 35% faith that they may pull a black swan out of their ass and prove all of us reading these boards wrong - but when I go out in public my gut feeling tells me we're all screwed.  If an oligarch does indeed rule the nation, why on earth would they take these measures that would put them at risk of losing global power?  Unless of course they didn't realize the power of the internet and a free-communicating society.  Thank Al Gore for inventing the internet

Sun, 03/06/2011 - 14:29 | 1023783 Dr. Porkchop
Dr. Porkchop's picture

It's true what you say. People out there taking food stamps and other programs aren't really politically aware people. It's easy to get caught up in online sites and forums with like minded people and to start to see the world too much through that lens. I'm willing to bet that most people on these programs think about politics about 2 weeks every four years, and that's if they even vote. The rest of their time is spent working and trying to live, and watching TV (not the news).

People who exist at this level won't become politically aware until they are hungry. I don't know how people expect them to be politically aware otherwise. The public school system turns out people who are barely literate. They are no match for the onslaught of propaganda, but corporate and government. By the time they finish high school, if they do at all, they are already indoctrinated. If you don't understand it, you tune it out and turn to something else... the passivity of TV.

Sun, 03/06/2011 - 01:29 | 1023072 tom a taxpayer
tom a taxpayer's picture

If one wants to play guessing games with the chart, the chart can just as easily suggest a continuing plunge into depression.

Sun, 03/06/2011 - 01:31 | 1023078 tony bonn
tony bonn's picture

the grotesque american empire is entering the nova phase of star destruction which not even simon cowles can save.....and now that america is past bankrupt can we stop the murder spree in the middle east?

let's look to rome for guidance when its phantasmagora nearly collapsed in the 3d century. what scared bear tactic will the totalitarian regime pull out of its despotic hat?

Sun, 03/06/2011 - 03:48 | 1023165 Antipodeus
Antipodeus's picture

If all else fails, I suppose they could always concoct some sort of extra-terrestrial alien invasion/contact scenario - complete with special effects, or even nukes detonated in near-space as evidence of the heroic efforts of our gallant EDF ('Earth Defence Force').  The PTB are probably sitting down with buckets of popcorn & 100 years worth of sci-fi to brainstorm the best ideas (unless they already did this decades ago - who knows?).

Sun, 03/06/2011 - 10:03 | 1023346 Snidley Whipsnae
Snidley Whipsnae's picture

"If all else fails, I suppose they could always concoct some sort of extra-terrestrial alien invasion/contact scenario - complete with special effects"

They already did... It's called Area 51 and Roswell.

Hey, there is even a museum in Roswell with mock ups of the 'aliens' and their 'spacecraft'...

Of course the town of Roswell actively supports the 'Roswell Story' and a flock of believers decends on the town each year...accompanied by a flock of vendors selling alien paraphanalia. Big boost for the local economy.


Sun, 03/06/2011 - 11:12 | 1023411 American Dreams
American Dreams's picture

Already been done, see - The Report from Iron Mountain -


Know your enemy

Sun, 03/06/2011 - 14:34 | 1023799 Dr. Porkchop
Dr. Porkchop's picture

I think that the Zombie, Nuclear, Commie, Terrorist, Alien, Computer, Robot, Natural Disaster, Monster destroys world, only to be beaten back by a rag-tag group of survivors narrative are just modern takes on the biblical apocalypse / rapture fantasy.

Americans tend to go for the extremes in imagining collapse. I think it will be much more complicated than that, and in slow motion.

Sun, 03/06/2011 - 02:08 | 1023111 JW n FL
Sun, 03/06/2011 - 10:09 | 1023352 Meme Iamfurst
Meme Iamfurst's picture always know just what to say to win our hearts.

hope all is well for you,


Sun, 03/06/2011 - 02:39 | 1023131 Yen Cross
Yen Cross's picture

All the PIIglets! North or south? Doesn't matter. Moodys,Fitch, ect.... The tusks grow in the sun. And ratings agencies are un-regulated. What is the difference between AA++ and AAA+? Give me an effin break!

Sun, 03/06/2011 - 03:52 | 1023168 Antipodeus
Antipodeus's picture

An A & a +. Did I win? Is there a prize? 8=))

Sun, 03/06/2011 - 04:18 | 1023181 Yen Cross
Yen Cross's picture

The med club! Greece,Portugal,Spain. The Northern club France, technically med. and north. Most of the British Isles. Oh the highly inflated Norway,Finland, Sweden GDP's can loft Europe out of disfunction? I have to piss!

Sun, 03/06/2011 - 02:40 | 1023132 Bobportlandor
Bobportlandor's picture


That's exactly what I was just thinking.

I love building real furniture, and just a moment ago I thought when did it all start to fall apart, it's when particle board furniture became acceptable.

Sun, 03/06/2011 - 02:48 | 1023136 Yen Cross
Yen Cross's picture

A man of reason! Keep the thread going. Pun intended!

Sun, 03/06/2011 - 04:20 | 1023182 Oh regional Indian
Oh regional Indian's picture

Astute Bob, good observation. Ikea! They put the gloss on particleboard.

Give me one hand-crafted thign over 20 machine made, any day.


Sun, 03/06/2011 - 13:09 | 1023606 Sean7k
Sean7k's picture

Morning Bob,

People marvel when you create a piece of furniture. It is something I give my kids and I build all my own for our home. If they only realized what off gasses out of MDF! Don't get the mechanics started on the quality of tools...Glad to hear from another builder.

Sun, 03/06/2011 - 02:49 | 1023137 Can2001
Can2001's picture

Welcome in the roaring 2000'

Sun, 03/06/2011 - 02:53 | 1023139 Yen Cross
Yen Cross's picture

Welcome you Loonie. The usd/cad is sweet for you.

Sun, 03/06/2011 - 03:53 | 1023170 boroldoi
boroldoi's picture

test, thats all

Sun, 03/06/2011 - 03:54 | 1023171 AAPL_Short
AAPL_Short's picture

The evil puppet House of Saud will be the next to fall:

Sun, 03/06/2011 - 04:02 | 1023175 linrom
linrom's picture

Whatever US will do, it must not ever make the rich pay any taxes nor cut the bloated defense spending of about $1 trillion per year. What they must do is cut Food Stamps ($60 billion per year and Social Security shortfall +$40 billion dollars), that will balance the $1.6 trillion budget deficit? I love the logic of math and real world economics challenged automatons(aka friends of Chamber of Commerce and Peter Peterson Institute.)

Sun, 03/06/2011 - 05:17 | 1023208 Creed
Creed's picture

OK, the defense budget needs to get cut in 1/2 & spent mostly on nukes and BORDER DEFENSE & the NAVY.

But this whiny ass BS about rich people not paying taxes has got to go. Most of the taxes in the US are paid by wealthy people. Duh. What poor person pays taxes that the rich do not?

Sun, 03/06/2011 - 07:52 | 1023256 grey7beard
grey7beard's picture

>> Most of the taxes in the US are paid by wealthy people.

Considering the wealthy people make the lions share of income in this country, what's the big problem with them paying taxes?  The wealthy have benefited much more from the system than the poor, why not pay much more to support the system?  Also, the effects of the rich paying more taxes is non-exixtant on their life style.  The middle class?  If they pay more taxes, they eat less, live in less desirable housing, have less medical care, etc.

>> What poor person pays taxes that the rich do not?

Our tax system is regressive, hence the poor pay a greater percentage of their income in taxes than the rich.  You pay the same for a tag on a $1,500 beater car as you do a $150,000 car.  Social security taxes are maxed o ut just over $100K and unearned income, the bulk of the wealthy's income, is exempt.  The list goes on and on.


OTOH, the government does a very poor job of spending what they do bring in in taxes.  That's the part that leaves me ambiguous about increasing taxes to balance the budget.  If there weres some responsibility to get value for tax dollars collected, I'd be a big proponent of taxes the rich until they felt the pain just like the working class.  My starve the beast instints leads me to not give a fuck that the rich aren't doing their part to support the country that supports them over all else.

Sun, 03/06/2011 - 12:34 | 1023531 sun tzu
sun tzu's picture

The tag on a car in my state is $70 a year. 


The vehicle sales tax is

6.25% x 150,000 = $9,375

6.25% x 1,500 = $93.75

Regressive tax system?


As far as social security, that's a payroll tax. Gains from the sales of stocks aren't payroll, so why would be be subject to payroll taxes?


How about the government cuts back on spending and stops wasting money instead of the ever increasing taxes. You are buying into 0bama's class warfare garbage. Just because a person makes over $250K a year it does not mean they are evil or a criminal. Most of these small and medium business owners work 60-80 hours a week. 


If you're talking about George Soros or John Kerry being undertaxed, then I might agree. Then if you confiscate the assets of every billionaire in America, it wouldn't even cover a half a year's deficit. Now you're right back to the problem of massive government spending. 

Sun, 03/06/2011 - 15:27 | 1023913 arby63
arby63's picture

REMEMBER THIS: It's the fucking poor who feed the rich.

That's all we really need to know about the fate of the nation.

Blue Light Special......NFL, NBA, Wal Mart, K-Mart, Budweiser, Verizon, AT&T, et al.

THE POOR FEED THE RICH. If they refused (which they are too fucking stupid to do), then there is a real game-changer.

Don't hold your breath.

Bread is on sale at Wal Mart.

Sun, 03/06/2011 - 11:38 | 1023438 snowball777
snowball777's picture

Please take this tripe to Juarez and ask them to make menudo for you.

Sun, 03/06/2011 - 08:49 | 1023283 overmedicatedun...
overmedicatedundersexed's picture

linrom: look in the mirror what do you see?

a tapeworm..stop your lust for other peoples wealth.  go out and create jobs thru a new business and see what your tax and regulatory bite are. and how your gov partner demands you send 30 % of your time on just reporting back to him.

How about a tax on the rich who do not support families thru job creation:

1. Artists, writers,actors, many investors,coupon clippers, MSM mouth organs, union leaders, congress and senate, judges, all gov workers for that matter should be taxed at much higher rates then the local  business owner who provides work for others. Now that's a tax I can get up with. how about all those "charities set up by buffett and gates as an example of wealth never taxed" in short non productive wealth of anytype is taxed at a higher rate..hmmm lets hope Timmy does not read ZH.

ps :you are really not a tapeworm, your moral compass is just the same.

Sun, 03/06/2011 - 12:43 | 1023546 sun tzu
sun tzu's picture

Most people who complain about the "rich" being undertaxed are government union parasites, trust fund babies, and welfare moochers. Basically all failures in life. I work with taxes all year and anyone who thinks that being self-employed or a business owner is easy is really stupid. Any of you parasites who think it's easy should go try it. 


If you think Warren Buffett and Bill Gates are undertaxed, then you might have something. Don't compare them to a guy who is running a company with 50 employees. He might be making $500K a year, but he's not in the same class as Gates, even though you parasites lump him in there.

Sun, 03/06/2011 - 13:36 | 1023669 cxl9
cxl9's picture

Government employees do not pay taxes. They merely accept discounted wages in return for their (unneeded) services. They receive taxes paid by others.

Sun, 03/06/2011 - 04:22 | 1023178 plocequ1
plocequ1's picture

Like Thurman Munson once said. "Im just happy to be here". I say, live your life. When its over, Its over.

Sun, 03/06/2011 - 04:26 | 1023184 Oh regional Indian
Oh regional Indian's picture

It's not the end of the world, till it is the end of the world. And when it is, it doesn't matter any way.

Or something like that.

Strange, plo, I think I caught mid-edit.


Sun, 03/06/2011 - 04:24 | 1023185 Yen Cross
Yen Cross's picture

Have you never noticed? I don't curse. Why you may ask! It's effin personal, and I love my Family.

Sun, 03/06/2011 - 11:04 | 1023403 buzzard
buzzard's picture

I hate euphemism a fucking lot.

Sun, 03/06/2011 - 11:43 | 1023447 snowball777
snowball777's picture

You think Jesus has your phone tapped?

Sun, 03/06/2011 - 09:18 | 1023310 grey7beard
grey7beard's picture

>> "Im just happy to be here".


That is how my best friend (besides my dog) and I handle the situation.  He drinks, screws his much younger hottie, cooks, and sails.  I shut the  business, sold off my properties, bought a farm, and intend to travel North America, starting Wednesday morning, in my fifth wheel RV.  When things went into the crapper for us business wise about three years ago, I spent a sold year wringing my hands wondering how I was going to keep it all going.  Then a brilliant idea came along, I wassn't going to keep it all going.  I did it my whole life mostly for the benefit of others, be it wives, girl friends, other people's kids who belonged to my girlfriends, family, employees, the tax man, the insurance man, etc, etc.  Living a simple, quiet life close to nature is all I've ever enjoyed. 


As I type this, I'm sitting in "my room", a little unheated, uncooled add on to our old trailer out in the sticks.  My dog is lying next to me.  I look out into a thick oak forrest.  I'm much happier than I was living in my classy digs in the exclusive neighborhood, paying nose bleed taxes.  To think this place was abandonded as uninhabitable for five years before I bought it.  The only people who aren't happier are all the ticks who lived off my efforts in the old life. 

Sun, 03/06/2011 - 11:09 | 1023406 FrankIvy
FrankIvy's picture

Very much I'm diggin it.

Sun, 03/06/2011 - 11:17 | 1023414 Implicit simplicit
Implicit simplicit's picture

Good for you man. Did you just go off the literal and figuritive grid? Another words. Can you now just live off of savings, or do you still have to pay taxes etc... The only way many people will be able to do what your doing is to beat the parasites to the punch by legally declaring bankruptcy first.

Sun, 03/06/2011 - 11:59 | 1023471 grey7beard
grey7beard's picture

>> Did you just go off the literal and figuritive grid? Another words. Can you now just live off of savings, or do you still have to pay taxes etc...

For the most part, I went off the grid.  My goal was to buy as cheap a liveable piece of property as I could.  Property taxes in our state , FL, are based on purchase price, with a $25,000 homestead exemption and a limited increase each year there-after.  I bought 10 acres with an abandoned and stripped 1968 trailer on it, an old collapsing cracker house, stripped well and septic.  I put about $12K back into the property: new well, put a vapor barrior under the mobil, re-leveled, re-insulated, new wiring, plumbing, bathroom fixtures, new kitchen cabinets and appliances, new air conditioning, paint and clean.  I had some locals tear down the old house for the materials.  I've hauled about 30 pick-up loads of garbage away (farm folks tend to dump a lot of old garbage "some where" on the lot.  So, I've got about $52K in a very liveable property.  In spite of the garbage and neglect, the area is very nice. Most of the local properties are much larger farms/ranches, or planted pine forrests.  I'm in an interor lot so I have no visible neighbors, only distant corners of peoples farm land and forrest.  As my repair costs don't add to the assessed value (if you use a contractor they do) my tax base is $42K (I used a contractor to install the new well so that kicked up my base from $40K purchase to $42K).  With a $25K homestead exemption, I've got a $17K taxable that comes out to about $350 a year.  Not completely off the grid, but as close as I can get.

I cancelled my medical insurance costing me $1,350 per month to a $155 per month catastrophic plan.  I have no home owners or liability insurance.  Auto insurance I whacked as much as I could, but my major plans are to travel so I can justify that.

>> The only way many people will be able to do what your doing is to beat the parasites to the punch by legally declaring bankruptcy first.

I was very fortunate to have been raised by me depression era grandparents.  I've always been a cash guy.  When the bottom fell out, I owned both my house and business property free and clear, no credit card or auto debt.  I sold my house just as the crash was getting well underway (closed the house on 11/30/08).  My tax assessed value was $540K.  The neighbors were appalled that I set the price at $350K to get it moved.  The arrogant jackass developer that bought it to tear down and build his personal McMansion has lost another $100K on it since closing and has been renting it out with the usual results.  I got extremely lucky selling my business property.  My tax value was $130K and I ended up selling it for $180K.  Everything around me was for sale with no action.  I'll take luck over skill anyday.

I'm as surprised as anyone I was able to liquidate and bail out of the city as well as I did.  Fortunately, I made the decision to get out about two years before the poo hit the blades for reasons very different than the economy, but it gave me a needed head start.

Best of luck to all.

Sun, 03/06/2011 - 13:16 | 1023618 Hulk
Hulk's picture

Very well done graybeard! I roughly did the same thing and it is amazing how much is saved by not needing to pay insurance and numerous taxes...Also had to clear truckloads of garbage out of the woods too, car parts, carpets, old furniture. Quality of life so much better. Sleeping in a paid off house\property is a very different experience...

Sun, 03/06/2011 - 13:38 | 1023670 grey7beard
grey7beard's picture

>> I roughly did the same thing

Good on you, bro.  I feel extremely fortunate to have pulled it off.  I take the time to post my experiences as it may give some the necessary information to follow suit.  I'm seeing properties, (mobile, well, septic, a few acres) in the high teens now.  It's not a life style that suits all, but it beats the heck out of just getting by in the city.

The downside to this type of area is that finding a job is really not in the picture, unless you can do something internet based.  I'm living cheaply off of savings. I have numerous friends back in the hood, vets, on disability, etc, who could live a whole lot better, and own their own place out here.  Living is extremely cheap.

Sun, 03/06/2011 - 14:07 | 1023737 Hulk
Hulk's picture

We are considering doing seminars on making the transition, perhaps you should too

Sun, 03/06/2011 - 15:16 | 1023886 fiftybagger
fiftybagger's picture

Good on ya grey.  Many talk about doing what you've done, but few accomplish.  I hope you enjoy your trip. There are some very interesting people out there to meet.

Sun, 03/06/2011 - 15:22 | 1023899 Implicit simplicit
Implicit simplicit's picture

Thanks for the feedback. Nothing like experience for teaching. "Touch of gray suits you anyways, but its alright"-Grateful Dead

Sun, 03/06/2011 - 11:41 | 1023443 traderjoe
traderjoe's picture


Sun, 03/06/2011 - 12:00 | 1023473 gmrpeabody
gmrpeabody's picture


Sun, 03/06/2011 - 12:52 | 1023566 sun tzu
sun tzu's picture

I'm with you. Starve the parasitic government/union/banker beast. The unholy trinity keeps demanding more and more control and their share of your income from your hard work. The people of the USSR starved their beast and it collapsed. If there is nothing for the parasites to steal, then they will die.

Sun, 03/06/2011 - 07:56 | 1023257 Horatio Beanblower
Horatio Beanblower's picture

Gresham's Law?


"A small town in northern Spain has decided to reintroduce the old Spanish currency - the peseta - alongside the euro to give the local economy a lift." -

Sun, 03/06/2011 - 09:46 | 1023332 Snidley Whipsnae
Snidley Whipsnae's picture

"Greshams Law"?

Greshams Law states that bad money drives out good. So, if the newly introduced 'old Peseta' is found to be a good store of value, compared to the Euro, it will be hoarded and will not function as a transaction currency for very long. The 'good' currency will disappear while the 'bad' one will be spent.

Sun, 03/06/2011 - 12:53 | 1023568 sun tzu
sun tzu's picture

Only if the bad is still accepted

Sun, 03/06/2011 - 11:49 | 1023460 snowball777
snowball777's picture

Bring back the piastre too!

Sun, 03/06/2011 - 08:09 | 1023261 duncecap rack
duncecap rack's picture

I am relatively new to thinking about these things so this might be a really dumb idea but here goes. If the fed allows a slight interest rate rise but resumes asset purchases at a lower rate would that not be strongly disinflationary? I think but am not sure the largest asset class in the world is treasury debt. If interest rates rise just a little wouldn't that kick the snot out of everybody in the world's portfolio? So my guess at Ben's playbook might be that at the next meeting he lets rates rise just a bit (citing inflationary pressures due to unforseen (by him not ZH)circumstances) and announces an extension of asset purchases to maintain this new target rate. Could this be his cure inflation in fifteen minutes strategy?

Sun, 03/06/2011 - 08:43 | 1023285 Everybodys All ...
Everybodys All American's picture

Interest rates are inversely tied to the price of the bond. As interest rates rise the price of the bond or goes down. There is now way Treasuries would maintain a lower rate. Yes an interest rate rise will cause the stock market to sell off. Bernanke's claim that he can cure inflation in fifteen minutes defies history.

Sun, 03/06/2011 - 10:09 | 1023353 duncecap rack
duncecap rack's picture

I'm sorry I used confusing terms above. When I mentioned buying bonds at a lower rate I meant buying less bonds. My point was if he announced QE3 at the same time as he raised the fed funds rate he could cause massive deflation by reducing the level of tier 1 capital on the books of banks around the world by reducing the value of the treasury bonds they hold. Since this capital is levered by fractional reserve practices the effect would be huge. At the same time he could raise the value of the dollar with the rate hike and continue to dilute the true value of the bonds held outside the US by conjuring into existence a larger fed balance sheet. It just occurs to me that there might a change from the ZIRP to the extremely low interest rate policy soon due to "unforseen" unrest around the world which has caused "unexpected" and unacceptable levels of inflation.

Sun, 03/06/2011 - 11:09 | 1023408 Implicit simplicit
Implicit simplicit's picture

If interest rates are "allowed" to rise, as I think they will, I think the Fed will have to revert back to a TARP type purchase program to offset a reduction in QE3 and POMO. There is no way they will be able to tolerate the higher interest rates (i.e.-described above) without a PONZI substitute.

Sun, 03/06/2011 - 09:03 | 1023296 ivana
ivana's picture

reading titles last few days it looks like small engineered financial disaster is looming. it suits everybody: s&p should cool down a bit, usd needs some o2, interest rates need help to stay low as long as possible, ecb already announced rate hike, PMs are out of control, banks are piling cash, oil could go temporary down to sustain "recovery" .... and the balance is full of shit as usual so choice of dumping part of it is easy. Chairsatan could continue and defend 0% policy for some time longer.

Sun, 03/06/2011 - 09:33 | 1023315 GOSPLAN HERO
GOSPLAN HERO's picture

Comrade President Obama will save America, comrades!  Wealth confiscation and redistribution will solve all of our problems.  Support the struggle of socialist state workers in Wisconsin.  They deserve more pay and benefits.  It is the just burden of Wisconsin's bourgeois tax payers to support the state workers.  All power to the Soviets!


Sun, 03/06/2011 - 12:55 | 1023577 sun tzu
sun tzu's picture

Why should state employees have to contribute to their own healthcare and retirement like the rest of use lowly peons. They work for the government. They are our masters.

Sun, 03/06/2011 - 09:22 | 1023318 tradewithdave
tradewithdave's picture

When you work for a company that makes the reset switch, your goal is to use the reset switch.  There's only one problem.  People won't allow you to use the reset switch until they are forced to do so.  Why is 6% some sort of revelation?  That was the number baked into the Fed at Jekyll Island and everything is on schedule.  It's called interest, or usury and as always it leads to foreclosure.  Where's the news in all this? 

The next step is as Niall Ferguson suggests and we start selling stuff to shrink the balance sheet and accelerate the mean reversion.  How much is the Grand Canyon worth?  How about the Federal Courthouse in your town?  They can turn the White House into a studio for internet TV shows such as Sheen's Korner and charge rent.  Might as well start by selling Fort Knox.  They'll need a safe place to store their gold and I'm sure there's plenty of room there.  Ron Paul doesn't realize he's actually advancing the Fed's agenda to End the Fed (aka "the reset").

I guess there's hope.  The writer did say "America's political class may skip straight to doing the right thing"...guess de Tocqueville was wrong.  Here's to America's political class... we're counting on YOU!

Dave Harrison

Sun, 03/06/2011 - 09:48 | 1023334 max2205
max2205's picture

When the boomers die off that health care curve will cone down and save the day. 2040 next super bull

Sun, 03/06/2011 - 10:57 | 1023398 Implicit simplicit
Implicit simplicit's picture

Not without a major discovery and ramp of some cost efficient enrgy source.

Sun, 03/06/2011 - 11:48 | 1023457 snowball777
snowball777's picture

Maybe we can find a way to "help them along", if you catch my drift?

Sun, 03/06/2011 - 13:14 | 1023614 sun tzu
sun tzu's picture

There's also plenty of useless eaters in section 8 watching Oprah and Jerry Springer all day.

Sun, 03/06/2011 - 14:00 | 1023722 JimS
JimS's picture

I am one of those "boomers". I have 20/20 vision, a loaded .357 S&W in my glove compartment of my car (and that's not my only weapon), a steady hand , and a strong desire to use my revolver on assholes like you. By-the-way, I have a conceled weapons permit, and I do carry most of the time.  Come over to my house, and "help me along", you cocksucker. Have a nice day.  :))))

Sun, 03/06/2011 - 14:27 | 1023780 Bastiat
Bastiat's picture

if you catch my drift?


Not sure I did; care to expand?

Sun, 03/06/2011 - 10:26 | 1023361 Alcoholic Nativ...
Alcoholic Native American's picture

Time to start selling off park lands and infrastucture to the assholes that just got trillions of dollars in bail outs.  As planned.  I blame socialist.

The only thing that can save us from this socialist nightmare is to privatize everything, toll roads and parks.  Generating profits and prosperity.

How much is Central park worth?  I'm sure some entrepreneur could throw up a fence around it and start charging admission.

Sun, 03/06/2011 - 11:46 | 1023452 snowball777
snowball777's picture

An awesome keep central park empty of everything except the homeless.

Sun, 03/06/2011 - 13:18 | 1023626 sun tzu
sun tzu's picture

What's so special about central park that makes it any different from any park in flyover country? How about a special NYC tax to pay back the rest of the country for what Wall Street did to us. 

Sun, 03/06/2011 - 13:36 | 1023664 Alcoholic Nativ...
Alcoholic Native American's picture

I'm sorry, that would be socialist redistribution of wealth.

Sun, 03/06/2011 - 10:29 | 1023364 huggy_in_london
Sun, 03/06/2011 - 10:49 | 1023385 Stuck on Zero
Stuck on Zero's picture

Not to worry.  Caribbean banking centers will buy all of our debt! See:

Also, anyone notice that Congress and the WWhitehouse are screaming and fighting about cuts to the budget that amount to less then 1/4 of the rate of rise of the budget?


Sun, 03/06/2011 - 10:57 | 1023395 UninterestedObserver
UninterestedObserver's picture

Yeah no shit - it's as if I was a Trillion in debt and my only big budget cutting idea was to stop going to Starbucks everdyday

Sun, 03/06/2011 - 11:06 | 1023402 Alcoholic Nativ...
Alcoholic Native American's picture

anonymous billionaires FTW.  This was a planned downturn, consolidating corporate power and selling off of public infrastructure and bullying "bankrupt" government regulation.

All hail our new corporate overlords!  They will save us from socialism.  Derp Derp stop the spending! Derp Derp There is no more money!  Derp Derp socialist marxist are ruining the country!  Derp Derp march on Christian soldiers.


Wealth distribution (Ignoring the largest ever that just happend) will not be tolerated!



Sun, 03/06/2011 - 13:22 | 1023632 sun tzu
sun tzu's picture

0bama, Pelosi and Reid were in charge the entire time it happened. Derp Derp

Hope for Change Derp Derp

Yes We Can Derp Derp

Si Se Puede Derp Derp

Sun, 03/06/2011 - 13:35 | 1023660 Alcoholic Nativ...
Alcoholic Native American's picture

I'm not a Democrate you fucken teatard.

Sun, 03/06/2011 - 11:42 | 1023440 RobotTrader
RobotTrader's picture

The solution is simple.

The Fed will allow 7% - 9% annual inflation, and over 10 - 15 years, we'll simply inflate out way out of this mess.  Interest rates will gradually rise, but occasionally we'll have a mini-stock market crash that will send the 10-year Treasuries down by 250 bp in a few months, so the overall increase over time won't be that bad.

In 20 years, we'll be back in the same spot as we are today.

Nothing is ever going to change.

PigMen will continue looting the system.

"Savers" who have their money parked in fixed income or cash will be decimated, unless they start transferring their money back into stocks.

The only way Joe Six will be able to survive is to start speculating in assets again, whether it be stocks, real estate, or baseball cards.

Sun, 03/06/2011 - 12:27 | 1023513 Matto
Matto's picture

Unfortunately its not possible to inflate your way out of debt with a debt based currency.

Sun, 03/06/2011 - 12:26 | 1023515 Matto
Matto's picture

Unfortunately its not possible to inflate your way out of debt with a debt based currency.

Sun, 03/06/2011 - 13:57 | 1023715 equity_momo
equity_momo's picture

RobotTrader, this post sums up you are as dumb as your chart posting-spam suggests you are.

You're a moron in dear need of enlightenment.

Sun, 03/06/2011 - 16:58 | 1024173 arby63
arby63's picture


The only way Joe Six will be able to survive is to start speculating in assets again, whether it be stocks, real estate, or baseball cards.<<<


As though you actually know what the hell you're talking about. This is the dumbest thing I have ever seen you post.

What a ridiculous joke. This "stock market" and "equities" you so kindly refer to is like a pimple on the ass of history.

There are a LOT more ways to make money than to give it up to idiots in NYC for folly.

You have frustrated me on this snowy Sunday.

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