The Myth of the Fed’s Exit Strategy
The “Exit Strategy” the Fed’s Bernanke is contemplating is nothing less than a total, unadulterated myth. This is the fairy tale you read to your young children at night where the government cuts back its spending and the Fed shrinks its lending. The private economy then picks up the slack, and the rest of us live happily ever after.
Unfortunately, this time there will be no Prince Charming riding in on a white horse. In 2009, the US ran an unprecedented $1.5 trillion budget deficit, financing the shortfall by issuing Treasury bonds. The Fed happily obliged by soaking up this tsunami of paper, either directly, or indirectly through mortgage purchases.
This boosted its own balance sheet from $800 million to a mind boggling $2 trillion in the process, or about 14% of GDP. Were there any other takers of new government debt? China bought $100 billion, and another $200 billion went to a hodgepodge of assorted foreign central banks and sovereign funds, barely 20% of the total.
Back out the Fed as the buyer of last resort, and where are we? The private demand isn’t there, especially if the Fed plans on raising interest rates at the same time. I can already hear the excuses the foreign buyers will be fobbing off on Tim Geithner; I’m sorry, but I’ve got to rush off to a Peking duck dinner; it’s Ramadan; I have a date with my mistress; the dog ate my homework; etc; etc; etc;. The $3.8 trillion budget Obama proposed for this year, with another kick in the groin, $1.6 trillion deficit and $1 trillion in tax increases, isn’t encouraging me to back off from this ledge.
There are only two possible outcomes to the greatest financing gap in history. Interest rates have to soar to unimaginable levels to attract recalcitrant investors, or the plunge in spending sends us into a postponed Great Depression II.
Let me know which one it is, will you? I’ll be hiding out in my camouflaged underground bunker in the desert. And if you do come calling, be a peach and bring me some MRE’s, a five gallon bottle of water, and a case of 9 mm ammo, will you?
For more iconoclastic and out of consensus analysis, you can always visit me at www.madhedgefundtrader.com , where the conventional wisdom is mercilessly flailed and tortured daily. You can also download past interviews with industry heavyweights on Hedge Fund Radio.
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on Tue, 02/02/2010 - 07:57
#214542
in a bunker with a five gallon bottle of water...
you're a real party animal he? :)
plus, I think that "I have a date with my mistress" is a eligable excuus to cancel appointments. ;)
on Tue, 02/02/2010 - 08:12
#214552
Probably the first time you've ever made sense!
on Tue, 02/02/2010 - 08:44
#214573
Or the first time you've been sober!
on Tue, 02/02/2010 - 08:24
#214561
For all their academic brain power the Fed is too stupid to realize they're creating their own deflationary cocktail by not providing an interest rate to savers. Sane people's reaction to zero interest rates, believe it or not Fed people, is to save even more aggressively.
on Tue, 02/02/2010 - 08:48
#214578
Thank you madhedgefundtrader, excellent.
The guys down under are certainly on top of things...
In a Seven News: News Flash, a Macquarie Bank worker can be seen looking a nude photos in the background during a live cross to Martin Lakos of Macquarie Private Wealth.
http://www.youtube.com/watch?v=v1m8a4Jl4ZI
on Tue, 02/02/2010 - 10:26
#214672
He was probably just reading one of Robo's posts.
on Tue, 02/02/2010 - 12:35
#214853
Interest rates are not the only thing rising!
on Tue, 02/02/2010 - 08:51
#214581
I wouldn't be so sure of such a scenario: the Fed may not have to fund USTs through MBS purchases if the retiree annuity plan goes through--which it may very well may with a well timed market crash, which might accidentally happen during the time the Treasury Dept is hearing opinions from the public concerning such a plan.
And the Japanese Post Bank saying that they might begin buying USTs?
Also, read the new HAMP changes: it appears they may be planning a liquidation of the housing market.
In my opinion, which I admit is not worth much, but your assessment seems to be very hap hazard. I would agree that the Fed may/will keep the liquity in the system going, but not along the MBS strategy.
on Tue, 02/02/2010 - 09:34
#214612
I like your crystal ball Turnstile. The coming market crash may not be engineered by tptb, but it will certainly provide a convenient excuse to "save investors from Wall Street" by for forcing them into Treasuries.
I no longer have a dime in retirement funds. All funds were removed several weeks ago. Easy for me since I'm over 59.5. No 10% penalty and tax rates at the lowest we'll see for years to come.
Please make more predictions.
on Tue, 02/02/2010 - 11:16
#214751
So people are just going to stand by and let their non-retirement assets go in the shitter and not even utter a whimper? I don't think so.
A market plunge will light a fire (that has been smouldering) that will engulf congress and Washington, DC. I don't think our current government could withstand such an inferno.
Could they orchestrate a market event that would result in people willingly converting their assets to government annuities? Possibly, but I think it exceedingly difficult in the current atmosphere. Possibly, the government could offer annuities to people as an "option" for people. If it were based on 12 month high watermark account values it may be palatable to some, but to make this work to fund deficits it would have to become mandatory for all retirement accounts.
First it will be 401ks; then 403bs/457s and then they will move from defined contribution plans to IRAs; it will be the traditional and rollovers and then finally ROTH accounts. Any such effort will have to have "look-back" provisions so that anyone who took money out of such plans will have to pay it back.
Sooner or later they reach the point of over-reaching that will ignite the public. Governments always misjudge that point and this will be no different. I see nothing good that can come out of 2 trillion dollar annual deficits and 15 trillion dollar debt ceilings.
The ancient wisdom has always been, "you don't cut spending in the middle of a recession." However, as most adages do, this one has a limit too. At some point you have to bite the bullet to preserve longer term health. I wonder if the GD I would have ended by 1934 if Hoover had resisted a little longer passing big spending bills? Maybe the adage would have been, "the best way out is through."
on Tue, 02/02/2010 - 21:17
#215518
Let's not forget the new money market requirement to hold 95% in Treasuries. The market crash will ease the pain of that rule as well
on Tue, 02/02/2010 - 08:53
#214585
If you agree that the crisis of 2008 was a SOLVENCY crisis, you have no choice but conclude that there is no exit strategy.
And even if the TBTF had become solvent by now (which I doubt), that doesn't make them buyers for the crappy paper sitting on the Fed's balance sheet.
Bernanke must be scared to hell, and at times it gets difficult for him to hide that.
on Tue, 02/02/2010 - 11:27
#214775
You got it, Toyota.
on Tue, 02/02/2010 - 08:58
#214588
I agree ....
Here is why....
Over 30% of the money in the form of equity and credit has basically been eliminated....
For example....if the total currency available in the form of equity and credit was $70 Trillion in 2006/7....and has been reduced by more than $21 Trillion....this simply leaves the question as to how can prices not decline accordingly ?
And the next question becomes one of sustainable wealth replacement....which cannot happen via a printing press or else there would be no poor countries in the world.....
Thus if a printing press is utilized ....this would serve as a reallocation of 39/70's not 70/70's....
One of the only ways that a ustainable form of wealth could more quickly be replentished is to change US tax structure.....ie replace the current system which is just reallocating what is left....to one whereby business formation can happen in earnest....
This brings the next question ....how ?
The logic is this....
The current policies are akin to cutting down orchard trees while demanding more fruit.....This will not work....
What will work is to buy more land and plant more trees ....then there will be more fruit....
How then ?
Remove all individual and corporate taxation.
Replace with a simple 15% consumption tax....to be divided into state and fed uses via state mandates.
Now model this versus the current system....and then 10 years out ....check the tax revenues from both systems....
The simple 15% consumption tax revenue would dwarf the current tax system take....and the real economy via the consumption tax only would be many times the size of the
current tax system economy....
..........................
Other notes....
If the exchanges were to be defragmented....and no transactions could occur off this exchange.....and transaction costs were further reduced to approximately 20 cents per 100 units.....and information on all securities was wiki style fact based.....worldwide and in the language of choice.....This cumulative valuation number alone would dwarf the previous total economy numbers....
on Tue, 02/02/2010 - 12:58
#214873
39/70? why not 49/70?
on Tue, 02/02/2010 - 21:15
#215514
One of the reasons the govt. loves the income tax is that we lose financial privacy.
on Tue, 02/02/2010 - 22:21
#215567
Land is the only thing that can't be hidden. The only tax that protect privacy is land tax.
on Tue, 02/02/2010 - 09:19
#214601
the feds exit strategy is hyperinflation. its historically well documented.
on Tue, 02/02/2010 - 09:38
#214620
+11
on Tue, 02/02/2010 - 10:17
#214660
They can't get to hyperinflation until an average wage earner has pricing power and we are a long, long, long, long way from that.
on Tue, 02/02/2010 - 11:22
#214766
Conventional wisdom says that is true ... without wage inflation you can't have hyper-inflation. However, a substitute for that would be more government giveaway programs. Plus, I am not sure hyperinflation is necessary for the exit strategy. I'm looking for the Black Swan.
on Tue, 02/02/2010 - 14:45
#215049
Wage inflation has nothing to do with hyperinflation. That's been a myth for so long it's now "accepted wisdom".
In a hyper-inflation scenario, the fire-hose will likely go into investors pockets, not wage-earners - which in turn will cause equities, commodities and everything else to explode in price as there's too much money chasing the same resources. That's why, even with no real demand, oil prices are still bouncing between $70-$80 a barrel, and why equities are now up by a stunning 60% from their lows last year. Wages, on the other hand, are under severe downward pressure - way too much supply, way too little demand. When wages are falling but commodities (and finished goods) are rising, then you're also in an inflationary scenario.
on Tue, 02/02/2010 - 15:37
#215133
Inflation is an increase in money supply and credit supply(credit performing the same function as money in fiatland.)
Prices rising is a symptom of inflation but not the definition. We are in a deflationary environment with money supply destruction, lowering labor prices and lower credit and money velocity.
Inflating prices are more a symptom of supply destruction.
Commodity price increases are more of a symptom of sovereign currency crisis- as people use commodities as a counter currency.
Increases in commodities like oil are more of an indication of lack of faith and high conversion rates from USD to OILFx or gold money.
Prices for most other things will crash as buying power collapses through labor competition and lower wages.
The only way to stop this death spiral is to forgive debt- as has been done millenia before this little pickle. Hang the bankers, forgive private debt, shrink the government and start over. That's the only way and that's not going to happen. In the meantime, let's cheer Iceland for giving the finger to Britain and saying, " we ain't paying."
on Tue, 02/02/2010 - 18:59
#215399
cocoablini,
Your post is the most clear-cut and accurate definition of terms I have ever read in the inflation vs. deflation debate. Thank you!
on Tue, 02/02/2010 - 21:01
#215504
+1000,
debt forgiveness is the right way but it would not happen in america today; had it happened last summer and had the bond holders been partially or totally wiped out with the tbtf banksters, america would not be facing depression ver 2.x. It is really mind boggling that an entire country is paying for the debtholders of these banks. Americans are being sold out by their political class.
on Tue, 02/02/2010 - 20:34
#215480
Very very good point
on Tue, 02/02/2010 - 09:23
#214605
Plunge in spending happens after a plunge in asset prices. This will force a flee into treasurys for one last fix. After that, it would be wise to be well stocked with canned goods and lead in the shape of bullets.
on Tue, 02/02/2010 - 09:33
#214613
Let me know which one it is, will you? I’ll be hiding out in my camouflaged underground bunker in the desert. And if you do come calling, be a peach and bring me some MRE’s, a five gallon bottle of water, and a case of 9 mm ammo, will you?<<<<
smart ass....ha ha ha
on Tue, 02/02/2010 - 09:37
#214618
Pay attention to the money supply - the money supply in circulation - not the fantasy accounting entries.
The money supply is VAPORIZING. And there's nothing the central banks can do about it. With no new new cash being borrowed into existence, there's no fuel for the economic engines of the West. Without new cash, all the rents come crashing down.
We're in the first innings of HYPER-DEFLATION.
Without radical tax and debt relief across the globe, the fiat money supply will disappear.
Debt is money. Debt was money.
on Tue, 02/02/2010 - 09:39
#214624
good point, what happens next in that scenario?
on Tue, 02/02/2010 - 09:44
#214631
Hyper-deflation?
Ummm... errr... gold bitchez?!?!
People should see that deflation, not inflation is coming, mainly due to the fact that the money being printed isn't making it anywhere where it can inflate anything.
on Tue, 02/02/2010 - 10:14
#214656
why buy gold in hyper-deflation? its value in dollar terms will fall along with everything else
on Tue, 02/02/2010 - 10:25
#214669
That was actually my point exactly. Hence the errr... ummmm...
It seems like gold bitchez seems to be the rallying cry no matter what the issue.
House on fire? Gold bitchez!
Wife pissed off? Gold bitchez! (actually, that one might work for a pissed off wife)
Flesh eating virus spreading across America? Well, I'm sure you can guess what's coming next.
on Tue, 02/02/2010 - 10:32
#214679
I think that one calls for colloidal silver (and a tinfoil hat). Silver bitchez!
Seriously, in a hyper-deflationary scenario (which I happen to think is ludicrous), you'd short gold using the ProShares UltraShort gold ETF, ticker symbol GLL. I don't recommend actually doing that as I happen to think you'd lose every penny you'd put in, but for anyone crazy enough to try it, there ya go.
on Tue, 02/02/2010 - 11:13
#214745
Agreed, BUT:
Since cash is king in a deflation, just point #2 makes it worth holding a bit of gold.Full disclosure: I have physical gold and tons of cash.
on Tue, 02/02/2010 - 11:27
#214774
I have a hard time envisioning that. If we hit hyper-deflation then the global economy has collapsed. People will want food, water, clothing and housing. What good will gold do except for a few goldbugs.
Likewise, shorting a collapsing market will be an excercise in futility. At some point there will no longer be settlements as liquidity dries up. Markets will stop functioning and you will be left holding your last brokerage statement instead of a can of beans.
on Tue, 02/02/2010 - 12:26
#214841
Eventually a currency will be required. You cannot make all those things yourself. At some point, what you have to trade will not correspond with what someone else wants. Conversely what you want, will not correspond with what somebody else has to trade. You will either need an intermediate exchange, or a currency item. Alchohol, Tobacco, Firearms...should be a convenience store.
Also Franks n Beans are not food...good way to develop various manifestations of malnutrition, or heavy metal accumulation. Remember scurvy?
So you decide to become a farmer. How you gonna pay for that plow, hoe, shovel, canning jars? Primary needs are food, water, shelter. At some point, everyone needs to keep their shelter warm. There are a myriad of small items we take for granted because we no longer use them in daily life. But they too are critical to survival.
All this is assuming we land squarely back in the Dark Ages, well beyond TGD 2.0...anything is possible at this point.
You worried yet? If not, your not paying attention. Sweet Dreams
on Tue, 02/02/2010 - 14:56
#215061
At some point, preferably near the bottom of the deflationary cycle, it would be wise to purchase tools that produce what people need.
I'm 100% cash and food storage. The rest is NOYB!
on Tue, 02/02/2010 - 16:07
#215187
Gold is GREAT in a deflation. It's a currency and the last resort currency. Gold must be measured by real purchasing power versus other things- not by nominal value versus just a senior currency. The senior currency will always have some strength since all obligations must be cleared by that currency.
In inflations- last 10 years- gold's nominal value has increased but nob as much as copper or silver or other commodities. It holds the line in buying power.
In a deflation, gold may buy less senior currency but it buys much more secondary currencies and commodities. See gold versus sterling or yen or Euro.
And when the dollar finally delevers and gets unwound, it be just be flat out revulsed and replaced with another shit bill or by another system wig assets of value.
Gold is money and it is fungible anywhere. As it's he money of last resort with no derivative obligations, it will get stronger in deflation.
on Tue, 02/02/2010 - 16:36
#215234
Finally - someone not so afflicted. GOLD is money, people. It may not be legal tender but it knows what it is. You think "Old Money" is worried about this or that friggin NOTE getting scarce? The same note that can be conjured into existence electronically? Hyper-deflation my ass. The soon to be reconfirmed Zimbabwe Ben already told you... "HELICOPTER BITCHES!". He could bang out targeted debit cards by the truckload to forestall "Hyperdeflation". He said - "It Doesn't Happen Here" - what part of that didn't you understand?
on Tue, 02/02/2010 - 18:40
#215378
LOL Except the game has always been about the transfer of assets and deflation is by far the most efficient means. End game. Good luck with gold that can become illegal at the stroke of a pen.
When the $100k tax rebate check comes in the mail to offset the $257k of increased debt burden for 2009....I'll buy into the hyperinflation facade!
on Tue, 02/02/2010 - 22:32
#215573
Confusing monetary inflation/deflation with asset inflation/deflation with price inflation/deflation with wage inflation/deflation will never lead a discussion towards a conclusion.
on Tue, 02/02/2010 - 22:54
#215589
it seems to me the question is whether the TBTF will fail (deflation) or will they survive and start lending again (inflation). my bet is on the Fed to prop up the TBTF no matter what. so after the Fed prints the another $4trillion that Barney Frank has already promised the TBFT, and they start lending, we start slipping into unambiguous inflation... then as that policy seems to do little for unemployment, further use of the printing press, which is really the only solution Keynesian theory offers, eventually leads to hyperinflation. so gold at any price right now is a good deal, so are MREs, ammo, guns, and cans of tuna.
on Wed, 02/03/2010 - 04:03
#215666
If you want ownership of all assets....why inflate and bail the debtor out after decades of pushing towards this point?
You are basically saying that our current situation is an accident with no intentional steering. I beg to differ....look at the relaxation in regulations. We started to flatten out on debt in the 90's and Greenspan created the Sweeps program. Early 00's and he dropped interest rates. They've dug a pit! No way we'll get thrown a ladder.
Look at Obama's recent executive order....then examine the FEMA regions....the creation of FEMA (Oliver North with CIA drug money)....get the picture yet???
Deflation will create chaos and provide justification of martial law! Plus it will transfer ownership of all assets back to the creator of the currency!
Ready to get chipped yet?
http://www.youtube.com/watch?v=XVctWVTA3gI
on Tue, 02/02/2010 - 10:44
#214699
MB,
You evidently do not shop where I do....
Everything I buy, has increased, at least 10% in one year, and the year before that.( wages are dropping, and REAL full time jobs are non existent),and I live in a HUGE state, with less fiscal issues than any other.
NOTHING is less expensive..........if this is not INFLATION, what is?.
PM's will go down initially in Hyper-Deflation, but, not for long......
on Tue, 02/02/2010 - 12:32
#214849
Similar here. Prices of most ordinary consumables are going up. It's mostly concealed, with the quality going down or the quantity in the container being smaller while the nominal price stays the same, but inflation is there.
BTW, a huge state with less fiscal issues than others... sure ain't Kalifornia! Texas, Montana, or Alaska? Since Texas and Montana have some issues, I can only guess.
on Tue, 02/02/2010 - 14:58
#215064
Dropping dimes to pick up pennies? Food is a whole different ballgame. The strategic supply has long been sold off to China and India.
Unless $10 extra in food a month suddenly made up for the 40% drop in housing values....I don't buy hyperinflation!
on Tue, 02/02/2010 - 16:01
#215170
Food was the easiest example I could think of. Housing isn't a good comparison because normal people don't buy/sell their house on a weekly, monthly or even yearly basis. They either get a mortage and stay 5+ years or they rent on 12-month leases. Landlords rarely give rent concessions at renewal, so few people are going to get any financial benefit from housing price deflation. Yes, theoretically you could let one lease expire and go rent elsewhere at the now-market rate, but few people will do that, and the transaction costs (e.g. moving company, shelling out a new security deposit long before return of the prior deposit) are significant. The ones most likely to get some benefit either sold their prior house at a loss or got foreclosed. Not a winner.
Deflation in things you own, inflation in things you consume. Great combination.
on Tue, 02/02/2010 - 18:46
#215383
Yeah how are those stats holding up these days....history is history....the future is wide open! Last rent contract I signed was for 9 months (owner wanted 12 mos and I wanted 6 mos). About time to renegotiate and since rent has fallen another 15% in the past 9 mos....yippee!!!
I'll move my self for the extra $500 to $750 a month! Gun prices have even started coming down!
That is a good combination....one guaranteed to sink the middle class! Lower end of the spectrum doesn't own anything!
on Tue, 02/02/2010 - 23:44
#215618
At present there are items that are deflating. Property taxes where I live are down 16%. Tolls are down about 10%. Labor rates are definately coming down, and as a contractor I see that everywhere. We have had to offer some nominal rent concessions at apartments we own in order to keep them rented. Consumables are rising in price, and soon everything else will follow. BB has already told us he will flood the skies with currency if it becomes necessary. And with credit evaporating (our current bank is revising the terms of our line of credit, so we are out looking for other lenders) it will soon be raining FRNs.
on Wed, 02/03/2010 - 04:06
#215668
Well time will tell the story on how well founded your belief in BB is.....since he's already been caught lying multiple times....I'll take the opposite side of that argument!
on Tue, 02/02/2010 - 19:02
#215400
Interesting note about food containers. My spaghetti sauce jar is now 24 oz., used to be 28 oz., that's a 14% decrease, and I'm pretty sure the price is the same. "Hidden" inflation if you will.
Same with coffee, it used to be 1 lb. bags but now they're generally 12 oz.
Yeah I can buy a computer for less nowadays, but I might buy one of those once every few years, while I'm buying gas, food etc. all the time.
on Tue, 02/02/2010 - 20:09
#215445
The shrinking food packages are across the board. Canned foods, cereal, ice cream (dramatic in some cases, e.g. Breyer standard containers are now 1/2 the size they were just 2-3 years ago), frozen dinners, etc. etc. But I'll bet most people don't notice.
on Wed, 02/03/2010 - 02:26
#215652
Yes its true. I noticed this 6 mo. ago.
on Tue, 02/02/2010 - 14:23
#215008
You're insane or you're lying. Houses, cars, electronics, fuel and everything else is cheaper than it was 3 years ago (sans food, perhaps). I haven't paid full price for anything in the past year. Go to your local mall and count how many stores are running banner sales.
on Tue, 02/02/2010 - 16:45
#215254
That's supply destruction. The deflationary bust comes before the inflationary boom. It takes some time before all fiat money is comes in consumer hands. Also, don't forget that inflation has been the us biggest export product. Those dollars will come home to roost.
on Tue, 02/02/2010 - 18:49
#215389
OR does the deflationary bust come after the debt inflation boom.....what fiat money? The stuff the Fed injected into the GSEs and then the taxpayers took the bill and gave the money back to the Fed....that's what I thought....there is no injection of fiat money....just a paper trading scheme to keep a floor under the market while it continues to contract buying time for the final groundwork (http://yophat.blogspot.com/2010/01/executive-order-fema-governors.html) to be put into place.
on Tue, 02/02/2010 - 11:30
#214780
You got that right, Jack.
on Tue, 02/02/2010 - 18:10
#215346
Credit is not money. Debt is not money. They are methods of creation of money, of financing the money used in an enterprise.
on Tue, 02/02/2010 - 09:38
#214623
The exit strategy has always been a gamble. Bernacke takes a lot of crap from readers at ZH, but he was initially correct in his diagnosis. Not his fault that congress and the white house went absolutely insane. Option a) let the situation play out (most banks fail and credit seizes) would have been really bad, while Option b) back stop the system creating a fire break was bad, but at least gave a shot at playing with the system to get out.
What f-ed it up was the new admin deciding to buy the auto industry and balance every state budget with 1.3 trillion of our money--the insanity.
Now we are in a bind as MHFT and all of you have reiterated. All I'm saying is that at one point (DEC08) we at least had a shot going forward. Now we don't.
on Tue, 02/02/2010 - 13:11
#214888
the choices were at least three and you left out the best: put the financial institutions in receivership after emergency legislation to legalize fdic or someone's supervision over shadow banking, replace management, separate the toxic assets, wipe out shareholder equity and as much bondholder credit as necessary to make up the difference between cost and market, pay off depositors and counterparties, sell the remaining part of the business reimbursing the treasury for any transitional costs. something like this is the standard practice for those banks that weren't too big to fail. check out paul volcker's oped in the nyt or john hussman's much more erudite post last week.
on Tue, 02/02/2010 - 15:10
#215093
But, but, but, that would make really rich people really poor!
on Tue, 02/02/2010 - 16:42
#215248
You forgot perp walks and bracelets. The national psyche requires it.
on Tue, 02/02/2010 - 10:01
#214649
It's worse than that. Once the interests rates start going up, I think they will have to explode, signaling that there is no more higher interest rate that can be offered to offset the risk, or rather the fact that the dollar will be absolutely worthless.
PS have already ordered Emergency Food storage supplies,mylar bags, 6 gallon food grade pails.
Ammo and guns? Got that a long time ago because the shelf life is decades.
on Tue, 02/02/2010 - 10:15
#214657
The exit strategy includes forced participation of all domestic retirement and investment funds into Treasuries starting at 10%. Military involvement throughout the world (particularly the Arab States encourages strong foreign Treasury bid prices. Infinite deficits can and will be financed.
on Tue, 02/02/2010 - 11:33
#214783
Perhaps, but Obama can't pull it off. His magic is done.
on Tue, 02/02/2010 - 10:20
#214662
I see wage deflation and consumer inflation as being essentially the same economic phenomena since both events reduce the spending power of consumers.
In the 70s you had strong unions so wages increased with the rising cost of consumer items
Now there is weak unions + more globalisation so you have lower wages with stagnant consumer goods for now
But the energy dynamics are much worse so once the feds money gets into the money supply you will get a vortex of declining wages with massive increases in vital goods and services and the continuing decline of asset prices with the exception of PMs
The 1970s stagflation is beginning to look like a pleasant dream
on Tue, 02/02/2010 - 10:22
#214665
I love it--yes it is a myth and it just makes me so furious how the myth is perpetuated by all the "so called" main stream pundits!!!
How can the privately held federal reserve exit from their monumental bank heist when they pumped so much directly into BLACKHOLEBANKS (pundits and the cartel legislator accomplices call them the TOOBIGTOFAIL) where the momentum of the scam created such a sucking of value for so many years by the leverage and subsequent bonuses and payments that went to these houses for years while the innocent depositors and taxpayers sat back, watched Glass Steagall get revoked and watch our government support the privately held federal reserve cartel suck away their future earnings and past savings?
Our government has become a corrupt political machine that makes Huey Long look like a little tiny street corner bully.
on Tue, 02/02/2010 - 13:40
#214921
agrotera - Huey was simply the sum total of the policies implemented post reconstruction just as our current financial system and the governments that have made themselves subservient to them are the sum total of these same policies with a nitrous injection of the Bank of England. Keep at it pal! Peace
on Tue, 02/02/2010 - 21:59
#215549
Hello MK! You said it so very well !!!
on Tue, 02/02/2010 - 10:28
#214673
madhedgefundtrader, you really need to get your own island and use hard-line, 3G or Satellite Internet (speed rated as best, better and just ok). Other options are some really beautiful non-USA beaches in the world. No need to hide out in the USA when you can relax in comfort within your own island or sea shore paradise. Enjoy great weather all year around, pristine beaches and water. You'd be amazed how far a few ounces of gold goes in other parts of the world. Who cares if the USA melts down when the fraud and Ponzi scheme called the Federal Reserve Note (aka United States Dollar) finally loses its faith status and goes to its intrinsic value of the utter nothingness that backs it.
Jesse Ventura and others have been leaving the USA and having a great time. Even Sammy Hagar has a nice lil place...
on Tue, 02/02/2010 - 15:27
#215116
I have thought about doing this since the summer of 2007 (Costa Rica was 1st choice, Chile 2nd and Panama 3rd).
I have decided to stay in America. I am sure it will not be pleasant. I don't stay for a flag or what it once symbolized. I am more or less free as my kids are close to out of the house.
I have been searching for a rational, altruistic reason but I have merely come to one conclusion: This is my home. My America. End of story, or perhaps I should say near beginning of a bitter-sweet adventure. Maybe it is the Slav in me.
on Tue, 02/02/2010 - 10:29
#214674
There'd be buyers for the junk at the appropriate price. Factor in the default risk and supply overhang and you're talking haircut, and not the kind you want to be seen on the street with, but the kind the dog would hide under the end table after getting.
on Tue, 02/02/2010 - 11:09
#214736
If you are going thru 9mm ammo, you are letting the roving bands get too close. You need to expand your perimeter, create more buffer zone. At handgun range, it's a skills match with too much luck thrown in. At long gun range, you can deal with untrained shooters easily and are more likely to be able to deal with several attackers simultaneously. (This post is an indicator of my pessimism today).
on Tue, 02/02/2010 - 13:14
#214895
+22LR
http://en.wikipedia.org/wiki/.22_Long_Rifle
While WaterWings' advice is excellent, there's a reason for the old saying "A handgun is for shooting your way to your rifle..."
on Tue, 02/02/2010 - 13:57
#214963
What are you going to do with a .22, shoot squirrels? Get something that perforates properly: http://en.wikipedia.org/wiki/M1A
on Tue, 02/02/2010 - 17:09
#215282
Hah - I was just watching the excellent HBO series "The Wire" last week. Snoop from Baltimore knows more than you (having seen a lot of people shot). An HV .22LR will bounce around in a body creating unrepairable wound channels. A higher caliber with stopping power will often simply break a bone. The .22 is also associated with professional assassins. I dare say I wouldn't want to take a CCI Quik-Shok 1600+ fps frag bullet under the armpit of my vest. Check the path(s) at 45 seconds in on this video:
http://www.youtube.com/watch?v=IO_TLCXNCro
on Tue, 02/02/2010 - 17:37
#215317
I'd say this is an unrepairable wound channel:
http://www.youtube.com/watch?v=k-Zip_b-5RQ
You're right about assassins. The IDF has been doing it for years:
http://www.haaretz.com/hasen/spages/1128403.html
on Wed, 02/03/2010 - 08:53
#215735
the problem with a .22 is that it doesn't have much ability to penetrate to start with and loses what it does have quickly. so, yes if you can get the bullet to the body then it can do a lot of damage, but anything in the way, some bamboo, saplings, a railing, a car door, and it probably will not get there.
even though a large caliber rifle is likely to pass straight through a body, its often the hydrostatic shock that incapacitates and sometimes kills the target.
on Tue, 02/02/2010 - 17:27
#215302
Considering overall weight and versatility the .22LR is fantastic! <$20 for 500 rounds and very, very lightweight. It's poor conceal-ability, shorter range, and weaker power are mere details for a resourceful, watchful individual that avoids conflict at all costs.
In a post-collapse(ing) scenario conflict avoidance will help you beat the law of averages when it comes to meeting your maker. Rather than having the mindset of killing a potential attacker one would be more concerned with scoring the first hit to ruin the assailants day and promptly getting the hell out of there! When you spray an attacker with pepper spray you don't hang out to see if they are okay!
Although, if you are skilled, a .22LR to the thoracic cavity will be curtains for someone that would choose to initiate force against you or loved ones:
Training for throat-to-forehead shots will also defeat attackers wearing personal body armor, which also will be in wide use. Shot placement is far more important than caliber - repeated studies have shown this. With very little kick it is not intimidating and can be employed by teenagers, the ladies, and the elderly. You'll feel like a marksman in no time! Although saying "I play for keeps" from 400+ yards with a scoped rifle or battle rifle is quite nice:
http://www.militariapress.com/miva/graphics/00000001/S0022.jpg
on Tue, 02/02/2010 - 17:21
#215298
Mossberg Persuader - at "handgun range" it takes the luck out of it...
on Tue, 02/02/2010 - 21:52
#215544
I don't come to ZH for gun advice, for much the same reason (though unbelievably, amplified even further) that I don't go to gun forums for investing advice.
No offense to smalltownlawyer who is basically right, but most of the gun comments here sound like 12 year olds who watched Rambo too many times and don't have even half of their first clue.
on Wed, 02/03/2010 - 05:32
#215676
We can't all be Mad Max
on Wed, 02/03/2010 - 09:50
#215784
:)
Mad Max didn't seem to know much about guns anyway. That whole Australian thing.
Anyone who is seriously interested in learning about firearms, in an accurate and responsible way, take an NRA "Personal Protection in the Home" course, which is offered regularly all over the US and in fact in many states is a course allowing you to obtain a concealed handgun license. It's a 1.5 day course, cost is around $150 and it's taught by credentialed instructors who actually know what they're doing and (for the most part) won't repeat hollywood or gun store stupidity and pretend it's fact.
on Wed, 02/03/2010 - 11:23
#215870
Jeez man, seriously? What are you talking about? Mad Max was proficient at every weapon he could get his hands on. And what Australia thing?
http://www.youtube.com/watch?v=-TC2xTCb_GU
The NRA? Those political sellouts?
http://www.nrawol.net/
Well your NRA instructor is going to give you the same personally biased information on firearms as any gun shop employee - anyone that takes advice as gospel without doing their own research to confirm, well, it goes without saying.
If you are serious enough to take more than a day's worth of classes you need to head to an academy like Thunder Ranch or Front Sight were they actually teach you how to use your weapon and don't talk down to you as if you've watched too many movies.
on Tue, 02/02/2010 - 11:10
#214739
The Fed will start posting $100k cheques to every family before they allow hyper-deflation.
on Tue, 02/02/2010 - 13:27
#214918
Sigh; the Fed is not all powerful.
Whatever power & influence both the central bank and federal government had peaked Jan 19, 2010. When the history of this era is examined, a consensus will form that while the MA election was not the beginning of the end, it was certainly the start of the end of the beginning.
While Nov '10 won't bring fundamental change (eg eliminating the Fed), it may well be the point where the end of the beginning reaches critical mass. Without an unbridled ability to print & spend, the deflationary tsunami which has been temporarily held back will finally be unleashed.
I'm a big fan of tells, so let me point out another factor to consider: If Hillary bails after Nov '10, you know the pace of the SHTF is gaining momentum.
on Tue, 02/02/2010 - 15:02
#215070
I'll believe it when I see it!!! i.e. after the bank cashes the check and I walk out with a bag full of money!
on Tue, 02/02/2010 - 16:25
#215216
well when the guy in charge of printing the money is nicknamed' helicopter ben'. i would imagine he would do exactly what it says on the tin. imho
on Tue, 02/02/2010 - 18:51
#215390
Or its just a wet dream facade for those in debtors prison!
on Tue, 02/02/2010 - 11:21
#214762
No matter the scenario a currency crisis is coming. Gold will protect you along with your weapon of choice.
on Tue, 02/02/2010 - 11:56
#214808
Does anyone know of a fiat currency that died by deflation?
CCCP
on Tue, 02/02/2010 - 15:03
#215074
Does anyone know of a dead fiat currency that was created by a private bank via a government debt obligation?
on Tue, 02/02/2010 - 12:21
#214833
In the marketplace I am seeing deflation. The stuff on the racks are going down in price.
on Tue, 02/02/2010 - 12:51
#214869
Hyperinflation reared it's monsterous head today. It is going big. So I say, go big or go home.
on Tue, 02/02/2010 - 13:05
#214875
If you choose to make a trip over the grade or ride over the top of The Valley, come and visit Corral De Tierra or San Benancio... Desert retreat indeed. heh
on Tue, 02/02/2010 - 14:58
#215065
Miles, i looked and its not a place to survive. Neighbors are far away enuff that you dont know them , so they are not your friends and they get hungry too. Try Oregon, half our homes are hidden by forests . You could drive right by a community (gated) and never know. Plus mostly retired, unlikely to riot and a lot of hunters. Plus we love it here so its a given we would stand together to protect our own. Many of us actually know one another. Also being older, many of us are stocked up even in good times and i have noticed awareness of our reality is filtering in at last in 2 out of five folks. I have made it a personal point of honor to inform all i meet during the day with the wonderful condition our condition is in. LOL No Fear here, just pragmatic action. Its still a wonderful world, new horizons are on the way as well as a higher state of conciousness due to the humbling we are about to experience. In the end its all good and i am so glad i am alive in this time of GREAT ADVENTURE.
on Tue, 02/02/2010 - 15:04
#215077
A little north....like that bottom stretch of Alaska is more like it!
on Tue, 02/02/2010 - 16:36
#215230
Duplicate
on Tue, 02/02/2010 - 16:36
#215240
If I were to go in that direction there are some fine areas between Dawson Creek & White Horse... As there are between Hope & Dawson Creek. Or were last time I visited. Although I must say as someone that has had many wonderful times boating the from the San Juan's north the chain of Islands between Vancouver Island & Alaska is another word for heaven to me. Especially with fond memories of time spent on Hornby Island.
on Tue, 02/02/2010 - 15:54
#215157
You're a brave SOB. The last thing I want is a bunch of cidiots coming out to my neck of the woods to be safe so my neck of the woods will remain a secret. Cidiots are the problem. That's why in this part of Texas the shotgun is always loaded and handy.
on Tue, 02/02/2010 - 16:47
#215227
And as Gary P. Nunn says; "Get your chili ready" because before we know it, it's gonna be tomorrow night.
on Tue, 02/02/2010 - 16:45
#215220
Having family and personal roots in the Willamette Valley, Bend, the coastal counties and especially Jackson & Josephine counties I fully appreciate the qualities Oregon brings to any discussion of residence. My suggestion was simply an acknowledged appreciation of another area with deeper roots for the author and myself... Chances are that I will at some point once again call Oregon home.
on Tue, 02/02/2010 - 14:31
#215024
49/70.....
Thank you....
on Tue, 02/02/2010 - 14:44
#215045
So madhedgefundtrader is no longer Bullish? Oh wait that was Leo K...nevermind.
on Tue, 02/02/2010 - 15:34
#215128
"In the marketplace I am seeing deflation. The stuff on the racks are going down in price."
Don't know where you are shopping. All the basic essentials are going up in my area. Only things going down are real estate and non-durables.
on Tue, 02/02/2010 - 15:47
#215146
You say "There are only two possible outcomes to the greatest financing gap in history. Interest rates have to soar to unimaginable levels to attract recalcitrant investors, or the plunge in spending sends us into a postponed Great Depression II."
What a bullshit comment worthy of a Yahoo message board. There are myriad possible outcomes of which you've provided the two extremes. Do you really believe your own line of shit, or do you just post it to see if others do? I don't, and I'm losing patience with you. Marla, you're better than this. Seriously.
on Tue, 02/02/2010 - 17:15
#215290
Anonymous aren't allowed to have patience meters, so suck it.
on Tue, 02/02/2010 - 15:48
#215149
How's this for bullish -
http://jessescrossroadscafe.blogspot.com/2010/02/why-is-blackrock-broadl...
on Tue, 02/02/2010 - 15:55
#215160
People are getting confused with rising nominal prices and inflation and deflation. Lower prices are a symptom of deflation in the early stages with high supply and shrinking demand. Once inventories are rebalanced, sellers have to charge more to compensate for less sales. They are still losing growth and this is called supply destruction.
Deflationary symptoms change from crashing asset values to supply squeezes and lowering money supply by debt issuance.
The only way to keep asset prices high is to squeeze supply(deBeers diamond model as used by USG in stock market purchases) or fullscale monopolistic takeover( as seen by uSG purchases of most real estate.)
everyone wants the same old money for oil,stocks, real estate,food.
If price discovery in the marketplace is not allowed, then purchases slow down and that's deflation. Historically deflations force hoarding of cash and money in the forms of gold and silver.)Thats how it works- and how it worked in Rome, Japan,the 30's and pre and post Civil War.
If people want to charge MORE for a service or good, they will sell less and that slows money turnover. That creates a supply issue which begets more high prices. And if people cannot put that on their VISA cards, then it's a deflaionary recession. If this was inflation, prices would be going up because there was competition for goods a services because people had too much "money."
similar symptoms can be found in both hyperinflation and deflationary death spirals. It always hurts the people in the end. Either through debt slavery or destruction of purchasing power.
on Tue, 02/02/2010 - 18:33
#215371
Amen brother, amen! Why is it so hard for people to understand when the value of equities and property fall more than the rise in commodity prices that is still deflationary?
on Tue, 02/02/2010 - 16:40
#215245
Yea who uses 9mm? If you have to use a handgun at least grab one that requires S&W 40. I agree with the riflemen from above.
Cocoablini:
Thanks for your posts here on ZH. I find myself learning something new everytime I hear your voice of reason amidst whatever clutter surrounds it.
on Tue, 02/02/2010 - 23:02
#215591
Gold, ammo, and Cheerios. Feels like it's going to be a Jim Bowie moment at the Alamo
on Wed, 02/03/2010 - 01:42
#215646
I'm a .223 guy myself, although 9mm sidearm always helps. Nevertheless, I share your sentiment.
on Wed, 02/03/2010 - 09:53
#215789
I'm starting to wonder if I could massively spike demand for some obscure cartridge by posting here and saying it's the best thing ever and to get them while you still can. Hmmm, should I claim 7.65 Argentine, 7mm Mauser, or 9.3x62?
on Wed, 02/03/2010 - 11:20
#215899
+1
Whatever it takes to get people into gunshops. Their greed will subside after they realize the employees there get a laugh. Let the education begin.