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The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs
Lately, there has been a lot of chatter by virtually everyone with some soapbox to stand on, about this and that. That's swell... if mostly irrelevant: by now everyone should be aware that only two charts actually matter, both of which are painfully self-explanatory.
Chart 1: The Federal Budget
Chart 2: The growth of the US debt in relation to the soon to be hiked debt ceiling.
And, for the purists, we'll add another chart, this time showing the continuing persistent deterioration in the budget due to mandatory spending. The question is where, absent someone discovering teleportation or some other revolutionary technological invention, will the paradigm technological step up allowing for a surge in revenues, come from.
And since even the most self-explanatory is supposed to come with some narrative, here is Goldman's most recent Q&A on the Fiscal "Debate" - although we wonder just what debate is being referred to: after all D.C. is nothing but a smokescreen for Wall Street which demands either more dollars in circulation or more public debt issued in order to keep the wheels turning. Without either of these it's game over.
Q&A on the Fiscal Debate
The formulation of federal fiscal policy is typically of interest to markets mainly when it involves large changes outside of the annual budget process, such as the countercyclical policies enacted in 2008 and 2009, or other one-off policy decisions, such as the extension of expiring tax measures at the end of 2010. By contrast, the appropriations process is normally not important to market participants apart from those focused on the effect on individual industries. However, split control of Congress and an increasing focus on fiscal sustainability have raised the profile of seemingly routine budget matters. In what follows we attempt to clarify some of the issues currently in play that are of particular interest to markets:
Q: What is currently being debated?
A: Discretionary spending for FY2011. Defense and non-defense discretionary spending (see Exhibit 1) are projected to account for $1.373 trillion in federal outlays this year, or roughly 39% of total federal spending (Exhibit 1). But with the current fiscal year halfway over, the spending level is still uncertain. Congress has funded the government through a series of six “continuing resolutions” (CRs) while it has debated full-year spending levels. These short-term spending bills are not uncommon, and are often used to provide funding for a few departments at the previous year’s level while appropriations work is being wrapped up in Congress.
However, it is unusual to be operating under a CR halfway through the year. The most recent two CRs also included a combined $10bn in cuts, and lawmakers are negotiating additional cuts of between $33bn and $40bn from current levels to be included in the funding bill for the full fiscal year. As of this writing, differences have narrowed, but the exact amount and composition of cuts is still unclear. Without an extension of spending authority, either through full-year appropriations (the goal of this week’s fiscal discussions) or another short-term measure (a fallback in the absence of a full-year bill), the federal government would partially shut down until funding is restored. Funding expires at the end of April 8.
Q: Why is there such a great focus on non-defense discretionary spending?
A: Non-defense discretionary is only 12% of the budget, but cuts here are often a first step in fiscal consolidation. While discretionary spending cuts will not resolve the budget imbalance on their own, this segment of the budget is addressed once a year, creating a natural first opportunity for cuts. It also tends to have fewer vested constituencies compared with mandatory spending, which is comprised mainly of benefit payments to individuals. In previous research we have found that the level of non-defense discretionary spending is the most responsive to the debt to GDP ratio, probably for these reasons.
Q: Is the possibility of a shutdown related to the debt limit?
A: The debt limit is a legally separate issue, with potentially more important consequences if action is delayed. For historical reasons that stretch back to the First World War, Congress imposes a legally binding limit on the amount of debt the Treasury may issue. Once the Treasury reaches the limit, a prolonged failure to raise it would require the government to reduce outlays to the amount of revenue it takes in, and would not allow it to smooth monthly revenue or spending fluctuations with borrowing. So while the non-essential functions that would cease in a funding lapse account for a few hundred billion per year in federal spending, maintaining the current debt limit would require outlays to decline by an amount comparable to the budget deficit, which we expect to total $1.35 trillion this year and $1.025 trillion in FY2012.
Q: When will the debt limit be reached, and when will it be raised?
A: Probably in June. Treasury has projected that it will reach this statutory limit no later than May 16 (Exhibit 3). Once the limit is reached, the Treasury has several strategies it can use to create additional room under the limit, but after using these options the Treasury projects the limit will become a constraint no later than July 8.
Q: What about next year’s budget?
A: A debate over additional spending cuts is likely. Even though the FY2011 process has not yet concluded, the process for the fiscal year starting October 1 has already begun. The congressional budget process begins with the budget resolution, which recommends spending and revenue levels for the next ten years. The House budget resolution, which passed in committee this week, assumes a reduction in non-defense discretionary outlays of $79 billion from the CBO baseline in FY2012. Along with changes in other areas of the budget, the House budget resolution proposes to reduce overall spending by $110 billion in FY2012, and aims to reduce the 10-year deficit by $4.4 trillion. To achieve this, discretionary spending reductions for FY2012 would likely need to be at least as large as those being debated for the current fiscal year. No budget resolution has been released yet in the Senate.
Agreement this spring on the budget resolution may be difficult. However, the process can continue without an agreement; in fact, the resolution by definition does not become law, and Congress has failed in several recent years to enact a budget resolution. That said, the House and Senate must agree on appropriations legislation for FY2012—or at least another short term continuing resolution—by October 1, 2011 to avoid risking a shutdown.
Apart from the normal budget cycle, lawmakers must also decide whether to extend the 2-point payroll tax cut and expanded unemployment insurance enacted in late 2010, both of which would expire at the end of 2011 in the absence of an extension.
Q: When will Congress tackle structural reforms?
A: The debate has begun, but major reform seems more likely after the election. While discretionary spending changes occur often, changes to tax policy and mandatory spending programs tend to produce the largest policy-driven changes in the budget balance (Exhibit 4 shows the 5-year fiscal effect on the budget balance of all legislation enacted in a given year, as estimated by the Congressional Budget Office).
Divided control of Congress appears to be a significant obstacle to these sorts of changes at the moment. Moreover, neither party appears interested in changes to the Social Security program that would reduce spending in the next decade. Some lawmakers have put cuts in health-related entitlements on the table, as have the various fiscal commissions, but in the wake of last year’s health care law, which was partly financed with $455bn in Medicare cuts over ten years, the “easy” reductions in that program have already been made.
Q: Does policy uncertainty increase the fiscal risk facing the US?
A: While potentially unsettling in the very short term, multiple upcoming deadlines could actually increase the likelihood of meaningful fiscal reforms. With two important deadlines ahead, fiscal policy will remain in the headlines. It is possible that the potential for a shutdown will return ahead of FY2012, which starts October 1. In addition, enacting an increase in the debt limit large enough to last through the 2012 presidential election could be difficult, as it would likely require an increase in the range of $2 trillion. Since it is unclear whether lawmakers will be willing to pass such a large increase at one time, the issue could be debated more than once.
While all of these deadlines could result in additional uncertainty, they also create multiple opportunities to enact fiscal reforms. At a minimum, additional spending cuts for FY2012 look likely, on top of what is agreed to for FY2011. Moreover, discretionary spending caps and other fiscal rules are very likely to be debated as part of these measures. Although it is likely to be at least as difficult for lawmakers to agree on multi-year fiscal restraint as it has been to agree on appropriations for this year, there are two reasons to think this could be achieved: first, prior debt limit increases have often been coupled with important budget reforms, so there is a precedent. The 1997 debt limit increase was packaged with significant entitlement reforms. The 2010 increase was combined with statutory pay-as-you-go rules.
Second, now that both parties have opened the door to discretionary spending cuts, imposing hard multi-year caps on this segment of the budget looks like a realistic possibility as these upcoming fiscal deadlines are addressed.
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SS and Medicare will continue to be paid until one fine day, the checks get cashed and only buy one big goose egg (with nothing inside!)
The way empires collapse financially is that the "powers" become irrelevant to the residents.
Violence, starvation, etc--yeah, that's going to happen in places because certain population densities are just inherently unsustainable. But by and large, the Federal government is going to lose relevance as it loses the ability to pay for enforcement, and regional authorities will come into dominance. Whether there's any violent revolution or not is totally up for debate.
The Soviet Union went broke and collapsed recently. We'll be lucky if we can do it as peacefully.
Martin Armstrong believes we've got till 2015 before there is real collapse. Sovereign debt crisis will be the short term show.
http://goldandsilverlinings.com/?p=541
Timing is everything...
Looking at these charts is like listening to Carmen Reinhart's testimony with Alan Simpson and the round table of young and retired Legislative debt Whores. I was doing some research on Babylonian counterweights before I saw her testimony on CSPAN at the Presidents Debt Commison etc..., she did not go that far back, just to World War One till now, to show the chart pattern before war etc...
I smelled the Devil's http://www.thesmsfreview.com.au/exp-investment-outlook.html hair cut in my mind and it Gross'd me out then too, like these charts, only because I know what's going to happen soon. http://www.youtube.com/watch?v=N3ZsKeX2_7A ...and there ain't no making it over the hurdle if you are among the tares. http://www.biblegateway.com/passage/?search=Matthew+13%3A24-30&version=KJV
http://www.youtube.com/watch?v=WLMjHy12eWo&feature=related
It seems pretty obvious by now that if Americans were to:
(1) Take out their money from the banks permanently / bank in other countries
AND/OR
(2) Stop paying taxes (or legally avoid taxes, the way Microsoft, Exxon Mobil, Amazon, Google or most hedge funds do)
The US government would instantly collapse, as
(1) $10,000 taken out from a US bank takes out $100,000 from the banking system
(2) What ultimately determines the perceived solvability of a country (and thus its long rates) is only the perceived ability of this country to collect taxes, nothing more
If you want to bring down the government and the Federal Reserve, advocating such moves is 1000x more powerful than the traditional political arena.
In fact, libertarians should totally stop wasting their energy on politics, and engage only in this type of campaigns.
Even if only 1 million Americans follow this movement (I am not idealist at all, in so that I don't believe most Americans are capable of this), it would be sufficient to bring the US government to its knees.
Libertarians: stop financing the State, by every mean available, legal or illegal. It is on the brink of falling from the cliff: push it down.
Not going to happen, obedience ('death and taxes') has been baked into American's DNA. It will take collapse to break the spell. Godspeed...
I also think resistance to slavery is partly genetic, as evidenced by evolutionary psychology. Some people are naturally obedient and don't care about freedom (most Americans are of this breed).
I don't think the average American can indeed 'wake up', but if all libertarians were to legally use offshore companies and trusts to stop paying taxes on capital gains, for example, it would be a welcome change.
"most Americans are of this breed"
Naturally obedient? This statement would imply that state run propaganda is unnecessary. If the majority are obedient/docile, why would they waste time/resources on it?
Bingo.
Most americans are not natually obedient nor docile... recent generations have allowed themselves to be herded into a debt feedlot.
I do not see US youth/future generations behaving so agreeably with the corporate/bankster paradigm.
Folks seem to forget Nov. 1999... Seattle... the WTO forcibly removed from american soil. A proud moment that should be remembered and celebrated. May many more revolutionary moments visit our shores...
2 good charts but I think the increase in money supply belongs as well.
All your wealth are belong to us.
Theft through inflation.
Hat tip to Chuck P! That sucker can write.
I am pretty sure I read it here recently. To paraphrase, arguing about how to re-decorate the kitchen as the house burns down.
Imagine the rioting that would occur if they actually enacted the cuts necessary to balance the budget. To those who would say modern Americans wouldn't riot, I say modern Americans haven't been tested yet.
I am guessing that is why we will not see a balanced budget anytime soon. Party on!
um,
party is over.
did we forget to tell you?
there are 2 cops at the door who want to meet the owner of the house.
Farewell America, I want to believe you went to heaven but I know you went to hell.
GO ICELAND!
http://online.wsj.com/article/SB10001424052748704302704576253542705319636.html?mod=WSJ_hp_LEFTTopStoriesTime is Now to Revolt America!
You bastards... now we are not going to let you join our zombie economic union. No NATO for you either ...Stoopid people :-)
yeah....darn tootin' ! That'll show 'em.... retards
baby_BLYTHE, i agree w/ iceland and even told a mid-30's man who wanted an "option" that it might be the best one, a few days ago. really.
i'm not quite sure how to address yer call to revolt. i recently responded when you wondered how long till we get "people in the streets" if you would accept that as a fair assessment of what you said, even, from my 65-y.o. memory. i advise preparation and continued advanced personal, family, and group preparation for TSHTF scenarios, and hate the FED and the fuking banksters just as much as you do, b_B. maybe we are pretty close, strategically, but not tactically, right now. does that fit?
oh---tactically, i advise getting outa banks AND brokerages/"markets"/casinos and stop using e-pay and debit/credit cards as much as possible. use cash, money orders and act like you're an "illegal" as much as possible. stop feeding the 1-3% of everything to them! stop coveting their "points and rewards" and the "accounting" they can provide.
i have 2 bank accts, one to take my paltry goobermint SS check and the other, checkless, for on-line capers, both free, with a local bank, not a credit union. i have a great relationship with the young guy whose desk is on the floor of the Main. last week i went in and told him i hated 1-800 #'s and told him to activate my new debit cards. he said it was impossible! the system wouldn't allow it. i enquired about his wife and told him he wuz a lying sack of shit, but a good one! now, do the fukin cards, douchebag! he said he hated the damned 800 #'s too, but slewie was stuck with them! i threateded to go to a credit union and he said they wouldn't miss me OR my then-$60 balance!, who the fuk told me i clould lean my bike against his desk, and would i like to meet the security officer?
so, we're both ROTFL and i hadta call the fukin # to activate the cards, too! plus, i had my A's hat on and he also insulted my team, b/c he is an asswipe Giants fan! i finished by telling him that if he and all these centerfold-qual women weren't totally overpaid, maybe we could get MY freaking bank off the "endangered species" list!
i also encourage all citizens to exercise their 2nd Amendment rights, IF they feel so inclined, and get safety training if they haven't had it, yet. the "well-ordered militia" is here, now, and real. no one is pointing a weapon @ another person. no one. it does not seem to be looking to get in the streets and/or start a revolt, presently. please be advised, b_B.
James on Potomac
Dearest Tyler et al..,
I take a break from my homebrew to tell you that all of the above, though very well researched and documented comes as no suprise to those in the lower classes. We are very well aware that those with the edumacations are trying to screw us - like leaches attached to our hemmoroids - but we also know that a short -term burn caused by boiling oil to remove said leaches is well worth the while as we have a s(i)alve for just such occasions. I don't mean to offend but really, who is your audience?
Lack of donations does not mean lack of clicks, just short on fiat. Will you take a BoA check?...
We are over 90% debt to gdp : tipping point. There is no economic recovery. Taxes are likely going to RISE - this will be like grabbing sand and cause UE to rise.
at this point arguing over cutting 30 bil , heck 300 bil , is moot.
Defense will never get cut. In fact , its number will rise : we are going to go war mad.
As Bernanke announces more QE , commodities will suck in more money looking for ultimate safety. That is what capitalism has become : storing wealth safely - the players know there is no real growth and they know we are approaching the end game. The only M/A activity is buying profits , not growth. And then firing workers. Or even more desperately , buying back stock in an attempt to juice earnings that bit longer.
This in turn puts even more pressure on the system and the serf , reinforcing the negative feedback loop.
In a situation with no solutions , default is inevitable. The only choice is how to default. I dont expect the control freaks to let whats left of the free market decide their fate , ergo the fx value of the dollar and interest rates. Because as the inevitable surge in yields come , the Fed will simply not be able to raise the FFR to reign inflation in - they will simply BK the govn (and themselves) in doing so. There is no Volcker coming to the rescue.
Given this , before they lose said control , there will be another fiat mindfart moment like there was in the 1930s and 1970s. Bretton Woods II , outright devaluation or the like. Or what no one seems to think possible , a huge flight to "safety". As the next wave of asset deflation and credit contraction roils markets and hammers risk assets , it will be kind , for a while , to US Govn debt. That buys a bit more time.
Funny how Soros is pushing the BW II agenda though eh? Timing is difficult , next year seems apt. Martin Armstrong sees Sov collapse happening in 2015 - my belief is they will act beforehand to prevent losing what control they have.
Its time to get your ducks lined up. Im still not sure what the best protection for wealth is over this period , its too obvious having 100% in PMs even though i am a huge believer in gold. Sad to say i think even the most well prepared could get hosed. The wise will get penalized by the reckless : who here expects wide-scale principal mortgage forgiveness? Its already started in a way. Bank holidays and capital controls will only become more common. One may make a fortune in paper wealth and find they can not access or materialize said wealth.
Learn chinese and to eat soya instead of meat...ride bicycles and fly kites to generate electricity, make love to renew the population and read poetry to revitalize the soul...not bad the pursuit of happiness on an empty stomach...as for fighting the plutocrats...laff, laff, laff; as they fall like bowling alley skittles in their own financial traps...Never compromise on constitution and individual rights... after all, Main Street is the majority and the vote it's greatest political argument. No way around it : become more politically conscious, staying focussed as a people, is the road to national salvation. But this generation is too f***k deep dipped in delusion and shit of uber-alles, as its grid-locking consequences now hit the collective fan...So it'll be up to the next as they wade through the deprivation of recent history's legacy to a road of constrained economy. That's when the current smoke in USA's collective eyes will start clearing out the chaff from the grain...Hopium and Nihilism, today; realism and focussed sweat slogging, tomorrow. The wheel of fortune turns and that's what men deserve...Don't feel sorry for yourself. As Huxley said it : chronic remorse is the worst of self betrayals...Jefferson's legacy lives on through the ages...raise high the roof beams, carpenters!
nice Falak, but ill pass on the chinese.
TJ's the man, and the original fed conspiracy theorist.
he called all this sh t like 200 yrs ago.
2 great PDF downloads on the Nuclear Issues at Fukushima
http://oahutrading.blogspot.com/p/japan-nuclear-information.html
Apparently the true reason that all dinosaurs became extinct is that one of them was named Bernard.
it is simple look atr the grain exports. us dies 1/6th of the world dies. we require 1/3rd return on the $ to make us sovent again. this is not the end. it is the begining of us living inside of our means. but like I said two fucking years ago silver is the critcal resourse not gold. no mv contacts made of gold, it would weld together.
it is simple look atr the grain exports. us dies 1/6th of the world dies. we require 1/3rd return on the $ to make us sovent again. this is not the end. it is the begining of us living inside of our means. but like I said two fucking years ago silver is the critcal resourse not gold. no mv contacts made of gold, it would weld together.
my word that was psyco. I never post unless i am toasty. ok the world wants food. simple enough. we have it. we go broke our system fails. no more food. the rest of the world does not want to die. never mind the 3000 nukes we got.
Where is AL Shaprton on THIS? Can you imagine if Jim Moran had an "R" after his name?
from the Washington Post, ..buried on Saturday....
Moran accuses eight-year-old boy of attempted carjacking
In April 2000, Jim Moran accused a black eight-year-old boy at a recreational center parking lot of trying to take his car keys and of threatening to shoot him and steal his campaign-subsidized car (since he apparently couldn’t afford his own despite the $141,300 congressional salary for 2000-2001 he received, not to mention the lifetime health benefits Congress has given itself).
According to the boy’s parents, the boy was merely admiring Moran’s car, a 1999 Toyota Avalon, and told him he liked it. The boy told the Washington Times, “He choked me and then cussed at me. I thought he was going to kidnap or kill me…All I told him was that I liked his car.” Moran responded, “It’s all lies.”
Several witnesses reported seeing a “beet-red” Moran yelling and cursing at the boy as he escorted him into the recreational center.
The boy’s mother said he was a straight-A student at school. His mom filed an official complaint against Moran. Moran responded by criticizing the mom’s parenting: “I had hoped that this boy would learn that this is not acceptable behavior…But if the parents are not going to teach him that this is not acceptable behavior, then maybe the courts will.”
The episode became national news, with NBC’s Today show picking up the story. Moran was accused of racial profiling.
Moran said, “I just wanted to hug him. I wish I could adopt a child like him.”
Considering Moran’s history of temper tantrums, the 8-year-old should probably get the benefit-of-the-doubt
It's pretty clear that we are setting ourselves up for a disastrous budget shortfall that will almost surely result in an emergency measure being passed -- a Value Added Tax (VAT) modeled along European lines. This will essentially be a Federal Sales Tax that will add from 3-12% additional cost to EVERYTHING you buy, including big things like cars and refrigerators. I don't see a way out other than to increase the personal tax area on the graphs.
Tex,:" don't see a way out other than to increase the personal tax area on the graphs."
major restructure of gov with elimination of dept of ed, enviro,energy,close all off shore bases,stop all funding of foreign aid..lots of other answers..not that any will be done..
how that vote of yours for Obuma work out??
I didn't vote for BOzo. I agree entirely with what you said -- I would LOVE to see the Department of Education shut down. What are the odds that will happen? Even under Reagan, the US government grew larger. I live in Texas, a state with NO INCOME TAX, and the idea of a VAT makes me sick.
me too, Tex, and cali has ~~10% sales tx already! the latest increase, locally, was due to a "commuter train" idea, and nobody knows where the money has gone, of course! this was done at the same time that the fukin brain-dead moronic voters passed a multi-$ Bil. bond issue to get high-speed rail started along the fault lines from LA to SF! and during the ongoing budget crises, no less! i guess they just thought it might be a "good idea" so that means a "yes" vote, eh?
your ample "points" are most well-defined and deserving of closer scrutiny. lol. slewie agrees, the elected goobermint fukheads, esp federal, will certainly go with VAT(s) before even considering sending about 60% of the time-serving life-sucking worthless federal "employees" home, forever. or even 1-5%, k? this as a wonderful string, here, Tex, until the pauldia got "informational" abt the congo-person and the child care, doncha think? but, at least s/he shortened it by 3/4 from the original on the "Egypt Revoltion" page. pauldia! you can stop now, k?
Precisely HOW does one determine "value" in order to tax it?
If you want to buy it, they'll tax it.
Just fucking do it already. Im tired of hearing all the tax increases they are going to impose on us proverbial " Middle Class" Taxpayers. Just do it Bitchez. It doesnt matter. I have nothing. In the end, We all answer to God.
------
if they were taxed 100%, it still wouldn't jibe. the VAT is just another temporary bandaid.
martin a. armstrong is baaaaaacckkk !!!
Saw a news clip last night about some State politicos meeting on some lame ass issue and there were probably thirty people in this room sitting at a long conference table all dressed up in their suits and ties, with another thirty people sitting in chairs behind them around the room.
I was thinking to myself then, look at all those people, do we really need 60 people in a room to discuss whatever the issue was? And then I started thinking that every one of them has a staff of probably a dozen people.
And I'm thinking, wow. About 30% of my income goes to those people, so the lot of 'em can sit around a room and argue about something that probably won't even matter a lick tomorrow or will be a temporary thing at best, until the next lot gets in.
And we call welfare recipients and the currently unemployed freeloaders? If welfare recipients and the unemployed had meetings, that news clip wouldn't have looked one whit different to me.
Its tragic isnt it.
Governments can only do one thing : get bigger.
Epic waste.
why is it for governments sooooo diffucult to understand that they shouldnt spend more than they earn?
the phenonenon of "other peoples' money", or better yet, imaginary "money", or in a nutshell: because it really doesn't cost 'em anything
Silver, Brent hyperbolic ... next week OE ... I would be pretty careful next week ... IMHO we peak (at least short term) either Monday or Tuesday. Expecting sort of 10% correction in Silver.
Then possibly eventually higher - before finally everything peaks - latest in June - for many moons to come.
Coming week not the time to be greedy but to protect capital.
http://marketcyclesresearch.blogspot.com/
a great post by Jesse
09 April 2011Stiglitz: Of the 1%, By the 1%, and for the 1% and the Downward Spiral Into the Abyss
The pigmen are going to be unrelenting in their attacks on the middle class and the poor. The attacks are threefold:
joe may be (finally) coming to terms w/ what those 4 years @ "college" were really about! after the envy and ass-kissing of the top 1-5%, of course!
i think he's found his voice, too, and i'm sure glad of it! no more nobel-ity for joe, with his ass hangin out this window.
he is showing genuine leadersip of thought and BEing, but the idea that We (the People) need to take "our" cuts, rather than cutting the goobermint back by about 60% is fukin bullshit, and, unfortunately, his "liberalism" may never be "examined" by the real joe stig. too bad, really, but conditioning stays operative until one actually begins to wake up and question everything "learned" along the trail...
say it ain't so, joe!
A bit off topic, but part of the FED story:
I have dived deeper in coming (VERY SOON- MATTER OF WEEKS, MAYBE 1 MONTH) silver price crash.
Nicer exposition with pictures here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=31692#p31692
More scientifically, you see on a silver graph a characteristic dip/plato before the final shoot up of a long log-periodic sequence it has been into during last years, and the growth of price turns super exponential, which is final pattern before crash. Its very hard to say when it will crash, at what level, as any action can be a tipping point ( FED /JPM , people starting to sell off , taking profits, something else) . That plato and dip is clearly visible when silver hit 26 in end of January 2011 after having reached 30 in Early December 2010. Since than, it growth has been superexponential compared to the trend it had had for last 2 years. It has broken loose. Hence crash can come anytime-it could have been March as well, from graphs, but from My graphs it came out later than beginning of April. But its definitely heading for one. On average,I think it can stay in superexponential mode to get the same increase as it had accumulated before the dip. So, before the dip it went from 9 usd to 30 then 26. So increase was 17-21 USD. So from the dip ( 26) it may grow approximately the same, that is 26+ 17-21. That makes a crash possibility at 43-47 USD. Getting kind of close by all these calculations, and , the closer it will be, the steeper the prices will go up.
My comparison ( which i did not spend more than few hours to work out) with older price variation patterns gave me value 45 USD as crash point, but it can be 42 or 50 or even more , as superexponential growth happens so fast that its impossible to predict with good accuracy the crash level. According to my graph, however, if You sell know at any point, You will be able to get back in cheaper before silver starts to grow again to 100 USD. You can sell past crash point as long as price is above 28 USD, so I guess there will be few days or at least hours when it will happen, there should be some time. Last time when Bear Stearns was bailed out, crash happened on March 17, 2008,Monday, dropped almost 20% from 21.50 to 17.50 in 4 days, than came back to -15% to 18.50 and stayed around that level (-155 to - 20% of peak) for 4 months till August 1st, 2008 when it completed its 40% crash (from 21.50 to 13.00) in 15 days (this corresponds to my 28USD) and than finally, reached 50% crash ( 10.50) in 1 month and lowest point ( 60% crash-9.00 ) in another 2 months. The historic graphs are here:
http://www.kitco.com/scripts/hist_charts/monthly_graphs.plx]2008 daily silver price graphs
So there is time, if You now wait for crash , to sell on both sides of it within 15-20% of maximum, and be happy, and than buy again some 20% above the minimum either before, or after it ( that would be at 28USD, I guess) . Its almost impossible to judge the maximum and minimum exactly in such complex dynamics, but 20% off should be considered an excellent move given the total potential scope of correction ( 40-60%) . The question is about having enough margin not to be thrown out while loss is accumulating ( i.e. sell before peak, than peak eats the margin away).
I do not think its tied to gold this time,as silver shorts are cornered , or so I have read. Gold has nothing to do with it, but the decreasing Gold/silver price ratio (36:1 vs normal >60:1) [b][i]shows that something that is wrong in the silver system (or some information about it ) is pushing silver price up in an abnormal way since April 2010[/i][/b]. That is why silver is the first one to crash, but it may take gold down with it a bit...or just restore normal price ratio.
http://static.seekingalpha.com/uploads/2011/3/30/21547-130149731943323-K...
Here is longer time series, from http://seekingalpha.com/article/261102-as-gold-silver-price-ratio-contin...
http://static.seekingalpha.com/uploads/2011/3/30/21547-130149755669561-K...
Now the question is WHAT happened in April 2010?
For that, one may look back at low gold/silver price ratios, and ask what happened when they started to go down?
http://goldprice.org/charts/history/gold_all_data_silver.png
Starting from Hunt brothers cornering silver market , when gold/silver ratio was down to around 15:1 in 1980, one can conclude that this ratio goes below historic average when someone is cornering the market. I think that is the case also this time.. Hunt brothers had rights to >30% of deliverable silver. So its not wrong to assume that someone ONE (or oligopolistic group) is holding close to 10%-15% of worlds silver contracts, as ratio is 36:1. History shows even 7% share in a commodity market is enough to corner a market.
In fact, it started already in 2009:
http://www.marketwatch.com/story/jp-morgan-hsbc-sued-for-silver-manipula...
J.P. Morgan and HSBC traditionally have been big players in the silver market. A CFTC weekly report for Oct. 19, the most recent period, shows that less than four market players hold 24.3% of all net bearish bets in the silver market. J.P. Morgan and HSBC are among those market participants, The Wall Street Journal reported, citing silver traders and a person close to the investigation."
If they have dumped as much as they could, they still can have 10-15% of selling silver markets.
Let us see how this unwinds. Not long to wait. Few weeks. 1 month maximum.
Ivars
One thing always amazes me when I read "technical" analysis.
Don't you guys ever think about underlying market mechanics? Like if a commodity supply is too low for the demand, shouldn't it impact the pricing dynamics just a little?
I do hope like hell we see a nice silver correction in the next month, but I doubt it's coming.
Proper technical analysis analyzes aggregate results of all inputs to a given commodity/asset price. As in every forecasting, the higher level aggregate is used, the smaller the relative mistake in forecasting. Law of big numbers.
When one starts to analyze zillions of possible inputs to the aggregate value (price) one can make:
1) 100% mistake on each of these since they are small, and in principle, stochastic by nature-unpredictable ( as they can be influenced by other bigger events that nullifies the hypothesis)
2) naturally overestimate the impact of one (few) observable which are possible to analyze, thus making unfounded systemic skewing in the forecast.
Based on gold/silver price ratios, has it been so many times in history when demand/supply for silver got scarce and then relaxed as can be seen from historic charts of gold /silver price ratios, when many times it approaches 35-45:1 just to return to 70-80:1 immedeately after. Was real manufacturing demand for silver especially then BIG when Hunt brothers were cornering the market? Of course, not.
Has there been any specific change in silver supply/demand that would influence the gold silver ratio since April 2010 in favour of SILVER, and thus almost exponential divergence from previous ratio? I have not heard of any, but perhaps I missed some. I think, the reason for silver price moving up is exactly the big short position holders closing them (buying) from April 2010, and trying to do it as fast as possible to avoid doing it at 47 USD. But, seems they have not succeeded to get rid of all shorts. If they would have done it faster, the price would have gotten up faster, so they are cornered themselves. The question is, how much they still have before the need for bailout. That would tell how big the correction will be.
By the way, JPM is reporting its first quarter profit on April 13th. Silver has gone up 23% in Q1, so their shorts have lost more money. May be they report it somewhere, in a hidden way, so their profit will be below expectations. Good date for silver crash to begin to unfold.
Silver and gold are not analgous. Silver is primarily an industrial metal with some currency applications, and gold is a currency metal with a tiny industrial value.
It's not clear to me that there's been any *massive* change in the silver market since 4/2010, but there has been long-term ongoing increase in demand for industrial silver for which price-effects were being counteracted through large effort by the US financial industry. The change is in the financial industry's ability to control pricing, not in the industrial market. Banks went into a tailspin back in '08, and what had been a previously stable equilibrium has failed.
As I said, I hope there's a significant contraction in price, but I doubt it's coming. If price drops lower than $37, I'll be very surprised.
they are BOTH "money" in the Consitituion, blunderdog. according to our LAW, that makes them pretty fukin "analagous" to m/l well-read pirates!
this whole string, from the orig. "anal"-ysis and below, seems to ass-u-me that the morgue is nothing but short, short, short, even tho there is ample ink on the www from respected and respectable peeps, who say the banksters are long, long, long, gold, now.
i like to play "what if" about blythe's book, myself, but i do NOT ass-u-me i know what it is, OR how it is structured, esp thru this summer. you don't make this assumption (good!), and put the price-counteractions in the past tense (good!). however, no one really knows how much silver is avail, above-ground, right now, even David "billion ounce" Morgan, whom most trained parrots parrot.
nice post, bd, but: "Silver is primarily an industrial metal with some currency applications, and gold is a currency metal with a tiny industrial value." is not true, for silver, according to the Founding MotherZ, ok? also, i could name a score of countries who also use Ag in their Mints, right now.
yes, Ag has more ind uses than Au, but i don't think that is what is really driving the silver bull, here, compared to the oceans of fiat in which we swim. silver is the real deal, "monetarily" for the average citizen, world-wide, today, b-dog. this IS what's happening, imv.
yeah slewie like the consistootin is troo and stuff even tho illeagles run the cuntry the 19th sentry definitions are what rilly matter, right man, far out
Looking at silver /gold price ratios, it seems that silver demand/supply is cyclical and silver price to gold ratio goes up. It has been falling sharply below 50:1 5 times since 1983, so something increases silver demand above supply, than demand falls back.
http://www.goldprice.org/gold-silver-ratio.html
The dates after Hunt brother cornering in 1980 are 1983 recession, 1987 market crash, 1997 Asia crisis, 2006 april mini crash , and today (there is no crash yet but coming around the corner) . Which of these dates would imply sharp change in industrial demand/supply of silver?
http://goldprice.org/charts/history/gold_all_data_silver.png
technical/schemcknical.... how pertinent are either technicals or fundo's in the past x months? market's a casino. I'd proffer just look at the run-up (and drop) at Hunt brother's gig in 1980's, convert to present-day dollars. Now that was a "crash". Sorry, I don't call drop from 50 to 30 a "crash", just a buying opportunity. Not to say one couldn't profit handsomely by trading the ETF's in the ranges.....
Not saying silver won't correct a bit but all this chartism is nonsense. There is physical demand in a tight market. They are losing control.
they have been losing and regaining control many times over last 30 years after Hunt cornering as silver moves in tandem with gold despite gold not being industrially in short demand. Does it not look like consistent attempts to corner silver market than demand supply dynamics plus consistent value loss by fiat money?
Yeah I'm going to take financial advice from a guy that doesn't know the difference between plateau and Plato.
"meaningful fiscal reforms' means cutting health, education and SS while expanding the military budget to spread democracy overseas...a few trillion a year.....
Kotlikoff writes on this subject and recommends stay healthy eating broccolli since we will not be able to afford or have access to health care...buy oil and gold...and chinese stocks. read his book.
they will bring back the draft and throw a dart at a map once a month and go to war against them
Nobody's going to submit to the draft when the Feds won't sign the paychecks.
According to Sornettes and Johansen log periodic crash precursor oscillations and their patterns, USA debt is about to crash (that means reduce by >20%) in 1-3 years:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=31693#p31678
if the USA do it by introducing gold standard that devaluates everything except M1 and almost nothing more, here are conclusions about the value USD/ounce at gold standard at
2013 - 3600 USD/ ounce
2014-5400 USD /ounce.
However, if, as it will happen, after silver crash this month the historic ratio of 60:1 is restored , then, since I based my timing of USA debt crash on silver price prediction chart:
http://saposjoint.net/Forum/download/file.php?id=2673
if gold standard is introduced in
2013 - 6000 USD/ounce
2014- 9000 USD/ounce.
That kind of settles it. 9000 USD /ounce would allow to cover about 2,6 trillion worth of money and equivalents with gold standard. The rest gets devaluated.
These are the only two charts that matter:
Retail stocks and shopping mall REITS.
Flat out, hands down, one of the biggest rallies in history.
clearly the vast majority of Americans were and continue to be oblivious to the economic quicksand that supports their lifestyle or alternatively the minority doomsters continue hunkered down in their bunkers riding out a storm that has long since past
Here in Southern California, I have seen a virtual explosion in new cars lately.
Most popular items purchased lately have been Toyota Prius and Chevy Camaros.
The sheep continue to spend, they could care less about the government's budget problems or what is going on in the Middle East.
And there is still money to be made, Robo, we get that.
I'd opine an alternate to all ya'll look-down-nose at "sheep". Maybe - just maybe - they know damn good & well SHTF and grabbin' while the grabbin's good....
Or alternately alternatively, you ain't seen nothing yet.
Skankification.
what's with the 4 chicks on one dude? is it about the money? duh. OK, Robo, per usual, looking in the rear-view mirror
i'm a leg man. All I can say is, hooray for hoboken.
i would argue the nasdaq priced in gold and silver; and domestic real estate priced in gold and silver would have striking relevance as well.
For all those who think silver will be confiscated next, I have news for you. They already confiscate your FRNs. It's called taxes. Bogus argument.
Cut discretionary spending? Don´t people realize that the bowel movements of earthworms located within the wine plantations of Napa Valley is essential research that must be federally funded or the world will end??!!
Georges I. Gurdjieff:
You don't seem to understand
You are in Prison
If you are to get out of Prison
the first thing you must realize is:
You are in Prison
If you think you are free, you can't scape
now yer talkin, Pepe! not only that, but many of G's "parables" are actually about sheep!
When it burns to ashes; the truth of paper fiat monies will be self evident. All the paper ponzi ashes smoldering will be good and bad! Good for those who know the only real monetary stores of value as a form of circulating money is ? GOLD/SILVER. Bad for most sheeple who haven't a clue why gold/silver prove to be money for milleniums. They're the go to money when economies brake apart and die. Like what is happening in the US now. Why wait for the burn down of fiat and get gold/silver while at these prices. It will cost so much more in FRN's later! Like when the truth is self evident!!
M E N @ w o r k†
Please define how the US will default and how this will play out?
no one really knows, E_g_B, but right now it looks like the fukin goobermint and joe stig, too, would just loooove to cut back "entitlements" while leaving the federal payroll undisturbed, and growing like baaad weeds. however, since this EZ one-sided approach could result in many goobermint peeps eating shit, laying eggs, and dying young, somehow or another, and they know it, who knows?
the asswipes who think they run this nuthouse (as well as the IMF/NWO fiat crack whores) seem to wanna protect the "holders" of US Treasury "promises" come hell or high water.
since this is diametrically opposed to the needs of the people, either the fukheads wake up & smell the coffee, ganja, and gun-oil, or: hell or high water it prob shall be, same as in ireland, too! right?
the "fact" that no goobermint, anywhere, seems to "get" that to begin by sending 20% of all "employees" home, forever, now, would be a heluva start towards stopping the "crises" and getting the debt-holders paid, too, may say more than any other fact, re what's prob gonna "go down", as it were.
esconced state socialism, fiat banksterism, their "intel" agencies, military goons, and "entangling alliances" are lock-stepping "our" march to total enslavement under the uber-elites and their NWO.
elected officials refuse to understand that we do not work for them or the goobermint employees/goons they love to hire, or that this is exactly bass-ackwards, according to all cogent political thought since the 18th C, at least, even earlier in England, imo. this is the true tragedy of our era, as i see it.
any more questions?
polimaster
reverse osmosis
pm
prayer.
The issue is not that the Debt Ceiling or Treasury Debt levels are broached; it is that these levels will be set too low and the exponential growth of debt will keep these items in the news cycle indefinitely. As the Debt Ceiling and Treasury Debt levels are repeatedly raised over and over in shorter time frames, the global J6P investors will begin to realize that the USA has no intention of ever paying them back and will dump dollars and US debt.
PIMCO is leading the charge showing what could happen.
We're toast! Plan and prepare accordingly!