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Paul Farrell Sees Dow Sinking Below 6,470, End Of Capitalism And Great Depression II Imminent
Some rather frightening insights from Paul Farrell on where the market is going. Not for the faint of heart.
First a comparison between his view and that of hedge fund manager, and beta-wave rider, Barton Biggs:
Last March I wrote "6 reasons I'm calling a bottom and a new bull." Today it's time for a new call. We've had a good year. Net gains over 50% in 2009. But now: "Game over, head for the exits." Bears beating bulls.
No, no, "it's a buying opportunity," says another legend, hedge fund manager, Barton Biggs. Buying opportunity? For who? Remember, Biggs isn't advising Joe Lunchbox about what to do with his little 401(k). Biggs' customers are mega-millionaires in his $1.5 billion Traxis Partners Fund. Main Street investors like Joe are prey in his casino.
Read on, you decide: As you stare from high up in the nose-bleed bleachers watching the game, staring at a Dow that not long ago was above 11,000 and heading for 12,000. Now the Dow's sitting on the bench, ready for the showers, weak after a couple air balls around 10,000. No more timeouts. "This game's in the refrigerator."
How bad is your bookie's point spread in this game? A blowout? Will the Dow drop below 9,000 again? Now that it's broken technical supports, will it drop below 6,470, where the last bull rally started in early 2009? Can you handle the nerve-racking volatility generated by Wall Street's high-frequency traders playing the game at warp-speed with algorithms making thousands of micro-bets in milliseconds, betting billions daily?
So who should you listen to? Barton and I arrived at Morgan Stanley about the same time. He stayed decades longer, became one of the world's leading strategists, advising the kind of high-rollers who also bet at private tables in a Vegas casino.
You remember Biggs: In his book "Wealth, War & Wisdom" he advises his high rollers to prepare for a "breakdown of the civilized infrastructure." Buy a farm: "Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc. Think Swiss Family Robinson." Biggs is not advising small investors on what to do with their 401(k)s.
If you're gambling at Wall Street's casino, folks, the odds-makers are betting against Biggs. It's "game over."
On the ever escalating duel between Wall Street and Main Street:
Wall Street won (proof, Goldman's $100-million-profit trading days and Blankfein's $68 million bonus) ... Main Street's headed for another losing streak ... Congress' lights are out ... the refrigerator door's closing on financial reforms ... the lobbyists are laying some rotten eggs, poisoning capitalism ... the Tea Party-of-No-No ideologies are hardening ... the bull's Jell-O is jiggling to a flat line ... and this market's going into hibernation, with the bears ... run, don't walk, to the exits, folks."
But will Main Street exit? Will we ever learn? No. The Wall Street casino makes mega-billions for insiders like Blankfein and the Goldman Conspiracy. Yet "The Casino" is still below the 2000 record of 11,722. So after accounting for inflation, Wall Street lost over 20% of Main Street's 401(k) retirement money between 2000 and 2010. Yes, Wall Street's a big loser the past decade. Their advice is self-serving. Period.
Given their miserable track record, only a fool would bet with Wall Street. Betting odds are Wall Street will lose another 20% in the next decade from 2010-2020. Yes, today's market is a "buying opportunity," but only for Wall Street casino insiders like Biggs, Blankfein and even low-level staffers inside "The Casino." But not for our 95 million Main Street investors, there's more pain ahead, this market's dropping.
And for those with more than a one-day, or one milisecond investment horizon, Farrell sees a new crash as "imminent, worse than 2008"
More proof: Earlier economist Gary Shilling said price-to-earnings ratios are at a "nosebleed 22.5 level." The Dow was around 11,000. Money manager Jeremy Grantham recently said the market's overvalued 40%. That could mean a collapse to 6,600. Last week in Reuters' "Markets Could Be Derailed Again," George Soros echoed a "game over" warning with a "stark warning ... that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis."
Now Dow Theory's Richard Russell is warning the public of an imminent crash: "Sell ... get liquid ... by the end of this year they won't recognize the country."
A bigger meltdown than the credit crisis? Yes, Bush's team drove America into a ditch. But now Obama and his money men, Summers, Geithner, Bernanke, are digging the hole deeper. Soros says we have not learned "the lessons that markets are inherently unstable." As a result, "the success in bailing out the system on the previous occasion led to a super-bubble." Now "we are facing a yet larger bubble." Worse than 2008?
Yes, the game may be "in the refrigerator," the lights will go out, but as Soros hints, the electricity may get turned off too. Get it? This may not be a correction. Not even a bear. What's coming could be worse than the 2000 dot-com crash and the 2008 meltdown combined, a "Super-Bubble" says Soros. And the biggest reason, Nouriel Roubini and Stephen Mihm tell Newsweek, is that "the president's half-measures won't fix our failed financial system" because he refuses to "bust up the too-big-to-fail banks."
Yes, Congress will pass something. But unfortunately, as reported on MSNBC, Senator Dodd, the reform bill's sponsor, is a turncoat, working overtime with Wall Street lobbyists "to weaken financial reform," leave us vulnerable to a new, bigger crash in the near future. And Wall Street lobbyists are spending hundreds of millions to kill reform.
It gets worse: what is about to come upon us is not just a new crash, it is the Great Depression II, it is the end of capitalism.
So please listen closely: All the TARP bailouts, stimulus debt and Fed loans won't work. Neither will a new conservative government. This is not a basketball game. We are not channeling Chick Hearn, calling this game before the final buzzer. While we prefer the illusion that "this time really is different," eight centuries of history suggest otherwise:
"The lesson of history, then, is that even as institutions and policy makers improve there will always be a temptation to stretch the limits. ... If there is one common theme to the vast range of crises ... it is that excessive debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom. ... Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang -- confidence collapses, lenders disappear and a crisis hits. ... Highly leveraged economies ... seldom survive forever ... history does point to warnings signs that policy makers can look to access risk -- if only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, 'This time is different'."
No, "this time" it's never different. Get it? In the end, it doesn't matter what happens to the Dodd-Obama financial reforms. The endgame's never a Black Swan, it's a very White Swan well known to historians -- guaranteed, inevitable and inescapable. This time is never different.
The clock's flashing. Huge point spread. Think bear, think crash, think end of capitalism, think Great Depression II ... This is no buying opportunity, this game's in the refrigerator, call it.
Somehow we don't think Goldman or Morgan Stanley will have anything to add to this perspective. If Farrell is right, and we have every confidence he is far more credible than those whose very leveraged livelihood and numerous Hamptons timeshares depend on perpetuating false confidence in the broken system, the great reset may be coming, and not a minute too soon.
h/t John
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its not just in the refrigerator,
its in jeffrey dahmer's refrigerator.
Genius!
Did he write the book 30 Below?
Rock.
Wolves love the terrific storm, the hard rain.
The best predators MAKE the storm.
Lambs are lucky only to be fleeced.
More money to be made trading upon the foibles and psychology of weak men than in putting order upon a chaotic earth.
Slaves make bread, while masters make rain.
"Slaves make bread, while masters make rain"
..and Heros used as tinder
we have capitalism in the US? news to me
If the US is not capitalist, I wonder which country in this planet is the capitalist one ... Botswana? Laos?
China.
Bingo. Last week, in a lapse of time-usage, I caught Cramer for about 2 minutes, and he was sure to use the phrase
"communist china". Like saying teabagger as a tagline of derision.
Yet if we placed Cramer in Beijing or Shainghai, he'd kowtow like the monks with their testicles in jars.
The term "capital" refers to money. As in those managing the money rule.
Maybe we need a new term for a market economy.
How about "Productionism?"
I like it.
What we all suffer today is "Legislationism"...
Productionism we be a GREAT! improvment over "Lobbyism"...
R & D is so expensive the cost curve verse the diminishing returns curve for little to no improvement... VERSE! Lobby and Legislate market share!
When there is respect for property rights, unrestricted trade, and unhindered movement you have capitalism.
Capitalism does not exist at the moment. False choice, Zina.
unrestricted trade has always been a complete fallacy
But it works in the lab!
"How much government does it takes to enforce free trade?"
You can never get a realistic answer from a libertarian to this question. They seem to assume that the capitalism fairy will make all trades fair and free. Trade for some will always be fre'er than for others.
Oh, that's easy. Get rid of psychopaths. Meanwhile we are a voice in the wilderness:
http://cheezpictureisunrelated.files.wordpress.com/2010/05/1291838601246...
The capitalist fairy looks a lot like Chewbacca. Will Chewbacca mark the psychopaths heads with upside down p's?
Well, yet the answer is easy to provide
"just enough for my appreciation of what free trade is to be"
Or clearer, "as long as I benefit, that's free trade"
Sadly, we have "capitalism" as practiced by the corporatist system under which we live.
May I respectfully re-phrase your question:
"We have free-market capitalism in the US?"
Hell, no!
If he said this on CNBC, The next question out of Beaker's mouth would be, "So what stocks do you recommend for the Apocolypse?"
+1
+1
That's funny!
lol,,yep..or "would when the lights going out signal a bottom and good entry point?"
Hahaha... Jesus christ. And the other value managers coming on: "Well there's just a tiny bit of nervousness in the markets right now so we're recommending the defensive "plays" like XYZ Bullshit (You'll still lose money but not as much)"... Or Joe Smith can just sell his share of the shitty fund and make it so that these idiots can't go home to houses in Greenwich...
I finally understand why the right to bear arms is so strong in the states. The founding fathers knew that some idiot named Keynes would come along and fuck everything. Time to join the NRA - we all need to protect ourselves from violent rapist looters like HeliBen and Tiiiiimaaaay G...
If Paul has a big rack, he has nothing to worry about in regards to getting a CNBC job.
Farrell is such an optimist.
Zero, quit it with all the happy talk.
No truer words have been spoken...
"Wall Street won (proof, Goldman's $100-million-profit trading days and Blankfein's $68 million bonus) ... Main Street's headed for another losing streak ... Congress' lights are out ... the refrigerator door's closing on financial reforms ... the lobbyists are laying some rotten eggs, poisoning capitalism ... the Tea Party-of-No-No ideologies are hardening ... the bull's Jell-O is jiggling to a flat line ... and this market's going into hibernation, with the bears ... run, don't walk, to the exits, folks."
But will Main Street exit? Will we ever learn? No. The Wall Street casino makes mega-billions for insiders like Blankfein and the Goldman Conspiracy. Yet "The Casino" is still below the 2000 record of 11,722. So after accounting for inflation, Wall Street lost over 20% of Main Street's 401(k) retirement money between 2000 and 2010. Yes, Wall Street's a big loser the past decade. Their advice is self-serving. Period."
+ infinity
Heading to Home Depot to max out my cards on pitchforks (for the garden) and 5 gallon gasoline cans (for the yard equipment)
Then I am going to the gun show with a big wad of cash.
I recomend obtaining guns with common military calibers so you can pick up ammo off the dead.
Thank you.
This is a great suggestion. Luckily you can find most anything you need in the parking lot at a Memorial Day weekend gun show.
7.62X35mm NATO round
NATO is 7.62X51mm; X39mm is AK-47.
1. http://www.fnherstal.com/index.php?id=269&backPID=263&productID=66&pid_product=295&pidList=263&categorySelector=5&detail=&cHash=b5dcbec1bd
http://www.youtube.com/watch?v=HYrymIOOBdk&feature=related
2. same round as above... http://www.youtube.com/watch?v=-GpBh52NZWU&feature=related and... http://www.fnherstal.com/index.php?id=262
3. AR-15 with a 416 conversion... http://www.youtube.com/watch?v=YWDxNimtWWY which cover your .223 needs... get some extra barrels and a few.. FEW, not couple of guns. If possible. http://www.youtube.com/watch?v=I5FPaSrxyK4&feature=related
4. http://www.benelliusa.com/shotguns/benelli_m4.php and... http://www.youtube.com/watch?v=Lyed7nZf9J4
You should also have a palet of ammo for each and maybe more to barter with... IMHO.
Good Luck, JW
nfortunately our chices in financial analysis are either - euphoric, permabulls or end of the world - doomsters. All on drugs. No coherent , logical thought involved at all - just hormones surging this way and that aided by pharmacopea.
And whores.
Lots and lots of whores.
I am Chumbawamba.
If you just got word Nazi tanks where on the way to Paris would you coherently eat your baguette and logically drink your wine?
SACRE BLEU!!!
But within a short period of time any Parisian that hadn't taken the time to coherently and logically prepare was back in the city standing in food ration lines. Create the new normal or it will create you.
Mais non, our magnificent french army commanded by Marshal Bernanke will stop them. Je pense I'll have another petit glass....
WW,
Will you call my wife and explain the importance of creating the new normal. She never listens to me.
For example, I have 20+ years of experience with personal computers, including substantial development experience in client server and web applications. Still, when we go to BestBuy to pick up an SD card for her camera, she insists on questioning my selection by asking the acne-faced 16-yo punk employee if "this is the right one."
Huh. Jesus said the same thing when he went back to his hometown, Nazareth.
"Damned punks. I'm Jesus! Can't get no respect. Can I get some wine over here or do I have to make it myself!"
and you know Jesus wouldn't have had a wife...
http://www.youtube.com/watch?v=DSwG9Tojg9I
Sounds like you're compensating for something. Who cares? It's a f***ing sd card!
Here come the trolls.
Sounds pretty standard. If Oprah doesn't recommend it, then women don't want it. Cognitive Dissonance (member here) i'm sure could expand on this.
You clearly don't have a clue if you're buying an SD card at Best Buy. They rape you on accessories.
that is just her way of telling you she is unsatisfied in other areas of your relationship....
Stay nimble, be flexible, go with the flow.
Welcome to ZH. We have some things in common.
timing is everything
http://www.youtube.com/watch?v=Qq8HgrcivFQ&feature=email
Rumour Spain going to get downgrade is it true?
Come to think of it. No downgrade then it will be a suprise just looks at the Spain Major banks bad debts. It is amount in hundred of Billion.
VXX bitches
Very few postings on ZH are suitable for the thin-skinned.
What the hell does history know? This time it is different! His Squidness said so! [/sarcasm]
If Wall Street wins, then Capitalism loses?
The Great depression was a suspension of capitalism? Great news.
It is getting worse and worse.
Lights out, but the .gov will respond. A major crash would cause another QE, more stimulus, more printing. We are as likely to hit 60k as 6k.
Mises was right.
Who was right?
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." - Ludwig Von Mises
That is a great quote, one of my favorites regarding to monetary policy.
So what does that mean for us who live in a country where the whole monetary system and economy is based off of ever expanding credit!?!
Credit has been replacing capital for years, and the end result is very ugly. At face value it would indicate DEFLATION like no one has ever seen before.. but with our money masters i believe they will devalue and QE and force inflation unitl the currency is totally destroyed..
Austrian economist Ludwig von Mises.
CRACK-UP BOOM BITCHES!!
But we'll be okay. They'll have the gulf cleaned up in a jiffy. Lil' KIJ will agree to official peace - he's not really insane. Israel will admit it has nukes and that Iran doesn't. Russia and China envy us in a healthy way - they don't want to be "#1" - they want safe factory working conditions and free-flowing vodka for everyone! Domestic racial tensions will ease and gangbangers and drug cartels will lay down their weapons...we've got O, and he has us.
I wonder what Lady Gaga thinks.
LOL
Kiss or hug you
Cause I'm bluffin' with my muffin
I'm not lying I'm just stunnin' with my love-glue-gunning
Just like a chick in the casino
Take your bank before I pay you out
I promise this, promise this
Check this hand cause I'm marvelous
Can't read my,
Can't read my
No he can't read my poker face
(she’s got to love nobody)
Can't read my
Can't read my
No he can't read my poker face
(she’s got to love nobody)
We should get all those floating casinos out of the gulf before it's toooooo laaaaaate.
BTW, stories of toxic storms spreading oil and dispersants from Denver to Poughkeepsie are completely unfounded as well.
Separately, Pelosi 2012!
A true speaker of the truth.
QE won't make a difference if everyone is hoarding. Without confidence in the system there is only deflation. To achieve velocity some cash needs to get into the hands of the peasants, and they need to feel good enough to spend it.
Concur. Well said.
"Mark it zero, dude"? "No. Market zero, dude."
Omigosh. That is great. SO great. My day is officially made. No matter what happens to me today, you have just made it better. Way better.
My sons just came of age last night. Showed them the movie. Good times, good times.
Is there ANY better humor than Labowski humor?
Obviously, you're not a golfer.
"some say the end is near,
some say we'll see armageddon soon,
certainly hope we will
I sure could use a vacation from this bullshit,three-ring circus, side show of freaks..."
"... moms gonna fix it all soon,
moms comin round to put it back the way it ought to be..."
Let that one rock today: http://www.youtube.com/watch?v=LgbEYSbyepM
Learn to swim...learn to swim...
"Armageddon was yesterday, today we have a serious problem"
Best, most appropriate song of the last ten years.
"Millions of dumbfounded dipshits..."
GOLD BITCHES!!
I am Chumbawamba.
Quite a fan club you've got going.
I finally got it. Thank you for patiently working the truth through the barrage of crap for all these months.
We'll make it thru the end of 2010, but the writing will be on the wall if you are reading the signs. 2011 will start out scary, and end in disaster. In 2012 will be the long slide into increasing disorder. In 2013, nobody will have a calendar on the wall to consult.
So the Mayans maybe got it right. How did they do that? WTF does that mean?
Talk among yourselves, I'm just watching. Running down the clock, got a year or so to make a workable plan, using the time I have.
End game. Man, this really sucks.
You mean that John Cusack lives to make another movie?!
"How did they do that?"
Ayahuasca bitches!
+1 vision of a leopard in the jungle
Remember the Aztecs? They felt because they convinced themselves that was written. If they had ever so slightly questioned their own beliefs, the Spanish wouldn't have had a chance on Earth.
If you believe the Mayans knew, it will be that much easy to make it as if they actually did.
It's the rules of fatalism, I guess:
1st rule - You have no chance;
2nd rule - There is no chance;
Like many of you, I scratch my head and wonder what "it" will look like. Soviet Union in the 80's? Mexico in the 60's? Lebanon in the 70's?
In the first Great Depression, things were fairly low tech in that most goods were produced domestically, and many locally. This produced a system that was fairly robust. True individuals suffered greatly, but the system more or less kept working. Today, we have a finely tuned system based on extreme specialization and few real skills. Just in Time system is so finely tuned, and interdependent, that just about every possible efficiency has been maximized, at the expense of the stability of the overall system. There are 100 ways the fuel supply could be disrupted, and disruption is fuel in many cases means disruption of water and food.
I just wonder what "it" is going to actually look like when/if it happens.
Probably best to keep an open mind.
We can produce plenty of goods domestically with little capital investment so long as you have the right kind of equipment.
I suspect a lot of people will behave like refugees. If you wanna turn a profit, you service the vast quantities of people sitting around and wailing for someone to save them.
So, ya give it to 'em. Play superhero, because the government ain't going to be able to step in.
I recommend reading The Homebrew Industrial Revolution: A Low Overhead Manifesto by Kevin Carson. You can download it for free here: http://c4ss.org/content/1776
'It' has already happened before. Russia after the default, as you say. Or Argentina. Pick a country.
Not much slack in the system, aggreed.
But how does this translate into less robustness?
The system is robuster than ever. Robuster than in the 1930s.
The topic is somewhat complex, but think of some simple examples. In the 1930's most people drove model T's. No matter what was happening anywhere else in the country, or in the world, a model T could be fixed by local people with local resources. Most broken parts could be repaired, or in an extreme case, could be made. Now think of your lexus. Engine control computer goes out. In order for you to get another one, it requires tens of thousands of people working in unison across the globe in order for that engine control computer to be built and delivered to you. The Lexus is a much nicer car, but it is not robust, in that when something goes wrong with it, things have to be going right in numerous ways and in numerous places in order for it to keep working. The complexity of the supply chain these days is mind boggling.
It's odd how computers function similarly to the Model T.
You buy computers in cash. You can keep a computer running with off-the-shelf parts for years on end. It's easy to customize it to your needs at low cost.
Cars are mostly financed. All the money in the car business, these days, goes towards advertising and marketing. Because you don't need to really give a shit what happens to the car after you make the sale.
I believe that the car business will improve after the banking system takes a stake to the heart.
You provide a good example. But I am more worried about our complex food chain. We can survive without a Lexus, but not without food.
You are correct. Same case in food chain. Even for domestically produced food, have you looked at tractors today? $500K behemoths. They will not last one season if parts supply is interrupted. Modern farms depend on complex equipment, transportation, fuel, communications, etc. Any part goes, the farm stops working.
On farming, the good news is that labor could become very cheap. With cheap labor, farms might start growing food again instead of cash crops.
Memorable lines from two songs spring to mind:
1) "Don't worry, be happy!"
2) "You'll work harder with a gun in your back for a bowl of rice a day, Slave for soldiers til you starve, then your head is skewered on a stake." ("Holiday in Cambodia" by the Dead Kennedys)
We are living the former now, and if you got up out of your sofa and took your eyes off CNBC for just a moment or two you might see the latter staring at you from just over the horizon.
Is that so?
Dont know. It seems to me that people somehow missed standardization and its consequences.
A supply chain involving many links is not forcefully less robust than a chain involving less links.
Fact is that many links (if not all) in the supply chain can be substituted easily. People do not need to work in unison. They need to work according to a standard. They do not need to know what the other cells do.
The issue of disruption in supply chains because of failure of internal links has been solved long ago. The protection of supply chains (that I consider as external to the supply chain itself) is another story.
The system is robuster than ever. It will take (much) more to take it down than it took to take down earlier systems.
I could not disagree more.
More complexity & specialization throughout the supply chain make the system more fragile and LESS robust.
Modern production and distribution systems are 100% dependent upon low-friction (read: cheap available energy) transit and margins. Any hiccup in cost/availability of cheap fossil fuels and the entire supply chain fails and grinds to a halt.
Robust my ass. The every-day existance of 95% of americans rests on a razors' edge. "Developed" nations will experience the most pain in this crash BECAUSE of mondern supply chain engineering, specialization, global 'sourcing', etc.
"The every-day existance of 95% of americans rests on a razors' edge. "Developed" nations will experience the most pain in this crash BECAUSE of mondern supply chain engineering, specialization, global 'sourcing', etc."
Yep. Wait till the first time masses of Americans show up at the grocery store to find the shelves bare. The cities will go up like flashpaper in a bookie joint.
Exactly. In the past, disruptions have been local in nature, and hence overall system responds. New Orleans was bad, but resources of entire nation (eventually) came in. The issue with a currency, financial, or fuel crisis is, the problem is everywhere, and no one can help.
Power out for a month would put forty million of us underground.
Sorry to come back again but you speak of complexity while you reduce the whole supply chain paradigm to its essential: cheap energy.
Wont get you anywhere.
Never written something about the system not coming to a halt in the end. Robust does not mean immortality.
Besides, contrary to what capitalists hammer, a market does not provide new solutions, a market articulates itself around the best solutions at the times.
Past times production and distribution system were all 100 dependent on the best energy sources possible at that time.
Seajacking a boat full of wheat usually ended with people suffering from starvation. People turned heroes by either preventing this kind of events or provoking them.
You simply outline a common point to all supply chains and claim the current one will fail as any other supply chain.
Everyone has to die, does not mean everyone die young.
AA, your posts/point are incoherent. Slow down. Simplify.
Simplest I can.
Every supply chain is based on the best available source of energy.
Remove that source of energy and the supply chain fails.
Today's supply chains are not different in this regard.
This property does not mean you can not assess robustness of different supply chain.Present times supply chains are robuster than previous supply chains.
They are robuster because most (if not all) links can be replaced at ease. It can be revealed by noticing that links within the supply chain have less weight on the supply chain than it might have in the past. Quick example: strikes are innocuous compared to what they were.
Previous supply chains: the work has to be done in a precise place.
Modern supply chains: the work has to be done somewhere.
"Previous supply chains: the work has to be done in a precise place.
Modern supply chains: the work has to be done somewhere."
Now you seem to be contradicting your original point...
The US has a greatly diminished manufacturing/productive capacity for real goods. As you say, the sourcing/production (part of the supply chain) was - once-upon-a-time - largely within our borders, utilizing local labor and resources. Now, that work HAS to be done elsewhere via a complex global supply chain consisting of ever-smaller (more specialized) links.
I struggle to understand how these globalized/specialized links will be readily replaced by local/other substitutes when these alternative/local/other resources & productive capacity no longer exist except in China, Malasia, etc., some 8000-10,000 miles away from the hypothetical demand.
Re-industrialization and localization will be a slow, expensive, painful process.
Swapping/replacing various failed links in modern supply chains will be challenging at best, if not impossible in many, many cases...
Hound Dog,
Yeah, that is what I was trying to say. It is a very complex topic. We have optimized on the efficiency of the system not the robustness.
Wording was not what it should be. I meant that in older days, the supply chains were rigider. The links were less disposable. They were preset.
Current supply chains are more flexible than they were, more adaptative.
A link is not delivering? This link is replaced by another link in a matter of two weeks or less. Not enough to cause a disruption.
Your struggle might come from the wish of seeing local stuff arise.
The most important thing is that you keep to lay the implicit hypothesis about a deprivation of what enables the current supply chain.
Nothing new here as any supply chain fails the same: when deprived of its energy source. If a supply chain is enabled by slavery, depriving the supply chain from slavery means the collapse.
If draught animals, same stuff. No supply chains escape this.
So why the expectation on current supply chains?
So why keep laying this hypothesis in order to assess the robutness of a supply chain? It makes no sense.
All supply chains fail the same. Why would you expect the current supply chain to pass a test no other supply chain passes?
Again, everybody dies. It does not mean everyone dies young.
Once you have admitted that this stress factor is inadequate in assessing robustness, the issue of reorganizing the modern model of supply chain will no longer appear as problematic.
Current supply chains have passed many tests, they are not dependent on links they are composed with. These links are easy to replace.
In former days, when a link was malfunctioning, all the supply chain was blocked (hence the vulnerability to strikes)
No longer the case.
Of course, as you go by the hypothesis that the current supply chain will be deprived of its enabler, you can achieve only one conclusion: supply chain collapse.
Now your point of view matters only if you are able to provide evidences the enabler of current supply chains is no longer available.
AnAnon,
Funny thing is that I am hoping you are right. My skepticism is based on years of trying to keep supply chains working, in the best of times. I believe that as the system has become more efficient, it has become more fragile. The Amish will have food, and will have transportation. Their system is not very efficient, but very robust.
You keep introducing new variables like efficiency.
Actually, the current system (as it is majorly redundant) allows to choose over multiple similar options therefore allowing an optimization in the process.
Accessing robutness in times of full stress can be misinterpretated.
If that top athlete catches a disease in times of heavy stress, when required a high efficiency, it is not forcefully the sign of a lack of robustness.
Same stuff with engines etc... That is not because a racing car engine only lasts for one race, it is less robust than a casual engine put in a commercial car.
Your troubles came from the necessity to maintain a high level of efficiency. Which is often achieved when you near the limits of resistance.
AnAnon,
Respectfully, I am having great difficulty parsing your sentences. I am not saying it is you, it is probably me.
You could strip me and three of my buddies naked, put us in the woods, and in a couple of days would could come out with a working abacus, and probably some reasonable pants. To get a working tractor engine microcontroler, it would take tens of thousands of people, working together, across the globe. A microcontroller works much better than an abacus, but when your system depends on one, your system is not robust. You might have multiple choices for given links in your supply chain, but they will suffer from common mode failures. Whatever disruption takes one out, will likely take all out.
Wow. No clue at all. You are going to be very disappointed.
+1
Spot on. Complexity is like leverage. It will unwind with the same ferocity as debt.
Likewise, debt is a sustitute for simplicity. Without debt you cannot maintain exponential growth and then you cannot sustain complexity.
Simplicity, like entropy, always wins.
Do not fight the laws of thermodynamics.
Entropy is an amazing thing, and it always wins. Debt and leverage is an attempt to cheat entropy, but entropy always wins.
Exceptionally said, both of you. Entropy will always prevail, there is no stopping it.
Don't be overconfident about that. Entropy in the universe always increases, but locally it can decrease. Entropy on Earth has been decreasing for 4 billion years.
I wouldn't worry about energy, it not very high tech:
Coal/Gas + O2 -> CO2 + H2O + Energy
Then we boil some water and spin a fan. Any hippie who raises his voice will quickly be greeted by a pipe to the side of the head. Stay out of big cities with poor people and an unarmed middle class.
Fantasies.
Doh, I guess NYC qualifies as a big city. You know, I always wanted to steal one of those large, luxury boats, and just hop on out into the Atlantic, as far as she'll go. See how that plays out.....
Ram pump bitchez:
http://www.clemson.edu/irrig/Equip/ram.htm
Dmitry Orlov has some thoughts on the collapse, and how the US and USSR systems are dissimilar:
There's an interview with Dmitry here.
Russell says not recognizable by year's end. What does "not recognizable" look like?
JIT is like dumping immunitary system in favour of the health system.
As someone whose trading account doesn't have three commas in the Current Balance column, I think I'll listen to Richard Russell and his five decades of market experience and move to the sidelines. Ahh, that feels better...
If we believe that govt's will print money and cause inflation, why wouldn't large corporations stock value rise due to inflation as well?
More dollars chasing resources will cause prices to rise.
Dow infinity!
It might in $ terms, but in terms of buying power of the $, we all still lose.
That just means you have to use leverage.
{one share of stock approaches infinity}
{price of one loaf of bread approaches infinity}
Number of loafs of bread that can be bought with one share of stock is infinity/infinity, which is undefined. Even with leverage (infinity/10(infinity)) is still undefined. Bottom line is you dont know whether or not you will be able to afford bread.
I totally agree! I'm just not sure that we will see Dow 6470. Even if the Dow rises, I think holding it will absolutely not add to your buying power. I am just saying that I don't think the prediction of Dow 6470 is a good one. I should RTFA to see if it can persuade me.
And, as those prices rise people will buy more and more of anything before it rises even higher. Real inflation feeds on itself. "Inflation, the cruelest tax of all".
Wall Street will never be what it once was since it relies on advanced and complex theft as opposed to the old days of commission based business. They had to enter the pockets of the middle class under promises of wealth and riches using men like Jim Cramer to extract as much cash from Joe & Jane's pockets.
Americans will return to investing one day however this will be years from now with much more regulation once these politicians are thrown from office and stocks will return to their fair value which is considerably lower than these levels. There will be a true return to the fundamentals of investment and that can only occur when Americans believe in the system once again.
Attempting to rebuild faith and confidence by marking up nominal values and feigning financial reform just by writing 2,500 pages and slapping FINANCIAL REFORM BILL on it is doing nothing. The middle class is becoming aware of the motives of the Greggs, Dodds, Schumers, Watts & Franks of the world because of the availability of information. Backroom deals are no longer secretive and sites like ZeroHedge place a bullshit filter on anything coming from Wall Street and central banks. There is only one version of the truth.
Maybe so, but for now...disintermediation, bitches!!!!!!!!!!!!
I seriously doubt Wall Street will survive in any form. Banking will slowly morph back into the aristocracy from which it arose in the 13th century.
People will invest in their neighbors who operate markets and mills and foundaries in their town. That's it.
They will forget, in a few hundred years, how they were abused by the aristocracy this time around. But until they do the aristocrats will keep to their manors and close the gates fast against the night.
...And I'm O.K. with that..."
-Michael Bluth
NO TOUCHING!!
I am having a LOVE AFFAIR with this ice cream sandwich.
It is quite sad...my mother in law has been in the stock market via mutual funds for around 40 years...so overall she has done quite well, however she refuses to believe that the system is now rigged, so she will never get out of the market. She just thinks "over the long haul the market always goes up" and for the most part in her investing life it has. At 70 I want her to be able to maintain some of her wealth so I'm telling her to get out now, but because she did so well over the years, she can't wrap her mind around the fact that the game is up now. I hope she's right but I can just feel some huge crisis coming around the bend.
i predict the S& P 500 to be "322" this time what say...
Armageddon? Armageddinouttahere!
(Apologies for the quality of this gag, sometimes I just can't help myself.)
Actually compared to most of the crap we post on here, it's not all that bad.
Excellent piece. The only disagreement that I have with Mr. Farrell is the end of capitalism. It cannot end. It is human nature. Someone is always motivated by the ability to make profit.
absolutely. It's ending is already in its beginning, and vice-versa. There's nothing magical or unusual about what's happening now, it's only that perhaps we didn't see earlier that we'd be around for the ending. Surprise!
Capitalism ended a few decades back. What we have had since then is a casino.
The casino is now ending. Fold up the tents, it's over. True capitalism will indeed return, at some point once the dust has settled and the gamblers are all swinging from lamp posts, but that could be many years hence.
In the meantime, people will invest in their neighbors and each other, then they will form small localized banks, and eventually invest in ventures. However Wall Street style casino operations won't be seen again in Western civilization for 300 years.
And there it is; the reason capitalism bashing is hilarious.
Mikey Moore: "Capitalism is an evil."
Uh, no, Mikey. Forcefully taking property and restricting human interaction is not capitalism. That's socialism.
Socialists have been the prevailing species since dawn of times then...
Pretty much. The Western psychopaths rule with baskets full of promises these days so it's cool to "share" - until they're taking it from you.
The credit market was/is the bubble, always has been. All humans were doing were complaining about small bubbles that lie within the credit bubble.
The credit system will collapse, life as you know it will be gone. After decades or probably a generation or two of liquidation, humans will probably pick the same choice over again and rinse and repeat.
All these exchanges, markets, boards, trading centers will implode.
S&P500 666 broken by 1% brings into question probabilitity of 0 on the S&P500
Just wondering what you think, is the solution to outlaw compounding interest and simply bake a fee into the total amount? $100 borrowed @ 10% = $110 paid in full at the end of a year (or whatever contractually agreed time frame). Is that how we avoid collapses?
I know it's pretty simplistic - just wanted to hear what your solution might be.
@WW
Pure fiat money. Not money backed by debt. The original Greenback issued by the U.S. Treasury during the War Between the States.
Now, I know that you did not ask me, but I have been thinking about the same, so I hope that you don't mind a little mind-experiment.
I am thinking that the problem is that we have "a payable" built into transactions without certainty of growth as a result of that transaction to fund it.
Imagine if the concept of debt and borrowing was abandoned. Imagine that every economic transaction is equity based. The "bank" would not provide funds, unless the bank had own money to invest. Instead the "bank" would broker a contact between a fund seeker and a fund provider. For that service the bank would receive a one off service fee. The contract between the Fund seeker and the Fund provider would be a profitsharing and equity ownership sharing agreement rather than a debt obligation that carries compound interest, no matter how the business venture turns out.
This means that both parties would have real risk to consider, which should result in better business plans, management and due diligence.
Fractional reserve dispursement of funds should ideally be prohibited. When someone puts money in a "bank", it should be for safekeeping or contact brokering, nothing else. It should not become a part of the usable assets of the bank. Isn't that form of deposit called bailment?.
The monetary system is causing me more trouble. It should be based on equity money (did such a thing ever exist??) in the way that money is printed/created based on population size and some solid metrics, that I can't figure out, what should be. Any suggestions? - metrics that can be monitored and evaluated in a transperent and precise way, so the money supply can be managed accurately to grow or shrink in lockstep with the economy - not more - not less. The ideal would zero inflation.
Does the above make sense at all? Even if it is VERY different from our world today. It may be very naive and I feel like I am walking the plank here, but I would be very curious to read other perspectives and ideas on the subject.
The money supply has to at least fluctuate with changes in demographics. Rising as we have more consumers, falling as we have less. We are very much concerned with inflaction here and now and there are many PM advocates on this blog, but a look at the period from 1873 to 1907 would show that a policy of deflation is not always preferred. We need a policy of stable money and we should remove control of our currency from a group of private bankers.
Stock valuations don't stay below the salvage value of a corporation's assets long-term. Unless assets other than food, water, guns and ammo all become worthless, and I'm not saying that cannot happen, look for a market bottom that reflects the aggregate salvage value of assets.
That is preposterous unless the SPX500 firm is overwhelmed by previous debt covenants and that the common stock assets disappear. That assumes a total control and ownership with the wipeout of common owners of the company. That can be done only by goomint. Do you think that real capital will allow a complete expropriation by leviathan? How wimpy are you? Do your tears and crying snot run down your dress?
if US decides to devalue the $... wont the market go up? I think that is the last bullet in the FED's gun..no?
so if this happens will not stock prices rise?
The myth of helicopter Ben is what keeps you guys going, there is no Helicopter Ben just like there is no Wizard of Oz.
"so if this happens will not stock prices rise?"
Once the credit system collapse, companies will be a zero, companies run on credit. The system runs on credit, no credit system, no mass credit = kiss your way of life goodbye.
Nobody wants a good party to end, but they always do.