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Rick Santelli On The Fed's Upcoming "Nixonian" Price Controls
Rick Santelli was on King World News today, discussing the distinction between deflation and deleveraging, or what some have dubbed the phenomenon of surging prices in things that one can buy without leverage (Friday's limit up open in various commodities being one example), and plunging prices in everything that requires debt (i.e., one's house). And while the Fed can game the CPI as much as it wants, once middle America see the cost of basic foodstuffs double (and it will once producers hit negative profit margins and are forced to pass input cost inflation to end consumers) they will realize just how serious this problem will be. Of course, the only way to offset this localized inflation is by returning to the time when America could use its houses as piggybanks in the form of taking out equity lines of credit. The problem with that, of course, is that the Fed will be forced to increase home prices at all costs, even as speculators take basic commodity prices up in anticipation of the coming hyperinflation. Which means that the Fed will be behind the ball, and will be forced to increasingly devalue the dollar as it is now obvious that no matter how cheap credit becomes, and how pervasive free money is, the last thing to go up are home prices which make up the bulk of US consumer "wealth." As such, today's collapse in the ceasefire in monetary talk is no surprise: every central bank is fully aware that with the monetary component to intervention, via cheap credit, now priced in, but priced in in terms of equities and commodities, the only way to create equity value in housing (of which per some estimates, 25% of all homes (and rapidly rising) are underwater to the underlying mortgage) is to broadly debase the currency. This is now a virtual certainty, and the higher gold (and soybeans, and corn, and what) goes, the faster the Fed will need to destroy the dollar, making the vicious loop of hyperinflation spin faster and faster...
We dare the deflationists out there to look at the charts of coffee, barley, oranges, pork, cotton, rubber, iron ore, and tell us where is this much-hyped deflation...The right answer, of course, lies in one simple word - and as Santelli confirms what every Zero Hedge readers knows, it is "monetization."
All that is well-known. What is more interesting is Rick's discussion of what will be the Fed's next step after another failed QE round: price target levels. This Santelli qualifies as a "Nixonian" approach of price, or specifically, yield controls, such as i.e., 2% on the 10 Year, and the Fed will keep bidding up securities until one after another target is achieved. Of course, for the abovementioned home equity values to reappear, the marginal cost of debt has to be as close to zero as possible, so that readers can refi into a new debt piece, which would make home prices essentially explode as consumer become price agnostic vis-a-vis taking one one dollar or one trillion in new loans: if the rate is zero, there is no cost. And this is what will ultimately happen, and be preceded by outright monetization and the collapse of the reserve currency system, and of monetarism as a result. That is, pure and simple, the end game.
Naturally, all of Rick's logical objections to the Fed's launch on this road to dollar debasement will be ignored by the relevant people.
Another amusing observation is the question by Jim Rickards addresed to Rick, and predicted by a Zero Hedge analysis on what is a statistically impossible perpetual upward revision in initial claims, as to whether "someone is finessing the data for the labor statistics." We agree and disagree with Rick that these adjustment are like noise in the grand scheme of things: agree in that indeed whether it is 450k or 455k is largely immaterial, when in both cases the economy is not generating jobs, yet when it comes to headline scanning robots, the difference can mean a world of difference to the marginal trader, who is being games by both the HFT system and the BLS bias.
A last observation, on what will likely be the source of the next major rant by Santelli in the upcoming week, now that FX wars are the topic du jour, is Santelli's very correct highlighting of Geithner's hypocrisy in damning FX intervention by others, when the Fed is the biggest FX debaser courtesy of Bernanke's printing press, whose only purposes these days it appears is to end the dollar's status as a reserve currency.
For all this and more, including Santelli's take on the upcoming mid-term elections, the link to listen to the always entertaining and informative Rick Santelli can be found here.
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Why doesn't Rick run for mayor of the stinking onion? Oh, thats right , he has ethics. Sorry.
I mentioned this on another post awhile back, but I'm willing to eat 1 $USD if the Fed actually implements anything close to QE.
Look, boys & girls, QE makes absolutely no sense if one considers the Fed as an entity subject to the same rules of survival as all other beings. The prime imperative of the Fed is to survive. Purposely exploding its very franchise as the world's reserve currency, in an effort known beforehand to have no positive economic effect, makes absolutely no logical sense.
Why do you think people lose fingers & limbs from frostbite? Because as the body begins to experience hypothermia, all external appendages are abandoned in order to protect core internal organs. That is, blood flow is restricted and recirculated within your abdomen, resulting in decay at the extremities.
Where do you think the term "batten down the hatches" comes from? It's a nautical term used to connote that in the face of a pending major storm a ship may, just might, survive if it takes down all sails/rigging, closes up all hatches in order to stay dry inside, and tries to ride out the massive waves much like a rubber ducky.
The two analogies above provide an illustration of what the Fed is really going to do. They will not survive QE at all, but they might, just may, survive the Dow @ 1,000, Petraeus as President, Ts defaulting, interest rates @ 20%, all mortgages underwater, etc.
Besides, you can make just as much money on the short as the long. The power-elite got bailed out 2 years ago and are now sitting pretty. If they can't profit much longer on the upside, then it's time to hammerhead this mother and drive it straight down.
Why do you think Obama vetoed the notary bill? There isn't going to be a resolution to the mortgage mess; it's just the vehicle they need to begin the dive. Plan accordingly.
Beautiful post. I agree - inflation does not benefit the private banksters who own all the debt and bribe the politicians. QE1 happened at a market bottom when everyone was terrified that the system would shut down. Those conditions are opposite now. The market is coiled up like a spring, pointing down...........
Beautiful? Yes
Actionable? No
While this site has undergone a Makover the past few days, few people realize Mako's spiritual guru is HyperTiger, another self-proclaimed expert in money mechanics. Here's a post for Aug 1, 2003 from Ol Hyper:
http://www.freedominion.ca/phpBB2/viewtopic.php?t=10290&postdays=0&postorder=asc&start=30&sid=7342d69f4c66ba5e5065c40f0d78d4e6
"I know more than bankers and economists... because they know how the system works...I comprehend how it works... I have a supreme understanding of the subject... 6-10 months max left in the good old days, maybe less... "
So much for that prediction. Now he's gone silent at his home base out of frustration: https://www.blogger.com/comment.g?blogID=32972305&postID=7300717509095690374
Here is the action: Buy commodities and sell debt. Pay yours down if you have any.
I think you got it only partly right Minion. You should have said, take out as much debt as you possibly can right now and use the proceeds and everything else you have to buy commodities, gold, farm land, art work and any other real item you can and pay back that loan with worthless dollars later.
FEMA camps exist........ only the banksters get bailed out, not you.
Take out debt that has a FIXED APR, and I'd agree.
Credit card debt can be ratcheted upward, infinitely--steer clear.
Anyone who puts a fixed timescale on the transitions in a complex system is simply a gambler. What seems like imminent collapse, even now, could drag on for years (or just days) depending on any one of a number of variables. Try predicting the weather, or sunspot activity, or the timing of an avalanche! ... yet trends and eventual outcomes are easily discernable.
I don't blame him! He makes complete sense, yet seems to have to repeat himself over and over as the idiots miss his points and ask the same questions over and over.
I see what his problem is. He thinks the system is pure create from thin air debt based. IT'S NOT. It's a hybrid system. Some loans are from exisint cash and some loans are created money. He thinks the entire system is central banks. It's not. Central banks operate differently from periphial banks. We have most contact with periphial banks so we think the system is ENTIRELY legit but it's not. The central banks abuse the system. If the periphials did it as well inflation would be outrageous all the time.
B9K9
Why do you look at the Fed as an organic entity? It's really a tool. It's real owners wield it for power and influence. In this way it has the same imperative to survive as a hammer. Sure the hammer may be extremely resistant to harm but it will do what it's master uses it to do.
A currency crisis is baked into the cake now. Should they do as you suggest and have interest rates at 20% with a full default the dollar will no longer be the reserve currency. The Fed will lose it's exorbitant private of being able to print to infinity. So the "rational" choice leads to a massive loss of power for the Fed. The other option is to simply become the buying of first and last resort. To take advantage of the reserve status of the dollar and flood the world with dollars while buying any and all asset classes. Now this will destroy the reserve status as well, and the Fed. However under this scenario the owners o the Fed can move the performing assets out the back door, mob style (Good Fellas). And for the kicker they can use these very same assets to buy off political figures to take over the next central bank of the US.
In you scenario the Fed lives, with a crippled balance sheet and no longer having a reserve currency. Under mine the Fed no longer exists but it's masters greatly profit and with a little skillful play can use the gained assets to start the ball rolling all over again. So tell me how my version makes no logical sense? The Fed is a tool, look to the hand that wields it.
EDIT: Having said the above I do not think they will announce QE2 at least not Nov 3. It can be done without the announcement so why spook people. After all it's not like we will ever see their balance sheets so long as they are a going concern. The printing will be in full force to loot while the opportunity to loot exists.
"We dare the deflationists out there to look at the charts of coffee, barley, oranges, pork, cotton, rubber, iron ore, and tell us where is this much-hyped deflation...The right answer, of course, lies in one simple word - and as Santelli confirms what every Zero Hedge readers knows, it is "monetization."
Whoop...der it is bitchez ;-)
Deflation is hiding in the closet with his good pal "mark to market".
Mish actually covered this in great detail. The definition he has been using is a contraction in credit. Generally this causes a decline in prices, and it certainly has for things that require credit.
As far as foodstuffs go, I have been hitting a supermarket that is changing owners, so the new owner wants to get rid of all the "old food". I bought 34.5 oz cans of Springfield coffee for $1.99 each, 40 oz cans of Dennison's chile con carne for $2.00 each, cases of bottled water for $1.99, 50 oz Tide 2X detergent for $3.99, 15 oz cans of (real) abalone for $2.99 each, 40 oz jars of peanut butter for $2.00, big jars of strawberry jelly for $0.79 each, 14-17 oz cans of Raid bug spray for $2.00 each, big cans of albondigas soup for $1.00 each (and they had a coupon for 55 cents off).
A month ago I picked up a Nissan D21 engine and trans for my truck for $300. My truck has close to 250,000 miles on it and runs great. I will eventually need one by 500,000 - 600,000 miles, so I was must planning WAY ahead.
You can not change the definition of a word to win a debate and you can not base your ideas on random particular examples.
Seriously, heavy inflation will hit after QE2 and Mish is just playing with words.
Two responses: First off, Mish isn't changing any definitions of words. The term "inflation" has been used for over a century to mean different things to different schools of Economics.
Inflation can be used to describe the general effect of the expansion of the money supply: Rising Prices.
Or it can be used to describe the expansion of the money/credit supply itself. (This latter definition is the one used by the Austrian school, btw)
Furthermore, the limited definition of "inflation" which pertains only to rising prices was championed by Keynesians who of course would rather you not notice expansions of money and credit. ie: Please notice the rising prices, not the shrinking value of the dollar which is entirely our fault.
More importantly: (Second response) There seems to be a very limited understanding on ZH of price-effects in a deflationary environment.
The layman's understanding of pricing under a deflationary credit contraction is that prices 'decrease'. And that is mostly true. But as we have seen throughout all historic depressions, while it may be "mostly" true, it is also very commonly not the case. Why? Because collapsing credit (and the associated capacity-overhang which defines deflations) causes implosions of industry, and such implosions of industry cause supply-chain disruptions. Supply chain disruptions frequently create scarcities in a wide variety of related products whose respective demand-levels have not yet collapsed. Such supply-chain disruptions frequently cause rising prices of specific goods and services in a deflationary environment.
Other increases in pricing occur from increased credit to specific industries, which can cause distortions in speculation (such as in commodities) and pricing. Such limited increases in credit, (and their corresponding distortions in asset pricing and speculation) are not representative of net monetary expansion.
This is not at all a reworking of the definition. This is part-and-parcel of an understanding of the microeconomic effects of a macroeconomic deflation.
To all those who point to rises in granular pricing data and proudly conclude "inflation", you are missing the forest for the trees.
Mish is not playing with words at all. He knows his shit cold.
p.s.: If one wants to play the game of tossing out individual datapoints in an effort to win the inflation/deflation argument, then try this one on for size:
"Wages".
Whoop.... 'der it is!
+ 3600
+ a 1000 acres
Or more simply put...a grossly less valuable dollar with which to purchase the same basket of desirable goods you purchased yesterday. I have not even bothered to look but I would assume the same commodities priced in gold or silver coin have seen no rise at all...perhaps even cheaper.
"p.s.: If one wants to play the game of tossing out individual datapoints in an effort to win the inflation/deflation argument, then try this one on for size:
"Wages".
Stag-Nation...real wage increases have been flat to nonexistent for at least a decade. In dollar term pricing power workers are actually working for less now than they were a month ago...or even yesterday. Running like hell to stay in the same place as it were.
http://www.youtube.com/watch?v=ySO-gryuO-c
Whoop...der it is X 2 ;-)
pretty sure you just won the game of "smacka'hoe'. thank you for a very good explanation.
dbl post
Mish knows his stuff my ass.
Have a look at the performance of the fund he manages.
Whoop..... 'der it is!
P.S. I didn't realize that rising prices in virtually ALL commodities represent "granular pricing data ". Well, what do you know, learn a new thing every day.
So I went and looked up the various food commodity prices. I could only find data back to the spring of this year, but I didn't see what you are seeing. Wheat, for example, has dropped in price since the spring.
WHEAT peaked @ 860 in early August (coincided with the forest fires in Russia), and have since then largely traded sideways after an initial drop to the 700 range. Over the past week or two, it has shifted a gear upwards again.
http://www.marketwatch.com/investing/future/WHEAT
Go look at the 5 year graph on that, looks like deflation to me, personally.
One could also mention a reverse economy of scale, once the output collapses, the cost per unit automatically rises, which makes it either unfeasible to produce the goods (for which the demand is inelastic) or the price will rise to a higher level (if demand is elastic). That's why, for example, food prices in a that case can actually rise, at least temporarily before new level of prices stimulates higher output.
The overall pool of credit is going UP. The consumer credit is shrinking so all governments are doing WHAT?
As Mr. Santelli puts it: "monetization."
And Mish does not see the forest for the trees, but he is welcome to whatever opinion he wishes.
As am I and as are you.
Please continue to believe exactly what you wish.
I know you will regardless.
:)
The overall pool of credit is going up?
Better recheck that. You're not even close. It's being decimated.
Your argument is with the St. Louis Fed. All their measures of money are going stratospheric: currency + demand deposits, M1, M2....
http://research.stlouisfed.org/fred2/series/CURRDD
http://research.stlouisfed.org/fred2/series/WM1NS
http://research.stlouisfed.org/fred2/series/M2
Even shadowstats measure of M3 decline is decelerating.
M3 as measured by shadowstats is the only stat you list worth mentioning. And 'decelerating' does not support your argument. A change in the second derivative does not constitute a change in vector. Credit is contracting, massively.
"Wages" always ALWAYS lag prices during hyperinflation.
You and Mish-kins don't know the difference between regular inflation, which is caused by credit-fueled demand, and hyperinflation, which is fueled by loss of confidence in a currency.
You see, I kind of doubt that there is a supply disruption in gold, being that all of the gold ever mined is still in the hands of people all around the world, and it is traded on multiple exchanges as well as on wholesaler and retailer levels.
Mish is a parasite.
Mish seems wedded to his concept; I guess his ego won't allow for conflicting explanations; he seems to spend a disproportionate amount of his time debunking any and all data points, stats, evidence, premises that argue for hyperinflation, I know where I stand but time will be the utlimate arbiter, a caution for those who position themselves for only deflation.
and that's exactly why I stopped reading Mish's writing.
I again agree with you, Mr. Gneiss. Mish and Denninger can torture the data and statistics, BLS-style, to argue in favor of their putative and chimerical "threat of deflation" all they want, but my reading of economic history tells me that a chronically overspending government, whose debt is not just expanding but exponentionally expanding, will always, always, ALWAYS resort to the debasement of the currency. There are hundreds of such examples throughout history, and curiously, not ONE example of a fiat currency significantly RISING in purchasing power, much less given the aforementioned circumstances.
Those who naively believe in the "threat of deflation" are the ultimate "This time it's different!" crowd. Yeah, and we saw just how well that worked for the NASDAQ and real-estate bubbles as well.
Strongly agree with your analysis, with the caveat that Tyler's differentiation of the two dynamics wrt commodities and specifically housing did do some justice to this argument, imo.
Deflations a nice fairy tail to drive people into cash so you can spread the debasement out far and wide and not have to pound idiots into paupers. Fed used to actually constrict money supply to start it off before debasing. Now they just bluff.
@Hephasteus
This inflation narrative only makes sense if wages rise along with prices. That is obviously not happening now, and with 15% unemployment it's not going to happen anytime soon. Food and energy price increases will just reduce consumption for other non-essentials. The real economy (absent bogus government stimulus) will continue to deflate.
lol, I guess food isn't part of the real economy. Only iPads and Detroit housing exist in the real economy.
Hyperinflation can easily happen with high unemployment and stagnant wages. It happens all the time. Just look at the history of any and every hyperinflation that has ever happened. Sure, wages rise EVENTUALLY, but they never keep up.
Hyperinflation isn't just really bad inflation, it's a currency crisis. You don't have to have a lot of it to know that it's worthless.
Fast food is the new soup line. Lots of 99 cent poop sticks in a wrapper these days. Garbage gut bomb still goes for pocket lint.
This is a point I've been struggling with. We've all heard about people in the Weimer republic showing up with wheelbarrows of cash to buy bread and stuff. I can see the Fed influencing commodity prices, but I want to know when the wheelbarrow of cash is going to available to me.
In short, without wage growth and with declining credit, how are we supposed to pay for $140 oil? This is a genuine question. I think the answer is we don't. Because companies have no pricing power all Bernanke is going to do is to squeeze company profits. If you want to sell me oil at $140, I'll ride my bike. The oil companies need to sell oil. if nobody can afford to buy it, they'll lower the price, plain and simple.
This isn't going to be like weimar. This is going to go down EXACTLY like the russian collapse. Complete with government killing it's own citizens to regain power. This is subjugation of every nation. Russia was just the 2nd hardest super power to thrust into poverty. The problem is the dog on a leash phenomenon. You take an aggressive dog and leash them up to attempt to control them and the second they get free they bite someone. Russia had a lot of pent up dogs on leashes because the kgb was always there suppressing people. America not so much. They'll probably collapse the place waiting for it to get bad enough that people beg them to come in and take back control. It'll probably backfire and 2 years after they collapse the place it will be as clean as a whistle.
.....Complete with government killing it's own citizens to regain power.....they'll probably collapse the place waiting for it to get bad enough that people beg them to come in and take back control. It'll probably backfire and 2 years after they collapse the place it will be as clean as a whistle.
I think you're far too optimistic.
Most likely, the government will start eating people. In any power struggle, the end game is cannibalism.
Similarly, Glenn Beck has done a fantastic job connecting the dots between ObamaCare and eugenics. Like Hitler, Obama wants to create a master race. Death Panels, anyone?
With a little Glenn Beck-style creativity, you can connect the dots between cannibalism, eugenics and, well....anything. It wouldn't surprise me if the currency is annihilated so that no one can eat (except those people here at ZH that were smart enough to have underground bunkers with 500 cans of green beens stacked against the walls).
When the currency vaporizes, Obama will send food stamps to those that he wants to live. All the others will be put on a stick and eaten like a teriyaki shishkabob. Without a doubt, that's control.
See how that works? In the connect the dots game, you're just a dot or two away from total lunacy - and so is your post.
Dude, you need some serious counselling.
Why do you do this? All you are doing is espousing your own ignorance of what is really going on in this country.
Why don't you go back to the Obama forums?
Why do you do this? All you are doing is espousing your own ignorance of what is really going on in this country.
Quite the opposite, actually.
Ah yes. Poster boy Beck. You forgot some of the most important facts regarding our president:
-He is in tight cohoots with the Black Planthers
-He is not a US citizen
-He was sworn into office with the Quran, not the bible
-He refuses to place his hand over his heart when hearing/citing our pledge of allegance
-He is a MUSLIM (shake, shake in our boots)
He pals around with terrorists
His taped broadcasts to schoolkids are hynosis sessions aimed at turning kids into Hitler-esque clones
-He sleeps with his tele-prompter.
-He is anti-Christ...satan's son.
What Am I forgetting here? Now, now- no ad-libs. Just the straight proven facts please.
Read fofoa's latest post on hyperinflation for a detailed explanation. Short answer: yes, there will be wheelbarrows full of cash (possibly food stamp cards, but who knows?), but it will come about as a political consequence of hyperinflation rather than a cause. When consumers are pushed beyond their absolute limit, as food prices explode beyond most anyone's ability to pay, they will start printing money to distribute to people so they can afford food. This is a desperate play to prevent armed rebellion.
Also, companies don't need to sell oil, they need to buy things they need to survive. They can normally effect this by selling oil, but if prices are rising, then they aren't going to be able to cut their prices. No-one is going to take a direct loss by selling oil for less than the cost of extraction. They will shut down operations or go out of business (or demand payment in gold--the most likely scenario from my point of view--there's plenty of gold out there at the right price).
Better make sure your wheelbarrow is full of low denomination bills. Russia made its high denomination bills worthless overnight when they had their "currency problems": http://articles.latimes.com/1991-01-24/news/mn-987_1_savings-bank
"The utter immorality of this decree is bound to cost the central government what little confidence people still have in it," Ruslan Khasbulatov, vice president of the Russian Federation, the country's largest republic, said in an interview. "Over the past two years, more than 70 billion of worthless rubles have been pumped into the economy by the government, and now the government is virtually confiscating this counterfeit money.
The obvious question to ask here is what proportion of the consumer basket goes on food as opposed to more credit-sensitive things.
What is really sad about human nature is that people will stretch that can of Alpo one more day to allow for their daily bottle of beer and three cigarettes.
Beer is quite healthy, in moderation. They don't call it liquid bread for nothing.
Cigarettes will probably be illegal within five years.
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@ Rogerwilco,
Prices can rise without an increase in the money supply or an increase wages. A decrease in the supply of goods and services also drives up the prices of things. Which is why hyperinflation is actually more likely to occur during massive unemployment. Do me a favor and go check the label for point of origin of everything you buy and figure out for yourself how much crap we don't supply ourselves with and how that would effect the price of things you wanted to buy.
Rapid deflation leads to hyperinflation as scales of economy unravel and markets fall lower than companies can produce at or meet. They go BK. Successive systems fail to this and the ability to supply collapses. Rebuilding supply proves more expensive than anticipated.
Governments attempt price controls to prevent this sudden shift from occurring. I haven't ever found a place where it worked.
Very good discussion. Very good to read your opinions.
Thanks.
Does anybody believe that there is any kind of "exit strategy" or way to avoid a Weimer or Russia style upheaval?
If not, then do you believe this road we are on is by accident or by purpose?
My feeling is that the road is set and there is no way around imploding the currency because you have two issue that need to be addressed and you have the Fed working one end and politicians the other.
The Fed alone might be able to avoid a currency collapse but because they are pawns to the political idiots they will print too much and the politicians will take care of the rest with price controls, rationing and all other stupid and hurtful schemes to "help the middle class" all the while driving the middle class to pauper status.
I beleive this is by design. Politicians have one goal, to remain in power and how can they gain more power over a people that looks to them for their daily bread, their health care and probably their homes and jobs too?
It's nirvana for the elite but it will blow in their faces and they will hang when enough of us get the point and we start hanging them from the lamp posts, burning them on their 108 ft house boats or at their Chalets in St. Moritz and Aspen.
In the last depression there were plenty of goods but no one had money to buy them. In the next, everyone will have plenty of money but they won't be able to buy anything.
I still stand behind my long-held thesis that the inflation/deflation debate is misleading, since there is no single answer. There will be a full spectrum of price behaviors, and they will be best understood by Maslow's hierarchy of needs.
http://en.wikipedia.org/wiki/Maslow%27s_hierarchy
I do not know if a loaf of bread is going to cost more or less in five years in terms of the dollar or gold or any other monetary metric. I do know that the loaf of bread/session of yoga or loaf of bread/Stairmaster or loaf of bread/college course in philosophy spread is going to collapse. Our kids are going to look back at the amount of time and energy we devoted to episodes of self-actualization, even as we let the system crumble, and wonder how their parents could have been such fools.
(Reuters) - Emerging powers won a battle on Saturday for heightened IMF scrutiny of rich countries' economic policies as world financial leaders sought to defuse mounting tensions over currencies. | Video
Great, unelected world body taking control little by little of currencies. There can't be anything bad about that!
Americqns have way more to eat than they need. There could be a lot of resistance to higher food prices. Supply vs Demand. Food nazis may have to deal.
And when us skinny Americans run out of food we go eat the fat ones. Tastes like prosciutto.
A Revolution is a process, the first of which is the 'turning of the intellectuals', not that I'd place Santelli there, but moreso than a Brad Pitt (who called for Capital Punishment for those responsible for the BP Gulf disaster) and probably in line with the yet unseen performance of Matt Damon in 'INSIDE JOB', ie, the people most sheople look to as an authority, or someone with an inside look which they respect. As that number turns the actual turnover inherent in a Revolution occurs rapidly. Then the real battle begins, because there remain factions to fight over the seat of power, to govern over what is left of what historically, is a bankruptcy of government which is as good a definition of a Revolution as there is.
The point being is that we are rapidly approaching this time where the 'intellectuals' turn against the government and the government loses its authority to govern. Its a race against time now, to disseminate the problems and solutions for the sheople in mass in order to give definition to a direction that will lead them out of the quagmire and support the winning ticket.
There will be blood, but hopefully, provided we can keep the battle confined to the ballot box, it will be minimized. But as I said,... we're running out of time. The peaceble legal transfer of the reigns of government must occur by the elections in 2012 which is a pretty high order.
I'm sure we'll all do our best and know our duty.
good thoughts. imo the greatest accomplishment of barack obama was adopting the worst policies of george w. bush and making them even more unpopular, in part by allowing republicans to hate them without fear of disloyalty.
Obama also got a large chunk of the left to hate the Democratic leadership. With control of the White House and Congress, there is nobody else to blame for creeping fascism, Obamacare, kleptocracy, etc. Little people on both the left and right now see the two-party system as a fraud and a distraction set up by the puppetmasters behind the scene. This realization is a necessary condition for revolution.
I read the arguments for revolution on this website, and I understand most of them. However, in the physical world, I do not see in my fellow citizens exhibiting any of the prerequisites for revolution. People are fat, drive cars wherever they want to go, change jobs at will, have access to cheap entertainment and foreign travel. Revolution? Maybe I am myopic, but I just don't see it.
In my opinion we would need to see some type of economic or energy collapse, first. A revolution would be a second or third derivative, not a prime event.
government loses its authority to govern
Ha! You must have no idea who you're dealing with here. They've killed presidents, congressmen, anybody who gets in their way and they have the guns. These people have been committing ethnic cleansing, genocide, crimes against humanity and the peace and you really think they'll go peacefully into that good night?
I don't think so!
http://www.youtube.com/watch?v=USGSOViaulc&feature=related
New Rev.
The point being is that we are rapidly approaching this time where the 'intellectuals' turn against the government ..
Don't you mean 'where the intellectuals get rounded up and disappear' ?
Much agreed, NR. There is hope. This is why I think simple things that effectively communicate some of the essentials of our complex situation (problem with intellectuals is that they love to argue minutia that only they can follow . . . and note the inevitable scrapping below about who and what is a real "intellectual") are extremely powerful things.
Take youtube, for example. Here is what I see as just one vehicle for reaching the "masses":
http://www.youtube.com/watch?v=9kPCYcBm-C8&feature=player_embedded
The beauty is they are succinct, compelling and accessable. Online media is the modern town square . . . and so powerful when it goes viral. Which costs nothing.
Unfortunately that video has been mashedup so many times it may have little impact on the desensitized.
Shortages, bitchez.
Canned ham buried in the back yard is looking pretty good if this is really what is coming.
I might even settle for canned JohnnyBravo --- "Spam Ultra-lite". Tastes like shit, and very high in sodium, but at least it is cheap in terms of gold!
Bernanke is YURI.
Berwanker is:
http://www.youtube.com/watch?v=USGSOViaulc&feature=related
interesting thoughts here but simply not possible. i did try and make a joke about "the Fed's using price controls to keep housing prices up" but it was only picked up by some black dude interviewing a highly brilliant Shill from Yale on SA. In short "you can't have price controls and bail out your real estate buddies." More than that "you have trillion dollar deficits"!! Oh, yeah--and did i mention "foreign borrowers control most of our debt"? Perhaps it's too blunt to say "this is the shit sandwich for your vote" but frankly "this is the shit sandwich for your vote." And of course I include "your non vote, too" which is the very definition of pure evil in my book. Again WHO THE FUCK IS GOING TO PAY FOR THIS STUFF. Raising taxes won't work. Flattening them might--but that's a moral issue so that won't happen. You can begin rampaging through...like Sherman through...
Yes but the Fed is now 2nd on the list of owners of our debt. With one new round of QE, the Fed will be the largest owner of our debt and the Chiinese will really be in a pickle. Fish or cut bait bitchez!
Chalk up one more for the pundits and politicians. The Chinese own a bit over 800B and the fed owns a bit over 800B. Problem is, we are more than 1.6T in debt. Are the French hiding it in their pants? NO, the social security trust fund (that non-listed player) owns practically all the rest. Thats right, we owe it to ourselves and let these elected douchebags (paid by the banksters) tell us we need to worry about the Chinese.
The smart thing to do (not that smart has any danger of breaking out in this administration) is to fire Geithner and hire a patriot for Treasury secretary. Direct every clandestine account the government owns to short the shit out of bond futures. Then seize the fed, jack fed funds to 15%, break the banks, and pre-refund the bonds with the profits. After every last dollar those useless TBIF cocksuckers own has been recaptured, sell the deposits to the small banks and get on with recovery. Think of recovery by 2012. Any other scenarios even include this as an outlier? Just look at 1921 for your guide.
It's also possible that the USG will just default. From current posture, however, it's totally unclear as to what the results of that will ultimately be.
You can hyperinflate and destroy the currency or default and cause trading partners to revolt... and destroy the currency.
But doesn't everyone owe the US more than we owe them, except for maybe China?
Default on China? Trade stops, and the lights go out. Do we even make light bulbs here anymore?
Either way, it's a default. What's happening right now is a selective monetization program with trial balloons floating for large scale monetization programs.
China has an interest in maintaining the status quo for fear of social unrest at home. Theoretically, the US could negotiate some kind of resolution with China. Unfortunately (or perhaps fortunately from the perspective of liberty), our government is resolved to piss them off as much as possible during this process.
Hahaha, where have you been for the last two decades? The US owes everyone and has very little in terms of foreign reserves of any type other than a rather large alleged gold hoard.
I have been looking for construction related items that are only made now in China and not manufactured in any quantity in other countries.
Have readied a list of those items and am prepared to buy quantities of them at the first sign of trade stops.
Sheetrock Screws Bitches!
Pretty sure that the last light bulb plant closed or will be closing here pretty soon per something I read a few weeks back
The ugly truth:
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/07/AR2010090706933.html?wpisrc=nl_headline
"Oil and Gold never travel in the same direction"
http://www.youtube.com/watch?v=WK6SS4ETHWQ
1973 to 1980 (up)? 1980 to 1999 (down)? 2000 to 2007 (up)?
False friends
Open your wallet and grab a FRN.
Faith based currency is being fucked over as it has in the past & future debasement cycles. History repeats.
People still don't get the joke being played on them. You must stop this madness before it becomes your very life. We can only warn, you need to react
http://www.you.tube.com/watch?v=EgMSe_0o9Bo
if you're a town judge or even a big city one you get the joke. the word "legal" does appear and "it ain't funny." now smokin' a joint while riding a motorcylce with a monkey ridin' beach while passing the cops "in their usual location" and flippin 'em off...THAT's funny. at least i thought it was funny until...
- "interest bearing debt instrument" = FRN = legal tender;
- so, what is "Lawful Money"?
Anything two people choose to use as money.
Monopolies are bad. They are bad in food, clothes, computer and the rest, including money.
Wow. don't know how that link materialized. My apologies. Fresh link & checked this time for conformance. Sorry ZH'ers.
The Federal Reserve, the IRS & Communism
http://www.youtube.com/watch?v=iqWQI3au7f4
This is what no inflation looks like despite occasional rants on price action in corn and soy beans:
http://www.bls.gov/cpi/cpid1008.pdf
Are you really using the BLS on ZH to try to prove a point?
Spend some time reading up on the CPI methodology - and how it has changed over time. Geometric weightings, home equivalent rents, etc.
Go visit shadowstats.com and learn a little more about the lies, damn lies, and government statistics.
ahh i see.. shadowstats is apparently the last and the truest word in macroeconomics..
well if you say so then it must be undeniable..
I am merely pointing to the fact that the bid to ag commodities on the back of weather-related supply shock has little to do with Fed policy.. How much of your personal cpi basket do you spend on soybeans and corn? The top expenditure item in CPI is housing which is 40% of the basket - and that will stay under pressure for a long time while supply/demand in housing heals
Hey, you're an alchemist, so I guess that means you can turn iPads into bread, so real inflation doesn't matter much to you. To us normal humans who have to eat edible food, it means poverty is creeping into the ranks of the middle class like a killer in the night.
Want to pay less than two day's salary for a loaf of bread? There's an app for that (maybe, for now).
Now that we have jumped the bailout/moron hazard Rubicon, why not throw centralized economic planning into the pot. Yum yum!
Maybe a picture would make the point? ;)
Enjoy the graphics WB7, glad you're a contributor now...
Amazing move in DAG on Friday. 18% in one day? I'll take that.
http://www.google.com/finance?q=dag
Wonder if this is the start of something bigger.
It's only a matter of time before the "speculators" start getting blamed for higher food prices.
why can't it be a sort of flanking attack by those countries getting screwed by the fed ? They can buy dollars, they can also conspire to buy ags/softs/metals to try and discourage BB and the ink jets no ? How much does it take to move those more illiquid markets? Imagine lock limit up days for weeks and weeks until BB backs off.. just saying
Excellent thought. But how would they not also be hurting themselves in the process? Knowing their strategy would they be hedged?
the collapsing US$ is abit of a natural hedge. for every other country outside the US the current rise of hard and soft comods is not really an issue just yet. yes, they are paying more in USD's as the prices rise but as the USD is collapsing against their own currency they are not really paying any more for them. You are really only f*cked if you are an end buyer paying USDs (US citizen / business) or pegged to the USD. watch the chinky chonks revalue the yuan pretty quickly if comod prices in USD's continue to soar.
> they are not really paying any more for them.
This is simply not true.
The charts on the right half are (mostly) commodities in USD.
The charts on the left half are commodities in JPY.
http://www.fuji-ft.co.jp/chart/frame1.htm
The commodities market is much more smaller than the currency market, so if people start buying commodities as a way to hedge the devaluation of the most liquid currency in the world, it will mean higher price of commodities everywhere in the world.
"not really an issue just yet"
BB is going to be out of job soon. This "party" is just gettin' started.
haha, seriously
It seems to me that this world could get along pretty darn well with very little credit. I think we should give it chance. "Progress" will just have to slow down a bit. No big deal.
and it might make it a bit less likely that we will drown in our own poop.
The only reason "growth" is worshiped is because it supports the global Ponzi (growth and/or inflation prolong the Ponzi) - therefore it is ingrained in the indoctrination. Global stability or even 'rationalization' would be healthy for the Earth, economies, and communities.
I have been thinking about growth and can come up with no entity in nature that continues to grow to infinity, including, supposedly, the universe. This being the case, how is it possible to grow an economy forever?
Excellent point, TJ. The other scam-type element of this growth-worshipping system is that all the growth goes to the top 1-5%.
The sheeple and the MSM accept growth unquestioned as the key to our happiness and standard of living despite the fact that it only benefits the rich, they are the only ones whose wealth and income has increased over the last decade+.
Thanks, I like both Rick and Rickards. The more insights the better on such things. The picture is becoming clearer. I still ponder the unintended global consequences.
We hold our collective banana republic breath.
"A Revolution is a process, the first of which is the 'turning of the intellectuals', not that I'd place Santelli there, but moreso than a Brad Pit."
Brad Pitt an intellectual? As for capital punishment for those who are responsible for the Gulf catastrophe, one wonders if Mr. Pitt includes the after the fact coverup by The Obama Administration.
Interesting, I had the same thought. Brad Pitt and Matt Damon as intellectuals. Straight out of the neo-modern, ex-Liberal, still Cadillac communist, Newly Self Defined as Mature Optimist, Income Redistributative, Ego Soaked Hollywood far Left Coast Central Casting Cattle Call. All and all Wholly Infuriated and Pissed off at the Past Gubamint which is Blamed for the Continuation and Escalation of Past Gubamnit Policies by the New Gubamint, which is No Different than Any Other Group yet seen Slopping at the Public Trough whilst Further Abrogating Citizen's Rights.
Yessireee. Now that's an intellectual. One of the Financial Elite Supportive of the Delusions and Diversions Flooded Upon the Masses by MSM's Tabloid Silicon Enhanced Propaganda.
If there are Alien Beings surveying the Earth, reading all of our electronic emissions, considering its demolition to make room for an Intergalactic Truck Stop, they'd have no compulsion whatsoever deciding upon our immediate demise.
Intellectual, my ass.
knuckles.......you have some serious writing talent happening.......wow!
the flip side of the adoration that gives currency to the 'intellectualism' of the actors guild you describe also happens to be the lowest common denominator, which therefore puts you my friend light years away in the night sky........not a bad place to occupy.
brad pitt for president.......
brad pitt nominates matt damon to make a film to save America..........the sequel; save the world.
The FED version; save the consumer......
why bother........let the fucker burn.
Yes, but it was still a good point. Watch for it happening any second. We will begin to see exactly who is in the pockets of the elite and who has the ethics and balls/ovaries to help stop this shit.
butt think
What, you mean Brad Pitt isn't Tyler Durden?
Damn, my world is shattered.
brad pitt an intellectual? why is he even mentioned here? he is a dolt.
he belongs to the media. and who are they?
what part of ' thou shalt not kill ' is giving you trouble?
Brilliant interview
Rick and Diana Olick are just about the only times I take the idiot channel off of mute. When these two decide to leave it is lights out for the worst business channel on the planet. The end game is known, oh, 1/2 my kingdom to get the timing right. What a disaster this is going to be.
My head hurts. Ben can't force a recovery in housing unless he burns down all the empties. Corn don't go up cause there's too much corn
I call BS on this theory and that he might think this would work. BS.
Santelli might not be much longer on CNBC. Remember Ratigan.
The truth will get ya run off from the pump-n-dump network.
I'm shocked he has made it this far, what with all the Tea Party talk and what not.
I stopped watching CNBS after GE squished Kudlow and when there were fewer appearances by Joe Battipaglia.
I know I keep waiting for Rick to get the axe.
They won't get rid of Rick unless he does something on air that can't be forgiven. They know he's about all they have over there. The hosts salivate every time they get Santelli and LIESman on at the same time. They do what they can to taunt them into battle.
the ' tea party ' is all bullshit and will stay bullshit until it only offers support to those who sign a document saying that the country will return to a government owned hard currency and they will resign if they don't support action to this end as soon as they are elected.
I believe most of them would sign it.
Draw it up and present it to them.
I love the whole idea of the Tea Party. They will have to start talking SPECIFICALLY about the "smaller government" that they want before they will be taken seriously as a political power. Exactly what health care, social security, and military cuts will they be willing to make? All the rest of the government expenditures are minor by comparison. I wish them well.
RR I very much like your posts but you are way out in left field if you think Santelli is anything other than another hypnotist talking head. CNBC has given him the title of "Rebel Bad Boy" and encourages his diatribes because he is just soooo entertaining. Notice how much more coverage he and Liesman get these days while shouting at one another? All a circus act for the masses. Santelli is another talking head gifted at hoodwinking those who need something to believe. Ever listened to him get all hormoned up when reporting how "great" a t-bill auction went? Ever hear him continue with a breakdown of what percent of each auction was purchased by Big Ben and our tax dollars? Nope. Never. Not because he does not know this fact but because he is another cheerleader. In wolf clothes but a cheerleader noentheless.
You are completely correct, of course. Santelli is all that you say he is. He's the lead clown in the CNBC lineup of fully retarded hosts. Fact is, he IS the bond reporter. There isn't another one. He is the closest the network will get to reporting the facts so we'll just have to put up with him. He knows the score but there is a line that he will not cross for fear of losing his job. That makes him a shill. Ratigan was willing to go the last mile.
But even Dylan Ratigan had the gall/cluelessness/shillosity to rail against the "goldbugs" when gold was rising fast in 2008, and to imply that those holding gold were unAmerican by stating that "if you are buying gold, you are shorting America!" Not just shorting the (corrupt and justifiably crashing) American economy, but "shorting America" itself! That anti-gold rant of his on CNBC will forever remain in my mind as the classic viewpoint of the typical pro-establishment collaborator and sellout regarding gold.
With Brazil's election apparently a big victory for the leftist candidate Dilma Roussef, Russia facing increasing political and economic uncertainty, India in the grip of spiraling inflation and even China's growth prospects seeming dimmer, the great growth story of the last decade is acquiring a few dents. For the first time, it is reasonable to ask: are the BRICs broken?
Brazil is the most straightforward case. Its finance minister Guido Mantega this week denounced the "currency war" he saw developing among the world's major economies, by which each country attempts to devalue its currency to reflate its economy. Such a war was a minor but contributing factor in the Great Depression but at present, since all the major economies seem likely to succeed in their devaluations, it will merely cause a nasty burst of global inflation. In any case, Mantega's true motivation in proclaiming a currency war was to protest the Brazilian real's rise above Rs.1.70=$1, and divert the Brazilian electorate from the country's true economic situation ahead of Sunday's election.
The real is rising because of the mass of hot money flowing into Brazil, attracted by its apparent rapid growth and commodities wealth. In a well-run economy like that of Chile, currency inflows of this kind are sterilized by the government creating a rainy-day fund, which can be used when commodity prices drop back. However that requires the government to keep public spending under control. As Mantega perfectly well knows, being finance minister, Brazil has done nothing of the sort. While official public spending has been kept nominally under control, lending by the state development bank BNDES and investment by Brazil's 118 public sector companies, financed by borrowing, have been allowed to explode ahead of Sunday's election – both are up 30-40% on the previous year.
The Brazilian public lulled by the popularity of outgoing President Luis Inacio Lula da Silva and apparent prosperity, are giving their votes to Dilma Roussef, Lula's former development minister, an avowed Marxist who believes in the rapid expansion of state control. You can already see the result in the Petrobras share sale, in which $42.5 billion of the nominal $70 billion of proceeds was paid to the government in return for overpriced oil rights which Petrobras had thought it already owned. This kind of seizure, accompanied by meddling, can be expected to affect Brazil's other resource behemoths going forward, even those nominally in the private sector such as the iron ore giant Vale and the forest products titan Fibria.
With Roussef in charge, far from being an emerging world superpower, Brazil will relapse fairly quickly into its habitual third world chaos. The respected central bank governor Henrique Meirelles, whose monetary policy of double-digit interest rates has kept the Brazilian economy stable throughout Lula's reign, is unlikely to last long. Once he goes interest rates will drop and the inflationary forces will become overwhelming.
If natural resource endowments per capita are overwhelming as in Argentina and Venezuela, bad governments can combine with a resource boom to produce a semblance of normality, albeit with gradually worsening living standards, violation of property rights and soaring inflation rates (suppressed in official statistics.) A country with successful private sector companies and perhaps a private pension system can provide loot for the socialists and mafiosi for several years, as Argentina has shown. However Brazil's economy is less dominated by natural resources because of its immense population; hence the descent into chaos is likely to occur more quickly. As for the country's fate if and when the current resource bubble bursts, it does not bear thinking about.
Russia, next, is a much simpler case, economically if not politically. Its economy is more resource based than Brazil's because of its oil and gas wealth. However its propensity to use its gas resources as a political bludgeon has caused its potential customers to search frantically for alternative sources of supply, and the availability through new technology of massive shale gas deposits in Poland and China suggests that customer freedom is not far off.
Economically, the Russian economy will survive, though hardly be a beacon of growth while the relatively moderate albeit corrupt President Medvedev remains in power. The Economist team of forecasters project growth just above 4% in 2010 and 2011, but those two years combined will not make up for the 7.9% drop in GDP suffered in 2009. Then in 2012 the presidential election allows the probable return to power of Vladimir Vladimirovich Putin. Putin is a true wizard at the nastier forms of power politics, but his economic understanding is negligible; he has turned Russia into a kleptocracy for his cronies in which independent forces who achieve wealth but do not make their escape to Knightsbridge are likely to end up in jail with their property stolen.
Russia under a renewed Putin regime is Venezuela without the nice weather and with a more effectively aggressive foreign policy. Countries of the former Soviet Union should rightly fear Putin's efforts to restore it. The domestic economy will be a swamp of inflation, expropriation and declining living standards. Oil output, no longer buoyed by major international investment and technology, will follow the same path of accelerating decline as has Venezuela's. In the short term, Russia is an important enough oil supplier that this may prop up global oil prices. In the long term, alternative energy sources will be found and Russia's oil export earnings will go into terminal decline.
The other two members of the BRIC quartet, India and China, would benefit from a decline in commodity prices, but they have other problems. India has enjoyed rapid growth for the last decade thanks to the reforms brought in by Atal Bihari Vajpayee in 1998-2004. However the foolish ingratitude of the Indian voters in 2004, replacing his government with the Congress party, responsible for half a century of stagnation, and then re-electing Congress in 2009, is now bringing its just reward. Prime Minister Manmohan Singh is a gentleman, and in a mild way reformist, but he has no effective control over the corrupt leftist barons who control the Indian government, led by the odious Gandhi family and their stooge, finance minister Pranab Mukhergee, whose previous term as finance minister was in 1982-4, the most benighted era of Indira Gandhi's state-controlling quasi-dictatorship.
The chaos over the Commonwealth Games venue has brought Indian corruption to the notice of the western public, but it has always been notorious to those doing business there. Under Mukhergee, the "permit raj" is back in full operation, with public spending soaring out of control and a public sector deficit this year, national and local of over 10% of GDP, in a year of 8% growth. Inflation has been running well into double digits for more than a year, while interest rates are held down artificially low at around 6%. India is due for a gigantic blow-up, with either hyperinflation or a massive foreign exchange crisis, when enthusiastic foreign investment can no longer stem a growing current account deficit. Like Brazil, India needs to rein in its public sector, but shows no sign of doing so.
Unlike, Brazil and Russia, where political and cultural norms currently seem insuperable, India has a reasonable chance of long-term growth and prosperity – but it must go through an economic crisis first, in order that the Indian electorate can come to its senses and elect a reasonably pro-market, less corrupt government. Since, absent a major crisis, its first chance to do so is only in 2014, the current outlook must be negative.
Finally there's China, the only one of the BRICs where prospects remain reasonably good. Even here the Asian Development Bank (ADB) caused a stir by suggesting that China's growth rate could slow sharply from its current 9-10% to 5.5% per annum over the 2010-2030 period. That contradicts Goldman Sachs' forecast of the Chinese economy surpassing the U.S. economy by 2027, pushing that momentous cross-over point out past 2040. The ADB's rationale is that the capital deepening of the Chinese economy has passed its most productive point, and that the country's reserve of working-age labor will grow only slowly in the years ahead because of low birth rates after 1980.
That looks right, and of course the effect of lower birth rates is wholly positive in a country of 1.3 billion people whose living standards have only recently risen above subsistence level. An aging China is a more stable China, less likely to engage in military adventurism because it will not have immense supplies of surplus youth for its armies.
There are other reasons to expect Chinese growth to slow. Because of its size, the country has forced up commodities prices worldwide, a factor that itself will produce consumer price inflation and possible resource shortages. Further, the immense Chinese export machine is running into increasing resistance in the West. With European and U.S. growth subdued for several years, it is likely that various forms of protectionism and "voluntary restraint" will restrict its further growth. China must increase domestic wages and thereby consumption, but by doing so it will find its export industries undercut by cheaper competitors in India and elsewhere. Finally, China's banking system, state sector and commercial real estate industries are a mass of corruption and undeclared losses.
The ADB's estimate of 5.5% growth for China over the 2010-2030 period is probably on the high side. China's trajectory is likely to be one of financial crisis followed by several years of very slow growth and adjustment, followed by a much healthier "catch-up" period. Both China and India probably have a healthy long-term future, but it is not quite as untroubled as current markets predict.
For the West, the BRICs' troubles will be something of a relief – their extraordinary growth in the last few years has caused huge stresses in Western economies that require time to adjust. The process of wage differential shrinkage between western and emerging markets will continue (there are, after all many emerging markets beyond the BRICs, most of which have not yet enjoyed their fastest periods of growth) but maybe at a slightly slower pace. Provided interest rates are regularized within the next year, so that saving in the West can resume and its de-capitalization cease, the period of BRIC setback can be one of global rebalancing, in which the inevitable tensions of a changing balance of global economic power can be defused. Certainly two, maybe more of the four BRICs are by no means broken, but they will all suffer some damaging blows in the years ahead.
Naturally, those who have rushed ahead too fast to embrace the new world of the BRICs will lose their shirts. But then that is the fate of pioneers; as the immortal Saki said: "It's the early Christian that gets the hungriest lion."
If anybody looks at China closely and meticulously, he will know China is a gigantic bubble and sordid scam.
- talking about a scam;
http://www.the-privateer.com/paper.html
Mish's comment in 3...2...1...
Mish seems to be flipping, at least to me.
The deflation thesis required that you take Ben at his word when he said that he wouldn't monetize.
That's line's been crossed in a big way, with more to come...
Yea, and Bullard may be thinking he has been fucked too........at least if you listen to what he said on Friday.
Or maybe they are just getting people to price up commodities so that the really connected can sell what they bought last year for a huge profit, then they'll allow the normal economy to take its course, with their wealth fully protected?
The big money, the Players only need to do one thing to grab more and more of the good assets. Create volatility.
because, the little guy cannot stomach a 10% or 20% decline. The little guy will panic out and sell if his investments decline 10-20% quickly.
The hedge funds also are like the "little guy" in the sense they have a very low threshold for pain. So they will also get shaken out.
So- for instance if you wanted to buy more gold off these shallow-pocket players - all you have to do is engineer a 20% "crash" and they will all sell their gold to you.
I agree. The smart people will continue to hold onto their precious metals while the gamblers throw their hands.
I'm not sure who junked you for this - volatility is exactly what the large traders want. They can't chase price because they have too much money, so they buy weakness and sell strength at very small price intervals. Volatility creates opportunity for this type of trader. To clarify, these aren't hedge fund managers........... ;)
It is nonsense to assume that as bond yields go towards zero, the price of houses must go up. First of all there are those property taxes, and insurance premiums. On a 500,000 house, typical property tax and insurance would be about 15,000/year. The capitalized cost of this will skyrocket as discount rates tend to zero.
ie. If you ask yourself how much you need to invest in treasuries , so that your investment will pay all property tax and insurance on your house for the rest of your life - that number, the number to buy your freedom from tax slavery; the number to ensure that some goons wont throw you out on the street - out of your "fully paid for" house when you are 75 years old; - will skyrocket.
At todays yields around 3%, to generate 15,000 in interest , you will need to put aside 500,000 in treasuries.
So, interestingly, even as your mortgage payments go down ( assuming you can refinance), the capitalized cost of your tax obligations will skyrocket.
Yes, finally. Carrying costs are a big part of the problem. Why would squeezing another 1% out of long rates matter to anyone with a brain?
Buying an overpriced house at zero interest makes sense only if you plan to live forever, and live in THAT HOUSE forever. Think about what happens when you try to sell. That is too great an intellectual leap for Ben & Co.
Oh , I was assuming you could earn 3% (after tax) on long term treasuries to "defease" ( look it up) your property tax burdens. Thats probably a bit too high in today's market - more like 2% .
So, on your 500,000 house, you will need to set aside $750,000 in long term treasuries that will earn the 15,000/year after tax to pay your property taxes in your old age.
Oh, and as yields go down even further, say to 1% after-tax, you will need to save and set aside $1.5 million to earn enough after -tax interest to pay your property taxes.
See - where Iam going?
And - you will probably need to save this $1.5 million during a time when your cost of living doubles - food, oil, etc.
No sir, inflation of the bernanke kind is an absolute killer for 90% of the population. Its the one hing people should fear more than anything else - if they used their brains and some 6th grade arithmetic ( look it up).
No amount of money will free your mind. The simple act of paying is all they want.
Yes, it does not make sense. No, it will not work. Millions will die from food shortages, riots, etc. around the world. BB and the Fed do not care. They are a privately-held corporation that will do whatever it takes to maintain their control over 'our' money. Even if it is only to buy 6-12 months of time.
Fractional reserve banking is mathematically destined to fail as all geometric/exponential growth curves are. We are at the end game (for this iteration). They have had a terrific run of almost 100 years of skimming from the top and controlling virtually everything.
This will not end well, but they are not our friends. They are not looking out for us. They are sociopaths looking out for only themselves...
I think 32$ an ounce is a fair price. ;)
I meant 32$ an ounce for bread. You goldbugs are so sensitive.
Price Chasers have a thin skin. This gold infatuation was nowhere to be seen @ $1156 when it was the best time to buy. Typical herd mentality. At least RoboChart can take the heat.