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Rick Santelli Uncut (And GE Turbofan Commercial Free)
Having rapidly become the only person worth listening to on CNBC, Rick Santelli's insights on the economy are now far more valuable than any other guest's on the Jeff Immelt propaganda station. Which is why we were very happy to find that Eric King's latest interview was with none other than Mr. Santelli. The topics discussed are numerous, varied and and very critical to our economy, covering such concepts as deflation, deficit spending, bailouts, government spending multipliers, Fed transparency, spending cuts, austerity, the folly of Keynesianism, strategic defaults, direct bidders and treasury auctions, and lastly, tea party dynamics, making this a must hear interview for anyone still on either side of the economic fence, and who enjoys listening to Rick for longer than the 45 second segments the CNBC producers will allow.
- Deflation: "deflation is the most disingenuous argument especially in the current conditions. [When the bubble process ends prices have to come down to reality] the process really is deleveraging, but what happens when prices go down you get the economists call it deflation. Deflation is always the biggest bogeyman in a central banker's closet. It also allows them to use the only tool in their toolbox, which is to spend money, and usually money they haven't collected yet, so it's usually a deficit form of spending. Think about what economists are trying to do: we go up too high in leverage, prices are too high, we try to correct that process, it's called deflation, and they try to put money in to prop it up at an artificial price-deleveraging is the word we should stick to"
- Deficit spending: "the only thing that works is across the board tax cuts because it fuels the type of small business that does the bulk of the hiring"
- Bailouts: "the only regulation that will ever work is failure. If you don't allow failure what you end up with is regulators trying to serve when it's time to take punch bowls away. Regulators never go against the grain. Back in 03-04 many in the fixed income markets saw it coming but nobody wants to pull that punch bowl away. Businesses should fail, that's the way the system was designed"
- The Multiplier of Government spending: "Larry Summers on many occasions has said that the multiplier of government spending is greater than 1. If that was true, we'd never have another recession ever again, and I would be advocating to spend a trillion dollars every hour. It would be like a perpetual motion machine and all physicists know those are impossible. Every dollar the government spends comes from somebody's pocket"
- Fed Transparency: "It seems to me we are making some progress on the financial audit. I absolutely agree that on all of the issues that take taxpayers' money and end up being distributed or put on the balance sheet and in any way used by the Fed, there should be an audit that should be fully transparent. I am worried about the financial accounting"
- On Spending Cuts: "Listeners, this is going to be the most important thing I am going to say: we need to maintain the focus on spending, the politicians in my lifetime always spend. If we end up spending way more than we can take in, in essence the deficit panel becomes a tax panel. We must stop spending before we talk about VAT taxes or taxing Americans more, we need to get spending under control. The retings of congress are the lowest they have been in history."
- On Austerity: "Nobody wants that. But there is a silver lining - the UK have conditions in their economy worse than the US, but they came up with an austerity plan, and we see that their currency has been rewarded. The GBP has risen about 10% in a very short period of time."
- On Keynesianism: "The Keynesians are both right and wrong. I don't think Keynes advocated the kind of helicopter-Ben spending that many say he promoted. He promoted the kind of stimulus that created jobs, that's more the medicine for a cyclical downturn, we have a structural issue because of the bubble credit scenario."
- On the ECB's Debt Monetization: "I think that the ECB has a huge issue and they are behind the ball. They don't have a constitution in the eurozone, they have cultural and monetary cultural issues to deal with. I think that buying securities or monetizing or QE is always a bad idea. Once there is a subsidy in the marketplace, it becomes the normal pricing mechanism. For the Fed or the ECB to unload these securities, becomes a destabilizing force and in the long run does more harm than good."
- On Strategic Defaults: "I have feelings on this that go both ways. I think morally I would have an issue doing that, but people who did the mortgage, or the second mortgage, or took a HELOC to pay for cars, pay for the vacations, I think it is reprehensible that we end up reshuffling wealth to pay some of that off. But I think the dynamic is from the government side - I think contracts between banks and homeowners - if it's unsecured, it's unsecured, I don't have an issue with that."
- On Direct Bidders being a proxy for the Fed (a much debated topic on Zero Hedge) and Treasury Auctions in general: "That's the best question anyone has asked me in a long time. I think there is a recycling quid pro quo going on: the Fed is making banking obsolete because a lot of the programs that they have is to take the cheap end of the curve and invest it in Treasuries. Well the Treasury needs as many buyers as it can get. I think the financial institutions are recycling easy money that should be going into John Q Public's pocket, to those that deserve credit, all this money is ending up in the forms of purchases of 10, 7, and 5-Year Notes, and I don't like that way that's working. That's why I think that raising rates would be a good thing. Why? Because it would take some of the easy ways the banks recycle the Fed's cheap money and put it back in the hands of the public and actually make banking a relationship between banks and Americans that need it whether it is for funding a mortgage or funding a small business."
- And on Tea Party dynamics: "I think November 2 is going to be a watershed of Americans letting Washington know they're the boss."
Full must hear interview can be listened to here, courtesy of King World News.
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This lil guy knows
Check this lil guy out!!
http://www.youtube.com/watch?v=Bdta3i3gMhw
Rick could never be president. The first requirement is that you know how to talk out of both sides of your mouth and run to the precise middle or center so no one can tell you are not still on their side.
Rick could never be president. The first requirement is that you know how to talk out of both sides of your mouth and run to the precise middle or center so no one can tell you are not still on their side.
lol, how many times you gonna edit that shit? Better than One, am I write?
Story of History.
Let us not forget the Rick Santelli's Shout Heard 'Round the World back in Feb 2009... http://bit.ly/ajJ42Q
Santelli put it in a nutshell, that “deflation is the most disingenuous argument” used by the oligarchs to cover the Fed’s self-serving push for inflation when, instead, the bubble process is ending and “prices have to come down to reality.” As Satelli says, “the process really is deleveraging.”
It reminds me that, at least in Germany, the government has drawn the line somewhat against global financialism, which is the same as global socialism.
As the Germans bring up the financial issues that are important to them and the world, it underscores America’s total capture by the international financial cabal. Merkel’s statement last week that the Germans aren’t interested in pursuing stimulus but are more interested in dealing with their debt, underscores America’s total capture by the international financial speculators. It flies in the face of Obama’s position that he took to the G20—that to deal with the dangers of recession, America needs to continue stimulus, i.e., continue to keep paying the banks.
Germany is different. She understands capitalism and how capitalism works; that as a society grows, more and more people will share in that growth from the benefits of free enterprise. And, guess what? The nation’s political position gets stronger. That’s why, no matter how you drive her down, you turn your back and she pops back. Germany is a growth-oriented society.
Therefore, she has been targeted. It turns out that because of the worldwide recession and the tremendous debt problem and the incredible corruption coming primarily from the large investment banks, that there is not enough money and value to go around. Everybody’s in a tight spot, looking around for who’s going to help whom. The Obama Administration looked around and decided to take the money from America’s savers and working people to solve its problems. European politicians looked around and decided to take Germany’s taxpayer money to bail themselves out.
But the Germans have drawn the line. They know that every increase in stimulus is payday for the banks and debt for the people.
And anything that the Germans do that N.Y.Fed/U.S. Treasurer Geithner doesn’t like is good for the American people, IMO. And it was Geithner who burned the midnight jet fuel to try to stop Germany’s defensive move last month to slap a 9-month “unilateral ban on short sales of euro-zone government bonds, some financial shares and to prohibit some types of speculative transactions in credit default swaps.” IMO, it’s a signal that Berlin intends to fight.
The message for Americans is that the bad news may be good news. It is bringing exposure to this world gambling casino, who its people are and what they are trying to do. And it is beginning to force a policy change that eventually will hamstring them and remove them from our political system. This corruption has been running for decades—the “news” is that we now see it.
Also. the naked short restrictions that Germany put in place are going to force the major leveraged casino players to ply their trade in a smaller casino. This will accelerate all vampire squids and psych-algo maniacs into a tightened up feeding frenzy where they can tear each other apart even quicker. Ah, the beauty of economic and market creative destruction as the swans fly away tuning from gray to black with time and distance.
Thanks for your insightful and prescient observation. It will be exciting watching the play off. While Germany is supporting a pan-European initiative to rein in speculation against euro-zone governments in defense of her sovereignty and citizens, Obama is fronting for the ruthless TBTF speculators that are cannibalizing America and the globe. He is a sockpuppet, owned by the cartels and their organiations—the IMF, European Commission, World Bank, BIS, WTO, etc… IMO!
Before these developments occur that you’ve analyzed, international speculation appeared about as concentrated in a few hand as it could get, wound up so tightly, the swindlers were taking unchecked everything they could asset strip around the globe for personal gain.
Based on your observation, I’m wondering if Obama will try to knock Germany and China off balance to prevent any roll back of the exorbitant proliferation of derivatives or regulation and restraint of the ”hedge fund hyenas whose activities are ravaging the globe.”
With the casino refusing to shred a major portion of the $1.5 quadrillion of derivatives, the world economy will be forced into economic depression on a colossal scale.
That said, bring on the swans...
As usual, the next shocking event will not be expected, thus shocking. For instance, everyone is expecting another derivative blow-up; but the squalgos (squid/algos) might lay a little lower; like a bad child caught stealing, they might not want to draw attention to themselves with the passage of the watered down bill recently.
Of course, this is all just speculative entertainment, but I would bet on a military strike by someone, whether it be a small terrorists group or a larger country terrorist complex; or another natural disaster-volcano, hurricane, maxi-pad failure etc...
i saw Merkel dancing in the aisles in south africa, she was really
h o o p i n i t u p†
go deutschland.
merkel will get off on wednesday, possibly one of the best semi matches in all of
S P O R T S†
R S: let's talk reality here, instead of dead economists†
you go santelli.
Happy July Third, Germany!. Happy Fourth of July, Velobabe! :)
And thanks for your tremendous moral and financial support of Zero Hedge. And your wit and wisdom! Without Zero Hedge and all here, I wouldn’t be in as high a celebration mood this Independence Day. As it is, I give thanks for those who gave “their lives, their fortunes, and their sacred honor” for this day, and am indebted to those making the ongoing sacrifices for the sake of liberty. Thank you, Tyler Durdens.
“Our Lives, our Fortunes, and our Sacred Honor.”
http://www.aspecialdayguide.com/yorktown/foundingfathers.htm
America the Beautiful
O beautiful for spacious skies,
For amber waves of grain,
For purple mountain majesties
Above the fruited plain!
America! America!
God shed his grace on thee
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for pilgrim feet
Whose stern impassioned stress
A thoroughfare of freedom beat
Across the wilderness!
America! America!
God mend thine every flaw,
Confirm thy soul in self-control,
Thy liberty in law!
O beautiful for heroes proved
In liberating strife.
Who more than self their country loved
And mercy more than life!
America! America!
May God thy gold refine
Till all success be nobleness
And every gain divine!
O beautiful for patriot dream
That sees beyond the years…
Oh Babe!
Regarding: banks recycle the Fed's cheap money- I think he meant to say that the Fed should raise bank reserve rates. Denninger did a great piece on that issue. Apparantly the banks arn't incented to lend when thier bank reserve rates are this low. It's no accident. Like Rick said, the Fed needs as many buyers as it can get.
Speaking of Denninger, Karl lights up the Fourth with this July 2nd editorial…
OUR DOUCHEBAG GOVERNMENT – MIDYEAR DEPT UPDATE by Karl Denninger
Keep up the lying, legislators, about how it's all "those other guys" fault.....
Yesterday gave me the opportunity to update this chart (on Nominal GDP, Deficit Spending and REAL GDP Y/O/Y) with an extrapolated forward number for this year through the first six months.
Yeah, tell me it's all the Republicans' fault. Or all the Democrats'.
Nonsense.
Our government refuses to deal with the facts - there is no recovery in the private economy, there has been no recovery, private final demand collapsed in 2008 and has not come back one iota and the Federal Government is LYING - on both sides of the aisle.
You want a stock market crash and economic collapse Mr. Grayson? Mr. Reid? Ms. Pelosi? Mr. McCain? Mr. Hoyer? Mr. Issa? Mr/Ms (Pick a name)?
You're going to get one and the longer you keep this crap up the worse it's going to be.
Want to argue with me? Go ahead and try - argue with the math. I double-dog-dare you. Tell me how we can keep doing what we're doing, and for how long. How long we can borrow and spend 10, 11, 12% of GDP on an annual basis…
Are you in Congress and the White House so damned arrogant as to think that this can't or won't happen? What are you going to threaten people with? 6,000 nuclear weapons? For what? Refusing to fund an ever-spiraling higher Ponzi Scheme? For how long will that game work? Can such a threat be effective beyond the mathematical limits of capacity, even if the leaders of said nations want to continue doing so?
No.
Here's reality folks: We've written checks for 30 years with our political mouths we cannot cash with our producing fingers. We've papered over this with fraud in virtually every nook and cranny of public and private life. We have allowed producers to depart for lands where effective slavery exists for labor, refusing to enact parity tariffs to put a stop to it. We have allowed blatant and outrageous theft of our producers' intellectual property and conferred upon these nations "most-favored nation" trading status. We have blown serial bubbles in the stock and housing markets and would love to blow another one in "carbon trading", but all three were and are frauds without foundation in reality - or sustainability.
Jeff Immelt, GE's Chief Executive, came out today against the Chinese - and Obama:
Of course they don't. You slept with Satan and you woke up with a sore butt. Who's fault is this, exactly? A government that's communist, a workforce that operates under effective slave conditions, a population that has license to steal anything intellectual from anyone without recourse or the rule of law, indeed, a government that has stolen military secrets and warhead designs - when they couldn't just buy them (as they did during Clinton's term.) Suddenly Mr. Immelt shows outrage and shock when the snake does what a snake does - and it was very visibly a snake before he got involved over there?
Who's responsible for intentionally sticking one's hand on a lit BBQ?
There is no "lack of clarity" in the economy. What has been done is transparent to anyone who cares to look. The Federal Debt picture is published each and every day and it is clear, convincing, and irrefutable. The same bluff was run in both Iceland and Greece, and got called twice by the market. Europe has recognized this and has pledged to stop playing Ponzi (whether they'll actually do it until cities burn at the hand of angry mobs is another matter, but at least they're claiming intent.) We, on the other hand, keep pressing for more and more Ponzi.
I don't care if people want to talk about austerity - and implement it - or not. I don't care if people want cradle-to-grave medical care with the "best" we can offer. I don't care if people want to be able to have $100/month cell phones while unemployed, or 99 weeks of unemployment so they don't have to save for their own tough times, or $40,000 annual tuition and fee costs at universities to learn about "woman's studies" or "primary education."
None of what I want, you want, or the government wants has a thing to do with the mathematics of the situation we have before us today and the instabilities we built into the economy over the last 30 years.
In 2000 we had to accept a 10% contraction in GDP, along with a reduction in debt levels in the system to 150-175% of GDP, to get back to some reasonable resemblance of parity.
In 2007 the contraction we had to accept was 20%.
Today, it's approaching forty percent, and the commensurate reduction in debt in the system - in total - is about 60%.
This means the federal government must shrink in size by that same 60%.
As I said a couple of weeks ago, get the BBQ sauce and pick several sacred cows, because we must size the Federal Government to roughly 15% of a $10 trillion economy, or $1.5 trillion in total. Here's the pie chart you need to reduce by sixty percent: …
Go ahead and tell me how you're going to do it. Or tell me, if you wish, that you're NOT going to do it, and then extrapolate to how long our creditors will permit that situation to persist, because it is not under our control - it is under theirs.
We are in the beginning stages of a global asset market collapse….
When did the stock market take off? At the same time the debt Ponzi took off. The debt Ponzi is now collapsing. What's going to keep the stock market from losing all of the "gains" it put on during those years? Yes, all the way back to early 1980s levels.
Go ahead - make the case that it won't happen when the leverage capacity disappears - and it is disappearing. The "establishment" folks know damn well this is in the cards, which is why they're scrambling to lie, lie and lie some more lest you figure it out and hold them to account. They're well-aware that while most of the time the "elites" manage to do just fine there are historical exceptions when extreme imbalances are cranked too far and the arrogance of the elites continues beyond all reason. Hold a seance and ask Marie Antionette's ghost about the consequences of such actions and how quickly they can appear.
What you saw in 2008 was the opening act. 2009 and early 2010 was the intermission - the eye of the hurricane when everyone came outside and marveled at the pretty blue sky.
The back half of this Cat 5 storm is far worse as instead of an offshore wind this time we'll get the onshore wind and a 30' high storm surge. The wind is starting to pick up.
We either act right now or our choices will be made for us.
Now go watch the pretty Fireworks over the 4th of July weekend - and consider what it's going to feel like when those start going off in your face in the coming weeks and months.
"Here it comes"
http://market-ticker.denninger.net/
Haven't wached CNBC since the flash crash. I'm a once a year viewer, maybe twice.
Nevermind, I switched to basic cable (cable discounts my internet bill more than the cost of it), so CNBC is dodo'd in my home.
After Nov.2 it will be bussines as usual. Different faces , same old, Modus Operatus. Key words include F**k John Q debt slave into the ground, doggy style.
strange
Santelli, has backup whatever he says, who really wants to fuck with him? I really feel sorry for these losers.
peculiar happenings with our earth. major sink holes in china. massive sink hole in guatemala last month. now this in malaysia last night. http://i.dailymail.co.uk/i/pix/2010/07/01/article-1291127-0A4411C7000005...
RELAX TAMPAX!!! It's just a sinkhole... thats what happens when you build on unstable ground A hole or depression in the ground that results from surface material moving into subsurface pathways caused by the weathering process. A sinkhole occurs by either gradual subsidence to form a depression in the landscape or by collapse to form an abrupt break in the soil.. This is natural, it HAPPENS we have more structures over land yo will see this more often as we build.. Remember water takes the least path of resistance over time the ground can become unstable..
If you didnt notice the roadway is next to grass which GROWS ON SOIL!!!
Can we get Back to this topick on RICK Santelli and not this dam SINKHOLE!
yea... you're right. sorry. it's such a small crack. this one was caused by a leaky faucet. http://www.csmonitor.com/var/ezflow_site/storage/images/media/images/csm...
It is a small crack, in comparison to the EARTH.. to you it might be big!!
Sooooo if you are comparing a leaky faucet with a leaky EARTH "rain" ELEMENTS ECT.. Then YES I AM CORRECT!!! Your Faucet has a drain to guide the ELEMENT... ROADS HAVE NO DRAIN!!
you seem quite excitable.
I'm always excited..
:)
Perhaps all those millions of Gulf oil released that was under pressure until Halliburton pricked the balloon has caused round the globe dislocations of sub-strata?
what's going on?
This will start the dominoes falling, or the backlash. Ahhhnold wants to push it all back to minimum wage.
http://www.huffingtonpost.com/2010/07/03/california-state-workers_n_6346...
Rick is one giant HIPOcrite ,he rails on government spending but has a job only because CNBC- GE were bailed out by the government he hates. I wish they would have let the whole thing sink and these guys would be out of unemployment compensation that they hate and stealing from grocery stores to feed there families. a-holes!
Yeah, I googled it, just a I remembered it. GE got $140 BILLION. HIPOCRITE........ HIPO as is fat lying bastards
Actually it's HYPOCRITE, not HIPOCRITE. And Rick Santelli isn't one, you ignorant cretin.
<3 Rick Santelli
Love love love love that man.
Jesus, I want to disagree just to be different from the herd of lemmings around here.
santilli is just a bit player, local color, they keep him around like they keep Olberman around, (a mediocre sportscaster is never going to give credibility to anything.) it alls a game ducklings. ratings is the name, and when the bear bites, maria will bare it all on a bear skin rug. i've seen it, they will do whatever the audience wants. santelli is an economist like a truck driver is a transportation engineer.
it used to be hem lines, now its cup sizes, watch out B cup is the indicator of a bear market.
Yeah - and Summers is an economist like Gotti was a sanitation engineer. Difference? Summers has the power to do real damage, under the cover of authenticity.
i would say Santilli has authenticity, and Summers has a job. power at his level is the power to make mistakes. Gotti had authenticity, he ,made the trash trucks run on time.
Colorful. Like many, thinks he is smarter then he really is.
Amazing, how much time is wasted watching tv, Even here!!!
Hate radio is unlistenable because of the commercials.
TV, is so.....Dead Brained, but I do like bouncing boobies.
Check out www.kuvo.org, "the Oasis in the City"
From the Wall Street Journal Editorial page
"'Next year when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits step up. Because I'm calling their bluff."
That was President Barack Obama, the heretofore unknown deficit hawk, all but announcing the other day the tax trap that he's been laying for Republicans. From what we hear about intra-GOP debates, more than a few will be happy to walk right into it.
You don't need a Mensa IQ to figure this one out. Mr. Obama's plan has been to increase spending to new, and what he hopes will be permanent, heights. Then as the public and financial markets begin to fret about deficits and debt, he'll claim that the debt is "unsustainable" and that the only "responsible" policy is to raise taxes. …
This strategy explains why Mr. Obama is now starting to fret in public about deficits and debt. This week he even said reducing the debt will be "our project." Funny how debt seemed a lower priority when he was urging Congress to pass $862 billion in stimulus and $1 trillion in new health-care subsidies.
The Congressional Budget Office is contributing to this political drama by declaring this week that the "federal budget is on an unsustainable path." Of course, but why? The biggest reason is that Medicare and Medicaid keep rising at two to three times the rate of everything else in the economy and, as CBO explains, will eventually take up every dollar of tax revenues raised, leaving no money for anything else, including national defense
http://online.wsj.com/article/SB1000142405274870342600457533899185294718...
Tyler,stop confusing me, goldman and now a CNBCer. Mainstream turning on itself confuses me, make them stop.
rick refers to the US federal reserve bank as "an arm of the US government"...?!?!?!?!?!?!?!?!?!?!?!?!?!
i know he knows better than that!
Updated DOW chart:
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
"I think November 2 is going to be a watershed of Americans letting Washington know they're the boss."
Now that is a well placed piece of propaganda in this two party state!!! Makes every patriotic heart sing and dance.
Well folks here are the news: as long as the two parties running the country are owned by a select few they are the boss. If you can only choose between A and B (because there is no C, D or E) they are set in the saddle.
Putting another speaking monkey like Rick in front is another smokescreen ... but I gotta complement them on how well they do it.
Cognitive Dissonance...
There's courage, and then there's courage. For someone who is 71 years old, who has worked and saved all their life, to cash out your 401K, buy some precious metals, give the children their inheritances, to buy a farm and start building a geothermal strawbale dwelling was hard.
When my husband and I cancelled the cable and cut off the television at the beginning of the Iraq war, we severed ourselves from the rest of the world. Taking our money out of the stock market was horrifying. But we're doing quite well, thank you very much. We don't owe a penny to anyone. We have a lake, a house, a large garden that actually grows food, some stock, some chickens. But we live down a gravel road in the boonies, drive old vehicles, and I make our clothes. Looking at the world from here is a lot different. Our lifeline is the Internet. I really appreciate the honesty and savvy of ZeroHedge and a few of the commentators on this site. After the weather, this is where I come. Please don't go away.
Thank you for taking the time to post a reply. And it sounds like you're assuming responsibility for yourself and not waiting for others to make decisions for you or to save you. Bravo!
May I ask one more thing of you? Teach just one person who doesn't already understand these concepts your way. I know I'm asking a lot from someone who's already doing a lot. But would you please take this just a little further?
Thank you.
Straykitty, I envy your courage...
Straykitty
While everything you say is admirable i need to question this:
"When my husband and I cancelled the cable and cut off the television"
I find far too often people overreact and think that ending cable solves the problem. If you did that to save money then fine. But if you did it to limit the negative influence of media, you threw out the baby with the bathwater.
There is informative and educational programming which exists when one simply changes the channel from news to say PBS or Animal Planet.
How hard is it to raise Chickens?
I'm also considering Aquaponics for the fish as well as vegetables.
Here is some advice from Automatic Earth. They are worth the daily read.They have been prophetic on the Deflation leading to hyperinflation cycle.
http://theautomaticearth.blogspot.com/2010/07/july-3-2010-dollar-denomin...
Stoneleigh: Since we at The Automatic Earth generally tell people to hold cash or cash equivalents, it makes sense to expand on that a little, and to point out some of the location-specific risks of doing so. We tell people to hold cash because that is what they will need access to in order to make debt payments and to purchase the essentials of life in a society with little or no remaining credit. The value of cash domestically - in terms of goods and services in your own local area - is what matters most.
Domestic currency value relative to other currencies internationally will be very much a secondary concern for most people, as the ability to exchange one currency for another is not likely to last far into the coming era of capital controls. Currency risk is likely to become very large, and almost everyone will be better off holding whatever passes for cash wherever they happen to be.
As the price of goods and services fall, thanks to the destruction of purchasing power brought about by collapsing money supply, what cash you still have will go a lot further in terms of, say, milk and bread. Capital preserved as liquidity will go a long way. However, there are no no-risk scenarios. Apart from the obvious risks of fire, flood and theft, other risks to holding cash will grow over time. Liquidity can be as hard to hold on to as it sounds.
One particular risk is the reissuing of currency. Russia did this during the economic collapse of the Soviet Union, and made it so difficult for ordinary people to convert old currency into new that much of the middle class lost their life-savings. In Russia trust in relation to banks was not particularly high, hence there was a lot of money under the beds of the nation that the powers-that-be were attempting to flush out. That is not the case in present day industrialized countries, where people generally believe that banks are safe and deposits are publicly guaranteed in any case.
On top of that, few people have savings, having become dependent on access to cheap credit for their rainy-day funds. There is virtually nothing under the beds of the Western nation, and so essentially nothing to flush out.
Although that particular rationale for currency reissue does not really exist (the flushing out of hidden wealth), there may be other reasons for doing so, and these will be locational. The risk of currency reissue in the US is likely to be low for some time. The US is likely to benefit from capital flight from other places, on a knee-jerk flight to safety.
In addition, dollar-denominated debt deflation will increase demand for dollars, and hence increase their value. This should reduce pressure for any kind of radical currency reform for a while. If the US does eventually reissue its currency, I would imagine them doing so in order to deprive foreign holders of dollars of purchasing power. There are very large numbers of dollars held overseas, and these would not be able to be exchanged in a currency reissue. At some point this may serve the interests of the US, but not soon.
The situation in Europe is far more complex, and the risk is likely to vary between European countries. The reason is that the euro is less of a single currency than it is a strong currency peg. Whereas in the US the primary loyalty is to the political unit that issues the currency, in Europe the primary loyalty is to a lower level political unit. Currency values are grounded in relationships of trust, and the disparity between primary loyalty and currency control suggests that this essential component is weak in Europe. Where trust is weak, common currencies are also weak and my have a limited lifespan.
I think it very likely that the eurozone will decrease in size over the next few years, as the countries of the periphery find the austerity measures they are forced to live with increasingly intolerable. The social divisions that will widen as austerity measures are applied locationally will have greater and greater effects. Europe has a long history of conflict, with each country feeling that the natural extent of its own sphere of influence is whatever is was at its maximum past extent. This means that they all overlap on a continent with a long history of imperial rise and fall.
Emotional responses to past events still run very deep in Europe, even where those events were hundreds of years ago. This is a recipe for balkanization once there is no longer enough to go around. Witness for instance the ridiculous marching season in Northern Ireland, which exists to rub the noses of the catholic population in a defeat (the Battle of the Boyne) from several centuries past. That sort of behaviour is grotesque and should be an outright anachronism in a modern Europe, yet it persists, and there are other comparable examples (see for instance the reaction of Serbian people to the anniversary of the Battle of Kosovo Polye).
All common currency zones define zones of predation, that is: define the regions that feed an imperial centre. The current European periphery includes such nations as Greece, Spain, Portugal, Ireland and all of Eastern Europe. It may also include Italy and the Netherlands, as both of these areas have major debt issues (housing bubbles and national debt). It would also include the UK in a sense, despite the fact that the UK is not part of the single currency. The UK is an international financial centre of considerable stature, but has an enormous debt problem and very few visible means of support going forward, once North Sea oil and gas cease to provide revenues and the City of London takes an inevitable knock-out blow.
I would expect the eurozone to be composed of a much smaller number of countries in the future than it is now, as peripheral countries are driven to the brink and beyond. The risk of currency reissue in these countries is therefore significantly elevated in comparison with the US, for instance. Where that risk is higher, there will be greater impetus for moving from cash to hard goods sooner rather than later. In places where that risk is smaller, one may wait longer for the price of hard goods to fall and therefore spend less on them. Where that risk is larger, the wait should be shorter, even though that would mean paying more, so long as debt is still not part of the equation.
Short term bonds (the primary cash equivalent) are not really an option in Europe the way they are in the US. The shortest term available is measured in years rather than months, which could easily be too long. This means that Europeans will face harder choices on this front as well. I would suggest that Europeans afraid of facing a currency reissue should consider the value of hard goods sooner rather than later. As always, pooling resources can get you further own the list of recommended priorities than you could possibly hope to achieve on your own (ie hold no debt, hold cash and cash equivalents and gain control over the essentials of your own existence).
Everyone will need to make the transition from cash to hard goods at some point. Cash is what you need to navigate the great deleveraging, but over the time the risks to cash will rise and you will need to think of the next phase, which is addressing the risk of the kind of economic upheaval that breaks supply lines. That will come first, and inflation (ie actual currency printing) will come much later. Inflation is only a risk once the power of the bond market has been broken, and that is not today's risk, nor tomorrow's.
That is something to consider much further down the line. Deflation and depression are mutually reinforcing in a spiral of positive feedback. That is not a dynamic that will end quickly, but end it will some day. At that point, or well before depending on where you live, you will want to be fully invested in hard goods.
Reflecting on your insights lead me to believe that one viable option for risk aversion to the many potential world currency problems is to own physical gold outside the country. Disclosure-own PHYS and CEF.
Rick Santelli and the tea baggers are bullshit.
^^ FAIL
WTF do you mean FAIL? That was awesome.
The only reason that Santelli associates himself with the t-bags is because it reminds him of the old frat boy days.
Here's my bro Spike from our frat woofda-kappagrowl-woofda doin the bag doggy style.
http://westernexperience.files.wordpress.com/2009/09/tea-bag-1.jpg
Junk me all you want. The tea baggers aren't going to do shit. Rick Santelli never freaked out and lost it on cam. He's got less balls than BEAKER!!!
The religious people will give you the Jesus is coming bullshit.
The New Agers will give you the a giant mothership is coming to fix it bullshit.
And everybody else will give you a wait and see try it you'll like it bullshit.
The Santelli rant and the tea baggers that grew out of it was simply a capture and steering of people. It was a sheep herding movement. They paid fucking Sarah Palin to write on her hand and give stupid speeches.
Ok, so who's going to do shit? A lot of people are becoming apathetic and desensitized towards everything that's happening around them. "I don't trust anyone, i know shit will happen and nobody's gonna do shit, let it all go down the toilet"
What's the difference when you hit on prozac or marijane with attitude like that - you don't care shit. That's exactly what TPTB want you to be. Yes, tea party agenda has been hi-jacked and discredited from the start. Doesn't mean everyone else should curve up a ball and roll down the canyon.
Stunning rebuttal filled with facts and links.
Though I agree the main portion of the original tea bag movement seems to have lost it's way and embraced the same GOP members that helped create the mess...Mr. Santelli accurately reflects the frustration and distrust most feel towards government.
http://www.realclearpolitics.com/epolls/other/congressional_job_approval...
Do you think things need to change?
What is your proposal for expressing disatisfaction in a public manner that exhibits collective dissent?
Without numbers, nothing will get done politically.
Santelli for PRESIDENT....
Seriously
You have to admit the bitch slap Jon Stewart did on him was pretty funny on The Daily Show. I don't agree with the homeowner bailouts, but the bank bailouts are a festering pustule on the ass of humanity. For your amusement.
http://www.thedailyshow.com/watch/wed-march-4-2009/cnbc-financial-advice
Stewart is hilarious! Still like santelli though, even though I don't agree with some he says.
However, it is the same here at Zero, where I don't agrre with some that some posters say, but agree with other parts of what they say. It is not all black and white.
Santelli for Prez.
Santelli for Prez. Echo that.
I swear to God, reading this backwards, one actually get a feeling of arriving somewhere.
GOLD daily charts are still bearish.
http://stockmarket618.wordpress.com
Santelli is a circus act - in this present monetary system you have to spend to keep the shark alive.
Yet he does not seem to me to want to radically change the monetary ecosystem.
He wants to reduce fiscal deficits after credit money finance urchins have destroyed the reef.
Anybody who is a true advocate of the present system of money creation should be looking at the quality of money and stimulus creation.
To be honest the very word stimulus has polluted the concept of investment spending.
"The only spending that truly multiples in the positive arena is private, because every dollar the government spends comes from somebody's pocket OK because the government does not run a business that generates a profit".
Oh really the private creation of money within banks does nothing to the overall economic jungle ?
And what is profit Rick - it is extracting surplus (if true profit and not capital extraction) from a functioning ecosystem.
Without government to sanction the polluters on the beech your private fishing industry will be a short term financial adventure.
Just because they don't take it directly from your pocket via taxes does not stop making it real.
These guys are Reganites in conservative clothing - they are planning to fool the people again and become the new plantation owners now that the old bosses in the FED are going the way of the Dodo or maybe more likely to feed in a more clandestine manner.
Their narrow concentration on fiscal deficits when the real monster is what goes on in the banks betrays their carnivorous nature..
Caveat emptor
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