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Roubini: "The US Economy Is Unsustainable"
Yesterday Nassim Taleb said that his primary concern about an upcoming "Black Swan" is a failed Treasury Auction. This is precisely what Zero Hedge has been concerned about for the past year, although we feel that this event will likely be at least marginally telegraphed, either in the form of Direct Bidders taking down close to 50% of each auction (with the Primary Dealers monetizing the balance), and an accelerated flattening of the yield curve. Last night, Roubini, who has apparently thrown away the mantle of moderation and is back to his gloomier ways, said that he worries "that with a trillion deficit this year and next year, 2012, and for as far as the eye can see, eventually, not this year, but the next year, the markets are going to wake up and say, this is unsustainable." In other words whether via the Treasury market, or some other way, at some point the balance will shift from one where the market still believes that reserve currency is enough of a backstop to prevent the collapse of the US, to a regime where incremental bailouts will be seen as negative. That moment will be true black swan, and the beginning of the end of the great US experiment.
Back to Rooubini, who in his last night's interview with Fox Business' Neil Cavuto is about as bearish as we remember him from the doom and gloom days of early 2008.
On Greece being the tip of the iceberg:
“In my view what is happening in Greece is just the tip of an iceberg. With private debt in many parts of the world, we socialize these private losses. Now with large budget deficits in Europe, in Japan, in the United States. The bond market vigilantes have woken up in Greece, in Portugal, in Spain.
At some point they're going to wake up in the U.K., in Japan, in the United States. We're running a 3.5 budget deficit. It is obviously over time not sustainable.”
On why there has not been any market discipline:
“The Fed has near zero rates. There is low growth. There is still deflation. So for a number of reasons, interest rates are still low. That is why there is no market discipline. This is unsustainable. There is going to be market pressure and we will be forced to do the tough adjustments.”
On how the US fiscal problems will cause high inflation:
“In a country like the U.S. where you can monetize the budget deficit, run the printing presses, monetizing the fiscal deficit eventually leads to inflation. So we're not going to have a default in the United States, that is not the option on the table. But we could have high inflation if we don't fix our fiscal problems.”
On possible riots in the US:
“Well, we have a social safety net that means that unemployed people and poor people get some income, so you're not having so far riots in the streets.”
On the implicit debt being huge:
“You have a federal deficit problem. A state and local problem. You have unfunded liabilities of Medicare, Social Security. And you have also unfunded liabilities of state and local government pension funds. You add it all together between the official debt, the implicit one, the bill is huge.”
On the need to raise non-distortional revenues:
“The official numbers suggest about $9 trillion budget deficits for the next decade. Even with reasonable assumption about economic growth, at some point we have to reduce spending, we have also raise some kind of non-distortional revenues.”
On Governor Christie’s plan to cut spending:
“If I had to make a choice at the margin, it is better to cut the budget deficit on the spending side…the size of the deficit is such that realistically the two parties will have to accept -- the Democrats, spending cuts, and also the Republicans will have to realize that some increase in revenues, want to limit as much as possible, is going to be needed to shrink over time, this deficit.”
On the need for a VAT tax:
That is why we have to cut the fat of the government first. We have to reduce the inefficiencies.”
“Realistically down the line we'll have to raise revenues. In my view, there are less distortional ways of raising revenue. We don't want to increase income taxes, capital gains, dividends, and other things of this sort. Probably introducing down the line a value-added tax, it's less distortionary, an indirect (ph) tax will be the right way of doing it over time…we have to fill this gap.”
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"this is unsustainable"
Duhhhhh!!!!
It was unsustainable when humans first start to lend and borrow with attached interest before our grandfather's grandfather was even a thought.
60-80years, collapse, liquidate,rinse and repeat.
Peaked in 2007 with credit creation at $4.7T
2008 unable to expand and started collapsing
2009 collapsing until credit creation is negative
2010 into the death spiral, currently credit creation around negative $-600B annualized
Sorry, you can't service $52.5T with negative credit creation. Currently the system is lacking probably $3-5T of credit creation to fund itself.
"Same as it ever was"
Correct.
This cycle keeps happening because humans make the same choice. We make the same choice and expect different results, I would say that is the definition of insanity.
So would Albert Einstein ;-)
To me that is an excellent and nearly perfect definition.
if the story of adam and eve is true then we are all retarded
I'm fairly confident we live inside a fractal
http://www.simulation-argument.com/
Are You Living In a Computer Simulation?
Well.... It is plain as day that our reality is governed by a sort of binary law. I'll bookmark that, and read it later thanks.
It can also be the shine of brilliance. We gold bugs are expecting the same golden swan as others before us.
I have no delusions about being above this cycle.
Completely off topic, but yours truly was quoted in FOFOA's blog from a ZH post:
http://fofoa.blogspot.com/
Once gain, thank you Tyler & crew for making available a platform by which the truth can be revealed and (re)referenced by others who help spread the word.
... and to make B9K9 popular with the women.
I love the quote, and your insights are certainly worthy of greater recongnition, sir.
Ok. Enough of the ass-kissing for one day...
"All this has happened many times before and I was there to fix it. All this will happen many more times, and I will continue to be reborn under various avatars to fix it." - Krishna to Arjuna in Bhagwad Gita
Kalki
FYI, in an honest money system, the gold used to pay the interest on a loan comes from the gold spent on consumer goods. This process sets the interest rate in a free market environment. If people prefer to save, there is less gold available to pay interest, and more competition for that interest, so rates go down. Conversely, if people prefer to spend, there is more gold available to pay a higher interest rate, and there is less competition for interest rates, so interest rates go up.
You don't seem to understand that, and by not understanding that, you take on a tone of ultimate defeatism that just doesn't make sense (ie humanity would be dead now if what you said was true).
"This process sets the interest rate in a free market environment"
I can loan gold or anything out at any rate I choose. It's almost like you threw away all the history of the world and rewrote it to fit some type of weird fairytale.
Put 1 oz of gold in the bank and lend it out at 3% annualized within time that 1oz will consume all the world's gold. This is a fact basically 7th grade Math.
End of story... you read too many nut books.
Every single financial system in the history of the world has collapsed, every one of them. This is fact, what planet are you from?
You still don't even understand what "credit" is? Sorry, had a gold standard last time and the time before that and the time before that, some countries were on the silver standard, they ran out of silver.
Everyone wants to lend and borrow at a rate of interest to get paid for doing nothing, sounds nice until the balloon payment comes due.
One ounze gold in the bank lent out at 3%.
Year1 - 1.03oz
Not bad
Year 20 - 1.81oz
Not bad
Year 50 - 4.38oz
still not bad
Year 100 - 19.22oz
still not bad
Year 200 - 369.36oz
still not bad
Year 500 - 2,621,877.23oz
problem will robinson
Year 750 - 4,245,399,152.55oz
holy shit
Year 1000 - 6,874,240,231,169.63oz
unforunately there is only 4.5b oz. that has been mined
Now imagine billions of stupid humans doing the same thing... basically 60-80 years.
No, you can't loan at any rate you want. Go outside right now and offer to loan a million dollars at 100000% interest, and you will find you have approximately 0 takers.
No, you put oz of gold into the bank and leave it for all time, it will accumulate gold at an exponentially decaying rate, as the bank will have an increasing amount of money to lend out over time. This will only drive down prices for everyone else.
You really should STFU about the "nut books". You talk about math, but you don't actually do the work, and look at the capital flows. The only capital systems that have collapsed are the ones that were subjected either to debasement, or to fiat currency. I can still spend Roman gold dollars today just as easily as my ancestors did 2000 years ago. I can do the same with Chinese gold coins. And the same with Japanese coins. Or with Spanish doubloons. Or with any other gold or silver coin that has ever been minted.
Lending money is not getting paid for doing nothing, it is paying someone else to do something. You take the risk that they will run off with the money, or that the venture will not be successful. It is not free money. You had to do some work to get the gold in the first place.
Countries only run out of gold or silver under gold or silver standards when the government overspends. This is not the fault of people borrowing and lending that gold or silver, it is a problem of GOVERNMENT SPENDING MONEY IT DOESN'T HAVE.
Yeah then how does the person down the ponzi scheme get paid. You are not making any sense. If what you said were true every ponzi scheme would work.
"The only capital systems that have collapsed are the ones that were subjected either to debasement, or to fiat currency. I can still spend Roman gold dollars today just as easily as my ancestors did 2000 years ago. I can do the same with Chinese gold coins. And the same with Japanese coins. Or with Spanish doubloons. Or with any other gold or silver coin that has ever been minted."
Yeah that is why Rome is still capital of the world dipshit. They collapsed into a mess. Yes you read nut books, you can't do basic math.
Let me see you think pyramid schemes work? Well they do, until you can't get enough bricks to pay the amount of outgoing bricks.
"it is a problem of GOVERNMENT SPENDING MONEY IT DOESN'T HAVE"
Everyone is spending what they don't have, why do you think all you morons are lending and borrowing with interest? You are strange, you don't know basic Math, you think pyramid schemes work, let me see just pyramid schemes that use gold as it's scheme.
Sorry collapse, the financial system collapsed in the United States in 1930, it was a gold backed system, the system before that was a gold backed system, collapse... they have all collapsed. Yeah, I am sure the Roman empire is alive and well in some stupid book you read.
I can lend at any percent that someone else is willing to take the other side. I have no idea what planet you are from.
Before the Great Depression of the 1930s there was the what was known as the Great Depression of 1872, and before that depression there was the Great Depression of 1807... all gold standard. THIS IS A FACT. Let me see they had a depression why exactly? Oh, the government. You have no idea what you are talking about... you read too many stupid Peter Schiff books. Well he is correct, Europe did decouple, they decoupled and are falling into the Med. Only a dipshit would ignore basic Math.
System unable to expand to pay interest, everyone took their stuff off the table... system collapsed, end of story.
You're getting really boring. Please take a minute to study some type of intellectual discipline outside of mathematics and finance, preferably ecology and physics. ALL systems are inherently unstable and come to an end. It all depends on the way you define the system and the time frame you use. The sun the will come to an end. Humans will come to end. The sale at my local grocery store will come to end. Does that mean these things should not exist in the first place? It's called cycles, waves. This is just how it is. Existence is transient. Deal with it.
"You're getting really boring."
You do realize you have the choice to not read my post, right?
"ALL systems are inherently unstable and come to an end."
Never said otherwise. This one has a predetermined lifespan based on Math basically 60-80 years, its a nice little scam while it works, the ending is going to be a bitch... I figure 1-2billion liabilities at the least will be taken off the books. Never said humans will be on this floating rock forever. That's life.
I'm just glad that college kids have no actual power in this world...
"its a nice little scam while it works"
It's only a scam as defined by your tribal moral values. It could just as easily be defined as a natural cycle.
"You do realize you have the choice to not read my post, right?"
Mathematics...yet you must resort to lame language tricks. Putting the onus back on me. Anyways I was just pointing that you are turning into a spammer, as we all know this stuff already. If that's fine with you, it's fine with me. But you are correct in as the internet says "Don't feed the trolls"
Just wondering. Humans will come to end.
Why not? That is an event to come.
But how does it fit two billion liabilities to disappear?
It seems that in this case, that some humans will come to end.
Survival as an analytical framework is a sure win. If some survive, it is a win. If none survives, the issue is settled.
Basically useless.
The issue at hand is not survival of humanity but survival of some part of humanity and death of the other part.
Might be indeed a morality case. Might be not. But should not be depicted as humans come to an end.
It's because of the twisted morals in control of high levels of gov't that we're here. They are responsible for the deaths of billions by lying about sustainability. Many conclude that it is planned.
Who created these?
http://en.wikipedia.org/wiki/Georgia_Guidestones
The current issue of Nat'l Geographic has an article on Mt St Helens - 30 years later. The biologists all confirm your observation: new life emerges & grows quickly, reaches maturity while depleting its primary resources, then dies out/is replaced by other forms.
The scale they were using was bacteria through incipient fungi, plants and finally animals, but of course it parallels our human experiences ie the cycle of life.
Mako may appear repetitive, but that's only because there is still a significant number of people (such as tmosley) who still believe there is some way out. There isn't - free, open markets, abolishing the Fed, restoration of the gold standard, etc - nothing is going to work.
(I've suggested to Mako that he tone down his combativeness in order to get his message through. You are both in agreement, yet look how far your side discussion has degraded into personal insults.)
If we were somewhat self-sufficient and prepared, perhaps we could deal with the credit-boom echo, but our government and its enablers (masters?) is actively conspiring against the citizenry to suppress the knowledge they are going to require to survive the coming ordeal.
That is why they are criminals and are engaged in crimes against humanity.
We are not in agreement at all. He believes 1+1 = 3, as far as I can tell that is incorrect.
Yes, you are correct, humans are using the same equation as bacteria or a virus. It's not going to end, well, just like it didn't end well last time and the time before that. I know you already know that.
if there is no hope (certainly an arguable prospect) why do you continue to post it over and over? do you recommend any action? do you have a need to "spread the word?" Take it from me people are not going to listen and change their minds (esp. general public). So why get so worked up on every post? This is not a criticism, I would like to know your thought process.
How do people get paid later? Simple, people SPEND GOLD. No-one just puts money in a bank and lets it continue accumulating interest for a thousand years.
Rome debased their currency and spent more money than they took in. That is why they collapsed, not because of money lent at interest.
You must think that you can pile up water on one side of the pool using a bucket. Money flows, period.
You seem to think that there is just one lender in the world. This is not the case. You you offer to lend, but at a higher rate than any of the millions of other people offering to lend, no-one will take it. This is why you can't accumulate all the gold in the world with just a bank account.
No, everyone is NOT spending money they don't have. You really need to stop calling everyone that doesn't give you a handjob in every post a moron.
All you have to do is look at where the actual, physical money comes from in these systems to understand what is going on. Instead of doing that, you use a half-baked logic to determine that it can't come from anywhere, and you throw your hands up and run around screaming that it's all impossible like a lunatic.
Analyze the capital flows or GTFO.
"How do people get paid later? Simple, people SPEND GOLD. No-one just puts money in a bank and lets it continue accumulating interest for a thousand years."
think, let me see everyone has their money in their pocket not making interest... heck no they want money for nothing. Are you telling me billions around the planet are not using interest, well, you are on a different planet than I am.
As soon as you have withdraw than that's it... bank run. I don't know what you are talking about, it's like you are ignoring basic Math and all of human history.
This system is exactly the same as every other system that has existed. Lend out 1 million oz. which is nothing and see how long it last, not long at all.
Sorry, I hate to tell you... they ran out of gold the last time, they ran out gold the time before that, and the time before that, etc. THIS IS A FACT.
The financial system in the US has collapsed many times in just 200 years, all for the same reason... failure to expand.
"same as it ever was"
The only way you continously get capital flow as long as expansion is going on, once you peak capital flow will go negative for the system... how do I know this... it's happening right now... see Federal Reserve Z1 report... let me see you are like Peter Schiff and believe the total money supply is going up? It's not, it's going negative.
I guess you've never spent a dime of any money that you've made, and it is all sitting in an account somewhere?
People have to spend money on some form of consumption, unless they are self sufficient AND have a specialized job that brings in money. You speak in absurdities, sir.
If everyone saved every penny they made, interest rates would be zero.
If they keep running out of gold, then why does all their gold still exist?
Or by "they" do you mean "the governments" ran out of gold, meaning they spent themselves into oblivion? If so, then I agree with you. But lending and borrowing had nothing to do with it. It was the fact that they were no longer able to collect enough taxes to fund their profligate spending that is the problem. THAT is what causes governments to collapse.
I have no business butting in, cause i know how little i know.
Just the same, seems to me MAKO has a valid point.
No credit creation=curren-sea flow stops. money must flow, move on, be created.
Millions of us unemployed, money is not moving.
We are not buying on credit anymore
Banks wont lend anyway
values are changing drastically.
History proves Makos point. Dont see why we are arguing.
Mako, you see millions dying in your imagination
I see us in our days of turmoil sharing, helping each other past the crisis.
What we envision may come to pass merely because we have envisioned it. Thought is the creative power. Be careful what you think.
I encourage all of us to think in a more positive vein to offset all the negative .
I recognize the difficulty, on the other hand its only money. we can actually live without it.
+1
Yes! Small communities with small-scale farming and redoubled efforts of mutual growth and self-defense will pave the way to freedom again. Barter and exchange of coin will allow intra- and inter-community trade for increased growth. There is no other nucleus of protection. We must make the human connections necessary to trust each other.
The alternative is to be subjected the the "thief" class of human beings. This element of society cannot be corrected. It is ultimately human nature that is the greatest friend or enemy. Positive thinking alone will allow you to become prey, just as in Russia - which was the first time in history when all of those of a hateful disposition, from top to bottom in society, controlled and oppressed the "good" with theft, murder, and rape - physically and emotionally. It is frightening to see so many parallels today - it started with Lenin's "revolution".
For clarity, I will state that there are always destroyers among us. When they are allowed to rise to power expect killing to move from the small-scale to the epic-scale.
Hope I'm not preachy or anything MH. Glad you have thick skin and are still fighting the battle for truth. This place would be a more lonely without you around.
Nice post WW... 4 of 5 homeowners on my block, including myself, are now in the process of turning our lawns to gardens. We're doing our best to be prepared for whatever happens. If a worst-case meltdown, I hope it's 3 years away... that'll give my blueberry bushes time to mature.
LOL
Best of luck! I too have some time frames for various things. You can never over-prepare - in my book.
Wings, gotta have balance between the micro & macro for it to work fo sho.
The difference is that I am talking about an honest money system, where banknotes are backed 100% by gold. The current system is most certainly unsustainable, but not because of lending and borrowing. It is unsustainable because of the high and increasing rate of government spending (ie government monopolization of resources).
I should also note that the depression of 1872 was caused by the issuance of fiat greenbacks to pay for the Civil War. The depression of 1807 was caused by a self imposed embargo in the US which cut off ALL foreign trade (an attempt to keep the US out of the Napoleonic Wars).
So yeah, pull the other one.
They all fail for the same reason... failure to expand. End of story.
In Rome the resorted to chipping off their silver coins because the silver mines not only were not expanding they were going negative. All the silver ever produced by those mines still existed when the population of Rome went from over 1 million to like 30k.
Sorry, who's they now? You're jumping around on subjects, apparently because you can't refute my logic. How about you respond to the topic at hand, and either refute my argument, or admit that government interventions caused both of those depressions that you cited as being caused by the fundamental act of lending at interest?
"you can't refute my logic."
Sorry but I haven't seen one slice of logic in any of your posts on this board. Too many Peter Schiff books.
Bro, we all go through a period of libertarian belief in free markets. There's only one catch, but it's a good one (sort of like Catch-22): individual income/wealth or aggregations (aka "the economy") must continually grow at an exponential rate in excess of debt in order to service compounding principle+interest.
To re-phrase, it doesn't matter what interest rate the market sets, because no matter what it is, it must always by exceeded by absolute economic growth so that in nominal terms the debt is satisfied & extinguished.
But unlike the unthinking math expressed in payment terms clearly stated on a debt covenant (contract) collateralized with real productive assets, the nominal economy must constantly search, develop, exploit & grow to avoid foreclosure. Hence, the image of a someone running faster & faster on a hamster wheel, yet never "getting ahead".
Like life itself, one can run swift and/or long, but eventually entropy catches up. But what about the contract? It doesn't care, it simply keeps accruing the promised payments. And when they can't be met? Foreclosure & debt peonage.
We have documented histories of these events repeating endlessly over & over again for over 5,000 years (called the "Bible"). It always ends this way - there are NO HISTORIES IN EXISTENCE that differ in the telling of the eventual outcome.
The power-elite well understand these principles. They have been repeatedly admonished, as usury was considered an act of war. We know who is prosecuting this war on humanity. Right now we're experiencing a brief interregnum while mankind becomes reacquainted with reality.
OK I think we all agree that our financial system is not sustainable in perpetuity. But let's give it some credit. There are a billion people in the World today who live better and healthier lives than ever before.
And yes at some point there will be a payback. But the consensus here is that the Federal Reserve is to blame, and that doesn't seem reasonable to me. Blame its Chairmen, particularly the last two, OK by me but honestly, what form of "lender of the last resort" (phrase first used by Paul McCulley at the Richard Russell 80th. birthday dinner last year) do you offer in its place?
"Slapped in the Face by the Invisible Hand" by Gary Gorton is extremely good if kinda long at 54 pages.
http://www.frbatlanta.org/news/CONFEREN/09fmc/gorton.pdf
"There are a billion people in the World today who live better and healthier lives than ever before."
How can you quantify this? And what about the other 6 billion?
And to add, how do you know this was the result of fiat money / fractional reserve system?
Just a wild ass guess, US plus Europe middle class is what I had in mind..
But yes, I think that FRB is the primary driver. World population (I think) began to increase exponentially from the fifteenth century, which was when the Judaic Christian peoples began to dominate the Muslim world.
Look, there are too many people accustomed to living as leeches and mooches to completely privatize government overnight.
It will take time. The process can be aided by allowing full homesteading of all inhabited property. This allows the nonklematura to retire in peace. The veterans and police can be bribed with pensions and free medical care (see the post-War West German example).
The typical insurgent types can be held in line by controlling their favorite radio hosts - a la Rush Limbaugh. These guys are drug addicts, for the most part, and they will obey whomever their pusher is.
Think Bush Medicare Plan D - a plot, basically, to make the elderly physically reliant on the government and the drug companies for basic survival. You take away their drugs, they die of the DTs.
If 2 - 4 billion of them die within a year because of lies about sustainability and subsequent war instead of robust prosperity we will still be sure to repeat the cycle. We're human.
I wonder if that's a consistent ratio to predict collapse: When 1/7th of the population is high on the hog with record levels of income disparity there will be a lot of pain.
Nonsense. Shut up. There need be no mass death or pain. I suspect we will be able to grow the world population by billions so long as the semi-conspiracy of... INCREDIBLY BORING ACADEMIC/POLITICAL CONFERENCES... (by Jove, have you ever been to one of those things? So dull!). You have plenty of CI experts, Laurence of Arabia types, among the junior officer corps. They can keep the violence to a minimum.
There will be a refugee crisis (think water rights in Arizona... T.Boone Pickens... unwinding of Bush-era fiscal madness)... but these pseudo-issues are all solvable.
Warnings of pain and austerity are typical barbarian-King ploys.
Yes! All hail WaterWings, barbarian king of the Rocky Mountains! But I'll settle for prophet instead:
From what are ye an apostate?
When an economy grows, it is not necessarily resources that are consumed exponentially. If that were the case, humanity would have starved to death in the 70's (google "Green Revolution").
What you and Mako fail to understand is simply that the money that pays the interest on a given loan either comes from consumer spending, or is defaulted on. There is no reason to think that a gold standard requires an exponentially increasing supply of gold. If such a situation were to occur, it would simply force prices down.
Mako thinks you can just dictate prices to the market. He's thinking like a central banker, but with a fatalist twist. The fact is that you absolutely can NOT dictate prices to the market. Even if you manage to dictate them for a given transaction, the other party will simply go elsewhere eventually, and your hoard of gold will stop earning interest.
His irrational hatred of Schiff, and his automatic alignment with anyone who calls him on his "it's simple math" assertion is very grating.
I think you are correct; as long as new gold and silver production was greater than or equal to net interest charged (minus defaults and haircuts), then a gold based currency would be sustainable even with an interest charging system. However, I'm not at all confident that such a system would be sustainable indefinitely, over the kinds of timelines Mako is talking about, due to human imperfection and the resultant imperfections and distortions in free markets. Anything we create is going to be flawed (including our markets), because we are inherently flawed. Entropy does rule in this universe, and anything made by humans has a much shorter half life than the rest of the universe at large. Ashes to ashes, dust to dust.
Trading the commodity face over the currency face. Trading gold, not a currency in some cases. Or in better cases, archeological items which are more expensive than the commodity they are made of. Works for paper money too.
Technically, no differences between an amount of gold dating back 3000 BC and the same amount of gold dating 10 AD and melted in a currency. What is traded is gold as a commodity, the currency aspect is naught.
How many gold currencies have made it up to this day? Zero would be a close answer.
The only capital systems that have collapsed are the ones that were subjected to debasement? Unclear.
Quick examples: Spanish empire. Gold supplies from new world started to dwindle toward the end of the 17th century. Gold as a currency failed for the Spanish empire before that. Debasement?
In 300 AD, the solidus was introduced. No debasement as the gold supplies were provided by roman temples plundered by Christians. The solidus failed as a currency the roman empire before that.
Mako, if every financial system has collapsed, then what is the solution?
I enjoy your thoughts and would like to hear more explanation. Thx
A solution to what? Solutions depend on the problem.
Basic stuff is expansion. Expansion works very well until no more room left to expand. So what?
Ponzi schemes: very useful to concentrate wealth, to transfer vertically wealth.When the bottom is depleted, the ponzi scheme is over.
Still, the end result is here, wealth is transfered and concentrated.
So what is the problem? Not having your share off the scheme? Not being at the top as a vessel of the newly concentrated wealth?
It can be your problem. It is not every one's problem.
Financial systems collapsing might not require a solution if they serve their goal.
Right, so lets stop expansion, and just all kill ourselves.
Wealth is concentrated ONLY by government action. This has and always will be the case. Free markets create vast and thriving middle classes, and make EVERYONE wealthier, sustainably.
It does not seem to me that expansion and the moment to stop it is to be decided over.
It seems to me that expansion is a matter of capability. Either a yes,can do/no, cant do.
Western world has been buzzing with the idea of overcoming the environment, of expanding at will.
Now that globalization is reaching its term, the principle will be tested fully as the world environment is finite.
Free markets create vast and thriving middle class and make everyone wealthier?
When?
By the way, I already know that Indians were communists deserving their fate.
But still, does not change the way. The US army was an extension of the US government.
First, you should learn to differentiate between the term of morality "deserve" and the hard science concept of "cause and effect". The treatment that the Indians received, while horrendous and genocidal, was the natural result of their failure to recognize property rights, both among their own people (thus impeding their own technological and economic growth), and among others (causing hatred and resentment among the settlers). The Indians in the Spain-dominated portions of the Americas were not killed to nearly the same extent that those in North America were. This is for the simple reason that they recognized property rights both among their own people and among the Spanish. Their problems arose from their failure to recognize natural rights in the "right not to be ritually sacrificed to the gods in a gory, public, and terrifying manner, which resulted in widespread hatred for the "city folk" among the "country folk", who therefore joined a small band of well armed white men and overthrew their oppressors.
Second, free markets created every single middle class on the planet Earth, during each community's industrial revolution. Unfortunately, most societies clamped down on free markets just as they began to create the most benefit for their citizenry. In the United States, the process of clamping down on the free markets began in 1913, taking a strong uptick in the 1930's, again in the 60's, and "going vertical" over the last couple of years. Who knows where we would be today had the government not clamped down on scientific, technical, industrial, and financial progress over the last hundred years?
Finally, technology, when left uninhibited by regulations and taxes (which are a failure to recognize property rights, referencing the above paragraph), will advance exponentially. The world supported as many humans as it could since the time of the Romans, but technological advances meant that our population could grow. As technology continues to advance, people will either be able to wring more calories from the sun and a given amount of water (as in the Green Revolution), they will be able to harvest the oceans, or they will be able to expand beyond the Earth. Of course, you can say "no", but that is what they said to DaVinci, Columbus, the Wright Brothers, and who knows how many more.
Collective decision making leads directly to hell. Every time. So let's refrain from giving more fuel to the Malthusians, shall we?
20smoney
You have choice, either enter the ponzi scheme or don't enter the ponzi scheme. The lie is that there is limitless inflation and that human's can expand exponentially long-term.
The alternate choice is not to use an equation that promotes the lie, of course that comes with it's own problems. Limited or no growth, you will then only maybe get what you need and not what you want.
Of course, you can believe the lie, which is humans can supply and demand exponentially long-term or infinitely, the choice is yours.
This book is just like the last book, the ending is always the same. What are you are witnessing is people running from the Truth, they have been promoting the lie, they don't like their choices. Well, that's too bad.
Mako: It was unsustainable when humans first start to lend and borrow with attached interest before our grandfather's grandfather was even a thought.
Bullshit.
Lending and borrowing money all by itself is not inherently pernicious or unsustainable and certainly not undesirable. Sorry.
Show me a society that does not have a functioning capital markets - that does not effectively price risk and lend money and I'll show you a society that is going nowhere fast and more often then not locks the vast majority of it's people into successive generations of stagnation and/or grinding poverty.
Medieval Christian Europe and most of the Muslim world come to mind.
The US is about to go down the tubes because the government is too damn big and too many people (and too many powerful people) are abetting it.
Medieval Europe and most of the Muslim world were not going nowhere. They were going to their future.
Besides, pricing risk is born in the Muslim world. Pricing effectively risk is another story as a society not delivering the expectations can be described as pricing risk ineffectively and reversely.
My bad: I took the leap of faith that successive generations of stagnation and/or grinding poverty = going nowhere. To each his own.
I suggest you review Islamic attitudes toward money lending which is really where the rubber meets the road in terms of risk pricing.
Mercury
"Lending and borrowing money all by itself is not inherently pernicious or unsustainable and certainly not undesirable. Sorry."
Sorry, humans have no ability to expand exponentially long-term. Lending and borrowing is not the problem, attaching a rate of say compounding interest limits the duration of the system.
You can call bullshit all you want, if I were wrong then all pyramid schemes would still be operating.
Current US system is $52.5T down from $52.9T, you can remove the government and watch the system imploded because you and rest are not generating enough new credit to service the prior... see FR Z1 report. Good luck in your quest to defeat Math.
Just because you lend someone money at a price and then that someone turns around and essentially does the same thing doesn't mean that the whole system expands geometricly like bacteria in a Petri dish until in suffocates itself. Some loans fail, capital is misappropriated, people get hit by lightning, human nature gets ignited and there are booms and busts....life is messy. But it's still a better system - one on which most free enterprise relies by the way - than those that prohibit it.
This current crisis was caused by the govenment, directly and indirectly putting it's thumb on the scales of price/risk. It's going to get ugly now but something will come afterwards and it's foolish to think that feudalism, stong-man rule, central planning or some other system that prohibits capital markets will be an improvement.
Mako,
Do hypertiger or mannfm11 ring any bells for you?
Vinz
Yeah but nothing can stop the market rally. World War 3 could start tomorrow and this market would still be up.
Math loses all the battles, but always wins the war.
No math loses unless you live in a vaccuum. By the time you calculate something it has already changed. If math won, everyone would be a scientist and everything would be run by computers. In your life you will probably never realize how far ahead of mathematicians artists are. When you divide the world into defined categories you create inherent contradictions. All reason based philosophers come to a dead end. There are infinite variables... and when you miss one your whole calculation could be wrong.
Note: I have a degree in both mathematics and computer science.
...and yet if you manage to convince yourself that black is white and white is balck you're much more likely to get killed next time you try and cross the street.
Things like Newtonian physics and the laws of thermodynamics may have their limitations but you'd be a fool to conduct your everyday human affairs under any assumption that considers them to be less than perfect.
Hard to stop a fiction.
Taleb's real primary concern is that his "every man, woman and child should short Treasuries" advice is going to make him look like another just another failed guru. He wrote a great book, but then he got seduced by all the attention it generated.
Uhmm, someone should explain asset-liability matching to my dear friend, Nouriel Roubini. Here it is in a nutshell: If the yield on Treasuries reaches 7% or 8%, trillions of global pension assets will jump on them, locking in that yield. These "brains" that are worried about yields skyrocketing have still not understood the reason why they're capped on the upside. Unfrigginbelievable the nonsense some market gurus spew!
Interesting point. Might make a lot of difference insofar as pension obligations being met. But in longer run, mkt. interest rates will still just zoom on up as they did in the 80's. And pensions just won't keep up with cost of living, even if they're funded.
Academic attention-seeking whores tend to go over the top whenever they're given the opportunity. Why not -- they've got tenure . . .
+1
Leo, I love your work.
You seem to be implying that yields can't go that high because of the great demand will always push them down.
I'm taking his point to mean that this is a debt spiral and is also unsustainable. At some point, no matter what the yields, the buyers dry up a la Greece.
Also, at some point, if we monetize the debt, what do the yields have to be to keep pace with inflation? The yields may never catch up. Not his point, but mine. I think. I'm butting up against my mental capabilities at this point.
My wet dream for teleconomists is that as part of their certification requirement, they manage their own retirement plan - using any asset class they want, from SPY to Tibetan silkworm futures to CDO^2 - but must disclose their returns every time they appear in the press.
Leo, you give far too much credit to the 'brains' that run the funds. If it's simple, they don't want it.
Roubini switching camp. Very interesting. Who pissed him off?
Ha! I was wondering the same thing! He has been Mr. Moderate for months now. I wonder what's up?
Obama's checks aren't clearing anymore.
He's getting out in front of November's Democratic holocaust. Probably figures there will be some sacrificial lambs in the fallout and best bud Larry Summers is at the top of the list. Wants to seperate himself from Summers.
He was recruited as a moderate some time back. Now he's off the payroll.
I think he sees gold going up along with the dollar and realized the jig is up.
Waiting for a failed Treasury auciton will be like waiting for Spoos to get to fair value, not gunna happen , wouldn't be prudent.....Turbo Timmy will open 6 more CIA funded hedge funds in northern Virginia way before thats a problem.
Don't underestimate these sociopaths - they could nationalize Pimco and Blackrock and fund the entire deficit...now move along, nothing to see here....
LOL. Very true.
Yes, utterly ridiculous to believe the Feds wouldn't move heaven and earth before allowing a Treasury auction to fall below 2.0 b/c even.
I concur. The level of duplicity amounst the players is fast approaching 'epic'(fail) proportions.
However, maybe that could be what Roubini is getting at, that the epic fail is moving on up in the probability tables.
Remember at infinity (without bounds), all real numbers are meaningless.
I have to say I'm stymied on this point.
If the FED "prints" money out of thin air to loan to the Treasury, and then the banks borrow it for free to buy the bonds, to use as collateral on a fractional-reserve basis, and then buys every paper "bet" under the sun (stocks, bonds, etc.) ----
if they never buy anything REAL, how does this end up creating inflation? Can't it just continue as a paper game forever? Where is the reality leak?
the reality leak is in the laboratory trying not to piss away the great american experiment
Treasury dept. spends that money and it ends up in the economy.
Okay, some of it does -- it ends up spent on pencils, paper, gasoline, etc. -- but doesn't alot of it end up as other forms of $FRN-denominated whatzits like:
pension funds
insurance policies
401Ks
In other words -- doesn't a lot of it stay in the ether?
Yeah if the money never enters the real world but just swirls around in cyberspace there wont be any goods and services inflation - only inflation in certain assets like bond prices and stocks. The reality leak is not inflation. It is a shift from a capitalist economy to a centrally planned one. After all this is kind of what the soviet union looked like - a few top people shuffled money around and the peasants had not much. The danger is much much worse that CPI inflation - it is a destruction of capitalistic incentives - and a move towards a kind of centrally planned economy with a handul of people calling all the shots. Historically such systems have turned out - well - to put it mildly - miserably.
- can someone please tell what the hell this is, can someone confirm it ???
New US currency is Gold Dollars: Peter Schiff
http://www.commodityonline.com/news/New-US-currency-is-Gold-Dollars-Peter-Schiff-25560-3-1.html
"Starting days from now" and it's dated Feb 10th.
I don't know what the hell it is, but it looks like pure horseshit.
Parody?
Meanwhile, Venezuelan gas rig sinks:
http://english.peopledaily.com.cn/90001/90777/90852/6984552.html
The North Koreans are coming! The North Koreans are coming!
Good catch noticing the dateline, Ivanovich.
It's pretty clear its an ad. Still -- thought experiment:
If the US Government WERE to come out with a "new dollar" "backed" by a gram (one twenty-eight) of the (unaudited) gold held in Fort Knox....
would you swap your existing $FRN for such a thing?
"backed" by a gram (one twenty-eight) "
- you mean "one thirty-one"...1 troy ounce=31.1 grams.
No, not going to be swapping anytime soon.
Nope!!
Yeah, sounds like they are using Schiffs name to give credibility to some scam.
Sounds like they want to take your savings account information and "change your money into gold dollars" ie take every penny out of your account and disappear.
Turns out they were just promoting their newsletter ($50 subscription got you a "free" copy of Bull Moves in Bear Markets: http://www.stockgumshoe.com/2009/06/gold-dollars-americas-new-legal-tend...
They were talking about goldmoney as though it were a US issued currency.
Rusty act now and we will include... for absolutely FREE!!!
And that’s not all…
If gold simply rises by 25%, you could get up tomorrow and use “Gold Dollars” to pay that much less for gasoline, groceries, computers, TVs, houses, cars, clothes, you name it!
While your neighbor will spend $100 for a bag of groceries, you could pay the equivalent of $75 for the exact same bag!
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and until then, the idiots will keep ruling the world
The idiots work for TPTB. The public face is never the visage of power.
"and the beginning of the end of the great US experiment."
depends on what your definition of the great american experiment is...
Always next year. I've been hearing this crap for years. Blah, blah, blah, treasuries are going to crash. Yeah, boyee! Meanwhile the 10y can't even stay above 4%. :YAWN!:
The question is if you think the 10 will hit 2.5 before it sees 4 again?
TNX will eventually trade with a one handle. Short Treasuries = short JGB, aka "the widow-maker."
I don't have a sense for that, too many variables. What I do see is a strong appetite for Ts at 4+%, putting a lid on yields. I actually started building a short term T position when everyone started screaming "bond crash" (for the twentieth time) last november. Waiting... My gut tells me that yes, we will see 2% again on the ten year before we see 5%.
Agreed. With the potential for volatility perhaps yours makes better sense.
The list of the prominent speaking about the unsustainable nature of our current circumstance grows. The discussion is now moving on from a presumption that debt loads didn't matter to how to address the situation as it is. This is the one area where the financial & political elites are failing miserably.
How can they be "failing miserably" when the masses are still distracted by the mundane?
Are you sure the masses are so distracted or are many simply seeking distraction and reaction?
-
Meanwhile, investors are celebrating and buying tech and consumer stocks:
Investors?! Indeed...
OMG! I hate the VAT tax talk! 1% today, 10% tomorrow. It will increase the price of everything, driving down consumption. I bet they won't even get rid of income tax. UGH! Buy gold & silver
"I bet they won't even get rid of income tax." Probably the safest bet you'll ever make. Good luck finding any takers.
JP Morgan guy on bloomberg right now recommending home builders and everything house market related because he sees a shortage in housing supply in the next 18 months.
The cutie in charge of the interview did not have a second question ...
That's the press
He may be right..They are reducing the inventory right now..Isnt detroit and others bull dozing off the less vibrante areas of the city and turning it back into rural farmland? Atleast it was being proposed the last I heard.
They must have some homebuilder positions they're anxious to unload. Shortage in housing supply? I will say I'm impressed at how far they're willing to push the envelope in terms of feeding BS to the public.
The denonminator of the fractional global banking system is ZERO! Thanks to ZimbabweBen Man. Yeah he is our hero!
http://www.shtfplan.com/wp-content/uploads/2010/02/bernanke_hero2.jpg
There is this little song I wrote
I hope you learn it note for note
Like good little children
Don't worry, be happy
Listen to what I say
In your life expect some trouble
But when you worry
You make it double
Don't worry, be happy......
Don't worry don't do it, be happy
Put a smile on your face
Don't bring everybody down like this
Don't worry, it will soon past
Whatever it is
Don't worry, be happy
Don't worry, be happy, By bobby mcferrin
How can there be a "failed" auction when the Fed has the ability to cover each and every auction through the TBTF banks?
It's all nonsense and trickery. If we had a truly free market, auctions would be failing TODAY. Either that, or the yield curve would run from 6 to 12%.
Most of us are ahead of the curve here; we see over the horizon. What is stunning is the overwhelming percentage of investors/professionals who are either too stupid to think original thoughts or they choose to just bury their heads deeply in the sand, hoping to make it through another day/week/month.
I've been a financial advisor for over 20 years. I am currently exiting that business. I can no longer, in good conscience, advise regular Americans that all is well, that the government in altruistic, that the market is fair and honest. Perhaps I'm growing overly cynical in my old age? Maybe. Of course I admit I could be wrong or just plain deluded. But this sucks. Our political and economic system is now wholly corrupt. The average American has no control or hope.
"Of course I admit I could be wrong or just plain deluded." No, I think you've pretty much got it figured out Mr. Ferguson. And you have good taste in hats as well.
I am being serious because Im still learning so I ask this genuine..
Wouldnt the money get into the streets if we end up having to bail out states such as ca ILL etc?
money would get to the "streets" perhaps, but how's the bill going to be paid? Who do you propose pay for it?
and then there's the rationale? why are we putting money on the streets anyway? So people can go out and consume as before (unsustainable)? What about those who aren't borrowing because they don't want to? Will those people spend the money...unlikely, they'll just stick it in the matress.
and then there's the aftereffect - some who believe that since we're now putting money on the streets it'll always be there (moral hazard), or better yet, that they deserve it or are entitled to it. Next thing you know you've got food stamps and medicade / medicare and welcome to the present day.
more money will not solve the problem because each dollar actually represents a dollar of debt somewhere...so more money equals more debt.
solution - do nothing and let the broken system fail, at least then we can say we still have winners and losers.
Could be wrong, but I don't think silvertrain was suggesting this is a good idea, but asking whether funneling fed funny money to real people to spend on real stuff could trigger consumer-price inflation (as opposed to cycling it through the banking system does not). At least that would be my question.
“Well, we have a social safety net that means that unemployed people and poor people get some income, so you're not having so far riots in the streets.”
With numbers like these, http://www.stateline.org/live/ViewPage.action?siteNodeId=136&languageId=1&contentId=15158
expect social programs to be dismantled. Then we'll see rioting.
Data from 2003?
Thanks, that explains how alaska could be running deficit. Wasn't oil only $20 back then.
How can oil rich / low population alaska be running a deficit?
When all those "99ers" run out of their unemployment benefits, the rioting will likely begin.
Thats why the unemployment benes are almost 3 years long now...
I need to stop coming here, Buy the dip is back in force. Everything is so negative here. I must remain flexible. Long short I don’t care. This place is all about supporting the negative side, Tyler is not flexible, or neutral.
There's always the blue pill . . .
Huh?
did you ever see the movie the Matrix?
Do you really want market analysis that just goes wherever the prevailing winds takes it?
You would be better served taking in a bearish opinion and contrasting it with the more common bullish opinion.
After you absorb both sides you can form your own view of the market.
I have not been here that long, but this genlteman "Harry" seems pretty positive.
Tyler....instead of a flag as junk button...can we get a flag as stupid button??
Dude, you have been reading me...LOL!
Go watch Larry Kudlow for an hour.
Then come back.
Shock therapy, and welcome back to the 'real'.
MSM financial will make a poor person out of you, of course, if you are in full self-destruct mode. What can I say.
Z/H rules!
That's my opinion and of course, you are welcome to yours ... have you met Harry Wanger yet?
Good morning everyone, Another Prem. title for Chelsea. Go you Blue!! OK, enough of that. Let's look briefly at the century past, 1900-2000. What did it bring us? Two World Wars, a "Great" Depression, An ideological "Cold" War (with attendant "skirmishes" in Asia), War in the Balkans, India v. Pakistan (pre-nukes, of course), A Soviet Union "of the not so willing" (ha ha....union), Rwanda, Pol Pot, Pinochet, Somoza, The founding of Israel and all of the related attempts to stop is coming, the Holocaust, The Turkish extermination of Armenians, African droughts and famines galore....la la la la la la la.... Lots of suffering, eh? Billions of un-natural deaths. And as we take stock of such a sick phuquing century, let's examine the one currently upon us. Are they different? How about: Peak Oil, Nuclear weapons for everyone, Islamic radicalism, Securitization, 9/11, FINANCIAL WMD, snort snort snort... The sick 20th century is giving way to the totally puuqued-up beyond all possible reason 21st century. The suffering of the past 100 years is gonna be a walk in the mother-phuquing park compared to the next. Go you Blue!!!
Well I guess as long as Chelsea is doing well we can handle the rest of it ok.
Rhoubini - fuck you and the VAT tax. They should disban the entire current tax system and implement a simple consumption tax. A flat tax. You BOOB!
No they have to make it complicated and overly burdenous so that you're incetivized to cheat so that they can beat you when you do. You never systemize something that's straightforward that everyone follows. It undermines your authority.
you make a good point...one I never thought about, but it might stand up in court if you think about it....that is if one could ever get it there.
Look at what is going on in Europe. Spain et. al are cutting spending to avoid being "Greeced". This is hugely countercyclical and will lead us soon into a huge deep new downturn. This process will repeat here, Japan, and elsewhere.
This is exactly true and exactly how it will play out.
Bernanke's thesis was that these actions would have significantly improved the economy and throttled lending, but it did not.
We are now in an endless loop of government spending keeping the economy above water.
Had Ben's thesis proved true, the government would have been able to slowly remove all the stimulus and spending and returned to normal over time. But that is not the case.. and will not be the case.
Eventually this level of spending will have to cease and the economy will pay dearly for it.
Or, they can keep spending without concern until debt inflation destroys the currency, and the country, and the world.