You're now on the archive server. Commenting has been disabled.
Sprott On Problems And... Problems
The Federal Reserve’s policy of Quantitative Easing is failing. The US budget is ludicrous,
spending is out of control, spending promises are out of control, the world knows it - and we
know it. For all the pundits who see the economy improving over the next year, we invite you
to explain to us how this debt crisis will resolve itself without significant turmoil. We’ve
tabulated the numbers above - and they do not lie. As we wrote this past January, welcome
to 2009.
Eric Sprott's latest is a must read.
»
- 5194 reads
- Printer-friendly version
- Send to friend
" For all the pundits who see the economy improving over the next year, we invite you to explain to us how this debt crisis will resolve itself without significant turmoil. "
The crisis will just vanish. *poof* Acraba !
Voila.
Exactly. Just like my 401(k). Poof.
Phenomenal report... It merely reinforces the SS that we pay into as a huge joke (read: ponzi scheme). I'd feel 'better' about being informed if I wasn't getting crushed in the market...
...and your pension too, along with all your tangible assets, not excluding your home. I am targeting another crisis even worse than last fall to begin in the range of Aug.15 - Sep.15
Well, despite 50% jump in the oil prices, CPI is only 1.4 YTD & -2.3 in the last 12 months. Total credit is down & even huge inflationary pressure has not moved the prices. Quantitative easing my a!!!, deflation is coming. Now if you look at the historical records of "deflationary" recessions (1893, 1930, & Japan) those lasted for five (!!!) years.
Not that I mind green shoots, but the only green shoot I see is the increase in the savings rate, however it is harmful for short run (good in the long run). Reminds me of South Park episode, Imagination Land (rofl). Our imagination has been hijacked or should I say hedgejacked?
You're really trying to get every goldbug hooked on this site, hey? Sprott is one of my top names to follow.
Here's another good read, although nothing can follow that Sprott piece:
http://mineweb.com/mineweb/view/mineweb/en/page33?oid=86153&sn=Detail
New user- test
is that a goldman thing referring to 'cowbell'? I was with a Goldman employee over the weekend & he kept using that term & then said 'we are at the top of the food chain. I am Goldman!'.....was then time for me to leave.
SNL.... I need more cowbell
http://www.youtube.com/watch?v=VhZ78XGYsGY
Why do Americans keep payong into SS...when will the civil disobedience start?
Sprott is a long time favorite of mine. I think his research and findings are impeccable.
Employers withhold social security and medicare taxes (aka FICA) from employee paychecks. They are obligated under federal law to deposit these funds plus a matching amount to a bank which in turn passes these to the treasury.
It's not an individual decision, unless you're self-employed.
It demonstrates a lack of understanding of our taxation system if that's new info for you.
Anon, am not a US citizen so have no idae about your laws governing SS. That is why I was asking.
But thanks for the backhanded info.
PS I don't need to know your tax system as I do not pay taxes there, I am trying to understand the article from overseas
Employers withhold social security and medicare taxes (aka FICA) from employee paychecks. They are obligated under federal law to deposit these funds plus a matching amount to a bank which in turn passes these to the treasury.
It's not an individual decision, unless you're self-employed.
It demonstrates a lack of understanding of our taxation system if that's new info for you.
Ditto on above reply
If you own Treasuries through a retirement fund is that , on Sprott's list, pension or intragovernment? ( I am not American)
It's not clear from the table unless you're a federal employee. According to the footnotes in the chart at http://www.fms.treas.gov/bulletin/index.html (the link in footnote 1, then click on "ownership of federal securities" link), purchases of federal securities by federal employees through their 401(k) plan are included in #6 "other investors. (See FN 6 in the "ownership of federal securities" report.) ............
I'm not an expert but I'd assume that Treasuries held via a 401(k)/403(b) plan would be included under pension unless the 401(k) account owns an interest in a mutual fund that holds securities. Then I'd guess it would be under the "mutual fund" category. (401(k)s and 403(b)s are retirement plans offered by private and governmental employers where the employee makes contributions into his/her own personal retirement account. Some plans give employees a wide range of options for investing the funds in the account. Others only have a couple of choices.) However, it's not completely clear. .............
If you have an IRA, it would probably be included in either the mutual fund, other investors, depository institutions, or insurance company category, depending on where you have your IRA. (An IRA is an individual retirement account. Each year you can put ~$5000 in pretax funds into it. If you leave your employment at a place where you have a 401(k)/403(b) account, you can usually take the money in that account and transfer it to an IRA.)
If your retirement plan is a defined benefit plan (your employer puts in all the money and you are "guaranteed" a specified amount when you retire), then any Treasuries it holds would be included under pension funds (private pension funds if your employer is private or state and local pension funds if your employer is a state or local government). These are typically the big pension plans that have professionals who invest the money for them.
Yeah Sprott had some really good calls in the last year or so.
What's that one really good one that comes to mind... Oh yeah Timinco! Gold Jerry GOLD!
I'm afraid that Sprott is die hard gold bug.
Whos that A-Hole that was on BNN saying he was going to short it at 27$ ???
haha
All I can think of is this....
http://www.youtube.com/watch?v=7GSXbgfKFWg
Run with the hunted, America!!!
google i.o.u.s.a - same same, but in video form how funked america is.
We need this girl on the Tee-Vee for our Fed updates. (http://www.youtube.com/watch?v=pZu2oQ77mP0&feature=player_embedded).
All smiles and sweet nothings of 'auditing the Federal Reserve' puts her above the Citi-jet BJ ladies from That Other Channel on my list of 'women to hole up in a Montana fortress with'. Didn't go to her site so I have no clue if she's just a nutter tho.
Dude that's Shelly Roche, the queen of the online liberty movement and sometimes co-host of Freedom Watch on Fox with Judge Andrew Napolitano (great show by the way).
Simple & effectively presented... until the final chart. The return of the 10Yr to pre-Lehman levels is correlated with QE, but could be caused by a number of different factors. A scary trend, to be sure, but pretty JV to include this as the final point in an otherwise slam-dunk analysis. That said... Ka-Poom!
2T of known borrowing plus at least 1T in 2nd stimulus plus xT in response to any other shoes dropping = a combo of (a) manufactured crises to increase appetite for Treasuries and (b) insane inflation.
I'm firmly in the deflation/disinflation camp at present, but at some point the US/world economy will pull out of its nosedive and find a stable (but much lower) level, and the marginal utility of goods and services will stabilize or begin to increase. Similarly, at some point the debasement of gov't liabilities via QE and decreasing likelihood of repayment will trip some currently unidentified threshold and their marginal utility will drop rapidly. It'll be fast, it'll be ugly, but there will be valid deflation concerns until the very end.
Now Obama's claim that health care is key to debt reduction is clear. If we can't bring the rate of health care cost increases below the inflation rate, there is no other option besides a hyperinflationary collapse. If we can, we'll still get ugly inflation, but we have a chance of outrunning our debt and will only have to face the "Volcker cure."
I'm surprised that the gov't insurer option is "negotiable", as this is THE critical beachhead for ultimate government control and any hope of surviving our debt.
Thank you very much Tyler. This letter will be very helpful in explaining to my flock why "Quantitative Easing" is a polite euphemism for "Quantum Greasing".
Americans from the most informed all the way down to the stupid are getting it rammed up their ass.
So what to do? Who the fuck knows!
The government will invent a new class of bonds.
Benny and the jets are shooting the potato gun at the M1 Abrahms as it's trac's grind them
into mush---------------this pyramid of debt is beyond our solar system.
http://www.creditcontraction.com/images/affiliate/Great-Credit-Contraction-Liquidity-Pyramid-Large.jpg
Overall fully agree, a very solid report but I think Sprott is underestimating the amount of forced buying to come from #6, banks, brokers dealers etc... Given the govt bailouts, this is in effect moving $$ from the left pocket only to return to the right pocket. Total self-financing. As well, foreign central govts have shown a willingness to continue to buy. I think we will be surprised by their willingness to take one more "for the team", though it is very doubtful they will triple purchases. The Treasury's main source will be to create havoc in the equity market and direct capital into treasuries like a shepherd herding sheep like last fall, the flight to safety trade. Also there was a reason the definition of indirect bids was changed so as to mask the drop off in participating foreign sources. In the end, rates or the dollar have to give as it is not plausible to be able to keep low rates and a strong dollar with this amount of borrowing.
Greenspan's greatest achievement was the SS reform. If it had been stipulated that the SS surplus be used to purchase ordinary run Treasury issues then they would have had to be paid back. By putting them in the limbo (a cognitive but not at this point legal limbo) of intergovernmental IOU's he guaranteed they wouldn't be.
The intergovernmental IOU's have been found by the Federal courts but I'm not sure the Supreme Court, to carry the constitutional guarantee of "the full faith and credit of the United States". That will be changed of course, by this court. Then the Treasury will continue paying the principal and interest on its obligations to the Central Bank of China but not to American wage earners. It's a beautiful thing.
Of course the broadest issue is if the Treasury will pay off even it's ordinary debts denominated in fungible Treasury Securities. Well as the article says they will be even if the Fed has to print to do it.
One other little bit of minutia. The SS surplus, which is given to the Treasury for the IOU's, is counted in the annual settlement of accounts as income but the liability is ignored. It is ignored that is in relation to that years specific deficit. However the total deficit includes the IOU's. It's a bizarre bit of accounting legerdemain and perhaps Greenspan should not be given all the credit. That probably should go to Reagan's White House.
There is no real solution, at least not anything most humans want to hear.
The final conclusion to the equation has been known since the beginning, the temporary solutions have always been to delay the final conclusion as long as possible. The problem is, humans do not have unlimited ability to prolong the final conclusion forever.
The real solution is for humans to stop cheating themselves and cheating the generations the come after them because there is no way that humans can support the exponential equation forever.
You will not avoid collapse and liquidation, that is the price that is going to be paid by someone when the equation is no longer supported.
There is nothing Benny and Jets can do when the system is exhausted, all they can do is whip the tired greyhounds into a frenzy but if the dogs are dog tired... game over.
Man this dog is tired--tired of getting doggied styled---
good to see mako slapping ink to screen.
For those who don't have enough to read and can use more overload.
Top 5 comm banks by derivative exposure as % of RBC courtesy of the
Comptroller of the Currency(theres magic in the air) OCC quart report 2009.
http://www.occ.treas.gov/ftp/release/2009-72a.pdf
ek-e-'sig'num--behold the sign look at the proof
Maybe one day humans will see what the true problem is so that there doesn't have to be a bunch of tired dogs at the end of the game. Unfortunately I doubt that will happen. Humans take the path of least resistance.
This will not end well. Benny and the Jets could never keep pace with exponential growth but everyone bought it over the last 65 years, everyone bought the lie. If the dog handlers don't get those tired dog off the ground very soon it's lights out. Humans can't beat the demand for exponential growth which the equation requires forever. Soon the tanks will be rolled out.
It is entertaining watching everyone blame each other though. I could just imagine the same thing happening in Rome.
.
Rome didn't have a massive stockpile of nukes when it went down in flames. This will not end well.
I have to agree with Mako's comments.
Frankly everything that is going on is simply noise and symptomatic of a more deeply rooted problem. The real enemy is human nature (greed) and that will NEVER change.
Money can't simply be created in perpetuity out of thin air (i.e. interest) without consequences. The fractional reserve monetary system is the biggest ponzi scheme ever devised. Charles Ponzi would be proud!
The root of the problem is exactly what you have pointed out anon7709 but that isn't what anyone wants to hear because the alternative has it's own set of problems.
To me you are completely correct, it's all noise to keep you busy on the everything else but the cause.
The media: The financial crisis was caused by too many people speculating on housing.
Me: Bullshit, that is just what you have seen before the peaked... without the housing bubble within a bubble the system would have collapsed way before.
I am a fan of Sprott because he talks common sense. However, this report is a little old, bearing a May-June 2009 timestamp. Does anyone have contacts at the firm who can give an explanation as to how the Treasury has completed several HUGE financings since then, with 10 year yields dropping by 50 bps?
I believe that the most recent 10 year auction was covered more than 3 times, a rate we haven't seen since 1994 I think it was. Seems to fly in the face of Eric and Co's math.