Sprott's Last Decade Retrospective: It’s Déjà Voodoo Economics... All Over Again - This Weekend's Must Read

It’s Déjà Voodoo Economics... All Over Again

By: Eric Sprott & David Franklin

If you’re of a certain age, chances are you remember exactly where you
were when JFK was  assassinated. Similarly, if you’re from Canada or
the United States and have an even remote interest  in hockey, it’s
highly likely that you remember exactly where you were when ‘Sid the
Kid’ scored the  winning overtime goal in the Olympic gold medal game.
These were both "significant events", albeit  for different reasons. We
wonder, however, if any of you recall where you were on September
18th,  2008? Do you remember that day? We can’t seem to recall it
either, which is strange, because it was  one of the most important
days of the decade. October 7, 2008 is another day that should stick
out  in our memories, but we’re sure you don’t remember that day either
– and we’re in the same boat.  How is it, then, that we can’t recall
where we were or what we were doing on the two days the entire 
financial system almost collapsed?!? It boggles our mind. These dates
should have been emphasized  in every "review of the decade" written at
the end of 2009, but we’ve been hard pressed to find them  mentioned in
any mainstream publication. This is troubling to us, and makes us
wonder if people are  even aware of the incredible events that took
place on those fateful days only eighteen months ago.

The financial industry often prides itself on the hindsight principle.
We may not predict the future  with great accuracy, but when things
fall apart we’re very quick to explain why and how it happened  with
authoritative aplomb. "Hindsight is 20/20", as they say. But is it
really? Despite our seemingly  thorough analysis of past failures, the
financial industry seems to have an uncanny ability to make  the same
mistakes over and over again. Perhaps this is due to the fact that we
don’t properly review  events passed. Our obsession with predicting
future results impels them away into oblivion. The fact  remains that a
cursory look back on the last decade reveals an apparent cycle of asset
bubbles that  all grew and burst before our eyes, with little effort
made to actually address the underlying causes  that made them
possible. We have written at length about the next asset bubble now
forming in  government debt and currency. Looking back on the last
decade from 2000 to 2009, are there any  lessons that can provide some
guidance for the next decade? And are there any lessons that can  be
gleaned from September 18th and October 7th, 2008, when we almost lost
the entire financial  system? We certainly hope there are.

The seeds of the financial mess we are currently experiencing began in
the mid-to-late nineties.  As we approached year 2000, the widespread
belief developed that new technology would rewrite  economic rules. The
euphoric years between 1995 and 2000 blew the first asset bubble of the
21st  century in the technology-heavy NASDAQ Index. Alan Greenspan
first uttered his now famous  "irrational exuberance" warning in
December 1996 when describing stock valuations at the time.¹
It  wasn’t until mid-1999, however, that the U.S. Federal Reserve
actually increased interest rates in an  attempt to quell the
overheated stock market. The Fed actually raised rates six times
between June  1999 and January 2000 in an attempt to cool an already
overheated economy. The dot-com euphoria  burst on March 10, 2000, when
the NASDAQ peaked at 5,132, representing more than double its  value
from only a year before. We were watching the bubble closely at the
time, and wrote on March  9th 2000, "In the next few months, if not
weeks, we anticipate that the Nasdaq will capitulate to market 
liquidity. Valuations are screaming at us! Excessive speculation is
running rampant! DON’T BE A  PART OF IT!!!" It was a timely
recommendation.

In many ways, the NASDAQ bubble was somewhat conventional in that it
was born out of over- enthusiasm for the prospects of new technology.
The fact that the Federal Reserve actually tried to  cool the bubble
down, however feebly, in the years before its peak, is really what
differentiates it from  the bubbles that followed. The NASDAQ collapse
is well understood now, ‘in hindsight’. This collapse  compelled Alan
Greenspan and the Federal Reserve to embark on the largest rate cuts in
US history  in an effort to soften its impact. The inability to face
the economic pain of the market crash ultimately  set the stage for the
second bubble of the decade, this time in housing. The key point to
emphasize  here is that the Federal Reserve lowered interest rates thirteen
times between January 3, 2001 and  June 25, 2003 in order to cushion
the economy. These rate cuts allowed for increasingly easy access  to
credit on a worldwide scale. It didn’t take long for the second bubble
to develop, and it wasn’t hard  to see the warning signs. Even The
Economist magazine noticed, stating on June 16, 2005, that "the 
worldwide rise in house prices is the biggest bubble in history."²
Home prices rose at an annualized  rate of more than 11% from 2000 to
the peak on July 31, 2006 -more than doubling in that time  period.³
The financial sector became the US economy’s central economic driver,
generating up to  41% of all corporate profits and making it the
fastest growing sector of the economy.⁴ In July 2005, 
Greenspan described certain real estate markets as "frothy" and
recommended that the Federal  Reserve rein in lending standards.⁵
We wrote in response at the time that "(Alan Greenspan) should  be
careful what he wishes for… it may come true. It’s like throwing stones
in glass houses. It may  all end with the Federal Reserve having to
bail out the financial system, as it did with the savings  and loan
crisis a decade ago." We now know what transpired in the years to
follow – we’ve all lived  through it, and it ended with the biggest
bailout in financial history.

So what’s the point, you ask? In hindsight, it’s very safe to argue that the Fed probably shouldn’t 
have lowered rates thirteen times between January 3, 2001 and June 25,
2003. It proved to be an  extremely damaging policy. Artificially low
rates created a lending mania of enormous proportions  which dragged
consumers along for a debt-fueled buying orgy. In our January 2008
commentary,  aptly entitled "Welcome to the 2008 Meltdown", we opined
that "There are meltdowns occurring  everywhere: commercial real
estate… car loans…credit cards. It was all a massive Ponzi scheme 
sustained by overleverage. Because this has been one of the most
egregious bubbles ever, its impact  is likely to linger longer than
anyone expects. This is more than just a market failure. It’s a
systemic  meltdown." And it was. But the meltdown happened so fast that
it never seemed to burn into our  collective memory. Everyone remembers
that we went into a severe recession in late 2008, but do  they know
the details of what actually transpired? A quick review is needed to
appreciate how close  we really came to a full shutdown.

It was the Lehman Brothers bankruptcy on Sept. 15th that set everything
in motion. Most market  participants will remember that date - Bank of
America bought Merrill Lynch the very same day, so  it was certainly
memorable. What many people fail to appreciate, however, is the mayhem
that took  place during the following days in the US money markets. The
day after Lehman’s collapse, the  Reserve Fund, one of the oldest and
most high profile US money market funds, began to hemorrhage  money as
investors redeemed in panic. Large institutional investors soon began
pulling money out  of other major US money market funds fearing heavy
losses from Lehman Brothers debt. Almost  $173 billion was pulled from
such funds over the next two days, threatening to collapse the entire 
US financial system.⁶
Two weeks later, on Sept. 29th, investors sent the Dow Jones plummeting
778  points, representing the largest single-day loss in the history of
the index. In hindsight, it was somewhat  of a delayed response,
because the real damage had by then been averted by the Treasury’s
blanket  guarantees on all money market funds.

The fact remains that on Thursday, September 18th, the US financial
system almost completely  collapsed. The details of that day remain
frustratingly murky. The imminence of complete disorder  seemed to
scare Congress into action, but we can only piece the story together
through random  anecdotes that have been partially revealed through
subsequent interviews. In what has been dubbed  ‘the Kanjorski meme’,
Congressman Paul Kanjorski recounts a meeting that was held between
Ben  Bernanke, Henry Paulson and certain members of Congress where the
conception of the "Troubled  Asset Relief Program" (TARP) supposedly
took place. To stem the flow of money out of US-based  money market
funds, Paulson had to provide an almost instant guarantee on all money
market funds  held within the US. Kanjorski recounts, "If they had not
done that, their estimation was that by 2pm that  afternoon (September
18th), $5.5 trillion would have been drawn out of the money market
system of  the United States, [which] would have collapsed the entire
economy of the United States, and within  24 hours the world economy
would have collapsed. We talked at that time about what would happen 
if that happened. It would have been the end of our economic system and
our political system as  we know it."⁷
Further details of these meetings have been provided by Senator James
Inhofe, who  recounted that Paulson had warned of martial law and civil
unrest if the TARP bill failed.⁸ It is interesting  to note
that while Henry Paulson mentions several meetings that took place on
September 19th in his  book, the discussion of ‘imminent financial
collapse’ and ‘martial law’ was noticeably absent.

The official record of the events of September 18th, 2008 comes from a
research report issued by  the Joint Economic Committee. The reports
states, "On Thursday September 18, 2008, institutional  money managers
sought to redeem another $500 billion, but Secretary Paulson intervened
directly  with these managers to dissuade them from demanding
redemptions. Nevertheless, investors still  redeemed another $105
billion. If the federal government were not to act decisively to check
this  incipient panic, the results for the entire U.S. economy would be
disastrous."⁹
Between the official  record and the statements by members of congress
and the senate, we can piece together an almost  system-wide collapse
that was potentially hours away.

The second fateful date to remember was October 7, 2008, when the UK
almost collapsed. Bank  of England Governor, Mervyn King, describes the
situation: "Two of our major banks which had had  difficulty in
obtaining funding could raise money only for one week then only for one
day, and then on  that Monday and Tuesday it was not possible even for
those two banks really to be confident they could  get to the end of
the day."¹⁰
This was the justification given for the Bank of England to provide
secret loans of £61.6 billion to The Royal Bank of Scotland and HBOS to
maintain solvency.¹¹ Amazingly,  news of these loans was
never revealed until November 24, 2009, more than one year later.
Recalling  that fateful day, David Soanes, Managing Director of UBS
Bank, and part of the group assembled  to assist with the UK
government’s crisis response, stated, "We only really knew by probably
about  seven o’clock at night (October 7, 2008), that we, that everyone
was going to get through to the next  day."¹² These
revelations raise new questions about the true scope of bailouts
undertaken by the  major governments at the time. Lord Myners, the UK
Financial Services Secretary, alluded to similar  covert banking
operations conducted by the European Central Bank and the US Federal
Reserve.13  We have no idea what he is referring to, but we would
certainly be interested to learn more.

This type of activity by the leaders of our financial system certainly
helps to explain why those two dates  are not more ingrained in our
collective memory – strong efforts were obviously made to hide their 
severity. The fact that these details were left out of Henry Paulson’s
memoirs strikes us as astounding.  It also seems incredible that the
best we can do to understand those fateful days is to cobble together 
comments made after the fact. It serves to be reminded that the events
of September and October  2008 had previously been considered
unthinkable, and we must never forget that the ‘unthinkable’ can 
happen again. A complete banking collapse would not be pleasant – and
it’s certainly not an experience  we would ever wish upon ourselves,
but it must be remembered that WE ALMOST WENT THERE.

So where does this leave us for the decade ahead? In bad fiscal shape.
It seems as if we’re just  making the same mistakes over again, and on
a far larger scale. We have passed the debt obligations  of the
financial system onto the governments. We have liquefied the system
beyond any rational  explanation, more than doubling the monetary base
since the collapse of Lehman Brothers. Social  Security, which was in
balance in year 2000, is now underfunded by $15 trillion dollars. Total
unfunded  obligations of the US Government are now $104 trillion. If we
add the $6 trillion of outstanding Fannie  Mae and Freddie Mac debt and
the $12 trillion of outstanding national debt, we arrive at a total US 
government debt obligation of $122 trillion. It’s a truly preposterous
amount of money that will never  be paid off in today’s dollars. As we
wrote in our October 2009 article entitled "Dead Government  Walking",
the US Government is on a trajectory to default on their obligations,
and the same can  realistically be said for the UK and Japan. The
answer put forward by the US, UK and Japanese  governments? Quantitative Easing and 0% interest rates. Have they learned nothing from the past  decade?!

As our readers know, the flagship funds at Sprott have been managed
with the view that we entered a  long-term secular bear market in year
2000. We have never detracted from this view, and it remains in  place
today. We will not be bears forever, because the cycle will eventually
reverse, but a new secular  bull market will not, and cannot, emerge
until the world solves its debt problems. Our overarching  macro view
is strongly influenced by the Kondratieff Cycles. The ‘winter season’
began in the year  2000 and continues to this day. We have watched this
cycle unfold, and have noted the Kondratieff  Theory’s eery ability to
predict the debt defaults and banking collapses that we witnessed over
the  past two years. Our analysis suggests that we are only half way
through this Kondratieff winter, with  another approximate ten years
remaining. They will undoubtedly be an interesting ten years, and it 
should come as no surprise to our readers that gold is considered the
ultimate asset class to own  during the ‘winter cycle’. It has
certainly served us well up to now.

A review of the last decade would not be complete without our
predictions for the next ten years.  Rather than bore you with
prognostications, we would like to leave you with some titles we are 
considering for future editions of Markets at a Glance:

---

1. The Federal Reserve Board. Remarks by
Chairman Alan Greenspan (December 5, 1996). The Challenge of Central
Banking in a Democratic Society. Retrieved on March 10, 2009 from:
http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm
2. The Economist. (July 16, 2005) In Come the Waves. Retrieved from:
http://www.economist.com/opinion/displaystory.cfm?story_id=4079027.
3. Bloomberg, S&P/Case –Shiller Composite – 20 Home Price Index Not Seasonally Adjusted
4. Johnson, Simon (May 2009) The Quiet Coup. The Atlantic. Retrieved on
March 10, 2010 from:
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

5. Andrews, Edmund (May 21, 2005) Greenspan is Concerned About
‘Froth’ in Housing. The New York Times. Retrieved on March 10, 2010
from:
http://www.nytimes.com/2005/05/21/business/21fed.html?_r=2&oref=slogin

6. Henriques, Diana (September 19, 2008) Treasury to Guarantee
Money Market Funds. The New York Times. Retrieved on March 10, 2010
from: http://www.nytimes.com/2008/09/20/business/20moneys.html?em
7. Kanjorski, Paul (January 28, 2009) Kanjorski: We came so close to
complete financial collapse. Pocono Record. Retrieved on March 10, 2010
from:
http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20090128/NEWS04/9...

8. CNN iReport (November 20, 2008). Paulson Was Behind Bailout
Martial Law Threat. Retrieved on March 10, 2010 from:
http://www.ireport.com/docs/DOC-150837
9. United States Congress, Joint Economic Committee Research Report
#110-25 (September 2008) Financial Meltdown and Policy Response.
Retrieved on March 10,
2010 from: http://www.house.gov/jec/Research%20Reports/2008/rr110-25.pdf
10. BBC (September 24, 2009) Mervyn King and other key players reveal
true extent of financial crisis one year on . Retrieved on March 10,
2010 from:
http://www.bbc.co.uk/pressoffice/pressreleases/stories/2009/09_september...

11. Conway, Edmund and Monaghan, Angela (November 24, 2009) Bank of
England tells of secret £62bn loan to save RBS and HBOS. Telegraph.
Retrieved on March 10, 2010 from:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6646923/...

12. BBC (September 24, 2009) Mervyn King and other key players
reveal true extent of financial crisis one year on. Retrieved on March
10, 2010 from:
http://www.bbc.co.uk/pressoffice/pressreleases/stories/2009/09_september...

13. BBC (November 25, 2009) Alistair Darling defends secret loans
to RBS and HBOS. Retrieved on March 10, 2010 from:
http://news.bbc.co.uk/2/hi/business/8378087.stm

Comments

[Silver Bullet]

I was on a train heading to Milan on September 18, 2008...

[Anonymous]

I was glued to my screen with crap in my pants.

[GoldSilverDoc]

I went down to the safe and opened it, looked at the gold and silver, the years' supply of food, the generator and the tools, and started giggling, then laughing out loud for at least ten minutes.  It was one of the most fun days of my life, thus far (more and better are coming).

[Anonymous]

Might I suggest adding guns and ammunition?

[nuinut]

from Harvey Organ:
Rob Kirby with a fascinating find:

Subject: looky here 

Go to the Fed's "flow of funds report" Q4/09 just released toady at this link:http://www.federalreserve.gov/releases/z1/Current/z1.pdfScroll down to page 24 [Flow of Funds with Rest of Word] and observe line # 14 on that page. It states that the U.S. Fed sold 190.7 billion dollars worth of gold / SDRs in Q3/09. 190.7 billion @ 1,000 per ounce would be 5,937 tonnes of gold .

A Chartered Financial Analyst subscriber of mine follows this release every quarter and alerted me to the "back-dating" of the gold sales for Q3/09 in the release today. Note: In the same flow of funds report for Q3/09 at this appended link - there was no mention of gold / SDR sales - period:http://www.federalreserve.gov/releases/z1/20091210/z1.pdfI've attached the Flow of Funds Report for both Q3/09 and Q4/09 for comparison purposes.

Question: has the Federal Reserve just "papered over" the disgorgement of nearly 6,000 metric tonnes of sovereign U.S. Gold bullion? 
best, 
Rob Kirby

end.

The report is from the federal reserve government releases and it shows the flow of funds in the 4th quarter.

I checked the government data and sure enough on page 24, line 14 the usa sold 190.7 billion dollars of gold (SDR's translated into real oz). At 1000 dollars per oz that translates into 5937 tonnes of gold.

The previous quarter on the flow of funds reports showed no gold activity. Looks like the usa is trying to paper over their sale of 6000 metric tonnes of gold.

The usa has 8133 tonnes of gold so 73% of the usa gold reserves have been liquidated.

The problem here is that the gold belongs to its citizens and not government. The government needs congressional approval to sell the gold.

Trouble ahead on this front!

[THE DORK OF CORK]

      deleted

[Anonymous]

I turned up the volume on Metallica, got out my 9mm,filled my clips, and took my post by the front window......

[malusDiaz]

Know the stages of Collapse, The era of Big Men will be after a quick stop on level 2.

http://cluborlov.blogspot.com/2008/02/five-stages-of-collapse.html

[Anonymous]

... when the time comes you won't be able to reload fast enuf and I doubt you'll be laffin

[aint no fortuna...]

I was in a condo on a ski trail in the Mad River Valley of Vermont on Sept 18, looking at my two PC monitors and wondering whether there would be a bank anywhere open by the end of the week. I had taken a lot of cash out of the bank just in case... but I figured if peanut butter was going to end up costing $100/jar that cash wouldn't last long. I looked out the window and there was this great big bull moose chomping on the leaves of a tree 20 feet outside my window, and for some strange reason he seemed totally oblivious to the financial meltdown threatening mankind... I was a little jealous but also happy for him... I figured his chances of survival were much better once man was off this rock.

[Anonymous]

I would have gotten long peanut butter

[THE DORK OF CORK]

I was in Corsica walking the GR20 , I had diversified my deposits into Government guaranteed portions so I was under the impression that I was safe from the gathering storm - when I got down I realised what a foolish boy I was.

[velobabe]

ZH i love this. this is a brilliant creation, damn i'm giving you guys 5 stars and a nobel prize.

i wish i could print some of your masterpieces out. could you creative printer friendly pages? a lot of the other blogs do. i print out stuff to send to my non-computer users friends. this is educational information and the beauty is how effective you are at connecting dots and bringing into existence with words such a powerful picture. and explained to a layman dumb down blond. TD and guests your artists that paint a really powerful picture.

ps we were doing our '08 crush and it was beautiful!

MEN keyboarding, thats what happened, too funny. i think that is it.

[Anonymous]

I remember well where I was during those fateful days - I was glued to CNBC. Good thing too, by carefully following Maria's sage advice I was able to avoid any losses! I remember how concerned I was about Bear Sterns - until Jim calmed me with his words of wisdom. A big booyah to all my friends at CNBC!

[Anonymous]

Remember the crash well. Completely did not expect the open fraud, felonious nature of the gov't response nor that all the regulatory, supervisory, law-enforcement agencies would join the open conspiracy AND that no indictments, prosecutions, or attempts to cure the fraud would ever occur.

As it becomes more apparent that the entire debacle was a state-sponsored fraud to "juice" the Ponzi system to some final conclusion, and as it becomes widely apparent that these very wise (if not demonically motivated) "guardians" will gut this system until the bitter end instead of move to reform, revise, or even re-revolutionize it--Know this:

The global system cannot withstand the snowballing political and financial insults defiantly striking at its core since at least end 2007.

Tellingly, the Erskine Bowles/Alan Simpson interviews about their supposed recommendations to bring budget balances are a study in assumed failure--systemic parody--gallow humour. Sparrow Belch?

http://www.dipity.com/timeline/Alan-Simpson

Industrial production another deep arterial cut.

Boeing Airline plunge (remember deep depressionary is at least 25% drop in production)

http://www.metal-pages.com/news/story/44664/

http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=comm&id...

Caterpillar heavy equipment disaster

http://topnews.us/content/210371-caterpillar-reports-65-decline-q4-earnings Caterpillar

GE engine, locomotive, turbine and earnings declines

http://www.huliq.com/3257/90721/ge-earnings-beat-estimates-still-drop-19...

http://www.reuters.com/article/idUSTRE5A95PM20091110 f-35 no engine

http://www.tradingmarkets.com/.site/news/Stock%20News/2513536/

Add that the gov't now effectively controls and operates the auto sector, insurance sector (AIG and stock props), mortgage sector (F&F), what productive sector of the economy can power us away from the implosion?

Forget not the blatant global "milking" of hot/cold major currencies, PM metals short scandal, equity PPT, bond market buys via the FED, MBS taken upon FED balance sheet, and the explosion of monetary base-federal debt/deficits.

Open defiance of the gilded laws of free market economics and repudiation of the justice demanded by heaven's mandate for the felicity of the Great Creator's children portend a great, great fall. This, to now, is just a slip.

Earlier stumbles were a young world that could again arise and mend itself. The world is now old and ripe and brittle. When it collapses from the snares and stumbling block deliberately placed in its path, it will never again stand.

[Spitzer]

I am surprised that Sprott is such a believer in the Kondra cyles. I am not a believer in in simply because it only goes as far as the Fed takes it. If Greenspan was fired and replaced by Volker in 2002 then what would that say about Kondra cycles.

It reminds me of how many chartoligists predicted the Indai IMF gold purchase. None

[jimmyjames]

by Spitzer
on Sat, 03/13/2010 - 00:17
#264148

I am surprised that Sprott is such a believer in the Kondra cyles. I am not a believer in in simply because it only goes as far as the Fed takes it. If Greenspan was fired and replaced by Volker in 2002 then what would that say about Kondra cycles.

*********************************

Think your right--

This chart shows how the K-Cycle winter-was delayed by Greenspans bubble blowing--

http://photos1.blogger.com/hello/101/3984/1024/K-Cycle-Interest-Rates.jpg

[Anonymous]

Yes - you nailed it Easy Al invented the extend and pretend dogma that dominates CB strategy today and succeed to the extend that winter was delayed a couple of years, you could make the case that is what was pursued in 1997 as well...

[Blindweb]

Theories like that only work when they aren't well known.  Once everyone finds out about them they can be planned against

Like an exploit in a piece of software.  Or a tick in your poker opponent.

[Howard_Beale]

Cycles are cycles--known or not--and the bursting of the debt bubble has yet to really occur. We're still in it and nothing will resolve it until it gets wrung out. And then we begin again.

[A_MacLaren]

+1  Spot on HB.  The Kondratiev cycle will not complete until the Debt bubble bursts.

[Anonymous]

Sept 18 '08? Sitting in an airport lounge watching CNN.

I think some of us were aware of what was going on, expecting an 'event' and the magnitude of what was happening made an indelible mark at the time.

[Zodiac]

Reasons not to remember Sept 18 and Oct 7, 2008:

1. The US president had already abdicated any leadership role and was probably on drugs, booze or both.  There was no FDR moment where the president came out and declared that this date would live in infamy.

2. There was no vivid recorded moment (still pictures, radio, television, film) that would stick in peoples' minds.  No convertible limousine speeding off from Dealy Plaza with a wounded president.  No Zapruder film of this financial meltdown.

3. The operation to save the financial system was largely covert, with not a large number of people involved. 

4. There was no great national debate or adrenalin build up leading to those dates in the fall of 2008.

[faustian bargain]

Indeed, the events of the crisis seem to have been designed as anticlimactic faits accomplis.

[Orly]

Funny how all the "right" people were in the "right" place at the "right" time, eh?

[Anonymous]

Perhaps not so funny afterall

[Enkidu]

"...make  the same mistakes over and over again..."

And, most significantly, they are not 'mistakes'. They make the perpetrators very very rich!

[BlackBeard]

We're headed for crazeeeeeeeee!!!

Let's all join hands and chant kumbayah in hopes that this is the decades where Keynsian theory is proven to be as retarded as it sounds when explained to 5 year olds. (it mystifies me as to why undergrads and graduate students fall for it).

[Cognitive Dissonance]

"........where Keynesian theory is proven to be as retarded as it sounds when explained to 5 year olds. (it mystifies me as to why undergrads and graduate students fall for it)."

For decades, children have been indoctrinated from grade school NOT to "think" as the word is classically defined. Like a rat in an extremely complex maze, as long as the child stays within the parameters of accepted thought and action, they're told they are thinking (brilliantly I might add, keep up the good work) and are encouraged to do more with bell curve grading.

The "No child left behind" program is a classic example of group think hive mentality taken to the nth degree. Everyone learns the exact same thing (state approved newspeak) and are repeatedly tested to make sure the approved (science, history and math) propagada has been ingested and can be regurgitated on comand. Even the teachers, after a few years of vigorous protest, have been beaten into submission and now stay within the lines when drawing with their red marking pens.

Nope, I'm not surprised at all that by the time the mental robots reach college they accept everything placed on their mental hard drive. It all makes sense to them because everyone says it makes sense, including the ultimate persuader, the economic system. You can't get someone to think "A" if they're paid to think "B".

[Anonymous]

Love your posts, CD. Some food for thought:

I was a member of an "alternative" teaching program called Teach for America. Though predictably opposed by the conventional vested educational interests (unions, administrators, etc), the program was actually far more tame than I had initially hoped. For the most part, both corps members and the program's facilitators bought into the traditional public education constructs (uniform and homogenized standards especially) lock, stock, and barrel, and saw very little value in truly unique approaches to education. What you say about teachers being beaten into submission is absolutely the case, and a significant part of why I decided to leave the classroom. Wholly unique approaches to instruction are marginalized from the get-go.

And don't get me started on TFA's "training." Because they recruit folks who aren't necessarily education majors, there is the need to condense several years of Education Curricula into one summer. What was discouraging was that instead of telling us WHAT to teach, they instead told us HOW to teach. It was indoctrination of the highest order, replete with "diversity training", "learning teams", and a manufactured culture designed to illicit hive thinking and submission-inducing groupthink.

I take comfort that I wasn't the only one in my cohort to see through Teach for America. Sadly, we were a distinct minority, and seemingly more and more college graduates eagerly dispense with the notion that education doesn't have to be as it is today in lieu of the tepid, inside-the-box reforms advocated by "radical" organizations like Teach for America.

[Bob]

It's easy to see why the "indoctrination program" would produce people incapable of "real" thought. 

That said, however, it does not square with my first hand experience with the actual results (see below.) 

In confronting this apparent contradiction, I'm reminded of the old USSR.  No doubt, that system was effective in controlling the population's behavior in the aggregate.  But, in spite of its renowned "totalitarian mind control" apparatus, did it actually succeed in washing people's brains?  Perhaps somebody who lived in that system can speak directly to this issue, but I suspect (and have seen alot of supporting anecdotal evidence) that most people remained fairly aware of what was actually going on, but had no viable alternative but to go along as if they didn't know better. 

I think this question is of more than academic value and is far more than a semantic distinction. 

[Cognitive Dissonance]

Nothing was said of brain washing. We are talking about group think and hive mentality. There is a world of difference. In my opinion, brain washing is indoctrination that is forced upon the person after the education process is mostly over and one thought must be supplanted by another.

Group think and hive mentality starts at birth and is true indoctrination because it is accepted, even welcomed, as proper and needed from the very beginning. The USSR system didn't work because everyone "knew" they were living under a oppressive regime of haves and have nots. Most of the people living in America have bought into the notion of "freedom" and "equal opportunity" and thus they welcomed the programing, at least until the last few years, when the emperor began walking around without clothes.

[Bob]

Yes, it will be interesing to see how people react to the news that the soma is all gone if/when the drama of American Lifestyle gets seriously derailed. 

Will our answer to the unemployment problem be increased "opportunity" in the National Guard?  That would be a touching demonstration of community, a people "pulling together" in time of crisis. 

BTW, what are "clothes"?

[Cognitive Dissonance]

–plural noun

1. garments for the body; articles of dress; wearing apparel. 2. bedclothes 
http://dictionary.reference.com/browse/clothes

[Bob]

Never underestimate Google:

http://www.ineradicablestain.com/dollgames/glossary.html

Hey, I just stumbled upon it!

[Cognitive Dissonance]

I like your definition better.

"Clothes:

When admitted to Doll Games, dolls were immediately stripped of the clothes they arrived in. Dolls incapable of nudity, i.e. those who wore plastic clothing molded to their bodies or lacked a realistic body beneath their clothing, were usually disqualified, important exceptions being Josh McBig, tolerated in spite of his molded underwear, and cowboy Dan, handicapped but not ruled out by his full length, but fortunately more or less skin-colored, plastic suit. Doll games used both homemade (see Sock Dresses) and store-bought clothing, the latter often pillaged from dolls excluded from the doll games, or from Gemco (see Gemco.) Store-bought clothes, while more rare, were often highly fetishized for their fitted quality."

[Bob]

Spooky, huh?

[Anonymous]

Right on, CD. I was born and lived half of my adult years in the USSR and after coming to the US and living here for the first couple of years was shocked to discover how much worse the brainwashing was in this country and how amazingly ignorant the "sheeple" are about being brainwashed and fed with the tea spoon the official propaganda. The big difference, as you said, was in the USSR people knew they could not trust what they read in official papers and watched on TeeVee. People learned to "triangulate" (piece together small pieces from various sources of news to try to sift through the propaganda noise). However, it does require extra effort and higher intelligence. Here, 99% of the people do not even know they need to triangulate...

But I hope not all hope is lost, thanks to alternative channels like this ZeroHedge where people can get the unvarnished and undistorted news and the so-what, rather than the 3rd grader "Booyah" crap.

[Bob]

You know those "standardized" tests given to virtually all students nationwide throughout their K-12 public educations?  For at least the past ten years, they've all included essay questions in social studies as well as reading, math and science. 

Moonlighting on this work, I have read thirty to forty thousand of those essays over the past 10 years.  It's like reading their diaries. 

Initially it was a profound shock.  These are not the kids we've been led to believe they are. Originality of thought and expression, analytical sophistication, informed idealism and deeply humane values are astoundingly present in the majority of the students' essays--most especially, of course, on questions that relate to "social issues", e.g., government spending, the media, education, individual freedom, etc, which impact them. And believe me, they are not only well aware of that impact, but able to impressively reason about and articulate it. 

This holds true from elementary school through high school graduation.  Sure, they're not all writers, but perhaps the majorty (at minimum 30%) are rigorous thinkers when given the opportunity to demonstrate it. 

Which, when I first experienced this epiphany 10 years ago, forced me to think about what the fuck happens to these kids.  Having worked in colleges and been around college kids enough, I know most of those kids aren't "captive" minds in college, either.  So when does the critical lobotomy occur and how?

Clearly, to my mind, it happens when they hit the "real world" (interesting that we bill it that way, isn't it?).   

I've concluded, given what I know about these kids from kindergarten through college, that what happens is literally "on the job training." 

OJT in this case is all-encompassing.  It's a full embrace of the sad slavery of conventional life.  Which is about paying the bills, meaning getting and keeping that all-important job.  And it's us who teach them--on the job--how it's done in the real world: Keep your head down, go along to get along . . . or you'll pay the price.  

Sorry, folks, but the problem is us.  We welcome them to the "real world" of our making.  It ain't them.  And it ain't their school teachers. 

It's us.  

[Clampit]

I have two kids of my own, who are being brought up to see the world exactly as I (and most here) see it. I really can't wait until they enter "the real world."

My favorite sound bite from the great pillage of '08 is, "threatening to collapse the entire US financial system." Exactly what the hell does this mean, and why on god's earth would I as a productive citizen be against it? 

[Crummy]

They were afraid the world might realize that a coyote can't survive having an anvil dropped on it's head, so they ran over, picked it up, and made it wave to the crowd. Then the following week CNBC reports having seen the coyote enjoying a meal, CNN has him shopping for Christmas presents with a dressed down (yet still fashionable) Road Runner, and TMZ has pics of it doing coke with Kristen Stewart...

BTW, I have decided call this particular overwrought metaphor "Weekend At Bernanke's" if anyone's interested.

[Anonymous]

Oh, +1. +1. Clapping loudly!!

[Anonymous]

Oh, +1. +1. Clapping loudly!!

[merehuman]

clampit. i junked you because all the rest of us go tjunked. Did not want to leave you out. And no, its not me doing all the junking.

[Anonymous]

+ 100 million billion trillion zillion.

I'm 40 years old now. I've experienced this. I get dumber and more scared every bloody year, and I'm still not half and dumb and scared as the 'adults' all around me.

[Anonymous]

Bukowski said it best:

How in the hell could a man enjoy being awakened at 6:30 a.m. by an alarm clock, leap out of bed, dress, force-feed, shit, piss, brush teeth and hair, and fight traffic to get to a place where essentially you made lots of money for somebody else and were asked to be grateful for the opportunity to do so?

[Anonymous]

Ah! Bukowski, a man assembled of palestinian potsherds. Reminds of the turmoil of '35.

http://www.time.com/time/magazine/article/0,9171,748605,00.html

[Cognitive Dissonance]

Thank you for your feedback. I was most certainly not pointing at the academic world as "the" problem. If you've been reading my posts for any length of time, I have consistently pointed the finger back towards ourselves. My post was a response to the prior post about acceptance of erroneous information by graduate students.

I didn't say students did not exhibit the ability to express ideas. My example was of an extremely complex maze in which the student is placed. The large roaming area convinces both the student and the observer that there is a wide range of thought allowed. This is an illusion. If the "system" quickly coverts the open minded and inquisitive student into mindless robots, not only must we question the system but the students who were trained to adapt so well so quickly.

The younger generation has been totally co-opted, just as we all have been. We all talk about fixing the system, as if a tune up or even major overhaul with "fix" a fundamentally unsound and ultimately self destructive system. Until we begin to search within for basic answers for our own behaviour and our propensity to lie and deny, there will be no fixing of anything else.

[Bob]

Hey, CD, I'm one of your most ardent followers and admirers, man!  In the ZH beginning I used to address, informally and in comparatively meager fashion, some of the territory that you have since come to so comprehensively, inexhaustably, courageously, creatively and authoritatively speak to on such a regular basis. I'm still around now and then, though.

How could you get me wrong? [smiley emoticon]

[Cognitive Dissonance]

Bob? Is that really YOU? 

You look.....er....different. Did you do something with your hair? New mustache? Did you loose weight? Oh, I know what it is. It must be those Norwegian Olympic Curling Team Pants you're wearing that tripped me up. Wait a minute, let me put on a pair of shades. Yes, there......much better!

http://www.facebook.com/photo.php?pid=3276300&id=311163439555

http://www.facebook.com/pages/The-Norwegian-Olympic-Curling-Teams-Pants/311163439555

I owe you an apology because after reading the posts again I most definately jumped you in the back alley. Sometimes I get very narrow in my focus and step on a lot of friendlies in the process. My apologies. And thank you for your kind words. I sometimes become a bit frightened trying to push against the seemingly endless tide and I suspect that makes me a bit......jumpy and irrational.

[Bob]

It's okay . . . I know about Fight Club. 

Seriously, though, regarding "If the "system" quickly coverts the open minded and inquisitive student into mindless robots, not only must we question the system but the students who were trained to adapt so well so quickly."

I think the position of freshly graduated newcomers to the workforce is analogous to the position of, say, rookies in the NBA.  Is it appropriate to place a Michael Jordon-sized measure of responsibility for the team's performance upon every rookie?  Hell, the Kafkaesque game of "Nod and Wink Reality" they face has little or nothing to do with the one they learned in school.  It's virtually the opposite, in every way that involves morals and positive social values at least.  Consider: Most MBA programs are now requring classes in Ethics--does anyone really think it's gonna make a difference?  Have professional Codes of Ethics that supposedly impose penalties made much difference in the "real world"?

I say you gotta blame the veterans, coaches and referees, i.e. co-workers, bosses, owners and officials.  You can't blame the rookies who can't even make the team if they refuse to play the established game. 

[Cognitive Dissonance]

"I say you gotta blame the veterans, coaches and referees, i.e. co-workers, bosses, owners and officials.  You can't blame the rookies who can't even make the team if they refuse to play the established game." 

Agreed wholeheartedly. I'm just focused on the narrow slice posed by the original poster and you quickly broadened your scope to encompass the entire problem, not the squeaky wheel in one sub-section.

However, the one area of consistent rebellion for hundreds of years has been the student body of various colleges and other "higher" learning centers, though most people just focus on the 60's and 70's students. What has stunned me is the near total apathy and indifference displayed by these students over the past 20 years and particularly over the past 10. The programming of mind and spirit by video games and other various video interfaces has been most effective in it's assimilation and indoctrination technique.

Our children have been co-opted most expertly.

[Anonymous]

CD, an admirer here. The Academic world *is* a major part or the problem. My experience at the London School of Economics (Phd-level, financial regulation) showed to me that any type of deviant thought is punished in an exemplary manner. Legitimacy questions regarding "lender of the last resort", "interest rate management", "income transfer through inflation" -inter alia- were either rejected or downright ridiculed. LSE claims 9 nobel prize winners in Econ, and my own supervisor was from the board of the BoE. Yet, as I said, deviant thinkers WILL be sorted out.

[Cognitive Dissonance]

While doing additional research to flesh out the outline for part 2 of my most recent article....

http://www.zerohedge.com/article/end-empire-waking-zombie-nations-psychology-consciousness-and-egoic-mind

.....I came across some interesting academic articles that unfortunately are not posted on the Internet but must be purchased from the publisher. After doing so, I was surprised to find that they bravely poked sticks into the bees nest of rigid academic group think and myth reinforcement and most certainly merit more than passing mention here on ZH.

I have decided to stop working (for now) on part 2 and instead immediately launch into an article about these 6 academic articles. I suspect the authors of these articles won't be invited to any tea parties for some time and I hope they have tenure. What's truly amazing is the deafening academic silence left in the wake of the publication 2 months ago.

More to come.

[Bob]

I'm glad to hear that.  It's hard to refute reports from the LSE.  But I have to say that in my grad program--not an Ivory League type, Future Leaders of the Civilized World operation to be sure--I enjoyed extraordinary license to challenge sacred cows. 

I know I'm hardly alone in that.  The research is always out there.  At most schools you can find some freedom, imo. 

Of course, there are usually biases built into the various schools of thought of any academic discipline, but how many institutions make no place whatsoever for "alternative" views (even if no more than token positions on the periphery)? 

Of course, publishing is something that happens at the "real world" level of existance, subject to the same old limitations. 

[Cognitive Dissonance]

"I know I'm hardly alone in that. The research is always out there. At most schools you can find some freedom, imo." 

One is always allowed to discuss the consequences of the Big Lie(s) but NEVER allowed to discuss or refute the Big Lie(s) itself. This is what I'm talking about. When articles and/or paper questioning the Big Lie can't even get into peer reviewed publications, despite clearly articulated and expertly presented evidence and well thought out examination, it's at best self censorship and at worst centrally controlled censorship.

These articles discuss this phenomenon with examples and particulars. 

[Clinteastwood]

CD,

OK, everyone agrees it's a good idea to use your head.  Think about this (since the above thread is about the financial meltdown):

Maybe Kanjorski was lying about the $trillions about to be withdrawn from our financial system?  Think about it.  Where would those who were withdrawing all that money park it?  Did they demand cash (of course not)?  Did they demand that it be put into their bank accounts, perhaps?  (Where the hell else could it go?)  

So, if all those $trillions were being withdrawn from one part of the system and placed into another part OF THE SAME SYSTEM.....why was it such a meltdown?

It's not like the money just disappeared.

We've been lied to.  TARP resulted.  The banksters made off with mucho FRNS at taxpayer expense.  Talk all you want about using your head..........and then see if you can actually do it.

[steve from virginia]

Every time I read that remark I have to laugh. There's no point in putting a check under your mattress.

I think Kanjorski was complaining about all those trillions going to Antigua ... wait! That's where they are all going, anyway ...

[Anonymous]

Don't bother. Take your meds and STFU.

Or just jump already.

[Cognitive Dissonance]

Wow, someone is overloaded. It seems it's time for your nap because thinking beyond you nose requires more than reflexive hatred and simplistic worldviews.

Just sit down in front of the boob tube, each your nachos and shut the fuck up like big brother taught you. See, life looks better already, doesn't it.

[Anonymous]

Communists have infiltrated the Academic world, and not by accident. The evil of government interference in the economy is described to the young skulls full of mush as (a) natural (b) necessary (c) to be further developed in many exciting directions. I was born in a Communist country. I ask you, stupid Western Communists: why don't you ever learn? It can't be your abstract hope of total power that is really motivating you. Those professors will never really achieve this personal power en mass. What the heck do you really want and why don't you can about how many people you destroy in the process?

[Master Bates]

Kids aren't stupid, and most aren't indoctrinated.  That's just tripe that Rush Limbaugh and Glenn Beck WANT their sheep followers to believe, so that they will fight to seek out conservative indoctrination for students in schools.

Some people in our country WANT to keep people stupid and uneducated.  it's easier to lie to them that way.

It's not the education system though, it's the media.

[MachoMan]

I remember writing an essay in sociology in undergrad regarding my "high school experience."  I had a fairly detailed section likening our pep rallies to the two minute hate.  They could have put anything in front of the student body and we would have cheered just the same.  I say we, like I haven't been a weirdo as far as I can remember.  Needless to say, I was never aligned to the practice, but there's not much else to do when the state requires one to be babysat.

Having been through 7.5 years of education past high school, racking up 2 post graduate degrees in the magnificent public school system, I can say that freedom to be creative and break the mold is incredibly situational and, in general, nonexistent.  If X teacher is grading my work in the course and X teacher adheres to Y theory, then I had best accept Y theory if I care about passing.  My grandparents were life long educators and my grandfather always told me, "your gpa is simply a function of your ability to schmooze."  In this sense, we're all taught to be machiavellian scholars, adapting to and taking on the ideals of who wields power over us.  Machiavellian chameleons.  As a result, we never really ever truly develop our own way of thinking or, at the very least, do not subject it to the rigors of peer review.

The problem is even more perverse as we enter the work force.  With rising real costs (what happened to price discovery?) and scarce jobs, we have no power in which to wield or require politically entrenched superiors to listen.  Further, given that a bachelor's degree is a must now, even for making coffee at the local cafe (because like the FED and factional reserve banks, educational institutions print things en masse as well), student loan debt becomes nothing less than a hangman's noose, dragging us around by our captors' hands, relegating us to indentured servitude.  And, to exacerbate the problem, somehow, along this entire journey, we never even learned to balance our checkbooks or discovered one item of legitimate financial knowledge, thus making us completely incapable of "living" in the modern world (on a long enough time line because of the boom/bust cycle), despite being sold a different bill of goods. (everyone is a genius in a bull market fueled by unbridled credit expansion).

When education budgets get stripped and state employees become a skeleton crew, we might get a chance to correct these issues.  Until then, the entire system is too entrenched to be budged.  What happens when an immobile object is struck by a moderately confident force?  Kind of like a suicide bomber running up to an abrams and detonating...  give it some red paint, but the people inside are none the wiser.  Hope you don't get blacklisted.    

[stoverny]

I think Keynesian stimulus could have a beneficial effect during cyclical downturns, IF AND ONLY IF the government was setting aside money during the good times to use as stimulus during the bad times.

As we all know it is virtually impossible for politicians to put aside money during good times, so in real-world practice the theory is useless.  Instead it is used to put a veneer of academic respectability behind an obvious all-gain, no-pain scam.

[Anonymous]

Perhaps the WISEST statements I have read in 5 years.
Thank you!

[Dantzler]

Of course any money put aside would have to be first taken away from the citizens. Why not leave it with them in the first place?

[Crummy]

"... and Mises never spoke to stoverny ever again."

[THE DORK OF CORK]

Hey Ireland reduced its physical national debt and created a 20 billion euro pension reserve fund - fiscal responsibility does not mean jack shit when commercial banks are allowed to create monetary time bombs.

This insane money creation inside banks must stop - at the very least go back to conservative fractional reserve system.

[xPat]

I don't recall where I was on the 18th, but I sure do remember where I was about a month earlier: At the bank withdrawing cash after Chris Martenson warned his readers to get 3 months worth of cash out of the bank and get ready for a possible banking holiday!

This piece sure hit home in reminding me how prescient Dr. Martenson's writing actually is.

xPat

[umop episdn]

I was probably checking Dr. Martenson's site (and a few others) on Sept 18, just like every other day that September. Ah, the days when I thought the financial world just might collapse....now I know for sure.

[Anonymous]

Yeah you betcha... the frequency and amplitude of the Kondratiev wave is increasing exponentially as we roll along.
I don't think she can hold much more Captain! She's gonna blow!
Then its bye bye blackbird...
Keep it real y'all
and remember...

http://www.youtube.com/watch?v=iMUiwTubYu0

[waterdog]

There is a possibility that these two important dates will be a part of some writings related to significant dates of the decade as soon as the decade ends at midnight on 12/31/2010.

Why is the base 10 counting system such a challenge for 95% of the population? It is taught in the 1st grade. If you really want to screw with some minds, ask a person who believes the new millenium began 01/01/2000, why the 1900's was called the 20 century.

[jeff montanye]

for that matter the stock market decline mentioned in the article was not the biggest decline if one measures in percentage, black monday in 1987 was.  if it's only nominal terms we care about, we shouldn't correct for inflation either.  some people think the stock market was flat from 1965 to 1983 instead of down about 70%.  

[Anonymous]

0... 9 not 1 to 10. Once you dinos die out, there will be no confusion.

The calendar should have started at year 0 rather than year 1.

[godfader]

How's Sprott's "SPX to 400" prediction coming along?

[serendipitous_one]

We would've already seen it last year had it not been for the intervention of the PPT.

[Orly]

Hold yer horses, mate.  We're getting there.

[Howard_Beale]

Giddy-up! The carnage is coming.

[Anonymous]

"Almost" is the key here. No one remembers when the team almost won the big game or the president almost got shot either.

The real question is would we be better off now and in the next few years if there was no "almost" on 9/18/08 but instead a real, honest to God systemic financial collapse?

If society needs to, as ZeroHedge seems to believe, delever at all levels...well, how are we doing now compared with the probably outcome of a financial collapse in Sept '08?

-Would the system stay collapsed or would we pick up the pieces and move on?

-Would we be looking at more or less government in our personal lives and wallets right now?

-What problems would be worse, which ones better or avoided altogether?

-How are we not traveling on the same road as Greece right now?

Sorry but assuming that we barely avoided the worst in Sept. '08 (WE ALMOST WENT THERE)seems like stealing third base to me. I think a lot of us would like a do-over and more of us than you think, given what we know now, would have rather taken our chances with a good old-fashioned bank collapse.

How about a ZeroHedge poll - If the options are zombie economics/slow death or complete banking collapse with at least the possibility of rebuilding while there are still people walking around who know what it's like to thrive in an economy not dominated by the state....I know which way I'm betting.

[Bob]

Great points and vital questions.  I like the idea of that poll.

[DoctoRx]

The S&P 500 was at 645 in March 1996.  If one assumes an inflation rate of 5% per annum over 14 years, the averages should be at 1290 to keep pace w inflation.  

The average investor was better off in Treasuries.  Certainly for less risk than the stock market, almost everyone except those gifted w inside info, would have been better off in the corporate or muni bond market than stocks.

Fair value for the S&P 500 may be as low as 700 even today.

[Winisk]

The only explanation for the pattern of repeating 'mistakes' and the bizarre lack of transparency of what exactly went down on those fateful days is that they don't want us to know, nor do they have any intent to fix anything.  Nothing new here.

I remember where I was with much detail.  It was a beautiful autumn day, sun was shining, warm, people busy doing what they always do with smiles on their faces. I was at work obsessively listening to CNBC while my coworkers showed a passing interest to my statements such as "The financial system is broken!".  They had no clue of the gravity of the situation, nor did they care.  It wasn't remembered because few people took notice.  It was over before they realized what had even happened.  It was like a magic act.  The hand is quicker than the eye.

[Anonymous]

I was watching Kim Kardashian seducing men and turning their loins to jelly.

[chindit13]

As we know, the only system that was broken, or near broke, was the system that rewards underserving people far in excess of any value that add to the species.  Can we live without banks?  Probably.  People find a way.  The greater question, though, is can we live without Goldman Sachs' Prop Desk or must the taxpayer stand behind those servants of god?

Most of the banks we saved do not add the value to society they think they do, yet they do it at a cost that is shared anything but equally.

There are places in the world where people pay cash for most everything, including homes.  There are places in the world where insurance is sketchy or non-existent, yet people still ship goods and buy homes and drive cars.  There are places in the world where people have little debt because debt is difficult to obtain.  Their economies still grow.

The "threat" we faced was to the system that enriches the Prop Desks and the Primary Dealers.  Several hundred million Americans would be doing just about the same without the bailouts, except that they would share a smaller National Debt.

[Orly]

Bravo!

[Crab Cake]

"Can we live without banks?"

Yes.

Can banks live without us, the slaves?

No.

They will not willingly allow us to leave the plantation.  It's time to stand up and fight.

[Sancho Ponzi]

Economies are far more resilient than people think. Jeez, take Italy for example. Italy can go through governments like most folks go through toilet paper. Their fiat currency was debased to the point locals called it 'Funny Money'. In the end, the Italians are an intelligent resourceful people, and the country and economy survived.

Looking at the current macroeconomic situation, banks and businesses will fail, hardships will be endured, debts will be forgiven, paid down or paid off, and life will go on. Despite the Fed's meddling, housing prices are continuing to drop toward the historical average of 2-3x yearly family income. Individuals are paying down debt and tightening belts. Inefficient and over-extended businesses are failing. Even the big banks will eventually face their day of reckoning. 

By all means play it safe. Pack away some gold, silver, seed, MRE's, etc. Purchase a small caliber rifle, and learn how to use it. Get in shape, but keep a few extra pounds just in case. Have no illusions. There will be difficult and possibly violent times ahead. Financial meltdowns are a virtual guarantee, and the government could be overthrown, but life does and will go on.

Every day I interact with hard working, industrious people who don't have 'surrender' in their vocabulary. The sheeple exist, but there are hundreds of millions of hard working, decent Americans left in this country. Bet on hard times, but America is bigger than those weasels on Wall Street and buffoons in Washington. Never surrender.

[Anonymous]

I was cleaning up the yard after "IKE" A major hurricane.
Brought to us by HAARP?

[Anonymous]

Look Sprott....

Consider this....

Let's say there are 10 economies constrained by sovereignty....

All 10 economies double their money supply

All 10 economies print relatively the same amount of money

All 10 economies force interest rates to 0%

All 10 economies show massive relative losses albeit not in exactly the same way or time frame

Look....Sprott....Given the above.....what relative changes for each sovereignty really differentiate the economies....to make one better than another....

All this paper shifted on the govts. books is worth what ?
Not the face value ....that is certain....

..................................

So at the end of the day.....which sovereign economy wins ?

And...is relatively better than the other ?

..................................

Answer...it will be that sovereign economy....that has the balls to reconstruct the way that it taxes and spends....such that it develops massive private not public wealth .....which in turn is reflected on bank's books....as REAL SUSTAINABLE ADDITIONAL VALUATIONS....

Those that kick the can down the road....WILL BE THE LOSERS....from this point on....

[Anonymous]

Agree. Small Govt. Low taxation.
Over the past 50 years, all small countries.
Hong Kong, Monaco, Lichtenstein, Switzerland up to about 2000, Singapore ?
Lichtenstein is now one to watch.
Any more ?
The common thread is opportunity and a high standard of living. Money goes were it is treated best.

The ending of parasitism. Does not look likely. Parasites gravitate towards government...always. Antidote is unpaid politicians as in the UK in the 19th Century.

[A_MacLaren]

...such that it develops massive private not public wealth .....which in turn is reflected on bank's books...

I agree with the first part of this combination of phrases, but not the second.

Private wealth, real private wealth, is reflected on the balance sheets of the individual and household units, not the banks' balance sheets.

Under debt based fiat money systems, banks are parasitic leeches sucking the wealth created by the labor and capital away from productive units of the real economy for the benefit of the bankers who produce nothing.  Bankers do not produce food or water or land.  Bankers do not produce shelter or clothing.  Bankers do not produce healthcare goods or services, telecommunications goods or services, transportation goods or services, etc.  Bankers do not produce anything of substance that enhances the effiency or well-being of economic actors in the real economy of goods and non-financial services.

Yet for any entrepenuer lacking capital but pocessing an idea or concept that will enhance and improve the lot of real economic actors, any debt based funding utilized by such a creative individual to develop the idea or concept, there is the banker creating "capital" or "money" out of bookkeeping entries for free, and extracting financial rent.

F~@# the bankers, their books and balance sheets.

[Anonymous]

Many good points.
What caught my eye were his "sticky notes".

Interesting that he envisions scenarios like "Silver Shellgame", "Nortelization of Gold Sector", or "continued fraud in the gold market".

What can the average person do if even the so-called safe havens are hijacked by scammers with Tungsten bars not to mention paper speculation?

I am starting to wonder if there is some degree of bliss in ignorance. Ignore the noise, use your own counsel, diversify, don't be too trusting of anything - most everything is out of our hands anyway, though we all pay a price for malfeasance in financial markets.

[blindfaith]

I remember, I was at the bank taking out 10,000 in cash the week before, the top was wobbly...you could see it.

We have legalized white collar robberies and shruge them off like weather reports, washed the truth out of facts and replaced them with assorted soap boxes, spammed the ordinary American with distractions and cute garbage while their children are getting raped and their retirement 401k, IRAs, and Bonds are being made worthless.  Absolutely nothing has changed to stop the rapping of America, the jello has simply been moved around the plate or called by a new name everyother day.  The players are the same, just sitting in different seats, the game has not changed.  Let them eat cake, they say!.....And, what 'Lone Ranger" is going to come in and change something for our benefit when they will be destroyed in 24 hours by those in powerful places?  These people have NO Nation to call their own, they can move anywhere, anytime, saluting no flag, honoring nothing. 

Debt ceiling raised from 12 to 14+ trillion just two months ago and half is gone already!  The FDIC is out of money, the Social Security has been borrowing since last August to make payments,  Medicare is broke, only 3 States are now solvent, Americans are on the hook for 70 trillion dollars of unfunded pension payments, the military is spending 100 million dollars PER HOUR alone (a mear 10 hours would pay for health care), net income tax collections this year are down 80%,  a Congressman serves one term and gets a lifetime salary and benefits,  all media is owned by a handful of names, a handful of company's own the complete food chain, and on and on and on... We have sold ourselves to the Devil.

If the devil can't tell a Democrat from a Republician, a banker from a CEO, an insurance company from a food producer, a priest from a pagen, how the hell can you?

If we could sell talk, we would have no debit at all. 

If there were competition we would restore the 'quality' in life. 

If people could mind their business not yours, peace would be everywhere.  

If we could out source the government to China, we might get something done.

 90% of our manufacturing has been moved to China (and you can not take one dime or one screw out once it is there) and yet a staggering 80 billion in a few months has been invested there by US mutual funds (China has opened 150 new schools HERE in the last year to teach Americans how to speak Chinese).   

We have landed on Park Avenue with a hotel and all we now have left is Baltic, turned over, since we took out the loan on the last roll of the dice.

Consumer spending up in February, yeppie!  From folks who just got a tax refund and the folks who have defaulted on all their debit so they have cash to spend (most sales were cash not credit card).

Ten years to get this mess cleared up, sound optimistic...but I will likely have fallen on the branch by then.

[Rusty Shorts]

Spot-on blindfaith, don't forgot the last nail in the coffin for the world economy, OIL. The the game is over, and these fuckers know it, you will not recognize this place in ten years.

[Bill DeBurgh]

Uh... 10 x $100 million = $1 Billion

"Healthcare" is slated to cost $1 Trillion, or in laymans terms, one million millions.

[pacmac]

Re: military spending per hour, I come up with a different number:

$1.03 trillion per year / ( 24 hrs * 60 mins * 365 days) = $195,966,514.46 per minute.

But my math is probably wrong.

In any event, same thing.

[pacmac]

Darn, my math was wrong (numbers are so large as to be incomprehensible).

$1.03 trillion per year /

(24 hrs * 60 mins * 365 days) =

$1,959,665.14 per minute, or

$117,579.91 per hour of military spending.

[perchprism]

Sorry, you're still wrong----$117,579 per hour when you've got $1,959,665 per minute???

[Hulk]

Pacmac, 10+ digit math is best done using
exponents, error checking/correcting also
much easier

[Hulk]

Well done blindfaith
The only thing that will clean up this mess
is a collapse. If the PTB would let the likes
of William Black and Paul Volker and Art Laffer in the room, this mess could be cleaned up..But that ain't going to happen
and that is why collpase is inevitable.
If Black were allowed to look into this thing,
the level of corruption would be revealed quickly, and that just can't be allowed

[Madcow]

What would stop RE prices in New York City from falling back to pre-1980 levels?

[Fritz]

Nothing....once Goldman has finished shorting it.

[Not For Reuse]

Maybe the fact Wall Street is the ONLY sector in the US economy that is expanding and thriving right now?

[DavosSherman]

Like Enron - we are broke and our books are cooked. Reality is just a matter of time away.

[Instant Karma]

Bubbles are being blown right now in the stock and bond markets. Commodity markets too to an extent.

People lament the steadily rising stock market in spite of depression-like headline news. They search for explanations. I offer two: the market is being walked up by the Governments to reverse some of the wealth loss from the depression, and, two, its a bubble.

[stoverny]

"Social  Security, which was in balance in year 2000, is now underfunded by $15 trillion dollars. Total unfunded  obligations of the US Government are now $104 trillion. If we add the $6 trillion of outstanding Fannie  Mae and Freddie Mac debt and the $12 trillion of outstanding national debt, we arrive at a total US  government debt obligation of $122 trillion. It’s a truly preposterous amount of money that will never  be paid off in today’s dollars."

Good lord, are these numbers correct?  I've heard lots of big numbers, but nothing approaching this horrific scale.

[Hansel]

According to usdebtclock, those numbers are right.

http://usdebtclock.org/

[perchprism]

"Good lord, are these numbers correct?  I've heard lots of big numbers, but nothing approaching this horrific scale."

Yes.  This debt will never be paid in US dollars as they stand today.  Probably won't get paid under any circumstances, even if we went to a different currency standard.  It's not possible.  The day hasn't arrived yet, but we could declare insolvency now, based on what is glaringly obvious.  But nobody wants to be the bearer of bad tidings, lest he lose his head.

[B9K9]

From Mikla's fire science essay:

@Shameful - Nominally I agree (that economists are tools of the PTB), this is true of the vast majority of economists, but there are some good ones out there so we cannot claim all are bad.  I'll point to the boys at Mises.org as some of the good ones. 

Shameful, you are confusing the term economist with capital 'E' Economist. The first is a label ascribed to academics interested in exploring the human condition within the social science field of economics. The primary characteristics of many economists are very typical to those of other scientists and artists, in that they are often motivated by the process of discovery rather than the (overt) pursuit of wealth.

On the other hand, capital "E" Economists are an artificial creation crafted for the sole purpose of advancing the policy initiatives of our global masters.

Junior MOTU are trained from a very young age in the classics - there aren't any rote trade school careers like medicine, law, science & the military in their futures. As such, they quickly learn that throughout history, in all cultures and societies, shamans, witchdoctors and other mystics rely on the phenomenon of an "appeal to authority". Kings and princes long ago learned the importance of utilizing these figures to credential certain decisions made to influence overall behavior.

Fast forward to today; what are the key components to crafting a strategy of complete control? First & foremost is to capture public opinion via the appeal to authority embodied in the modern day shaman - the Economist. Economists are awarded prestigious 'prizes' (with the predetermined outcomes & awards being engineered/financed by the MOTU themselves); Economists are granted chairs at leading universities; Economists are funded to conduct studies to explore issues in which government/business have determined to be of importance.

Von Mises and other Austrians are only economists. They are never referred to as experts or allowed anywhere near (actual) policy makers. They hold 'weird' beliefs, and are widely discredited by the MSM (which of course is another important tool in the arsenal of the PTB).

To understand the world in which we live, you need to understand the basic elements of manipulation & control. Once the picture becomes clear, the ongoing saga is all so pathetically transparent as to render it practically irrelevant. What is important is to understand that throughout human history, jubilee (default) has been the end-point of the exponential math of compound principal+interest.

Once you understand that, you might quickly discard any interest in the day-day bullshit that seems to occupy a lot of people's attention.

[Shameful]

I did address that, these guys get their paychecks from the Gov and Fed Reserve.  How long would any of us keep our jobs if we constantly said "My boss is nightmarishly incompetent and corrupt!  He/She will destroy this company through criminal negligence and fraud!"  Telling not only your boss this but anyone in earshot.  My guess is you would be out on your ass in a day.  Contrast hat with "My boss is the greatest person ever!  He/she can do no wrong and very well might be perfection made flesh!"

A lot of economists get a paycheck form the Fed Reserve so naturally they will say it's the best thing ever.  People don't normally publicly badmouth their employer.  And the way the profession is structured you need to get graduated up, by the same people that are whores to the Federal Reserve.

Look who is signing the paycheck, that's all you need to do.  People were surprised by Obama, because they didn't follow the money.  Follow the money and all things become clear.  I agree most of hte poeple that we see are nothing more then whores and shills.  They will say anything they are told to say no matter how insane or outlandish.  It's what they are paid to do.

[Anonymous]

don`t mean to be picky but.... Sprott states: "Everyone remembers that we went into a severe recession in late 2008"

I would have thought he would have his facts more lined up (though I must admit that since Bear Stearns collapse it has all bean a blur

[Anonymous]

Funny how all the "right" people were in the "right" place at the "right" time, eh?

indeed

I don't understand some of you guys. We are getting ready for a walk through the Olduvai Gorge. The assholes seem to know this while the 'decent Joes' here do not.

Look into the eyes of these guys: When intelligent people act in a consistently stupid manner it means they have cards (information) they aren't showing.

When, in a very short period of time (< 10 years), you are a quivering mass of shit just hoping for a scrape of food; When you've watched your wife die of a gallbladder attack and one kid die of simple tonsillitis, one fact will be abundantly clear:

You wasted a whole lot of time you did not have to waste.

[Crab Cake]

"The fact remains that on Thursday, September 18th, the US financial system almost completely  collapsed."

I would argue that on that day the US financial system did in fact collapse.  What we have now is not a "financial system."  We are not in Kansas anymore.

The politicians, the regulators, and the cops are in bed with the criminals.

You want your country back?  You want your economy back? 

"Occasionally the tree of Liberty must be watered with the blood of Patriots and Tyrants." -Thomas Jefferson

Death to the criminals, the banksters, the fraudsters, the aristocracy, and the oligarchs.

We have the power, and they should fear the good, honest, hardworking people of this country.  My bet is soon they will.

"Together we stand, divided we fall."  -Abraham Lincoln

[bc0203]

Might be time to re-read the following article?

http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

As much as people might have wanted to dismiss him at the time, it seems like Simon Johnson's warnings were spot-on.  The corrupt bankers in bed with the politicans have turned out to be Goldman Sachs, and convincing politicans that staying in bed with them will result in them not having a country to govern in the long term might be the ultimate hat trick.

Given the coordinated looting going on, and the way everyone is "working the system," I'm wondering if anyone in the US has considered the RICO statutes yet...

[Crab Cake]

I have read that article several times, something that is quite rare for me.  Thanks for the link, anyone who has not read it should do so.  The same goes for the William Black interview on Bill Moyers show.

http://www.youtube.com/watch?v=Rz1b__MdtHY

All I can say my friend is that I am way way past any faith in the jurisprudence system, and thus the RICO statutes.  There is no fixing this from within the system any longer, it is too broken, too rotten, too corrupted.  There is no court of law that can, or will, deliver the justice that is necessary.

It's time to call for a national reset, and it's time for the criminals of the People to pay the highest price for their treason. 

[Bob]

Thanks for the reminder!  Almost a year ago and not a single word of it would seem to have made a bit of difference. 

Perhaps the climate is changing, though.  I expect that the public will projectile vomit the old green shoot shit when they discover it was laced with poison. 

Maybe then we'll get some real change.  It's a shame to almost have to hope for the worst . . . what a shameful reality we've allowed. 

[Anonymous]

During those "fateful" days, we all witnessed/participated/allowed one of the biggest financial scams in history. Paulson and his buddies at the Fed flim-flammed the "little people" world wide into allowing a transfer of their private mistakes and obligations onto the public balance sheets. If their so-called rescue efforts had failed, would we have seen blood in the streets? Of course not. Twenty big banks would have failed and that certainly might have been unpleasant for a month or two, but the markets would have taken care of it in due course. Yes federal government assistance would have been needed at the margins, but the dollar amounts would have been a fraction of the transfers engineered by Paulson and his pack of thieves.

America was raped that day, and now the bankers are rewriting history to make it look like it was the victim's fault. Goddammit it makes me ill! Where are the indictments?

[Bob]

+100

[Howard_Beale]

Ditto to the +100.

[SteveNYC]

Beautifully said! Yes, that stuttering stammering squid really pulled one off. Plenty of time to burn in hell for it though.....

[Everyman]

We may not "remember where we were" on those two dates however,

The next popping bubble will start a massive outcry from enraqged Americans and our fellow human beings across the globe.  These enraged Citizens of the United States and the rest of the globe will then proceed to have a populist uprising where JPM and GS felons and the rest of the financial and bank criminals will be removed from their offices by physical force and taken out in the street and beeaten into the concrete.

The same will happen to politicians across the spectrum of city, county, state, and federal all of whom have promised the world but never fully figured out how to pay for this entire mess. 

"We the people" will be enraged and outraged if this bailout does not work, and I believe when this next bubble pops that is when people had better start jumping out of windows or purchasing a shiny handgun with one bullet and then proceeding to use it properly to atone for their economic rapes and misdeeds.

For it is not only the "misdeeds" that got us to where we are (with the American Citizen footing the bill), these economic geniuses set up a way to sell debt and make money on it and then leveraged it!!!  After thaty did that these so called "capitalists" (all of whom are really con men or out right crooks), they came a running for a bailout, and so much for risk.

Throw in the fact that they have lied, obfuscated, and manufactured numbers to tell us that everything is "better than expected", with is a better shade of sucking to high heaven.

I believe everyone will know EXACTLY "where they were" on this next crash, and they will reacft violently and patriotically in my view.

The next section, the famous preamble, includes the ideas and ideals that were principles of the Declaration. It is also an assertion of what is known as the "right of revolution": that is, people have certain rights, and when a government violates these rights, the people have the right to "alter or abolish" that government.^[70]

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

[Bob]

Dangerous words, oh Patriot!  And to quote the very Declaration of Independence . . . whoa. 

I've been waiting for the opportunity to share one of my most disturbing experiences of the past week:

Bob's Trip To The Movies.  The movie was pretty good, but it was one of the "Previews" that had me surfing for answers when I got home.  The "Coming Attraction" of note was a recruiting/promotional piece for The US Army National Guard.  I've never seen such artful construction or high production values in a Government recruiting commercial before--it was so well-done that it literally took a couple minutes to be sure that it wasn't actually the start of the movie itself.  Amazing action, compelling imagery, powerfully gripping music, all pushing a single inspirational concept:  Citizen Soldier. 

I could have sworn the music was Wagner (a question whose irony seemed wasted on the people sitting next to me.) 

It looked to me like the National Guard is mobilizing in a very big way. 

Wish I had been able to find the actual video online.  A check of the web address from the closing shot only led me to the usual, far less cinematic crap at the NG's site. 

It was definitely food for thought, though.

[Everyman]

"But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

I really do not know how the lies and actions of the corrupt and powerful could not be considered "abuses and usurpations", and it is pretty clear by the Declaration that it is not only a "right" but a "Duty" to safeguard the future generations and the future of the country.

It must be done, and is required of every American Citizen, andit is the "right to revolution".

"That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness."

I would also sumbmit that these financial, banker, economic misdeeds and outright corruption is a "form of Government" that has truley become "destructive of these ends" such as nuking the entire economy and the rest of the crap that happened in D.C. the last 3 decades with political illegality and corruption.

Do you feel safe and "happy" about how the economy and the State of affairs of the United States?

Sometimes there are things lorger and moreimportant than one's self, and/or money.

[SteveNYC]

The only violence I want to see is the executions, after a fair and orderly trial, of the perpetrators of this massive crime.

If we want to get their attention, country-wide strikes, country-wide periods of "I'm just not going to show up to work" or "I'm just not going to buy shit" or "I'm just not going to pay taxes" or "I'm pulling ALL of my money out of the banks" will have a far greater effect.

Shut the place down, leveraged institutions and financial gambling houses will be bust within two days.

[Bob]

Fully agreed, including the appropriate form of revolution--one that could be done from home, actually (echoing "Jack" in Fight Club.)  Sleep in and, if you wanna see what the media said about it, set the DVR.  Could it get easier or cleaner than that?

[Anonymous]

To this day....

There is no accountability ....

I find this to be a insult to the intelligence of the American people....

It could not be clearer that Fascism is embedded in the US system....Goldman Sachs style ....

What average American thinks that for a second that a GS employee really wants to be in a public service office ?
For WHAT reason ?

Just listen to Corzine's comments on Bloomberg....

What more does one have to hear or see ?

........................................

The fact is that the EVENT has already happened....

The banks simply over-levered a bad position....and passed the bill to the great great US grandchildren....

Does anyone remember when it was announced on Bloomberg that Dick Fuld ex head fo Lehman sold his Florida home to his wife for a $1.00....in hopes of asset protection from the Lehman fallout ?

If this is not an insult to the average American's intelligence ...I would like to know what is....

........................................

And know this....

The rating agencies are 99% responsible for labeling CCC trash AAA....so it would sell to the non-suspecting....The rating agencies used their historic good will on a last gasp lunge for fast cash....

Not one of them is being prosecuted...Not one...

...............................

In the previous S&L crisis....the late Bill Seidman oversaw....scores of people were prosecuted....

Today ?

Nada

.............................

I will let the public just use their imagination as to what I would really like to say in this forum...

.............................

[nope-1004]

I remember those days well.  I welcomed "tragedy", and was hoping for an all out collapse.  Anyone think what we have today is better?  I don't.

I dated a little hotty many years ago and asked her where she was when Kennedy was shot.

She turned to me and said:  "Ted Kennedy was shot?"

Most of America is in that boat when it comes to those two dates.  No clue.

[Gordon_Gekko]

Despite the present mass delusion of "recovery", the system never recovered. It collapsed that day and remains collapsed to this day. Only the recognition of that fact remains. It will come - out of the blue and sooner than you think.

[Anonymous]

best comment on this post....

unfortunately recognition is farther off than
you think...

the fundamental theorem of the crash is that there
has been no recovery and there never will be a
recovery.

[Anonymous]

+1

El Erian has suggested similar

[Anonymous]

I remember watching football late Sunday afternoon on September 14, clicking over to CNBC for Squawk Asia and seeing live video of that mad exodus of Lehman employees from HQ.

If I recall correctly CNBC and Fox Business were live with programming about the unfolding crisis all Sunday night ...

[doublethink]

I was wondering how to sneak billion dollar Federal bearer bonds across the border into Switzerland.

TOKYO -(Dow Jones)- The Japanese government's probe into a confidential post- war agreements with the U.S. not only confirmed the existence of a secret deposit that Japan kept with the Federal Reserve for nearly three decades, but also uncovered Tokyo's lax management of information related to its foreign reserves.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=20100312...

[JR]

And Bernanke called Ron Paul’s allegations “absolutely bizarre.”

[Anonymous]

An excellent read! I just launched my new trading blog and added your blog's feed to my reader to keep up with your news. I'll be checking back quite often.

Jim
www.tradinggraphs.com

[JR]

And here’s the latest from one of the foxes in the hen house who's "shocked" that the chickens are dead:

IMF Official: World’s Rgulatory Supervision Shockingly Inadequate | Calculated Risk

From Tom Abate at the San Francisco Chronicle: Financial leaders dissect meltdown

"What is quite shocking," [John Lipsky, a senior official of the International Monetary Fund] said, is how inadequate the world's regulatory supervisors were in curbing the lax lending standards at the heart of the housing and credit bubbles.

The Lipsky bio:

Before coming to the Fund, Lipsky was Vice Chairman of the JPMorgan Investment Bank. In this position, he advised the firm's principal market risk takers, published independent research on the principal forces shaping global financial markets, was actively engaged with JPMorgan's key clients, and represented the firm around the world with senior public and financial sector decision makers.

Previously, Mr. Lipsky served as JPMorgan's Chief Economist, and as Chase Manhattan Bank's Chief Economist and Director of Research. He served as Chief Economist of Salomon Brothers, Inc. from 1992 until 1997. From 1989 to 1992, Mr. Lipsky was based in London, where he directed Salomon Brothers' European Economic and Market Analysis Group.

Before joining Salomon Brothers in 1984, he spent a decade at the IMF, where he helped manage the Fund's exchange rate surveillance procedure and analyzed developments in international capital market. He also participated in negotiations with several member countries and served as the Fund's Resident Representative in Chile during 1978-80.

In 2000, he chaired a Financial Sector Review Group, established by former Managing Director Horst Köhler, to provide the IMF with an independent perspective on the Fund's work on international financial markets.

http://www.imf.org/external/np/omd/bios/jl.htm

[velobabe]

JR the exposé

[Hulk]

I was glued to the screens watching trillions
flee the money markets and thinking the following

1) Glad that I had PM's, food and weapons

2)Realizing that my retirement accounts were
close to being toast

3) wondering what martial law in this country
would actually be like, knowing full well
that only certain, predefined areas of the country would be "protected" and the rest would be a repeat of New Orleans after Katrina.

I can still remember when it was announced that the fed was backstopping everything,
which stopped the bleeding.
But calls to Vanguard and fidelity
painted a completely different picture..

Now I just wonder when this will happen again,
fully expecting that this time there will be
no backstop.I also wonder what will be the trigger this time...

[Anonymous]

"We have watched this cycle unfold, and have noted the Kondratieff Theory’s eery ability to predict the debt defaults and banking collapses that we witnessed over the past two years."

I like Sprott, but it's lines like this that reveal his douchiness. C'mon. Many of us predicted the debt defaults, and we didn't need a hundred plus year old theory from the agricultural cycles of old to predict it. Besides, K-Wave did not predict the timing of the debt defaults.

Everyone is desperate for new clients. Sprott is no different. Lines like that are fishing for new money.

Cheesy stuff.

[Fix It Again Timmy]

It's a Potemkin financial system, when Humpty Dumpty hit the concrete... well you know the rest of the story.

[Anonymous]

What if the problem isn't a Keynesian vs. Austrian approach, but corporation?

Perhaps there would be benefits to the Keynesian side if the government was really following the principles of deficit spending to increase aggregate demand in bad times and saving money and raising rates in the good time, without concern of how that might affect things around election day and how that would impact their contributes pockets.

Perhaps there is wisdom in the Austrian beliefs too and our government is set up to have a back and forth debate where one policy initiative wins for a bit and then the other, to make sure no ideas become too dominant and an error in judgment would be caught and prevented from causing too much damage.

If there was an honest debate in our government between Keynesian democrats and Austrian Republicans who both debated honestly with no lobbyist influence and only the best interests of the people in mind, maybe we would see good results and neither of these mindsets would be the enemy.

[bc0203]

The problem is all those pesky humans and their human nature.

Most people think in terms their own short term self interest, instead of their long-term enlightened self interest.  This only gets compounded in times of crisis, when "I''ve gotta (win this election/make my quarterly target/protect my COLA /etc)" takes precidence over concerns of long term sustainability.  To do this, sacred cows will be slaughtered, rules bent and laws ignored.

At the end of the day, this results in everyone getting what they want in the short term, and nobody getting what they need in the long term.

[Anonymous]

economic problems are not fixed by modifying
aggregate demand....i have no interest in your
voodoo economics debate...

both democrats and republicans are keynesian
/ monetarists....

you couldn't find an austrian economist in power
to save your last brain cell....and for those
who could find one it would be immaterial....

what a fool post..

[Tripps]

this guy is asking have we learned anything? no

the direct response from this 0% interest rates and government propping up/quant easing is very easy to see:  another stock market bubble, another commodity bubble, bond bubble, etc...and a whole hell of complaceny in the market accepting this and actually loving it

[Mr.Kowalski]

I remember the day Lehman collapsed; I was at work in a panic; I went into my bosses office twice trying to describe the danger we were in. I distinctly remember the Italian prime minister saying something to the effect that "we'll probably have to shut down the stock market for a few weeks in order to establish a better economic system". That report sent chills down my spine. What was completely surreal was that none of my co-workers had a clue what was going on, and to this day have no idea how serious things were and still are. My immediate supervisor constantly told me to "do my job" and not talk to Jesse, the one guy in the building that knew what a credit default swap really was. Jesse was sheet white the day after Lehman went under. We did lunch that day and contemplated martial law whilst others in the restaurant simply looked at us like paranoids. One day interest rates on the 10yr Bond will reach double digits and/or $140bbl crude will be the trigger for round two. I was utterly unprepared for it in Sept '08; next time it happens I'll be well ready. The UK and/or Japan will be the first major powers to cross the River Styx with us following a week or so later.

[godfader]

The question is not what "we" learned, the question is what Sprott learned. This guy is talking so arrogantly about markets that it is only a matter of time he will learn a painful lesson. Anybody trying to be right is ALWAYS punished by Mr. Market. Always.

Jan 2008 through today Sprott's main hedge fund is down 5% in what should have been a bear's dream market.

Once again shows how making money is completely disconnected from writing smart papers with wild predictions.

[Mr.Kowalski]

DORK OF CORK "This insane money creation inside banks must stop - at the very least go back to conservative fractional reserve system"

Such a solution, whilst sane, would create a deflationary depression, a solution Bernanke will not allow. No my friend, "inflate or die" is the mantra, with the likely result being "inflate and die".

[THE DORK OF CORK]

I sometimes wonder what goes on in Bens mind - given that he is a central planner he must have some overview of the American and global economy.

But I believe he only sees paper interest and liabilities - his little primate monetarist brain can not conceive of productive capacity , real capital such as energy infrastructure ,transport ,humans with functioning brains.

The debt paper he plays with at night is now but a token of his compound interest desires - he can jack off all he likes but he will never archive his infinite growth model now as the capital of the nations he toyed with no longer exists.

[no cnbc cretin]

Sprott is right about how most don't have a clue. Even more don't have a clue about the train wreck that is coming. Only ZH readers do.

[w a l k - a w a y]

. . .  a false flag to cover this one up?

[Clinteastwood]

Sprott drank the Kool-Aid.

Maybe Kanjorski was lying about the $trillions about to be withdrawn from our financial system?  Think about it.  Where would those who were withdrawing all that money park it?  Did they demand cash (of course not)?  Did they demand that it be put into their bank accounts, perhaps?  (Where the hell else could it go?)  

So, if all those $trillions were being withdrawn from one part of the system and placed into another part OF THE SAME SYSTEM.....why was it such a meltdown?

It's not like the money just disappeared.

We've been lied to.  TARP resulted.  The banksters made off with mucho FRNS at taxpayer expense.