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Time For Another Truthfest From Bob Janjuah
After not having written at all since early Nov, I am now onto my 3rd note in less than a mth. Apologies for this. But no doubt you will all have figured out that I don't have much value to add whenever the whole world is busy gorging on yet another phase of policymaker sponsored & excess liquidity enabled 'buy fest', which is YET AGAIN designed to fool us into mistaking YET ANOTHER Ponzi Bubble for a real, genuine, sustainable and broad-based economic recovery.
During such phases, which have become all too common thxs to the failed policies of Greenspan, Bernanke and Washington which put lobbyists, pork-barrelling & Wall St ahead of Main St, and which confuse an S+P bubble for real wealth gains, I am not a guy many folks want to hear from. 'Lucky' for me it seems like the rally out of the March 09 lows is now over, with S&P topping at 1150. If this view is right it is gonna get far more difficult for the bulls from here and no doubt I will once again start receiving invites to parties/events etc, sometimes from people I have never heard of nor know, all because of my reputation as a bear.
Using the S&P as a global risk proxy, the great bear market (which began in 2007) saw the move from the all-time high of 1576 to the 09 low of 666 as the 1st of what I think will be 3 big legs. We then had the post-March 09 hope, deficit & liquidity fuelled rally which has seen us go from 666 to what I think is the top of this leg, 1150, mid/late last month. I now think we have begun the 3rd and final leg of the multi-yr bear mrkt which began in 2007 and which SHOULD, hopefully, finish late this yr, but which COULD (hopefully not) drag on deep into 2011. This new bear leg SHOULD see S&P trade sub-1000 this mth. After which we can bounce a little (back up to 1080/1100) over late Q1/early Q2. However, this I think will then be followed by a move down at least into the low 800s in Q2/H2 10, and depending on how policymakers behave, potentially down towards/to New Lows. Specifically, if policymakers choose to shun austerity and favour recklessness, then whilst it may provide very shrt term relief, the end game will be much much worst for risky assets. Credit will follow equities weaker, esp lower quality weak balance sheet credit, ditto EM. Old economy govvies are the asset class of choice. And I think the USD will do OK and Gold won't - assuming of course the US IS on an austerity path. Look for the iTraxx XO index to trade in the hi-500s in the next few weeks, and if the move to low-800s S&P is correct, XO will be north of 750. At the same time we'll see old economy 10-yr govvie yields well below 3% - 2.5%? And of course volatility, esp. in risky assets, will rise significantly, with market liquidity falling significantly. I will be forced to chge my mind if S&P reverses in the next few days/wk or so and manages to break out and close above 1120 for 3/4 consecutive days.
What is driving my thinking that the post-March 09 rally may well be over and that the next leg of the great bear mrkt may well have begun? Well, since mid-09 most clients I speak to regularly have gradually got more bullish, based largely on the view that Policy will remain effective AND will remain uber easy/get even easier if needed, and that there would be little/no consequence to easy policy. Well, guess what? I think that game is now over. Partly because the Market is doing/did its jobs (periph Europe). However, in the UK and US the Market seems again to have failed to do its job of seeing a delusional debt fuelled Ponzi Bubble for what it is. The real vigilante this time seems to be The People.
2 weeks ago my Monday note (http://strategy.rbsm.com/Tools/Content/ContentViewer.aspx?ContentID=136292&clid=3579&menuKey=317&source=ContentList) talked abt the need to give power to the Volckerites and to go for Voluntary Austerity (as opposed to Involuntary Austerity). My note released Thurs a.m. Ldn time that same week (http://strategy.rbsm.com/Tools/Content/ContentViewer.aspx?ContentID=136292&clid=3579&menuKey=317&source=ContentList), pre Obama's Big Speech, highlighted my read of the Mass. result (massive) and highlighted my view that Obama must now be seriously worried abt his reckless policy path (unsustainable debt/deficit levels, supporting Summers, Geithner & Bernanke).
Well, IMHO, the events of that Thurs (afternoon time in Ldn) and of the last few days in Europe signal in a massive shift 'my way'. The key takeaways:
1 - Forget Volckerites, Da Man himself is centre stage!!! Geithner and Bernanke are now exposed and vulnerable. Summers must be seriously upset. The Print/Borrow/Spend + Bail-Out policies of these guys is a disaster for the long term success and health of the US. And such policies may now be seen by Obama as his biggest political liability, which he can't continue with. I was most unsurprised when one of my sources indicated to me that Volcker himself was critical in getting Bernanke's affirmation by the Senate - he may have made some calls. The message seems to have been that NOT affirming Bernanke would have been a disaster (hmmm..happy to debate, but not now), but wavering Senators may have also been given assurances over how the Fed and the Fed Head will behave going fwd. Lets see.
2 - Hopefully the events of that Thursday are a sign that we are abandoning such disastrous policies and are moving towards Voluntary Austerity, a period of Austrian cleansing during which we will see eco/grwth pain, but which will allow major and much needed balance sheet repair, a massive economic restructuring, and which will create the platform for the next 15/20yr period of real economy and equity mrkt success (surely even the most ardent equity bulls will accept that equities have been a dud investment for the last 10yrs). The bad news is that the cleansing leg has 3/5yrs to go, the good news is that 2015 thru to 2030 could be phenomenal.
3 - In this context it is a waste of time getting too hung up over the 'detail' of Obama's budget proposal. Without being disrespectful to anyone, this proposal is not worth the paper its written on in a yr with such critical issues afoot AND when critically important mid-terms loom. What IS clear however is that TAXES are gonna go up, and that Obama will continue to try and put in place an 'as European as possible' welfare state/benefits/social security system, in order to appeal to the votes of the folks who got him into office but who are suffering disproportionately during his reign. The reality is however that so many accounting fudges are in use in terms of the Budget (No 1: Fannie and Freddie ARE US Sovereign debt/liabilities) that it is clear the US government is either at or close to the limit in terms of how much more reckless it can be. And if it can't be more reckless, it must therefore be becoming more austere (think abt how fiscal policy wrks..)
Dear Readers, it seems to me that the events of the last few wks now tend to imply that we ARE headed towards Austerity in the US, something which is already clearly the case in China and the Eurozone. The UK will hopefully make this leap over the next few weeks/mths, before its too late - hopefully. The QE announcement by the BoE last week was a decent step in the right direction. But we need fiscal solutions too - clear and credible ones. We in the UK shud not desire/be happy to be in a Gang of 2, with Japan. Surely policymakers in the UK know that this is NOT a club we want or shud be part of. After all it has 'failed' Japan for over 20yrs, and in any case, we do not have the domestic savings or current acct surpluses to afford such reckless luxuries (QE, excessive deficits/debt) for another qtr or 2, let alone another year or 10.
In Austerity the game is up for deficit primed grwth and for uber easy money. Grwth and bubble gains in risk assets are relegated to the backseat of the bus. Balance sheet repair and prudence are the new drivers of the bus, in turn driven by The People (the private sector). Policymakers will do what The People want, or risk losing THEIR jobs. In Austerity deflation rules, as do Govvies, very High Quality Credit and only the highest quality big cap global equities/best earnings streams. Currencies do OK. Commodities (gold, crude) don't.
Let's see what happens. But clearly the events of recent weeks SEEM like a game changer. Time will make it all clear but for me the odds have definitely shifted in favour of Austerity sooner rather than later and in favour of the view that we HAVE already seen the equity highs and spread tights for the post-March 09 risk asset rally.
On a few other topics:
1- China/US - 'Agreeing' to sell arms to Taiwan, talk about meeting the Dalai Lama....these are BAD developments and important ones....I fear the outcome for the West, esp the US, but also the UK, if the idea is to flex muscles in the direction of China. I am sure the US would not take too kindly to China agreeing to sell serious military hardware to Vene or Iran, nor would it take too kindly to the Beijing authorities hosting a global fundraising conference for global jihadists. NO, I am not saying Taiwan is the same as Iran/Vene, and of course I do not think the Dalai Lama is in any way comparable with al-Qaeda. But what I think is NOT the point. It is all about the Chinese leadership, and I reckon they must be seething. We in the old West need to be very very careful here. China funds the US to a meaningful degree. Imagine if China decided to stop buying US govt/agency debt. And then imagine if it decided to sell 300/400/500bn of such debt, say on the same day as the next big auction. The word UGLY comes to mind. My real fear is that PROTECTIONISM might become THE central issue later this yr as a result of all of this. Not good at all.
2 - Greece/Eurozone - something occupying many peoples minds. My views - not necessarily the House view (plse talk to Jacques Cailoux & Harvinder Sian) - are simple. The Core must not bailout the periph on any open-ended basis as then they themselves would be at serious risk. Surely there is no way that Germany is gonna give up its balance sheet for a 3rd party? East Germany was one thing, Greece is quite another. Any 'bailouts' HAVE to be based on very strict & transparent and credible conditions/deliverables where any failure to deliver/comply HAS to be followed by the withdrawal of any such 'bailout'. The way forward for the periph - as is BEGINNING to be demonstrated - is to show willingness and ability to repay, and this is all about putting in place and then successfully implementing AUSTERITY budgets. Nominal wage declines and deflation. BUY GOVVIES. I am a long term ACCUMULATE on Greece sovereign debt. Spreads CAN go much wider then even now as the implementation is challenged. But ultimately Greece and the Greek people will need to decide if it/they want to be in the Euro or not - this is in essence the issue of 'are the people of Greece and its Govt. willing to repay?'. I think the answer is a defo YES. So I think that in a years time, Greek govvie debt will be trading 200+bps tighter then now, although it COULD get to 500/500+ over Germany in the next few mths. The EUROZONE project is NOT going to fail because of Greece. In fact, a EUROZONE break-up is only really likely if Germany/the Core DO bailout the periph on a soft/open-ended basis, so that's why I don't think it happens. Spain and Portugal will have to undergo severe AUSTERITY too. More deflation. BUY GOVVIES. And of course, the UK and US are in many ways in at least the same or bigger mess. Yes, the UK and esp. the US have currencies that can share the hit. But the idea that we can devalue our way to real wealth is laughable. Our own AUSTERITY is here/is coming. BUY GOVVIES.......NOTE: If Greece is either unwilling and/or unable to repay, then IMHO Greece must be allowed to default/restructure within the Eurozone, much like when US states go bust. I am confident however that if this very low probability event happens, the EURO and the EUROZONE would see significant credibility GAINS - the project is far far stronger than its weakest link. The way to utterly destroy the project is to allow the weakest link to dictate policy - this is why I can't see any soft bailouts nor any softening of the austerity that much of periph Eurozone is going to have to go thru if it wants to remain in the club. The credibility of the whole EUROZONE project is ANCHORED by German/Core HARD MONEY - if this is allowed to be watered down, then I would see this as the death knell for the EURO and EUROZONE.
3 - DATA - US data improvements PEAKED in late Q2/Q3 last yr. The rate of improvement has declined ever since and is trending weaker now. The Q4 GDP number was totally in line and full of largely non-repeatable items (as austerity kicks in). The ISM last week was a mild surprise, but folks need to remember the US (and UK) are service/shopping/consumption based economies with manufacturing very much a very junior part of our economies - and non-Manu ISM was poor again. Unless you believe that something extraordinary is happening in the US/UK around sustainable (non-govt funded) prvte sector final demand (and I see no evidence for this) then the only reason to be bullish 'grwth' and risky assets is if you think that (the US and UK) governments can become even more reckless with policy at no cost whatsoever. IMHO the clearly is NOT the case.
4 - Closely connected to the above is a point on data, mrkts and timing. Unlike most supposed uber-bears Kevin and I both expected and warned hard in early 09 that we were due a multi-mth eco and mrkt bounce. We were abt 4/6wks too early on this call, but the call proved bang on over Q2 and much of Q3. HOWEVER, we both expected the eco and mrkt bounce to peak in Q3, to be then followed by the next swoon weaker. It wasn't much fun taking flak from more than a handful of folks over late Q3 and Q4 - 'perma bear' was abt the nicest cmmt I got from many at the time. Well we can now see that Kevin was right on grwth - except for the part where governments increased/extended their bailouts, in the auto and housing mrkts in particular, beyond Q3 and into Q4, and apart for the call that the big inventory rebuild qtr would be Q3 when it turned out to be in Q4. All of this is now basically over. And as for mrkts, on the basis that global stk mrkts have now, over the last few days/weeks, given back ALL their gains from the last 6/7mths, then maybe we more right then we all thgt. I make these points for 1 reason in particular: All our client feedback/polls points overwhelmingly to the view that very very few people participated in the March to Jun/July rally leg - this was all abt shrt covering. The consensus only turned bullish post-July. Well, in global equities, we are now back to/close to those levels.It is also of course 'pleasing' to note that the 'reasons' for the sell-off are the 2 reasons we have been speaking abt for many many mths - A) where is the sustainable prvte sector final demand? and B) 2010 was always going to be the year of SOVEREIGN RISK. And clearly our big call that credit would outperform equity seems pretty validated too.
Cheers
Bob
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Bob,
Just MHO, but I think you are way too optimistic.
He's just angling to get back on the London party circuit, a la Roubini.
Too optimistic indeed especially considering the fact that China officials are now documented saying that the US should be punished for the US arm sales to Taiwan. How specifically? By selling some of their holdings of US bonds.
http://www.reuters.com/article/idUSTRE6183KG20100209
When China decides it's time to cut off our credit card before Bernanke can have an orderly devaluation of the US dollar, just who in the hell is going to pick up these bonds that China will inevitably sell? Bernanke himself. Who will fund Obama's “Bush on steroids” budget? Bernanke himself. What happens then?
I believe Chumba has the answer....
"Old economy govvies are the asset class of choice. And I think the USD will do OK and Gold won't"
"very High Quality Credit and only the highest quality big cap global equities/best earnings streams. Currencies do OK. Commodities (gold, crude) don't."
Janjuah Truthfest Nugget: USD AND NOT GOLD, BITCHES
I think it's important to consider that a deflationary environment could also be bearish for govvies. Deflation would raise the real value of the obligations to be paid, and for highly indebted states like the US and the PIIGS, this could cause investors to further doubt the ability of the governments to service these obligations. Basically a decline in value due to uncertainty of principal repayment vs. an inflationary devaluation due to a higher discount rate on a principal that is certain to be repaid.
That's a complete about face on commodities for Bob in a 3-4 week timespan.
What happened to "I think hard assets, most obviously to me GOLD and even CRUDE, will do EXTREMELY well. Over the belly of 2010 I expect to see CRUDE up at $100 and Gold up at $1500."
WTF?
yawn....
In other good news Washington was shut down thanks to the snow and the country got a well deserved break from the antics of our hard working politicians..
Nope, the country got a well deserved break from the reporting of the antics of our hard working politicians. If the reporter can't get to an event, it didn't happen, regardless of whether it really did or not. Sort of along the idea that if a tree falls in the forest and no one is there to hear it fall, did it really happen?
You don't think a little (or a lot of) snow stopped the various Congressional Critters from their appointed rounds receiving or placing phone calls to various defense, financial and health industry lobbyists or CEOs, do you?
And the "Escorts" got to wear their fur.
Very sane. I reluctantly assume pols will do whatever is in their immediate interest, but thanks for the logical longer-term suggestions.
Interesting stuff. Not your usual hyper-inflation/devaluation/debasement fare.
Sure hope he is right about austerity.
This article is wishful thinking. I would hope there would be some austerity, but there is no meaningful effort to cut spending and "services". Without that initiative, the deficit will continue to grow sequentially.
Elections have consequences. Americans have been underestimated for quite some time. Well deserved criticism.
But Europeans we are not. Now is not the time to underestimate USA Americans. Elections have consequences. Forewarning.
I think the only entity that can introduce austerity at this point is the Federal Reserve. It's apparent that those wielding power in Washington DC STILL cannot control their urge to spend/borrow their way out of problems. Obama's travesty of a "budget" suggests that in a nutshell.
So... did the close vote and campaigning give Benron new religion?
I do hope so... becuase if not, we've got (at least) 4 more years of pain and suffering.
A babbling nutcase. Junjuah sounds like a guy who has dreams and makes predictions based on them. Like Rosie on LSD.
No wonder your post got flagged as junk. It didn't have any spam, or junky market predictions.
It just went against the overwhelming concensus of permabears at ZH. Better luck screaming "gold bitchez" next time!
Godfader, my impressions exactly. I only think you are expressing undue charity for this supercilious rehashing of the most obvious and utterly banal talking points. this kind of blind insouciance and gay nonsense coupled with tweeny girl idiomatic punctuation is just party talk devoid of any meaningful analysis or insight. to think this guy has clients!? Wow! This kind of drivel demeans the otherwise solid and sometimes brilliant work seen all across this site.** and by the way Bates, the pablum you've been spoon fed by the illiterates at UCD and which you mistake for an education only augments an overweening schoolboy ignorance which puts you in the same class as the pretentious non entity Bob.. uh.. what's his name?
"Greece is either unwilling and/or unable to repay, then IMHO Greece must be allowed to default/restructure within the Eurozone, much like when US states go bust . . ."
WTF? Did I miss a string of US states going bust? BS. So is his call on Greece and, by extension, the EuroZone. The problem with Elites---- and, yes, Bob, by dint of your circle of associates and profession, you are one---- the problem with Elites is that they spend NO TIME with the 'Common Man' and hence don't know what's happening on the broad bottom of the pyramid. Well let me tell you, Bob: there is a growing and unquenchable rage against the machine that is completely out of bounds of anything the world has seen in 80+years. Elitist technocrats are about to find out what happens when the Common Man slips the tethers of your models and formulas and rational thinking and does the impossibly irrational, for the actions of a wounded beast cannot be predicted by your philosophies and you, and all the other elites, are blind to its possibilities.
Hold on to your butts, the third act is gonna be a doozy.
Real change is coming.
Really?
It seems to me that you are the optimist.
All I see is people (common people) fast asleep.
Is anyone willing to walk through a scenario where bebasement, default, 'do-over' with bonds/debt? There might be inflation, there might be deflation, we might have a few more rule changes/accounting holidays, but what if it tips over?
He's out of his mind if he believes the West will choose Austerity - especially with the Chinese as our creditors.
godfader
why is he nuts?
he only appears nuts to me in that he seems to think life will continue well in 2015
well some of us survive the fallout maybe
I just cannot see a happy ending here
An ending that doesn't see complete collapse and war
He's nuts because politicians steadfastly refused to accept austerity. City of LA, state of California, state of New York - local municipalities. Nobody is cutting costs while everyone is playing a game of chicken to see who will give in first. Austerity is not an option.
Read some older pieces. He previously argued that austerity is inevitable, the only question being whether G goes there voluntarily or the bond market forces them to. The change in this piece is the idea the G will voluntarily do it. I too am somewhat skeptic but the argument dovetails nicely with the popular rage against bailouts etc.
I read his older pieces. Austerity would result in the next Great Depression as the US government is the only entity holding up our current economy. When you run a deficit of 11% of GDP and reporting 5% growth, you're implicitly taking an economy with a negative 5% trend line and reporting higher sales thanks to borrowing and spending. Austerity would immediately produce negative 5% gdp trendline, and would be made worse by additional negative multipliers.
On top of that, our biggest creditors are mercantilists. It would be easy and politically popular to destroy the value of their holdings. Keep in mind, the median household has less than $11,000 in total savings and a mortgage worth many times that number. Devaluation is both the easy and politically most palatable way to exit this mess.
People who subscribe to Austrian theories are theoretically correct - it's the way you should run a country's economy, but those theories don't work with political animals.
Again, I am somewhat skeptical that G will do this voluntarily, but even forced austerity produces the same result: When financing the debt (forget about increasing it) is impossible, you are going to see the huge contraction anyway. It’s just a question of timing and degree (and presumably a little bit of control if you go there voluntarilty).
Also, I don’t buy the devaluation argument. It works when you borrow in a foreign currency, and when you don’t plan to borrow any more (at least in the short term). Neither are currently applicable to the ol’ US of A.
It's devalue or default - pick your poison because the USA doesn't generate the income to service its debt.
Of course Austerity is a no-go, how do you justify the bank bail-outs, Goverment money for the wealthy, and then tell the general population that they have to cut back. The optics are horrendous. There are all kinds of "experts" that give all kinds of interpretations of what is needed for this or that to occur. But the bottom line is, the government gave the bankers trillions of dollars and telling the electorate that they have to pay for it through austerity programs will never get off the ground. I read these blogs and I wonder who is more diluded.
Germany has no need to bailout the PIIGS.
A weak EUR is exactly what the former top mercantilist country wants!!!! Trichet knows this too, and wants the same thing.
Everybody wants it which is why the next step will be trade barriers - at least against the mercantilists from the East. If your Germany, you sell them as many pieces of high end industrial equipment as you can, then close your markets to the product of that equipment. Push for barriers, then sell the same equipment to domestic producers.
dude, i am very impressed with your second derivative thinking.
+ 2 gazillion.
Right back at you!
I don't know much about this guy, but he may be right. Especially when he says "The People" will be in charge. I since the "People" are beginning to be heard and there is also evidence that some politicians are even beginning to listen. Our world works via the politician and the politician (in charge) is sensing that the the people are getting a bit pissed off and this potentially threatens the politicians being.
Does it result in austerity for the US? I sure hope so. Furthermore, I hope it spills over into the consumer and business sector. This, in my opinion is where our problems are rooted. I don't think, in the long run, that the powers to be will be able to fight off the inevitable. That being austerity for all sectors of the economy. My fear is that it gets pushed out another 5 years before it becomes reality.
Thanks for that post. It was just what I needed to put me down for my morning nap. I suggest that you follow blog post protocall in the future, 1500 words or less. You demonstrate a good imagination, but your optimism ruined the story.
Washington and austerity ???? I quit reading after that....drivel
+1
"I am an oil man"
"Washington and austerity ???? I quit reading after that....drivel"
Agreed...
Come on guy, ''the Chinese'' ''Iran'' etc... coupled with this new world order economic controlled market inversion. Wake up my friend, ZERO INTEREST and Debt to global GDP offers no resolution to the corruption that designed this ''devouring of the principle of labor'' and ''mark everyone with debt'' reality at hand. No my friend, the big geopolitical event is defined by SUICIDE.
There is no defense against this new world order market beast. The whole damn thing is measured by the burdensome capstone, Israel. The fact is, Israel's counter intelligence defense play is defined in the market crisis management and the next mass slaughter play designed to utilize the military force of America and Europe to force peace among nations.
The ''play'' is, the ''prophetic strong delusion'' of the leaders of nation, risen from the corruption which has already sealed the sacrifice of labor for the sake of ''peace and security'' based on the outcome of another 911 crisis management MIHOP LIHOP.
The whole plan all along has been to detonate a WMD in a city and to use that slaughter to frighten the nations to seal the deal with the devil. That's just the way it is and always has been.
The offer of temptation is risen from the strong delusion and that means a violent murder suicide maneuver, just as any counter move of sacrifice on a chess board is made, to get an opponent to commit and expose themselves to loss do dominion can be claimed. It's dirty pool man, a dark pool of ill liquid assets debt and military action so that peace through compromise and military threat of assured mutual destructing maintains a new world order system of control.
The wolf is in the field, it's tracks are well defined in history and guess what? Yeah, that's right, the lamb eating the sheep, well, it ain't no lamb my friend, the tag is still on the coat it robbed from the slaughter house it established through deception. DUCK AND COVER, don't crap your shorts.
In a rational world, things might play out this way. Unfortunately...
.....Unfortunately Germany is bailing out Greece so perhaps you should rewrite that whole thingy Bob.
Ben
you say austerity will result in a great depression
but if we don't accept it then we get a depression and our whole system goes up as well
ie complete collapse of currencies as well
a deflationary depression is the best option
as your currency remains intact
assets go down and the savers pick them up
thats how its supposed to work
then when asstes reach bottom other people can afford them and then on we go
If we keep the bailouts going and trying to correct this then the whole thing collapses
iTs about time the politicians were honest and said look that is the choice
A few hard years for those wityh debt, then we can continue
or we try and stop it and end in hyperinflation
It makes me so angry
I am a saver unyet now I am getting shafted as well while everyone else gets bailed out
where are the savers bailouts
yabs,
As a saver, you join me and others in the minority. Our country is made up of borrowers, not savers and those borrowers vote. It really is that simple.
In addition, by devaluing, we spread the pain to China and other mercantilists, instead of giving them a leg up on us for the next cycle. Lastly, by devaluing the buck, we can regain some of the industries we lost to Asia.
to me this all comes down to this: how much ability do the banskters and their captives, governments, to keep the poniz scheme going...my bet is the monied powers have a fight amongst themselves that precipitates rush to exits...and then, in my mind all bets are off....once some of the inner workings are exposed, the vengenance of the people globally will be unleashed...
so who is most connected and insulated and how long will that save them?
The USD will do okay, but gold will not?
The flight to safety will pump up the USD as usual. The gold market consists of buying the physical or holding paper gold from the ETFs. There is evidence of a disconnect occuring between the physical and paper gold price.
This will be more pronounced as demand for the physical rises and knowledge becomes wide spread, that there just is not enough physical to satisfy demand. Premiums for the "real" thing will continue to rise as lower prices take effect for the paper version, eventually causing the TBTFs to start facing the music and no chairs available.
The system is toast. Free trade and low tarriffs are at the crux of our imperialist problem that begat the derivatives, which begat the soverign debt issues, which are crushing our world economy.
The answer is Credit system, not monetary system. The answer is Fixed exchanges under a New Credit Bretton Woods. The answer is for each nation to be integrated as a global credit system via a world of soverign credit systems of each country acting through treaties. With high tarrifs to be the barrier to the dumping nature of goods upon lands to destroy their production which is imperialism, and what has destroyed our manufacturing here in the U.S.
We don't need to build everything again, but we do need to build a whole lot more of what we buy....or at this point SOMETHING. The whole world needs that. We can't rely on cheap chinese labor to produce the world's goods. (or any cheap labor for that matter - anywhere!)
Meanwhile with the credit system, a new credit bretton woods, and various other treaties you allow for other countries say Sudan, Bangladesh, or any country so they may build up their infrastructure, become self-sufficient, so on and so forth. There's no bank saying no. Because they can utter the credit themselves.
Now if people go against the treaties, and print all day for luxuries, yes that will have rammifications, but that is the exception, not the rule. Printing for infrastructure loans, for R&D, for Nuclear Power, etc is the only way these things will happen, because for monetarists, these are poor investments compared to the derivatives casino market.
Otherwise we have the hop-skip-and-jumping of corporations to produce in an area with dirt cheap labor in order to dump the goods upon the world to build marketshare and destroy competitors, usually other industrial countries. We've seen it the last 40 years, unless you're blind.
But I do agree with his aspect of how things will probably play out, although we never know what sleeve helicopter ben can pull out to put us down the hyperinflationary bandwagon. But as long as we don't reach that hyperinflationary tipping point, it's deflation we are going to be facing, because that is the biggest black hole, and the original cause of the problem.
I just disagree with this author that the system has a chance to pull out, nor should we implement austerity in the fruitless attempts to save it. Paying off this debt? To who? What for? It's mostly fraudulent. The world does not need austerity to pay off fraudulent bubble debt. Wage cuts aren't the answer. Higher wages are. Much higher for the average worker *if any of the debt level was to survive, the more debt that is destroyed the less the wage increases*. Austerity to pay off these debts is insane. It can never work. So the pain even if you think it could be justified by 'getting through this', can't be justified, because it won't solve this problem. Austerity won't solve this problem, if anything, it will exacerbate the problem.
Our floating rate, free-trade, debt based monetary system is toast. How long you want to hold onto the back of a dune buggy going over rough terrain at 30 mph is your choice, but anybody that holds on is crazy. Let go. It's not worth trying to climb up while it's moving. Let go, let it stop, and then get back in.
Only when you realize the problem is really this severe will you understand that a major change is necessary to salvage civilization.
I think this guy sees the next 6 months quite clearly, but after that is gets hazy. Maybe living in the lion's den has clouded one's opinion, as it's hard to see that it's the U.K.'s system that is causing this whole world implosion. If you don't start there, you can't see the solution, because your circumstances may be clouding you.
HBPA of 2007
New Glass/Stegall
Fixed Exchange rates
American Credit System
Nuclear Power plants (until fusion...these two areas should get the trillions
LaRouche 4 Powers Plan (U.S., Russia, India, China) - If these 4 countries got together to develop the new credit system, ALL others would follow us into it.
And more!
Plus do we really want to mess with china?
That 2.4+ trillion in dollars China has won't be worthless, thus we won't go to war.
Or we can force austerity, pick a fight with China, and really screw ourselves, all to save the imperialist monetary system? Why? It's obviously not working, and with the world integrated, there are no huge new markets to expand the debt based monetary system so that it functions, not with derivatives already being at this level of strangling the economy.
You could cut ALL social spending around the world to 0, and it wouldn't make a dent in the black hole beneath us. So why do it? It's insane. Why are things that bad? Because the debt and derivatives are strangling us that much. Nothing can function unless the losing bets are reconciled through destruction by default, which are the vast majority of them out there. That's how far we've gone past sanity. The ficticious debt is the majority of your costs in just about everything you purchase. Which means it's gonna roll everybody over. Because both costs, and prices are inflated because of the debt, when that goes away, you'll be surprised how much things cost. That is of course, if we don't hyperinflate bailout our way forward. They dying must be allowed to die so that the rest of us may live.
U.K. style N.I.C.E. which here in the U.S. would be called IMAB, IMAC or IPAB is the death panel, through bunk statistics, used as the word of god, instead of guesses by people who want to save money...guess what that combination brings, reduction of services because statistical models said they weren't worth it.
****Just like statistical models told AIG they could sell it's crappy insurance for dirt cheap and never be in trouble. The same way they goosed the global warming data. The same thing involved in Cap and Trade. All these are swindles. Imperialist gov't policies. Not big gov't policies.*****
Here in America we want socialized medicine. But we want it done the right way. Not the chincy way. Not the liverpool pathway hospice care way. What we don't want is imperialist socialized medicine. That is the death panel way. That's what people are pissed about. ...that's one of the reasons they voted a republican in Ted Kennedy's seat who I'm sure is rolling over in his grave. Of course plenty of idiots won't be able to tell the difference, and thus be against ALL socialized medicine while their HMO"s screw them over while charging them an ever increasing premium for every decreasing services.
They see the idiocy of what's going on even if they can't put their heads around it. But they will learn. Just a matter of time.
It's very simple, we must break with Britain's monetary system. It's what's drowning the world. They can take part in the new system as well, but the Queen will be pissed. If the U.K. wants to keep their way alone and have austerity themselves, good luck. But it isn't our system people, we don't need to follow them. We'd be insane to.
Once we do we need to know what to turn to. I used to hear the stories about the guy, but he saw this problem coming 5-10-15 years + ago, and has been talking the truth of it for a very long time. Read his stuff in addition to everything else for a matter of time and you'll realize that Lyndon LaRouche is actually the most accurate economic forcaster there has been. You want to know the truth, when the crazies are bringing you more of the truth than anyone else, you should realize that we really are far, far down the rabbit hole. So we need a credit system. We need to cancel the bailouts, and if those firms can't survive without the money, cya. Anyone caught up in the derivatives game? CYA.
HBPA of 2007 again so you don't have to throw out millions of people from their homes
I've already listed most of what needs to be done above, but there's plenty more. We need bedrock change, a new economic system. Everything else is cookie cutter that won't work.
We can wish on a star all we want, but this system is toast, irrevocably. Truth hurts, but it is, and if you don't know it, and if you don't think it's true, at least know of it, so as things continue to show the truth, you'll remember back and go, hmm maybe I was wrong, maybe we really do need that big of a change.
We do. But it's only until the majority of Americans agree, that change will happen. (but we have to be on the same page, or at least chapter...as of now there's too few of us, and were merely in the same book of shakespere, or dictionary....we need to close that gap a bit more.)
Remember we can say to the economic world, 'stop we want off'. The solutions are there.
Good luck all. (and to the author it was a great read, and I do agree with you on some things, and always want to hear differing viewpoints because it makes all of us stronger and if our collective spirit can move things, it'll move it to a bit better of a location)
Will the Eurozone break up over Greece's debts? Of course not. But Greece is just the most visible of a large number of countires that aren't getting with the German ideal of a "good euro member". In a perfect world, countries like these would embrace teutonic austerity and get with the program. They would slowly get their finances in line, and the EU would get back on its prosperous track.
But all this happened for a reason. The Greeks are Greeks! They aren't going to change just because Germany gets upset with them. Their government may try, and go through the motions, but unless the people themselves really change, it won't happen. We'll be right back here again, only worse. But why should the Greeks change who they are just to be in the EU?
You really have to ask if the EU is viable, or was just an idealistic, but misguided attempt to transcend their history of conflict, and to join the USA as a peer on the world stage. After all it was conceived when the Soviet Union really demanded Europe present a unified block to the East. But does it go agsint the very essence of what Europe is, a very loose collection of nations that are just too different to be one nation. And lets not fool ourselves, the EU will slowly coerce these different countries into one nation, to expunge the differences in the cultures for the greater good of I don't know what. I don't think that's intentional, but I think the thing itself with concentrations of power, inevitably leads toward that result. Forcing that kind of uniformity is doomed to failure, and happily so.
I probably shouldn't say this, but the whole thing is just too eerily like a benevolent fourth reich; the Germans keep trying to reform the whole of Europe, and bring it under control of properly run government. I know this is a bit narrow minded and simplistic. But it Napoleon couldn't do it nor could the Germans, twice. So you have to ask yourself if the EU will fail for the exact same reasons? Nobody really wants it.
Just so you understand I'm not paranoid about Germans, US foreign policy can be viewed as a modern form of Empire Building. Even though we don't view ourselves that way, it often looks like we are doing just that. You could argue that by deregulating our financial companies, we let them loose on the world, like a conquering army. Who needs a military?
Anyway, back to Greece. It will come down to them changing who they are for the privilege of being in the EU. And it won't be the government that decides, but the people themselves. Will they pay their taxes? Will they stop corruption? Will they hunker down for 5-10 years to pay down their debt? Does being in the EU bring real advantages that the people want? I don't know. Most important, Greece is a petrie dish for the rest of the EU. And every question you can ask about the Greeks, you can ask about the Spanish, Italians, Irish, Portuguese and a host of other countries, not to mention England and Switzerland.
Wow. It's refreshing to read that Obama "gets it" now and may be ready to lead us down the path of voluntary austerity. Who would have thought it could be so simple?
What a joke. Whatever Obama or the Republicans might be willing to do in some alternative universe, the "austerity" versus "QE to infinity" fork in the road has been passed.
I see the merits of a voluntary vs. involuntary austerity line of thought. What I don't is how you can think the Fed, or anybody, is on the verge of any type of austerity after Fannnie & Freddie credit lines were raised to infinity. Who is actually going to step in & stop that party?
The "genius" here is the Fed & crew have found ways to print without seeming to print. To dodge the conventional measures of inflation while inflating.
Eventually, this too will become obvious & a deflation-based portfolio may not do so well.
How can this guy call himself a bear?
Just mark it all zero........
What a load of bear I mean bull!This guy does not know what the.... he is talking about..he isn't as smart as he thinks. He needs to make his mind up. Can't believe RBS have allowed him to talk such a load of crap.
He should go on another 3 month break!
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