The Worst-Case Scenario

Tyler Durden's picture

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Cheeky Bastard's picture

gold, CAD, AUD, NOK,silver, oil ...

Anonymous's picture

Well said.

Tangible is better, but any hard assets will do.

Cognitive Dissonance's picture

Because you want to own "real stuff" and the currencies of the countries that produce and own reserves of the "real stuff".

When all the paper begins to collapse (after all, owning currency paper is faith in every sense of the word) people will want to own things they can hold in their hand and which retain their value not in any currency but in their need and use in the world.

I don't care how many pieces of green paper I need to purchase a barrel of oil if I already own the barrel of oil. That problem is no longer mine but someone else to deal with. This is also why real estate that is owned out right is good because I own the land and improvements regardless of the declining value of the paper needed to buy or sell it.

Back to barter at it's simplest forms. That's how paper currency began, to make barter easier and more convertible. We lost our way decades ago and with the help of financial engineering, we've been able to hold off a collapse longer than most expected. But it will come eventually. Own real stuff.

SV's picture

Yes, but ultimately holding the currencies from those producing countries is predicated on their ability to be fiscally prudent.  If you have actions like Obama is pushing in any of those sovereigns, you'll have debasement like USD (because debt will be incurred, probabilistically leading to QE or some form of issuance to deal- classic Keynesian).

I don't like the idea of Govt Bonds in the early days - maybe later when we have a better idea of who will/will not default.  Then, as Trading Places so eloquently pegged it, you can get 15-20% on your money and retire on a beach somewhere.  Bonds are soooo not the investment yet, that's unless you like buying into a bubble.

Cognitive Dissonance's picture

I agree that a producing country's currency is dependent of the management of said country. But, the value of any one currency is based upon it's relative value compared to other currencies. We can't know anything for certain at this point so looking at the way the cards are showing on the table now, the higher odds go to producing country currency appreciation and stability.

SV's picture

Thank you for keeping the short and long term play in mind, hence the reason I say ultimately.  I'm all about they're much better odds on appreciation and at least we know what to look for when those nations start resembling the US, Japan, Banana Republics, etc.

Cognitive Dissonance's picture

Agreed. I suspect there will be some "resource" wars down the line in some surprising directions.

Not let's see, how can we get pissed off at Australia? :>)

loderbe's picture

Windows 7 key serial windows 7

windows 7 product key

 

Bonds are soooo not the investment yet, that's unless you like buying into a bubble.

trav777's picture

100%

real things matter...fictions like debt and paper do not.

if you erased all the math concepts like debt and compound interest, who makes and has the real things? 

money is supposed to be backstopped by something real; in the case of fiat and debtmoney, it was backstopped by THE FUTURE.  this is the most important concept people need to grasp.  The interest component of lending represents a claim on real things that the future holds above and beyond the things of the present.

Fiat debtmoney worked so long as the future appeared to hold MORE things than the present, iow, so long as growth could be sustained.  With the peak in energy supply and continued decline of EROI, it's become clear that the future may not hold more things in it that can satisfy the NPV of the interest claims made by the existence of debtmoney.  To put simply, growth has reached an epoch.

Thus, the synthetic economy, intended to fudge GDP and present the illusion of growth.  Money was making money in the FIRE economy, the interest was satisfied by more debt, but not more real things.  This is always why debt-to-GDP and not overall debt was what mattered, because the issue was whether you could grow production of things to satisfy the future interest claims levied by today's debt.  Lending is a growth mandate.

The jig is up now thought, so expect confidence in all things paper to begin to wane and eventually collapse.  This is INEVITABLY what happens in fractional reserve and 0 reserve kiting schemes.  It's happened dozens of times, hundreds, throughout history.

We must return to Real Bills Doctrine; this is the only way.  That system was conceptualized to represent real production of real things and facilitate commercial paper.  But it made bankers no massive profits, so they have always tried to kill it in favor of debtponzis.

Bankers WANT to use their capital to acquire all of your shit; it's as simple as that.

dnarby's picture

The only problem with RE is...

It's NOT PORTABLE.

...Sorry!

Cognitive Dissonance's picture

Good point.

I was thinking more along the lines of real estate already held rather than dumping money into it now. But you're very correct, RE is planted by mother nature where it is and if "things" happen, you could soon be relocated without your RE.

Neo-zero's picture

Wondering if anyone has any thoughts on this.  Looks like someone's betting big on jan2011.

http://pragcap.com/traders-bet-on-a-60-rise-in-silver

 

Cognitive Dissonance's picture

I expect Silver to rise at a greater percent or multiple than Gold for various reasons. I own a lot of physical Silver.

Cognitive Dissonance's picture

Haven't seen you around for a few days CB. Hope all is well with you.

Dr Horace Manure's picture

Me too.  CB's acerbic wit is sorely needed at times.

 

Greyzone's picture

4Gs first, then speculative investments afterwards. If you aren't squared away on the front end, it won't matter one bit how much paper wealth you have on the back end if the system actually collapses.

Look at Richard Rainwater, billionaire, for an example. Remote farm, gardens, weapons, the works and then he focuses on his investments. Rainwater knows that the entire system can blow up and what's a dollar good for then?

If you have enough cash to be investing in this casino, then you have enough cash to do the front end preps properly too. Failure to do those preps means you are really betting the Fed and Bernanke won't manage to totally crater the economy.

Are you really feeling that lucky? Do you really believe Ben is that good?

gatopeich's picture

The thing is, economy is already screwed, only there is no perception of the fact by most people. They prefer not to think about it. Julius Caesar said something like "Nothing easier than making the people believe in something they want to believe."

So a likely scenario is a 'soft landing' into a feudal society, where people will just accept their role without daring to think they could fight for something better. Can't help but to see it already happening: people working from dawn til sunset at my city.

etrader's picture

You guys are the best!

:-)

TomB's picture

Government bonds??

geopol's picture

Governments have to pay higher interest... Spread as you push time-line. Not my choice, but..

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajFHnGFuSkXY&pos=6

 

Winisk's picture

Same reaction here.  What good is a government bond that has a high probability of defaulting.  Seems to me that bonds are a faith based investment.  I don't have any of that. 

geopol's picture

The idea of selling bonds in this country has gone wacko!! In the old days we used to sell bonds to build factories,,today we sell bonds to buy granite counter tops...Our main export is inflation./ promises to pay nothing.... That'll work :)))))))))

 

 

Cognitive Dissonance's picture

Agreed. Very few in the MSM seem willing to discuss what currency and government bonds issued in currency paper denominations really are.

Acts of faith.

The only reason I accept that green well printed piece of paper from you for my units of labor (work) is because I believe (faith, remember?) I can exchange it for the things I need from someone else. Faith in the system and the government is all that supports the currency of that government.

Paper currency is a confidence game in the strictest sense of the word. As long as I have confidence in the system I will accept the coin of the realm. To even question the basis for the system by the MSM would start to destroy the confidence in the system.

What isn't talked about much with regard to Gold is the tremendous amount of labor (machine labor and/or human labor) needed to extract the Gold. That is it's intrinsic value, as a store for the large amount of labor required to extract it. It's scarcity requires a huge investment in the only thing we have to offer each other, our physical and intellectual labor.

That's why Gold has retained it's value for 1000's of years. Gold will always require huge amounts of labor to extract. Paper does not and will not. Gold relies upon the labor, not faith, of others to mine. Paper relies on faith, not labor.

Anonymous's picture

You're wrong, the US Federal Reserve note is actually backed by the future tax collections of the work of the US citizenry.

In fact, if our corrupted government leaders would get off their asses, they could simply increase the tax rate substantially on the top 5% of income earners, or, better yet, cap an income level, the US debt would decrease incredibly quickly. But we can't expect that from our fully-owned millionaire congressmen who are 100% beholden to that same wealth class.

We have the ability to get out of this mess, but it would hurt the rich a lot, and that is something even our 'hope'-less Barry seems unwilling to do.

Warren Buffett said something on Charlie Rose last week that was very telling: when the top tax rate was 70%, it didn't stop investment, and it didn't stop profitability. In fact, from his opinion, he never heard any of his clients crying the way they do today if you threaten to go back to a fair tax code.

TAX THE RICH, and save the US Dollar. It really is that simple.

Increase interest rates, increase tax rates HUGE on the top 1-5%, and create government jobs with new stimulus truly aimed at improving the future, and we would have a healing and growing economy. But the propagandized ignoramuses in this Fox-bred nation are too stupid to realize that it really is that simple. But it really is.

Anonymous's picture

++++1,0000%!!

earnyermoney's picture

Soak the rich and using Uncle Warren as your example is LOL funny. Just last  week, the Treasury department denied Warren Buffet's attempt to purchase tax liabilities from LICHC of Fannie and Freddie to shield his gains. Hypocrite in the extreme. Wonder why a 70% tax rate did not stop investment? Probably structured their income so that it was not taxed at 70% rate.

I have a better idea. How bout Warren, Soros and the gang cut a personal check to the U.S. Treasury with "debt reduction" on the memo line.

Anonymous's picture

I notice you left all the GOP inheritance silverspoons of the list.

Apparently another pseudo-intellectual GOP apologist masquerading as a populist on the zerohedge site, I see.

Why leave any billionaire behind? I wouldn't.

Soak 'em all. Why should that corrupt Walton family be our BS royalty. I piss on 'em. And I hate their stores. They are the largest benefactor of our selling our entire economy to the Chinese. What about that Scaife joke? Or Sensenbrenner? Those pathetic inheritance frat boys couldn't earn a dime on their own, cause their soft-skinned pansies.

Why did you choose to leave them out?

Billionaires be damned, this is an all-out fight to save our entire civil society. There shouldn't be 1 single billionaire in the entire world.

Anonymous's picture

http://www.kctalk.com/forums/showthread.php?t=694

"The Board of Curators at the University of Missouri has voted to change the name of the new basketball fieldhouse from the Paige Sports Arena to Mizzou Sports Arena. The name change came up after allegations that the previous namesake, Paige Laurie - an heir to the Wal-Mart fortune - had cheated her way through the University of Southern California. Her parents, Bill and Nancy Laurie, had donated $25-Million to build the new arena but relinquished the naming rights after the scandal came up."

What pathetic rich we've created. I don't think a university of higher education should be beholden to some pathetic rich family. It shouldn't be dependent on some pathetic rich family. It shouldn't waste time and money on some pathetic extracurricular activity that detracts from the purpose of higher education.

That's why a University of Spoiled Children degree doesn't carry much clout. Too many of the graduates didn't even earn their own degrees.

SOAK 'EM ALL!!!!

faustian bargain's picture

In other words, put the Ponzi scheme into turbo mode. Backed by future taxes indeed.

I'm nowhere near rich, but I think a 70% rate is silly, and if I were up in that stratum and that kind of number came around, I would be packing it in for my own private island somewhere. Warren Buffett is proving himself to be a two-faced populist. Although I suppose with enough government backstopping, any exhorbitant tax rate can be mitigated. (Hint: it's called corporatism.)

Funny how you don't mention slashing the size of government.

Also funny how you don't mention that the Federal Reserve's printing press is what allowed the government to get so big in the first place.

Balancing the budget and raising interest rates are actions that address symptoms, not causes. Re-integrate the economy with real money and market forces, disable moral hazard, and those actions will indeed take place as market and political realities are allowed to set in.

Getting out of this mess is going to hurt everybody, not just the rich.

Anonymous's picture

Private Island????

Good God, how dumb a reply can you give. And, uh, who would defend you? What would you use as currency, gold? Which you would defend how? Go, we'll see if any legitimate functioning society will help you.

At this time, I don't believe any will.

PLEASE, PLEASE, PLEASE, YOU STUPID RICH, GET THE HELL OUT NOW. LEAVE AMERICA TODAY!! WE DONT NEED YOU. REPEAT: WE DON'T NEED YOU!!!!!

Go find those stooges that are going to be willing to continue to protect you.

If that is the best argument a GOP apologist can give up here, you guys better realize how desperate you've become. You no longer make any sense at all.

faustian bargain's picture

So, if you don't need the rich, then you should have no problem with not taxing them. At all. Think about what you say before you hit the CAPS key.

 

Listen, the problem here is not taxes. The problem is massive government-sponsored distortion of our economy for the past 100 years. Yes, the rich and powerful were instrumental in creating the Federal Reserve and in buying influence in government. You don't get rid of that by taxing the rich, or capping incomes, or any other bizarre artificial economic policy.

You get rid of it by:

  • getting the distortion out of the markets,
  • making everyone play by the same rules,
  • not creating money out of thin air,
  • not punishing people who produce,
  • removing moral hazard and regulatory capture,
  • eliminating corporate and public welfare,
  • ending unnecessary wars,
  • dropping entangling alliances,
  • promoting free trade & sound currency,
  • standing up for liberty,
  • limiting policy to that allowed by the Constitution.

 

And for the record, these are not GOP talking points. I don't know what the GOP platform is, but it's not what I just listed.

I suggest you get your partisan head out of the sand.

tomdub_1024's picture

Damn fb, speak it!...you rock! +10000 :)

xpistos's picture

Faustian Bargain,  , Anonymous is just pulling everyone's chain.  Do not feed the troll it will go away.

faustian bargain's picture

lol, already forgotten. Man what kind of crack was I smoking yesterday.

Anonymous's picture

No chain pulling at all, just exposing the shallow-minded greedy pseudo-intellectuals that live on the zerohedge site.

It's too bad you have no influence, isn't it? That's why you live writing comments to fellow shallow-minded greedy fools here. If you had any actual power, you'd be more self-serving and damaging than any of the worst Goldman scum.

I can honestly say that I'm very glad Ben Bernanke is where he is, and you and your other pea-brained ilk are nowhere near any real power. As bad a job as he can sometimes do, I see completely how much worse it would be if your kind ever had a hand near any lever.

Your soul is starved.

Apocalypse Now's picture

Drama queen? On an emotional roller coaster? Take a deep breath, relax, enjoy some sunshine, and smile.

sohbetme's picture

I like your ideas and thoughts. by chat Greetigns..

ThreeTrees's picture

Here here!  Fix the real problems instead of piling bandaids on top of bandaids.

TomB's picture

Taxing the rich won't solve the problems the West is facing, it will only further wreck the economy.

The idea that the rich don't pay enough taxes is silly. The richest 5% already pay 60.6% of all income taxes, how much more do you want them to pay?

http://www.zerohedge.com/article/5-us-taxpayers-account-606-all-tax-reve...

Anonymous's picture

Considering that they are getting 95+% of the income, I believe they should be paying, oh, uh, let's say 95+% of the taxes.

Another pseudo-argument from a GOP apologist.

Cow's picture

First, they are not "getting" xx% of the income.  They earn it.

Second, taxes are presumably paid because some service is rendered by the taxing authority.  Just because you make a certain income doesn't mean you use more services.

Third, I don't know why I'm bothering to explain this to someone who has made such an inane comment, because the likelihood of you "getting it" with your high school equivalency intellect is slim.

Certainly not apologizing for the GOP.  That would take all day.

 

Anonymous's picture

top 5% got 95% of income?? That means thepeople in the top 5% are making a few millions on average. That don't sound right...

Anonymous's picture

Top 5% got 95% of the income? That means top5% have income in the millions, on average. That don't sound right to me. I'm in the top 5%. My income is not in the millions. Not even close.

Mark Beck's picture

Increased investment ideas:

1) Drop the Capital Gains rate to 5%.

2) Have the US Central Government back a new special state infrastructure muni in case of default. These of course would be issued tax free. 

Mark Beck

Anonymous's picture

1) Yes, let's give everything that isn't yet theirs to the people with investable money.

You have achieved a new level of stupidity from the zerohedge comments section.

Let me guess, you're another top 5% GOP apologist. Too bad that you still are fighting for the losing team.

We'll see who Time proves right.

Anonymous's picture

Anonymous. Right now, there is a child in East St. Louis who has two failed kidneys. He's dying, Anonymous. It's not fair that you have two kidneys, and he has none. In the interests of fairness, we'll be dropping by your house this afternoon to grab one or both of yours--as soon as we figure out who you are.

Anonymous's picture

And that has to do with capital vs. labor how?

God damn, you parasites are getting dumber by the minutes.