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Bill Gross: The US Is A Debt Meth Addict - Unless The Fiscal Gap Is Closed Soon "The Damage Will Be Beyond Repair"

Tyler Durden's picture





 

The highlights from Bill Gross' latest monthly piece:

  • Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them.
  • The U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.
  • What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.
  • To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year!
  • To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million.
  • We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. It just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.
  • Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
  • If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. The damage would likely be beyond repair.
  • The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.

Full letter:

Damages

From Bill Gross

  • The U.S. has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency.
  • Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. 
  • Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.

I have an amnesia of sorts. I remember almost nothing of my distant past – a condition which at the brink of my 69th year is neither fatal nor debilitating, but which leaves me anchorless without a direction home. Actually, I do recall some things, but they are hazy almost fairytale fantasies, filled with a lack of detail and usually bereft of emotional connections. I recall nothing specific of what parents, teachers or mentors said; no piece of advice; no life’s lessons. I’m sure there must have been some – I just can’t remember them. My life, therefore, reads like a storybook filled with innumerable déjà vu chapters, but ones which I can’t recall having read.

I had a family reunion of sorts a few weeks ago when my sister and I traveled to Sacramento to visit my failing brother – merely 18 months my senior. After his health issues had been discussed we drifted onto memory lane – talking about old times. Hadn’t I known that Dad had never been home, that he had spent months at a time overseas on business in Africa and South America? “Sort of, but not really,” I answered – a strange retort for a near adolescent child who should have remembered missing an absent father. Didn’t I know that our parents were drinkers; that Mom’s “gin-fizzes” usually began in the early afternoon and ended as our high school homework was being put to bed? “I guess not,” I replied, “but perhaps after the Depression and WWII, they had a reason to have a highball or two, or three.”

My lack of personal memory, I’ve decided, may reflect minor damage, much like a series of concussions suffered by a football athlete to his brain. Somewhere inside of my still intact protective helmet or skull, a physical or emotional collision may have occurred rendering a scar which prohibited proper healing. Too bad. And yet we all suffer damage in one way or another, do we not? How could it be otherwise in an imperfect world filled with parents, siblings and friends with concerns of their own for a majority of the day’s 24 hours? Sometimes the damage manifests itself in memory “loss” or repression, sometimes in self-flagellation or destructive behavior towards others. Sometimes it can be constructive as when those with damaged goods try to help others even more damaged. Whatever the reason, there are seven billion damaged human beings walking this earth.

For me, though, instead of losing my mind, I’ve simply lost my long-term memory. It’s a damnable state of affairs for sure – losing a chance to write your autobiography and any semblance of recalling what seems to have been a rather productive life. But I must tell you – it has its benefits. Each and every day starts with a relatively clean page, a “magic slate” of sorts where you can just lift the cellophane cover and completely erase minor transgressions, slights or perceived sins of others upon a somewhat fragile humanity. I get over most things and move on rather quickly. The French writer Jules Renard once speculated that “perhaps people with a detailed memory cannot have general ideas.” If so, I may be fortunate. So there are pluses and minuses to this memory thing, and like most of us, I add them up and move on. If that be the only disadvantage on my life’s scorecard – and there cannot be many – I am a lucky man indeed.

The ring of fire

In last month’s Investment Outlook I promised to write about damage of a financial kind – the potential debt peril – the long-term fiscal cliff that waits in the shadows of a New Normal U.S. economy which many claim is not doing that badly. After all, despite approaching the edge of 2012’s fiscal cliff with our 8% of GDP deficit, the U.S. is still considered the world’s “cleanest dirty shirt.” It has federal debt/GDP less than 100%, Aaa/AA+ credit ratings, and the benefit of being the world’s reserve currency – which means that most global financial transactions are denominated in dollars and that our interest rates are structurally lower than other Aaa countries because of it. We have world-class universities, a still relatively mobile labor force and apparently remain the beacon of technology – just witness the never-ending saga of Microsoft, Google and now Apple. Obviously there are concerns, especially during election years, but are we still not sitting in the global economy’s catbird seat? How could the U.S. still not be the first destination of global capital in search of safe (although historically low) prospective returns?

Well, Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them. Apparently so are many others, among them the IMF (International Monetary Fund), the CBO (Congressional Budget Office) and the BIS (Bank of International Settlements). I hold on my lap as I write this September afternoon the recently published annual reports for each of these authoritative and mainly non-political organizations which describe the financial balance sheets and prospective budgets of a plethora of developed and developing nations. The CBO of course is perhaps closest to our domestic ground in heralding the possibility of a fiscal train wreck over the next decade, but the IMF and BIS are no amateur oracles – they lend money and monitor financial transactions in the trillions. When all of them speak, we should listen and in the latest year they’re all speaking in unison. What they’re saying is that when it comes to debt and to the prospects for future debt, the U.S. is no “clean dirty shirt.” The U.S., in fact, is a serial offender, an addict whose habit extends beyond weed or cocaine and who frequently pleasures itself with budgetary crystal meth. Uncle Sam’s habit, say these respected agencies, will be a hard (and dangerous) one to break.

What standards or guidelines do their reports use and how best to explain them? Well, the three of them all try to compute what is called a “fiscal gap,” a deficit that must be closed either with spending cuts, tax hikes or a combination of both which keeps a country’s debt/GDP ratio under control. The fiscal gap differs from the “deficit” in that it includes future estimated entitlements such as Social Security, Medicare and Medicaid which may not show up in current expenditures. Each of the three reports target different debt/GDP ratios over varying periods of time and each has different assumptions as to a country’s real growth rate and real interest rate in future years. A reader can get confused trying to conflate the three of them into a homogeneous “fiscal gap” number. The important thing, though, from the standpoint of assessing the fiscal “damage” and a country’s relative addiction, is to view the U.S. in comparison to other countries, to view its apparently clean dirty shirt in the absence of its reserve currency status and its current financial advantages, and to point to a more distant future 10-20 years down the road at which time its debt addiction may be life, or certainly debt, threatening.

I’ve compiled all three studies into a picture chart perhaps familiar to many Investment Outlook readers. Several years ago I compared and contrasted countries from the standpoint of PIMCO’s “Ring of Fire.” It was a well-received Outlook if only because of the red flames and a reference to an old Johnny Cash song – “I fell into a burning ring of fire –I went down, down, down and the flames went higher.” Melodramatic, of course, but instructive nonetheless – perhaps prophetic. What the updated IMF, CBO and BIS “Ring” concludes is that the U.S. balance sheet, its deficit (y-axis) and its “fiscal gap” (x-axis), is in flames and that its fire department is apparently asleep at the station house.

To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% “fiscal gap” in terms of today’s economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 million. As well, the failed attempt at a budget compromise by Congress and the President – the so-called Super Committee “Grand Bargain”– was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart “Ring of Fire – Part 2!” suggests close to four times that amount in order to douse the inferno.

And to draw, dear reader, what I think are critical relative comparisons, look at who’s in that ring of fire alongside the U.S. There’s Japan, Greece, the U.K., Spain and France, sort of a rogues’ gallery of debtors. Look as well at which countries have their budgets and fiscal gaps under relative control – Canada, Italy, Brazil, Mexico, China and a host of other developing (many not shown) as opposed to developed countries. As a rule of thumb, developing countries have less debt and more underdeveloped financial systems. The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult.


As one of the “Ring” leaders, America’s abusive tendencies can be described in more ways than an 11% fiscal gap and a $1.6 trillion current dollar hole which needs to be filled. It’s well publicized that the U.S. has $16 trillion of outstanding debt, but its future liabilities in terms of Social Security, Medicare, and Medicaid are less tangible and therefore more difficult to comprehend. Suppose, though, that when paying payroll or income taxes for any of the above benefits, American citizens were issued a bond that they could cash in when required to pay those future bills. The bond would be worth more than the taxes paid because the benefits are increasing faster than inflation. The fact is that those bonds today would total nearly $60 trillion, a disparity that is four times our publicized number of outstanding debt. We owe, in other words, not only $16 trillion in outstanding, Treasury bonds and bills, but $60 trillion more. In my example, it just so happens that the $60 trillion comes not in the form of promises to pay bonds or bills at maturity, but the present value of future Social Security benefits, Medicaid expenses and expected costs for Medicare. Altogether, that’s a whopping total of 500% of GDP, dear reader, and I’m not making it up. Kindly consult the IMF and the CBO for verification. Kindly wonder, as well, how we’re going to get out of this mess.

Investment conclusions

So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don’t address our “fiscal gap.” IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual “fiscal gap,” then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”

If that be the case, the U.S. would no longer be in the catbird’s seat of global finance and there would be damage aplenty, not just to the U.S. but to the global financial system itself, a system which for 40 years has depended on the U.S. economy as the world’s consummate consumer and the dollar as the global medium of exchange. If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. It would be a scenario for the storybooks, that’s for sure, but one which in this instance, investors would want to forget. The damage would likely be beyond repair.

William H. Gross
Managing Director 

 


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Tue, 10/02/2012 - 07:56 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

 

Bill still thinks this can be fixed......I'm all ears.

 

I hope he's had his morning dose of speed. Get'em tiger.

Tue, 10/02/2012 - 08:00 | Link to Comment Landotfree
Landotfree's picture

He's an idiot or worse a liar trying to continue the lie.   It's basic Math, the system has always been unsustainable long-term.   

If the US government did what he is suggested and stopped spending, the ATMs would stop working tomorrow.  There is no solution the hairless monkeys want to hear.... the solution to the equation has always been collapse.

"How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns"

Billy is looking for a return on capital ie interest for his investment, sorry Billy but humans have no ability to produce expoential growth long-term... usually about a generation.

Tue, 10/02/2012 - 08:15 | Link to Comment Badabing
Badabing's picture

BANG ahhhhhh happiness is a warm gun.

 

got gold?

Tue, 10/02/2012 - 08:19 | Link to Comment malikai
Tue, 10/02/2012 - 08:26 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Only a problem if you're trying to smuggle dope.......German Shepherds can't smell PMs.

 

Just don't act nervous.....and you'll be fine.

Tue, 10/02/2012 - 08:58 | Link to Comment LouisDega
LouisDega's picture

I don't handle money. It's dirty

Tue, 10/02/2012 - 09:01 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

It's a bad habit......don't start.

 

Tue, 10/02/2012 - 09:17 | Link to Comment markmotive
markmotive's picture

Some interesting commentary coming out of such a mainstream shop. I'm glad these guys don't feel constrained to the 'glass half full' argument.

Debt control depends on growth. And growth is a phenomenon that didn't really exist before 1750. So if the world trends back to normal (after all, 250 years is a blip in human history) the entire system fails.

Watch and learn...(Documentary on money and banking - Zeitgeist 2: Addendum)

http://www.planbeconomics.com/2012/10/01/documentary-on-money-and-bankin...

Tue, 10/02/2012 - 09:47 | Link to Comment Big Slick
Big Slick's picture

RUMOR IS that Bernanke will be selling short term Public Sector Deficit to purchase long term Structural Fiscal Gap.  This is known as Operation SOCKITT TWIST: ‘Screw Our Children Kindly In The Tuckus as they TWIST'

(media and other users should credit Big Slick)

 

 

Tue, 10/02/2012 - 08:14 | Link to Comment knukles
knukles's picture

The math is astounding.

Here's a simple mental exercise.
Assume 50% of all expenditures are borrowed at the Federal level.  So to pay down the debt, without tax increases (revenue as per the gubamint to make investments ... horseshit) at least 50% of expenditures must be curtailed.
OK, now hold on, stay here with me.
So then add in the unimaginable off budget (what budget expenditures and the number becomes even greater than 50% to be cut) but let's use 50% for starters.

That means that we take 50% of current expenditures as baseline... that which can be spent.

Now, start the argument over what and how much gets cut.
Use it alongside your friends and neighbors, both lefties and righties...
You'll soon find out that they couldn't give a fuck because they can't even fathom the magnitude of the changes necessitated.

Success!  You can declare success and go home a winner in the intellectual exercise, for they're not even prepared for reality... and moreover, I'll betcha that they'll immediately revert back to the old cut this, that, what policy, horseshit... right back into the Hegelian Dialectic Product of Nothing New But teh Argument.

To put this in perspective:

Top panel, the US "budget"

Federal tax reciepts:        $2,170,000,000,000
Federal expenditures:      $3,820,000,000,000
New debt:                            $1,650,000,000,000
Total outstanding debt: $14,271,000,000,000

Recent budget cuts:       $38,500,000,000

Make it into your and my manageable graspable numbers and assume the following is a regular household doing the same degree of budget reparation:

Gross (before tax) family income:$21,700
Cash expenditures:                          $38,200
New debt added to credit card:     $16,500
Outstanding credit card balance: $142,710

Total family budget cuts:                       $385

Sure looks like a winner to me...

And betcha your buds will argue the same shit till the budget comes home

Tue, 10/02/2012 - 08:14 | Link to Comment Landotfree
Landotfree's picture

Irrelevant to the problem at hand.

Tue, 10/02/2012 - 08:26 | Link to Comment malikai
malikai's picture

Hello Dr. Krugman.

Tue, 10/02/2012 - 08:57 | Link to Comment kridkrid
kridkrid's picture

No... not Krugman... kind of the opposite of Krugman.  Krugman wants you to believe that there is a solution.  landotfree will call you an idiot for suggesting that there is.  He's not a big "how to win friends and influence people" sort of a poster, but he's correct.  The budget deficit is a symptom, not a cause.  Focusing attention on it is a distraction... by design.

Tue, 10/02/2012 - 09:21 | Link to Comment ATM
ATM's picture

Krugman doesn't believe there is a solution. Far from it! He is the leading prponent of creating the collapse. He wants a power vacuum so that his communist friends have a free run at taking control.

Tue, 10/02/2012 - 09:31 | Link to Comment MiltonFriedmans...
MiltonFriedmansNightmare's picture

We at the point the bansters have been striving for the past 100 years. Their goal can now be attained....a totalitarian state controlled by *they*...as long as *they* don't fumble the ball, and there's the rub.

Tue, 10/02/2012 - 09:52 | Link to Comment Big Slick
Big Slick's picture

I'm taking my ball and going home!! 

 

(i.e. exiting the system and loading up on AU, AG, PB)

Tue, 10/02/2012 - 09:53 | Link to Comment MachoMan
MachoMan's picture

Hi Mako.  Love your work.

Tue, 10/02/2012 - 11:30 | Link to Comment malikai
malikai's picture

Mine was a joke about how Krugman likes to debate.

Totally agree with you here and your post below.

Spot on.

Tue, 10/02/2012 - 08:28 | Link to Comment machineh
machineh's picture

'the problem at hand' -- what's that, a small, limp penis?

Tue, 10/02/2012 - 08:46 | Link to Comment kridkrid
kridkrid's picture

The problem at hand is a monetary system where virtually all money is loaned into existence with interest attached.  There isn't enough "money" in the system to pay back both principle and interest, so the system must issue more debt... at all times, or face cascading defaults - Collapse.  It's how the system was designed.  Government debt is just one piece of connected equation that requires that aggregate debt grow at all times.  The exponential function tells us that this can't be sustained.  That which can't be sustained will collapse. 

The gov't debt is a red herring... it's 3-card monte.  Our focus is trained on it so that the banking oligarch can pin the blame on something other than the system itself. 

Tue, 10/02/2012 - 09:12 | Link to Comment new game
new game's picture

yup-spot on-backed by blind faith and not backed by anything except more usery debt and more blind faith.

fast approaching the point(or there and not acknowledged) of no return and "loss of faith"

got proVISIONS, gold, guns and a plan?

Tue, 10/02/2012 - 09:15 | Link to Comment RiverRoad
RiverRoad's picture

kridkrid:

Yup, as long as the Fed and the banksters keep putting money to work instead of people....

Tue, 10/02/2012 - 09:34 | Link to Comment Landotfree
Landotfree's picture

It's the same system that existed when things such as banks and central banks did not exist.   Nothing has changed.  The system will collapse, the only questions are, 1.) exactly when and 2.) how many of the unfunded liabilties will be have to taken off the books... my guess 1-3 billion this time... if nukes are used then 100% is not out of the question.

Tue, 10/02/2012 - 09:11 | Link to Comment Offthebeach
Offthebeach's picture

Those aren't debts, they're "investments in our future ".
It's for the children.
We'll get incredible efficiencies from the PC and paperless office.
A college edkamakated work force will bring higher incomes.
You don't understand Modern Crony Keynesian Policy
.

Tue, 10/02/2012 - 09:22 | Link to Comment centerline
centerline's picture

http://www.youtube.com/watch?v=Li0no7O9zmE

 

A must see on this subject Knukles

Tue, 10/02/2012 - 11:21 | Link to Comment blunderdog
blunderdog's picture

There are plenty of ways to "solve" things, but they're not palatable.  It's not at all that we lack the ABILITY to solve the problems.  We lack the MOTIVATION to solve them.

You could ditch social security and medicare and welfare and foodstamps and disability by having government operations actually PROVIDE the materials and services rather than shuffling tax-dollars around.

You could cap "money" aggregation in the hands of fictitious legal entities to prevent the problem of "liquidity traps" at big companies requiring massive artificial dollar creation.

You could "bill for services" for all public-provided resources/utilities.

You could means-test every government payout.

The problem isn't with constructing a better world, the problem is with expecting POLITICIANS to be able to navigate the conflicting interests of a huge and varied electorate.

Tue, 10/02/2012 - 12:14 | Link to Comment Landotfree
Landotfree's picture

Wrong.  Eliminating those programs does nothing.  You are still have a system that can't expand exponentially forever. 

It's pure basic Math and common sense.

Tue, 10/02/2012 - 12:43 | Link to Comment blunderdog
blunderdog's picture

The system doesn't have to expand exponentially forever UNLESS you continue to believe that all debts must be paid in full with interest.

That's obviously not true, though.  "All debts" have NEVER been paid in full with interest.

You're right about the problem, but you're wrong that the existence of a logical flaw at the basis of the system means that the system cannot be maintained.  We're people, not computer programs.  Debtors have defaulted throughout history. 

How can you rationalize the CURRENT existence of the debt-system in light of those historical facts?  We've been doing this for thousands of years.

Tue, 10/02/2012 - 08:14 | Link to Comment kridkrid
kridkrid's picture

I wrote this in a thread yesterday... makes as much sense to post here.  I suppose it makes sense in any conversation that I have with any person... but people "ain't wanting to hear none of that"....

Recognizing that there is "no solution"... That the system was going to collapse because it was/is created to collapse is the mental realignment that people MUST have in order to ask the right questions and to seek logical answers. ALL conversations that start with the premise that "something can be done" retards our understanding of the world around us, by design.

Tue, 10/02/2012 - 09:31 | Link to Comment FEDbuster
FEDbuster's picture

I guess the question for me isn't will it collapse, but  when will it collapse?  How long can the printing/debt Ponzi continue?  What role does "reserve currency" play in keeping the scam going?  Do you have a timeline for collapse, will it be slow or overnight?  How do you see the system going down?

Tue, 10/02/2012 - 09:48 | Link to Comment Calmyourself
Calmyourself's picture

FB, not a popular subject around here.  Some have tried to predict or list a set of triggering events but it comes to nought.  One of the reasons I have backed off ZH, lots of complaining about the Ponzi but no real efforts to predict and deal with its supposed collapse.  When the supply chain starts to change and become unstable manifesting as late deliveries, Winter zones of the country not seeing fresh fuits and veggies for example.  This is one of the signs I am alert too.  At that point start preparing for some sort of end game as scarcity builds from bidding to hyperinflation.

Tue, 10/02/2012 - 10:08 | Link to Comment Big Slick
Big Slick's picture

FB - Lots of bright people out there attempting to time the collapse, however NO ONE has a clue.  Because the status quo "must be sustained" and the system is run by human beings who have accomplished things like landing on the moon, IMAGINE the effort and ingenuity into sustaining the status quo!

My experience tells me YOU CANNOT TIME THIS.  YOU CAN ONLY PREPARE FOR IT AS BEST YOU CAN.

My guess is that this is a boilling frog model and rather than some huge collapse (a la 1987 or 2000 or even 2008), this will be a long process (begun in a more acute phase in 2008) and we will wake up one day and say "how did the value of my home, retirement, & purchasing power erode by 90%?"

However under the boiling frog scenario, that will be 2 seconds before some 20-year-old with an AR-15 shoots you in the head for your five American Eagles.

Every self-invested individual should own a firearm.  If you own gold and no means of defense, I pray for you when the first trash can comes through the living room window.  Remember, you can own a shotgun by lunch today ($200 at the local sporting good store - 12 guage Remington 870).  Think they'll be in stock when you're the 1,000th person in line?

"Everyone has a plan until they get punched in the face." - Mike Tyson

(Sorry this evolved into a sermon on home/personal defense.  I just think everyone should think about it)

 

Tue, 10/02/2012 - 10:46 | Link to Comment Overfed
Overfed's picture

If you can't personally defend it, you don't own it.

Tue, 10/02/2012 - 12:09 | Link to Comment FEDbuster
FEDbuster's picture

I am WELL aware of prepping for the collapse (look at a collection of my prior posts).  I have been investing in beans, bullets and bullion for several years.

I am trying to answer the question of "how long can they kick the can down the road?"  Will it be an overnight event with the urgency of the 2008 financial/swaps markets collapsing?  Riots in urban areas, when EBT cards fail?  Or just a continuation of our current fall to third world living conditions?  Does the petro dollar reserve currency status buy us extra time? 

I see WW3 prior to complete economic collapse.  These crazies in D.C. aren't going to go down without a fight.  WW3 puts people to work, thins the herd and joins most of the Country in a "shared sacrifice" mentality.  If the choice is blow up the Middle East or let our metro areas burn to the ground and impose martial law everywhere (creating Civil War 2), I would think TPTB would choose to fight the "Big One" in the Middle East.

Tue, 10/02/2012 - 19:42 | Link to Comment Big Slick
Big Slick's picture

The Fed can print to eternity - literally - so the answer is that the can can be kicked quite far down the road.  

(Didn't mean to imply you weren't prepped FB - my post got away from me :)

Tue, 10/02/2012 - 08:41 | Link to Comment Gully Foyle
Gully Foyle's picture

GetZeeGold

Why yes it can Blinky.

See all those large sums are illusionary money, numbers on a server somewhere. Do you think pallets of cash are transported from place to place?

TPTB understands that. They created the problem. All those European nations looked solvent and worked until TPTB decided to break them down for spare parts.

TPTB can and at some point will merely switch to a digital currency. That devalues everyones savings and pm supplies.

Everything will still be relatively priced, but now they have much more control over the flow of monies.

They will also require real world assets in exchange for the digital. like Warcraft or Diablo 3. Those are test cases.

If they truly wish to be creative and tap into hipster angst, they will base everything on carbon debt. This is being tested already in either Australia or New Zealand, a small island community.

Rich still remain rich, poor poor. But now everything is much simpler to control.

The fly in the ointment is that Russia and China don't want to be controlled by those western powers. Neither  do all those small nations rich in rescources but kept technologically poor by western powers.

The next quarter century will be about this battle.

remember it takes a single generation and the new paradigm is accepted.


Tue, 10/02/2012 - 08:52 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Dude....please use caps.

 

I'm old.......my hearing isn't so good these daze.

Tue, 10/02/2012 - 09:27 | Link to Comment centerline
centerline's picture

Very plausible argument.  Is one of the nagging thoughts in the back of my mind.  Certainly I can see immediate and serious obstacles to implementation.  But, general public acceptance is really already in place.  And the technology exists now.

 

 

Tue, 10/02/2012 - 11:49 | Link to Comment Biosci
Biosci's picture

It devalues no one's pm supplies.  Maybe at the official rate, but the more the official rate diverges from the supply/demand of physical goods, the greater the size of the parallel (aka black market) economy.

Tue, 10/02/2012 - 08:47 | Link to Comment azzhatter
azzhatter's picture

interesting that the #1 and #2 economy of world are in the upper right hand quad. China belongs in there too, they just structure debt differently. Basically all the big guys just been buying growth at very high cost

Tue, 10/02/2012 - 11:49 | Link to Comment Biosci
Biosci's picture

All depends on how you measure "growth," doesn't it?

Tue, 10/02/2012 - 12:58 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

"Bill still thinks this can be fixed......I'm all ears."

I think in the way he laid it out, he's actually telling us that there is no way in hell this is going to get fixed, the US is basically in the final stages of drug addiction prior to death or a long ass prison sentance, and to run the fuck away from everything that isn't physical. 

Tue, 10/02/2012 - 07:58 | Link to Comment blindfaith
blindfaith's picture

Stock investment consultants are often failed investor themselves.  Mr. Gross is laughing all the way to the bank.

Tue, 10/02/2012 - 09:49 | Link to Comment Big Slick
Big Slick's picture

 ... and BOOM goes the dynamite!

 

 

Tue, 10/02/2012 - 07:40 | Link to Comment q99x2
q99x2's picture

Guess this means the US should be more like China before it is too late eh?

Ole Billy Boy knows its too late.

Whoopie we're all gonna die.

Tue, 10/02/2012 - 08:19 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Spot on.

"Unless we begin to close this gap..." yada yada

Suddenly I'm thinking about deck chairs on a certain ship...

There's not a snowball chance in hell that there isn't a global financial and probably military conflagration long before there's any significant closing of the enormous "gap." Does any sober person really believe America will make serious progress in lowering the debt in the next few decades, or that in that time, a conflagration will not occur?

Hopium is a helluva drug.

 

Tue, 10/02/2012 - 08:31 | Link to Comment machineh
machineh's picture

And anyone can make hopium crystals in their own bathtub using common household ingredients!

Tue, 10/02/2012 - 09:22 | Link to Comment Jethro
Jethro's picture

Economists see this as a monetary policy problem (not enough cash flow).

Politicians see this as a funding/debt problem (social programs/votes).

Central planners see this as an excess population problem (even the Nazis werent six sigma...).

Tue, 10/02/2012 - 09:26 | Link to Comment TuesdayBen
TuesdayBen's picture

" Does any sober person really believe America will make serious progress in lowering the debt in the next few decades?"

No. We Americans are too soft to do anything hard. See the physical softness all around you, and perhaps in the mirror. See the intellectual softness in TV viewing habits and programming, in the masses who will hand over their votes for trinkets.

We're soft and stupid and nothing good is deserved or destined for us.

Tue, 10/02/2012 - 08:43 | Link to Comment Gully Foyle
Gully Foyle's picture

q99x2

Yes we should have. China has been making major inroads into nations with rescources they need.

China has been loaning them money and building roads/bridges/factories.

We just bomb the shit out of them and steal what we want.

How long do you think that cab go on?

Tue, 10/02/2012 - 07:40 | Link to Comment Dr. No
Dr. No's picture

What a looser.   Its always we need to fix this "soon".  There is "still time".  No there isnt.  It is too late.  There will be a default. Prepare.

Tue, 10/02/2012 - 07:56 | Link to Comment gjp
gjp's picture

Exactly. How does he know Armageddon isn't around the corner? He doesn't, but he'd sure love to keep getting rich of the ponzi while telling everyone how oh so worried he is.

Tue, 10/02/2012 - 08:43 | Link to Comment Gully Foyle
Gully Foyle's picture

gjp

Cocaine they say it will kill you, but they don't say when.


Tue, 10/02/2012 - 09:02 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Don't bring Whitney Houston into this.....show some class.

Tue, 10/02/2012 - 09:04 | Link to Comment Acet
Acet's picture

For some reason, this teminds me of an old cartoon in the Mad comic about how getting AIDS didn't meant one would be killed by it:

  • One might first die in a traffic accident
  • One might first die from falling from a high place
  • One might first die from drowning
  • ...

 

Tue, 10/02/2012 - 08:03 | Link to Comment blindfaith
blindfaith's picture

Dear Dr. No,

 

You know little.  As long as the legal tender is legally printed to pay legal debts, there can be no default.  Debasement yes, default no. 

This can go on for a long, long time.  All the past years of screaming, have done nothing and the band plays on as if nothingis wrong.  If this were not true,CNBC would be off the air.

Tue, 10/02/2012 - 08:15 | Link to Comment EscapeKey
EscapeKey's picture

Debasement = implicit default.

Tue, 10/02/2012 - 08:29 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Dr No didn't say it couldn't take a long time. He just said it's inevitable. It is.

"As long as the legal tender is legally printed to pay legal debts, there can be no default. "

So you think that can go on infinitely? To quote you, "You know little."

Tue, 10/02/2012 - 08:45 | Link to Comment Dr. No
Dr. No's picture

I think you need to reexamine what you think you know.  The $200+ Trillion in unfunded liabilities cannot be paid off with printing.  Alot of those liablities have inflation adjustors (COLA).  Others are for services.  If a Doctor charges $1000 for a check-up, is the government going to pay this amount or will they continue to only pay the Medicare negotiated rate of $50? Doctors will choose to not do the work for Medicare patients...unless of course they will be forced.  Some argue this, personally, I dont think it will come to this.

Also as a member of the "they will just print" crowd, you may want to re-visit Mises "The Theory of Money and Credit".  Mises states that as inflation takes off, people switch to alterntive currencies.  Eventually, people do not accept the broken currency for services. It is impossible for the government to "print" $200T+ in services without the people abandoning the currency and swithcing to somehting else.

There will be a default.  There will be broken promises.

Tue, 10/02/2012 - 08:48 | Link to Comment NewWorldOrange
NewWorldOrange's picture

I regret that I have but one green arrow to give for that post.

Tue, 10/02/2012 - 09:22 | Link to Comment RiverRoad
RiverRoad's picture

And then they will most assuredly call it something else entirely.

Tue, 10/02/2012 - 09:32 | Link to Comment centerline
centerline's picture

+1.  Inevitable.  Short of a world war.

Tue, 10/02/2012 - 09:36 | Link to Comment Dr. No
Dr. No's picture

It will still be a default.  In the event of a war however, people will gladly accept the default.

Tue, 10/02/2012 - 11:56 | Link to Comment Biosci
Biosci's picture

A large fraction of the $200+ trillion in unfunded liablities could be resolved with the stroke of the legislative pen.  All it takes is a reduction in benefits.  Likely?  Not yet.  Politically palatable?  Not until the inflation pain is greater than the benefits pain.  But possible, in principle, and the only way out other than collapse.

My bet?  This won't happen for a decade, and gold will be $25k by then.  (That's only 30% y/y)

Tue, 10/02/2012 - 10:00 | Link to Comment resurger
resurger's picture

If you think ya know, then i dont think ya know ..

Tue, 10/02/2012 - 08:50 | Link to Comment azzhatter
azzhatter's picture

obammy says it's not a problem in the short term. been saying that for 4 years and before him bushy said not a problem and ..................................

Tue, 10/02/2012 - 07:42 | Link to Comment francis_sawyer
francis_sawyer's picture

I'm already experiencing the 'ring of fire' on account of the spicy taco I had for dinner last night...

Tue, 10/02/2012 - 08:01 | Link to Comment in-Credible Banker
in-Credible Banker's picture

LOL!!!

Tue, 10/02/2012 - 08:16 | Link to Comment EscapeKey
EscapeKey's picture

...and it burns burns burns, the ring of fire

the ring of fire.

Tue, 10/02/2012 - 08:36 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

I'm right there with you.

I had a Chicken Vindaloo.

My A-hole is like a fire truck - same colour and making twice as much noise ;o)

Tue, 10/02/2012 - 09:29 | Link to Comment ATM
ATM's picture

your asshole is hi-lite yellow?

Tue, 10/02/2012 - 08:46 | Link to Comment BlueCollaredOne
BlueCollaredOne's picture

We call that Tokyo Syndrome in my house.  It's when your asshole looks like the japanese flag

Tue, 10/02/2012 - 09:36 | Link to Comment Temporalist
Temporalist's picture

In your house you go around looking at one another's assholes?  I bet it's really bad when your asshole looks like the Union Jack.  Yeah baby!

Tue, 10/02/2012 - 07:45 | Link to Comment q99x2
q99x2's picture

He doesn't know how easy it is to quit meth compared to the opium Bernanke has been giving out.

Tue, 10/02/2012 - 07:46 | Link to Comment PUD
PUD's picture

There is no fix. In a debt based economy all money is debt. To increase the gdp (grow your way out) you by definition increase debt. Reduce the debt and by definition you reduce growth. No win. Debt compounds. To "grow" gdp which is also a compounding function you must compound grow debt. Nothing in nature can compound grow forever. If you put 2 bacterium in a petri dish with a food medium they will "grow" and they will also totally consume the food medium and die. There is no way out. It all will collapse catastrophically. It is math not my opinion

Tue, 10/02/2012 - 07:48 | Link to Comment Urban Redneck
Urban Redneck's picture

That ignores the balance of payments accross borders.

Tue, 10/02/2012 - 07:59 | Link to Comment Sean7k
Sean7k's picture

That ignores that all trade is conducted in fiat, debt based currencies.

Tue, 10/02/2012 - 08:14 | Link to Comment Urban Redneck
Urban Redneck's picture

No it doesn't ignore that, it's a simply false conundrum that GDP cannot be grown without increased debt, when all this is required is a positive balance of trade.  What is the US GDP vs. total outstanding debt/wealth/money denominated in USD- there is plenty of room for growth and building a better system over the medium term in the huge discrepancy between those two numbers.  But growth without addressing balance of trade and the reserve currency structure is not a long term solution.  The Triffin dilemma wasn't solved by slamming the counter window down on de Gaulle's leprechaun fingers, but by the same fiat or gold token, without a positive balance of trade money will flow out (so better to export some worthless fiat IOUs than gold).

 

Tue, 10/02/2012 - 08:18 | Link to Comment EscapeKey
EscapeKey's picture

GDP = private consumption + gross investment + government spending + (exports ? imports)

so, either private consumption increases (won't happen)

gross investment (unlikely)

government spending (extremely likely)

or (export-import) grows (potential)

Tue, 10/02/2012 - 08:47 | Link to Comment Urban Redneck
Urban Redneck's picture

GDP is very crude measuring stick when Central Banks are manipulating the money supply and it velocity to achieve targeted inflation or deflation.  Regardless, the most likely outcome is still an epic train wreck.

Tue, 10/02/2012 - 10:06 | Link to Comment EscapeKey
EscapeKey's picture

I don't disagree with that, but you did specifically address GDP in your comment.

Tue, 10/02/2012 - 11:02 | Link to Comment Urban Redneck
Urban Redneck's picture

My personal opinion is that money is nothing more than a State tool manipulated to achieve strategic and tactical ends.  But there are some schools of though that attach such value to money that, if believed, one could envision Ben & Mervyn getting into a who printed more wealth pissing match over scotch at Boodles.  Perhaps it just poor advocacy of an otherwise good argument-

Tue, 10/02/2012 - 08:27 | Link to Comment Sean7k
Sean7k's picture

All fiat currency is generated by new debt issuance. It does this regardless of who generates it. As all debt has interest attached to it, all debt requires new debt to pay the interest. The only way to stop this debt creation is to RETIRE it, but this will decrease GDP, as this action is deflationary.You are a moron.

Tue, 10/02/2012 - 08:41 | Link to Comment Urban Redneck
Urban Redneck's picture

The only way to stop this debt creation is to RETIRE it - NON SEQUITIR FAIL

All fiat currency is generated by new debt issuance - US-CENTRIC PERSPECTIVE FAIL

As all debt has interest attached to it, all debt requires new debt to pay the interest. - EPIC FAIL in an environment of ZIRP and NIRP

Stupid people shouldn't call others names...

 

Tue, 10/02/2012 - 09:14 | Link to Comment Sean7k
Sean7k's picture

Well then, perhaps you can explain why. Saying fail is not an arguent. ZIRP and NIRP have to do with interest rates, not the new debt being issued. As a reflection of the quality of debt that is held by insitutional investors. As only a small percentage of bonds have these rates attached, in the overall market, new debt must still be issued and interest rates still aplly- even when CB's are buying their own bonds. You really are a moron.

Tue, 10/02/2012 - 09:31 | Link to Comment new game
new game's picture

add inevitable inflation to this and you have the current crisses unfolding.

the bankster reaping the rewards of this debt churn and the rest getting ass raped via savings, stagnet income and loss of equity relative to this inflation...

Tue, 10/02/2012 - 10:03 | Link to Comment Urban Redneck
Urban Redneck's picture

Money and debt are largely interchangeable from both the State and Central Bank perspective, but they are not equated to "wealth" at that level, they are simply tools used to achieve various ends.  The consequence of poor US fiscal and monetary policy for the holders of both money and debt will be loss of purchasing power, beit through the more likely inflation or less likely deflation.

Tue, 10/02/2012 - 11:49 | Link to Comment Sean7k
Sean7k's picture

You GAIN purchasing power in a deflationary environment- moron.

Tue, 10/02/2012 - 13:02 | Link to Comment Urban Redneck
Urban Redneck's picture

WRONG.  A constant amount of currency gains purchasing power in a deflationary environment, whether an individual's supply of currency remains constant in a deflationary environment is an enitrely different matter.

I'll repeat what I said below,

You really need over your own ignorance, insignificance and inability to influence the world around you.

It's not all YOU, YOU, YOU.  There are aggregates and societal concerns involved.

Tue, 10/02/2012 - 09:32 | Link to Comment Urban Redneck
Urban Redneck's picture

You are passing off sloppy broad generalizations as fundamental truths, and throw childish temper tantrums when you get caught doing it and called out.

You really need over your own ignorance, insignificance and inability to influence the world around you.

Tue, 10/02/2012 - 11:51 | Link to Comment Sean7k
Sean7k's picture

Again, zero argument and zero examples. The only one passing off broad generalizations is you. Moron.

Tue, 10/02/2012 - 13:17 | Link to Comment Urban Redneck
Urban Redneck's picture

Actually I have been obnoxiously precise.  Why don't you just come out and say what you think-

Is it that money should be tied to something other than debt?

Is it that money should be a measure of wealth, in addition to, or instead of a medium of exchange?

And please, BE PRECISE, my dinner is cooking and the sun is setting on happy hour-

Tue, 10/02/2012 - 09:36 | Link to Comment Acet
Acet's picture

A growth in Exports would indeed be able to grow GDP without growing debt. There are however two reasons why it's very unlikelly that this time around a growth in exports will work for developed nations:

a) Export to whom? Everybody is in the shitter at the same time. They're all having problems and they're all engaging in competitive currency devaluation. Even the "huge potential Chinese market" is no salvation since they're having a slowdown too and the Chinese have always done all they can to create local competencies (they bring in foreign companies, force them to partner with local companies and then kick the foreigners out once the locals have learned the "secrets of the trade") - For decades we've been hearing from bright eyed CEOs about the potential of growth into the Chinese market and yet almost every single company that went there ended up creating their own local rivals and then pushed out.

b) Export what? All developed nations have heavilly reduced industrial production (which was sent to the likes of China) and agriculture is a tiny percentage of their GDP. All we have is Services which don't add to the economy directly, they only do it via improving quality or efficiency of the productive industries and lo-and-behold, we don't have much of those anymore. Then, as you might have noticed, Developing Nations are quickly climbing the Technology ladder, doing their own design, technological and production improvements (only those who have the factories are in a position to find better manufacturing techniques), developing local competencies and importing less and less of the few services that we can export (the pressure on the likes of China to obbey Western IP Laws is a last ditch effort by those who were first in the technology ladder to entrench their dominance).  Why do you think our economies are reduced to just Services around marketing and trading products and direct services to our own citizens (really, look around, most successful Business-men in the West are glorified traders and middlemen)? All we have left is just one huge economic circle-jerk.

Maybe the likes of Germany might survive the collapse of the debt ponzi, not the likes of the US, UK  or most of Europe.

Tue, 10/02/2012 - 10:20 | Link to Comment Urban Redneck
Urban Redneck's picture

This started out as a hypothetical on maintaining steady GDP while reducing the debt.  I pointed out this could be achieved by increasing net exports.  Without increasing gross exports the same result could be achieved by reducing gross imports to the point  that that net exports is positive and equals the amount debt reduction targeted.  However to do so without destroying purchasing power would require signinicant Investment in domestic production capacities (again it's unlikely, but possible).

Tue, 10/02/2012 - 12:06 | Link to Comment Sean7k
Sean7k's picture

Unfortunately, you are confusing now with the times of a gold standard or atleast real assets that could be exchanged that have no counter-party debt.

GDP is measured in dollars. All dollars are debt instruments. You cannot increase it without creating new debt.

Dollars are not wealth. They are debt instruments (notes). Every dollar or credit account is debt. Everyone is held as an asset by some bondholder, somewhere and if ever called in, are only valued in what they can be exchanged for. Faith is not wealth. If it has counterparty risk, its' value is negotiable. 

Even if you export products all day long, what do you receive? Dollars. If you get foreign currency, they are fiat as well and are merely debt instruments. You are being paid in debt.

Tue, 10/02/2012 - 08:10 | Link to Comment sessinpo
sessinpo's picture

And that ignores that trading partners are highly indebted too. Thus countries are just passing debt back and forth, not balancing. And then adding new debt upon that. Global debt is reported to exceed global assets in some reports. And not all trade is equal, nor are the products traded.

Tue, 10/02/2012 - 08:23 | Link to Comment Urban Redneck
Urban Redneck's picture

substituting money for debt (since everyone is playing the money is debt semantic game) yields -

And that ignores that trading partners are rich too. Thus countries are just passing money back and forth, not balancing. And then adding new money upon that. Global money is reported to exceed global assets in some reports. And not all trade is equal, nor are the products traded.

I am not sure what I am supposed to be missing here-

Tue, 10/02/2012 - 08:35 | Link to Comment Sean7k
Sean7k's picture

You just said absolutely nothing. We have zero rich trading partners, all our partners are in debt- many in excess of 100% GDP, which if properly computed would exclude negative government expenditures (those where taxes yeild negative results, like war) and create multiples of this percentage.

Yes, China is in debt. Current account balances are only one measure.

You are missing what you want to miss to perform your trolling duties.

Tue, 10/02/2012 - 08:55 | Link to Comment Urban Redneck
Urban Redneck's picture

How are you defining "rich" and "trading partner"?

What does China have to do with this discussion?

Again with the name calling (really, a troll?)

 

 

Tue, 10/02/2012 - 09:16 | Link to Comment Sean7k
Sean7k's picture

Again, zero argument. Can't they get better trolls?

Tue, 10/02/2012 - 13:10 | Link to Comment Urban Redneck
Urban Redneck's picture

There's a reason they don't give people like you a seat at the table.

On a micro level- I've seen the same thing happen to people of a similar vein at family holidays such as Thanksgiving.

Tue, 10/02/2012 - 09:26 | Link to Comment RiverRoad
RiverRoad's picture

PUD:

Fer sure.  Debt is our biggest product:  the "d" in gdp stands for Debt.

Tue, 10/02/2012 - 07:46 | Link to Comment LongSoupLine
LongSoupLine's picture

Gross...crazy like a fox.

Tue, 10/02/2012 - 07:47 | Link to Comment razorthin
razorthin's picture

Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets.

Party like it's 1999

Tue, 10/02/2012 - 09:01 | Link to Comment francis_sawyer
francis_sawyer's picture

 "I don't think the hard stuff's coming down for awhile..."

Tue, 10/02/2012 - 09:12 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Best game of my life.....nothing can stop me now.

http://www.youtube.com/watch?v=8A3M-d_eIqo

Tue, 10/02/2012 - 09:57 | Link to Comment Calmyourself
Calmyourself's picture

Galunga, balunga, no, bunga, lunga gunga..  I got that going for me..  That is about all we got going for us long-term..

Tue, 10/02/2012 - 09:32 | Link to Comment RiverRoad
RiverRoad's picture

He should know; he'll have his finger in Armageddon.

Tue, 10/02/2012 - 07:49 | Link to Comment Sudden Debt
Sudden Debt's picture

At least the president likes to watch football games when he should be working...

your average American citizens in presidency...

Tue, 10/02/2012 - 08:53 | Link to Comment knukles
knukles's picture

Could it be some kind of cultural work ethic thingamajig?

A lot of people, including the uber-leftie California Cadillac Commies are wondering that themselves....
Just sayin'.  I'm merely the messenger, a Casual Observer of the Human Condition.

Tue, 10/02/2012 - 09:04 | Link to Comment ZeroAvatar
ZeroAvatar's picture

Ummm, no, I don't think that culture HAS a work ethic.

Tue, 10/02/2012 - 07:49 | Link to Comment Whoa Dammit
Whoa Dammit's picture

Ross Perot on debt:

"If I told you I don't want to dig out of my debt problem until I go broke, you'd say, 'What are you talking about, Perot?'  You're not going to pay your debt if you don't have the money."

Tue, 10/02/2012 - 10:03 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Ross Perot is not Ron Paul.

Tue, 10/02/2012 - 07:52 | Link to Comment dwdollar
dwdollar's picture

"The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult."

And Bill was/is the supplier...

Tue, 10/02/2012 - 08:11 | Link to Comment blindfaith
blindfaith's picture

You can't finance the government on 'no taxes', so you have debt instead.  There is no free lunch is what everybody is saying and at the same time, that is what everyone is screaming for...free lunch.

Just how much of the 'debt' is financing the military???????  Yep, no one wants to talk about that.  And, I read that 605 of Americans want to go to war with Iran, as if chasing ghosts all over the world hasn't cost us enough already.

GIVE ME RON PAUL !!!!!!

Tue, 10/02/2012 - 07:51 | Link to Comment bullionbaron
bullionbaron's picture

Only gold and real assets would thrive within the “Ring of Fire.”

 

No longer is Gold smiled upon by the hardcore perma-Goldbugs, but also by the largest investment/fund managers. Gross has been pimping Gold for awhile now, when will the general populace wake up and start adding metal to their portfolios? 

IMO when the public starts buying the metals heavily it's going to send the metals into a bubble phase (price will be multiples of today): http://www.bullionbaron.com/2012/09/saddle-up-for-bubble-phase-in-gold.h...

Tue, 10/02/2012 - 08:39 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Cue up sinister CNBC group laugh......insert here.

 

 

Tue, 10/02/2012 - 08:48 | Link to Comment MillionDollarBoner_
MillionDollarBoner_'s picture

Did you see those assholes this morning on CNBC?

Report from DB that gold will be US$2,500 in 2013.

The "Guest Hosts" then slammed the report with the usual bullshit.

One of them was called "Yogi".

Can't fucking make it up !:O) 

Tue, 10/02/2012 - 08:57 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

One of them was called "Yogi".

 

That's OK......if you see a little green person named Yoda.....start praying like a mother.

 

Tue, 10/02/2012 - 09:06 | Link to Comment knukles
knukles's picture

Yogi ....
Nobody in their right mind who wants to be taken seriously in the money business refers to them self as "Yogi"
Has all the fixin's of using Twitter to communicate investment ideas...
Has all the gravitas of many of my ex equity manager bosses.
Go Team Alpha!

Standard CFA dogmatic drivel....

CFA equity geek claims markets are efficient.
And therefore tough to beat.
(D-u-fucking-h by definition... failure of even syllogistic logic)
To do so requires a clearly defined, simple, repeatable, explainable, high value added investment process.

Ask them the question:  If the market is efficient, how can you then consistently outperform it... why not just index?

Answer:  You don't understand dumb fuck, you're fired.

Result:  Bond manager goes off and successfully runs bond money without equity baboons (or marketing pukes ... real evil of the business...) around.  Looks back and figures equity managers pabulum all BS, captive to fallacious assumptions.

Oh Where is Thy Alpha, Brother?
 

Tue, 10/02/2012 - 12:42 | Link to Comment billsykes
billsykes's picture

Forgot their Ethics exam that is hard but everyone who passes gets to go on to steal money.

Tue, 10/02/2012 - 14:13 | Link to Comment holgerdanske
holgerdanske's picture

He must have been pretty bearish then?

Tue, 10/02/2012 - 08:04 | Link to Comment Landotfree
Landotfree's picture

Once it hits it's peak and the credit system bust it will nose dive.   I had this guy tell me he was going to buy everything at walmart one day with one gold piece.  I told him when the global credit system collapse there won't be anything at walmart for him to buy.... he still doesn't get it.   All this runs on the global credit system, it doesnt run on money.   The word "safe" should never exist as it does not exist while you are on this floating rock.

"IMO when the public starts buying the metals heavily it's going to send the metals into a bubble phase (price will be multiples of today)"

Tue, 10/02/2012 - 08:46 | Link to Comment bullionbaron
bullionbaron's picture

"Once it hits it's peak and the credit system bust it will nose dive."

 

That is definitely a possibility, Gold/Silver may be the bubble which ends all bubbles, multiplying as the central banks try to kick start growth but ultimately collapsing with everything else as the system comes apart at the seams...

Tue, 10/02/2012 - 09:14 | Link to Comment Winston Churchill
Winston Churchill's picture

What the gold bugs do not get,because they become emotionally attatched to their stack

is that the whole point of holding gold is to exchange it for productive assets at some point.

Whether thats at 10k or 50 k per oz only time will tell.

Will gold overshoot into a bubble.Without doubt.

What will be the top of the bubble ? Who knows yet.

Timing will be everything.

Tue, 10/02/2012 - 10:36 | Link to Comment AT
Tue, 10/02/2012 - 09:24 | Link to Comment MilleniumJane
MilleniumJane's picture

You've definitely given me something to ponder this morning.  Ratcheted up the ol' anxiety level a couple of notches!

Tue, 10/02/2012 - 09:55 | Link to Comment Chump
Chump's picture

Is this a joke?  What is the public going to use to buy pieces of metal?  USD?  Yeah right, people are living hand-to-mouth, week-to-week, and buying iGadgets on credit.  When will the general populace wake up?  When it's time to start eating each other.  So not only will they not be "buying metals" at that point (what with all the cannibalism and such), GLD will not be priced in multiples of anything other than zero.

Buy metals, take delivery.  Trade GLD and SLV at your own risk, but if you're hoping to sell into the bubble as the world burns, convert to fiat, then convert to physical...well good luck, sincerely.  We're all going to need it.

Tue, 10/02/2012 - 07:53 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Bill Gross, reformed meth dealer.

Tue, 10/02/2012 - 08:36 | Link to Comment machineh
machineh's picture

Why endanger yourself with inflammable chemicals, when the Bernank can manufacture 'the stuff' with a couple of keystrokes?

It's the new weightless economy -- more GDP goodness per ounce!

Tue, 10/02/2012 - 09:43 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Wack the bondholders, no need to cut spending right now, just create inflation and inflate away the debt, PIMCO is the cold loving frog in the warming inflation pot. Farmers love 5-6% inflation for the next ten years. PIMCO will have tons of redemption and people will spend their monied capital, thereby raising nominal GDP and nominal wages. Fuck the bondholders who want permanent cold, boil them up BEN, BOIL THEM UP BEN! That would be the exact opposit situation to the 1873-1896 period.

 

Tue, 10/02/2012 - 07:55 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

Sounds like Armageddon to me...........and Im quite sure you know why we call it Armageddon

Tue, 10/02/2012 - 07:55 | Link to Comment rsnoble
rsnoble's picture

So in other words a slow ass-fucking and gradual decline from middle class to no class is in order. Save bankers at all costs. Of course all these opinions don't consider accelerants like Iran.

Tue, 10/02/2012 - 08:47 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Most don't even know what "Armageddon" actually means.  It is one of those "hollow vessel" words whose meaning is ascribed to it over time.  Like "Wall Street" which is in fact is only a place but connotes many other things, "Armageddon" is a reference to nothing more than a place.  It is mentioned only once in original form, and is the English translation of a Greek translation of a Hebrew word.

Just so ya know...

EDIT: This is intended to respond to dick cheney's ghost's above, but fer some reason I'm getting tossed here.  Regrets to all

Tue, 10/02/2012 - 08:46 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Dupe.  Regrets

 

 

Tue, 10/02/2012 - 08:47 | Link to Comment machineh
machineh's picture

A bankster named Bennie Shalom
Made a debt-backed currency bomb
Bill Gross called it meth
So Ben fucked him to death
Without even using a condom

Tue, 10/02/2012 - 07:55 | Link to Comment Landotfree
Landotfree's picture

Billy is a stupid hairless monkey as well, getting up on his soapbox.   The US government could stop spending now if it wished and the whole system would collapse within hours.   Sorry Billy there is no out.  All Billy is doing is trying to hold up the lie, sorry Billy but the system is unsustainable... always has been.  

Tue, 10/02/2012 - 07:55 | Link to Comment Sudden Debt
Sudden Debt's picture

start raising taxes in the next 10 years to 11%....

really?

10 years from now, debt to GDP will be 500% and taxes will need to be at 99%!

Tue, 10/02/2012 - 08:14 | Link to Comment rbg81
rbg81's picture

Exactly.  Any revenue gained from raising taxes will be immediately spent.  Period.  Everyone knows the System is unsustainable and it will eventually collapse.  But the eventually part is the problem.  No one knows exactly when or how the System will die, so it becomes this abstract boogeyman that can be ignored.  Meanwhile, the Politicans are staring at this extra cash that they can use to buy votes TODAY--so they will spend it.  The votes they can buy are not abstract--it is real.  And the real will always trump the abstract.  Only when the System actually starts to collapse will the Politicians move to fix it.  And that will take some time as they need to overcome a lifetime of being conditioned to spend and avoid hard solutions.  You also have to overcome a populace who has likewise been conditioned to expect bigger and bigger Government handouts. Only when bread goes for $100 loaf and grocers will no longer honor SNAP cards will our leaders spring into action.  But it may be too late by then.

Armaggedon is too weak a word for what's coming.

Tue, 10/02/2012 - 08:30 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

The tax rate needed to close the fiscal deficit is incompatible with one that can allow the economy to grow.  It's an unresolvable paradox.

The pin is long out of the grendade, folks.

Tue, 10/02/2012 - 07:58 | Link to Comment grunk
grunk's picture

If gold is the only true currency, it will soon be seized or taxed into government hands.

Tue, 10/02/2012 - 08:07 | Link to Comment sabra1
sabra1's picture

PFG FOREX AND PHYZZ METALS ACCOUNTS RAPED 1 POSTED BY ANN BARNHARDT - OCTOBER 1, AD 2012 8:46 PM MST Good grief, this is awful. But not surprising. And look who is doing the raping . . . JP Morgan with an assist by RBS.

Just to be clear, what this means is that people who had CASH FOREX (not FOREX futures, but people who were trading the actual currencies themselves) and people who were trading PHYSICAL precious metals (gold, silver, platinum and palladium) through PFG are having 100% of their accounts permanently confiscated. Imagine that. JP Morgan confiscating bullion. I'm shocked. Knock me over with a feather. The next thing you're going to tell me is that the Rule of Law no longer exists and that the Republic is dead - overthrown in a neo-Stalinist putsch.

Tue, 10/02/2012 - 08:34 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Ann Barnhardt and her pink AR-15......that's the real code pink there.

 

Don't push her.....she WILL open fire on your ass!

 

Tue, 10/02/2012 - 08:08 | Link to Comment Nimby
Nimby's picture

I still don't quite understand how it is going to be "seized".  Seized by whom?  Are you suggesting agents of the state are going to enter my house, ransack it, and take my PM?  

Tue, 10/02/2012 - 08:32 | Link to Comment mayhem_korner
mayhem_korner's picture

 

 

Yes, with the qualifier that if you're holding pre-1933 gold, they don't need to ransack your house.  More of an emminent domain type of seize.

But the gov folks may not be the first ones showing up at your door looking to take by force.  Might be your neighbor.

Tue, 10/02/2012 - 09:50 | Link to Comment RSBriggs
RSBriggs's picture

They'd better bring scuba gear.  I lost my PM's in an unfortunate  boating accident in a nearby lake...

Tue, 10/02/2012 - 14:48 | Link to Comment blunderdog
blunderdog's picture

Folks who talk about government "seizures" of various things are usually alarmists with a poor understanding of logistics. 

The Feds just don't have the RESOURCES to do very much on the national scale. 

Spin the dial on the Internet and you'll find video of all kinds of passionate and interesting people telling you that the FEMA camps are going to be opened tomorrow, and tens of millions of Americans are going to be loaded into vans and shipped to this new as-yet-unrevealed "American Gulag." 

It's a reasonable idea to think that someone in power would *want* to do such things, but the notion that they actually have the *capacity* to do such things is just batshit-crazy.

They really don't.  That's why the propaganda is so important, and why the Feds are desperate to make sure the checks keep flowing.

Tue, 10/02/2012 - 08:01 | Link to Comment holgerdanske
holgerdanske's picture

Nothing much combusts at 212 degree F. That's the boiling point of water at sea level.

However the term might be apt, because the complacency prevailing reminds one of a frog being boiled slowly. Everyday another death defying stunt, and the show just grinds on, and on, and on-----.

 

Until it suddenly doesn't!

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