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Backed Into A Corner Of Our Own Making

Tyler Durden's picture




 

Via Mark J. Grant, author of Out of the Box,

It is neither pessimism nor optimism but a squaring up with the facts and, when done, it is the inescapable conclusion that we have backed ourselves into a corner of our own making and that to escape this dark and dangerous place will be a painful experience. The scheme rests upon various feet; Central Banks acting in collusion to lower yields and provide capital as an off-set to the government in America and the governments on the Continent who cannot bear, for political reasons, to do what should be done and that is to cut expenditures.

The United States and the European Union are spending far too much money on anything/everything which cannot be afforded by their economies and so the Central Banks print more and more and more money to accommodate their Masters. Inflation, the conclusion that would be expected in normal times, is not present because all of these Central Banks are operating in unison and so, with nowhere to invest money off-world, we are restrained by the boundaries of the planet and what is available to absorb the slosh of capital that has been created. With the Central Banks buying up around eighty percent of any new supply; what is left for the poor beggars defined as private investors and so the money is put to use, equities head higher, absolute yields fall, compression continues unabated in Fixed Income, Real Estate increases in price and it soon become obvious that it is not this sector or that sector but the entire planet that has been filled with a gigantic amount of hot air and newly minted little pieces of paper and that a bubble has been created which is not only world-wide and systemic but it is the likes of one we have never seen which is why it has gone rather unnoticed. It is rather like lying in the poppy fields of Oz on some warm afternoon in May and forgetting that the wicked witch still lurks in her castle and watch out for Toto because she means to get you both!
 
The worry then is how does it all end, what do you do in the meantime and how and what do you do when the bubble is pricked. The Central Banks will try to manage it but they will fail as the demon is now far larger than either spun rhetoric or their ability to contain the monster that they have created. The politicians, on both Continents, have fed the incubus by offering sustenance to the people that elect them far past what their pocketbooks can afford and so Uncle Ben and Super Mario turn on their magic machines which mystically morphs paper into a special affair that can be used to buy goods and services with all of it backed by nothing more than promises to pay and “full faith and credit” and other lofty sounding words that mask the fact that no government could afford to pay except in this “pay in kind” fashion and so the presses print, old debt is paid off with new debt, the size of the debt is hidden in musty drawers, most isn’t counted and six and twenty blackbirds have baked a meringue pie.
 
A meringue is really nothing but foam. And what is foam after all, but a big collection of bubbles? And what's a bubble? It's basically a very flimsy little latticework of proteins draped with water. We add sugar to this structure, which strengthens it; but things can, and will, go wrong. Perhaps very wrong.
 
So there is the definition of the problem. There is the crystallization of the dilemma. The entire world’s financial system encased in a bubble and nowhere to go, nowhere to hide and nowhere to be safe. Many argue for the value of gold when the prick comes but gold is just a currency replacement and while it will rally in response or perhaps rally with inflation if it comes it begs the question of valuation as it has no absolute value as defined by me before and so relative value without the payment of income is a major cause of concern.

Consequently unless the world’s financial system implodes, a thought expressed by some, gold may be a choice but not the best of choices.
 
Since off-world investments are not possible then we are bound by the choices that are available. This brings us around to TIPS or corporate bonds tied to inflation, staying very short in maturities, floating rate notes that rise with interest rates or any other types of investments that float off of CMT (Constant Maturity Treasuries) or any other asset class that will rise in yield and price as valuation decreases and as the effects of the slosh of money wears thin. Bonds such as step-ups may have additional worth now as a partial hedge and fortunes, once again, will be made and lost making the right bet. The big Kahuna will be the question of timing because we play the Great Game to win and not to be right. Preparation is the key now because history teaches us that small bubbles, much less our humongous one, will not last as political and economic forces unite to prick that which is so over-valued in one manner or another.
 
When the economies of Spain, Greece, Italy, Ireland, Portugal and France are in decline and yet their sovereign yields fall as supported by a conditional promise from the ECB then trouble is in the making. When America spends money like it is without end because the Fed hands out the byproducts of the forest as if it was an unlimited supply then the valuation of paper overtakes the use to which it is put. We are sitting with our little round plastic toys and blowing bubbles into the sky and when the turn comes, when the bubble is pricked, scant few will be able to run fast enough or get through the door quickly enough when the madding crowd is rushing in a collective push to get out of the burning theatre. It may not be today and it may not be tomorrow but soon enough and hence my caution before the storm.

 

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Thu, 01/17/2013 - 11:33 | 3162323 GetZeeGold
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Just get a bailout of course.

Thu, 01/17/2013 - 11:38 | 3162348 Badabing
Badabing's picture

The only way to believe in the American dream is to be asleep.

George Carlin

Thu, 01/17/2013 - 11:41 | 3162364 trav777
trav777's picture

title is wrong.

We didn't make our biology an exponential growth mandate.

Thu, 01/17/2013 - 11:52 | 3162405 Skateboarder
Skateboarder's picture

PIIGS is now F(ucking french) PIIGS?

Thu, 01/17/2013 - 12:27 | 3162561 Doña K
Doña K's picture

<<<Gold is an option but not the only one.>>>>

The other one is silver. TIPS is just another paper promise, Do we still believe?

Thu, 01/17/2013 - 12:45 | 3162651 madcows
madcows's picture

I'd rather give my money to late night TV preacher than entrust it to the Government.  TIPS!  Ha!  Those are hedges against inflation where the Government is the one doing the inflation calcs at 1/8 of it's actual rate.

Thu, 01/17/2013 - 13:05 | 3162715 Fish Gone Bad
Fish Gone Bad's picture

Just downsize.  In the end, everyone dies, even those with a lot of money.  Get out of debt, go for a walk, and let the big fucking mess be someone else's problem.

Thu, 01/17/2013 - 15:27 | 3163418 Ruger556
Ruger556's picture

This is probably the best financial advice I have heard recently... I will probably buy some ammo too..

Thu, 01/17/2013 - 13:16 | 3162763 MrSteve
MrSteve's picture

TIPS are paid off according to US government statistics on inflation which is like buying into retirement at Wounded Knee, Pine Ridge, S.D.

No thank you!

Thu, 01/17/2013 - 14:03 | 3163026 YC2
YC2's picture

This article is pretty worthless.  Saying to prepare but offering no insight except that "gold is ok but not really" and then a bunch of debt products where the counterparty is contracted to pay off handsomly when they least can afford to (and wont) is not providing any insight.  Anyone who thinks TIPS are a good idea in a currency and debt crisis should ask the government of Argentina what the official inflation rate is there.  Im sure those inflation indexed corps will take their word for it...

Thu, 01/17/2013 - 17:19 | 3163870 Panafrican Funk...
Panafrican Funktron Robot's picture

In utilizing the lesson of one Mr. CogDis, regarding "we"-ness:

"we have backed ourselves into a corner of our own making"

I object to being included in the responsibility for this fucked up behavior.  The vast majority of what would be encompassed in "we", share this lack of responsibility for this fucked up behavior.  The blame, and responsibility for fixing, rests in a select few, very powerful individuals, who I should mention, as my dad puts it, "still put their pants on one leg at a time".  

Fri, 01/18/2013 - 00:19 | 3165226 JeffB
JeffB's picture

^^^ This ^^^

Thu, 01/17/2013 - 12:40 | 3162622 upWising
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"No matter how cynical you become, it is never enough to keep up."

"Most likely, man learned to walk on two feet so that his hands would be free to masturbate."

–Lily Tomlin

Thu, 01/17/2013 - 11:45 | 3162368 BKbroiler
BKbroiler's picture

Or a few more decades worth of bailouts.  Everybody waiting to use the backyard bunker when TSHTF should take a good look at Japan and learn that can-kicking can go on longer than anybody would have ever predicted.  Fighting the fed is a fool's errand, they will borrow more money and keep doing so until we pay $100 for a loaf of bread.  You can attempt to stop the tidal wave or you can surf that shit.

 

Thu, 01/17/2013 - 11:48 | 3162388 samcontrol
samcontrol's picture

surf's up!

Thu, 01/17/2013 - 11:51 | 3162402 Rainman
Rainman's picture

USA household incomes at mid-1990 levels. USA residential real estate at 2003 values. Japan residential real estate at 1983 levels. I see your point.

Thu, 01/17/2013 - 11:55 | 3162413 otto skorzeny
otto skorzeny's picture

the yen is not the world's reserve currency-it's just a bit player on the world's stage.

Thu, 01/17/2013 - 17:44 | 3163976 Panafrican Funk...
Panafrican Funktron Robot's picture

"it's just a bit player on the world's stage"

Disagree, the yen is one big fat fucking domino in all this.

Thu, 01/17/2013 - 11:55 | 3162416 Skateboarder
Skateboarder's picture

Japan was only able to kick the can this long. because Etas Unis and the EU were able to hold down the Ponzi while they were falling. When there's no one left to back the Ponzi, the show ends and everyone goes home (or starving, in this case).

Thu, 01/17/2013 - 12:06 | 3162465 BKbroiler
BKbroiler's picture

ok, fair point.  But the US operates on thinly veiled gunboat diplomacy.  The whole "trillion dollar coin" fiasco wasn't aimed at republicans, it was a reminder to the world that as long as we have the guns, things are worth what we say they are.  Treasury can print a trillion dollar coin, write "fuck you, pay me" on it and put a picture of Joe Pesci on it, and the world will have to accept it as legal tender if they value their own economy's stability.  I am not saying it's justifed, but that's the way it is.  It's good to be king.

Thu, 01/17/2013 - 12:42 | 3162636 hedgeless_horseman
hedgeless_horseman's picture

 

 

I agree with BK, and would add this...

Germany, like Japan, are post-war pawns. Their currencies are DESIGNED to be debased, as and when needed, to achieve synchronized diving with the pound and dollar. If Germany wasn't in the Euro, its prior experience with hyper-inflation would prevent it from debasing when instructed to do so (obviously not a problem with the Nips). Both countries go along as willing pawns simply because they have been re-created post-war as export nations totally reliant on weak currencies.

 

The PIIGS profligate spending has ALWAYS been there, like a fat store, and can be used by the brain when needed to feed the body.

 

http://www.zerohedge.com/contributed/2012-21-24/will-grexit-be-euro-positive-or-euro-negative

Thu, 01/17/2013 - 13:25 | 3162679 francis_sawyer
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 "It's good to be king"

~~~

On a long enough timeline the survival rate for everyone drops to zero [that includes KINGS]

~~~

Edit: I get a JUNK for that... Tyler(s)... You're going to have to officially re-write the ZH Constitution to exclude KINGS from the "timeline/survival rate' paradigm because your readers don't agree with the fundamental tenent anymore...

Thu, 01/17/2013 - 14:09 | 3163054 Colonel Klink
Colonel Klink's picture

Very good point! +1 for you.

Thu, 01/17/2013 - 12:56 | 3162689 BKbroiler
BKbroiler's picture

Hey man.

Germany, like Japan, are post-war pawns

 

Yes, forbidding a nation to have an army has a way of affecting trade relations and limiting economic clout.  Japan took US econ theory, ran with it like a champ and reached saturation a decade before we did (80's vs 90's).  Germany had learned a few lessons  prior to WW2 that Japan didn't have on the books yet, so they played their hand much better, imho.  Germany was the clear winner in the Euro project, and I'm guessing Uncle Sam wanted it that way.

Thu, 01/17/2013 - 12:59 | 3162698 hedgeless_horseman
hedgeless_horseman's picture

 

 

Yes, forbidding a nation to have an army has a way of affecting trade relations and limiting economic clout.

Gunboat diplomacy is, indeed, much more difficult without any gunboats.

Thu, 01/17/2013 - 13:03 | 3162705 NotApplicable
NotApplicable's picture

Uncle Sam Rockefeller?

Thu, 01/17/2013 - 13:19 | 3162783 Fish Gone Bad
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It's about the money.  It's always about the money. 

Thu, 01/17/2013 - 16:41 | 3163730 FrankDrakman
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 Japan took US econ theory, ran with it like a champ

Huh? They took 18th century mercantilism, and tried to run with that. Closed doors to imports, resulting in huge trade imbalances, an appreciating yen, an immense property/stock bubble, and as usual, just as Sony chairman Morita was scribbling "The Japan That Can Say No", the bubble reached its height, and they've had twenty lost years ever since.

Not saying that we're doing any better right now (at least we're having babies), but they certainly weren't running the US playbook.

Thu, 01/17/2013 - 13:18 | 3162741 Ghordius
Ghordius's picture

yes, hedgeless. and no, hedgeless. the EUR is designed to achieve synchronized diving with the pound and dollar if needed

(plenty of evidence for that, by now - I still shudder to think how it would have gone with 17 currencies instead of one...)

and it's also designed for a couple of other things, including reacting to some SHTF scenarios - and one of the most horrifying is still a hyperinflationary bout of King Dollar or Prince Pound

(note that nobody foresees hyperinflation for Princess Euro - her balances, both financial and trade are positive)

and it has one "terminal" trick up it's sleeve: disintegration into 17 known and loved old, "reliable" currencies - again, if needed

before talking about Germany we should always remember the real history of the DM and the BuBa:

a great high-flying kite and a kid desperate to keep it down - with London and NY both speculating on it's flight

------

btw, BK, you are not supposed to utter this kind of truths. they kinda hurt, you know?

Thu, 01/17/2013 - 13:34 | 3162869 francis_sawyer
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Fine debate [& accurate on all parts]...

But mentally masturbating on these contrived things of the past isn't going to help anybody when the timeline eventually reaches ZERO [which was my 'King's' reference above]... It's all just a charade to buy time...

Understanding it, or evaluating it intellectually only serves one purpose... The NEXT gang of crooks [after the above referenced 'timeline' reaches ZERO], will probably xerox a couple copies of the old playbook and use it to dominate & fleece the next round of sheep...

Thu, 01/17/2013 - 13:40 | 3162906 Vooter
Vooter's picture

"Treasury can print a trillion dollar coin, write "fuck you, pay me" on it and put a picture of Joe Pesci on it, and the world will have to accept it as legal tender if they value their own economy's stability."

Well, they can accept it, but that doesn't mean they have to use it, as Turkey and Iran's gold-for-gas swap has shown...

Thu, 01/17/2013 - 14:17 | 3163091 Bohm Squad
Bohm Squad's picture

Seems to me anyone crediting their account with a $1 trillion coin would want to use those proceeds as quickly as possible...!

Thu, 01/17/2013 - 16:12 | 3163577 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

that's why we will see the USS Ronald Reagan and the USS George Washington sinking to the bottom of the ocean

Thu, 01/17/2013 - 12:15 | 3162507 forwardho
forwardho's picture

Only cause they were first in the race.

 

Thu, 01/17/2013 - 12:49 | 3162671 upWising
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Living in hyper-inflationary Nicaragua, where prices doubled in the blink of an eye, a thousand Córdobas became ten thousand,  then a hundred thousand, then a million, only to be "redenominated" as One New Córdoba, you get cynical real fast.   You realize it is all just a lot of coloured paper.

I joked that the box trucks on the streets were delivering "zeros" to local businesses so that everyone could keep up.  Warehouses somewhere were packed to the gills with "zeros," until they ran out, at which point a "currency reform" would be announced, old money would be stamped and punched and re-issued with the "old zeros" surgically removed and returned to the warehouses, only to begin again.

Long the ZEROs Industry.  It's a growth industry.  How high can we go?

Google "Hungary inflation" and you will see.  "The pengö" in its quintillion pengö incarnation was so worthless, people threw it on the street like a cigarette butt.

Thu, 01/17/2013 - 13:26 | 3162810 DR
DR's picture

Yes, default in slow motion. Real negative yields for the forseeable future.

Now I understand why some people sleep with gold under their pillows.

Thu, 01/17/2013 - 11:32 | 3162325 bigdumbnugly
bigdumbnugly's picture


Backed Into A Corner Of Our Own Making

The worry then is how does it all end, what do you do in the meantime and how and what do you do when the bubble is pricked.

 

they just print more corners?

Thu, 01/17/2013 - 11:34 | 3162328 LawsofPhysics
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Ha!  With the Fed, Primary Dealers, and all the 401k sheep (by force) supporting the "market".  It is indeed different this time.  Dollar dumping/repatriation is the only thing can now "pop" this bubble.  Congrats central planner, you saved the "market" and have destroyed trust and the currency -" Winning" -  Hedge accordingly and watch what now happens to the paper price of commodities versus the physical price (for delivery).

Thu, 01/17/2013 - 11:45 | 3162381 Commander Cody
Commander Cody's picture

Exactly.  With the world's central banks and primary dealers all coordinated with one purpose and one purpose only: To inflate risk assets infinitely, this is an investment opportunity of a lifetime.  Everyone must go all-in and lever up because if you don't, you will be left ashore on the tiny little island with most ZeroHedgers with no means of escape.  Cannibalism comes to mind.  So, hop on and join the fun!

Thu, 01/17/2013 - 12:12 | 3162497 forwardho
forwardho's picture

Son, your gonna drive me to drinkin!

Thu, 01/17/2013 - 12:32 | 3162585 Doña K
Doña K's picture

Commander Cody, what is the name of your spaceship? How many space cadets are onboard?

Thu, 01/17/2013 - 13:21 | 3162789 Commander Cody
Commander Cody's picture

To be precise, there are 7,060,258,054 space cadets currently on board.  This is according to the U.S. Census Bureau world population clock as of 17:15 UTC (EST+5) on January 17, 2013.

Thu, 01/17/2013 - 11:59 | 3162436 Joe Davola
Joe Davola's picture

As one of the herded 401k sheep, I joke about the government forcing the money into treasuries, but wonder if:

1.  they need to - the fed will take them bonds and hold indefinitely, whereas people retire and start to demand actual cash to buy goods and such

2.  they want to - the current state of affairs with the stock market being the recipient of the fresh cabbage, provides a false idol to point at and proclaim 'all is well'

Thu, 01/17/2013 - 13:08 | 3162725 NotApplicable
NotApplicable's picture

Do they really need to force the money anywhere, if the holding entities can use the captial at their own discretion, ala Dimon's Whale, with the worst case being Corzining it?

Thu, 01/17/2013 - 11:37 | 3162332 francis_sawyer
francis_sawyer's picture

Let's narrow this down, shall we?... The 'evil', of course, is the PAPER DEBT MONEY [because it 'PRINTS ITSELF', of course]...

Thu, 01/17/2013 - 11:46 | 3162384 mayhem_korner
mayhem_korner's picture

 

 

Slightly disagree.  The Paper Debt Money is the enabling instrument.  That the sheep believe it has value enables the evil to be carried out.  All debts will be reconciled, however.  Like gravity, time always wins out.

Thu, 01/17/2013 - 11:59 | 3162426 francis_sawyer
francis_sawyer's picture

I guess you missed the [/sarc]... OK ~ so PAPER DEBT MONEY is the 'enabling instrument'... [& then all that other shit follows in line]...

& that 'enabling instrument' is like some nano-machine that prints itself...

~~~

One bush [so many ways to beat around it]... A daily phenomenon on ZH & elsewhere...

Thu, 01/17/2013 - 12:22 | 3162542 vamoose1
vamoose1's picture

  mr  grant  is  unquestionably  brilliant  but  he  appears  to   diametrically   contradict  himself  in  his  comments  on  gold

Thu, 01/17/2013 - 12:53 | 3162685 francis_sawyer
francis_sawyer's picture

The only thing that I can COUNT ON anymore when I wake up in the morning is to be slathered with a full day of "contradicions"...

Thu, 01/17/2013 - 13:10 | 3162738 NotApplicable
NotApplicable's picture

You'd think they'd invented more coherent looking facades by now, but NOOOOOO!

They made stupider people instead.

Thu, 01/17/2013 - 14:33 | 3163163 francis_sawyer
francis_sawyer's picture

I look at it this way... People aren't so much STUPID as they are HIGHLY MALLEABLE...

~~~

Before the 'Information Age', it was easy to fleece people because they were uninformed... With the advent of INSTANT communication... lies, stories, & propaganda have to be deployed as a way to FAKE people into believing that it's all fair out there & they're not just a bunch of human pinata's hanging there for the elite to swing at...

Well ~ maybe they ARE stupid after all...

Thu, 01/17/2013 - 11:35 | 3162338 CPL
CPL's picture

I want pie now after reading that.

Thu, 01/17/2013 - 11:38 | 3162340 Sudden Debt
Sudden Debt's picture

It may not be today and it may not be tomorrow but soon enough and hence my caution before the storm.

so.... not this weekend either?

If I used these kind of warnings to my kids, my house would be on fire, my daughter would be pregnant at age 11 and my son in prison at age 15 :)

Thu, 01/17/2013 - 13:08 | 3162722 MrSteve
MrSteve's picture

S.D. makes a solid point: alarming alarmists screaming no exit are pointless and incidently, no threat or counter force to the existence of a bubble or bubbles.

There are measures of value in the world that endure when paper grows ever worthless- a pound of copper today is equal to the paper cost of a loaf of real bread (~$3.50). Most gold and silver is mined as a byproduct of copper mining, so there is an energy, cost and mineralization ratio driving new metal production for a base price case. The 16:1 silver gold ratio is a silly USA historical artifact. Every English monarch clipped the gold coinage ratio when they assumed the throne, it made their money "go farther". Gold is gold and silver is silver, have some of each for a rainy day or maybe for seven lean years.

Gold-EagledotCom has editorials showing US debt to alleged gold holdings that puts the debt to gold at $61K per ounce implying a fractional revaluation (at 10%) that Oz's Yellow Brick Road is paved with Au Oz. =$6,100, some four times today's gold price. If accurate, this means cash is worth 25% of what you think it is. More likely, a meaningful revaluation would take the dollar down to 10% so the USA would get real bang for buckling the currency's value. Your accounts would then be valued at 1/10th their current balance. Social Security would pay off at $200 per month and bread would cost 35 cents a loaf.

Without some gold to anchor your future cash value, you are just another hurricane victim waiting for FEMA to issue you a tent in February. Good luck if that's your plan.

Every inflation has ended in a sudden and tragic deflation. History. No exception. No exit. Plan for real and hold real value, your family is counting on you. Don't be a screaming alarmist.

 

Thu, 01/17/2013 - 11:36 | 3162341 youngman
youngman's picture

"and the governments on the Continent who cannot bear, for political reasons, to do what should be done and that is to cut expenditures."

This is the exact problem......soooooo..they will print until the paper money craters.......and I think that will be when China and Russia have enough gold to back up their paper....

Thu, 01/17/2013 - 11:37 | 3162345 Seasmoke
Seasmoke's picture

There are no corners in a bubble

Thu, 01/17/2013 - 11:58 | 3162430 joego1
joego1's picture

square with buggar in it.

Thu, 01/17/2013 - 13:33 | 3162861 Umh
Umh's picture

Well it certainly better not bump into one.

Thu, 01/17/2013 - 11:37 | 3162346 madcows
madcows's picture

Look, it's all pretty simple.  There is far too much national debt than can ever be paid.  This is nothing more than a debt bubble collapse.  All the irresponsible countries borrowed far more than they can ever repay, and now the debt holders are going to get a haircut. 

What's unknown is the level of contagion.  The debt collapse will extend far beyond the government bond holders.  All the poor saps that are getting some government subsidy will be hit when the governments can't pay anymore.  So, they'll probably go belly up, too, which will impact all their debt holders.... and on down the line. 

It's going to continue to be ugly for many years.  Here's hoping the world fucks the banks and lives within its means in the future.

Thu, 01/17/2013 - 12:09 | 3162478 forwardho
forwardho's picture

All the poor saps that are getting some government subsidy will be hit when the governments can't pay anymore.

There are 47 million being fed by said govt, Their going "belly up" is going to impact much more than their debt holders.

Add on SS and medicare/aid.

Ugly, is a very optimistic description,

Thu, 01/17/2013 - 12:27 | 3162562 vamoose1
vamoose1's picture

    well  put...... 72  hours  after  those  food  stamp debit  cards   go  glitch  you  can  shoot  a   howitzer  through  every   stripped   supermarket  in  america

Thu, 01/17/2013 - 12:28 | 3162564 mayhem_korner
mayhem_korner's picture

 

 

It's not just countries that have borrowed more than they can ever repay...  Lotsa undisciplined people as well.  Sovereign debt and private debt are both slow-motion train wrecks.  And it's not a given that devaluation of the dollar will make all of those private debts disintegate via inflation.

Thu, 01/17/2013 - 12:42 | 3162638 madcows
madcows's picture

The FED's efforts to inflate away the debt in order to solve the problem is having just the opposite effect.  By creating inflation (14% by my calcs) they are hurting the majority of Americans.  Those citizens aren't getting raises or at least raises that keep up with inflation (because that would require growth, not just money printing), so they must cut or borrow in order to make ends meet.  That means they are spending less and going further in to debt.  Thus, they are a negative on the overall GDP, not a positive... That's Negative GDP.  Fucking Berstankee is worsening the problem, not making it better.  Those private debts are getting worse, just like the Federal debt.  This all ends badly.

Now, if Ben(Dover)-The-Financial-Terrorist actually wanted to inflate the debt away, he would give the money to the people, not the government or the banks.  What good is it in the hands of the banks?  So they have more to lend?  People are already up to their chins in debt.  Just making the debt cheaper doesn't help much.  They still can't pay the bills.  By giving it to the banks it's not going in to circulation.

Thu, 01/17/2013 - 15:05 | 3163322 Antifederalist
Antifederalist's picture

Well said.   McHugh had the same suggestion.  Rebate 5 years taxes, require it be used to pay off debt.

Thu, 01/17/2013 - 16:43 | 3163738 pvbflorida
pvbflorida's picture

So madcows if the entire world inflates prices then they do not change competitive forces that drive markets to the best values. When that happens wages will rise in concert since there would be no fear by businesses pricing themselves out of marketshare by squeezing margins. Then with the efforts of central banks also acting in concert keeping interests low to inflation they increase dispoable income which puts the brakes on nonperforming loans. It's the long game. Do you really think they are going to put the money directly in the hands of Americans? Really? Americans have displayed the ability of getting easy money and then spending it like crackheads. 

Thu, 01/17/2013 - 18:42 | 3164209 madcows
madcows's picture

So, sending up prices via printing will work in your estimation?  How about this.  Shit costs a lot more, people and businesses can't afford it, so they keep cutting and keep cutting until noone has a job and all the companies are gone.  I think you have it wrong.  Just b/c they drive up the costs doesn't mean people can demand raises and spend money.  People get raises when their companies are growing.  The easy money game is over.  The only way out is for the debt to be cleared.  Inflating won't work.  But, Uncle ben is a banker.  His clients are bankers and governments.  He's not going to let that happen.  My arguement is that in order for Benny to inflate away the debt, the money needs to be in circulation, thus too much money chasing to few goods... all we have is monetary debasement, no circulation. 

Thu, 01/17/2013 - 21:09 | 3164726 pvbflorida
pvbflorida's picture

Thanks for replying madcows I appreciate your opinion. My point was that if we were sending up prices by ourselves this would not work. Timmy was going to Europe every 2 months to evaluate the progress of the concerted efforts of all the countries involved. So as long as everyone inflates in a way that it relative to their existing debt then the existing debt would be devalued proportionately. I think Benny and the ECB are putting the money in to circulation. The paper is being bought by the Fed at a significant percentage. Other countries are doing the same. Everyone involved realizes that the bondholders will be taking a haircut but it's better than a beheading. Increased pricing will bring about wage pressures for every country if they maintain everyones agreed upon share. Increased wages will pay for more expensive goods and services. They will also reduce the number of non performing loans. Like I said before I am not rooting for the strategy just trying to understand it.

Thu, 01/17/2013 - 11:38 | 3162349 Dr. Engali
Dr. Engali's picture

"Many argue for the value of gold when the prick comes but gold is just a currency replacement and while it will rally in response or perhaps rally with inflation if it comes"

 

Gold does not "rally" the dollar falls against gold....fixed that for you. 

Thu, 01/17/2013 - 15:37 | 3163461 madcows
madcows's picture

Gold is typically a hedge against inflation.  People buy it expecting that it will go up in value as the dollar depreciates.  Do you think it will also go up when the dollar explodes?  I think we're in a top for PM's and the stock market due to FED printing, and those assests will fall in value when the economic collapse comes.

Thu, 01/17/2013 - 23:46 | 3165160 Angry White Dude
Angry White Dude's picture

we are nowhere near a top. Read up on Germany's market pre-Hitler.

Thu, 01/17/2013 - 11:39 | 3162357 pvbflorida
pvbflorida's picture

I think the plan is to avoid the sudden reconciliation of excess debt. Stealing wealth, not income, at a rate that governments can get away with. Death taxes and such. Continue to rachet up the debt to force wage pressures globally and thereby dilute the buying power of wealth that was earned at a greater cost. Basically a redistribution over time. I don't like it but I think that is what they are doing. 

Thu, 01/17/2013 - 11:42 | 3162370 francis_sawyer
francis_sawyer's picture

Naw ~ they're just STEALING... No need to make it complicated...

Thu, 01/17/2013 - 11:43 | 3162373 busted by the b...
busted by the bailout's picture

It remains, as always, just over the horizon.

Thu, 01/17/2013 - 12:19 | 3162531 SmallerGovNow2
SmallerGovNow2's picture

damn CB r's keep moving the fucking horizon....

Thu, 01/17/2013 - 11:43 | 3162376 Contra_Man
Contra_Man's picture

Or we could FIND $$$$ 15 Trillion in new taxable assets found abroad... and BOOM... all done... crisis averted.... onwards ho! 

Easy Peasy Stealie Winsie.

Thu, 01/17/2013 - 11:45 | 3162383 Nid
Nid's picture

War is the only answer....sorry.

Thu, 01/17/2013 - 11:48 | 3162389 Contra_Man
Contra_Man's picture

War is just the Plutocrat's economic growth stimulus plan in disguise.

Thu, 01/17/2013 - 11:49 | 3162396 G_T_A_44
G_T_A_44's picture

"The worry then is how does it all end?"

Very simple:

In no particular order-

1. $600+ TT Global OTC Derivitive  Apocalypse

2. Global Bond Mkt Implosion

3. Global Currency Cris/Wars

4. Cannabalization

 

Global Hyperinflationary Depression

 

The End~

Thu, 01/17/2013 - 13:00 | 3162699 THX 1178
THX 1178's picture

It always ends with dessert, doesn't it?

Thu, 01/17/2013 - 11:51 | 3162397 Nid
Nid's picture

The Debt is too large to be repaid, it's too large to be written off by the creditors without bankrupting them...someone's going to have to say "uncle"....I doubt any white flage will be waived.

Thu, 01/17/2013 - 12:34 | 3162593 pvbflorida
pvbflorida's picture

I don't think so. If the velocity of money exceeded that of debt and if the seizure of wealth came as people die you could effectively get debt under control. It's the long game but it is one that I think is being deployed.

Thu, 01/17/2013 - 11:52 | 3162406 otto skorzeny
otto skorzeny's picture

so  "dorothy lying in the poppy fields" is another way of saying that we are bankrupting the US by spending hundreds of billions on the military to protect the CIA's poppy fields in afghanistan while "the wicked witch in the castle" is the eventual monetary crisis because of our overspending-I get it

Thu, 01/17/2013 - 11:54 | 3162414 Contra_Man
Contra_Man's picture

"Around, around, around she goes.... where she stops, nobody knows?" As if,... C'mon!

Thu, 01/17/2013 - 12:01 | 3162442 joego1
joego1's picture

Tips indexed to price food. Backed by the full blah blah blah...

Thu, 01/17/2013 - 12:05 | 3162461 Spastica Rex
Spastica Rex's picture

FTA: we are restrained by the boundaries of the planet

hmmmmm...

Thu, 01/17/2013 - 12:24 | 3162550 Flakmeister
Flakmeister's picture

A lot of people ascribe to the Buzz Lightyear view point...

To Infinity and Beyond....

Thu, 01/17/2013 - 13:49 | 3162943 Spastica Rex
Spastica Rex's picture

Yes - Lance Armstrong wasn't "restrained" by any limits, and look what he accomplished!

Just Do It!

 

Thu, 01/17/2013 - 12:05 | 3162462 JR
JR's picture

It is true that money’s worth as a medium of exchange is based, in the end, on “faith and belief and nothing more.”

My mother, retired publisher of a national trade magazine who is now partially dependent upon her self-employment retirement savings, was extremely chagrined when Ron Paul told Alex Jones earlier this month that while he disagreed with Ben Bernanke, he thought Bernanke's intentions were “good.” My mother is just one of millions who are victims of Ben Bernanke’s central planning, daily watching the accrued purchasing power of their stored labor stolen and disseminated as Ben inflates and monetizes away government’s political mismanagement.

They already have lost faith in their “currency.”

As the disintegration of the economy progressed in the Great Depression and FDR seized private gold holdings and then fixed the price of gold to remove any remaining impediments to limitless currency and credit expansion, Sen. Carter Glass warned Roosevelt, to no avail, in early 1933:

“It’s dishonor, sir. This great government, strong in gold, is breaking its promises to pay gold to widows and orphans to whom it has sold government bonds with a pledge to pay gold coin of the present standard of value. It is breaking a promise to redeem its paper money in gold coin of the present standard of value. It’s dishonor, sir.”

If Congress issued debt-free and interest-free money, says Sheldon Emry, “money issued in such a way would derive its value in exchange from the fact that it had come from the highest legal source in the nation and would be declared legal to pay all public and private debts.”

Declared Emry in 2001: “Issued by a sovereign nation, not in danger of collapse, it would need no gold or silver or other so-called ‘precious’ metals to back it. As history shows, the stability and the responsibility of the government issuing it is the deciding factor in the acceptance of that government’s currency—gold, silver, or iron buried in some hold in the ground.

“Proof is America’s currency today. Our gold and silver are practically gone, but our currency is accepted. But if the government was about to collapse, our currency would be worthless.”

Emry points out that Germany used debt-free and interest-free money “from 1935 and on, accounting for its startling rise from the depression to a world power in 5 years.

“Germany financed its entire government and war operation from 1935 to 1945 without gold and without debt, and it took the whole capitalist and communist world to destroy the German power over Europe and bring Europe back under the heel of the bankers.

http://www.lewrockwell.com/blog/lewrw/archives/130375.html

Thu, 01/17/2013 - 12:41 | 3162631 busted by the b...
busted by the bailout's picture

"It’s dishonor, sir."

Yes, but the only thing that matters now is maintaining the status quo.  Honor, respect, fairness, justice, and honesty have become irrelevant.

Thu, 01/17/2013 - 12:09 | 3162469 falak pema
falak pema's picture

Mark Grant has opened his eyes, stopped quoting Shakespeare to Eurobash in his slanted rants, and now realises WE (I love the collectivist knee jerk) have put OURSLEVES in this huge collective mess.

So who is this WE pray? Is it the man in the street? The "we the people" type. The Syntagma scarecrow sacrificed to save Banksta margins and CB hopium, now coming to every local station according to same Mark Grant?

Weeee? we? We did this?

We didn't do this but we will suffer this bigtime!

Thank you for changing your macro tune from singing those "filthy piigs" to "we the guilty", but no thank you to assuming us all collectively guilty of this betrayal of civilization by the "happy few" in power, as representatives of we the people.  

Thu, 01/17/2013 - 12:10 | 3162487 Spastica Rex
Spastica Rex's picture

"We" are bees and this is the hive we made.

Thu, 01/17/2013 - 12:18 | 3162508 falak pema
falak pema's picture

so who's your queen? As busy bees we all work for queenie! 

Thu, 01/17/2013 - 12:19 | 3162532 Spastica Rex
Spastica Rex's picture

Bees, at all social levels,  work through their programming, not for any abstraction like "the queen wills it." I have developed a dim view of humanity over the years.

On a bright note - as individuals we can do whatever we want.

Be a psychotic bee and flee! (I'm trying to sound like you.)

Thu, 01/17/2013 - 12:47 | 3162599 falak pema
falak pema's picture

you're convincing, onomatopoeia and alliterate; purple prose and iterate; I think I'll let you say it from now on, can we now speed date? I don't know what I ate but it makes me horribly gay-ted!  

Flee Fly Flo flum I smell the blood of an englishman! 

Words say it better than deeds in terms of writing when tipsy turvy; I'll wait till I'm sober to edit it or to walk it off.  

We can't all photocreate like WB7 or we would all be hooked on bosomy blossoms of geisha fantasy world. Now thats the type of queen bee I'd like; for tea and sympathy.  The guy who made that iconic movie 'The empire of the senses' just died.

 

Thu, 01/17/2013 - 12:53 | 3162683 Spastica Rex
Spastica Rex's picture

You always make me smile. Thanks.

Thu, 01/17/2013 - 15:49 | 3163508 RockyRacoon
RockyRacoon's picture

I think he's channeling ole Slewie the Pie-rat.

Sun, 01/20/2013 - 03:24 | 3170256 AgentScruffy
AgentScruffy's picture

So where would you recommend a good bee flee to?

Sun, 01/20/2013 - 03:25 | 3170257 AgentScruffy
AgentScruffy's picture

So where would you recommend a good bee flee to?

Thu, 01/17/2013 - 12:28 | 3162560 sodbuster
sodbuster's picture

Barney Frank???

Thu, 01/17/2013 - 12:28 | 3162536 CaptainSpaulding
CaptainSpaulding's picture

Shakespeare? I thought he was quoting David Carradine from Kung fu fame

    " If you cannot be a poet, Be the poem"

                                      David Carradine

Thu, 01/17/2013 - 12:28 | 3162571 Spastica Rex
Spastica Rex's picture

Hey, thanks: Bruce Lee just rolled over in his grave again.

Thu, 01/17/2013 - 12:15 | 3162512 SmoothCoolSmoke
SmoothCoolSmoke's picture

Greece/EU has kicked the can for 3 years.  You gonna tell me the US cannot kick it 10x as long? SP is going to 1570-1600, minimum.

Thu, 01/17/2013 - 12:23 | 3162546 Arbysauce
Arbysauce's picture

I think America just needs a new start. Our culture is stale. We've become wealthy beyond what could have been imagined at the founding. Now what? Perhaps we are like the guy who makes it big and promptly jumps out a window because he realizes he has nothing left to achieve, and lacks the imagination to change his philosophy. Now America bickers and cannabilizes itself. I hope to see in my lifetime the new start, so hurry up DC and die.

Thu, 01/17/2013 - 12:27 | 3162558 Chippewa Partners
Chippewa Partners's picture

By the title of the article I thought they were talking about Manti Te'o..........

Who's on first?     The web of lies continues on all fronts............

 

Thu, 01/17/2013 - 12:39 | 3162617 NidStyles
NidStyles's picture

Our own making? I didn't realize that Bernanke and me were homies.

Thu, 01/17/2013 - 12:49 | 3162670 SpykerSpeed
SpykerSpeed's picture

I hate it when people use "we" like I have backed myself into a corner.  No.  I didn't back myself into a corner.  Those fuckwits in Washington, D.C. backed themselves into a corner.

Thu, 01/17/2013 - 13:04 | 3162710 holgerdanske
holgerdanske's picture

Gold not the best choice?
I don't know, maybe you are right, but many thousand years of localized crisis seem to point towards gold. Maybe not always at full value, it is always the last thing to be accepted before you get to food and water.
And food and water as an investment, I don't know what to say.

I think the whole system is so corrupt, so off the track and so into untested waters, I wish I could just get off the merry go around. This is not my game, and yet I don't want to loose all my assets.

What is a man to do?

Thu, 01/17/2013 - 13:08 | 3162731 H E D G E H O G
H E D G E H O G's picture

"This brings us around to TIPS or corporate bonds tied to inflation, staying very short in maturities, floating rate notes that rise with interest rates or any other types of investments that float off of CMT (Constant Maturity Treasuries) or any other asset class that will rise in yield and price as valuation decreases and as the effects of the slosh of money wears thin. Bonds such as step-ups may have additional worth now as a partial hedge and fortunes, once again, will be made and lost making the right bet. The big Kahuna will be the question of timing because we play the Great Game to win and not to be right. Preparation is the key now"

My question is HOW are your examples of "Tips, Bonds, inflation adjusted this and inflation adjusted that, going to SAVE anyone IF FIAT is worthless? So you have inflation adjusted Tips, that will only allow you to get a GAZZILLION WORTHLESS FIAT DOLLARS, INSTEAD OF A NOMINAL MILLION FOR YOUR WORTHLESS PAPER. Fuck that shit, GOLD, SILVER, Platinum and any other HARD asset is the key! just BTFD! PAPER ANYTHING IS WORTHLESS.....................

Thu, 01/17/2013 - 13:38 | 3162892 Never One Roach
Never One Roach's picture

MSM and the NAR say "everything is fine." They wouldn't lie, would they?

Thu, 01/17/2013 - 13:40 | 3162902 HurricaneSeason
HurricaneSeason's picture

The Bernank will choke.  He doesn't want a balance sheet of $10 Trillion to be called fraud and be discharged. He'll go $5 Trillion, at the most, in treasuries and mortgage backed securities. Interest rates will rise quickly along with interest payments on the national debt and a fall in housing prices. The IRS will be replaced with a national sales tax so they can collect all taxes hourly. The war on terror and foreign bases will close and the dollar will lose half it's value overnight.

Thu, 01/17/2013 - 13:47 | 3162931 SilverFish
SilverFish's picture

That's rather optimistic of you.

 

 

....... but I'd take it.

Thu, 01/17/2013 - 13:55 | 3162963 Miles Kendig
Miles Kendig's picture

Mark, since when has an academic or central bank economist been concerned with economic affordability (beyond ever higher capacity ink cartridge magazines, strike that, belt fed (pun) extraordinary and transitory bazooka's from which to launch an ever greater spray of monetary rounds to motivate the gerbervores)?

Thu, 01/17/2013 - 15:55 | 3163532 hairball48
hairball48's picture

Gold has been "real money" for 1000's of years. I don't see that changing no matter what happens. I'll take gold eagles over US TIPS any day.

Sun, 01/20/2013 - 03:20 | 3170253 AgentScruffy
AgentScruffy's picture

Plus, in a total catastrophe, one can use gold and silver to barter with.

Thu, 01/17/2013 - 16:24 | 3163633 steve from virginia
steve from virginia's picture

 

 

@ Grant sez:

 

"With the Central Banks buying up around eighty percent of any new supply ..."

 

New supply of what?

 

The thrust of this analysis is incorrect, from the wrong starting point is is impossible to come to correct conclusion or make proper policy. Central banks don't 'buy' anything. They lend, they are banks, they make loans.

 

They attempt to solve the problems associated with too much debt by adding to the amount of debt, by substituting central bank debt for private sector debt ... a fool's errand.

 

There is no money -- no 'little bits of colored paper' -- sloshing around anywhere. Nobody has any money. Everyone is broke including bankers and businessmen. Any 'surpluses' are bookkeeping artifacts ... that are borrowed. Our crisis is the consequence of devouring capital and calling the consumption 'production' ... then, believing the lie.

 

Maybe Grant is like Simon Black and hangs out in Gstaad or Monaco and is surrounded with swells with fat bankrolls but the rest of us are busted. Anyone with any cash is hanging onto it for dear life. There is nothing to 'invest' in b/c everything is a form of money-losing waste.

 

Too much easy blaming on central banks, the problem is at the end of your driveways ...

 

 

 

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