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Bill Gross: "Credit Supernova!"

Tyler Durden's picture


First Seth Klarman, then Paul Singer, and now Bill Gross: the respected voices speaking up against the lunatics in the Marriner Eccles asylum is getting louder and louder.

From PIMCO's Bill Gross

Credit Supernova!

This is the way the world ends…
Not with a bang but a whimper.
T.S. Eliot
They say that time is money.* What they don’t say is that money may be running out of time.
There may be a natural evolution to our fractionally reserved credit system which characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.
But before mimicking T.S. Eliot on the way our monetary system might evolve, let me first describe the “big bang” beginning of credit markets, so that you can more closely recognize its transition. The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time – in fact they keep very little – thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking – the U.S. in 1913 – and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central banks were and remain essential elements of a productive global economy.
But they carried within them an inherent instability that required the perpetual creation of more and more credit to stay alive. Those initial loans from that first deposit? They were made most certainly at yields close to the rate of real growth and creation of real wealth in the economy. Lenders demanded that yield because of their risk, and borrowers were speculating that the profit on their fledgling enterprises would exceed the interest expense on those loans. In many cases, they succeeded. But the economy as a whole could not logically grow faster than the real interest rates required to pay creditors, in combination with the near double-digit returns that equity holders demanded to support the initial leverage – unless – unless – it was supplied with additional credit to pay the tab. In a sense this was a “Sixteen Tons” metaphor: Another day older and deeper in debt, except few within the credit system itself understood the implications.
Economist Hyman Minsky did. With credit now expanding, the sophisticated economic model provided by Minsky was working its way towards what he called Ponzi finance. First, he claimed the system would borrow in low amounts and be relatively self-sustaining – what he termed “Hedge” finance. Then the system would gain courage, lever more into a “Speculative” finance mode which required more credit to pay back previous borrowings at maturity. Finally, the end phase of “Ponzi” finance would appear when additional credit would be required just to cover increasingly burdensome interest payments, with accelerating inflation the end result.
Minsky’s concept, developed nearly a half century ago shortly after the explosive decoupling of the dollar from gold in 1971, was primarily a cyclically contained model which acknowledged recession and then rejuvenation once the system’s leverage had been reduced. That was then. He perhaps could not have imagined the hyperbolic, as opposed to linear, secular rise in U.S. credit creation that has occurred since as shown in Chart 1. (Patterns for other developed economies are similar.) While there has been cyclical delevering, it has always been mild – even during the Volcker era of 1979-81. When Minsky formulated his theory in the early 70s, credit outstanding in the U.S. totaled $3 trillion.† Today, at $56 trillion and counting, it is a monster that requires perpetually increasing amounts of fuel, a supernova star that expands and expands, yet, in the process begins to consume itself. Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result. Minsky’s Ponzi finance at the 2013 stage goes more and more to creditors and market speculators and less and less to the real economy. This “Credit New Normal” is entropic much like the physical universe and the “heat” or real growth that new credit now generates becomes less and less each year: 2% real growth now instead of an historical 3.5% over the past 50 years; likely even less as the future unfolds.
Not only is more and more anemic credit created by lenders as its “sixteen tons” becomes “thirty-two,” then “sixty-four,” but in the process, today’s near zero bound interest rates cripple savers and business models previously constructed on the basis of positive real yields and wider margins for loans. Net interest margins at banks compress; liabilities at insurance companies threaten their levered equity; and underfunded pension plans require greater contributions from their corporate funders unless regulatory agencies intervene. What has followed has been a gradual erosion of real growth as layoffs, bank branch closings and business consolidations create less of a need for labor and physical plant expansion. In effect, the initial magic of credit creation turns less magical, in some cases even destructive and begins to consume credit markets at the margin as well as portions of the real economy it has created. For readers demanding a more model-driven, historical example of the negative impact of zero based interest rates, they have only to witness the modern day example of Japan. With interest rates close to zero for the last decade or more, a sharply declining rate of investment in productive plants and equipment, shown in Chart 2, is the best evidence. A Japanese credit market supernova, exploding and then contracting onto itself. Money and credit may be losing heat and running out of time in other developed economies as well, including the U.S.


Investment Strategy
If so then the legitimate question is: how much time does money/credit have left and what are the investment consequences between now and then? Well, first I will admit that my supernova metaphor is more instructive than literal. The end of the global monetary system is not nigh. But the entropic characterization is most illustrative. Credit is now funneled increasingly into market speculation as opposed to productive innovation. Asset price appreciation as opposed to simple yield or “carry” is now critical to maintain the system’s momentum and longevity. Investment banking, which only a decade ago promoted small business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance Minsky once warned against.
So our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic – it is running out of energy and time. When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets.
Visible first signs for creditors would logically be 1) long-term bond yields too low relative to duration risk, 2) credit spreads too tight relative to default risk and 3) PE ratios too high relative to growth risks. Not immediately, but over time, credit is exchanged figuratively or sometimes literally for cash in a mattress or conversely for real assets (gold, diamonds) in a vault. It also may move to other credit markets denominated in alternative currencies. As it does, domestic systems delever as credit and its supernova heat is abandoned for alternative assets. Unless central banks and credit extending private banks can generate real or at second best, nominal growth with their trillions of dollars, euros, and yen, then the risk of credit market entropy will increase.
The element of time is critical because investors and speculators that support the system may not necessarily fully participate in it for perpetuity. We ask ourselves frequently at PIMCO, what else could we do, what else could we invest in to avoid the consequences of financial repression and negative real interest rates approaching minus 2%? The choices are varied: cash to help protect against an inflationary expansion or just the opposite – long Treasuries to take advantage of a deflationary bust; real assets; emerging market equities, etc. One of our Investment Committee members swears he would buy land in New Zealand and set sail. Most of us can’t do that, nor can you. The fact is that PIMCO and almost all professional investors are in many cases index constrained, and thus duration and risk constrained. We operate in a world that is primarily credit based and as credit loses energy we and our clients should acknowledge its entropy, which means accepting lower returns on bonds, stocks, real estate and derivative strategies that likely will produce less than double-digit returns.
Still, investors cannot simply surrender to their entropic destiny. Time may be running out, but time is still money as the original saying goes. How can you make some?
(1) Position for eventual inflation: the end stage of a supernova credit explosion is likely to produce more inflation than growth, and more chances of inflation as opposed to deflation. In bonds, buy inflation protection via TIPS; shorten maturities and durations; don’t fight central banks – anticipate them by buying what they buy first; look as well for offshore sovereign bonds with positive real interest rates (Mexico, Italy, Brazil, for example).
(2) Get used to slower real growth: QEs and zero-based interest rates have negative consequences. Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems. Australia, Brazil, Mexico and Canada are candidates.
(3) Invest in global equities with stable cash flows that should provide historically lower but relatively attractive returns.
(4) Transition from financial to real assets if possible at the margin: buy something you can sink your teeth into – gold, other commodities, anything that can’t be reproduced as fast as credit. Think of PIMCO in this transition. We hope to be “Your Global Investment Authority.” We have a product menu to assist.
(5) Be cognizant of property rights and confiscatory policies in all governments.
(6) Appreciate the supernova characterization of our current credit system. At some point it will transition to something else.
We may be running out of time, but time will always be money.
Speed Read for Credit Supernova
1) Why is our credit market running out of heat or fuel?
a) As it expands at a rate of trillions per year, real growth in the economy has failed to respond. More credit goes to pay interest than future investment.
b) Zero-based interest rates, which are the result of QE and credit creation, have negative as well as positive effects. Historic business models may be negatively affected and investment spending may be dampened.
c)  Look to the Japanese historical example.
2) What options should an investor consider?
a) Seek inflation protection in credit market assets/ shorten durations.
b) Increase real assets/commodities/stable cash flow equities at the margin.
c) Accept lower future returns in portfolio planning.
William H. Gross
Managing Director
* The terms “money” and “credit” are used interchangeably in this IO.  Purists would dispute the usage and I would agree with them, arguing for the usage for simplicity’s sake and the evolving homogeneity of the two.

† Outstanding credit includes all government debt as well as corporate, household and personal debt. Does not include “shadow” debt estimated at $20-30 trillion. [ZH: emphasis ours]



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Thu, 01/31/2013 - 10:27 | 3202202 kliguy38
kliguy38's picture

CONfidence is the only thing backing this paper fiat and that left town a long time ago

Thu, 01/31/2013 - 10:28 | 3202215 Say What Again
Say What Again's picture

When all this paper "money" really hits the street the result will be hyper-inflation.  Let's see, what should I buy in preparation for this inflation?

Thu, 01/31/2013 - 10:35 | 3202225 Pladizow
Pladizow's picture


As Jim Grant has said, "Return Free Risk."

Thu, 01/31/2013 - 10:35 | 3202237 Say What Again
Say What Again's picture


But wait, Mandy just told me they're the only place to get any return at all! 

I feel so conflicted!

Thu, 01/31/2013 - 10:36 | 3202243 Dr.
Dr.'s picture

Return to sender?

Thu, 01/31/2013 - 10:46 | 3202281 Say What Again
Say What Again's picture

There is no way the Bernank will allow RUT, INDU, etc. to be down for two days in a row.  Therefore, we can conclude that we should buy early today and sell on the close.
That was easy.

Thu, 01/31/2013 - 11:15 | 3202374 Dr. Richard Head
Dr. Richard Head's picture

I guess that is the "productivity" that Bill was referring to when he wrote "Banking and central banks were and remain essential elements of a productive global economy."  I love how these money managers mix in truth with non.

Thu, 01/31/2013 - 11:37 | 3202456 trav777
trav777's picture

Bill Gross:  "waah waah waah waaah waaaaah"

Somebody call the fkin waahmbulance for this idiot.  He made ALL OF HIS MONEY on this credit boom, by having AUM and being able to just BUY STUFF and get paid a free yield for doing NOTHING.

He's lived his whole life off of OTHER people's efforts!  That's what bonds ARE.  The money Gross plays with came from thin air- all of it.  And NOW he's complaining??  Why?  Because he's not getting his EASY YIELD anymore.

In Gross's mind there should BE NO RISK to his money.  He should get paid yield just to sit there.  Mansions, moats, jets...all his entitlements for having "AUM" and some insider tips.

Thu, 01/31/2013 - 11:48 | 3202497 Dr. Richard Head
Dr. Richard Head's picture

God Trav, I love a non-gay kind of way.

Thu, 01/31/2013 - 12:14 | 3202643 Spirit Of Truth
Spirit Of Truth's picture

In other words, addiction to debt is like addiction to crystal meth.  Someone should do a before and after meth addict portrayal of Bernanke.  This would be a good image to use:

Thu, 01/31/2013 - 12:21 | 3202671 Enslavethechild...
EnslavethechildrenforBen's picture

The Dollar is not backed by confidence, it's backed by stupidity.

GOLD bitchez

Thu, 01/31/2013 - 12:38 | 3202749 THX 1178
THX 1178's picture

This is the way the world ends. Not with a bang but a whimper. Hmm. I disagree.

Thu, 01/31/2013 - 14:10 | 3203107 TPTB_r_TBTF
TPTB_r_TBTF's picture

The World is not ending.


high-tech civilization is ending.


The few survivors will go back to the basics.

The World will still be here...

Thu, 01/31/2013 - 15:57 | 3203610 Jack Napier
Jack Napier's picture

The new world will begin with a bang. The old world will fizzle out as it becomes obsolete with only the ignorant and bloodsuckers clinging to its cold comfortability. Get with the times or get out of the way bitchez. Buy gold and silver if you don't want to be a broke beggar or a thief on the next page. If you live by sword, you'll die by it.

Thu, 01/31/2013 - 12:28 | 3202704 derek_vineyard
derek_vineyard's picture

Trav is right on the money.  Interest in real terms used to be near risk-less.  The world has changed.  Money is not easy to make. Its survival of the fittest.  I suspect the younger generation won't tolerate this crony fucking bullshit.  I'm thinking the internet will be their weapon.  But, then, there are Zucken-fuckers amongst their group.  They may become more savage than even our generation to aquire money.  Or many may just not reproduce  and detach.

Thu, 01/31/2013 - 12:39 | 3202745 trav777
trav777's picture

Gross is facing the very ugly possibility of having to actually DO something productive to earn a yield and that means getting dirty and it means RISK.

The only decent alpha yields are in tobacco stocks and some pipeline LPs and stuff like that.  The days of earning 5% off of a risk-free sovereign are gone.

Gross will have to get off his @ss and deal with some geopol risks and all of the other risks that us little people have to navigate whenever we deploy money to this or that "investment."

Thu, 01/31/2013 - 12:36 | 3202730 CrashisOptimistic
CrashisOptimistic's picture

A yes, the moat.

Maybe it should be built around an oil well, or a gasoline truck.

Thu, 01/31/2013 - 12:24 | 3202684 eclectic syncretist
eclectic syncretist's picture

Bubble, then turmoil, uncertainty, confusion, and plunge.

Thu, 01/31/2013 - 12:54 | 3202821 mightycluck
mightycluck's picture

Is this guy right?

Worst economic recovery since 1882? If so, Gross may be right.

Thu, 01/31/2013 - 10:49 | 3202297 smlbizman
smlbizman's picture

am i the only one who thinks these tip bonds are not worth a an inflation protected bond where the inflation is rigged....

Thu, 01/31/2013 - 11:05 | 3202337 redpill
redpill's picture

Of course they are a scam, the government figures if you are going to try to "stick it to them" by investing in something indexed to inflation, they'll just fudge the numbers on the measurement and "share" your profit with you.  Make no mistake, manipulated inflation statistics represent deliberate and calculated fraud and theft by our government.  Bill Gross is a bond man so it's hard to tear him away from the notion of buying them in some form,

Thu, 01/31/2013 - 12:13 | 3202632 ATM
ATM's picture

(5) Be cognizant of property rights and confiscatory policies in all governments.


Seems to be a warning to avoid all government issued or manipulated markets. Really doesn't that mean everythng and anything that is in your personal possession? Real Estate can be confiscated and stock certificates, bonds, savings accounts, checking accounts, insurance contracts are all claims made against someone or something else.

PMs, art, collectibles, etc..... I can pack them up and leave wherever I am for somewhere else. I may get robbed on the way but I know that I will get robed with these others eventually.

I will take my chances....

Thu, 01/31/2013 - 12:36 | 3202731 redpill
redpill's picture

And truly getting your money out of the country has a price. The feds are getting savvy on financial accounts, leaning on different countries to tell them whatever they want to know. An offshore banking account is no longer out of reach, and if they can get to it, you really haven't gotten it out of the country. If I had to make a quick move I'd probably take the cash and get a nice watch to resell at my destination. Sure you'll take a hit on it since you'll have to sell it to another dealer below retail, but once you conduct that transaction the money will be out of the reach of the us gov't. And obviously the TSA goons don't know a Patek Phillipe from a Seiko, so there should be no probs there.

Thu, 01/31/2013 - 12:25 | 3202687 DeadFred
DeadFred's picture

You're implying that the gov. won't be honest and pay you the full amount of inflation? That it might just fudge the numbers to keep its payments lower than they should be? You must be paranoid (doesn't mean you're wrong). A double major in Econ and Creative Writing is a guaranteed job with the BLS.

Thu, 01/31/2013 - 12:39 | 3202744 Groundhog Day
Groundhog Day's picture

Gross says look to Japan on expansion of credit and the outcomes and at the same time he says expect more inflation? Japan is in a deflationary death spiral.  Sounds contradictory to me

Thu, 01/31/2013 - 10:33 | 3202229 Say What Again
Say What Again's picture

There goes a supernova  

What a pushover-yeah  

There goes a supernova

What a pushover


We're a long way from home.

Welcome to the Pleasuredome!

Thu, 01/31/2013 - 12:28 | 3202706 eclectic syncretist
eclectic syncretist's picture

You better mover comes a supernova

Thu, 01/31/2013 - 10:34 | 3202235 mcl2177
mcl2177's picture


Thu, 01/31/2013 - 10:47 | 3202285 Bad Attitude
Bad Attitude's picture

Yup, beans, bullets, and bandages. Too bad Dear Leader created a run on guns and ammunition.

For what it's worth, shotguns and their ammunition are still relatively plentiful.

Thu, 01/31/2013 - 11:27 | 3202416 Theosebes Goodfellow
Theosebes Goodfellow's picture


(5) Be cognizant of property rights and confiscatory policies in all governments.

(6) Appreciate the supernova characterization of our current credit system. At some point it will transition to something else.


(7) Understand that anything you own that you do not posess may not be yours or does not exist.



Thu, 01/31/2013 - 12:15 | 3202641 ATM
ATM's picture

Words to live by.

Thu, 01/31/2013 - 10:42 | 3202259 eclectic syncretist
eclectic syncretist's picture

Non-perishable commodities.

Thu, 01/31/2013 - 10:41 | 3202261 CPL
CPL's picture

Anything you'll need.

Thu, 01/31/2013 - 10:44 | 3202269 Thomas
Thomas's picture

Holy shit! It's like Bill Gross is channelling Doug Noland.

Thu, 01/31/2013 - 10:54 | 3202307 Say What Again
Say What Again's picture

I was thinking more like Carl Sagan.

"Billions and Billions of stars"

Or should I say; "Trillions and Trillions of FRNs."


Thu, 01/31/2013 - 14:26 | 3203198 viahj
viahj's picture

more FRNs in existence than the combined stars in 10 Milky Way sized galaxies?

we're fucked

Thu, 01/31/2013 - 11:12 | 3202369 rogeliokh
rogeliokh's picture

Looks like Mr. Market logic is More they Print lower Metal prices go.
Gold again manipulated this morning and dropped like a rock. Few cents up daily
then Thursday/Friday all gains wiped out in 2 hours. Miners at 5 years low.
I see Bernanke fingerprints all over the chart. When they stop this BS already?
It's been going on for months now.

Thu, 01/31/2013 - 12:15 | 3202649 ATM
ATM's picture


Bad place to be. They will all be know, for the public good. Fuck the shareholders. They're nothing but greedy capitalists and hoarders.

Thu, 01/31/2013 - 10:42 | 3202257 Stoploss
Stoploss's picture

Perfect..  I like the supernova theme.  After all, the barbarous relic not known as money is created by a supernova explosion, and nothing else. Gold cannot be created with out the supernova.

Thu, 01/31/2013 - 10:54 | 3202308 daxtonbrown
daxtonbrown's picture

Wow, this article could have been written by Tyler, or many of the readers on zero hedge. It dowsn't change what I know, but it might change the thinking of some of my family and partners.

Thu, 01/31/2013 - 12:07 | 3202603 eddiebe
eddiebe's picture

Kliguy, I disagree. Confidence has not even begun to leave town. Do you own gold? Do you price it in fiat? How many people do?

If and when confidence in fiat finally does begin to wane in the Western world, who knows how massive the effects will be? My guess is that for the PM's the move will be spectacular and much unlike what we are witnessing as I type this.

Thu, 01/31/2013 - 12:16 | 3202656 kliguy38
kliguy38's picture

CONfidence in "the system" backs fiat. We only have the military levitating the system which still provides a support. CONfidence lost in the system of government, laws, an morality is a travesty to Nature's law and you can manipulate that for awhile but eventually Nature's law will dominate. "What goes up...does come down"

Thu, 01/31/2013 - 10:28 | 3202213 TideFighter
TideFighter's picture

What options should an investor consider?

a) buy gold

b) buy gold

c) buy gold

Fixed it for ya', Bill.

Thu, 01/31/2013 - 10:35 | 3202238 EscapeKey
EscapeKey's picture

I had a debate with some fucking moron the other day who suggested that gold was a bad investment because "we might just discover huge new ores" and consequently "that the US Dollar was by far the safer asset".

Yes, moron, because the fact that they're printing £1tn/yea (no doubt going up anytime soon) is in no way equivalent to "discovering huge new ores" every day!

Thu, 01/31/2013 - 10:39 | 3202250 francis_sawyer
francis_sawyer's picture

On the subject of 'morons' & 'mining' [for ores]... Riddle me this...


There are what?... About $150 million dollars worth of BITCOINS out there?...


The FED is printing $85 billion A MONTH to keep the fiat ponzi going... That's what? $2.7 billion a day [or a little more than a billion an hour]... So basically, in about much time as it takes for a Bitcoin geek to drive down to 7-11, get a hotpocket, & nuke it in the microwave, the FED will have printed the entire notional value of all the Bitcoins in existence...

But they ARE LEGION!... [they'll tell you so themselves]...

Now take that argument to it's next possible step...

All the holders of 'fiat wealth' in the world... [All the Rothschilds, & dark monied interests ~ forget about Buffett & Gates, they're just piss ants]... ALL of them, COMBINED, are supposed to wake up tomorrow & say "Oh shit ~ we missed out on this BITCOIN thing, we'd better go get us some... So they proceed to exchange some fiats for some... I'll leave aside the fact that if BITCOIN owners were so enamored with their currency, why the hell would they want to sell them for FIATS in the first place?...

But let's say it happened anyway... IOW ~ I guess we're supposed to logically assume that the families who have accumulated their so-called "wealth" [& the entire power matrix that goes along with that], over CENTURIES, which required countless wars, murders, extortions, etc. & have endeavored to KEEP this money & power within tightly knitted family structures], are just going to make a few computer geeks the new POWER BROKERS in the world...

Nice try...

Thu, 01/31/2013 - 10:40 | 3202255 EscapeKey
EscapeKey's picture

oh look, it's our resident bitcoin "expert".

Thu, 01/31/2013 - 10:47 | 3202287 fuu
fuu's picture

Naw, it's just francis.

Thu, 01/31/2013 - 10:53 | 3202306 LasVegasDave
LasVegasDave's picture

you are much more effective when you are blasting the Yids for ruling the world.

Stay with your best pitch, asshole

Thu, 01/31/2013 - 11:14 | 3202349 francis_sawyer
francis_sawyer's picture



It sems like YOU (& others like Dr. Engali) are more interested in, [your word] 'YIDS', than francis_sawyer is... I made zero mention of them above... The other day, Engali did the same thing... Brought the subject up, unattached...

So it must be YOU PEOPLE who are 'closet cases' on the subject... 


Instead of quipping about the subject [as above] ~ why don't you explain to me [in the context of my argument], how BITCOIN is going to supercede the OPERATIONAL aspects of my scenario...

Tell me what's going to happen... Is Warren Buffett going to just pull out his wallet & buy all the BITCOINS in the world tomorrow?... & even if he DOUBLED or TRIPLED his value offer (took it to, say, a half a billion)... My guess is that all you bitcoin holders would be scrambling to exchange them into fiats as fast as you could...

Or no, wait... At the point that WHALES arrive, they could just PRINT MORE bitcoins to accomodate the flow... But no wait... The CAN'T PRINT more bitcoins can they?... It goes against the principle of the whole thing...

Thu, 01/31/2013 - 11:28 | 3202395 EscapeKey
EscapeKey's picture

Your argument essentially boils down to "the money masters won't allow it" without describing exactly why or how.

Oh I guess we can all stop our mining rigs now, then, because you've determined that since the money masters won't allow it, all bitcoins are essentially worthless.

As for why you'd want to swap one instrument for another MORE liquid instrument when you're out shopping... well, I guess if you don't even understand that part, then there truly is no point in even attempting to converse.

Thu, 01/31/2013 - 11:28 | 3202415 francis_sawyer
francis_sawyer's picture

 "As for why you'd want to swap one instrument for another MORE liquid instrument when you're out shopping"


I would think that a MAJOR factor in your choosing would be 'liquidity' (which hardly makes the case for bitcoins over fiat)... & of course, most around here know what francis_sawyer thinks about "fiat"...

I think my larger question is... Why not just stick to gold & silver?... [instead of all the interest in a novelty that hardly anyone understands]...

Thu, 01/31/2013 - 11:32 | 3202433 EscapeKey
EscapeKey's picture

the most liquid instrument is not necessarily one which retains its value.

why not gold or silver? because they serve different purposes. i can't buy stuff over the web using gold or silver (unless you want to start trading with "certificates" and other easily fractionally reserved assets).

besides, diversification is good.

Thu, 01/31/2013 - 11:40 | 3202444 francis_sawyer
francis_sawyer's picture

& on this:

Your argument essentially boils down to "the money masters won't allow it" without describing exactly why or how

No, that's NOT what my argument boils down to... Instead ~ it boils down to "How are you going to replace $1 quadrillion dollars of notional wealth out there with a system that only has a notional value of $150 million dollars [without either hyperinflating the existing 'unit value' of bitcoins, or PRINTING more which is no different from fiat printing]?...

The answer is that you could DEFLATE all that $1 quadrillion of wealth into a cube of $150 million... [at which point a BITCOIN = ZERO]... But I'd bet someone would accept your gold in that moment [for something]...

Thu, 01/31/2013 - 11:43 | 3202474 EscapeKey
EscapeKey's picture

Oh sheesh, this is the SAME retarded argument people uses against gold "OMG there isn't enough gold..."

If the value of a single bitcoin were to increase, it could theoretically eclipse existing money supply.

Also, your argument is fucking retarded, and shows how far off the deep end you truly are. Because bitcoin wouldn't need to replace ALL WEALTH, it would only need to replace what we use as money, which is not the same thing, ie my house is worth $500k, but it isn't $500k in Dollars; it might alternatively be swapped for 40,000 bitcoins (if that's what you'd prefer).

But hey, no doubt you'll use this post as "proof" that "all us bitcoin tinfoilers" want a "bitcoin endgame" despite having said nothing of the sort.

Thu, 01/31/2013 - 11:47 | 3202491 francis_sawyer
francis_sawyer's picture

Hey ~ I bet if you listed your house with a real estate agent for 50,000 bitcoins, they'd be lining up around the corner, right?

When you get your property tax bills, insurance bills, & utilities bills, how many BITCOINS do you have to pay to your local government/service provider?

How many 'bitcoins' does it take for Joe 'buttcrack' plumber to come fix your pipes?

Thu, 01/31/2013 - 11:51 | 3202514 EscapeKey
EscapeKey's picture

Swap the "bitcoin" for "gold coin" in your post and use google for your answers.

They've been answered many, many times before. On ZeroHedge, too.

Thu, 01/31/2013 - 11:49 | 3202512 forwardho
forwardho's picture

Stop feeding francis.

It always ends the same.

 vomitus hostilis

Thu, 01/31/2013 - 11:56 | 3202548 francis_sawyer
francis_sawyer's picture

 "Stop feeding francis"


...chimes in the deep thinker, from left field, with his well formulated plan to LIMIT conversation & comments

Thu, 01/31/2013 - 12:04 | 3202583 dick cheneys ghost
dick cheneys ghost's picture

We need to have a 'national conversation' about jews running hollywood, the MSM, banking and foreign policy ETC.........this never seems to be talked about. If the jews have nothing to hide, they should welcome this conversation.


btw, fuck u bill kristol

Thu, 01/31/2013 - 12:27 | 3202688 francis_sawyer
francis_sawyer's picture

good luck on that ever happening... Hell ~ the topic can't even make it past the poser crew on ZH... [I'm about to stop talking about it myself because the conversation goes NOWHERE after about the first dozen comments that SHOUT "anti-semite" at the top of their lungs & provide nothing else]... It's a war of attrition folks ~ & the HOME TEAM [which controls banking, politics, & MSM] has a clear advantage...

Thu, 01/31/2013 - 11:35 | 3202446 francis_sawyer
francis_sawyer's picture

I'm too lazy to look it up... But I'm surte there's some currency [like 'Moldova' or something], that has $150 million in 'units'...


I guess to be more DIVERSE, I ought to get me summa dat too...

Thu, 01/31/2013 - 11:47 | 3202492 EscapeKey
EscapeKey's picture

I'm not stopping you.

Thu, 01/31/2013 - 11:25 | 3202403 Dr. Engali
Dr. Engali's picture

You're kidding me right? Are you seriously trying to deny the fact that the bulk of your posts are blaming the Jews for all of our ills? It's brought up because you have a track record and you are being called out on it.

Thu, 01/31/2013 - 11:30 | 3202425 francis_sawyer
francis_sawyer's picture

No ~ I'm NOT kidding you... Do you need me to bring up your comment from the other day where I made zero reference to Jews, was commenting on something completely different, & YOU brought 'Jews' into the mix with some pithy comment? Is that where you want to go with this?...

Thu, 01/31/2013 - 11:43 | 3202477 trav777
trav777's picture

you're always here to say "look over there" every time someone points out the GROSS disproportionality of this ethnicity in banking, finance, media, congress, lots of places, in the US and UK.

Always...nothing to see here, move on, these aren't the droids you're looking for.  GFY

Thu, 01/31/2013 - 11:49 | 3202515 francis_sawyer
francis_sawyer's picture

Ha! the pot calling the kettle BLACK...


Oftentimes, you suffer from the same syndrome... People [on ZH] want to draw you into a 'race' argument because of the comments you have made before on the subject of blacks...

WTF ever... My thesis is that most, to some degree, are 'closet cases'... They gravitate towards the issue because it gives them the opportunity to speak in the open [under a false cover]... It's kind of pathetic really...


Thu, 01/31/2013 - 11:54 | 3202530 Dr. Engali
Dr. Engali's picture

I don't feel that no single race or class of people is responsible for the problem, and there is no certainly class of people who are free from corruption.

Thu, 01/31/2013 - 11:58 | 3202559 francis_sawyer
francis_sawyer's picture

We had this argument the other day... If anybody is truly interested, they can go back & look it up [it took about a half a page]... Nice grammar BTW...

Thu, 01/31/2013 - 12:05 | 3202587 Dr. Engali
Dr. Engali's picture

Before you start talking about grammer you might want to learn how to spell. I may have transposed my words, but at least I know how to spell the word "sure".

Thu, 01/31/2013 - 13:30 | 3202622 francis_sawyer
francis_sawyer's picture

I suck at typing...


In broader terms, on this subject:

"I don't feel that no single race or class of people is responsible for the problem"

I don't remember the exact number, but it is something like 99% of all the species that ever existed [on planet Earth], are now extinct... A fact which is mirrored by the ZH motto itself "On a long enough timeline the survival rate for everyone drops to zero"... That phenomenon is a result of a myriad of things...

One of those 'things' is also species within species, who would, given time, eliminate OTHER breeds of their same species [as is the case with africanized honey bees]...

To think that that IS NOT the case with humans [as a species] is naive... At minimum, the theory should be considered because HUNTER/PREY is present in all forms of nature [all the way down to microbiology]...


oh yeah... & it's "grammAr", Mr. spellAr... Or 'Doctor Kelsey', in your case...


Thu, 01/31/2013 - 12:03 | 3202578 sunnyside
sunnyside's picture

So it's the blacks AND the jews then?

Thu, 01/31/2013 - 18:39 | 3204218 DaveyJones
DaveyJones's picture

it's clearly the sephardic jews

and then the retired in Miami

Thu, 01/31/2013 - 12:41 | 3202754 trav777
trav777's picture

good, then we agree and I should expect you to stop MISCHARACTERIZING the opinions of those who POINT OUT a FACTUAL matter of gross disproportionality and nondiversity in various professions.

Thu, 01/31/2013 - 12:57 | 3202827 francis_sawyer
francis_sawyer's picture



I actually think I misread your first comment... Let me REWIND & say this [in an attempt at clarification]

- I don't believe my own comments [with regards to over-representation in banking, MSM, & politics] to be a MISCHARACTERIZATION

- I mostly don't believe that you yourself make any gross MIS-representations with regards to the curious over-representation of blacks with regards to crime & other social ills

- I, mostly, shy away from the 'black issue' because it doesn't encroach on MY existence as much [which is a 100% SUBJECTIVE view]... I'm not here to debate which has the larger effect on society as a whole

IOW - in many ways, you & I are "peas in a pod"... I'm not trying to MAKE ANY FRIENDS here... But I'm simply saying that your views [on your torch] & my views [on my torch], share a commonality...

Lastly ~ I'll venture to say that the aforementioned [TORCHES], are IN NO WAY 100% of the complexity of EITHER of our beingness... Notwithstanding ~ it's easy to see that ZH readers are all too prone to compartmenalize any character that they see [which dilutes them into being one-dimensional persons in the end]...

In the end, I don't really worry about it that much [& I'm confident you don't either]...

Thu, 01/31/2013 - 11:14 | 3202371 cxl9
cxl9's picture

Your argument, to the extent that it is an argument at all, seems rather confused. I am not a bitcoin user, but I'll offer a few opinions in response.

1. I don't think anyone seriously believes that bitcoin will replace all other currencies or media of exchange. It will probably be one of many competing currencies in the exchange marketplace. Hey, come to think of it, it already is.

2. bitcoin "owners" exchange their bitcoins for fiat money for the same reason that tourists in Mexico exchange dollars for pesos. Because what you happen to want to buy at that moment is offered for sale in some other currency. Not everyone takes bitcoins. If you want to buy something from someone who does not take bitcoins, you exchange them for a currency they will take. This would seem to be a point so obvious that it need not require explanation.

3. The "notional value" of bitcoins would quickly rise if any of that $85B being printed started to chase bitcoins. Presumably as more people use bitcoin, and more dollars chase them, their value relative to the fiat currencies will rise. The bitcoin is divisible to 8 decimal places, so mathematically there is plenty of room for it to appreciate against the dollar and still be useful for commerce.

Hope this helps.

Thu, 01/31/2013 - 11:22 | 3202397 francis_sawyer
francis_sawyer's picture

 "I don't think anyone seriously believes that bitcoin will replace all other currencies or media of exchange"

That's not how the bitcoin freaks [here on ZH], represent the subject... Instead ~ they paint the picture that it will become the ubiquitous endgame...

"bitcoin "owners" exchange their bitcoins for fiat money for the same reason that tourists in Mexico exchange dollars for pesos"

That's fine... But then all that means is that they're playing the same 'TRADING' game as everyone else is... So basically they're no different from someone buying LuluLemon at $20 bucks & hoping to get a 5 bagger...

"The "notional value" of bitcoins would quickly rise if any of that $85B being printed started to chase bitcoins. Presumably as more people use bitcoin, and more dollars chase them, their value relative to the fiat currencies will rise."

PRESUMABLY ~ the operative word...

Thu, 01/31/2013 - 11:38 | 3202461 EscapeKey
EscapeKey's picture

Stop your revisionist bullshit. The original discussion was about your argument that "bitcoins will never work because they're too complicated". The thread is right here:

Look ~ I'll be clear here... In order for something to WORK in this world, it has to be UNCOMPLICATED... Forget about the technological infrastructure & 'non'-ubiquitous aspects for a moment [in a SO CALLED 'Global Economy']... People simply don't UNDERSTAND IT...


Thu, 01/31/2013 - 11:42 | 3202476 francis_sawyer
francis_sawyer's picture

It's not 'revisionist'... It's the same fucking argument...

COMPLICATED = People don't understand it... People understand GOLD=MONEY [except, of course, Ben Shalom Bernanke]...

Thu, 01/31/2013 - 11:51 | 3202520 EscapeKey
EscapeKey's picture


First, it was "because they're too complicated".

Then, it was "because the money masters won't allow it".

Now, it's "because you can't pay your bills with it".

Oh sorry, yeah I can totally see how all of those "are the same argument". Clearly my mistake.

Thu, 01/31/2013 - 12:01 | 3202574 francis_sawyer
francis_sawyer's picture

All valid points...


aka: "3 strikes & you're out"

Thu, 01/31/2013 - 12:03 | 3202589 EscapeKey
EscapeKey's picture

Oh right, so now they ARE different arguments.

This is not the revisionism you're looking for.

Thu, 01/31/2013 - 12:18 | 3202637 francis_sawyer
francis_sawyer's picture

OK ~ for the LAST TIME



2. THERE ARE NOT ENOUGH OF THEM {I didn't really say "Masters won't allow it", but you interpreted it that way... I just implied that it would be VERY hard to upset that applecart}, but go ahead and REDEFINE what I said...


I'm going to go ahead & feel to ADD to that list [which ALL fall under the umbrella of IT'S TOO COMPLICATED], as I please [much to your future chagrin]...

Thu, 01/31/2013 - 12:18 | 3202658 EscapeKey
EscapeKey's picture

OK, considering this previous post of yours:

It's not 'revisionist'... It's the same fucking argument...


 I will here make 3 points which, I'm sure you'll agree, are all different:

1. You're a moron

2. You're a moron

3. You're a moron.

All good points, and I shall feel free to add to this list of different points as I see fit.

Thu, 01/31/2013 - 12:33 | 3202725 francis_sawyer
francis_sawyer's picture

I'm s happy that we've finally arrived at the


moment of the debate... It's LONG been considered the pinnacle feature of any battle of thoughts & wills... 

Thu, 01/31/2013 - 11:38 | 3202459 Shizzmoney
Shizzmoney's picture

I don't think anyone seriously believes that bitcoin will replace all other currencies or media of exchange.

No, but the P2P model is a fascinating theory, and one that can be a potential hedge versus a failing fiat in the future.

Also, it is already be used to circumvent government intervention.  As a poker player, bitcoin sites have popped up left and right, and VCs are considing using the medium as a deposit tool that's attractive to bettors for being anonymous as well as flexible to move (albeit VERY confusing to the layman, which is why it probably won't gain any HUGE traction until that's cleared up on the user end).

The only "market" I'm bullish on in these times is the BLACK Market.

Thu, 01/31/2013 - 11:52 | 3202525 francis_sawyer
francis_sawyer's picture

poker playing bitcoin sites...

Of course!... online poker is considered illegal so NATURALLY people would gravitate towards something that gave created a smokescreen... It's the 'bathtub gin' of the Prohibition Era...

Thu, 01/31/2013 - 11:45 | 3202488 forwardho
forwardho's picture

cxl9, Try not to feed francis.

It will just come back to you as vomit.

Thu, 01/31/2013 - 11:53 | 3202532 francis_sawyer
francis_sawyer's picture

Well 'at least' cxl9 made an attempt to present a thoughtful argument...

Thu, 01/31/2013 - 12:30 | 3202710 unrulian
unrulian's picture

Solar flare?.... EMP?  

Thu, 01/31/2013 - 13:44 | 3202748 francis_sawyer
francis_sawyer's picture

I think slar flares & EMP's were addressed the other day... The answer was some technological geeky thing [which, for now, I was satisfied with the answer to]...


My only LAUGH is this... It would take Bernanke only about an hour to print up enough to buy all the bitcoins in existence [& offer 4x the going rate] for them... RIGHT HERE, RIGHT NOW...

I'm guessing a lot of bitcoin owners would JUMP at that chance... [which makes bitcoin nothing more than glorified Pokemon cards at the moment]... Furthermore, I'd be willing to bet that the total value of the Pokemon market [at it's pinnacle], was a lot more than bitcoins are at the moment...

But they are LEGION [never forget that]...


Here's a thought... What does it cost [about $1000 bucks], to buy one of those bitcoin 'miner' gizmos that you occasionally see on CLICKADS on ZH?... To do what?... Mine for bitcoins in the background [& slow up every goddamned PC on the planet] while you perfect your 'World of Warcraft' skills?... Maybe you make a few bucks on the side & can buy a speedier graphics chip?

Want 'currency'?... Why don't you take the same money & buy a couple of sheets of copper, some metal working tools, some solder, a couple of beakers or erlenmeyer flasks, & some seed corn or potatoes, make yourself a still & homebrew some hooch [& acquire 3 'trade skills' in the process]?... They've been doin' it for years!... My gues is that ALL THE BITCOINS IN EXISTENCE combined couldn't buy 1/100th of the worlds hooch at the moment... I'm probably being generous here...

Naw ~ forget it... That would be TOO COMPLICATED...

Thu, 01/31/2013 - 10:44 | 3202275 CPL
CPL's picture

Where we are going there are no investors.


Just those making due.

Thu, 01/31/2013 - 10:32 | 3202227 agNau
agNau's picture

Don't leave home without it!

Thu, 01/31/2013 - 10:34 | 3202230 Water Is Wet
Water Is Wet's picture

Haha, dance sheep!  You must bend-over backward to find yield, while the Bernank prints money in perpetuity, assuring you will never outrun inflation or government deficits.  Sucks to be you.


The Bernank

Thu, 01/31/2013 - 10:35 | 3202240 Dr.
Dr.'s picture

Bring it.

Thu, 01/31/2013 - 10:38 | 3202244 tradewithdave
tradewithdave's picture

...or when Tide detergent no longer cleans the least of the "dirty shirts" no matter how many times you rinse and repeat.

Thu, 01/31/2013 - 10:40 | 3202252 DaveyJones
DaveyJones's picture

Funny, usually the black hole comes after the supernova

Thu, 01/31/2013 - 14:42 | 3203282 viahj
viahj's picture

ah, yeah but not all material is trapped by the black hole.  some elements escape to spread and be foundational elements in new systems.

Thu, 01/31/2013 - 10:42 | 3202260 Martin T
Martin T's picture

"Every wave, regardless of how high and forceful it crests, must eventually collapse within itself."  

Stefan Zweig (1881-1942)

Thu, 01/31/2013 - 10:44 | 3202263 mayhem_korner
mayhem_korner's picture

Visible first signs for creditors would logically be 1) long-term bond yields too low relative to duration risk, 2) credit spreads too tight relative to default risk and 3) PE ratios too high relative to growth risks. Not immediately, but over time, credit is exchanged figuratively or sometimes literally for cash in a mattress or conversely for real assets (gold, diamonds) in a vault.


How many years into this are we already? 

1) has been true for some time

2) didn't anyone learn anything from the collateralized debt obligations double-derivative punchbowl?

3) unless it's growth of fiat money, P/E ratios are absurd relative to market fundamentals

I suspect the average ZHer knows this; the real question is what percent of the general populous is awakening.  That's the driver of the tipping point, and the evidence is mounting that the scales are falling away from their eyes.

Thu, 01/31/2013 - 10:58 | 3202319 DOT
DOT's picture

Noticed an article on the Libor scandal (not a crime by today's standards or lack thereof) on the front page of Digg. Some recent grads are catching on, now that they are out and into the not-so real world.

Thu, 01/31/2013 - 10:42 | 3202264 merizobeach
merizobeach's picture

Uh oh, I do see it coming: NIRP.

When gravity gets reversed, all bets are off...  Or, at least insomuch as bag-holders float off into oblivion.  Nail your shit down, bitchez.

Thu, 01/31/2013 - 10:45 | 3202276 SheepDog-One
SheepDog-One's picture

I think when that actually happens, most all people will be living in a reality where you'll be lucky to survive just thru the day.

Thu, 01/31/2013 - 11:01 | 3202324 merizobeach
merizobeach's picture

Yep, that's the vision I had.

Thu, 01/31/2013 - 11:29 | 3202430 forwardho
forwardho's picture

Agree, We will have already stepped into the abyss.

Thu, 01/31/2013 - 10:43 | 3202265 Everybodys All ...
Everybodys All American's picture

Expanding cycles last on average 44 months since WWII. We are now at 42 months and the Fed is locked in with zero interest rates. What does the Fed do next when we start to experience a contraction in the coming months? Do they take rates negative?

Bernanke is beyond psychopath anything is possible in my opinion.

Thu, 01/31/2013 - 10:46 | 3202278 mayhem_korner
mayhem_korner's picture



Real rates are negative.  Only Becky Quickie and Andrew Sow-Porkin don't realize that.  Ben will just print MOAR and deepen the negative short-term rates. 

Thu, 01/31/2013 - 10:48 | 3202291 yogibear
yogibear's picture

This Keynesian robot will print more of course.  

All the rest of the Keynesian PhDs (Evans, Dudley, Yellen) will also push for more printing.

No original thinking here.

Make the printing plane go faster to dive in the ground when the wings are gone, rather than ejecting out of a failed policy.

Thu, 01/31/2013 - 11:16 | 3202378 merizobeach
merizobeach's picture

"Do they take rates negative?"

This article conjured the same response in us.  I wondered, 'would they outright call it NIRP, or dress it in a fancy name?'.. I think that should the time come, they may play heavy-handed: NIRP is confiscation, but when you need to cut to the bone [read: when the central banks need to nearly skin us alive], maybe it's also a fancy enough name as it is.  Besides, which of sheeple change the pitch of their wailing on account of a central bank decision?

It's gonna be brutal!  ..As I watch on ZH and keep laughing.

Thu, 01/31/2013 - 10:42 | 3202267 eclectic syncretist
eclectic syncretist's picture

The banks already were shown that they have the full backstop of the FedGovTaxpayer so high-roller gambling is the paradigm, consequences be damned.

Thu, 01/31/2013 - 11:24 | 3202402 optimator
optimator's picture

It won't be over till you see a clean shaven Bernak, with a toupee, in the El Al Airline boarding line.  Banzai will have a nice illustration of that just before it really happens.

Thu, 01/31/2013 - 12:18 | 3202626 Captain Kink
Captain Kink's picture

@ eclectic

True.  and more true than we may be prepared to believe.  The 3 signs Bill points out can really get to extremes.  Perceived (by the banks) Credit Default risk and the spreads that compensate for it will get very very thin this time.  The notion that the Fed has your back will lead to some outrageous excesses during this "reflation".  Even the word implies that they want another bubble.  With the banks sitting on massive reserves, both the credit and stock markets can run run run to nosebleed heights.  The greed will again go too far, the reflated bubble will pop one day.  it is inevitable. And it will be ugly.  Perhaps terminal.

Thu, 01/31/2013 - 12:17 | 3202630 Captain Kink
Captain Kink's picture

double post.

Thu, 01/31/2013 - 10:44 | 3202268 nonclaim
nonclaim's picture


To me that was about 2 years ago.

Thu, 01/31/2013 - 10:45 | 3202270 SheepDog-One
SheepDog-One's picture

On a long enough timeline, even the TBTF turn to way around that law.

Thu, 01/31/2013 - 10:45 | 3202271 asteroids
asteroids's picture

"Too much credit, too much debt, and an asteroid full of CDS's ready to fall on your head." The implosion will happen when poverty rates spike. That'll probably happen in a few years time as the boomers really really start retiring.

Thu, 01/31/2013 - 10:48 | 3202272 Paper CRUSHer
Paper CRUSHer's picture

The SPX will more than likely rally a further 5%,maybe attempt a move to the 1600 level around May then risk V reward for fund managers will definately point to hard assets if it already hasn't done so.,by then TNX will be above 2.5% and the VIX going six foot under.

If,although highly unlikely that S&P moves above 1600 we may have to revaluate,by which i mean opening the top drawer under ya trading desk and pulling out the ol' infamous supernova.....err supernovel, Mr Glassmans' Dow to 36000'.

Thu, 01/31/2013 - 10:47 | 3202280 Mi Naem
Mi Naem's picture

It looks like PIMCO's site can't handle the media view trafic ZH is pushing its way. 

Thu, 01/31/2013 - 10:49 | 3202289 SheepDog-One
SheepDog-One's picture

And why the HELL do all these damn muppets keep buying up all the GUNS and not our equities?? Aren't they listening to our 'All is well never been better!' bullshit?

Thu, 01/31/2013 - 10:52 | 3202300 CheapBastard
CheapBastard's picture

Bill cracks me up sometimes....he's funny and much more candid then the Wall Streeters.

Thu, 01/31/2013 - 11:05 | 3202344 Mi Naem
Mi Naem's picture

So is he joking when he says buy TIPS and Italian sovereign bonds? 

Thu, 01/31/2013 - 10:50 | 3202302 DOT
DOT's picture

How long is a "Minsky moment", can it be measured like a di-pole moment? Will the event be transitory or permanent? How much flame and smoke?


Thu, 01/31/2013 - 11:23 | 3202400 forwardho
forwardho's picture

Think Event horizon.

A singularity

Thu, 01/31/2013 - 17:34 | 3204024 Poor Grogman
Poor Grogman's picture

Check out Steve Keens work on this, the general idea is that it's the point of reversal where credit begins to contract, we essentially had that in 07-08

Now IMHO we are into the post Minsky regime or endgame where it has been recognized that credit contraction is simply unacceptable politically. As a result the PTB are trying a new approach or "third way" where they modulate the flow of new funds to soften the natural deflationary post Minsky environment. In the process of doing this however they are creating ugly patchy and unpredictable inflationary pressure in areas that they would rather not.

In the end the flow of funds will meet declining flow of oil, and an unproductive and suffocated economy and then we will see the REAL effects of the monetary inflation.

How long before that happens is the 64k$ question?????

Thu, 01/31/2013 - 10:51 | 3202303 Jacque Itch
Jacque Itch's picture

I know this guy is just another one of the cheaters but this says it all...

"Credit is now funneled increasingly into market speculation as opposed to productive innovation. Asset price appreciation as opposed to simple yield or “carry” is now critical to maintain the system’s momentum and longevity. Investment banking, which only a decade ago promoted small business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi finance Minsky once warned against."

Thu, 01/31/2013 - 10:56 | 3202315 buzzsaw99
buzzsaw99's picture

Gross = Broken record

Thu, 01/31/2013 - 11:00 | 3202320 aleph0
aleph0's picture


Their servers seem to be totally overloaded ... thousands of ZH readers I suppose.

Took ages for that JPG to appear ( only 1.2MB) .

Thu, 01/31/2013 - 11:05 | 3202347 freet0pian
freet0pian's picture

Who's the Tyler who direct linked this one? Good job! Now the pimco servers will implode =)

Thu, 01/31/2013 - 11:02 | 3202331 1835jackson
1835jackson's picture

When the tire hits the road we live in a REAL, PHYSICAL world not in a world of fantasy money which does not give a shit about the REAL world. Greed will be the undoing of us all. Courage and leadership is what is required now but sadly in this REAL world that is sorely lacking.



Thu, 01/31/2013 - 11:04 | 3202336 SmallerGovNow2
SmallerGovNow2's picture

"Australia, Brazil, Mexico and Canada are candidates. (3) Invest in global equities "...

Lost me there, no thanks...

Thu, 01/31/2013 - 11:12 | 3202360 barliman
barliman's picture

Bill Gross is a good guy but I think he's behind the curve ... again.

I'd swear Tyler has posted earlier versions of this graph I am providing the link to below, so click on the link:

And scroll down to just before the half way point to the chart titled:  DJTMG total Weekly Trading Volume - 10Wk Moving Avg

Let's pay particular attention to the part on the right inside the green shading. It's every ZH'ers old friend, Collapsing Volume.

If one applies Biryni's Ruler and extrapolates the trend line ... by September 2015 or thereabouts we will have ZERO Weekly Volume ... but the last print on the DJIA will be 25,000!

I am being facetious, obviously ...

... collapsing volume on the irreversible trendline created by Central Bank central management will never get to zero. Sometime before then, even the frontruning algo's will get a software patch designed to cause a supermassive COLLAPSE complete with an event horizon.

We are headed into a Black Hole, Bill G - not a supernova.

Thu, 01/31/2013 - 11:11 | 3202363 Super Marco
Super Marco's picture

Hate to go off topic but is Twitter down or has it been hacked?

Thu, 01/31/2013 - 11:31 | 3202431 Desert Irish
Desert Irish's picture

yep it's down "over capacity" just think of all the money they're losing...wait a minute...

Thu, 01/31/2013 - 12:20 | 3202675 francis_sawyer
francis_sawyer's picture


Thu, 01/31/2013 - 11:14 | 3202365 DR
DR's picture

Oh, the inflation/risk-on trade is back until something blows up (Japan INc?) and everyone pours back into Tsy. But this time the sovereigns won't be able to absorb the risk unlike USA/2008 and Europe/2011.


The new normal is that Fed Funds will stay at the zerobound and any interest above that will be risk determined. The days of "safe" money with interest are over. Bill is going to have to earn his money going forward...


The post OECD world is in contraction and contraction implies aggregate real negative rates. All the CBs can do is inflate financial assets far beyond what their income stream warrants-a.k.a HYPER asset inflation.


Investing in precious metals will let you sleep at night...


Thu, 01/31/2013 - 11:12 | 3202368 jeffgroove102
jeffgroove102's picture

Article fails to mention that their is virtually no consequences for banksters and government officials with very little skin in the game. They are truly the head of the fish where the rot has set in. The problem with people like gross is that they have spent a lifetime moving poker chips around on a table(securities) versus doing actual work and creating actual value. I agree with Nassim Taleb that bond buyers should be stung properly for supporting evil organizations like governments.

Thu, 01/31/2013 - 12:05 | 3202586 DR
DR's picture

Taleb is just pissed because he lost big on his shorted Tsy bet back in 2010.

Thu, 01/31/2013 - 11:21 | 3202392 forwardho
forwardho's picture

Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems. Australia, Brazil, Mexico and Canada are candidates.

There is a term for this action, Whats it called...

Ah yes.

Capital flight


Thu, 01/31/2013 - 11:28 | 3202406 DaveyJones
DaveyJones's picture



                    Let us go then you and I

  when the markets are spread out against the sky 

Like a patient etherized upon a table;

      Let us page through certain financial cheats,
      The muttering tweets
      Of restless nights in five star hotels
      And outrageous restaurants where the homeless yell 
      lingini that twists like my tedious argument
      Of insidious intent
      To lead you to that overwhelming question ...
      Oh, do not ask, "What is it?"
      Let us go and give Goldman their visit.
      In the room where the elected come and go
      Talking of the overflow 
      of cheap credit that rubs its back upon the window-panes,
      and drone smoke that pours down pain and  
      Licked its tongue into the corners of the evening,
      Lingered upon retirement funds  that stand in drains,
      Let fall upon the smack and soot that falls from  pennsylvania chimneys,
      Slipped by the MSN, made a sudden leap,
      And seeing that it was a soft October night,
      Curled once about the whitehouse, and fell asleep.
      And indeed we have more time
      For the green and liquid smoke that slides on third world streets,
      Rubbing its back upon the window-panes;
      There will be time, there will be time
      To prepare a my face to meet the angry faces that I meet;
      There will be time to murder and create,
      And time for all my works and commands
      That lift and drop a question on your shrinking plate;
      Time for you and time for me,
      And time yet for my hundred indecisions,
      And for a hundred visions and revisions,
      Before for your children are sold to sea.
      In the room where the elected come and go
      Talking of of the overflow.
      And indeed I have more time
      To wonder, "Do I dare?" and, "Do I dare?"
      Time to turn back and descend the credir stair,
      With a bald spot in the middle of my soul
      They will say: 'How his speech is growing droll!")
      My morning gold short mounting firmly to the chin,
      My necktie rich and modest, but asserted by a pimple and my spin 
      (They will say: "But if they say how this this economy is growing thin!")
      Yes I dared
      Disturb the universe
      There's alwaus one minute - there is time
      For decisions and revisions which a minute will reverse.
      For I have known the end already, known it all:
      Have known the evenings, mornings, afternoons,
      I have measured out your child's life with coffee spoons;
      I've ignored the voices dying with a dying fall
      Beneath the music from a farther room.
      But I know best I presume
      And I have known the children's eyes already, known them all--
      The eyes that fix you in a formulated phrase,
      And when I am formulated, like my daily spin,
      When I am pinned and wriggling on the wall,
      Then how should I begin
      To spit out all the butt-ends of my days and ways?
      when the markets are dead and then exhumed
      And I have known the bankers hands already, known them all--
      that are jeweled and white and bare
      (But in the lamplight, downed with with satan's stare!)
      Is it perfume of market stress 
      That makes me so digress?
      projections that lie along a table, or wrap about a shawl.
      Was I wise to presume?
      And how should this end?
      Shall I say, I have gone at dusk through narrow streets
      And watched the NASDAQ rise from my pipes
      the work of lonely men in shirt-sleeves, leaning into Windows (c)
      I should have been a pair of ragged claws
      Scuttling across the floors of a silent exchange.
      * * *
      strange the afternoon the market sleeps so peacefully!
      Smoothed by my long fingers,
      Asleep ... tired ... perhaps it malingers,
      Stretched on the floor, here beside all of you and mostly me.
      Should I, after tea and cakes and shorts
      Have the strength to force the moment from its crisis?
      But though I have wept and fasted, wept and prayed,
      Though I have seen my head (grown mostly bald) brought in upon a platter,
      I am no prophet but this is one overwhelming matter;
      I have seen the moment of my markets flicker,
      And I have seen the eternal Footman hold my coat, and snicker,
      And in short, I was afraid.
      And would it have been worth it, after all,
      After the shorts, the marmalade, the lies,
      Among the porcelain, among numbers talk that I despise
      Would it have been worth while,
      To have bitten off the matter with restraint,
      To have squeezed the universe into a ball
      To roll it towards some overwhelming truth
      To say: "our markets are Lazarus, come from the dead,
      Come back to tell you all, I shall tell you all"--
      If one, settling squeexing a pillow to my head
      Should say: "That is not what I meant at all;
      The markets were never meant to fall  
      And would it have been worth it, after all,
      Would it have been worth while,
      After the meetings, the heroin projections sprinkled in the streets,
      After the long and painfull injections that trail along the floor
      And this, and so much more?--
      It is impossible to say just what I mean!
      But as if my magic lantern threw my nerves in patterns on my screen:
      Would it have been worth while
      If one, tucking a grandhild 
      And turning toward the window, should say:
      I despise you all 
      I despise you all 
      No! I am not Prince Hamlet, I was never meant to be;
      I'm just a servant one that will do
      To make up progress, start a scene or two,
      Advise the prince; no doubt, an easy tool,
      Deferential, glad to be of use,
      Politic, cautious, and meticulous;
      Full of high sentence and low morals, 
      At times, indeed, almost ridiculous--
      Almost, at times, the Fool.
      I grow old ... I grow old ...
      I shall wear prison trousers rolled.
      I I had hair to part behind? Will the jail gaurds be kind?
      I shall wear an oranje jumper, and walk upon the grounds
      I have heard the large inmates singing, each to each.
      I do not think that they will sing to me.
      I have seen them riding toward me on waves
      Combing their not white hair, waves or brown black
      I'm so afraid I'll be attacked 
      For I have lingered in the chambers of my sea
      with numbers wreathed in ed and brown
      Till human voices finally wake up, and I drown.
Thu, 01/31/2013 - 11:28 | 3202424 sdmjake
sdmjake's picture

Delightful---who knew Davey Jones' Locker contained the bastardized version of Prufrock?! I am keeping a printed copy!

Thu, 01/31/2013 - 11:35 | 3202455 DaveyJones
DaveyJones's picture

I wrote it too fast. I can't edit the typos

Thu, 01/31/2013 - 13:57 | 3203072 tip e. canoe
tip e. canoe's picture

actually, lingini adds to the charm.

most excellent verse dj, it begs for an illustrated version.

Thu, 01/31/2013 - 11:29 | 3202427 janus
janus's picture

in the room the women come and go/

talking of michaelangelo...

i wish i were a pair of ragged claws/

scuttling about the floors of silent seas,


Thu, 01/31/2013 - 15:56 | 3203608 Apostate2
Apostate2's picture

One of my favourite poems.

You have parodic talent Mr Jones.

Now, how about...'April is the cruellest month....'


Thu, 01/31/2013 - 18:45 | 3204233 DaveyJones
DaveyJones's picture


Thu, 01/31/2013 - 17:09 | 3203940 RockyRacoon
RockyRacoon's picture

Most excellent piece.  My hat is off to you... even thought I don't wear one, I'll get one just for this occasion.

Much more satisfying than all the pissing contests above on this page.

I dare say Eliot would approve.


Thu, 01/31/2013 - 18:51 | 3204226 DaveyJones
DaveyJones's picture

thank you Rocky. and Eliot was a banker!

I just wish I type checked

Thu, 01/31/2013 - 11:28 | 3202413 janus
janus's picture

that's just incredible, mr. gross.

of late, i've been toyin with the idea of headin west.  i always fit in very well in LA.  in fact, of all america's mega-cities, LA was the most hospitable to good ole janus.  there's a couple cute girls in that town as well.  i miss em.  i have a few good LA stories; but i'm presently inclined to live-out some more.

more than anything, california is just too amazing...i won't sit by and let the jackals and hyenas ruin that endless stretch of eden.  in all fairness, i've got to at least give NY a shot before i go...i've been savin the big apple for my entire life -- i simply refused to go without a good reason.  i finally have a very good reason.

oh, here's a fantastic young band from right down the road in rhode island... Deer Tick

yes, they are extraordinarily special.  here's another

here is main-street/middle-class-american-malaise made manifest in melody...magnifico!

if i'm understanding our 'leaders' correctly, we (our 3 generations X, Y & Mils.) are to be exploited, enslaved and subsumed; and, most importantly, rejoice in our servitude?  our anger is invalid?  it oft befuddles the master when a slave protests the lash.  crazy, i know.

picking apples for the kings & queens/

of things i've never seen,


Thu, 01/31/2013 - 11:46 | 3202487 falak pema
falak pema's picture

Credit Bosa Nova? 

Yeh! we all head for brasil and world cup in 2014! 

This guy Gross is truly gross. He doesn't read what his buddy El Erian says! 

One company two diametrically opposed mouths. Which one is the gross bottom hole? 

Thu, 01/31/2013 - 11:50 | 3202506 TrumpXVI
TrumpXVI's picture

They say that time is money.* What they don’t say is that money may be running out of time.


I LIKE that quote!

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