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"An Economy Built On An Illusion"

Tyler Durden's picture


From an op-ed by George Melloan, posted in the WSJ, and can be read in full here

The Fed's Asset-Inflation Machine

Asset inflation often produces something called "wealth illusion," the belief that pricier asset holdings necessarily make one permanently richer. Illusions are dangerous. Eventually, painful reality intervenes.

* * *

President Obama and Mr. Bernanke worsened the effects of the 2008 crash by adopting the same Keynesian antirecession measures—fiscal and monetary "stimulus"—that had failed before, most dramatically in the 1970s. Stanford economist and former Treasury official John Taylor recently argued persuasively on these pages that "stimulus" measures had retarded rather than speeded recovery.

Mr. Bernanke will have great difficulty letting go of the near-zero interest rate policy without severe consequences for both the Fed and the economy. The Fed's own economists recently warned that the Fed itself could lose as much as $100 billion on its vast portfolio when bond prices finally fall from their artificially elevated levels. Meanwhile, higher interest rates will cause the cost of financing government debt to skyrocket.

The Fed policy of quantitative easing is designed to rebuild the asset inflation edifice that collapsed in 2008. German banker and economist Kurt Richebächer provided some of the earliest warnings of the dangers. In his April 2005 newsletter, he wrote that "there is always one and the same cause of [asset inflation], and that is credit creation in excess of current saving leading to demand growth in excess of output."

Richebächer added that "a credit expansion in the United States of close to $10 trillion—in relation to nominal GDP growth of barely $2 trillion over the last four years since 2000—definitely represents more than the usual dose of inflationary credit excess. This is really hyperinflation in terms of credit creation." Richebächer died a year before the debacle of 2008. The crash that surprised so many bright people wouldn't have surprised him at all.

The rising Dow is of course good news for savers, who have been forced into equities to try to find a decent return on investment. Thanks to Fed policy, "safe" 10-year Treasury bonds yield a near-zero or negative return, depending on whether you measure price inflation at the official rate or at higher private estimates.

Winners on stocks or land holdings should happily accept their gains as the best to be expected in a very unsettled financial environment. But they should also remember the 2000s, when so many people thought their newfound riches were real and cashed them in for yet more debt, such as home-equity loans.

They later had a rude awakening. The "wealth illusion" of asset inflation is seductive, which is why central banks in charge of a fiat currency and subject to no external disciplines so often drift in that direction. Politicians smile in satisfaction and powerful Washington lobbies cry for more.

But an economy built on an illusion is hardly a sound structure. We may be doomed to learn that lesson once again before long.

* * *

And visually:


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Thu, 02/07/2013 - 20:10 | 3224600 Muppet Pimp
Muppet Pimp's picture

We need all the shit that congress approves to go into a queue (not funded yet), and then have them vote on the importance of each.  The mechanism to fund these items should be ran like a business.  OK, you want all this, well taxes go up this much to pay for it.  Something tells me the wish list will shrink when people realize what it costs (assuming baracks 47% have to actually pay something for these freebies they want).  Start with 12% deficit, next year 9, then 6 then 3.  Let them have 3 and the fed eats all the paper it has bought so far.  Or something.

Thu, 02/07/2013 - 20:17 | 3224614 Cheesy Bastard
Cheesy Bastard's picture

Remember this;  If you do not hold it, or cannot defend it, you do not own it.  This will be the first rule.

Thu, 02/07/2013 - 21:49 | 3224826 MrX
MrX's picture

exactly....see here:

Thu, 02/07/2013 - 22:27 | 3224894 ForTheWorld
ForTheWorld's picture

Disturbing, to say the least. Such is reality however.

Thu, 02/07/2013 - 23:34 | 3225040 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture



haha... exhibit 5 presumes "western world tightened monetary policy"...  which reality does this guy live in?  


wtf next please

Fri, 02/08/2013 - 00:05 | 3225112 ACP
ACP's picture

Yeah all I have to say about any of this is:

"No one gives a shit until the shit hits the fan."

True, no?

Fri, 02/08/2013 - 01:28 | 3225217 TruthInSunshine
TruthInSunshine's picture

 "The rising Dow is of course good news for savers, who have been forced into equities to try to find a decent return on investment."


I sort of stopped reading the article at that sentence as it triggered my automatic bullshit meter.

Savers, forced into equities? Really now?

Retail participation in this POMO-steroidal juiced rally has been seriously lacking, and savers being forced into equities....what's that about? If a saver is "forced" into equities, they're no longer a saver, but a speculator, or more accurately, a pure, unadulterated gambler, in these "markets."

Good luck to all such "savers" (wherever they may be) when the crash cometh.

This guy needs to have another fifth of whatever he's been drinking. Bottoms up, George!

Fri, 02/08/2013 - 02:43 | 3225271 YBNguy
YBNguy's picture

Just wait, the DOW will replace God in the textbooks. After all a three letter revision is cost saving.

Sun, 02/10/2013 - 05:18 | 3225281 All Risk No Reward
All Risk No Reward's picture

The more society produces physical wealth, the more impoverished society becomes.

Do you know why?

Debt Money Tyranny

Fri, 02/08/2013 - 01:41 | 3225238 401K of Dooom
401K of Dooom's picture

MrX, thanks for the memeories.  Brings back happy thoughs that I had watching the Los Angeles riots back in 92.  Heck I remember the recriminations about the four officers and the end result of their trial.  Now contrast that with all the great things going on about our society.  A I want to make couple of points:

1.)  Four years later, Black america achieved it's revenge with the OJ Simpson trial result.  Don't tell me that the Cacausian Jurors actually made a fair and objective decision on Simpson's guilt.  They where thrown into a corner of the room and told to vote to acquit.  I also remember talking to a Cacausian woman and she said that she though Simpson was innocent.  No, she was not an idiot rather she was evil.  The kind of evil that emanates from society.  Oh and don't forget that Robert Kardashian was introduced and his daughters then took up the cause of degrading Western Civilization after that.

2.)  Strange how people will view an event.  After the LA riots of 92, many people where calling them an uprising.  I wonder what those people think of it now?

3.) This video was great!  Romney should have used this in a television commercial.  Just think, Romney's voice narrating thirty seconds of the LA riots:"That's right folks, this is what we will get with another four years of the Obama administration.  You better get the shelter ready and keep your ammo & guns safe!"  I know the media would have gone apeshit but it would be great to stick it to them on this.



Thu, 02/07/2013 - 22:01 | 3224850 Antifaschistische
Antifaschistische's picture

Remember this too; even if you hold it, if you are subjected to the alternative of taxation of that which you hold, or confiscation by TPTB....then, you only hold don't truly own it.

This is why we buy gold, silver, rhodium, palladium, copper, nickel and other assets with cash that the government does not know we have.   It's the hidden wealth that will matter in the future.  Everything not hidden....wil be pillaged by the tax man.

Thu, 02/07/2013 - 20:32 | 3224642 CH1
CH1's picture


Let it go my friend, they are your oppressors. Putting your hope in them is like petitioning bears to leave the salmon alone next year.

They will continue to do whatever they want to you, so long as you stay inside their slave game.

Thu, 02/07/2013 - 20:42 | 3224674 mightycluck
mightycluck's picture

This guy summarizes it nicely. Everything is falling!

Thu, 02/07/2013 - 21:46 | 3224819 caconhma
caconhma's picture

Another view of China's economy and its future.


"... There are many other factors that allow analysts to predict an upcoming stagnation of the Chinese economy. Among them, for example - increase the social burden on the budget, due to the aging population, the decline in foreign investment due to the crisis, etc., etc., etc..


After all, again - experts have seen it all. This has already happened, for example, in Japan, the first of the "Asian tigers" created economic miracles, and now Japan does not know how to deal with these miracles’ hangover.... "



This description is in a full compliance with the Holly books of the “liberal/democratic” monetarist totalitarian sect. However, this does not take into consideration few vital things:


1) Social obligations and wage growth - is not only "a loss of competitiveness," but it is also contributing to a domestic demand growth.

2) Japan is not suffering the consequences of their own economic miracles. No, instead Japan became a victim of predatory economic bubbles organized by U.S. banksters in the late 80's.


Indeed, China's growth rates have actually decreased and will continue to decrease even more as their standards of living will keep growing. But China’s growth will become more qualitative (we can see it already). This growth will not come from the ruthless exploitation of low-cost slave labor force and the environment but due to the growth of domestic demand, improved the quality of life of the Chinese people, and growth of labor productivity (and not just its numbers). Actually, this is already happening.


American banksters already several times tried to inflate Chinese economic bubbles, similar to what they have done in Japan. This way, these vampires would be able to suck out all "blood" out of Chinese economy and its growth transferring it to these vampires, as it has been done in Japan. It did not work out this way. They were repeatedly stopped by Chinese regulators and, consequently, there banking vampires have lost big money (instead, this money went to China's economic development being invested into stocks and bonds but they were prevented from inflating the intended bubbles).


There are the China Communist Party and many bureaucratic and corruption issues associated with it. This is the China primary issue. Whether China Communist Party can reform itself will determine the China future.

Thu, 02/07/2013 - 22:25 | 3224890 Accounting101
Accounting101's picture

Or everything is rising! We live in a long hallway filled with mirrors. Everything is fake, yet it is all real. TPTB will not let their system fail.

Fri, 02/08/2013 - 01:07 | 3225206 A Nanny Moose
A Nanny Moose's picture

CONgress is not smart enough to oppress. They are but puppets to make you feel as if you have a voice.

Thu, 02/07/2013 - 22:12 | 3224864 LongSoupLine
LongSoupLine's picture

At this rate it's just a matter of fucking time before every central banker is hanging by their fucking balls and betten with fucking sticks in the public square.


Fucking pieces of subhuman ass juice.  Fuck off and die Bernanke you stinking bank ball juice licking asshole.

Thu, 02/07/2013 - 22:37 | 3224910 Joe moneybags
Joe moneybags's picture

You're not really the Limerick King, are you.

Thu, 02/07/2013 - 23:41 | 3225053 LongSoupLine
LongSoupLine's picture

There once was a Bernank from Fed

Who's fiat stunk like the dead

He fucked taxpayers up the ass

Soon we'll pay $10 for gas

that fucker needs a gold brick through the head


Nope, not the Limerick King.

Fuck you Bernanke.


Thu, 02/07/2013 - 23:25 | 3225026 Yen Cross
Yen Cross's picture

Long Soup Line (kicks ass) +3

Fri, 02/08/2013 - 00:36 | 3225161 bobthehorse
bobthehorse's picture


We have a bullshit economy.

And we're in a depression.

But we've been in depressions before.

We'll eventually climb out of the hole.

Thu, 02/07/2013 - 20:12 | 3224601 falak pema
falak pema's picture

the economy IS the market and the market is...oh well, lets ask Alice or the fairy queen or wizard of oz, or...yikes, mephistooo! 

Its like the ball queen scene in Carrie...

Carrie au bal du diable (1976) - IMDb

Thu, 02/07/2013 - 20:14 | 3224610 dick cheneys ghost
dick cheneys ghost's picture

I dont know which lies to believe anymore

Thu, 02/07/2013 - 21:19 | 3224763 Deacon Frost
Deacon Frost's picture

Believe this,

Hyperinflation is the terminal stage of any fiat monetary system. In a fiat currency system, the value of money is based on confidence and scarcity, and once that confidence is gone, money becomes irreversibly worthless, regardless of it's scarcity.




Thu, 02/07/2013 - 20:15 | 3224611 zerotohero
zerotohero's picture

I wish The Fed were a fucking illusion and disappear.

Thu, 02/07/2013 - 20:16 | 3224613 Manthong
Manthong's picture

“the Fed itself could lose as much as $100 billion”

That’s if reality reasserts itself gently, but I think this chain is yanked so tight that the snap is likely to cut everything to shreds.

Thu, 02/07/2013 - 20:18 | 3224617 Cheesy Bastard
Cheesy Bastard's picture


Thu, 02/07/2013 - 22:06 | 3224860 knukles
knukles's picture

Declare every holding Level 3 or refrain from reporting for reasons of National Security.

Both of which can be done, "legally".  I did not say morally and ethically correct.

The whole world is an illusion, smoke and mirrors.
There is a matrix represented by the government(s) parties, monied interests and "free" press supported by Free Shit in the form of Bread and Circuses.
All backed by the tip of the spear, authoritarian threats of violence.

Bernays outlined the simple model in Propaganda, the natural extension of the "illusion" from sales to marketing into perceptions management culminating in propaganda, immortalized by the Big Lie. 
And it's all real.
Around you 24/7/365

Illusion, lies, deceit, half truths, errors of omission and commission....  None of which are meant to provide the truth. 
News is meant to be hidden, the rest is all entertainment and programming.

Indeed, it has become tiring and draining to assure oneself that one is seeing clearly.  We not only fall into others rabbit holes, but create our very own, for we all have belief systems and defer to normalcy biases and reaffirmation.  Why else would we all be here at The Hedge instead of HuffPo?

The world in which we live, truly exist, is Orwellian in nature, needing no sustenance, feeding, care or attention,  It is the Leviathan itself comprised by definition of all the singular parts including you and me.  If one thinks of one's self as exempt therefrom, one's very ego has been subsumed thereby, by definition..  Large, omnipresent, cunning baffling and powerful, easily taken to redacted and directed history.
Of which we are a part.  Not separate, distinct, above and/or superior to.  A part.  One amongst many. Another very small cog....

Question everything.
Assume nothing.
Plan for the worst, pray for the best.

The single most effective path to comprehending and effectively dealing within such is to not strive to understand "it", but to first understand one's self.  Which is the most difficult journey of all.


Thu, 02/07/2013 - 22:30 | 3224901 Deacon Frost
Deacon Frost's picture

Also Zbigniew Brzezinski (CFR member), the national security advisor under President Carter, wrote in his book ‘Between Two Ages: America’s Role in the Technocratic Era’ (1971). He states “In the technetronic society the trend seems to be toward effectively exploiting the latest communication techniques to manipulate emotions and control reason.  Human beings become increasingly manipulated and malleable…The technetronic era involves the gradual appearance of a more controlled society. Such a society would be dominated by an elite, unrestrained by traditional values. Soon it will be possible to assert almost continuous surveillance over every citizen and maintain up-to-date complete files containing even the most personal information about the citizen. These files will be subject to instantaneous retrieval by the authorities."

Thu, 02/07/2013 - 23:03 | 3224965 fonzannoon
fonzannoon's picture

"The single most effective path to comprehending and effectively dealing within such is to not strive to understand "it", but to first understand one's self. Which is the most difficult journey of all."

 - knukles

Just when we thought we had a pure and simple hero, a millionaire athlete who gave up wealth and fame to become the ideal patriot, to make the ultimate sacrifice, his friends and family complicated everything. They turned Pat Tillman into a human being Monday, showing us what was really lost during that ambush in Afghanistan, insisting that we question every assumption we've made since he died an icon on April 22.

Yes, there were uplifting tales, moments when tears and pride swelled in everyone watching Tillman's memorial service at the San Jose Municipal Rose Garden. There were jarring moments, too, and they carried the message of the afternoon -- "challenge yourself" -- more powerfully than those laden with conventional inspiration.

Tillman's youngest brother, Rich, wore a rumpled white T-shirt, no jacket, no tie, no collar, and immediately swore into the microphone. He hadn't written anything, he said, and with the starkest honesty, he asked mourners to hold their spiritual bromides.

"Pat isn't with God," he said. "He's f -- ing dead. He wasn't religious. So thank you for your thoughts, but he's f -- ing dead."

What? This didn't happen for God, as well as country? A professional athlete turned soldier, and we're supposed to believe that he'd have no use for piety? Robbed of a cliche, where does that leave us?

Challenge yourself.

His brother-in-law and close friend, Alex Garwood, described how Tillman handled his duties when he became godfather to Garwood's son. He came to the ceremony dressed as a woman. Not as a religious commentary. He was doing a balancing act.

"We had two godfathers, no godmother," Garwood explained. And what NFL player turned Army Ranger wouldn't don drag to make that math work?

Who on earth was this guy?

He was the same person who often talked late into the night with his linebackers coach at ASU, prying apart stereotypes about college football players and future soldiers.

"He talked about gays," Lyle Setencich, the former ASU assistant said. "He asked me, 'Could you coach gays?' " Setencich told Tillman yes. He could, and he had. He repeated that at the memorial service, televised on ESPN, in front of the sports world, showing another side of a coach, another side of an American hero.

Challenge yourself.

Tillman talked about everything, with everyone. According to the speakers, he had read the Bible, the Koran, the Book of Mormon, Ralph Waldo Emerson, Henry David Thoreau, and he underlined passages constantly. Garwood recalled how he'd mail articles to friends, highlighting certain parts and writing in the margins: "Let's discuss." A quotation from Emerson, found underlined in Tillman's readings, adorned the program.

It concluded with this: "But the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude."

Yet he was a team player. When the Arizona Cardinals lost their kicker early in a game, Tillman cut into a conversation between the team trainer and head coach Dave McGinnis. "You know who's kicking off for us now, don't you?" McGinnis said, quoting Tillman, a safety who had no real credentials for the kicking job. Most pro athletes wouldn't risk humiliating themselves that way.

"Pat didn't want to be the focal point, but he liked being out front," McGinnis said, "if that makes any sense."

Tillman's roommate in the pros, Zack Walz, took a newspaper clipping to the podium and read about how he and some Cardinals teammates had made up faux dog tags for themselves, declaring their unit a band of warriors. "Soldiers, battlers, lay it on the line," Walz said, sniffling as he scanned the clip. "What the hell did we know? Listen to the words. Listen to the metaphors. ... How hollow they ring."

When Tillman came home late last year from his first tour of duty, Walz said that he understood the difference now, what genuine war and real dog tags meant. A couple of weeks later, he received a gift in the mail, Tillman's dog tags.

"I'm holding them in my hand now," Walz said, "but they will never be this far from my heart again."

Tillman's respect for his former teammate holds another lesson. Since he died, it has been fashionable to contrast his sense of duty with the petulance and inflated sense of importance in modern athletes. Still, Tillman was an athlete as much as he was a soldier.

It has been said over and over that he wouldn't want to be revered while we ignore the other soldiers lost in Iraq and Afghanistan. Would he want his former friends in football belittled, their values bashed as a way to measure his sacrifice? That's too easy.

Challenge yourself.

By the time the ceremony ended, after his brother and brother-in-law sipped the Guinness that Garwood poured in Tillman's honor, the funny, thinking, wild, crazy man had come to life. The family's loss, the loss of every soldier's family, seemed more real.

Tillman wasn't an icon anymore. He was a man you wanted to know, to spend time with, to lift a Guinness alongside. But that had become impossible, the price of war, because his brother was right. Pat is dead. He's f -- ing dead.

Read more:

Thu, 02/07/2013 - 23:28 | 3225031 Its_the_economy...
Its_the_economy_stupid's picture

Everytime you speak, I learn somedthing.....well, almost every time.

Fri, 02/08/2013 - 09:58 | 3225573 marathonman
marathonman's picture

What does it matter if the Fed loses money on its balance sheet?  What does it really matter?  It's all BS.

Thu, 02/07/2013 - 20:17 | 3224615 fonzannoon
fonzannoon's picture

it's too late. now we just sit back and watch them figure out ways to keep rates down while pumping the market up. i thought it would be interesting but it's boring as hell.

Thu, 02/07/2013 - 22:55 | 3224942 NoDebt
NoDebt's picture

You should buy some stock.  I mean, if you really believe the Fed can eternally make the market go up, why not?

Somehow, I think you know it's a fools game, as I do.  When the SHTF, the government will just TAKE.  From everywhere, including the market and bankers and little old ladies and everyone.  It only requires a sufficient level of desperation on their part.  When the king is in check, lesser pieces will be sacrificed.  All of them, if necessary.

Thu, 02/07/2013 - 20:25 | 3224632 Yen Cross
Yen Cross's picture

 +1 Fonz. When inflation drives the serfs into the streets, mark to market will return.

Thu, 02/07/2013 - 20:26 | 3224635 ersatzteil
ersatzteil's picture

So the Bernanke is an Economic Illusionist. I hope he's around when I raise kids, pulling quadrillion-dollar notes out of his beard would make for one hell of a birthday magic show.

Thu, 02/07/2013 - 20:28 | 3224641 q99x2
q99x2's picture

What a coincidence. I'm watching the Matrix trilogy. I paused it to read this article. Neo Thomas A. Anderson the One will save us. Not to worry.

Thu, 02/07/2013 - 20:31 | 3224651 Cheesy Bastard
Cheesy Bastard's picture

Please, take the red pill.  The red one.

Thu, 02/07/2013 - 20:29 | 3224645 Floodmaster
Floodmaster's picture

Mr. Bernanke work for Canadian/Australian people.

Thu, 02/07/2013 - 20:33 | 3224650 jonjon831983
jonjon831983's picture

Here's some more illusion - food security/inflation:

Now they found horsemeat in UK lasagna (not that it'd be a surprise).

Thu, 02/07/2013 - 21:43 | 3224812 Deacon Frost
Deacon Frost's picture

The commentator Max Keiser makes the point that the adulteration of horse meat in beef products is a disguised form of inflation.

Fri, 02/08/2013 - 00:51 | 3225185 Imminent Crucible
Imminent Crucible's picture

All your horsemeat are belong to us.

Thu, 02/07/2013 - 20:45 | 3224679 Yen Cross
Yen Cross's picture

    I watched most of those. Bloomturd had a writeup with Bill Gross and Jim Rogers. I'm still perplexed.?

 Here is the link; Jim Rogers Joins Bill Gross Warning on Treasuries - Bloomberg

Fri, 02/08/2013 - 05:54 | 3225339 new game
new game's picture


some very large problems with that bet:

timing and staying power


when/if you win that jackpot

i wonder if the banking collapse(that must result) will allow you to get your digital fiat

you win but lose...


Fri, 02/08/2013 - 08:03 | 3225392 BigJim
BigJim's picture

I agree... seems to me shorting US Treasuries is the 'end of the world' trade. Yes, eventually, they'll go to zero... maybe not nominally, but in real terms. But the Fed will defend them til their last dollar, and they have very deep pockets.

Thu, 02/07/2013 - 20:37 | 3224663 Griffin
Griffin's picture

There have been lots of people that would not have been surprised to see how things have turned out, but unfortunetly while everything seems to be going well, not many notice or take seriously what they are saying.

More of this kind of thinking might help.

Fri, 02/08/2013 - 13:41 | 3226318 matrix2012
matrix2012's picture


That video is excellent... every one better takes a close look on it


Carl Sagan was and still is, an amazing inspiration to many people around the world. He was not only incredibly intelligent, but presented the mind boggling information to us in a way that everybody could relate to, everybody could understand and anybody could appreciate. He was the kind of man that makes the world a better place for having been in it and I for one, am thankful for the knowledge and wonder of this great cosmos that he instilled in me. Try watching his series Cosmos.

Thu, 02/07/2013 - 20:39 | 3224666 mjorden
mjorden's picture

Illusion? you call this iPod an illusion? you call going long the EUR/USD an illusion? you DARE call my 'faith and credit' in the United States dollar an illusion? ... HOW DARE YOU!

Thu, 02/07/2013 - 20:44 | 3224682 Town Crier
Town Crier's picture

"The Bhagwan Shree Bernanke is evolved beyond illusions such as material wealth and time itself, as in 'the bill for all this stuff will someday come due,'" explained the laughing, bearded acolyte.  "Why shouldn't he have a Rolls Royce for each day of the year?" asks a young woman among the throngs of his loving followers known affectionately as "the Sheeple," clad in a beautiful red jumpsuit uniform, walking on the dirt path to a "levitation" meditation guided by the Baghwan, explaining further with a smile, "The goal is to levitate the entire planet."  Watch this site for event announcements involving The Bhagwan, and his belolved assistant, The Maharishi Krugman Yogi.

Fri, 02/08/2013 - 11:26 | 3225839 matrix2012
matrix2012's picture

I wish we can LEVITATE them all, yes, ALL the banksters from the highest echelon to their lieutenants incl the entire apparatchiks onto MARS or MOON in order to achieve a better humanity on EARTH!

Thu, 02/07/2013 - 20:48 | 3224695 dolph9
dolph9's picture

The most important thing to disappear from Amerika is trust.

Once that goes, it is difficult if not impossible to build up.  It certainly can't done by creating digital money or bombing a few countries in the desert.

Those actions just destroy it more.

Thu, 02/07/2013 - 21:15 | 3224753 Mark123
Mark123's picture

Isn't it funny that the approval rating of congress/senate is less than 20% consistently, yet we pretend we have a freely chosen representational system.  The ONLY politician that I would trust is Ron Paul, and he quit after being rejected/mocked for decades by both parties, media etc.


Bloody sad.

Thu, 02/07/2013 - 22:42 | 3224919 SmallerGovNow2
SmallerGovNow2's picture

Mark, whomever junked you is a full fucking retard...

Thu, 02/07/2013 - 20:51 | 3224700 cherry picker
cherry picker's picture

There was a clip on Bloomberg showing a chart where household debt is now at a low of 15% of take home earnings and corporate debt is increasing implying that corporations are doing a lot better.

These are charts in direct contradiction to what i read here.  Much of what I read here makes sense, but when it comes to charts, I just don't know who or what to believe anymore.  Like viewing a seven day weather forecast, you never know until day seven arrives and when it does best step outside to get an accurate picture.

Thu, 02/07/2013 - 21:02 | 3224724 MFLTucson
MFLTucson's picture

Have you ever heard the saying garbage in garbage out? If not, check it out!

Thu, 02/07/2013 - 22:12 | 3224865 Miffed Microbio...
Miffed Microbiologist's picture

The MM today is as far as I can see is an Orwellian Ministry of Truth. They peddle lies and misinformation. The are the vehicle to total historical revisionism. A couple of years ago I tried to watch MM and read ZH. I found I was becoming borderline schizophrenic. I realized I had to choose and I opted for ZH because it seemed to me to be the closest to reality, not that anything can be perfect. Yes I still struggle at times. I drive by a local Indian casino everyday and the parking lot is always filled to capacity. I see a lot of new Escalades on the freeway and gas here is now $4.19. A work associate told me today said 3 homes near her house sold (700,000+ cash). She did say she thought they all were Asians which did confirm an article posted here recently. I'm confused too but if I added the MM back in I fear my head would explode.


Fri, 02/08/2013 - 06:09 | 3225342 new game
new game's picture

Miffed, i too see exactly as you.

cog dis III part series will clear the mind.

it offersa valid explanation to it all.

my path is oposite of most everything/body i obbserve.

minmalization-less is more.

start with that fucking smart phoney.

as one goes down this path he/she will be greatly rewarded.

you will be starving the beast, improving your life and if fully implimented

you will take back hours(time, your most valuable asset)and be given the freedom to do as you see fit.

it is so fucking logical, i quite even wasting my time argueing the merits.

as you will see the more they consume the more latitude minmalzation gives you as they foot the bills for you.

owning a car is a perfect example... free roads for me baby, fill that fucking suv-thank you kindly(petro dolla debt slave-haha).

rewards are endless...

psst. because most will never do it i feel safe in revealing this secrect...

Fri, 02/08/2013 - 14:47 | 3226545 Miffed Microbio...
Miffed Microbiologist's picture

So true new game. My brother has been laughing at me for about four years now because I've been slowly morphing into a Buddhist as he! I finally have come to the realization that one doesn't own things,they own you. When this world tries to hook your attention, being awake and mindful prevents the claws from sinking in. It's so simple. It's been a slow process but I've been working on unwinding from the matrix. I used to love talk radio,Savage Bill Handle, John and Ken. I was totally addicted. Now I can't stand five minutes; like a million gnats buzzing. I have so little patience with asleep people whose sole interest is entertainment. It's best to walk alone rather than have a fool for company. You haven't revealed any secrets. The funny thing is is they are in front of us always in plain view. One just needs to be awake to see them. Thanks for recommending CD 's series, I'll check it out.


Fri, 02/08/2013 - 14:43 | 3226535 Blankenstein
Blankenstein's picture

Just think how the media treated the housing bubble.  We started looking for a home in 2001 and if you checked previous selling prices from the mid 1990s and also the income and wealth distribution for the area, it was obvious that things were already heated.  It wasn't until 2003 that you could hear someone, very infrequently, talk about the possibility of a housing bubble in the media. was the first source where I could find discussions about the very likely possibilty of a housing bubble.  The MSM, with their ad-driven content, was for the most part, a cheerleading section for the NAR.  They used to laugh at Peter Schiff when he questioned the stability of the housing market.  

There was a housing town hall on CNBC that had four people representing each side of the discussion.  Two of the people on the "there is no bubble side" were David Lereah and Robert Toll.  Robert Schiller was one on the other side.  The Bubblers shouted down the other side and moderator did nothing to intervene.  I was livid after watching.  Then there was Cramer and his two ballloons, with Schiller's name on one and Steven Roach (who was another one of the lone voices warning of a bubble) on the other, taking a pin out and popping them, saying, "Here's what I think of the housing bubble." Just a couple of examples of the continuous stream of propanda to keep the mania going.  

After reading sites on the internet that had indepth economic discussions based on facts and fundamentals, I came to regard the MSM as mostly shills and idiots.

Thu, 02/07/2013 - 21:20 | 3224758 disabledvet
disabledvet's picture

the reason why the critics of 2008 make "it all sound so complicated" is because pretty much all of them (myself included) were wrong about it. We're talking Government...therefore we're talking simple. How simple? "Massively counter-cyclical on steroids." No one knew then whether it would work (i thought for sure there was no way). Bottom line...IT WORKED. The WORKOUT of all that debt is...truly..."a monster." But hey...the facts are the facts..equities are right back at all time highs and inflation...excepting oil which i think is about to go bust...has be nowhere to be found. MISSION ACCOMPLISHED. I'll leave the rest for the history folks. If you told me THIS result was possible then...well, now you know why i'm laughing like a lunatic all the time. AMAAAAAZING! As a result i say MOVE IT DOWN THE HIGHWAY folks. What's done is done and it's time to "take stock" of where we're at right now. I might be crying but it's not because i missed this Mega Move higher. the question for the policy makers therefore is "how to build a base here and make another move higher"...this time one spreading throughout the economy and creating an obvious and MATERIAL upward momentum IN THE ECONOMY. Clearly "the market rallies when Republicans talk" and "collapses whenever the Democrats offer up an alternative." Well...sounds to me like the so called "right wing" (perhaps we can call them "the correct wing") are on to something...and methinks it has a LOT to do with "taking an axe to the Federal Edifice." It's not like the Democrats haven't said "bring it on!" So i say...BRING IT ON. Both sides SHOULD agree that "the best time to have that recession is RIGHT NOW"...i'm surprised they aren't "secretly on board a stealth austerity." But in my opinion the more the Democrats shout blame the more the Republican star will rise. I'd give this President his War Cabinet (and i think this crew is eminently OVERQUALIFIED for the task at hand) and keep the powder for a showdown of "paying down that deficit." Shall see...yet another thing to factor into the "investing calculus"...yet another that can be counted on that also happens to be a BIG deal. (there is a war going on folks...and it is EXPANDING.) Austerity doesn't have to mean "war on the cheap." Indeed "paying for that conflict" may in fact be the "true way Forward" both in reviving the moribund US economy and putting the war itself on sounder footing. ("Relief in force" anyone?) Anywho i still think we're overdue for "flushing out the ridiculous longs" here. I will stay tuned to the news flow coming out of DC and USA Inc. I still believe shorting this thing DOES NOT WORK...but i do like to be proven wrong as well (h/t Reggie M.)

Fri, 02/08/2013 - 08:23 | 3225411 BigJim
BigJim's picture

The paragraph is your friend.

Go on, give it a try... a couple of carriage-returns never did anyone any harm.

Fri, 02/08/2013 - 08:29 | 3225421 Ghordius
Ghordius's picture

carriage-returns could decrease the hypnotic effect that disabledvet's comments have on me ;-)

Thu, 02/07/2013 - 21:19 | 3224762 Yen Cross
Yen Cross's picture

    How many on this post have heard of  Lincoln Logs Classic Edition Tin (86 pcs) - Free Shipping

 How many on this post have heard of Carbonite Online Backup 


     I would rather store my shit in a "hollowed out log" then a "make believe cloud" any millenium!  Welcome to the Illusion...



Thu, 02/07/2013 - 21:35 | 3224790 Westcoastliberal
Westcoastliberal's picture

Lincoln logs were muy cool.  Played with them as a Boy.  Ever see a "Remco Shark"?

Thu, 02/07/2013 - 22:19 | 3224884 Obama4Ever
Obama4Ever's picture

"Played with them as a Boy."

What did you play with as a Girl?

Thu, 02/07/2013 - 23:11 | 3224990 willwork4food
willwork4food's picture

Fair question, assuming each of us has returned as both sexes in time.

Fri, 02/08/2013 - 02:11 | 3225254 RSBriggs
RSBriggs's picture

Dipshit.  The expression indicates that the poster is now a man, and played with them earlier in life as a boy.  

Thu, 02/07/2013 - 21:25 | 3224772 besnook
besnook's picture

the only way to perpetuate the illusion is to print more fiat. this is the zimbabwe economy. on a global basis all asset prices will go to the moon and half the first world population will starve to death unless war saves them the torture with a bullet to the brain, the obvious solution.

Fri, 02/08/2013 - 06:24 | 3225346 new game
new game's picture

but after the great inflation comes the great deflation as i ask, who will have anything of value to buy from the producers of all this shit?

unless the great reset takes the form of wwiii-then many broken windows need to fixed with the survivers willing and able.

the great wash rinse with same cast behind the curtain.

not much new to report, just your age and whether or not you happen to be part of this history.

we need another generation of storytellers as wwii vets are dieing off...

Fri, 02/08/2013 - 11:54 | 3225918 matrix2012
matrix2012's picture

yup the great reset, the production of bows and arrows will be needed to up!

"If the Third World War is fought with nuclear weapons, the fourth will be fought with bows and arrows." - Lord Louis Mountbatten

Thu, 02/07/2013 - 21:32 | 3224785 Westcoastliberal
Westcoastliberal's picture

In 2008 instead of realizing a dreadful mistake had been made repealing Glass-Steagal and NOT enforcing the Sherman Antitrust act, the Feds instead stuck their fingers in the dike & hoped status quo could continue, plus the political benefits from the 1%.

What should have happened is mark to market for the worthless assets, a plan to straighten out title and halt foreclosures and make those persons ripped-off whole.

The huge debts that have been run up in the taxpayer's name have flowed like an IV of Ringers and D5W into the main artery of the 1%, without any measurable effects to increase demand.

Now, we as a country are stuck between a rock and a hard place.  This country is growing more fascist every day.

Thu, 02/07/2013 - 21:34 | 3224788 Michelle
Michelle's picture

I say BS, the government knew about the coming collapse and made damn sure BB was ready to take over the printing presses upon Greenspan's departure.

Thu, 02/07/2013 - 22:16 | 3224875 JR
JR's picture

You know, I too have seriously come to believe Bernanke and Greenspan anticipated it. Remember these quotes from Governor Ben S. Bernanke November 21, 2002, before the National Economists Club, Washington, D.C.?

 “Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

And, this, from the same speech:

“The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.”

And, later, this:

Certainly derivatives instruments pose challenges to risk managers and to supervisors, but these risks are manageable and thus far have been managed quite well.”  In fact, Bernanke said that derivatives are good for the economy, making the U.S. economy resilient to risk.

Fri, 02/08/2013 - 12:39 | 3226005 matrix2012
matrix2012's picture

Love it JR, you just lent me an excellent quote!


-fans of Dr. Benjamin Shalom Bernanke


ps. i do enjoy your high-clarity, pinpoint comments, most if not all :)

Thu, 02/07/2013 - 21:42 | 3224807 JR
JR's picture

“The rising Dow is of course good news for savers, who have been forced into equities to try to find a decent return on investment.” - George Melloan

Even Bernanke would not have nerve enough to put this in print - that your loss of income and loss of opportunity and increase in risk is good for you. This author is some sort of fiend. There have been false reasons why the central bank operates the way it does, but this is a new low in the message from the tyrant to the serfs, i.e.,that your increased poverty is not only good for the country, it’s good for you.

As for land, I bought a lot in 2003 and it still is down 75%. So much for landholdings. Everyone knows that the WSJ is banker Pravda but don’t they at least have some criteria for op-eds that make them look like fools?

The truth is savers are losing $400 billion a year to Wall Street and retirees’ fixed incomes are dropping like rocks while their non-discretionary  costs are soaring. It's straight from Ben’s mouth that he's sacrificing savers for the “good of the economy."

Yet, here’s how Joe Weisenthal of Business Insider recently defended Ben’s message to Grandma: “So in other words: The main thing is that you can't save if you don't have a job, and that's what the Fed is trying to address. Furthermore, there are lots of kinds of assets that do benefit from low rates.

“When the economy returns to health, savers will be able to get paid, just like everyone else. But until then, there's no special right to earn income on having money in a bank.”

And that takes care of Grandma.

Here’s how ZIRP worked (and is still being used) to give the illlusion of recovery, according to Quinn:

 Reduce interest rates to 0% so Wall Street banks could borrow for free and reinvest in Treasuries, therefore earning risk free profits so they could rebuild their non-existent capital. The Wall Street banks also used the free money to generate trading profits using their HFT supercomputers, with only the occasional glitch (JP Morgan London Whale $9 billion slipup, Corzine blowing up his firm and stealing $1.2 billion from ranchers & farmers). The ability to borrow at 0% has spurred these financial institutions to make 0% loans to subprime auto buyers and offer 7 year 0% interest deals on behalf of furniture, electronics, and appliance retailers. This Keynesian solution is supposed to spur demand and generate new jobs. The reality is that Bernanke’s ZIRP has transferred $400 billion of annual interest income from savers and senior citizens to the Wall Street bankers, while setting the table for more massive bad debt write-offs when the millions of subprime borrowers default. -- Jim Quinn Apparitions In The Fog, ZH (01/23/2013)

Thu, 02/07/2013 - 22:39 | 3224911 Yen Cross
Yen Cross's picture

 +2 J.R.  I want to discuss something more important with you. You have been a wonderful mentor over the years.

 Look at the 4hour chart on aud/jpy. look at the left shoulder from last night, and where the 'neck line is', [on the 1 hour] chart Risk/ reward is 94.263.

    fuck that ponzi euro cross trade.

Thu, 02/07/2013 - 23:03 | 3224962 JR
JR's picture

You are the investor par excellence, Yen, the deep pocket. But, yes, based on the methods I use in my real estate transactions… Just kidding, just kidding... 

Thu, 02/07/2013 - 23:12 | 3224991 Yen Cross
Yen Cross's picture

   Jr. (You're a national treasure). My pockets are full of fiat. I'm poor< Did you look at platinum?

 Enough joking. The pattern is still intact. You like to midterm/swing trade.

Fri, 02/08/2013 - 00:28 | 3225152 tip e. canoe
tip e. canoe's picture

"As for land, I bought a lot in 2003 and it still is down 75%."

how so?   did a tornado come whip 3/4's of the soil away?   did a fire come and burn down 3/4s of the timber?   did a drought happen to dry out 3/4s of the water table?

if no, then the land has the same value as the day you bought it.

Fri, 02/08/2013 - 06:44 | 3225350 new game
new game's picture

agreed if it is never for sale...

problems arrives if you are a flipper or thought is was an investment

common mistake these days

r.e. scares me silly because now you just gave a shit load of power to the guv.

first position to take away

and taxes forever...

i know, gotta live somewhere...

just minimalize exposure like say 1100 sq ft instead of 5000...

Thu, 02/07/2013 - 21:43 | 3224808 Bunga Bunga
Bunga Bunga's picture
WSJ: Monte dei Paschi was aided by covert loan. Neither the country's central bank nor Monte dei Paschi disclosed the loan at the time.

Bank of Italy today (lying): "the loan from the Bank of Italy - a perfectly normal over-the-counter operation"


Thu, 02/07/2013 - 21:52 | 3224831 sbenard
sbenard's picture

But, but Bernanke says it's a wealth "effect", not a wealth "illusion"! Shouldn't we believe him?

I suppose that based upon his track record, NO, we shouldn't believe anything that flows from his mouth! I think one of the prerequisites of being a central banker is that they must be a pathological LIAR!

Thu, 02/07/2013 - 21:54 | 3224835 IridiumRebel
IridiumRebel's picture

....and evil.

Thu, 02/07/2013 - 22:00 | 3224846 The Gooch
Thu, 02/07/2013 - 23:54 | 3225082 Seer
Seer's picture

All using the wrong spelling!

It's wealth "affect!"  Are we feeling affected yet by Their wealth?

Thu, 02/07/2013 - 22:34 | 3224906 Cabreado
Cabreado's picture

Collapse Fatigue is a real thing...

Fight it off... don't let it infect you.

Thu, 02/07/2013 - 22:40 | 3224915 world_debt_slave
world_debt_slave's picture

debtors vs savers, who will win this figt?

Fri, 02/08/2013 - 10:11 | 3225598 madcows
madcows's picture

I'd say noone, unless one of them gets out before it implodes.

Thu, 02/07/2013 - 23:22 | 3225014 yatikto
yatikto's picture

Debt and Credit are the same thing but for different people.

Wealth for one, opression for the other.

Thu, 02/07/2013 - 23:49 | 3225069 Brixton Guns
Brixton Guns's picture

Ass inflation can be cured with liposuction, which can in turn be used to make soap.

Thu, 02/07/2013 - 23:50 | 3225071 Yen Cross
Yen Cross's picture

 Come on Ladies and Gents? Metaphorically speaking/  Do I really need to crack out the "Win-7 wordpad"?

   I write and correct along the way. Let's stick to the trade. 

 Honestly, I love all of you.  Let's keep it short and sweet for newcomers. 

Thu, 02/07/2013 - 23:50 | 3225074 gmcniff
gmcniff's picture

A wise old priest who taught philosophy in high school would constantly remind us that piety is no substitute for technique.  I suspect when all is said and done and future generations are sifting through the rubble and ashes, our epitaph will read technique is no substitute for piety.

Fri, 02/08/2013 - 00:00 | 3225096 Seer
Seer's picture

All human existence as we know it is an illusion!  It's all based on perpetual growth on a finite planet!  This other stuff (economics) is nothing but subplot material, and those that think otherwise are either ignorant or practicing one of humanity's greatest traits- deception.

Fri, 02/08/2013 - 00:14 | 3225131 Yen Cross
Yen Cross's picture

Quantum Theology, can wait! 

Fri, 02/08/2013 - 00:38 | 3225164 Seer
Seer's picture


Fri, 02/08/2013 - 00:47 | 3225178 Yen Cross
Yen Cross's picture

 SEER, I welcome your input!  Plus one ! Share some ideas!

Fri, 02/08/2013 - 00:22 | 3225136 helping_friendl...
helping_friendly_book's picture


zh is selling out space to the destroyer of economies and hiserrath?

This article appears to be a plug for wsj?


I canceled my subscription many years ago. I considered, and still consider, their bile monkey spunk.

I might/will stop reading this rag.

so sad.

When you start directing me to "pay only" wsj articles is the day I call your site compromised, unbelieveable, sellout, traitors, unworthy of my time and time to head back to the univesity library for some old school bound perusal.

shame, shame. I am so disappointed.



Fri, 02/08/2013 - 00:26 | 3225148 ebworthen
ebworthen's picture

Did you not read the text?

I mean, have a little positive thought.

The fact that the WSJ allowed the following article and two sentences to be printed should be reason for hope:

"But an economy built on an illusion is hardly a sound structure. We may be doomed to learn that lesson once again before long."

Much less than that gets past the CNBC and Bloomberg filters lately, amongst the other pablum.

Chin up, Comrade.

Fri, 02/08/2013 - 00:20 | 3225142 ebworthen
ebworthen's picture

I heard some asshole on CNBC this morning arguing this, that the "recovery" in housing was "more wealth" in the pockets of Americans who would "go out and spend" and put legs under the recovery.

Fucking dumb shit, that is the definition of illusory wealth and a debt pyramid scheme, perceived wealth that is levered into debt that cannot be paid.

Him and Wall Street and Washington and the fucking FED; what a bunch of ass sucking leech pariah morons!!!  OMFG!!!

Fri, 02/08/2013 - 00:33 | 3225154 Yen Cross
Yen Cross's picture
                     Friday is my favorite day.
Fri, 02/08/2013 - 09:24 | 3225497 Freddie
Freddie's picture

You watch TV and CNBC and you are calling someone a dumb shit?

Dude - wake up and pull the plug on TV and hollywood - ALL of it or you support it and support your own serfdom.  Stop putting money in their pockets and wake the ***k up!

Fri, 02/08/2013 - 00:37 | 3225157 hedgehog9999
hedgehog9999's picture

Mega Stagflation will be the end result with oil at 96 and Bernanke printing every bit of the government deficit.

Unemployment should worsen quite a bit in the next few years should the economy not implode sooner than that.

The market will ultimately come to its senses and correct this bullshit. The fucker will say he could not anticipate that, whatever happens will be contained........

Fri, 02/08/2013 - 00:43 | 3225172 Seer
Seer's picture

The "Market" as we know it will likely cease to exist.  Most is owned/controlled by a handful of folks.  And the stuff in said market is mostly unaffordable, though commodities will push past all others: at the very least people will have to eat.

This is no "cycle" thing.  That is, this is the end of an entire system.

Fri, 02/08/2013 - 00:39 | 3225162 847328_3527
847328_3527's picture
Monster Worldwide reports loss; exits Brazil, Mexico & Turkey


The CEO was quoted as saying, "it's a monstrous problem."


BTW, visited the Mall tonight....two more stores mawled since last week by the 'green shoots recovery.'  The huge Hallmark store shrouded in black curtains...may it R.I.P.

Fri, 02/08/2013 - 01:16 | 3225215 hedgehog9999
hedgehog9999's picture

Monstrous decision indeed. Mexco, Brazil and Turkey are high population growth markets and problems there are exacerbated by the high rate of growth in working age people. The proverbial canaries in the coal mine. They might as well close shop and re-open in a few years as Europe and the US are imploding from a growth perspectve. Great money making short. Should go to zero or nearby pretty soon.



Fri, 02/08/2013 - 01:44 | 3225237 Lord Of Finance
Lord Of Finance's picture

Getting back to the topic of the illusionists running the fedI


After the Bernank makes his long overdo exit, we should appoint David Blain as new fed head. We can ask David to show us the trick where he bites the trillion dollar coin in half, gives it a blow and kazaam! Its a whole trillion dollar coin again.  He can certainly make that balance sheet disappear!


    Then we can get Mr. Blain to select a zero hedge user to be his assistant in performing the old trick of sawing a person in half. Timmy Geithner should be the subject of that trick. Then we could get another user to assist with putting Krugman up for the gillotine trick. What fun this would be!


Fri, 02/08/2013 - 01:49 | 3225246 Brixton Guns
Brixton Guns's picture

Reading this makes me need to go take a long hot steaming Bernanke, then wipe myself with some Krugmans.

Fri, 02/08/2013 - 13:12 | 3226145 Lord Of Finance
Lord Of Finance's picture

Yeah. I eat a lot beans, so I took the biggest bernanke I ever took yesterday. It was so massive it piled up above the water line, nearly filling the entire obama. I was out of krugmans, so I had to use some paper geithners.


   Why wife has a seperate toilet. Its a soros biday. She said she prefers the Monte douche. 


She's European. Whatta ya expect.

Fri, 02/08/2013 - 02:39 | 3225267 Akrunner907
Akrunner907's picture

So does this mean that it wasn't necessarily growth but leverage?  When you expand credit by $10 and the economy only grows by $2, then the leverage was 5:1?  So, since the growth is a non-recurring occurrence, then we have to re-earn the growth, plus an incremental increase to cover the 5:1 leverage.   

Fri, 02/08/2013 - 04:33 | 3225311 AnAnonymous
AnAnonymous's picture

'Americanism' is a ghost built on a bubble of nothing.

As a ghost, it will keep haunting and devastating humanity for a long, long time.

Fri, 02/08/2013 - 05:48 | 3225336 mkhs
mkhs's picture

We are all dust in the wind.



Fri, 02/08/2013 - 11:02 | 3225774 TheFourthStooge-ing
TheFourthStooge-ing's picture

"Casper, the friendly ghost, the friendliest ghost you know..."

Fri, 02/08/2013 - 05:41 | 3225334 Grand Supercycle
Grand Supercycle's picture

DOW monthly chart shows impending Wile E. Coyote drop.

It doesn't take a genius to realise this chart will end in tears.

Fri, 02/08/2013 - 05:49 | 3225337 Black Markets
Black Markets's picture

Rising fungible assets can be crystallised into capital at any time.

The wealth is real it is not an illusion.

The crux is when rising fungible assets are fuelled by a credit expansion.

As the credit expansion is the source of this additional wealth.

The wealth is real.

What actually happens in a credit expansion is that wealth is transferred from the future to the present.

Governments deliberately precipate credit expansions in times of war by plunging interest rates and transferring wealth from the future to the present in order to fight the war.

That is exactly what happened here. Post 9/11 Greenspan primed the economy with a credit expansion in order to destroy the public mindset from connecting grand acts of terror with recessions.

If a recession had been allowed to materialise post 9/11, then every subsequent act of terror on the US mainland would have caused a market wide collapse. The US would have been extremely vulnerable.

The problem with the course of action taken by Greenspan is that it came at a high cost. He wrestled economic power from international terrorists and by proxy he gave it to domestic criminals on Wall St.

2001-2008 saw a credit balloon as the Fed was 3 years too late in removing the punch bowl. 17 consecutive increases in the prime rate was too slow. They tried to engineer a soft landing and failed because they lost control of the expansion in 2003/4.

Today the whole world is still reverberating from 9/11. There have been countless mistakes along the way, but things could have been much worse.

Markets are unconcerned with terrorism. Which is a huge undocumented achievement on the part of the US.

The next stage of history is maintaining stability whilst the colossal transfer of wealth (which was transferred from 2013-2033 to 2001-08) is rebalanced.

Currently this huge imbalance is very destabilising and during the next two decades we will carry the economic burden of that one day in NYC.

But life will go on. We will overcome it. Through hard work and sacrifice.

Fri, 02/08/2013 - 08:30 | 3225426 tip e. canoe
tip e. canoe's picture

you write very pervasive copy.   the past pulling forward of future wealth is a really interesting way to look at the larger picture.

were you a speechwriter for Stalin in a past life by chance?

Fri, 02/08/2013 - 09:58 | 3225371 Shylockracy
Shylockracy's picture
"Take the life-lie (Lebenslüge) away from the average man and straight away you take away his happiness."  Ibsen, The Wild Duck.
Fri, 02/08/2013 - 07:54 | 3225383 Venerability
Venerability's picture

Truly "free and open" Markets - what we had for decades before the Extreme Supply Side and its incessant bullying took over - ARE tremendous Builders of Wealth, productive Wealth which is widely distributed.

So is an efficient housing market, which favors most homeowners, not just a few wealthy investors.

How is it that so many (mostly younger) traders and investors cannot grasp how it is too much Wealth Inequality per se that is at the root of pretty much all of our problems?

I remember my first trip to Latin America on a college spring break and how literally shocked I was at the gulf between rich and poor and how a middle class seemed to be non-existent.

I never imagined that the US - which, once again, owes its historic strength to being the first All-Bourgeois society - would ever embrace the Colonialist - or perhaps Neo-Colonialist? - model and turn into Latin America in the 70s.

How did we allow it?

And how - if one is truly Pro-Business - could anyone here lose focus on the simple truth that an All-Bourgeois, All Middle Class! society is the BEST possible society for Business progress and Business growth?

It's Colonialist societies which are ANTI-Business.

Fri, 02/08/2013 - 08:06 | 3225395 Ghordius
Ghordius's picture

Venerability, the "middle class" is a political construct. As you yourself hint, the correct term would be bourgeois

and this means being either a net creditor OR being a favoured debtor

when Reagan and Tatcher choose the second way over the first they opened the credit sluicegates to the "middle class", in order to expand it

and so "everyone ought to have an own home" started, together with "everyone ought to have a top-notch education"

this to your question: "how did we allow it", though I have to note that the post-WWII US middle classes were also profiting from the US-corporate colonialism of that age - all historians agree that their growth and wealth were unique

Fri, 02/08/2013 - 08:12 | 3225398 hedgehog9999
hedgehog9999's picture

We have reached the limits, the mathematics, not even that, the arithmetics of the budget and taxes has reached the exponential phase long ago.

government size as a percentage of the economy     taxes on rest of the economy to balance the budget

                 10%                                                                               11% 

                 20%                                                                               25%

                  25%                                                                               33%

                  30%                                                                               42%

                  35%                                                                                50%

                   40%                                                                                68%

                                                                                    you are here                                              when you factor in ALL government expenses at the city and state level

                   50%                                                                                 100%

                    50% +                                                                                 ?????      


Fri, 02/08/2013 - 09:54 | 3225559 wonderatitall
wonderatitall's picture

obama gona drone yo ass...there can be dissent with our daddy

Fri, 02/08/2013 - 13:24 | 3226219 Lord Of Finance
Lord Of Finance's picture

It makes sense for a people where 80% grow up without one. He didn't say Michele was their mommy. They already have a mamma. All that's needed now is an Obama.


 It comes from their sub-conscience. 

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