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Guest Post: A Sane Person Ought To Consider These Important Lessons
Submitted by Simon Black of Sovereign Man blog,
One would think that certain truths are obvious by now.
It should be obvious, for example, that there are consequences to living beyond your means.
It should be obvious that there are consequences to a long history of spending unsustainably and accumulating mountains of debt.
And it should be obvious that there are consequences to dealing with such problems by spending more and accumulating even more debt.
It should be obvious. But it’s not.
In Europe, politicians are hailing their responses to the Cyprus crisis as a success. They pretend like everything is OK, notwithstanding the capital controls now imposed.
Keep moving people, nothing to see here.
Curiously, institutional investors have mostly shrugged off the turmoil. European markets are down just a few percentage points… which is not even considered a correction let alone a crash.
Gold, when denominated in euros, has ticked up a few percentage points. Like sheep running in to a burning barn, most institutional investors have piled into US Treasuries for ‘safety’, bidding the 10-year yield down from 2.05% to 1.91%.
Frying pan. Fire.
(As an aside, it’s incredible that these institutional money managers get paid tens of millions of dollars to manage people’s hard-earned savings. And yet, they view the US government… the greatest debtor in the history of the world… as ‘risk-free’. It’s genius!)
Meanwhile, back in the Land of the Free, mainstream financial press is toasting the economic recovery, particularly as the housing recovery picks up steam.
Yet as anyone who has cracked open a book on monetary history and financial crises can tell you, THIS is how it starts.
In the early 1790s, for example, the interim government of post-revolutionary France began an experiment with paper money called assignats.* Famous orators declared it a panacea to the crisis that had been plaguing the country at a time when people were begging for solutions.
Initially the results were very promising, and property prices began to rise. People cheered their perceived ‘wealth’ and asked for even MORE paper money.
Of course, it didn’t take very long for a currency crisis to develop… and within a few years, hyperinflation, capital controls, and failed price controls had taken hold.
In the Weimar Republic, the same thing happened when the government switched from ‘gold marks’ to ‘paper marks’. Initially, asset values rose. Stocks and property surged, and people felt very wealthy.
Shortly after, the currency collapsed. Pianos became a medium of exchange, and paper marks became nothing more than fuel for furnaces.
Hyperinflation always starts with a surge in asset prices. And as I see stock markets at new highs, property prices posting big increases, and bond yields of the greatest debtor nations in the world hover at just over ZERO, a sane person ought to consider these important lessons from history.
* Recommended reading: Andrew Dickson White’s Fiat Money Inflation in France, available for free online(PDF).
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Nothing matters any more, the end game has begun and all your money are belong to banksters.
Europe is done, stick a fork in it already.
SPOILER ALERT: We're pretty much fucked.
fat lady is warming up to sing
and to make matters more unpleasant, the fat lady is kim kardashian
Long time listener, first time caller...
They should, but once again, won't.
Hey, BHO! I didn't build that bubble.
Diary of an Austrian middle-class women (hyperinflation prior to fürhrer)..
http://www.scribd.com/doc/132775497/Diary-Of-An-Austrian-Middle-class-Wo...
Thanks.....great piece on inflation and deflation and hunger and privation....I would welcome any other insightful links you have to offer....
*groan*
I submit that the problem is more like 1936 and compared such in a chart within the post below. I think we are about to see the hardest, sharpest 40% decline in almost 80 years and when it hits, Herr Bernank will have to work with his Bankster Masters to hyperinflate to destroy what is left of the dollar and introduce a new universal world trade currency, thus bifurcating the dollar and turning Americans into a slave state like Greece or Cyprus.
March 26, 2013: New Dow All time High today, Happy Days are Here Again!
Those who have held on to stocks and bonds have done very well, contrary to my expectations. NOW would be a good time to get more into relatively hard assets...
"American Hard Assets - Issue No. 2"
http://tinyurl.com/cuo4z3s
It's amazing how some of the guys on here are so fucking short-sighted. Hyperinflation won't happen because the last time I checked none of the examples cited had the ability to print the currency that was most widely accepted as the trade for a barrel of oil as is the USD.
The USD will be a safe haven and the influx of money into it will be unlike anything ever seen as the Euro steadily declines. It needs to be. The giant crash won't happen until then. I'm thinking Dow 20,000. Wall St. likes to fuck with people using round numbers. It's a psychological thing. That's when you should get scared. At that point, the TBTF banks will have unprecedented amounts of cash and hedges in place. Tick, tick, boom!. The Fed cites systemic risk as the need to bump interest rates to 10%, crashing asset prices everywhere. But all of the sudden those cash reserves will be generating a pretty penny. And the rich get richer. For now, enjoy the fucking ride and stop freaking out. I say we have another 3-5 years before we should get scared.
Yes but make money while you can. Long junk bonds hedged with Au & Pb.
If the banks cause massive deflation and then hyperinflation, they will be able to steal much more of the goods.
on page one of the playbook i believe
<<there are consequences to living beyond your means>>
Like what?
consequences like this: http://vimeo.com/15056028
outstanding observations.
Curiously, another international 'Sovereign Man', the famous Jim Sinclair, who long ago endorsed the '3 flags' concept of Harry Schultz*, seems to be doing a 180-degree flip-flop on Cyprus.
Jim's initial take was that the theft of depositor funds was a new Lehman Brothers episode, with the way it broke the myth of safe bank deposits ... an event accelerating the financial destruction of the West
Now - ha! - Jim says Cyprus is no biggie, that bank deposit confiscations in Cyprus are much less than being reported, and he is minimising it, saying it is just part of a media scheme due to the low velocity of money ... that the Powers That Be are just trying to run scare stories to push savings money out of the banks and into being spent
Senior citizen Sinclair does not seem to be aware of how he is contradicting himself
In his 70s now, it seems time is catching up to the old warrior ... Well he has done a lot of good for people in the past
* The Harry Schultz idea ... Harry the great grand-daddy of investment newsletter writers, now in his 80s in tax-free Monaco ... Harry said everyone needs a passport from one country, residence in another, and assets in a third country
I am partial to Schiff and I fully admit it, but I don't see how people hang their hats on guys like Schiff, Sinclair etc. etc. etc. and expect these guys to predict anything with any accuracy. Was it Sinclair that was screaming last year that Morgan Stanley was about to tank?
These guys all generally are correct, but to put a time stamp on any of this is insane.
Agreed. You can't ask anyone to set a timeline for things based on today's knowledge, then criticize them for not meeting the timeline because an unforeseen Fed or ECB action props up the market and kicks the can a little further down the road. I prefer to believe that a forecast based on the US debt being $15 trillion does not go away as the debt reaches toward $17 trillion.
fonz, simon black is brilliant...he knows everything.....and for $300,000 and some free chilean inflation protection bonds, this chilean villa can be YOURS!!!!!......................
http://mw2.google.com/mw-panoramio/photos/medium/21321293.jpg
location location location.
If you go out in the back of that house and count 12 paces south/southeast and dig 3 feet you will find the 3 kruggerands he has been hiding.
LOL........
"These guys all generally are correct, but to put a time stamp on any of this is insane."
Agreed. Rather than making a General Rule, based on a/few selective samples, please bear in mind:
1. The very best investors and advisers are wrong at times.
2. A broken clock is right 730x per year. Better than any broker I know.
3. The whole point of geographic diversification should be obvious, but is not realistic for many. It still does not negate the principle and proven track records of diversification. No place is "perfect" forever. E.g., the US.
I thought it ironic that a computer model suggests the best investing strategy is random selection http://www.bizjournals.com/orlando/morning_call/2013/03/the-best-investm... You'd think that with a 50-50 chance (up or down) that "experts" would be batting 80-90%. But they are no better off than the average Joe. The key is handling the down times.
Paraphrasing Kyle Bass, "one would be naive to think they could suggest with any degree of certainty, the timing of the end of a 70-80 year debt super cycle".
These are infinitely complex systems. Just like if we put a drop of water on the wall. We know that due to fundamentals such as gravity that the droplet will eventually move to the bottom of the wall. We can't predict the exact path it will take however.
Nassim Taleb and his Black Swan/Fragile/Anti-Fragile are relevant here as well. We generally know what is going to happen (due to excessive debt, history, math, etc) just not when nor what the trigger will be to fully set everything in motion.
A TBTF bank won't tank until QE stops.
It is not Lehman ... but maybe Bear-Sterns ... tick ... tick ... tick ...
Guru's are hit and miss. That said,
Seems to me the big confiscation will take place when the conversion out of the Euro happens. Exchange new local currency for Euros at;
1:2 E
1:3 E
1:6 E ?
Cash in mattresses will go up in smoke in such a scenario.
"Guru's are hit and miss."
They're only Guru's if you think they are. If you view them with respect but counter that with rational thought they are merely fellow market participants. Its always astounded me how people love to follow.
The West was finished before I was even born Bro. I'm not even 1/2 Jim's age and I understand his message. We should all learn from the wisdom of people that came before us. My parents were too self involved to be good parents, so I was raised by a grandparent, it was actually a blessing. So even though my parents were wrong, I don't blame their generation (many of my friends do). Justice is often delivered indirectly, who knows, they say parents eventually become their childrens children in their old age.
CNY
That's what to watch. It's been pegged for a year.
The way to play this is to take out an equity loan on your home, invest most of it in pms, some of it in liquer, cigs and tools and sit back and have a twinkie.
+1
outstanding
lol i like your style.
I'll add in junk bonds. I can still get 10% yield, pay the bank all most of my yield, pay down the debt, add a little Au each month, re-lever up, buy some more.............
I like the way you think! It's not like private property rights are protected by law anyway. On the other hand, I have some reservations taking financial advice from someone with your tagline....; )
LOL, the moar prepared you are, the moar fun this whole thing is to watch...
Learn to brew your own beer, then it's REALLY fun...
"Beer proves that God loves us and wants us to be happy." -- Ben Franklin
God Bless Ben!
Unfortunately, if you ask the average person about what has been going on in Cyprus, they will get that glazed sheepie look on their face and utter "Cyprus...who's he?" Or, "Cyprus...is that a fruit?"
These are the people whom responsibility and consequences for their actions fail to register...
Better yet, ask them what "Troika" is.
They get a wry smile thinking it's something dirty. Well, they're half right ;)
They still have full voting rights. That's why you got a second term for O.
And this is a relatively new phenomenon. As a youth a zillion years ago, normal folks read the paper. they matter of factly discussed such matters in school (without the strident politics) and it was taken for granted that responsible citizens were informed citizens. They could find China or Illinois on a map. They'd know that ondaleeza Rice was not a new version of Uncle Ben's (actually occurred on Leno) and they knew their reps and senators.
We were not utterly ignorant while claiming to be "qualified" to vote. There is a point that once passed, cannot be retrieved. Due to many reasons (racial politics, enormous growth of government, massive debt, falling wages, reactive vs proactive activies, bankrupt social programs, etc) we are on a straight path down.
The culture fell first. Can't save a failed culture, and ours is now based on collectivism. More government, less personal responsibility. Urban anonymity. Straight down, agreed.
AH...TYLER?
Estimated weekly flows into equity funds have been positive for the 11 consecutive weeks ended March 20, the longest winning streak in almost three years, according to data released Wednesday by the Investment Company Institute.
Those flows into equity funds have been picking up steam in the last four weeks. Flows for the week ended March 20 were $4.998 billion compared with $1.049 billion in the last week of February, ended Feb. 27.
The new money is concentrated in international equity funds, with$3.748 billion for the most recent week compared with $1.25 billion in domestic stock funds.
But it doesn’t appear that investors are allocating money to stock funds from bond funds. Total bond fund inflows were $6.231 billion for the week ended March 20.
I wonder where the rest of the QE money went - oh wait - it looks like it is buying silver eagles!
When you board a boat,everyone listens politely to the safety briefing on how to man the lifeboats and evacuate in an emergency.When the boat hits the rocks this goes out the window as people go batshit crazy to save themselves.
When this fuckup of a euro hits the rocks,do the Germans think people will calmly stick to an orderly plan?
They do not!
They will be the first ones off the boat,and the lifeboats they leave behind will not be in sound working order.
Now that will be a boat accident that only those who have boat accidents will come through relatively ok.
Thank god for ZH!
Knowledge is power
Ah, welcome aboard?
Everybody has a plan until they get punched in the mouth.
---Mike Tyson
Yeah...but this time is different!
Well if you are telling me theres going to be hyper inflation then real estate is exactly what you want (preferably levered as highly as possible). Sure, buy some metals etc but ideally you want any asset that can produce a yield in whatever current dollars happen to be worth. It won't be perfect but at least it will preserve your wealth much better than owning cash will.
OR you could tell your "mortgage" company to fuck off...sue me for foreclosure. Which...I did. Then I filed a motion to dismiss based on the forged, fraudulent (look those words up to see what they really mean) note they, the Plaintiff, submitted in the foreclosure complaint. Result? Would you want to explain to the judge why you submitted, in open court, forged documents? Hey, I am living in my house for free, 22 months now, but it is not my fault...I can not find anyone who can validate the debt. Got it? I pay the taxes and insurance and the upkeep of course. Fuck the banksters. I did and do. I like it.
Whodat? Name the name.
Every man for himself, already? S'ok, debt is a promise, and promises are no good anymore.
You must have a copy of the original signed mortgage document, why not just present that to the mortgage company to validate the debt? So just because a lender lost the IOU note, it means you get off scott free!
These folks have a grip on foreclosures, check'em out....
http://www.hofj.org/
TPTB are not gonna give up that easily. Before the inflation rockets kick in, they'll have price control. We keep underestimating how clever and resourceful they are at protracting this out. --> More time to "stack", fill the pantry & safe, build network of like-minded people.
Thank you. This is what most ZH folks do not seem to recognize. The FED, the federal gov't and iassociated ilk may not know how to get an economy going but they are masters of obfuscation, delay, temporary "fixes", creative runarounds, sidetracking and prolonging the inevitable. All those claiming that things will crash "this week" or "later this year" or "soon" are not living in the real world. Knowing something is inevitable does not mean it can be accurately forecast. As long as the market keeps rising, they could set up public whipping posts without a lot of protests.
How really hard is it push ctrl-P and say everything is fine?
"It should be obvious. But it’s not."
Yes it is. It is just that it is in many people's interest to deny the obvious, for now.
Barry Choomboi: "We do not have a debt problem. We do not have a spending problem".
Congressman Boner: "Ditto".
a sane person.....
That is where things went off track. Is there any sanity left.
When money was gold and silver, it represented the stored energy of labor produced wealth. This is what Keynesian retards like Krugman refuse to understand.
Debt based paper and electronic money represents only riches, not wealth. A nation cannot have prosperity based upon contrived riches. IT MUST PRODUCE WEALTH. If it does not, it will suffer the consequences.
Prosperity requires productive WORK. No productive work and you starve. It's just that simple.
That was how it was in the age before foodstamps.
Not true. You take my fucking dollar or I will kill you. Thats wealth.
True. You don't have wealth, you have a piece of paper with a number on it. Government can print plenty more of them with little effort.
It's all about an egocentric belief that we, as humans, can finesse any problem by virtue of our superior intelligence and morality. It leads to academics who write economic dissertations about solving misery with monetary arithmetic. There are people who don't believe people are selfish and lazy and who need motivating by lessons in character - effort, integrity, honesty. When debt becomes imaginary, so does productivity.
I wonder how much money Simon Black, that up-and-coming West Point MI officer, had in Cyprus.
Would you guys clear up your misunderstanding of hyper-inflation. Creeping inflation? Yes. High inflation? Yes. Accelerating inflation? Yes. Stagflation? Yes. Deflation? Yes. But NOT hyper-inflation. Hyper-inflation means the currency of the USA becomes totally worthless and that just ain't going to happen. No Fed chairman, no matter how evil or incompetent or both, would print into hyper-inflation. Interest rates would soar and that would put a complete end to the government (as it wouldn't be able to service its debt or maintain its military). And the Chinese, Japanese, etc. are NOT going to dump their USD on the world either. They would destroy their balance sheets. This is all gradual erosion. Can't you see that? It's been going on egregiously since 2007 and the pattern has been established... extend and pretend, intervene, kick the can, fraud, falsify statistics, spin in the media, etc.
Stop needlessly scaring the shit out of people. Geesh!
Bernanke the Dumber won't have and doesn't have a choice. It's already here anyway. Healthscare, food, housing costs, college tuition, and energy costs are all skyrocketing.
"We can guarantee cash benefits... but we cannot guarantee their purchasing power"
http://www.youtube.com/watch?v=HxSLtC62RG0
Sooner or later countries will wean themselves off USD to a more acceptable level. We`ve seen it with the growing number of alternative currency swaps between china, russia, south korea, japan, india, etc. Just found this one China and Brazil (http://www.bbc.co.uk/news/business-21949615).
Once enough players are in position, taking a loss on USTs is probably just going to be the cost of doing business. That doesn`t mean everything will be thrown out, but there could be significant declines leading to a multipolar system.
IMO at least.
Who cares about an argument that says, "oh well...milk might double in cost in a few years".
USD has already lost about 30% in real terms since 2008, per Shadowstats, and we're just getting started. When CPI hits 10%/yr it will really be 30%/yr.
- alfbell -
In the unlikely event we get hyperinflation, it will be based on a lack of confidence in paper money, not the result of some slow progression. One day, people could get the idea things are out of control in Washington DC. Debt without end, a government grasping more and more, a lack of trust in banks. They don't spend, they don't pay taxes, an underground economy gains in popularity. In desperation, the central bank prints a massive infusion.
Right now, our Fed prints $1 trillion a year. We are one domino away, and Cyprus was an economic speck, and look at the reaction.
Contemplate what will happen when the $$ loses World Currency Reserve status...
Assignats = "ass in hats" or "ass o' gnats" or just "Precious Metal ETF's" and "Treasury Buxs".
"It should be obvious that the Fed is blowing another bubble, especially in stocks",
but rather than use this knowledge advantageously (as in go long the market), the ZH deniers choose to decry the reality staring them in the face.
Why would anyone with any moral compass at all continue to fund the theft of the average american? Every $1 you add to the stock market gives the rich thousands more in leverage which they turn around and buy shit with. Fuck that.
It is our moral crisis. This is what is so evil about corruption. It makes the only path to prosperity through doing what we know to be wrong. Not only are ending up financially broke but with a bankrupt soul. The devil is laughing all the way to the bank.
I'm out. Doing just fine.
I remember folks saying that in the spring of '07. Then I remember Bernanke saying the sub-prime problem wouldn't spread into the broad markets.
Ooops. Glad I went short.
https://www.youtube.com/watch?v=INmqvibv4UU
I remember folks saying that in the spring of '07. Then I remember Bernanke saying the sub-prime problem wouldn't spread into the broad markets.
Ooops. Glad I went short.
https://www.youtube.com/watch?v=INmqvibv4UU
Go long the market? Really? Until when?
If I knew a drug dealer in the neighborhood who was giving meth to the kids to get them hooked, then charging them for it when they "neeeded" it, should I be long that market too?
Or, a pimp recruiting the wayward teen girls to whore them out and skim his profits and ruin their lives? Shouild I be in on that game as well or be "a fool"?
I see the equities markets, Wall Street, and Washington the same way. Utterly corrupt and not worth my time or money.
An interesting aspect of the real estate rebubble is tha tthe wealth redistribution disparity is more severe. Each end of the barbell are growing. Apt prices are getting so high in Socal that you need to really have some dough behind you... Multiple all cash offers on deals. Buy and refi! and buy again! Its really going now...
Is it rebound-based speculation, or is the economy picking up that much?
Rent-Seeking.
Don't worry, that too will have to taper off. People without jobs (most of the country outside of D.C. and Silicon Valley) can't pay ANY rent and will either move, double up, or grumble back to family for a roof over their heads.
You'd think a reasonably intelligent person could figure out the sequence of events following this massive debt bubble, and ignore the small stuff. This is money we're talking about. Run up debt, run up the money supply, don't let any sector go starve for government money. Somehow, someday, the eternal optimists of our world believe the magic of human goodness and intelligence will revive the economy. Keep up the life support long enough.
It's all about spreading the risk over larger and larger groups of people. Bye bye liberty in so many ways.
Why not be a little more honest with this article and drop the pretence that market forces are the reason for hyperinflation. The truth is that the Weimar Republic hyperinflation was the result of the Rothschilds gaining control of the Reichsbank as part of the deal Germany made to end WW!: They then used the Reichsbank to destroy the German economy. Market forces are not to blame for hyperinflation, but banksters are.
What's with all the retardeds around here saying "get a mortgage then pay it off in hyper-inflated dollars herp derp potato" ???
My employment contract (no, I'm not a high rolling big shot day trader millionaire like so many on here pretend to be) says nothing about adjusting my rate of pay to match inflation, does yours?
If your $2000 paycheck first goes to pay for the $1950 cart of groceries, how do you expect to pay your mortgage, Slick?
And what makes you think Darth Nigger Obongo won't let the banks raise your mortgage to match inflation?
When the banks finally collapse it will be depositors' money that disappears. I guarantee the list of every single person that owes them money will remain intact and will be accurate down to the penny.
After the dust settles, they'll be knocking on your door with the local police MRAP in your driveway telling you to pay up or vacate the premises in 60 minutes. And since most mortgages are backed by Fanny/Freddie, the .gov will have a good excuse to get involved.