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Elliott's Singer On Bernanke Destroying "The Value Of Money" And "Uprooting The Basic Stability Of Society"

Tyler Durden's picture




 

Previously, it was Seth Klarman, one of the most respected value investors of all time warning against the hubris of economists, the complacency of investors and the stupidity of politicians. Now, it is the turn of that other, just as legendary hedge fund manager, Paul "Commodore" Singer, to take what is an increasingly contrarian position in a field of "experts" filled with momentum-chasers, Fed apologists, and those who are convinced the world owes them a free lunch, and once again tell the full truth about the Federal Reserve and its utterly clueless, real world reject, chairman.

The Fed, Lost In The Wilderness, by Paul Singer

[T]he financial system (including the institutions themselves, products traded, and risks taken) has “gotten away from” the Fed’s ability to comprehend. The Fed is primarily responsible for that state of affairs, and it is out of its depth. Former Chairman Greenspan created – and reveled in – a cult of personality centered on himself, and in the process created a tremendous and growing moral hazard. By successive bailouts and purporting to understand (to a higher and higher level of expressed confidence) a quickly changing financial system of growing complexity and leverage, he cultivated an ever-increasing (but unjustified) faith in the Fed’s apparent ability to fine-tune the American (and, by extension, the world’s) economy. Ironically, this development was occurring at the very time that financial innovations and leverage were making the system more brittle and less safe. He extolled the virtues of derivatives and minimized the danger of leverage and risky securities and dot-com stocks, all while he should have been putting on the brakes. It was not just the disappearance of vast swaths of the American financial system into unregulated subsidiaries of financial institutions, nor was it just government policies that encouraged the creation and syndication of “no-documentation” mortgages to people who could not afford them. It was also the low interest rates from 2002 to 2005, the failure to see the expanding real estate bubble caused by an unprecedented increase in leverage and risk, and the general failure to understand the financial conditions of the world’s major institutions. Under Chairman Bernanke, the combination of ZIRP and QE completed the passage of the Fed from sober protector of a fiat currency to ineffective collection of frantically-flailing, over-educated, posturing bureaucrats engaged in ever more-astounding experiments in monetary extremism.

If you look at the history of Fed policy from Greenspan to Bernanke, you see two broad and destructive paths quite clearly. One path is the cult of central banking, in which the central bank gradually acquired the mantle of all-knowing guru and maestro, capable of  fine-tuning the global economy and financial system, despite their infinite complexity. On this path traveled arrogance, carelessness and a rigid and narrow orthodoxy substituting for an open-minded quest to understand exactly what the modern financial system actually is and how it really works. The second path is one of lower and lower discipline, less and less conservative stewardship of the precious confidence that is all that stands between fiat currency and monetary ruin. Monetary debasement in its chronic form erodes people’s savings. In its acute and later stages, it can destroy the social cohesion of a society as wealth is stolen and/or created not by ideas, effort and leadership, but rather by the wild swings of asset prices engendered by the loss of any anchor to enduring value. In that phase, wealth and credit assets (debt) are confiscated or devalued by various means, including inflation and taxation, or by changes to laws relating to the rights of asset holders. Speculators win, savers are destroyed, and the ties that bind either fray or rip. We see no signs that our leaders possess the understanding, courage or discipline to avoid this.

It is true that the CEOs of the world’s major financial institutions lost their bearings and were mostly oblivious to their own risks in the years leading up to the crash. However, as the 2007 minutes make clear, the Fed was clueless about how vulnerable, interconnected and subject to contagion the system was. It is not the case that the Fed completely ignored risk; indeed, several Fed folks made “fig leaf” statements about the risks of the mortgage securitization markets, as well as other indications that they appreciated the possibility of multiple outcomes. But nobody at the Fed understood the big picture or had the courage to shift into emergency mode and make hard decisions. In the run-up to the crisis the Fed was a group of highly educated folks who lacked an understanding of modern finance. After convincing the nation for decades of their exquisite grasp of complexities and their wise stewardship of the financial system, they didn’t understand what was actually going on when it really counted.

Ultimately, of course, as the system was collapsing and on the verge of freezing up completely, the Fed shifted into the (more comfortable and much less difficult) role of emergency provider of liquidity and guarantees.

All this background presents an interesting framework in which to think about what the Fed is doing now. QE is a very high-risk policy, seemingly devoid of immediate negative consequences but ripe with real chances of causing severe inflation, sharp drops in stock and bond prices, the collapse of financial institutions and/or abrupt changes in currency rates and economic conditions at some point in the unpredictable future. However, the lack of large increases in consumer price inflation so far, plus the demonstrable “benefits” of rising stock and bond markets, have reinforced the merits of money-printing, which is now in full swing across the world. In the absence of meaningful reforms to tax, labor, regulatory, trade, educational and other policies that could generate sustainable growth, “money-printing growth” is unsound. We believe that the global central bankers, led by the Fed as “thought leader,” have no idea how much pain the world’s economy may endure when they begin the still-undetermined and never-before attempted process of ending this gigantic experimental policy. If they follow the paths of the worst central banks in history, they will adopt the “tiger by the tail” approach (keep printing even as inflation accelerates) and ultimately destroy the value of money and savings while uprooting the basic stability of their societies. Read the 2007 Fed minutes and you will understand how disquieting is the possibility of such outcomes and how prosaic and limited are the people in whom we have all put our trust regarding the management of the financial system and the plumbing of the world’s economy.

Printing money by the trillions of dollars has had the predictable effect of raising the prices of stocks and bonds and thus reducing the cost of servicing government debt. It also has produced second-order effects, such as inflating the prices of commodities, art and other high-end assets purchased by financiers and investors. But it is like an addictive drug, and we have a hard time imagining the slowing or stopping of QE without large adverse impacts on the prices of stocks and bonds and the performance of the economy. If the economy does not shift into sustainable high-growth mode as a result of QE, then the exit from QE is somewhere on the continuum between problematic and impossible.

Central banks facing high inflation and/or sluggish growth after sustained money-printing frequently are paralyzed by the enormity of their mistake, or they are deranged by the thought that the difficult and complicated conditions in a more advanced stage of a period of monetary debasement are due to just not printing enough. At some stage, central banks inevitably realize, regardless of whether they admit the catastrophic nature of their own failings, that the cessation of money-printing will cause an instant depression. Even though at that point the cessation of money-printing may be the only action capable of saving society, that becomes a secondary consideration compared to the desire to avoid immediate pain and blame. The world’s central banks are in very deep with QE at present, and the risks continue to build with every new purchase of stocks and bonds with newly-printed money.

* * *

And, as an added bonus, Singer's thoughts on gold:

There are many current theories as to why the price of gold had been drifting down and then collapsed in mid-April. We are trying to sort out various possible explanations, but we urge investors to be cautious in their thinking about what circumstances would likely cause gold to rise or fall sharply. The correlations with other assets in various scenarios (risk on or off, economic normalization, inflation, the rise and fall of interest rates, euro collapse) may shift abruptly as the macro picture evolves. Many people think that if stock markets continue rising, and/or if the U.S. and Europe restore normal levels of growth and employment, then the rationale for owning gold is weakened or destroyed. This perception may be correct, and it is certainly a topic that is currently much discussed, but ultimately another set of considerations is likely to dominate.

The world is on a seemingly one-way trip to monetary debasement as the catchall economic policy, and there is only one store of value and medium of exchange that has stood the test of time as “real money”: gold. We expect this dynamic to assert itself in a large way at some point. In the meantime, it is quite frustrating to watch the price of gold fall as the conditions that should cause it to appreciate seem more and more prevalent. Gold may not exactly be a “safe haven” in the sense of an asset whose value is precisely known and stable. But it surely is an asset that, in a particular set of circumstances, becomes a unique and irreplaceable “must-have.” In those circumstances (loss of confidence in governments and paper money), there are no substitutes, and the price of gold may reflect that characteristic at some point.

 

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Fri, 05/03/2013 - 19:36 | 3528964 New_Meat
New_Meat's picture

bastards!

Fri, 05/03/2013 - 19:48 | 3528984 freewolf7
freewolf7's picture

This is well thought out.
Never underestimate the enemy.

Fri, 05/03/2013 - 19:52 | 3529007 jbvtme
jbvtme's picture

how do you post a picture?

Fri, 05/03/2013 - 20:20 | 3529077 The Navigator
The Navigator's picture

YOU can't - there's only a handful of posters that have that ability. You can include a hyper link to a pict or web page.

 

 

Fri, 05/03/2013 - 20:29 | 3529099 flacon
flacon's picture

 

The "price" of gold is what you can sell it for. Currently the price that you will receive for one ounce gold eagle is: $1,513.00. The paper price is still not too far behind, but I expect the divergence to increase exponentially - $1,470.00.

 

The price you will receive from one silver eagle is: $27.28, but the paper price is $24.13. That's physical metal at a 13% premium to paper. That's nothing to laugh at. But I'm waiting for my billion/trillion/septillion percent pemium.... it happened in Zimbabwe and there is no reason why it can't happen here. 

 

Fri, 05/03/2013 - 21:09 | 3529193 CompassionateFascist
CompassionateFascist's picture

Keep on printing. Our "society" - Ponzi scheme monitized debtconomy, Zionist-collectivist politics, Hollywood Kosher Culture of Death - is beyond saving. This Crash must echo through the Ages. And it will. 

Sat, 05/04/2013 - 04:20 | 3529728 Supernova Born
Supernova Born's picture

double, sorry

Sat, 05/04/2013 - 04:20 | 3529729 Supernova Born
Supernova Born's picture

IIRC, Greenspan said on CNBS (Squawk Box) that the LIBOR was THE thing to watch to discern the direction of the economy. I'd bet a dollar he KNEW it was manipulated when he said it.

Somewhere there is a clip of that eternally memorable moment. One can wish?

Fri, 05/03/2013 - 22:34 | 3529383 dark pools of soros
dark pools of soros's picture

not if you are selling to a dealer you wont... if you can find a buyer on your own you get those prices

Fri, 05/03/2013 - 20:29 | 3529103 Jendrzejczyk
Jendrzejczyk's picture

Go to a different website.

Fri, 05/03/2013 - 20:01 | 3529040 Sam Clemons
Sam Clemons's picture

Create the problem. Offer the solution. 

Fri, 05/03/2013 - 19:55 | 3529028 Aeternus
Aeternus's picture

Keep the foot on the QE gas pedal Bernanke! FASTER!!!!!!!!!!!!!!!!!!!!!!!!!!

 

https://www.youtube.com/watch?v=deuC8GPr31A

Fri, 05/03/2013 - 19:37 | 3528970 fonzannoon
fonzannoon's picture

"Even though at that point the cessation of money-printing may be the only action capable of saving society, that becomes a secondary consideration compared to the desire to avoid immediate pain and blame"

For whatever it's worth, everyone should listen to this. He said this years ago.

http://www.youtube.com/watch?v=8qGt4yeb6Wk

 

Fri, 05/03/2013 - 20:09 | 3529059 Timmay
Timmay's picture

What really matters is that whatever the outcome, "they" will do it to "you".

Fri, 05/03/2013 - 19:38 | 3528973 sitenine
sitenine's picture

2 words, "underlying value" - if only the sheeple really knew.. or understood...

Fri, 05/03/2013 - 19:43 | 3528992 IridiumRebel
IridiumRebel's picture

They don't....trust me. 

Fri, 05/03/2013 - 19:38 | 3528974 Clowns on Acid
Clowns on Acid's picture

"We see no signs that our leaders possess the understanding, courage or discipline to avoid this."

Avoid this ? This is the Cloward Piven objective as supported by Obama and indeed Hillary Clinton. Most of the rest just watch TV and "believe" that if life on tv is ok, then their lives will be ok.

Then of course the 15M illegals in the US, just hoping to get the paper and then get onto Welfare, ObamaCare, foodstamps, race based preferential treatment in schools, jobs, tuitions, etc....

What % of illegals are non white (i.e. would qualify for "minortiy status" in the US) ? 

Fri, 05/03/2013 - 20:43 | 3529131 Jendrzejczyk
Jendrzejczyk's picture

All the illegals I've seen work like a motherfucker. They embody the dream all of our ancestors came to this country for.

You see any unemployed worthless white kids living in their mom's basement standing in the Home Depot parking lot begging to work at six AM? 

 

 

 

Sat, 05/04/2013 - 00:13 | 3529542 TheMeatTrapper
TheMeatTrapper's picture

 

All the illegals I've seen work like a motherfucker. They embody the dream all of our ancestors came to this country for.

You see any unemployed worthless white kids living in their mom's basement standing in the Home Depot parking lot begging to work at six AM?

 

Your point is well taken. However, in addition to being hard workers, they also take full use of every government benefit that was designed to help Americans - welfare, food stamps, free medical care, etc. 

They also refuse to speak English and have no desire to be assimilated. They demand that we accomodate them, rather than insisting that they themselves accomodate us. 

When my ancestors came to this country from Germany, the father of the house forbade any German to be spoken because they were in America, and English was spoken in America. They also sent their sons to fight Germany on behalf of this nation. He also changed their name from Mueller to Miller. 

When the Mexicans decide to forbid their children from speaking Spanish; when they are willing to enlist in the US Army and go to war with their cousins back in Mexico, when they change their name from Sanchez to Smith - then get back to me. 

Until then, they need to stay the hell out of OUR country.

Learn to Trap Your Food 

 

Sat, 05/04/2013 - 17:50 | 3530560 longwind
longwind's picture

They busted their butts coming thousands of miles to hustle harder than I ever had to, or want to. So I bought an airplane ticket to France, where I hardly had to work at all. Guess what color I am?

Sat, 05/04/2013 - 21:02 | 3530811 Chuck Walla
Chuck Walla's picture

We see no signs that our leaders possess the understanding, courage or discipline to avoid this."

They never do when their personal power is on the line.

 

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” 

 Upton  Sinclair

 

 

FORWARD SOVIET!

 

Mon, 05/06/2013 - 19:36 | 3535883 lotsoffun
lotsoffun's picture

the immigrants also needs free cell phones, so they can find out where they are going to be working off the books to take the job from somebody that currently pays some taxes, for less, so they don't pay taxes and help the economy.

and they need to be able to vote also.  because they luv's big bad bama.  ain't that a whole lot of truthful frigging fun.

 

Fri, 05/03/2013 - 19:40 | 3528979 Marco
Marco's picture

"the exit from QE is somewhere on the continuum between problematic and impossible."

These Johny come latelys are 4 decades too late to start whining ... the exit from 4 decades of deficits (trade and budget) was somewhere between problematic and impossible, that's why we have QE.

Fri, 05/03/2013 - 19:41 | 3528980 miker
miker's picture

Excellent article.  Spot on!

Fri, 05/03/2013 - 19:43 | 3528991 IridiumRebel
IridiumRebel's picture

American society is quickly becoming a barbarous relic. 

Fri, 05/03/2013 - 20:41 | 3529125 otto skorzeny
otto skorzeny's picture

a tale of 2 cities-except now everyone is armed to the teeth.

Fri, 05/03/2013 - 19:45 | 3528996 Yen Cross
Yen Cross's picture

   Truth...

Fri, 05/03/2013 - 19:46 | 3528998 newworldorder
newworldorder's picture

There is the rub however... The banksters believe they are in control.  Congress believes that indeed the banksters are in control and most iportantly; That everything can be fixed. The fantasy is that peak oil is not here, good jobs for most will return, and financial derivatives can be netted out. They have had their "thelma and louise" moment but still believe they can jump the cliff.

Fri, 05/03/2013 - 20:42 | 3529128 lotsoffun
lotsoffun's picture

600 trillion dollars of derivatives between the top US banks alone. but of course - they net out.   nothing to see here.

so - why bother to put them on?  net them out then and rip up the contracts.

 

Sat, 05/04/2013 - 14:00 | 3530193 Bam_Man
Bam_Man's picture

They only "net out" as long as EVERY COUNTER-PARTY remains ABLE TO PAY.

The minute that A SINGLE COUNTER-PARTY becomes unable to pay, the entire $600 trillion derivatives pyramid implodes.

Mon, 05/06/2013 - 19:33 | 3535873 lotsoffun
lotsoffun's picture

yes.  i know that.  should have made it explicit, it was part of my sarcasm.  just like AIG needed 180 BILLION - so the lions share of 'insurance' 80 billion went to goldmine.  otherwise - they would have gone under also.  the next 100 billion was split with citi, merrill, jpm, morgan, bac and a bunch of foreign banks.  notice lehman got none, or wachovia, or wamu, because they were the bunch that the fed bought shares directly.  GS remained shareholder owned.

Fri, 05/03/2013 - 23:01 | 3529437 Anusocracy
Anusocracy's picture

The concern is not peak oil, it is whether or not we are reaching peak energy.

Not hardly.

Fri, 05/03/2013 - 19:46 | 3529000 Peter Pan
Peter Pan's picture

They had a choice to cut out the gangrene when it had infected only the toes. It has gone past the knee now and is headed for our short and curlies.

Like any parent knows, if you give in to an unruly child to keep it quiet you end up raising a pig of a human being.

Unfortunately the escape routes have been blocked by even more piles of debt and it seems to me that we are all going to burn in the theatre as the fat lady well and truly sings her little heart out.

Fri, 05/03/2013 - 23:43 | 3529503 akak
akak's picture

 

Like any parent knows, if you give in to an unruly child to keep it quiet you end up raising a pig of a human being.

Like any parent USED to know.

Fri, 05/03/2013 - 19:47 | 3529002 gwar5
gwar5's picture

The only exit plan for the FED is for 2700 DHS tanks and 1.6 billion rounds of ammo to provide them cover.  

Fri, 05/03/2013 - 19:59 | 3529034 Fedaykinx
Fedaykinx's picture

can't wait to have my own armored vehicle.

Sat, 05/04/2013 - 09:57 | 3529881 nightshiftsucks
nightshiftsucks's picture

That's okay,we can take them.

Sat, 05/04/2013 - 10:24 | 3529901 mofreedom
mofreedom's picture

no you won't.

Fri, 05/03/2013 - 19:51 | 3529015 jbvtme
jbvtme's picture

Fri, 05/03/2013 - 19:54 | 3529023 Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

Fri, 05/03/2013 - 19:56 | 3529031 cosmictrainwreck
cosmictrainwreck's picture

I see a trend here...lol

Fri, 05/03/2013 - 20:04 | 3529047 dick cheneys ghost
dick cheneys ghost's picture

I wish those guys would stop posting pics of their Bit-coins

Fri, 05/03/2013 - 19:52 | 3529018 lolmao500
lolmao500's picture

No biggie! The only real threat (according to them) is deflation. Inflation, hyper-inflation or a total loss of confidence can be dealt with!

Fri, 05/03/2013 - 21:39 | 3529266 DeadFred
DeadFred's picture

Bernanke: Will this happen before I leave? No? No biggie.

Obama: Do I have anymore elections? No? No biggie.

You're giving them to much credit.

Fri, 05/03/2013 - 19:53 | 3529021 Stuck on Zero
Stuck on Zero's picture

Central bank policy?  Is that what they call theft now?

 

Fri, 05/03/2013 - 19:54 | 3529024 smacker
smacker's picture

 

It is significant that not one central banker has ever been subjected to any democratic process. Yet these nutters are essentially 'running' the global economies and - being quasi-independent of government has given them licence to destroy their economies. Is it not past time for the elected political elites to step in and tell these maniacs that "Enough is Enough". After all - unless there are revolutions and they're all hanging from lamp posts - it will be them left having to sort out the shambles being perpetrated on societies by the central bank loons.

Let me name a few of the nutters who need bringing under control and stripping of their central bank powers:

Ben Bernanke, SIR Mervyn King, Mark Carney, Mario Draghi and whatever the Japanese guy's name is.

Fri, 05/03/2013 - 20:50 | 3529150 AllWorkedUp
AllWorkedUp's picture

"Is it not past time for the elected political elites to step in and tell these maniacs that "Enough is Enough".

  Unfortunately, these are the bought and paid for elites whose very survival depends on the survival of the CB's. They will willingly destroy their societies before "taking one for the team" and doing the right thing.

 There is only one option left and that is violence. They won't understand anything other than a threat to their existence. Unfortunate but true.

Sat, 05/04/2013 - 02:28 | 3529687 MrPalladium
MrPalladium's picture

"There is only one option left and that is violence. They won't understand anything other than a threat to their existence. Unfortunate but true."

Beginning to look that way, isn't it!

Sat, 05/04/2013 - 10:42 | 3529916 g speed
g speed's picture

listen closely---all the Gov'ts and the powerfull are steaped in corruption and murder- they are the vehicle of evil and death.  They are becoming obsolete-they will consume themselves and die like the Trex they are-- there is no need for violence on the part of the "meek"--  

Fri, 05/03/2013 - 20:16 | 3529027 JustObserving
JustObserving's picture

The whole problem revolves around the unsustainable debt in Western countries - hence the need for ZIRP and therefore the need for QE.  There will be no exit from QE since the Fed may lose a trillion on its holdings and interest on the debt may soar by $700 billion a year.  Then US deficit will easily reach $2 trillion a year.  And when Medicare runs out in a few years, you can add at least  $1.2 trillion to the annual deficit.  

Debt and unfunded liabilities are $446,000 a person now and increasing at $26,000 per person per year in the US.  The only two choices are default or hyperinflation.  And in the most bizarro of scenarios, US debt is trading at 237 year highs.  

Fri, 05/03/2013 - 20:03 | 3529045 are we there yet
are we there yet's picture

Which is worse,

1) TPTB want to destroy the dollar and economy so they can build a one world government, or

2) TPTB have oposing goals with each other and are dysfunctional but secretive, or

3) TPTB have no cogent vision or understanding where we are, but are just playing with matches, or

4) TPTB don't really exist and the train is running without a good or a bad conductor.

Sat, 05/04/2013 - 02:30 | 3529690 MrPalladium
MrPalladium's picture

"3) TPTB have no cogent vision or understanding where we are, but are just playing with matches, or"

Overall, option 3 seems to be the clear winner.

Mon, 05/06/2013 - 04:29 | 3533575 Andy Lewis
Andy Lewis's picture

Or 5) TPTB just want to take all our stuff and starve us to death.

Fri, 05/03/2013 - 20:06 | 3529051 W T F II
W T F II's picture

I respectfully disagree with Mr. Singer. He should know better. Does he really believe the Fed Chairman and his central bank cohorts, here and abroad, are clueless? If so, he needs to conjure more reasons than the standard knee-jerk reaction to the Fed's actions.

I submit the Fed knows precisely what it is doing and why. And I beleive the reason the Fed is engaed in QEs is to serve the sole purpose of increasing excess reserves to unprecedented levels, due to nothing more than systemic solvency issues. The Euro banks are bust and so are we by extension. The culprits are many, but the manifestation is the cross-counter-party web, which has illiquid and insolvent participants throughout the chain.

Additionally, the emerging economies see the Euro and U.S. dominated system as a de-facto wreck and an unsustainable and unacceptable risk going forward.

These factors necessitate the only sensible and reasoned out. That is, replacment of the dollar as World Reserve Currency with a new 'hybrid'. The Fed is simply preparing our banks for future viability in the new system.

The Chairman is not going to Jackson Hole because of "previous commitments and scheduling conflicts". Might those actually be the Conference To Rework The World's Financial System..?? I think so. If so, there will be no Jackson Hole to attend this year, or ever again.

Fri, 05/03/2013 - 20:13 | 3529069 TrustWho
TrustWho's picture

...So you must believe the EURO is a stunning success!

Fri, 05/03/2013 - 20:51 | 3529155 W T F II
W T F II's picture

No. Quite the contrary. The Euro is the critical epicenter of the problem. I foresee the Euro being crushed in a risk-off scenario before the re-work of the system.

Sat, 05/04/2013 - 12:13 | 3530020 Diogenes
Diogenes's picture

The Euro is a stunning success for those who have been printing them and spending them. Now they have worked the scam as far as it will go so it is time to roll out the next one.

Fri, 05/03/2013 - 20:40 | 3529097 sitenine
sitenine's picture

@W T F II

 

You disagree? Really? You should read this article again. The problem is the same problem that ever was. Tyler posted a most incredibly eye opening article about it here http://www.zerohedge.com/news/2013-05-01/desperately-seeking-112-trillio...

The world's population is just simply not producing enough to keep up with demand for colateral - not just for new loans, but for existing (and probably bad) loans as well. There is NO more collateral to pledge or rerehypothicate. Substituting fiat shit notes can not replace the real thing (think tangible) for very long before the jig is up.

Fri, 05/03/2013 - 20:52 | 3529158 W T F II
W T F II's picture

Precisely why a wholesale re-calibration is necessary. The Chairman is fully aware of what must ensue.

Fri, 05/03/2013 - 21:03 | 3529162 sitenine
sitenine's picture

No, you fucking idiot. It's not about fiat of any kind. It's about the lack of tangible, edible, and useful objects and services. Promises of paper ARE promises of tangible goods and services in the FUTURE. How can you be so blind to that?

Fri, 05/03/2013 - 21:10 | 3529197 Sean7k
Sean7k's picture

If you were around in 1990, did you ever think the US could handle a total debt in excess of 29 trillion dollars (not counting future payments)? How do you think we got where we are today? Money has been priinted, Bonds have been created, recreated, rehypothesized, ran through the derivative mill, good bonds, bad bonds, worthless bonds, national infrastructure, etc.

They will collateralize dirt in the future if they have to. What can we do about it, IF THE GOVERNMENTS ACCEPT THE COLLATERAL and place it on the backs of the people and their private wealth? Revolt? HAHAHAHAHAHAHAHA.

Before you call people fucking idiots, you might want to look at what has come before.

Fri, 05/03/2013 - 21:23 | 3529223 sitenine
sitenine's picture

CDS existed in 1990? Wait... The Fed was engaging in QE in 1990? Wait.. Banks were deemed TBTF? Wait. Dude, you have done worse than loose me, sorry, but thanks for trying, I guess.

@W T F II, Welcome to fight club!

Fri, 05/03/2013 - 21:29 | 3529244 W T F II
W T F II's picture

Grav Maga is most effective...http://www.youtube.com/watch?v=IjmBPFPTq-g...

Fri, 05/03/2013 - 21:34 | 3529256 Sean7k
Sean7k's picture

Actually, the FED did engage in QE after the Second World War and continuously since- you do know what a petro dollar is? 

https://en.wikipedia.org/wiki/Continental_Illinois TBTF in 1984 (where the phrase was first used)

I seriously doubt I "loosed" you. perhaps lost you. 

 

Fri, 05/03/2013 - 21:40 | 3529273 W T F II
W T F II's picture

True...and "Twist" was a Kennedy-era relic

Sat, 05/04/2013 - 01:11 | 3529367 sitenine
sitenine's picture

Sean7k, Perhaps you didn't read the article you linked to, "Continental Illinois became the largest ever bank failure in U.S. history", and do you have some fucking clue how productive the U.S. was after WWII?? W T F II, Kennedy? Really? Wow. Never mind. You really have no clue what-so-ever what's going on.

I don't play nice with fools (and by fools I mean W T F II, sean7k seems pretty cool if only slightly misguided), so I'll let you two have the sandbox.

Sat, 05/04/2013 - 07:53 | 3529797 Sean7k
Sean7k's picture

You. obviously didn't read the article. It explains the lengths the FED went to to save the bank. Operation Twist was a QE operation. You really are ignorant fool. Not to mention, no understanding of America's productivity after WWII ( a function of destroyed global capability) that was further diminished by massive gold transfers and debt via the Marshall plan, Viertnam War and the Great Society apending plans. 

If you ever hope to understand the inner workings of the Elites, a through understanding and study of economic history is a pre-requisite. None of what is happening is new. 

 

Sat, 05/04/2013 - 10:37 | 3529912 Imminent Crucible
Imminent Crucible's picture

It's always a good idea to know where your speaker is coming from:

http://en.wikipedia.org/wiki/Paul_Singer_%28businessman%29

Money to NGLTF and Gay Marriage proponents at the same time as GWB, Swift Boat Veterans and many police organizations.

Fri, 05/03/2013 - 21:41 | 3529240 W T F II
W T F II's picture

Incorrect. There is no future 'promise' of a tangible good or service from a 'paper pledge'. Because there is no set exchange value for that good or service in the future. It is reallly beside the point in any event.

The problems are that transactional pledges and their exponents are unsustainable because the pro-formas did not pan out as designed. It is a formulaic failure. The central banks know it because they have a window into the banks. The banks are truly insolvent from the exacerbated problems begining in Q4 2006 and really manifesting in Q3 2007. Read "The Quants" by Scott Patterson and you will begin to understand the magnitude of the credit derivative complex and it's extensions. Bear and Lehman amorphed from those conditions and now we have amalgamated to the present fiasco.

It will be 'rectified' very soon. First by an 'asset devaluation' and then by a re-calibrated 'new' currency order. All in the bag by end of Q4 2013. But pretty painful for a while thereafter

Sat, 05/04/2013 - 00:44 | 3529578 JacktheTab
JacktheTab's picture

What are you basing your timeframe on?

Sat, 05/04/2013 - 10:57 | 3529934 g speed
g speed's picture

at sitenine

how ever the "value" of the promise is arbritrary is it not? Based on a "market" of discovery is it not? Which does not exist any more. So the promises are lies about non existant goods and sevices? It would seem it has much to do about fiat--

Sat, 05/04/2013 - 14:14 | 3530148 sitenine
sitenine's picture

Agreed, but most fiat papers are undeliverable promises and lies at this stage. The point I was trying to make is that shifting or changing fiat medium is not the answer - it will not produce the moar goods or services that are expected. Fiat enables a dangerous perception that the future will always yield moar collateral. Growth is not just an economic assumption, it is mandatory for our fractional reserve idiocy to work at all. Yes, perceptions of value are deeply rooted in the faith of fiat, but even removing fiat altogether would not change the fact that folks still want what they think they are entitled to (yes, I get the irony that it was the fiat that made them feel entitled in the first place - such is faith). I apologize if I failed miserably in making that point.

The Bernank was recently asked if he thought our children would be better off than we are - He said, yes http://business.time.com/2012/08/08/bernanke-kids-will-be-better-off-tha...

Well, I just happen to disagree http://en.wikipedia.org/wiki/Exponential_function

Fri, 05/03/2013 - 20:55 | 3529163 AllWorkedUp
AllWorkedUp's picture

Not really sure why you were downvoted. Agree we are being set up for the big "reset". There is no other way out and the "reset" will only benefit the few already in power, and hopefully the few that hold physical gold and silver.

Fri, 05/03/2013 - 21:20 | 3529220 CompassionateFascist
CompassionateFascist's picture

Those who hold gold and silver in lieu of lead...are going to be dead. 

Fri, 05/03/2013 - 22:36 | 3529390 dark pools of soros
dark pools of soros's picture

i know this place is called zero hedge..  but most people are hedging across the board and have a bit of everything

 

Sat, 05/04/2013 - 09:55 | 3529878 AllWorkedUp
AllWorkedUp's picture

True statement, but I'd venture a guess that those with the mindset of owning gold and silver, also own plenty of lead. Likely some food as well don't you think?

Sat, 05/04/2013 - 10:45 | 3529924 Imminent Crucible
Imminent Crucible's picture

Those with gold and silver and lead

Will also eventually be dead.

It's a maxim of the Hive:

No one here gets out alive.

Pick guitar, fill fruit jar on the bayou

I think tomorrow be Cinco de Mayo.

Fri, 05/03/2013 - 21:35 | 3529257 W T F II
W T F II's picture

Agreed...the Powerful will be set and many of the rest will live through it. I believe it is because the elite actually fear the masses that they will take a more pre-emptive action sooner then later.

Sat, 05/04/2013 - 11:00 | 3529942 g speed
g speed's picture

the powerful don't fear the masses--they fear each other.

Fri, 05/03/2013 - 21:00 | 3529175 Sean7k
Sean7k's picture

I'm not sure why you would be down arrowed. Singer is desperately trying to protect a system that makes him money, attempting to blame FED and government officials for all the problems, when he must know that the international bankers KNOW EXACTLY WHAT THEY ARE DOING. This is why governmental regulation protects their actions and funds this process.

Singer is either an imbecile or attempting to place blame, so no one ever thinks to blame him. 

Everything he says is true, but at no point does he question why it is happening the way it is. He is trapped by a paradigm that no longer exists. He wants to explain it away with the hope we will return to some wonderland that only exists in his own mind.

History is clear on the methods and workings of the global elites. Do you think this is the first crisis? Just look at America: panics, recessions, and depressions from 1814, 1819, 1837, 1865, 1880's 90's, 1905, 1921, 1929, 1933, 1938, etc. All the result of bankers playing with leverage, debasement, capital withdrawls, war, on and on.

There has never been a free market-ANYWHERE OR ANYTIME. So, why would you think Elites are not manipulating the financial system for their own benefit? Never read a history of the Stock Market? Corn Laws, Waterloo? 

The Elites will find a way to eliminate competition from silver and gold. They will force the global economy into a digital system that can be controlled, taxed and put under constant surveillance. The only way out is turning your back on modern convenience and going native. Save just enough money to pay your taxes. 

Thoughts of revolution are for optimists.

Fri, 05/03/2013 - 21:22 | 3529228 CompassionateFascist
CompassionateFascist's picture

Only way they can "eliminate competition" from gold, silver - and lead - is to confiscate. There will be blood. Of course, I am an opimist.

Fri, 05/03/2013 - 21:40 | 3529271 Sean7k
Sean7k's picture

Now, let's put on our thinking caps; (Japanese raid MT Gox), windfall profit tax, legal tender laws, making possession illegal. None of which require confiscation. I like your optimism though...

Fri, 05/03/2013 - 20:08 | 3529054 Gromit
Gromit's picture

Don't cry for me, Singer.

Fri, 05/03/2013 - 20:08 | 3529055 ZeroPoint
ZeroPoint's picture

I never get tired of reading rebukes of all these psychopaths. They would rather see the whole human race wiped out before a banker lost a single penny.

 

Fri, 05/03/2013 - 20:44 | 3529134 otto skorzeny
otto skorzeny's picture

too bad they are only seen on ZH- never the MSM

Fri, 05/03/2013 - 23:11 | 3529449 Anusocracy
Anusocracy's picture

Ingroup-outgroup morality. Promote the survival of the ingroup, make war on the outgroup: it's nature's way.

The 99% are the outgroup.

Fri, 05/03/2013 - 20:10 | 3529060 ebworthen
ebworthen's picture

Jesus God in Heaven the nightly news is full of the jobs/economy/recovery propaganda.

"The markets are at all time highs!  The economy is recovering!"

BULLSHIT!!!

Fri, 05/03/2013 - 20:24 | 3529085 The Navigator
The Navigator's picture

BULLSHIT is right

All gov stats, every DC statement, the (casino) market hype, and MSM propaganda - All just BULLSHIT

Too bad - taking the Blue pill, after you've taken the Red pill, won't help.

Fri, 05/03/2013 - 20:26 | 3529094 Jena
Jena's picture

I'm not so sure that they're aware the propoganda they read is just that.  I think they might believe that bullshit is the truth. 

Sat, 05/04/2013 - 18:31 | 3530600 Miffed Microbio...
Miffed Microbiologist's picture

You are probably right Jena. I'm sure Obama and the MSM believe everything he reads of the TelePrompTer too, then have a wonderful game of golf, eat a delicious meal prepared for them and sleeps soundly knowing all is well. These people are so detached from reality, everything is so scripted in their lives and never anything contrary to this dream is put forth. Now the central bankers are not in this class. I believe they do know exactly what they are doing. They claim this QE is simply to get the economy moving again. This is a farcical lie because they know the underlying economy is dead beyond repair. Going through CPR on a lifeless patient is pointless unless somehow it is a delay tactic which I think it is. They need time for something and until it is in place they won't pull the rip cord. I'm sure they'll be safe and secure while the rest of us have to cope with the new reality were dealt at their hand. So many of my friends and associates are struggling now and I bite my lip bloody when I hear them say things like " it'll get better eventually because it aways does".
They listen to the MSM because it gives them hope. I'm called extreme and depressing. They're right. I am depressing. How can you not be when everything on the horizon seems so bleak? Well, I think I'm going to make myself a Margarita now. Cheers!

Miffed;-)

Fri, 05/03/2013 - 20:12 | 3529065 sschu
sschu's picture

Under Chairman Bernanke, the combination of ZIRP and QE completed the passage of the Fed from sober protector of a fiat currency to ineffective collection of frantically-flailing, over-educated, posturing bureaucrats engaged in ever more-astounding experiments in monetary extremism.

Utter nonsense, debasing currency has been going on since the creation of the concept of money.  These guys at the Fed have just become good at convincing us/some that they know what they are doing and it is different this time. 

It took me a long time to final come to grips with the fact that these Fed guys are no different that the coin “clippers” from long ago.  

We know how this story goes and how it ends, riches for a very small few; pain, tears and penury for most.  Satan’s work for all to see.  

sschu   

Fri, 05/03/2013 - 20:16 | 3529074 ebworthen
ebworthen's picture

Sounds like you are agreeing with the quote, rather than disagreeing (?).

Fri, 05/03/2013 - 20:28 | 3529095 sschu
sschu's picture

 

You are probably correct, Bennie is doing these things.  The idea that these are exotic, unusual and never-before-seen attempts to improve the economy are what bothers me.  It is all been done before, and at its simplest, is no different than the coin clippers of the 2nd century.

The result is the same, destroy your society.  Bennie is all too familiar with this, but playing God feeds the ego more than admitting you need to take your medicine and stop feeding the beast.

sschu

 

Fri, 05/03/2013 - 20:32 | 3529107 Urban Redneck
Urban Redneck's picture

September 2008 was the Event Horizon, and it occurred on Bernanke's watch- now there is no escape. 

Sat, 05/04/2013 - 00:52 | 3529586 snblitz
snblitz's picture

It is important to keep clear that the powers that be have not made convincing arguments, they instead seized control of the educational system and brought about people who will believe what they say.

Fri, 05/03/2013 - 20:13 | 3529066 rlouis
rlouis's picture

As a young man at the time, I didn't realize that Volker's heavy lifting, which bankrupted many, gave the Fed and the gov a 30 year free ride to play wizards and wanks.  If I had been only sufficiently cynical... 

Sat, 05/04/2013 - 06:24 | 3529756 Poetic injustice
Poetic injustice's picture

Hence the idea that Volker was last real money manager, not counterfeiter.

Fri, 05/03/2013 - 20:25 | 3529087 kchrisc
kchrisc's picture

Thanks for the article, however this is not a "policy" it is a scheme.

It is a scheme to 1) keep their asses a float, on our backs and 2) to keep profits rolling in until the music stops.

They will not stop printing because not only will the music stop but the whole skyscraper of cards would come tumbling down on their rehypothicated to infinity asses.

No they will print to the moon and blame the resulting hyperinflation on the usual suspects while they sneak off to climes less guillotine friendly. hujel

Fri, 05/03/2013 - 20:37 | 3529117 Gromit
Gromit's picture

"Speculators win, savers are destroyed, and the ties that bind either fray or rip".

Crocodile tears from Singer who is trying to use US Courts to force Argentina to favor his hedge fund over the vast majority of bondholders  who cooperated in a reasonable settlement.

Fri, 05/03/2013 - 20:46 | 3529140 otto skorzeny
otto skorzeny's picture

gimme the loot- biggie smalls. sometimes you gotta get yours.

Fri, 05/03/2013 - 20:47 | 3529141 reader2010
reader2010's picture

Do you really think Bernanke's been doing what he wishes? He's just followin orders.

Fri, 05/03/2013 - 20:54 | 3529142 razorthin
razorthin's picture

Hang him high.  Hang his handlers higher.  Make a rope with your skunk stems.  It will take the head clean off.

Well, not clean...

Fri, 05/03/2013 - 20:50 | 3529152 WTFUD
WTFUD's picture

At this stage of the game we should be looking for Solutions. . .a safety net for whistleblowers for example. . . .not wasting space and time on arseholes who see the end game and make headlines after the damage is done.

Fri, 05/03/2013 - 21:33 | 3529253 Fuku Ben
Fuku Ben's picture

safety net for whistleblowers  +1

if we don't do it the terrorists have won another battle

 

 

 


Fri, 05/03/2013 - 21:21 | 3529222 deerhunter
deerhunter's picture

walmart had 2 boxes of Federal 135 grain 9mm hydra-schock personal defense ammo for 22.97 for 20 rounds.  Thinking I should have bought it but a buck plus a round?  First 9mm ammo I have seen there in over a month.

Fri, 05/03/2013 - 21:27 | 3529241 IridiumRebel
IridiumRebel's picture

I read this elsewhere:
"18,000 troops = a typical US Army WW2 infantry division. Each day every day US civilians are buying guns at a rate that would equip a full division with rifles and sidearms. Three divisions make a Corps. Three Corps make an Army (traditional triangular establishment).

US civilians are purchasing sufficient firearms to field a new army every 9 days."

Think about that.

Fri, 05/03/2013 - 23:42 | 3529499 Cloud9.5
Cloud9.5's picture

The one percent must be crapping their shorts.

Sat, 05/04/2013 - 10:07 | 3529888 nightshiftsucks
nightshiftsucks's picture

 We can only hope.

Fri, 05/03/2013 - 21:43 | 3529277 bobbydelgreco
bobbydelgreco's picture

this is a classic zh article & thus stupid the velocity of money has never ever been lower qe is not & never will be about putting money into the economy where it might do some good or even cause inflation zhers u don't own the shit ben buys & u losers never will sorry cheer up when the dollar takes off on fatsos watch the bad guys will get theres 

Sat, 05/04/2013 - 04:22 | 3529730 akak
akak's picture

Allow me to introduce you to my good friend, Mr. Punctuation.

Sat, 05/04/2013 - 19:48 | 3530701 Miffed Microbio...
Miffed Microbiologist's picture

Oh akak, must you always be so prim and proper? Why I believe he may be trying to emulate e e cummings employing his strange idiosyncratic use of punctuation and syntax. I admit he does need some work on the satirical overtones common in cummings work but he's young and in time and practice...

Ok, forget it, he's a pathetic scholastically challenged millennial that has texted so much there is no hope for any credible functioning synaptic structure left. Take away the iGadgets and he'd just lay down and die. Oh well, there goes my goal to be less cynical.

Miffed;-)

Fri, 05/03/2013 - 21:44 | 3529280 JR
JR's picture

“If the economy does not shift into sustainable high-growth mode as a result of QE, then the exit from QE is somewhere on the continuum between problematic and impossible.”Paul Singer

A "sustainable high-growth mode as a result of QE" is not possible. And defining a QE exit as “problematic” or “impossible” is banker talk.

As a citizen who has watched the bankers steal years of his labor and begin tearing apart….limb, branch and root…the structure of the greatest free enterprise economy in the world, I’m having that difficult time you mentioned wondering how I’ll feel when the stock market winners have to sell a few paintings on discount.

How can anyone survey the economic devastation of this once great land and still say that so far the consequences of 100 years of Federal Reserve control are “seemingly devoid of immediate negative consequences.”  We're up to our proverbial necks in the "immediate negative consequences," as least those of us forced to live on Main Street.

And I can tell you one thing for sure. The bottom line is that QE stole the money from the American people in order to keep the stock market indexes high and the bankers and their friends and captured politicians happy.

And we know another thing for sure, the American people will have their economy one way or the other. And without a doubt, it is they who will decide the exit strategy, not Bernanke. And it may not be pretty.

And for anyone to say this was not done on purpose I have one word: OBAMACARE!

And concerning this author I’m having a harder and harder time taking consulting advice from people who are Jewish when there are so many Jewish people installed in positions of financial authority from regulatory, to policy, to legislative to judicial. Their silence up to this point has been deafening.

And in this author’s case, he apparently is a social liberal in an age when socialism has become a key fault line of our American system. Example: “Singer, whose gay son married his partner in Massachusetts, where gay marriage is legal, has donated $425,000 of his own money and raised another $500,000 to support the drive for legalization of gay marriage in New York,[13] and in October 2012, Singer donated $250,000 to the Maryland Marriage Campaign.

“In the area of gay rights, Singer has given more than $12 million of his own money to gay rights initiatives since 2007, including same-sex marriage efforts in numerous states.” … and “Singer was a major donor for marriage equality ballot initiatives in Maine, Minnesota, Maryland and Washington through Freedom to Marry, an organization that campaigns for the right of same-sex couples to marry nationwide.

Aside from Paul Singer’s philanthropy, his politics include the seed money that birthed the American Unity PAC with, according to the New York Times, the sole mission “to encourage Republican candidates to support same-sex marriage, in part by helping them to feel financially shielded from any blowback from well-funded groups that oppose it."

It is my tax money Singer ultimately intends to involve as it will be the taxpayers who will be held responsible for the social damage to the institution of marriage which was the key feature of a family structure that was literally the backbone of American communities and the growth of its representative government.

I am past ready for prominent Jewish people with conservative financial portfolios to begin criticizing the incestuous relationships of our ruling financial oligarchical families and the damage they have wrought these past 100 years to America…and to begin calling for an end to the Fed.

http://en.wikipedia.org/wiki/Paul_Singer_%28businessman%29

Fri, 05/03/2013 - 22:29 | 3529369 El Hosel
El Hosel's picture

Exit? There is no exit, but there is a fire..... Shhhhhhhhh keep it quiet.

Sat, 05/04/2013 - 09:17 | 3529847 Miss Expectations
Miss Expectations's picture

Previously, it was Seth Klarman, one of the most respected value investors of all time warning against the hubris of economists, the complacency of investors and the stupidity of politicians.

Seth Klarman

Philanthropy

This billionaire hedge fund manager is known as a financial wunderkind, which is good for all the organizations out there that this low-profile philanthropist helps to fund. Some of those organizations include the American Jewish Committee and the Israel Project, as well as several Jewish foundations in his home state of Massachusetts. Klarman is also the lead investor in The Times of Israel, a Jerusalem-based, Israel focused news-website that launched in 2012 and quickly gained a large following.

http://www.algemeiner.com/2013/04/24/jewish-100-seth-klarman-philanthropy/

 

Fri, 05/03/2013 - 21:48 | 3529289 deerhunter
deerhunter's picture

Iridium ,  According to your numbers and the numbers of deerhunters for gun season in just WI, PA, MI and TX there are 9 0r 10 armies equivalents.  When you consider the average age of a deerhunter is plus 40 years my guess would be you have some men and women who know how to handle firearms, at least at longer ranges.  As I have heard quoted here a handgun is for fighting your way back to your rifle or if you are stuck in an elevator.  I have heard claims of pistol shots in here bordering on the ridiculous.  100 and 150 yards.  I owned a Ruger Super Redhawk in 44 mag and with a scope and way too much expensive practice I could group 4 inches at 50 yards.  If it comes to defending my house or back yard in suburbia it is 12ga pump gun with 00buck.  Slugs in same barrel with my open sights I am good to 75 yards.  We are armed,  we are aware, awake, undisturbed,  so far.  The shelter in place in Boston left me speechless.  That is hard thing to do.  When the line is drawn it will be interesting to see what side of that line our military and police stand on.  There are a number of sheriffs who refuse to meddle with enforcing Fed rules on their citizens.  We have turned our schools into cushy feminized playpens.  We drug our 7 to 12 year old boys for not wanting to sit still in class and turn them into girls.  We throw kids out of school for making toy guns from sticks.  We teach sex education to grade schoolers.  We call good evil and evil good and the light at the end of the tunnel is another train.  I do think about that army and will stand with them.  I remember once in my wilder days being in an altercation in a tavern.  I hit a man who had swung at me first and I hit him flush on the jaw and he just blinked and came at me.  I realized I had crossed that line of common sense.  That man today is the Ammerican people.  I don't know what the punch is going to be but when it comes we will be ready for action.  We may bend but we will  not break.  Au, Ag, Pb. 

Fri, 05/03/2013 - 22:43 | 3529404 Aquarius
Aquarius's picture

"Gold may not exactly be a “safe haven” in the sense of an asset whose value is precisely known and stable. But it surely is an asset that, in a particular set of circumstances, becomes a unique and irreplaceable “must-have.” In those circumstances (loss of confidence in governments and paper "

Indeed.

Markets can be fixed just like horse racing is fixed by dope - same principle: Gold (and Silver) hard metal holdings are far more that mere market commodities as they represent the most fundamental of the human condition and emotionally driven passions; Survival.

What is now visible is that the large "investor" is losing confidence in the elite (and all that hangs off them) and their fiat - systems. And, around 6.5 billion Asians have already lost confidence and all together the global masses are hedging their survival into the metals (as well as other things such as food, guns, property, etc.) It is a clear trend, nearing its end.

Gold(and Silver) metal are not increasing in value: fiat is decoupling and confidence in Bankers, politicians and bureaucrats, that is the system of the 'status quo', and its manipulators, whose incompetances and agenda is now fully exposed for all to see; paper is collapsing to zero and the system is crumbling to dust. Visibly and clearly the system is in its last moments of "extremis"  and approaches full collapse led by the US Dollar.

Have optimism: Mileage will vary; for whom the bell tolls, it tolls for thee.

Ho hum

Sat, 05/04/2013 - 01:15 | 3529617 polo007
polo007's picture

http://news.goldseek.com/GoldSeek/1367608346.php

Because of excessive government interference with interest rates, those desperate for income—including pension funds—have pushed prices of virtually all secure sources to nosebleed heights. When the Fed eventually does raise interest rates, the bond bubble will be pricked and the stampede to get out of bonds should be like a herd of elephants attempting to exit through a revolving door. What to do in such a bond market crisis? Aside from TDL's blue-chip recommendations, we always recommend dispersing assets in several "friendly" countries. Also, diversifying in golds and silvers, including Saint-Gaudens double-eagle gold coins, rather than just keeping capital entirely in fiat currencies.

The world is in what we call "The Second Great Depression," comparable with the first one, in the 1930s. As laid out in my final business book, "Goldbug!," doubling the money supply in 1922 to pay for World War I caused a great inflation that after 1929 was corrected by the First Great Depression, in the 1930s. The similar printing of enormous quantities of paper money, not backed by anything except more paper, has also resulted in the current Great Deflation, still deepening, worldwide. The soup kitchens of the 1930s have been replaced by food stamps, but the resemblance is not coincidental.

Realizing that Keynesian economics failed to end unemployment after the 1932 crash, until World War II began around 1940, enabled us to predict with specific clarity that it would not work these days either. Indeed. Historically, large quantities of printing-press money has failed to reduce the downward trend of Americans with jobs in recent years. Few believed our prediction of "The Coming End of the Age of Jobs," or that it would lead to "The Coming New Social Order," but it is already unfolding. Unemployment in Europe already ranges between 20% and 50%, depending.

It is difficult for investors to protect themselves in this situation, but we cover it as best we can. We have recommended blue-chip stocks that have a dividend yield higher than that of U.S. Treasury paper, because they are proxies for institutions seeking to park their cash in areas other than overpriced bonds. That should end when the Federal Reserve finally allows interest rates to rise, but its fanaticism in continuing to suppress rates despite the Keynesian method not working represents a triumph of hope over experience—and will not end well.

Especially shocking is the delusion that adding inflation to a deflation would somehow cancel each other out, but is in fact the futile attempt to cure a problem with its cause. Overprinting paper runs at increasing risk of an eructation of "hyperinflation"—please note it is a word not used anywhere in the mainstream press these days. Predicting a hyperinflation is so daring in today's environment that we might be mistaken, so we will have to get closer toward the end game to be more confident of it. We hope we are mistaken.

Sat, 05/04/2013 - 10:47 | 3529923 smacker
smacker's picture

 

Central bankers the world over only know Keynesian economics and are one-trick ponies. Keynesianism is what they are taught at colleges and universities and it's what their co-loons in government demand of them, because it's associated with socialism and virtually all politicos these days are Left-leaning, whatever they call themselves.

We all know - and the evidence is there in spades - that neither QE/Zirp are working to kick-start economies, if indeed they were ever intended to. Or were they simply introduced to fund government spending which politicos seem unwilling and unable to scale back? ...and to help prevent sovereign interest repayments on its own mountain of unrepayable debts from going thru the roof? hhmmm.

Unless and until QE is ended, interest rates are normalised and Keynesian economics is thrown in the trash can where it belongs (along with the likes of Krugman), economic recovery will be elusive and the destruction of the middle classes will continue, which in itself will prevent or extend any chance of recovery.

Madmen with their own agendas are in control of the ship and it's sinking.

Sat, 05/04/2013 - 01:25 | 3529635 ToNYC
ToNYC's picture

FED is the OCD that don't work.

Sat, 05/04/2013 - 01:35 | 3529638 ToNYC
ToNYC's picture

ZIRP the Knife. Bear-non-key! Savers get ZERO, all natural allocations same NONE REAL. What could go wrong with that smack?

Sat, 05/04/2013 - 05:18 | 3529738 bardot63
bardot63's picture

"There are many current theories as to why the price of gold had been drifting down and then collapsed in mid-April. We are trying to sort out various possible explanations..."

Paul Singer, whom I'm sure is the genius everyone says, should stop a moment and discover for himself that the price of physical gold and silver is just about where it was before the 'collapse,' and climbing higher, thanks to free market forces, and then discover for himself the 'collapse' was in imaginary paper markets and not in real, physical gold, and then ask himself, using the genius everyone seems to know he has, to explain to us simpletons "what circumstances would likely cause gold to rise or fall sharply."  He might want to start with the 30 foot high stack of solid, transparent and readily available documentation compiled by GATA over the past 13 years that shows the current price of paper gold is nothing more than a government tool used to disguise a failing economic system.  That's not too complicated for us ordinary simpletons to see, so it should make for a fairly easy day for any intellectual to tackle.  

I can never get past the fact, the hard fact, that government and bank manipulation of prime interest rates, Libor, stock prices, housing markets, inflation numbers, unemployment statistics and God knows what else is accepted as gospel, but the economic crime of manipulation of the nominal dollar value of the one true measure of wealth, gold, is so difficult to comprehend by the intelligentsia.  Can someone tell me what it is I'm missing? 

 

Sat, 05/04/2013 - 09:21 | 3529854 EclecticParrot
EclecticParrot's picture

B-B-B-Bennie and the Feds

Oh, these low rates are so wonderful

That Bennie -- he's really keen

The Dow's electric moves

I just can't lose

You know I read it all in Time mag-a-zine

B-B-B-Bennie and the Feds

Sat, 05/04/2013 - 16:59 | 3530474 Cycle
Cycle's picture

We believe that the global central bankers, led by the Fed as “thought leader,” have no idea how much pain the world’s economy may endure when they begin the still-undetermined and never-before attempted process of ending this gigantic experimental policy.

Well, I doubt that pressure to end the idiocy will come from the useful idiots - at the first hint of the useful idiots embarking on the next version of QE, which will be called QP, quantitative printing, the market will body slam the economy into the deflationary mat.

Do NOT follow this link or you will be banned from the site!