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Guest Post: The Wealth Effect Shifts Into Reverse
Submitted by John Rubino via Dollar Collapse blog,
Stripped of all the acronyms and economist-speak, government policy of the past few years has been simple: lower interest rates to push people out of cash (which yields nothing) and into stocks and houses. And then, when those assets go up enough to make their owners feel rich, hope that this paper wealth translates into a willingness to max out credit cards and take out car loans.
This propensity to borrow and spend more when your investments are rising is called the wealth effect, and by early 2013 it seemed to many that America’s “normal” debt-driven consumer society was reviving and that we might, after all, be able to maintain our military empire, welfare state, big houses, SUVs, massive banker year-end bonuses, easy incumbent reelections, etc, etc, without any prioritization or hard choices.
Nope. It turns out that the laws of economics can be bent but not broken. You can’t have a vibrant, growing economy AND interest rates near zero AND a stable currency at the same time. One of these has to give. And in the past month interest rates have started moving back towards historically normal levels.
Rising interest rates are incompatible with housing and equity bubbles, and the air is now leaking from both. As this is written on the morning of June 20, global stock markets are down big. And US housing, which in some markets was approaching 2007-esque levels of speculation, has hit a wall, at least based on mortgage applications:
Mortgage applications tumble as rates rise further: MBA
(Reuters) – Interest rates on home mortgages rose last week to hit their highest level in over a year, sapping demand from potential homeowners, data from an industry group showed on Wednesday.
Rates climbed 2 basis points to average 4.17 in the week ended June 14, according to the Mortgage Bankers Association. It was the highest level since March of last year.
After hovering around record lows, rates have surged for six weeks in a row, pushed higher by worries that the Federal Reserve could slow its stimulus program sooner than had been expected. Rates have accelerated by 58 basis points since the start of May.
The Fed’s bond purchases have kept borrowing rates, including mortgages, low. Though mortgage rates remain low by historical standards, the ultra-cheap mortgages have helped lure buyers back into the market and worries have crept in that higher rates could disrupt the still-young housing recovery.
The rise in rates appeared to hold back homebuyers as MBA’s seasonally adjusted index of loan requests for home purchases – a leading indicator of home sales – fell 3 percent. The gauge of refinancing applications slipped 3.4 percent, though the refinance share of total mortgage activity held steady at 69 percent of applications. The overall index of mortgage application activity, which includes both refinancing and home purchase demand, declined 3.3 percent.
And so the wealth effect shifts into reverse. Fewer people can afford mortgages, so home prices stop rising, making homeowners feel less rich. Stock prices stop rising (or, like today, start going down) and the record number of people who have been buying on margin see their exciting gains melt away. They feel both less rich and suddenly very stupid. Most of them will spend less, and the recovery will stop in its tracks.
Which means it’s time to think about the next big announcement. A massive public works plan? Expanded QE? Maybe a major war? Whatever, it will have to be commensurate with the size of the now-global crisis. So, just a guess, but this time around it wouldn’t be surprising to see a coordinated attack on deflation from Europe, the US and China. In other words, global Abenomics.
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"government policy of the past few years has been simple: lower interest rates to push people out of cash (which yields nothing) and into stocks and houses. And then, when those assets go up enough to make their owners feel rich, hope that this paper wealth translates into a willingness to max out credit cards and take out car loans."
Or perhaps another version: "the private cabal of banks known as the Federal Reserve policy of the past few years has been simple: lower interest rates to push people out of cash (which yields nothing) and into stocks and houses. And then, when those assets go up enough to make their owners feel rich, shift policy and steal that wealth for the banks and oligarchs who are its rightful owners."
Bingo! Firist by inflation, then deflation -> inflation -> deflation -> until the cabal and cronies own everything and we are serfs.
It's in our culture.
According to Niall Ferguson, we are getting poorer because we've allowed institutions to run wild:
http://www.planbeconomics.com/2013/06/niall-ferguson-weve-developed-gree...
It's like a funeral in here. Did gold die? Are Zero Hedge, Max Kieser, Alex Jones, and all the other Doomers still going to pump a commodity that is less valuable than steel?
Gold is sleeping, having been administered a date rape drug called a Bennie. Fiat is dying.
Bennie is ruffie?
lol Boris. IMO, the next QE is state/muni debt. But wait for the banks to load up on them first. Can't have anybody else make out.
Liquidity crisis straight ahead..... from how I see the world....
Damned...
http://aadivaahan.wordpress.com/2013/06/21/strange-days-especially-now-t...
ori
hehehehehehe. for the record i did not down arrow you. "sometime the only thing you have in life is to take pleasure in other's misfortune." I would argue that pretty much sums up all there is to know actually. have to admit I've missed treasuries getting crushed here...but that is all I've "missed." I did have a cash option... but as that Nazi dude who fled to Scotland said "I took the risk." granted his risk cost millions of lives...mine so far has taken me down about 3 percent. heavens to Betsy!
Gold takes patience.
The longer they pump up bubble II and extend and pretend, the more Gold will be worth.
This is a battle of real-value tangibles versus unreal-value intangibles (binary creation of fiat and debt).
Maybe Zero Hedge can do its uber awesome reporting and show some support levels for gold.
Lol. You go Gil, I guess you showed us. Hoooraah! Lol. What a tard
Troll King: You had an opportunity to say something intelligent but you didn't.
I could've told you that, so could European serfs 500 years ago.
It's actually in our nature to (create cultures which) create institutions which benefit comparatively very few people, though they usually don't start out that way - it's the highly transitory nature of their beneficience that people just can't seem to understand. Any institution which was founded by people who are now dead has a much-higher-than-random odds of being, basically, a tool of oppression and theft.
The cycle you describe I've called biflation. Neither inflation nor deflation can run wild because when they're both at work simultaneously they pull in opposite directions. At times one has a slight edge over the other but soon enough it has to reverse since each one erodes the economy in different ways, and central bank maneuvers are countercyclical. The effects are additive.
2007 - 2009: Deflation
2010 - 2013: Inflation
2014 - : ?
Conflation
the problem is with the people who pay attention to this stuff thinking that it matters. "now it's all Ben Bernake's fault. AGAIN!" really? we're like a dog chasing our tail(risk) here. "my God! the market wen down! TOLD YA!" the Fed has a dual mandate...in NEITHER case is that mandate saying "to make sure all assets go up in price no matter what." please ask me...PLEEEEEASE ask my why!
"And so the wealth effect shifts into reverse. Fewer people can afford mortgages, so home prices stop rising, making homeowners feel less rich."
Bullshit, I'm a homeowner and I don't feel "less rich". It's my home, I live in it. If it is valued at $100,000 or $1,000,000 it will still be my home, and I will still live in it. Stop trying to tell me my life sucks, because it doesn't!
Precisely. Finally someone said it. You only 'lose' on your home if you choose to sell at a price lower than you bought.
No one on this site that holds gold / silver thinks they 'lost' anything just because the market price went down.
Personally, I did not buy my house to make money. I bought it to live in. I could choose to rent, and may yet do so, but my house is not viewed as an investment, but as a necessary place to live.
Well stated.
30 years ago I was contemplating a life as a "financial planner". Went to a couple of training courses, decided it wasn't for me.
I did however pick up some sound advice, specifically that a house is NOT an investment. The instructor, a guy in his early 70s was emphatic on that point. He said a house is shelter, nothing more. If you like a particular house, and you can afford it, buy it. But don't buy it for an investment or tax write off. He put a bunch of figures on a blackboard illustrating the costs of ownership, complete with interest paid versus taxes saved, and renting. on a dollar for dollar basis. was cheaper.
Then you add in Bruce Williams' advice to never fall in love with something that can't love you back, and you have a recipe for stable home ownership. Not the crazy "my house will make me rich if I don't over use the ATM feature and I just have to have that new granite countertop" market of the last decade or so.
Or, more simply, to quote my dad, don't make yourself house poor.
Biflation beyond all recognition.
What your instructor said may be true on paper. But I know a hundred guys who bought a house 20 years ago or more and it is now their biggest financial asset. I know exactly one guy who refused to buy a house, rented all his life, and invested the money he saved. And he was the most miserable old miser I ever met.
Confiscation.
Defenestration.
duplicate - post deleted
'Which means it’s time to think about the next big announcement.'
.
Cue in X-Factor Event... most likely something we cant predict, chart or research - however, it will likely lead to the usual, i.e 'war'
.
Either that or - they pull off a fake alien invasion (courtesy of that floating hunk of shit, ISS) and dupe us (again) with that and say they are here to 'save us.' Then i would start to get really paranoid...
.
Time will tell.
Yeah, any day now.
The first TARP ($700 billion TPs/dollars) was the clearest evidence of this.
They could have given the money to the mortgagees as a direct mortgage reduction. Would have helped both the people and the bankster's balance sheets. Instead they gave it to the banks who then could still hound the mortgagees and take title when they defaulted. If it weren't so criminal and tragic it would be funny.
If one understands the way fractional (fraud) banking works, he will rapidly realize that the banksters turn stolen money (a depositor's deposit) into counterfeit money (loans) and then into title to real property when the bubble bursts. It's fucking perverse and why I'm long guillotines.
Disclaimer: I am not saying that printing money would have been good either way, just if done, could have been done to "assist" both parties and not just the banksters.
I just quit my job because if I hadn't I think I might have done my manger serious harm. When you find yourself sharpening a BIG knife at your desk while staring into space, it is time to leave.
Time to start raise property taxes faster, eliminate the mortgage deductions, "eminent domaining" lots more properties lots faster 'for the higher use', and so on ...transferring wealth to where it belongs...to the GubMint.
As for all those Chinese, Russians and other "Aliens" who loaded up on property in LA and NYC...time to start "expropriating" their properties, of course, in the name of national sekurity.
You'll see.
Being that I live in a neighborhood full of racist Chinese immigrants in the San Gabriel Valley i can't say I wouldn't get a little schadenfreude if this happened. Got lots of great Chinese neighbors who are 2nd and 3rd generation immigrants. But the Chinese oligarch recent arrivals are almost uniformally racist assholes. I would be quite happy if they were specifiacally tageted for asset forfeiture :-)
I believe Jefferson called them out on the 2nd version and warned us !!
this is a brilliant article... couldn't have said it better myself.... http://tinyurl.com/mem7o7x
Re-post the link, as FrogPot changes things and the link only take one to their homepage.
tFed is the king of the fiat but strage enough people still keep on sticking to the fiat. Why ?
Is not it because of the taxes that have to be paid exactly in that fiat ?
It's much easier to steal wealth once it's been pushed into risk assets. You plebians wouldn't know what to do with money anyway.
WAR!
No doubt
Ben Bernanke's entire legacy rests on his (very idiotic; see below as to why) "virtuous circle" wealth transmission theory. It's nothing more complicated than that.
As a reminder, his "virtuous circle" theory is that as equity markets reflate, the accretive "wealth" it creates (even if history proves that such wealth is repeatedly decimated, typically at far faster speeds than it was "created," and is thus quite fleeting, artificial & illusory) props up confidence of those who see their portfolios rise, and thus fills them with the courage necessary to engage in more spending, especially of the discretionary type, which then somehow reduces the slack in labor markets by putting people back to work (even if much of that which is purchased is produced overseas).
This is his theory, as he has explained it time and time again, including during his interview on '60 Minutes' (where he essentially admitted that the Federal Reserve was acting to jig equity prices higher).
Just one of the many problems with his "virtuous circle" theory is that it depends inherently, no matter how rich (aka overvalued) equities are at any given time, that equities rise even further in valuation. There's literally no level at which equities are trading whereby Bernanke wouldn't attempt to drive them higher, directly and indirectly. This, my friends, is the textbook definition of blowing bubbles.
Another major problem with his "virtuous circle" theory is that equity "market" activity now consists of a historically low % of direct retail participation, and is concentrated predominantly within a relatively small group of hedge funds, TBTF financial entities (supported by near-free fiat shoveled their way by the Fed), and the "always there because they have to be" pensions and mutual funds. Additionally, given that Bernanke has suppressed rates to such artificially, manipulated low levels, corporations are also borrowing money on the cheap by floating bonds, and using the cash raised to engage in a historically high level of buybacks of their own shares of stock.
Thus, even by comparison with past, intentionally blown bubbles, such as the dot.com bubble, or the more recent housing bubble, there are far fewer participants receiving far lower (if any) benefits, of the temporary cheddar, and the stimulative effect on the overall economy is thus relatively benign, despite the fact that far more resources and tools have been devoted to this latest (and largest) bubble than the prior ones of recent history [in fact, it can be persuasively argued, and has been, that the tools, resources and other efforts implemented by Bernanke to re-flate the equity and other bubbles have had significant adverse impact on true, organic and productive real economic activity within the private sector].
The biggest problem with Bernanke's "virtuous circle" theory, however, is that while it requires radical, unprecedented interventionism within equity markets by what is supposed to be an independent central bank focused on monetary policy as a way of promoting its "dual mandate" (so clearly Bernanke is violating the Fed's charter as authorized by The Federal Reserve Act of 1913), there is and can never be any truly effective "put" or backstop put into place by that central bank, that will indefinitely suspend reality, and place a permanent "floor" (or create a "permanent plateau," to recall the infamous phrase in 1929 as uttered by Irving Fisher) underneath the equity market. As a result of this reality, there is a paradoxical correlation that mandates that the more that the central bank intervenes in equity markets, and that the more resources & monetary tools are used to promote its inflation, the larger the inevitable crash will be.
All's well that ends well and all's not well that doesn't.
Bernanke's biggest prayer/hope is that he's no longer in the hot seat when the massive bubbles (neat trick that, blowing simultaneous equity AND bond bubbles of historic proportions) he has now blown pop with a thunderous boom.
When that "pop" sounds, it will be the literal sound of MANY TRILLIONS of BORROWED FIAT NOTES (i.e. debt), pumped directly and indirectly into the rigged and warped "thing" some mistakenly call "markets" by a radically interventionist central bank monstrosity, BEING VAPORIZED.
That's an awesome post TruthinSunshine. Would you mind if I reposted it on my tiny blog and gave you "guest post" credit for it? I am assuming you wrote that because you do write well.
When that "pop" sounds, it will be the literal sound of MANY TRILLIONS of BORROWED FIAT NOTES (i.e. debt), pumped directly and indirectly into the rigged and warped "thing" some mistakenly call "markets" by a radically interventionist central bank monstrosity, BEING VAPORIZED.
The Bankster END GAME comes next in the logical response phase to the "pop" in equity and debt markets.
Upon the collapse the great majority of financial entities (such as the TBTF Banks) find themselves with severely impaired balance sheets and no solvent financial institution willing to risk conducting business with them. As a result the billions of daily financial transactions that we formerly constituted "the economy" quickly come to a grinding halt.
To re-establish the confidence necessary for the financial system to once again function the options are:
1) Nationalization or equivalent
2) Federal Reserve infusion of tens of trillions into the primary dealers and foreign CB's to not only re-inflate all asset bubbles but to reduce the real value of all dollar denominated debt outstanding by at least half.
Free money for the bankers to buy any assets of their chosing.. with the certainty of knowledge that a massive debt crushing hyperinflationary tsunami will follow to render this debt used to transfer these assets to themselves worthless.
Then they all get Congressional Medals of Honor for saving the financial system.
The pain for a lot of people who felt "wealthier" due to rising equity markets (e.g. they witnessed their 401(k) rising the past 4 years) will set in when they realize much of what they purchased due to their Bernanke-inspired confidence ("virtuous circle-nomics") was either unecessary, and/or expensive, and/or a "wasting" or "depreciating" item (e.g. vehicle), and/or an asset that has tremendous and ongoing carrying costs (e.g. a house with a property tax bill incoming with absolute regularity), and then they feel the Chinese water torture of the stair step-down in that same psychologically effective (but in reverse fashion now) asset class sink lower and lower...and lower.
These people, if they didn't escape the trap set by Bernanke, now have expended a potentially huge amount of their wealth, which may have since diminished dramatically (and may diminish quite a bit more), on non-income producing and depreciating items, which to add insult to injury and rub salt in the wounds, may be something acquired with a securitized debt instrument (e.g. mortgage).
Take it one step further: They will see their Bernanke-seeded "virtuously circular" investment portfolio decimated, and also see the value of that home or other large ticket item they purchased with debt, that also sucks them dry with its maintenance and property taxes, etc., expenses, decline...
...a truly painful way to learn to stay the hell away from casinos and stay the hell away from debt.
I will henceforth refer to these people as being "Unvirtuously Circle Jerked" by Ben Bernanke.
"the world must be at an end given what happened to gold and silver" yes, yes? the jealousy and hate here...as elsewhere...knows no bound. "and all Hero's must die to know Fame." so these are our "friends." people who speak of all that is good, right and just...but DO all that is wrong. "markets go up, markets go down." so now we celebrate the end of the world? "because it's how we make our wrong right"? be honest Tylers Durden. YOU ARE WRONG.
I agree wholeheartedly with your assessment.
Perhaps some relief for them may come from the degree of real debt reduction from the loss in purchasing power of the dollar due to (hopefully) one extremely sharp and finite wave of inflation. If not the risk premiums on interest rates will soar to levels not seen since Volker. Remember that it is the expected rate of future inflation that impacts interest rates the most... all this of course depends on the re-emergence of confidence in the system which may or not be there at the end of the day.
The second problem for the Fed in additon to stabilizing rates will be in crushing the dollar enough to gain some relative advantage in the manufacturing and exporting sectors. When all other nations will be adopting a similar strategy and/or protection of domestic markets from competition this could prove to be a difficult feat.
One thing for sure is that the Great Consumer Economy has been effectively been rendered to the dust bin of history the only question remaining is do thay pay out all winning bets on the quadrillion dollar derivatives play...
Whatever eventually happens portends to be extremely dark for western civilization at the very least.
Speaking directly to the points you raised, it's absolutely no "conspiracy theory" or "radical, unprovable hypothesis" to state that as the productive output of a nation-state declines (as it so happens when economies rotate from an era where they make intensely value-added goods and products to an era where they become service sector oriented; e.g. the share of economic output produced by workers such as mechanical engineers declines and the share of economic output produced by those in the FIRE sector increases), it is mandatory that the powers exerting the most influence over that nation-state implement an increasingly debt-dependent economic model in order to maintain the illusion of economic growth.
Thanks TIS, learned a bit.
"I will henceforth refer to these people as being "Unvirtuously Circle Jerked" by Ben Bernanke."
And absolving them of any responsibility as at-least nominally conscious and thinking human beings...
I prefer the massage parlor analogy, crude though it is. "I came for nuttin', but I got nothin'!"
"You can lead an investor to artificially, nominally inflated water, but you can't make it go long."
"...a truly painful way to learn to stay the hell away from casinos and stay the hell away from debt."
Maybe they will, maybe they won't. I'd bet on the latter. We've kinda seen it ... with every nation on earth with the possible exception of North Korea: access to credit may not cause people to lever up, in se, but does seem to be both a necessary and a sufficient condition...
Thank you, TIS, for this summary.
Bermonkey's 'virtuous cycle' theory, as you have explained it here, to me sounds indistinguishable from the "wealth effect". I've re-read this three times and missed the difference (no I'm not financially inclined). Would you mind specifying the difference, since I can't see it at the moment? His theory must be more than "rely on the wealth effect" but I can't see how, from this.
Then I have another question: if the idea is to keep raising prices, so that eventually people believe in them and then they just keep rising their own, until maybe the next slowdown when prices can be stimulated up again, until people believe those and then they just rise on their own again, and so on, and so on...when are prices meant to come down? Or are they not meant to at all?
If that's the case, how could this not be hyperinflationary at some point? Is the idea that the planners can always make sure that all inflation occurs relatively equally, across all sectors, generally, even if this means over decades?
Pardon my ignorance, but I can't pass up the chance to ask about more education from you and others here, who are well versed in this stuff.
Use it freely.
What strikes me is how intentionally complicated the Money Masters try and make everything appear to be, in order to try and dissuade as many people as possible from delving more deeply into the playbook and realizing how simple the scam truly is.
Economics is actually really simple stuff, and common sense is the best tool to analyze the entirety of the framework.
We're all witnessing a rehash of the Wizard of Oz when we follow "economic matters" as narrated by academia and the media, and then there's a person like Bernanke in the end, who is, in reality, an impotent & frail old man, hiding behind a desperately guarded curtain, trying to convince as many as possible through chicanery, holograms & propaganda by a collusionary state & media that he actually has the power to channel the fundamental, real forces of the economy.
He only has the ability to affect things at the slightest of margins (and inherently debt-soaked ones at that) in a "transitory" manner, before the fundamentals drown him.
But i must ask......Why ???
tell the truth and he would become a Saint. perhaps sooner than he would like but his name would be cheered for history. Guess, easy for me to say.
"kommon cents"...I like it.....thanks TIS!
TIS Let me know if you object and I will gladly take it down. I fell short on a title because it is not my work so I can not title it. Would you like me add one or just let it stand as is? That was a nice blog post you wrote and I think it flows well with no sidebar ads. More people need to read what you wrote and if I know where I can find it easily, I will make sure that it occurs.
http://www.boatingaccidentnews.com/repost-of-truthinsunshine-blog-post/
No objection brother.
I'd title it something close to 'Ben Bernanke's Syphilitic Circle,' or Ben Bernanke's 'Unvirtuous Circle Jerk,' but feel free to use any title you wish.
Metatags and title changed as requested.
brilliant title for a brilliant post.
keep thinking about Georgy's reflexivity "theory" here and how this all wraps into the larger pic.
it seems Benny's lost control of the narrative.
paper only gets ya so far i guess, especially when the Boyz are planting landmines along the way.
there is no honor in Mudville, oh well.
truth....what does the pop do to those holding physical cash vs holding bullion???
If I were Female I would have Truth in Sunshines baby.
Thank you.... you are the Curtain Controller on this site... without your clarity Zero Hedge would be just another blog.
keep it up because you really do "Get it"
however I never arrow anything because if it isTruth, it stands out
As always, thanks. i enjoy reading your posts. (was afraid u left ZH a few weeks back)
I really hope when Ben writes his book it is titled, "Monetary Hanky Panky by Ben Bernanke"
I agree with you. It is really sad what they have done and continue to do. Purposeful capital misallocation across the economy (when was that ever good), punishing savers and pensions who did nothing wrong for the better part of a decade and running, allowing the continued balooning of government deficits through zero percent deficit monetization, denying the ability of markets to find clearing prices.
These guys should have their economic degrees recinded.
TIS We are now in what i call a Bernanke put gap. His put may have worked at marking up little pieces of paper (aka stocks and equivalents) but failed abysmally at marking up the economy through stoking demand. What good is a Bernanke put when the global economy is going up in flames, political instability increases and the US is still mired in a jobless, incomless, homeless recession?
Exactly.
He will inevitably be remembered as creating a large cache of very "transitory" (to borrow one of his favorite adjectives) wealth that once existed in ledger form.
hence the USofNSA makes its intentions known to all and the drone factory looks to increase production, they know this will end badly and the "private security contractor"biz is going to be one hell of a growth industry. Can't wait until there are;
Republican Youth Leagues, Democrat Youth Leagues, Tea Party Leagues......wait a minute
I'll remember him as going from ChairSatan of a theft machine for private interests to head 'Pedro' at South of the Border...
~~~
Clearly, a path of upward mobility...
Central Banks have one product and one product only to peddle: debt money.
When people shun borrowing or can't borrow due to insolvency that debt money to keep the Ponzi going, the CBs are out of business.
We're there.
A monetary system reset is only a matter of time.
A lack of demand is also an achilles heel of the current fraudconomy.
Krugman harps on and on about the critical nature of lack of demand, and he's only right in pointing out that it's "critical" since declining aggregate demand spells the death of any system similar to ours.
What he fails to mention is that 90%+ of what our economic structure produces or makes available for consumption is so discretionary as to either straddle or cleanly cross over into the "purely unecessary garbage" side of the equation.
90%+ of what most "average" Americans have accumulated over the years are dust collection receptacles, used once, twice or thrice, for a week or maybe a month, and then stored in some corner of some room or in the basement, garage, or a storage unit.
Think about that, and how profound that is, if I'm even remotely close in my estimation.
Now, go to the next step, and think about the notion that - at minimum - 50% (and probably closer to 75%) of the currency used to pay for and accumulate that useless shit was based on & enabled by DEBT.
accumulate that useless shit was based on & enabled by DEBT
i/o/w, paying compound interest on a rapidly depreciating asset = NOT.TOO.SMART
the WASTE that society (meaning all of us) continues to produce is the pink elephant in the room for sure.
and it's about to insist on making its appearance very soon.
fat's gotta be cut somehow...willingly or not.
90%+ of what most "average" Americans have accumulated over the years are dust collection receptacles, used once, twice or thrice, for a week or maybe a month, and then stored in some corner of some room or in the basement, garage, or a storage unit.
Think about that, and how profound that is, if I'm even remotely close in my estimation.
Now, go to the next step, and think about the notion that - at minimum - 50% (and probably closer to 75%) of the currency used to pay for and accumulate that useless shit was based on & enabled by DEBT.
~~~
This comment works well in the other Dan Ackroyd/Jane Curtain thread... One wonders how 'Al Bundy' stayed married... Easy ~ he was a shoe salesman...
They're called (by me) "psychologically productive assets" because the only value they create is purely psychological - inflating the ego of and/or boosting the self-of esteem and/or eliciting some (enioyable) emotion in the buyer. Financially, these purchases are not investments, they are black-holes. But psychologically they are investments, and ones with no counterparty risk.
But are they good investments? One need only take a quick look at the mental health and psychological well being of the majority of people in financialized economies to determine that, no, "psychologically productive assets" are not good investments. They are awful investments. And far more so when financed with credit.
The parallels to narcotic drug addiction are so obvious they require no explanation.
.and, since all these 'banks' are now so interconnected, the result will be a 1-world currency (or perhaps 3-4 regional currencies at first) all done by 1s and 0s.
"One ring to rule them all, one ring to slime them, one ring to rule them all and in the darkness bind them...." or something like that.
Great post!
When the "pop" sounds, the world will know he is responsible for having created it. I wonder how long it will take for street justice to catch him.
War, takes care of our youth unemployment. Leaving the rest of us to manufacture bullets and bombs. Also, if successful, we get to steal the assets of some other region.
think about it. some staged "terrorist attack in a major city" and then a nice war should keep things rolling for a bit.
War is not really helpful at this point except to destroy infrastructure. Really need old people to move to the great beyond because the US and Japan are in trouble because of an aging population. War is good to control over population but not effective for controlling an aging population.
war will kill people, lesser people, lessers liabilities. US owes over $120 trillion of unfunded liabilities, when more people died, the liabilities shreks. Government also can blame the bad economy on war, then after the war, the country will need to rebuild, make more tanks, make more planes, make more bombs, which will creat more jobs, start all over again. Then all the wealth created by the people willl get scam away again. the Cycle never ends!
War ... War ... you can't afford a frigging war. You just cannot! ( unless you build the shovels that bury the dead... but you offshored even that)
America needs to withdraw and do what it does best... Build things that are as good as a 54 Chevy. Fuck you can do it and when you do it will be epic.. tired fulltime, proud workers with family values and a balanced check book. Fuck the Joneses, they are full of it.
May the Schwartz be with you...
Strange that that infamous ex sniper navy SEAL who was the founder and CEO of the company that was apparently hired to do the Boston Marathon false flag ops should be shot dead a couple of months before the big event. Bet there is an interesting story there.
Isn't there some sorta terrorism drill the 28th on Wall Street? If Oba is being pushed as hard as everyone thinks... Nah. That's just an unsubstantiated rumor.
The MO of the deep gubbermint is to have an actual "attack" while they are having a drill for something similar nearby.
It allows their agents who are already in the ranks of those drilling to carry out an op w/o being caught.
Each incident over the last few years has had ample video and recorded audio of other suspects fleein the scene. When LE corrals them, they flash legit ID and slip off.
In spite of the fact that my average price of Au accumulation is significantly higher than the current paper price, I find myself feeling completely unperturbed.
It made (and continues to make) sense to hold cash, rather than gold/silver, for the simple reason that deflation was fairly predictable. We'll see prices fall further as interest rates rise, including the price for gold and silver.
Long-term deflation without a currency crisis is not mathematically possible in an environment where government deficits and societal debt are measured in the tens of trillions of dollars, and when derivative exposure of major banks is measured in the hundreds of trillions. In the 1930's deflation occurred without a major currency crisis. In 2013/2014, deflation would result in outright default of U.S. debt obligations. Thus QE infinity. Gold and silver are being smacked down for a reason which has nothing to do with long-term trends.
Makes sense to hold all of the above.
As long as you are good enough to call the moment that holding cash is the wrong decision and PMs the right one, sounds like a great plan. I don't personally believe that I will know exactly when this point is, much less have the faith that I will be able to get physical PMs for my cash as others (that may be as smart as yourself) are also scrambling for them, so I own PMs and some cash, so as to buy more later, and hopefully cost average in lower.
Personally I doubt PMs can sustain prices under their mining cost for very long with the worldwide demand, and we are approaching that rapidly. Hone those prediction skills and make sure you pounce when your magic price gets hit. Too late will deny you the chance to spend those FRNs before they are just the choicest of TP.
The other day I saw a sign:
"No money down, bad credit, no credit; own a home today."
How many did you get?
Oh I was tempted for sure. I live in Phoenix, and the prices are still climbing here. No shortage of greater fools here as the Baby Boomer Snowbirds like thinking of houses as investments still.
I'm beginning to take this personally.
I wouldn't it's a waste of time and patience to think of those people as anything more than idiots.
"I wouldn't it's a waste of time and patience to think of those people as anything more than idiots."
Exactly - Stop Worrying and enjoy the show
Moar popcorn!
Worse, just today in Toronto, I saw an ad for a seminar for "FLIPPERS - How to flip houses and get rich" or something to that effect. That's a sign of what? Month-minus-12 to the big crash?
Big flop. This market is over.
Gee, in other words the true endgame of the Obowel Movement and his desire for worldwide redistribution of wealth.......but of course "both parties are the same, claim the enlightened"!
Obama sucks, but you make idiots look smart.
Coming from the braindead, that is a compliment.......
I'll note that your cowardly reply came with no rebuttal.
Go look those words up and get back to me.
I've replied to you enough and have read you enough to call you as I see you. You are an idiot who believes what he is told to believe. Your brain has been captured as a part of the divide and conquer false divide of R vs D. You are worthless and you are certainly misplaced here.
Please don't feed the trolls.
time to think about livin' thru it - and i don't mean the depression.
I dunno, scientists have recently engineered a new virus with a 60%+ death rate dubbed Middle East Respiratory Syndrome. It's like SARS only deadly as shit with no known remedy. I have no hope for a brighter tomorrow; shit even a dismal tomorrow would be better than what I feel is lurking right around the corner.....
I hear what you and ramacer just said. It really sucks when you know the outcome of the game yet everyone is still playing it.
Spot on.
There is strong potential for this to get much worse in the Fall.
Note the following regarding MERS CoV:
The Hajj
Given the apparent source point for this new virus, health officials worldwide are beginning to express extreme concerns over this year's Hajj in Saudi Arabia, slated for the middle of October. One of the five pillars of Islam, every practicing Muslim worldwide is urged to complete at least one Hajj pilgrimage in their lifetime. Thus, every year, millions of Muslims gather in the Saudi city of Mecca during one seven day period.
Public health and epidemiological professionals tend to cringe each year when the Hajj rolls around. It goes without saying that when millions of international travelers from all points on the globe converge in one city for a physically active, horrendously overcrowded, hot and humid gathering involving communal shaving, touching common surfaces and staying in tightly packed quarters, one is considered lucky to leave without having contracted some respiratory or digestive bug, if not worse. Even a cursory search of the Internet shows that cholera, pneumonia, meningitis, all forms of hepatitis, measles, mumps, typhoid, dysentery and a host of other communicable diseases run rampant during the Hajj. Then the Pilgrims, just a quickly, return to their countries of origin.
http://threatjournal.com/archive/tj06012013.html
Let's hope they genetically rigged the disease to target semetic genomes.
MERS killed owning houses . Now its going to kill people !!!
That's the very thing that should make you feel better about today. Live it cause it's all you really have.
No doubt members of TPTB already have the antidote.
I really like the massive public works option.
I mean, we've tried giving away money to money-center "bankers" and big-time thieves. Let's try giving money to construction firms and unions from sea to shining sea; it can't turn out any worse, can it?
See the Great Depression for how it turned out...
War - the other massive public works.
So, you see, the Great Depression ultimately turned out just fine, unless you happened to be among the 100 million dead, or had any interest in "freedom".
That would cause inflation. The banks just give it back to the Fed as "excess reserves"
<<That would cause inflation. The banks just give it back to the Fed as "excess reserves">>
heh - so the problems of unemployment, under-productivity, over-population, demographics, peak oil, and resources shortage - are being fixed by encouraging a bunch of banksters at the top to pass fiat back and forth amongst themselves in an ever-increasing 'price' spiral?
Amazing how that wouldn't have worked....
OK, I've over-simplified. But you have to admit it does look a bit like that!
This is a rigged system and we need to fight back with violent means.
Horrible first post after 1 year and 49 weeks. -1
You're a coward afraid to take a stand. You come on sites like this to rant at the wind, lacking the guts to do what needs to be done.
You first.
Perhaps I will be.
Only cowards resort to violence at the first sign of difficulty.
The first sign? You haven't been paying attention. Plus, you're projecting. You're transferring the perception of your own cowardice onto someone with bigger balls than you have.
You're fooling yourself if you think this game has even started yet.
Your balls are so big that you are seeking companionship to enact your ridiculous violent tendencies that will solve absolutely nothing, and make the lives of everyone around you that much worse. Then again I doubt you have ever seen the business end of a rifle shooting at you. If you had, you didn't learn the lesson the first time. Your frail human body is just as easy to kill on it's own as it is with your fellow violent statists. They have missiles, you have a maybe a rifle. You have already lost; if you think firing the first shot is how you win this fight.
The winner of this fight will not be the first to blink, it will be the last to make a move and the last to fire.
What is your method? To complain about where things are going? To vote? To advocate?
Method for what? I'm not obligated to make sure you don't get screwed. I'm not out to make sure you get what you think you deserve.
You're barking up the wrong tree if you think reality works that way.
The US is made up of several different societies, and those societies are all made up of individuals that band together in self-interest and commonality. There are no external chain responsibilities here. I am not responsible for your well being, or the well being of anyone else outside of my family.
Your problem is that you still believe in the fiction that "we" are all in this together. It's based on that fiction that there is a "we", when in reality it's just individuals that are going about their own lives. Pull your head out of your ass, because that seems to be your issue, your mind is clouded with thoughts and imaginery entities that do not exist outside of your idealism.
You are defending the existence of this corrupt government. I am advocating its complete elimination.
You can project all you like about how hard you've had it. I don't care. I want the system ended so that total freedom can ensue.
no movement will happen till the paychecks bounce on all goverment workers, political appointees, etc, etc etc
You mistake my advice on you living past puberty for defending the government.
Dude, just go back to your lesbian dhs boss butch, and tell her to fuck off.
We are not starting anything against .gov.
oh, and fuck you.
Get your high score in Ghost Recon tonight?
This is what most zerohedge blather is: a bunch of whiners who prefer to "hear no evil, think no evil" when someone suggests action.
A lot of us have served in the military here. A lot of us have been to combat and know what real fighting is like. A lot of us already know how to win this fight, and it's not the first to fire that will win with how the narrative has been framed for the past 10 years.
Unless you honestly think they were wasting their time spreading the delusion of domestic terrorists around as merely justification to spy on everyone. Pull your head out from your third point of contact, because all of that shit is fogging up your eyes, and clogging your synapses.
You give a lot of excuses but suggest no method for victory. I suggest you like the status quo and, deep down, want nothing to change. You are the true agent provocateur.
There is no victory when you are still stuck on the idea that "we" are in this together. There is no "we", there never was. If you want help with something, you need to make yourself of use to those that would be willing to help you. Until you learn that basic principle, you are fucked. At this point, all you are doing is advocating people to go get themselves killed over some BS idealism that doesn't exist outside of your mind.
No one wants to get their lives up at the altar of the state, because that is exactly what you are advocating here. You can't win that fight, because that fight is what the state does, and they are very good at it. Learn a skill and become useful, until then you are a coward and a child with your chest sticking out.
Quit behaving like a teenager and thinking that you are invincible, or you are going to get everyone you care about around you killed for no reason at all. The state gains it's power by you recognizing them, and if you simply move on without them, they lose their power. If you attack it, you merely strengthen the resolve of the individuals that believe in the state, and give it recognition.
You amatuers are getting annoying. You could at least read Sun Tzu.
You are surrendering your life at the altar of the state because you are too afraid to fight. People like you pretend to be fringe but are scared shitless of this government collapsing.
That was one of the most lop-sided exchanges I've read here. Drinking a beer, learning, and bloodsport at the same time - it just doesn't get much better than that.
Game, set, match - NidStyles....
And the eighth and final rule: If this is your first night at Fight Club, you have to fight.
That's 'used' to be the final rule...
I like my steak rare.. Silenus... Shut the fuck up... If you have ever had a bullet through your "Soup bowl" you would understand Life survives just by the Grace of God.
I kept that helmet and Im still deaf in the right ear.
and a Huey's beat still wakes me up, even though it's not overhead, sometimes I even vomit. I know " Dont feed the trolls"
"A lot of us already know how to win this fight"
You know how to win a fight that's been on for 5,000 years?
Please, do tell.
I saw another poster the other day bashing gold. He'd been here 2 years and 43 weeks and had never made one post until April 16th, the day after the smashdown in gold. Go figure.
There are long time sock puppets and trolls all over this board, and there always have been since I joined (3 years 4 weeks ago).
Nice catch regardless....
I've posted about a dozen times on this site. The counters are not accurate.
A dozen posts? Grizzled veteran.
You ignore the substance of my posts in favor of snark - classic distraction. Just admit that zerohedge is a whine-athon by people afraid of action.
What posts?LOL You are comical.
You're the sort of person who builds your identity around an online moniker. It's pathetic. There's a real world out there and it's falling to shit while you focus on the online virtual world.
LMFAOROTF. EFS.
That idiotic symbol string that only an online dork could decipher proves my point.
deleted
Edit: I just scrolled down after I was nice to you.
Fuck you troll.
Well, I have been around ZH since near when it first went dot com via the linkpimping at MarketWatch at the time. I have never had to check the status of the poster here before though but I have been doing so lately as are some others here. I see more and more screen names that I have never seen before who have supposedly been on ZH for 3 or 4 years now but have never posted and are NOW all of a sudden are starting to post. It really does not matter if it is gold or anything else, these "veterans" seem to keep turning up but have no post histories?. ZH'ers of all people should be noting this pattern. What does it mean?
A couple of mouse clicks are cheap on a cost benefit analysis.
It means people who've been watching your go-nowhere conversations for years are finally aggravated and speaking up.
No, we don't believe you and never will.
Old trick. They were doing this on Ron Paul sites starting with his '08 campaign. They work for the banks, or .gov, which in reality is still working for the banks.