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You Are In The Ponzi Scheme Whether You Realize It Or Not

Tyler Durden's picture




 

Originally posted at Monty Pelerin's World blog,

The reasons for continuing to participate in stock markets are discussed in this video from Gordon T. Long and John Rubino. It all comes down to liquidity (and little else).

The liquidity fraud is well advanced and likely will continue. This worldwide Ponzi scheme, engineered by governments, provides massive risks and opportunities. For those who don’t understand what is occurring, there is much to be gained from this presentation.

Mr. Rubino describes the problem the Fed’s liquidity has created. Bubbles are re-inflating just as they did prior to the 2008 collapse. Why shouldn’t they? The exact same scam is being perpetrated by government.  Another collapse will eventually occur, but its timing and form can only be speculated on.

Rubino does a good job of explaining Ludwig von Mises’  ”crack-up boom” which will ultimately destroy fiat currencies. That end leads to extremely high, probably hyper, inflation. The pieces are already in place for this outcome. All that has to happen is for banks to begin normal lending or for people to understand what is happening (or going to happen) to the value of currency. Something will ignite the timber.

Charles Ponzi and Bernie Madoff had to lure marks into their scams. People joined them by choice. The Ponzi scheme operated by governments is mandatory. You are in it whether you want to be or not. You are in it whether you realize it or not. The only issue is to decide is what the best way is to play this Ponzi scheme. Long and Rubino discuss your options.

 

 

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Sat, 07/06/2013 - 16:29 | 3726785 Decolat
Decolat's picture

(Sigh) Sorry, but disaster porn fails to excite me anymore.

 

And yes, when you realize your way of life is a ponzi, you know it's best to GET OUT NOW

 

 

 

Sat, 07/06/2013 - 16:48 | 3726806 ZerOhead
ZerOhead's picture

Yup...

Brief toilet flushing in assets first (to gain 'consent')... followed by the cries of 'help' from the masses... then "Crack-up BOOM" with the FRB injection of tens of trillions into Primary Dealers & foreign CB's for ultimate dispersal to the financial elite.

There is unfortunately nowhere else the Fed can send the money they will have to create to rescue the banks and the equity markets.... while obliterating the value of the existing unsupportable debt and uncompetitive dollar... to .

They get all the strategic assets worth owning for basically free... and the while the sheeple get the value of their debt obliterated it comes with an absolutely astounding and virtually enslaving bill for them. their children, their childrens' children, their children's childen's children....

It's a classic win/win.

Sat, 07/06/2013 - 16:55 | 3726837 FreedomGuy
FreedomGuy's picture

When governments do the ponzi's whether is is Social Security, currency or national debt in general there is no real escape. There are only those who do better and those who do worse. Frankly, I am having a hard time figuring out if it will be deflation, inflation or one after the other. I suppose you try to prepare for both.

Sat, 07/06/2013 - 17:17 | 3726887 ZerOhead
ZerOhead's picture

Plan for the worst... hope for the best... but never forget that the apex of the consumption driven economies of The West have long since passed...

Sat, 07/06/2013 - 17:45 | 3726928 SWRichmond
SWRichmond's picture

Whoever is talking for the first few minutes makes two critical blunders right off; I don't think I can listen to the rest:

1.  Conflating money and credit - this is a remarkably common error made by overeducated Wharton School dipshits and others alike

2.  The banks ARE NOT AFRAID TO LEND.  THEY ARE LENDING TO THE FED, WHO IS PAYING THEM INTEREST ON THEIR EXCESS RESERVES.  THE FED CREATED THE MONEY, CLICKED IT INTO THEIR RESERVE ACCOUNTS, AND IS NOW PAYING THEM INTEREST ON IT.  PLUS, THEY ARE LENDING IT TO THE FEDERAL GOVERNMENT (STEALTH MONETIZATION).  WHY SHOULD THEY LEND IT TO ANYONE ELSE?

If the Fed really wanted banks to lend they would start charging interest on excess reserves.  Wanna see some negative real interest rate love?

What the fuck is the matter with people?

Sat, 07/06/2013 - 17:48 | 3726932 negative rates
negative rates's picture

Get long baking soda, spoons and lighters bitches.

Sat, 07/06/2013 - 21:19 | 3727333 Think for yourself
Think for yourself's picture

I live on a permaculture project in Costa Rica. I have no money in banks or on the market. I trade and bbarter services with neighbours and community members. Occasional services provided to outsiders get paid in cash, allowing me to pay for basic consumption needs such as 4$ pair of crocs about twice a year, a propane tank refill for cooking every 3 months and bare minimum electricity/internet. My food is grown on location or traded with neighbors. Bicycle locomotion. Second-hand/thrift/upcycled clothes. No other spending except to invest inmaterials that are used to expand the project.

Please explain how I support the ponzi.

Sat, 07/06/2013 - 21:28 | 3727352 tip e. canoe
tip e. canoe's picture

happy independence day.

where everyday is independence day.

Sat, 07/06/2013 - 21:36 | 3727364 Tijuana Donkey Show
Tijuana Donkey Show's picture

Your Croc's! /sarc

How do I get in? I have 2 green thumbs.

Sat, 07/06/2013 - 21:49 | 3727391 Inspector Bird
Inspector Bird's picture

It's not so much that you support it.  You are part of it, though.  No matter how little you interact with the system, that interaction makes you part of the system.  You can survive longer and in a more healthy fashion than most of us, but you can't avoid any kind of social discord which results.

Sun, 07/07/2013 - 01:37 | 3727749 All Risk No Reward
All Risk No Reward's picture

I want to explain why the banksters have to run a debt money Ponzi scheme.

I'll use a simple example where $20 is lent to an imaginary society.

Banksters lend society $20 @ 5% interest.  In one year, society owes $21 due to bookkeeping adjustments that add $1 in interest liability to society and $1 in interest asset to the banksters.

The problem is society only has $20, yet owes $21 - payback is impossible unless...

1. The banksters allow society to work for the banksters to earn the bankster $1 interest asset in a timely manner so they can pay $21 ($20 original + $1 earned from banksters).  The net effect is society has no more money.

2. The banksters allow society to seel their physical goods to the bankster to earn the bankster $1 interest asset in a timely manner so they can pay $21 ($20 original + $1 earned from banksters).  The net effect is society has no more money.

3. The banksters issue a 2nd $20s into society.  The first $20 becomes payable because $21 is owed out of $40 issued to society.  However, that 2nd $20 poses the same problem to society as the first $20, so even more money needs to be issued, which creates an exponential debt growth curve for society.

The Ponzi scheme mentioned in this article is the exponential debt growth created by this kind of economic destroying Debt Star.  Like a neutron bomb, it leaves the structures standing.  Even better than a neutron bomb, the average consumer (citizens are few and far between!) has no idea a weapon has been deployed.  The Death Star is for chumps.  The Debt Star is the pinnacle of a Sun Tzu Art of War operation.

Now you know why a steady state is impossible - the artificial constraining debt based monetary system won't allow for it. 

Grow or die, indeed.  That's the creed of debt money tyrants - and the death of your economy is in their business plan.

The more alert people reading this may have already figured out what a "bailout" is in terms of this example.

A bailout is when the banksters create $20 in debt and pocket it for themselves while demanding that society pays them back $21 - even though they received $0 in proceeds from the debt issuance.

Spread this example to everyone you know.  Most will go "deer in the headlights."  Real men and women will "get it" and take action warning others.

Sun, 07/07/2013 - 13:28 | 3728274 malikai
malikai's picture

There is another organism which must grow or die - cancer.

Sun, 07/07/2013 - 01:06 | 3727705 All Risk No Reward
All Risk No Reward's picture

>>1.  Conflating money and credit - this is a remarkably common error made by overeducated Wharton School dipshits and others alike<<

All money is lent into existence.  IOW, there are two faces to money - the debt side and the Federal Reserve Note / bank credit side.  Credit is another term for debt, so our money is generated as a debt obligation.  Coinage is the exception - it is "printed" and not loaned into existence.

>>2.  The banks ARE NOT AFRAID TO LEND.  THEY ARE LENDING TO THE FED, WHO IS PAYING THEM INTEREST ON THEIR EXCESS RESERVES.  THE FED CREATED THE MONEY, CLICKED IT INTO THEIR RESERVE ACCOUNTS, AND IS NOW PAYING THEM INTEREST ON IT.  PLUS, THEY ARE LENDING IT TO THE FEDERAL GOVERNMENT (STEALTH MONETIZATION).  WHY SHOULD THEY LEND IT TO ANYONE ELSE?<<

Because they are afraid of using freshly looted good money to chase bad money, which was the original point in the proper context.

If you are going to play the sophist, at least get your basic facts right.

>>If the Fed really wanted banks to lend they would start charging interest on excess reserves.  Wanna see some negative real interest rate love?

What the fuck is the matter with people?<<

I suspect you received 15 up votes for your closing.  You are correct, the Fed, who is controlled by the mega banks, doesn't want the mega banks to lend to the plebians because the mega banks don't want to lend to the plebians.

Since the Big Finance Capital corporate front cash hoards are, by definition, the unpayable debts of everyone else, this action is effectively choking off the money supply from main street and and bankrupting it in slow burn fashion.

Given that these criminals are jacking rates against a backdrop of an organic GDP contraction of $500 billion per quarter and collapsing faster than it did prior to 2008, that slow burn looks to turn into a blaze sooner rather than later.

Third chart down...

Fed Z1: A SEVERE Storm Warning

http://market-ticker.org/akcs-www?singlepost=3216019

Debt Money Tyranny

http://www.keepandshare.com/doc/4768883/debtmoneytyranny-6-1-pdf-60k?tr=77

Sat, 07/06/2013 - 16:20 | 3726788 LetThemEatRand
LetThemEatRand's picture

"The 777 delivers more.  A complete family proven in the market."  http://www.boeing.com/boeing/commercial/777family/background.page?.  I love corporate speak.  They even play the "family" card because most people are suckers (as evidenced by -- everything).

Thankfully, it sounds like there are no mass casualties.

Sat, 07/06/2013 - 16:40 | 3726813 Ahmeexnal
Ahmeexnal's picture

Seems like a certain passenger, "Snowden, E. , Mr." was amongst the few casualties.  You can almost hear Drone Team 6 high fiving themselves in the middle of the Sonora desert.

Should have flown PanAm or TWA instead of that crappy "Asiana" airline no one has ever heard about.

 

Sat, 07/06/2013 - 16:39 | 3726812 MedicalQuack
MedicalQuack's picture

Per All Things Digtal it was a Samsung rep on board tweeting right after he got off the plane...

http://allthingsd.com/20130706/plane-crash-in-san-francisco-in-real-time...

Sat, 07/06/2013 - 16:08 | 3726772 put_peter
put_peter's picture

Evolution created intelligence (as we define it) to enable fraudulent behaviour. What is beyond fraud? I think we will need to wait to see... but certainly higher intelligence (artificial?) is needed.

Sun, 07/07/2013 - 01:42 | 3727753 All Risk No Reward
All Risk No Reward's picture

Macro-evolution is the justification of the dElites to destroy those they deem inferior.

"Gradually, by selective breeding, the congenital differences between rulers and ruled will increase until they become almost different species. A revolt of the plebs would become as unthinkable as an organized insurrection of sheep against the practice of eating mutton."
- Bertrand Russell, "The Impact of Science on Society", 1953, pg 49-50*

After all, the "fittest" rule the world (and financial system), correct?

In their eyes, this is true.

John Taylor Gatto covers this in The Ultimate History Lesson, but I don't recall where.  The whole thing is a must watch for people who demand understanding of the world around them.

The Ultimate History Lesson
https://www.tragedyandhope.com/th-films/the-ultimate-history-lesson/

Sat, 07/06/2013 - 16:14 | 3726779 LetThemEatRand
LetThemEatRand's picture

Anyone else wish they had just chosen the blue pill?

Sat, 07/06/2013 - 17:04 | 3726859 OneTinSoldier66
OneTinSoldier66's picture

Those that have taken the red pill know the truth. And in many ways the truth has already... set them free.

 

Perhaps the question should be more along the lines of... who doesn't like freedom?

Sat, 07/06/2013 - 17:52 | 3726935 Croesus
Croesus's picture

@ LetThemEatRAnd:

All the damn time, man. Life would have been SO much easier, if I had chosen a path of ignorance. Yeah, fine - SHTF, and I die; but I wouldn't have spent (and continued to spend) years of my life, worrying about crap that few understand, and less care about.

Just like The Matrix, wishing I wasn't 'unplugged'.

But oh well. Here I am, making the most of it.

Sat, 07/06/2013 - 19:32 | 3727129 Poor Grogman
Poor Grogman's picture

If you get past the point of worrying about it, and you can simultaneously embrace reality and the daily false reality, knowing that nothing will likely change but if it does you will be ready.

You don't have to be fully in one camp or another. Use the ponzi, bend the ponzi, control it to your own ends, ridicule it at every turn, teach others to hate it, mock those blind believers, highlight the inequality, dishonesty and utter sham that it is, and enjoy doing so.

The ponzi is like a sham marriage, one can live with it as long as one doesn't have to pretend to like it.

Sat, 07/06/2013 - 16:16 | 3726784 bratlever
bratlever's picture

Who has not participated in the Ponzi?  I reckon everyone.  One day reset.  Forgive the banks their bad decisions and restart.  Money goes poof.  No inflation.

Sat, 07/06/2013 - 16:30 | 3726798 AG BCN
AG BCN's picture

This reset seems to be taking a while, I'm prepared and my attention span is still intact, but while we're waiting The Stones are playing Hyde Park. If we can only have the reset anfter an extended version of Sympathy for the Devil I will be a happy man. 

p.s. In case anyone is confused about my position; FUCK YOU Bernanke. 

Sat, 07/06/2013 - 16:43 | 3726822 TheSilverJournal
TheSilverJournal's picture

The crackup boom is upon us. The only way to stop the rise in Treasury yields to speed up QE, sending prices up up and away.

Sat, 07/06/2013 - 16:58 | 3726849 FreedomGuy
FreedomGuy's picture

The other consideration is how fast it can and will happen. Think of the sophistication in 1929 compared to now. The crash will not be just in the stock market...it will probably be virtually everything at once through the magic of credit default swaps and simultaneous bubbles in bonds and stocks and maybe even certain commodities like property. I think one day that no one can predict you will wake up and find there has been some trigger and everything is crashing. You may even get the day off work as billions of action and reaction take place followed by serial government speeches saying "Do not panic. We have this under control. Just do what the hell we tell you to do."

Sat, 07/06/2013 - 17:09 | 3726875 August
August's picture

>>"Do not panic. We have this under control. Just do what the hell we tell you to do."

And do NOT loot the grocery stores.  Those National Guardsmen are using live ammo.

Sat, 07/06/2013 - 20:23 | 3727215 FreedomGuy
FreedomGuy's picture

Got the vacuum sealed groceries stored.

Sat, 07/06/2013 - 21:40 | 3727375 Tijuana Donkey Show
Tijuana Donkey Show's picture

I have live ammo, and if you think the stores are what they will be guarding, your wrong.

Sat, 07/06/2013 - 17:06 | 3726869 MedicalQuack
MedicalQuack's picture

Big companies and banks too also stay under the radar with a lot of what they are doing too..we don't get that opportunity as you say, we are in there for the data they can collect and make money.

http://ducknetweb.blogspot.com/2013/07/health-insurance-business-under-r...

And here comes Serco with a brand spanking new contract from HHS...ask anyone in the UK about these folks.  Their specialty is intelligence and the are the biggest company you have probably never heard of.  So these folks are tagged with he project of finding eligibility qualifiers for the new Federal data hub and health insurance.  Now after I wrote this they also downplayed a little with the fact that some of this won't be checked and they will rely consumers not to lie. (grin).  Let's say that is until they get the IT Infrastructure built to run it.

http://ducknetweb.blogspot.com/2013/07/obama-administration-doles-out-ye...

In my opinion when it comes to being under the radar, this is going to actually have the potential to "scare" people away from the insurance exchanges as we know queries take place with an automated process and you get stuck in a new data base for others to analyze and use the parameters to figure out if you can have something or not have it.  So yes we are in there partially but do we want to opt in for more might be a good question to ask...in other words are you ready to sell your life's data out from underneath you to get a 20% discount on the next soft drink or fast food burger you buy...worth some deep thinking...

 

Sat, 07/06/2013 - 17:13 | 3726882 alfbell
alfbell's picture

 

 

Martin Armstrong says no hyper-inflation can happen. History proves it. You can't count Weimar, Argentina or Zimbabwe because they were small economies without bond markets. Weimar was a revolutionary government about to be taken over by the Russian communists and no one would lend them money. Historically, collapsing empires and governments always default on their debt. The USA is the biggest and strongest country on the planet, has the largest economy, bond and stock markets and the reserve currency and the most powerful military. No hyper-inflation.

Sun, 07/07/2013 - 00:00 | 3727589 Mike7.62
Mike7.62's picture

Martin Armstrong is an asshole.

Sun, 07/07/2013 - 01:17 | 3727721 All Risk No Reward
All Risk No Reward's picture

Hyperinflation can happen, but Martin is right that it can't happen with an intact bond market.

The bond market has to break first, the result being a debt free monetary system.

I believe the end result will be serious to hyperinflation after the bond market is broken.

However, this will be after the banksters engineering a deflationary spiked pit that will convert their trillions in debt and trillions in cash into real, hard assets - exactly as many people on this thread are trying to do right now.

The debt based money / bond market system is the key to the world's greatest fraud and Art of War operation and won't be broken until it has accomplished its task of asset stripping society for the benefit of the criminal war mongers who created it.

Once their estimate of the cost/benefit of ripping the world's face off with this fraud money tilts in favor of cost, they will break the bond market and then serious inflation will ensue.  They won't care because they will claim ownership to most of what is real. 

The criminals balance their books, claim "capitalism failed" and then proclaim they can "save the world" if only we let them rule it from on high.

Same as it ever was - except the tyrants have continuously improved their operations while simultaneously dumbing down a willing and lazy society.

Martin Armstrong is technically right, but practically wrong.

The rules have never got in the way of the bankster agenda.  I'm surprised Armstrong hasn't learned that lesson by now.

 

Sun, 07/07/2013 - 10:25 | 3728055 Winston Churchill
Winston Churchill's picture

The bond market will be the crash event.

Already been happening in slow motion.Ben is losing control,

all thats needed at this point is a black signet,not even a swan.

I see hatching eggs everywhere.

Sat, 07/06/2013 - 17:19 | 3726891 alfbell
alfbell's picture

 

 

Per my reading... If you are a goldbug that has had the intention to make money with gold then you are a speculator or a gambler. The gold market is small and volatile and can be manipulated to a small degree. But if you are a goldbug from the viewpoint of owning gold as insurance, then you should just be looking at this gold "smackdown" from the viewpoint that your insurance premiums are going down making it easier for you to buy even more insurance. The USD is on a rally and will continue to do so as the EU and Japan crumbles. Gold will continue downwards as a result (especially if any tapering or threat of tapering occurs). Gold could drop down into the 900s before it's done.

Sun, 07/07/2013 - 01:21 | 3727734 All Risk No Reward
All Risk No Reward's picture

In some cases, gold in the hand will be worth more than millions of dollars in a bankster corporate front.

That doesn't mean the gold price can't fall much lower from here, though.  "More" is a relative term and "0," the future value of some people's millions in the future, is pretty easy to beat.

Even "shinier" than gold is control over the necessities of life within a solid community.

For those new to gardening, check out "Square Foot Gardening" on Youtube.  I also recommend the book.

No need to go hoeing!

Sun, 07/07/2013 - 14:28 | 3728431 Citxmech
Citxmech's picture

While you're checking out Square Foot Gardening - also put John Seymour, Steve Solomon, Elliot Coleman, and Carla Emery on your reading list.

Sat, 07/06/2013 - 17:39 | 3726914 Quinvarius
Quinvarius's picture

It amuses me that no matter what facts and theories are presented, the conclusion is always to do what happened over the last few weeks.  We are going to create trillions upon trillions as everone fears for the survival of the currency according to this, but sell gold and buy stocks.  If gold was already over 2400 right now, they would be saying buy gold and get out of stocks.

I will bet Charles Nenner is going to get back out of the crackpot doghouse:

http://www.youtube.com/watch?feature=player_embedded&v=zmnQTVn_JWs

Sat, 07/06/2013 - 17:39 | 3726915 withglee
withglee's picture

This is all very simple when you know that money is "a promise to complete a trade".

When properly managed the demand for money obviously equals supply (one promises to supply; another promises to pay as agreed). Money is just a "certificate" signifying the promise and thus trades freely. It is denominated in a unit that never changes value. Any changes in price cannot be caused by the value of money. They can only be caused by the value perceived by the trading partners of the goods or services in question ... knowing the value of money to be constant at all times and in all places.

When the trade is completed and the promise is fulfilled, the certificate is returned and extinguished. If the promise is not fulfilled you have DEFAULT and the certificate must be recovered by INTEREST collection. A rollover of a trading promise is a DEFAULT ... and that's what governments do.

The governing relation is INFLATION = DEFAULT - INTEREST. Through proper management, INFLATION is maintained at zero for all time and in all places by monitoring DEFAULTs (pretty trivial) and collecting a like amount of INTEREST (also pretty trivial).

To have hyperINFLATION you must have hyperDEFAULTs. And when you look at this condition historically you find the irresponsible trader ... a government making trading promises it has no way and no intention of keeping.

Read about Weimar Germany, Yugoslavia, Zimbabwe, and numerous other examples. It's all the same. It's like playing a game of monopoly where one of the players can reach into the bank any time he feels like it. Such a game is not fun and in time people just quit the game.

Keynes was clueless. Mises was clueless. But their writing was profuse and unnecessarily complicated, usually focusing on prices and employment ... both of which are irrelevant to proper management of any Medium of Exchange (MOE). Someone understanding this subject can explain it on the back of envelope. It's not rocket science.

Todd Marshall
Plantersville, TX

Sat, 07/06/2013 - 18:11 | 3726974 grid-b-gone
grid-b-gone's picture

durable, fungible, portable, divisible, scarce

Central banks and their fiat schemes remove scarcity over time (human nature) which eventually ruins the original stability.  

Sat, 07/06/2013 - 19:45 | 3727151 withglee
withglee's picture

Durable: Accounting records are easily exchanged. Are they durable? Does the durability of a metal dollar make it preferable over a paper dollar ... I think not. But the certificates representing money must have "integrity". Forgeries should be easily detectable.

Fungible: A properly managed MOE has an unchangable unit value. All value is defined by the traders themselves. Money (the MOE) has no interest in prices what-so-ever.

Portable: A properly managed MOE is just a record. If it's turned into a certificate it is physically portable. If it's an accounting record, it's virtually portable. The key is not portability. It's reclamation. When the trade is completed, the certificate representing that promise must be reclaimed and extinguished.

Divisible: As a certificate it is not divisible. As an accounting record it is infinitesimally divisible. And in a properly managed MOE, certificates are exchangable for accounting records so are virtually divisible

Scarce: Why should "promises to complete trades" be scarce. This is the exact fallacy of precious metals. Take gold. There's only once ounce per person on earth. That's only about $1,200. Petty cash for most traders. And BitCoins believe this ridiculous scarcity requirement. Traders determine the scarcity of the MOE. As the number of traders, their propensity to trade, and their trading domain (marketplace) change size, the MOE should have no effect on the trading. It grows and contracts automatically and perfectly maintains SUPPLY = DEMAND. Every trader has a trading partner.

You chant the classical definition of money ... and as is plainly seen, it is nonsense.

And regarding Central Banks: Just as there is no need for Central Mutual Insurance Companies, there is no necessity for Central Banks. The analogy of a Mutual Insurance Company and a properly managed MOE is almost exact. BitCoin could actually have been it if they had concentrated on the "integrity" aspect of the MOE rather than on the scarcity of it. Managing an MOE is a record keeping task with the additional processes of underwriting and acturial science. It's just like measuring risk (anticipating DEFAULTS and pre-collecting INTEREST in equal amount), extending protection (creating certificates ... making loans), collecting premiums (recovering certificates), and paying claims (completing DEFAULTed trades and collecting INTEREST equal to measured DEFAULTS).

Todd Marshall
Plantersville, TX

Sun, 07/07/2013 - 03:20 | 3727812 SmackDaddy
SmackDaddy's picture

OK.  But our MOE is also a store of value.  Or trys to be?  How you feel about that?

Sun, 07/07/2013 - 10:11 | 3728042 withglee
withglee's picture

Anything that doesn't change value over time is a "store of value". Our MOE loses value at an average rate of about 4% per year ... seemingly by design. With a properly managed MOE, INFLATION is guaranteed to be zero at all times and in all places. Thus, such an MOE which doesn't change value with time is a "perfect store of value". Precious metals are subject to supply and demand for the metal itself. Gold and silver discoveries in the middle and late 1800's had a value deteriorating effect. The bimetalism skirmish in the 1890's ended with silver being devalued. And of course the confiscation of Gold by FDR resulted in a 40% devaluation of it. Proper management of anything is problematic. For example, we have the U.S. Constitution which dictates how our Federal Government must be managed ... but of course our federal managers ignore it. Netting it out, if you mismanage something from the start you're going to get a suboptimal result.

Sun, 07/07/2013 - 11:14 | 3728112 Pareto
Pareto's picture

Sorry withglee.  I have to call you out.  First, you are essentially referencing Hussman's accoutning identity and the "two sides to every trade" axiom.  Fair enough.  But, the only way money demand = money supply at any given moment in time is through the price system.  You cannot possibly "manage" money.  And w.r.t PMs and infusion of a new discovery that increases MOE, is reflected through prices for "stuff".  Doesn't mean PMs are unstable as you seemingly suggest, w.r.t. money or MOE.

 

You write off the price system as if it doesn't mean anything, yet it is the exchange value of "stuff" that can only be represented by a price mechanism of relative value!  otherwise, how the fuck would we ever know our opportunity cost?  PMs are incredibly stable in echange value, depsite their price volatility.  Apart from a few moments in history where there were some movements away from the mean (like now), 1 oz of gold pretty much exchanges for real stuff at the same rate it always has, depsite its nominal price being jacked around all over the place.  This jack around, is a composition of government meddling in fiat, and politics (you referenced FDR).

And lastly, where is MOE "properly" managed?  Kurota?  Bernanke?  Carney?  What constitutes "properly managed?"  and how would you ever know you were there.  The difference between you and everybody else on this site, is not that you think you can count the number of fairies that can dance on the head of a pin.....rather the difference is that most of us simply don't believe in fairies.

Sun, 07/07/2013 - 18:25 | 3728977 withglee
withglee's picture

Pareto, I call you out ... for not paying attention.

First: Money is "a promise to complete a trade". It is an efficient extension over simple barter. In simple barter there is a negotiation; an instantaneous promise to trade; and a trade execution. All money does is extend the "promise" segment over time and space. To do this, all the money needs to have is units. The traders mutually decide the meaning of those units for each trade. The value of these units is learned by experience, just as one learns different exchange rates by experience.

But it is important that the meaning of those units doesn't change over time and space. By your own admission, gold units change pretty radically but average out over time. This is not acceptable.

Unit stability is accomplished by assuring that the number of units in circulation at any time are exactly equal to the trading promises in progress. That is assured by monitoring DEFAULTS and collecting a like amount of INTEREST. It is absolutely absurd under such management to think that something that stands for a trading promise does not exactly equal that trading promise.

Re Gold: People talk about it "backing" money. If they lose confidence in the money, they can exchange it for gold. How silly. There's only one ounce per person on earth ... today about $1200. Petty cash.

Re MOE properly managed: I know of no instance in history where MOE has been properly managed. I submit as proof the impossibility of serving up a timeseries of DEFAULTs over time. We have INFLATION timeseries; we have INTEREST rate time series; we have employment timeseries; we have CPI timeseries ... but no DEFAULT timeseries. And by the relation INFLATION = DEFAULT - INTEREST, DEFAULT is the simplest and most important measure of all for proper MOE management.

Mon, 07/08/2013 - 01:02 | 3729962 Pareto
Pareto's picture

Re Gold: People talk about it "backing" money. If they lose confidence in the money, they can exchange it for gold. How silly. There's only one ounce per person on earth ... today about $1200. Petty cash.

Since you don't understand price, discussion ends.  Your above statement suggests unequivocally (and as I thought) that you don't have a fucking clue what you're talking about.

Mon, 07/08/2013 - 05:44 | 3730155 Ratscam
Ratscam's picture

what is your thinking on Gesell or this MOE
http://www.reinventingmoney.com/worglExperiment.php

Mon, 07/08/2013 - 08:42 | 3730342 withglee
withglee's picture

Ratscam: You have pointed me to the first instance I have seen where the MOE appears to have been properly managed. I have not read your link yet but a quick reference to the Wikipedia article on Worgl turns up this:

The experiment resulted in a growth in employment and meant that local government projects such as new houses, a reservoir, a ski jump and a bridge could all be completed, seeming to defy the depression in the rest of the country. Inflation and deflation are also reputed to have been non-existent for the duration of the experiment.[citation needed]

Despite attracting great interest at the time, including from French Premier Edouard Daladier and the economist Irving Fisher,[3] the "experiment" was terminated by the Austrian National Bank on the 1st September 1933[4][5]

Since INFLATION was zero, they did it right. However, it doesn't show how this was accomplished with government being one of the traders. To succeed, the government "must" have been able to tax sufficiently to fund their projects. The borrow and perpetually rollover option would not yield zero INFLATION. But another indication that they were on to something is the "termination of the experiment" by the bank. Proper management of the MOE is hazardous to banker's health.

It will take me a little time to study your link.

Todd Marshall
Plantersville, TX

Mon, 07/08/2013 - 09:07 | 3730391 withglee
withglee's picture

I now read in an article about Gesell the following:

So the negative real and sometimes nominal interest rates which have been forcedly set up to stimulate economies is an indirect form of the demurrage fee proposed by Gesell.

This would put me in disagreement with Gesell. A "demurrage fee" (a charge for holding money) is alien to proper management of a Medium of Exchange. I suspect the need for such a charge had to do with the assumed damaging effect of hoarding on an economy. With a properly managed MOE, hoarding and otherwise saving have no effect on the economy ... favorable or unfavorable. The flawed thinking assumes that hoarding takes "money" out of circulation and thus has a deflationary effect. But knowing "money is a promise to complete a trade", one's ability to hoard it means he had previously completed a successful trade at a profit. He has returned his trading certificates as promised and yet has some left over to keep for himself. This is not a bad thing. And it has no effect on other trader's ability or propensity to make new trading promises (i.e. create new money). It should not be assumed that if one trader profits it is to the detriment of other traders. All traders can (and intend to) profit.

Mon, 07/08/2013 - 10:22 | 3730603 withglee
withglee's picture

Ratscam: Well, I've read your link. Talk about an improperly managed MOE ... !!!  I have gone through the whole article and annotated heavily. It is a laughable scheme. It was favored by the local government because it gave them the "privilege" of paying their bills with money they printed out of thin air. And it was disfavored by the bankers because it encroached on their "privilege" to do the same thing. It payed off old debt by selling public assets. It created new public works by paying in script and accepting script as tax payments (which otherwise lost 25% to 50% of their value). In the end, of course, the bankers won and the traders lost.

Sat, 07/06/2013 - 22:44 | 3727432 Trampy
Trampy's picture

Keynes was clueless. Mises was clueless. ... But their writing was profuse and unnecessarily complicated. ... Someone understanding this subject can explain it on the back of envelope. It's not rocket science.

Someone other than you, apparently.

Sun, 07/07/2013 - 10:28 | 3728057 withglee
withglee's picture

Proper Management of any MOE: Create certificates for trading promises and let them freely circulate as "money". Monitor DEFAULTS. Collect a like amount of INTEREST. Recover and extinguish certificates on completion of trades. INFLATION stays zero by the relation INFLATION=DEFAULT-INTEREST.

Doesn't take a very large envelope does it.

Todd Marshall
Plantersville, TX

Sat, 07/06/2013 - 17:39 | 3726918 bugs_
bugs_'s picture

poof.  overnight.  the sun comes up the next day.  be ready mentally.

Sat, 07/06/2013 - 17:39 | 3726920 max2205
max2205's picture

Nyse...7 doors that look like hft robot algos and bars on the prision windows

 

http://en.m.wikipedia.org/wiki/New_York_Stock_Exchange

Sat, 07/06/2013 - 18:00 | 3726950 grid-b-gone
grid-b-gone's picture

Free, unencumberd, discounted cash flows and stores of value

Dividend-paying stocks, but expect valuations to be volitile, especially in the deflationary stage

Precious metals for the store of value, though there is no cash flow - also, the historical model includes confiscation

Own a small business with customer demand that continues in hard times *Ding, ding, ding ... this winner also covers soft employment times.

Own your primary home and vehicles outright - unencumbered. The only downside is property taxes which in my area means I re-buy my home every 45-years at a 2.2% annual property tax rate.

Ag land, timber land, oil & gas land, land with water assets, waterfront property.

Rental units, especially smaller ones for Boomer downsizing and people getting small to get through tough times. 

If a reset scenario like this plays out, the winners either get the timing right as mentioned, or they have enough gold toward the end to pick up assets cheaply for a new post-printing beginning.

The reminder that today's scenario is similar to the banks of The Great Depression seizing farms to turn debt into equity/collateral. Now we may get the same process on a worldwide scale. In the end, all we get is a repeat of the past and one more disproven economic theory. And in the next few decades, a new Bernanke-like seemingly-bright econ PhD will create a theory of how this all could have been prevented. 

All we ever needed was a free market playing out on a level playing field... and then a super-bank was created so we could do it bigger and faster without being tied to gold. Now, if John Rubino is correct, this process reties everything in the end back to gold.

Sat, 07/06/2013 - 18:07 | 3726961 Salvian
Salvian's picture

There is a hedge for this insanity but it is a tough way to live, ride the contango of Vol ETFS.  I have been going long on volitility ETFs on the dips (VIX < 11), wait for a bump like the one we just had and sell. Wait again for them to flood the zone again, buy, bump, exit. Problem is that it is a directional play only and you have to have the patience of Job to wait for the lottery ticket to pop. The other problem is getting stuck in a long trough like the VIX has been in because of all the cheap money depressing Vol.  I am still searching for a hedge when rates pop to Weimar like levels.  Tax lien certificates in the U.S. are one, cheaply financed rental housing is a second, and hell, I don't know, a Cash America or a Chiba Hut franchise is a third.   I really am getting to old for this crap.  I just want to ride my convertible, get my kids out of school, and clip coupons.  

Sat, 07/06/2013 - 18:24 | 3726991 ebworthen
ebworthen's picture

I think the banksters have the same game plan as you, except they can rotate in and out of all assets, stocks, and sectors with lightning speed (HFT) and have essentially free money from the FED to do so.

Bigger picture - the big money banks and funds on the inside are playing both ends of these long term cycles, as pensions and individuals try desperately to follow - but a day late and a dollar short (months late and thousands of $'s short or years late and 100's of K's of $'s short).

So, most of us are just hairs on the tail of the dog.

Sat, 07/06/2013 - 20:03 | 3727185 Salvian
Salvian's picture

Yeah, this is freaking exhausting, but what can you do do?  Bonds are a disaster waiting to happen.  Some deals in real estate that I am into that are making money but that depends heavilly on the Government not changing the laws.  Tax Liens are good but illiquid as hell.  It would be really nice to have free money.  You could have the IQ of something in a Petri Dish and make bank with the deal you describe.  The rest of us really have to hustle...

Sat, 07/06/2013 - 19:37 | 3727136 mc888
mc888's picture

More of the same podcast clown garbage. Even when the information is valid the presentation is inaudible or unlistenable.

 

All of these retards have tons of money. Yet they can't be bothered to research or learn anything about audio production. Do your listeners a favor and learn about gain matching, EQ, compression, mixing multiple tracks and mastering the final product.

 

If you can't handle the basics, HIRE A PRO. Until then STFU.

 

Sat, 07/06/2013 - 20:28 | 3727226 blindman
blindman's picture

i realized it about 25 years ago, keep catching up I say!
back then I was catching up too. what hurts is those things
that just can't be caught up to .....
"damn it all anyhow" she was known for saying till she lost
her marbles.

Sat, 07/06/2013 - 20:28 | 3727227 Downtoolong
Downtoolong's picture

Nothing is safe. No asset class is without severe vol and risk. Every month another huge swing occurs in some market like we’ve never seen before.

In spite of the fact this all adds up to an accident waiting to happen it’s no accident. It’s all just the way Wall Street wants it and loves it. These are the kinds of markets which it profits from the most.

Sat, 07/06/2013 - 21:11 | 3727319 slimething
slimething's picture

My conclusion is: nobody knows anything, or not very much. If it is as easy as writing on the back of an envelope, I want to see it.

Sun, 07/07/2013 - 08:30 | 3727941 Salvian
Salvian's picture

That is somewhat true, but what I do know is that there is a coorelation between whatever these guys are doing and Volitility.  As the Fed and Central Banks flood the place with money in the form of QE, you see a flatlining of volitility.  The Contango aspect to Vol ETFs in partculiar is very attractive to shorts who make money basically on the mechanical aspects of this, until there is a fear that rates may go up.  You then see an explosion of volitility, but not to the point where you see Backwardization (yet).  This really disfucntional sitauation creates an opportunity if you don't get to cute to do the bump and run on things like UVXY and VXX, for example.  I am very conservative with options on these things, using them only to enter and exit the underlying.  This is not easy money and it is a very illiquid strategy as well.

Sun, 07/07/2013 - 16:54 | 3728839 sbenard
sbenard's picture

So we all now bear the mark of the beast!

Rev  13:17
And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

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