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Alasdair Macleod Warns A Currency Crisis Is Dead Ahead

Tyler Durden's picture




 

Submitted by Adam Taggart of Peak Prosperity,

This week's podcast interview introduces a new monetary measurement developed by Alasdair Macleod: the 'Fiat Quantity of Money', or FMQ.

Alasdair explains how FMQ is derived, as well as what it can tell us about the true levels of fiat money supply. In the case of the dollar, it reveals that levels are far above what is commonly appreciated – so far, in fact, that a currency crisis could arrive sooner than even many dollar bears expect.

 

What 'Fiat Money Quantity' (FMQ) Is Signaling

I started off with the desire to put together a metric of money which allows me to compare sound money with fiat money. My approach to this was to look at what happens in how fiat money was created.

 

It originally involved the money substitute. In other words, you and I or our great-grandfathers or our great-great-grandfathers would deposit gold in the bank for safekeeping. The bank would give them either notes, which they could then cash anywhere where it was accepted where that bank's credit was valuable, or alternatively, it would give them an account – a deposit account – which would show that yes, the bank holds the gold on your behalf. That was the starting point. So that was how deposits and cash were originally created as money substitutes.

 

Then the next thing happened: Central banks were invented. What happened was that they took over the note-issuing monopoly. They were given, by the government, essentially a monopoly. In return for that, all of the banks within the central bank's system would take the gold that was originally deposited and move it into the central bank in return for – guess what? – deposit accounts and nice new bank notes.

 

So really what I wanted to do was to quantify that process [by creating the FQM]. It involved taking cash, all of these instant-access deposits, or deposits which are readily accessible, plus the deposits that the banks have at the central bank, because that is money just the same as your deposit account is in your bank; it is exactly the same in that sense. If you look at that, you get some very interesting statistics.

 

Going from 1960 to the month before the Lehman crisis in 2008, the average exponential growth rate was around about 5.9%, year in/year out. It followed that track very closely. Then of course we had TARP and all of the rest of it.

 

And then we had QE. And guess what? The level of fiat-money quantity is now over 60% above that long-term trend line. Now, if we stand back unemotionally and look at that chart, we would say that this is monetary hyperinflation.

 

Here we have this situation now where the Central Bank, the Fed, is having to produce money to finance the government deficit. It’s having to produce money to keep interest rates down so that the banks don't have balance-sheet problems. And if it slows down in that production of money, and even if it doesn't increase the rate of the production of that money, then our world is going to come to a rather nasty halt.

 

It looks like not only are we in a debt trap, but we are in a hyperinflationary trap, potentially. We need someone who is really quite strong and understands these things to be able to stand on the system and say, no more!

 

So my question to you, Chris, is, can anyone do that? Do you think Janet Yellen will do that?

 

One of the things that's interesting in this, which I think is a dynamic that is going to play out over the next few months, is, here we are expanding a quantity of money hugely. But at the same time, what we're not seeing is the prices of raw materials, of things like that really reflecting that expansion of money. Now, there is always a time lag between the two effects. But actually we are seeing this effect on certain things, and in a way in which one would expect. That is that asset prices, particularly things like property, are beginning to rise.

What FMQ Indicates for Gold

The one thing which I think is being triggered is gold. We had a good rise today. We had about a $40 rise. Now I think that this is something quite significant, really, for a number of reasons, but if I go back to my FMQ (fiat money quantity), if I adjust the price of gold from just before Lehman Brothers went under, I think I'm right in saying that in July 2008, the price of gold at the close of that month was $918/ounce.

 

Now, if you adjust that price by the extra fiat money quantity that is now in circulation, gold has actually gone down, in real terms if you like, by about 30%. Put another way, if the price of gold was to match in real terms that $918 level, it would today be about $1,860. So we have this extraordinary thing where gold, for whatever reason, has become extremely undervalued compared to where it was before Lehman Brothers went under. Now this is important, because before Lehman Brothers went under, not many people actually understood systemic risk. So the price of gold did not really include the weighting for systemic risk.

 

The other thing I would say is that since then, with our FMQ having taken off, there is a substantial hyperinflation risk that is going to affect prices somewhere down the line. And yet, gold is trading at a discount of 30% to where it was before all of this happened, so it is horribly mispriced.

Click the play button below to listen to Chris Martenson's interview with Alasdair Macleod 45m:56s):

Click here to read the full transcript

 

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Sun, 10/20/2013 - 21:28 | 4074673 Seasmoke
Seasmoke's picture

Looks like something happened in 2008.

Sun, 10/20/2013 - 21:33 | 4074685 Caveman93
Caveman93's picture

I heard they fixed it with Green Shoots and all though. Oh yeah, we recovered that Summer too when we had some sort of Black Friday and a Red Line was drawn on something else.

Mon, 10/21/2013 - 00:02 | 4075048 Manthong
Manthong's picture

I endorse the 1130 AD English solution that involves right hand and both testicle removal for money adulterators.

Sun, 10/20/2013 - 22:03 | 4074751 Running On Bing...
Running On Bingo Fuel's picture

This chart is NOT 'true money supply in circulation', it's true money supply according to RB holdings.

Different.

Over.

Sun, 10/20/2013 - 21:34 | 4074683 Ghostdog
Ghostdog's picture

As stupid as everything is, the USD is no where near a crisis, namely because the rest of the world is way worse off.. for now... The problem for the USD happens once the other countries collapse and then have their balance sheets wiped. Then there will be a huge sucking sound of money pouring out.. but I think we have years yet before the inevitable big mess here because we have a crazy person at the new Fed chair. And the average idiot doesnt understand anything about finance. So it will all seem like a good idea to them. Gas needs to get above 7 bucks before the people say stop and then the pols will roll over and tell them to stop and the collapse will occur

Sun, 10/20/2013 - 21:40 | 4074708 DaveyJones
DaveyJones's picture

crisis:   a time of intense difficulty, trouble, or danger

just because the rest of the first world is there doesn't mean were not

 

Sun, 10/20/2013 - 22:38 | 4074845 smlbizman
smlbizman's picture

ghostdog...we have our 7 dollar gas....its called obohicacare...except its like 15. a gal....

Mon, 10/21/2013 - 08:45 | 4075535 Ghostdog
Ghostdog's picture

People are dumb they need to see it "read"15.00....

Mon, 10/21/2013 - 08:29 | 4075517 Ghostdog
Ghostdog's picture

Did you actually read what I said, or just post like you were Obama, without reading? The disaster WILL happen here but not as soon as everyone thinks.

Sun, 10/20/2013 - 21:42 | 4074715 UKdk
UKdk's picture

Ghostdog you are presuming the USA lives in a bubble and other countries actions have no effect. What might happen if China decides to make public it's real gold reserves next year?? Whether it's theatre or not China appears concerned at the USA's poor policy and it's highly likely Russia and China coordinate their action's at the moment.

Sun, 10/20/2013 - 21:53 | 4074731 fonzannoon
fonzannoon's picture

The reason Japan can sit there at 300% debt/gdp with their borrowing costs heading back down to 0% is because the whole world is chained together now. Japan should have had it's brains blown out a long time ago. Japan proves the markets are dead.

Mon, 10/21/2013 - 08:32 | 4075519 Ghostdog
Ghostdog's picture

I have even less faith in China telling the truth that MSNBC.. Ok maybe not MSNBC. but close... You are right. It is theatre

Sun, 10/20/2013 - 21:51 | 4074728 Winston Churchill
Winston Churchill's picture

Being the cleanest shirt in the laundry doesn't help when the whole bulding is on  fire,

Mon, 10/21/2013 - 00:16 | 4075076 holgerdanske
holgerdanske's picture

Being the wettest counts, in that case.!

Mon, 10/21/2013 - 08:34 | 4075521 Ghostdog
Ghostdog's picture

The metaphor doesnt work unless you give the building floors and say the fire started at the top and the US is on the first floor. Eventually it will get here but it will get here last and at that time it will be worse that all the other fires combined

Sun, 10/20/2013 - 23:19 | 4074942 seek
seek's picture

Imagine a fleet of boats, sailing across the now-glowing Pacific. Mid-way through, each boat springs a leak. In some boats the leak is huge, and they'll sink in a few hours. For others, the leak is smaller, so it will be days before they sink if nothing is done. Unfortunately the nearest land is weeks away. Just because one boat is sinking slower than another doesn't mean it isn't going to sink before reaching safety.

So it is with the US and virtually every other country of the world.

Mon, 10/21/2013 - 08:42 | 4075530 Ghostdog
Ghostdog's picture

Please show me where I said the US was not going to sink...

Sun, 10/20/2013 - 23:21 | 4074949 merizobeach
merizobeach's picture

"namely because the rest of the world is way worse off"

Keep telling yourself that, buddy.  It won't make it true, but it'll help you to keep believing it.  And thanks for the laugh!

I get that official numbers are horseshit everywhere.  A friend of mine in finance here in Taiwan recently explained that the GDP "growth" here is a scam because its based on the local ponzi real estate bubble.  If that popped, the standard numbers like GDP would implode, and everything would look horrible on paper.  It wouldn't change some, though, like every junior high schooler having a smart phone, the country being a surplus food producer, or the word for 'gold' in the local language translating directly as 'yellow money'.  Even the bum at the train station who collects the lottery tickets on receipts has gotten fat over the past few years.  If all the dominoes fall, then they all fall, but this country won't be first.

The only thing preventing a collapse of the USD from ruinous QE and ZIRP is its reserve status; with it, all countries using the dollar are dragged down together; without it, as Juan Enriquez said, "all bets are off".

Sun, 10/20/2013 - 21:42 | 4074707 Kirk2NCC1701
Kirk2NCC1701's picture

I'm surprised that he does not use the correct term: Fiat CURRENCY Quantity. What is being created is Currency, not Money.

Sun, 10/20/2013 - 22:26 | 4074816 disabledvet
disabledvet's picture

absolutely. deflations are like abortions: "safe, legal and rare" is the only way to spin them well. "never ever" is the goal. everything i see is flashing green for a generalized price decline however if not an outright deflation. Wall Street looks crazier now than it ever did in 2008. At a certain level the same is true for 2000 since during at both those peaks the Fed was tightening...at least trying to keep up the pretense of sound money. While this doesn't feel like the 1930's per se there sure is a whiff of it in the air. "beggar thy neighbor" was the result then...and this time around the problem is Russia and China (and Brazil and South Africa?) complaining that the dollar is too cheap. (back in the 30's it was Britain and France.) I found the free trade agreement between Canada and Europe interesting. Of course the USA and Mexico already have a free trade agreement so i'm not sure if this is some backdoor way to get free trade between the USA and Europe or how that's going to work but the Western world and Japan isn't looking too good when it comes to how it treats currency. the only reason the dollar is still the reserve currency is to prevent beggar thy neighbor from happening again. it appears to be happening again though. you could get a surprise spike in the dollar actually...as has already happened with Japan and the yen. any big sell off in gold and oil i would view negatively here.

Sun, 10/20/2013 - 21:39 | 4074710 ebworthen
ebworthen's picture

Parabola's are really good at reflecting heat I hear.

Sun, 10/20/2013 - 22:20 | 4074793 yogibear
yogibear's picture

As said before, get out of the US dollar while you can. Other countriies are doing it. Yellen already said  nflation is way too low.

Yellen and the rest of the Fed members won't change until the US has a currency crisis and they will do the wrong thing. They'll say they never saw it coming.

Sun, 10/20/2013 - 22:47 | 4074864 spooz
spooz's picture

Right.  And which of the wonderful remaining currencies or asset classes would you park your money in?  Gold?  I've got enough of that, thanks anyways.

Mon, 10/21/2013 - 08:16 | 4075504 gbresnahan
gbresnahan's picture

yellen also said she thinks negative interest rates are not unreasonable

Mon, 10/21/2013 - 08:44 | 4075532 Ghostdog
Ghostdog's picture

Exactly she is a crazy person

Sun, 10/20/2013 - 22:20 | 4074794 Drashta
Drashta's picture

There appears to be some double counting as the cash of instant deposits is the same cash that the banks deposit with the Fed as they do not know what to do with all of it. Better get 0.25% than keeping it with themselves.

Sun, 10/20/2013 - 22:24 | 4074805 Jack Burton
Jack Burton's picture

Unlimited printing. Just as Marc Faber predicted. As for the war he said was coming, well, Syria is on deck and Iran is always a good plan "B" for a really good regional war.

The idea that printing trillions and getting it into the hands of banks and hedge funds for zero cost of money, while the middle class and main street fucking rot?  Well, really, what did you expect? Is this not a nation ruled by the 1%? If you were the 1%, what would you do? That's right, you would print to infinity and make sure it all came to you with a zero percent cost of money. Yet we hear America is a socialist cradle to grave welfare state? People who make that claim have an agenda, for the truth escapes them, and I believe it escapes them on purpose. Congress and the President are openly bribed by Corporate millions, and we say the old folks are stealing all the money because they get back a portion of the fortune they have paid in in with holding tax for the SS and Medicre social insurance programs.

Who is fucking fooling who around here? Seriously? Check out income division, check out the manipulated value of stocks, check out QE and Zirp, check out corporate profits. Yet is always falls back onto the little taxpayer who might get an SS check when he gets old. HE is the problem! God, people buy into that shit? Or are they selling that shit and talking their book?

Mon, 10/21/2013 - 04:16 | 4075293 Amagnonx
Amagnonx's picture

You are both over simplifying and creating a false dichotomy here.

 

Printing currency and handing it over to criminals is the heart of the problem, but it is worthwhile examining the effect of social security and its contribution both directly to the financial problems but more importantly to the culture.  The dependence of western nations on the theft and redistribution of wealth is both enabling of corruption, and pacifying to the populations who became increasingly ignorant of politics and economics.  

 

Matt Tiabi recently had an article in the Rolling Stone magazine where he documented and investigated the reasons for the failure of pensions funds.  His discovery was that if those who controlled those funds had not been involved in ripping them off, then the pension funds would have been very well funded.  However the usual procedure had been to divert funds paid into social security, and also to borrow funds from them without ever paying them back.  Pensions which are paid into by people should have been fully funded, if they had not been stolen from by those charged with overseeing them - so I have no problem with self funded pensions, but there are far more vile forms of social security that are completely undermining the western nations.

 

Child support and any money given to single mothers undermine the family unit, providing a relatively risk free method for women to dump the husband and go it alone.  Couple this is extremely unbalanced divorce law, then you have a system which incentivizes women to leave their husbands - take most of his accumulated wealth and then raise their children on state benefits, which are largely paid for by men (who work more years, and more hours).

 

The issue of food stamps, and other state benefits undermines individuals self reliance - and creates a culture of dependence.  This is obviously great for politicians who can control those benefits, anyone threatening them is going to be unpopular - no matter how sane the reasons are to get rid of them.

 

The impact of social programs on the cost of running the US is fairly large, but it is war and preparation for war that is the largest unnecessary line item on the govt charge card.  This money is going straight into the pockets of the worlds worst sociopaths - and no public good is created, in fact the deployment of these weapons always incurs a social cost, both locally and abroad.

 

So while I am entirely against almost all forms of social security, the reasons are generally not even related to cost.  The reasons are severally the immorality of taking money by force from people who earned it and giving it others who did not, the destructive effect on the role of men in society, the enabling of criminal activity in politics and finance, and the decrease in a sense of responsibility of people for their own selves and for the govt that they might support.

 

Social security is a disease that needs to be eradicated - self funded pensions in my view do not even qualify as public funded social security - but to support a system where people are forced to finance their retirement by placing their wealth into the hands of those who would steal it seems to be the hieght of self delusion.

Mon, 10/21/2013 - 06:07 | 4075348 surf0766
surf0766's picture

Tiabi seems to be a socalist. FUck him and his holy crap.

Sun, 10/20/2013 - 22:28 | 4074818 abgary1
abgary1's picture

Horribly mispriced gold and s&p 500, just the way the Fed likes it and the way it will remain until the taper begins.

Sun, 10/20/2013 - 22:38 | 4074843 lasvegaspersona
lasvegaspersona's picture

Again I suggest fofoa's new article in which he explains that  90% of gold pricing is done in the Forex market. It completely skews gold price and depends upon gold's derivative value. 

http://fofoa.blogspot.com/2013/10/gold-as-forex-currency.html

Until other gold writers address this issue they will continue to sound confused.

Sun, 10/20/2013 - 22:39 | 4074849 WTFUD
WTFUD's picture

Surprised we're having this conversation.
Japan/Europe are basket cases and the ussa is a triple homicide suicide.
Game Over bar the KILLING.

Sun, 10/20/2013 - 22:49 | 4074869 Diogenes
Diogenes's picture

They call it Fiat money because it depreciates like a rusty Italian car.

Sun, 10/20/2013 - 23:19 | 4074941 Vooter
Vooter's picture

"Fix It Again, Tony!"

Mon, 10/21/2013 - 03:12 | 4075256 fourchan
fourchan's picture

fix it again droghi

Sun, 10/20/2013 - 23:15 | 4074931 q99x2
q99x2's picture

I took time from my studies to listen to the entire presentation because it was excellent.

At the end Chris's complaint about central banks preventing intellegent action at this critical time was right on.

There comes a point when people can't afford to say unless proven guilty assume that things are as told. That time is now.

Arrest the central bankers and CEO's of TBTFs.

Mon, 10/21/2013 - 03:50 | 4075191 Radical Marijuana
Radical Marijuana's picture

While the creation of "money" out of nothing, as debts, is bizarre, the destruction of that "money" back to nothing is even more bizarre!

http://www.youtube.com/watch?v=L12QKvZKEUE

On that Keiser Report, "In the second half, Max interviews Alasdair Macleod of GoldMoney.com about the $640 million sell order of gold. They also discuss Alasdair's new theory on money supply (FMQ) and his differences with Professor Fekete, a recent guest on the Keiser Report, regarding whether or not there is deflation."

At the present time, I go with the theory that despite the utterly awesome amounts of "money" being created out of nothing, there is actually overall more "money" being destroyed back to nothing.

When one considers that most of the "money" created out nothing has stayed within the cyber-casinos, to use to gamble with, and that vast pool of speculation, using "money" made of out nothing, has therefore still mostly stayed outside of the economy of the real world, where most people pay for goods and services, AND one considers how the astronomical amounts of fiat "money" created out of nothing are struggling to keep up with the amounts of that "money" being destroyed, I tend to favour the position of Fekete, more than that of Macleod.

Of course, ALL of this is a rather surreal mathemagical show, where the creation and destruction of "money" out of nothing, and back to nothing, never actually occurs, except as mostly legalized frauds, and bookkeeping tricks ... while the reality of the flows of matter and energy, or goods and services, that most people associate with their real life, in the real world, has become orders of magnitude less than the theoretical value of the surreal virtual money, enabled by legalized frauds, to pop into existence out of nothing, and also disappear back to nothing again.

There are an extremely hyper-complicated series of ways that the vast world of mathemagical frauds relates to the real world of energy and matter. The primary way that evolved was the totally tangled up and convoluted fashion in which frauds were enabled to be backed up by force. The biggest bullies could bullshit, and bullshit, while they could beat anyone else into submission to accept those bullshit stories as being "true." That went on, and on, for generation after generation, as a schedule of reinforcement that established the social habits which enshrined our state religion, as that faith-based monetary system, which was backed up by the taxation system, and legal tender laws in general.

The power of governments to enforce legalized lies with legalized violence was the historical source of the current systems, where "money" is both created out of nothing, and disappears back to nothing. The dynamic equilibria between those two events is utterly, awesomely difficult to figure out, since we are like those watching a mathemagical show, where everything is all illusions, where generation after generation of human beings have been born, lived, and died, while that show went on.

All of the ordinary people are forced to operate within the established monetary system, since almost everything that could be robbed already has been robbed. Almost everything that could be claimed as private property already has been claimed, and those claims are enforced by the police and military. Thus, it is impossible to live outside of those systems of organized lies, operating organized robberies, while there are those best organized gangs, the biggest banksters, which have taken control over governments, in order to become the high priests of the state religion, of fiat "money" based on nothing but faith, wherein that "money" gets created out of nothing, as debts, and can disappear again, if those debts disappear.

Those global systems of electronic fiat money frauds, backed by atomic bombs, and all the other weapons which the police and military have, are in states of extreme disequilibria. The relative balancing of the rates of creation, versus rates of destruction, of "money" made out of nothing, as debts, to "money" disappearing to nothing, as debts disappear, is like a vast, extremely improbable, pyramid, standing on its point, rather than standing on its base.

The violence to back up the frauds used to be more broad, and relatively stable, compared to being backed up by an abundance of weapons of mass destruction, which exist as other bizarre dynamic equilibria, referred to as Mutual Assured Destruction, MAD. Money As Debt is MAD in another form. The MADness of weapons of mass destruction backs up the MADness of the mathemagical illusions of "money" made out of nothing, and disappearing back to nothing. In my view, the reason why the MADness of the Money As Debts manages to hold together is similar to the interconnected reason why out of control wars are held at bay, as the MADness of Mutual Assured Destruction, which would follow if weapons of mass destruction ever started being seriously used.

Anyway, q99x2, that is the context in which I regard the ideas about "Arrest the central bankers and CEO's of TBTFs."  It is both practically impossible, as well as theoretically raises much more serious issues. Collectively, those banksters are a group of trillionaire mass murderers, and nobody else is remotely close to being in their league. When it comes to the ideas about "Arrest the central bankers and CEO's of TBTFs," I tend to regard the banksters as practically having the equivalent of sovereign immunity, due to the degree that they control governments. Indeed, organizations like the Bank of International Settlements, according to various treaties, does enjoy the equivalent of sovereign immunity and sovereign powers in many ways.

Furthermore, since money is measurement backed by murder, and the debt controls depend on the death controls, and both are hyper-complicated entangled knots of force backed frauds, where the lives of everybody to be able to buy and sell goods and services, and generally use "money" to channel the flow of matter and energy, has been reduced to being less than 10% of the greater world of "money" created out of nothing to gamble with, where the equivalents of the annual GDPs of entire countries, or total revenues of big corporations, are routinely being created out of nothing, and disappearing back to nothing, every month, the vast majority of flesh and blood human beings have become trivial components inside of that globalized state religion, of faith-based money, operating through legalized mathemagical transactions, to be created and disappear back to nothing. The real systems are now computers routinely creating and destroying trillions of units, out of nothing, and to nothing, as the overall accounting systems, which have utterly bizarre, historical relationships to the real world of the flow of matter and energy, or goods and services! In the big picture, the force to back up those electronic frauds is the combined existence of all the weapons of mass destruction in the world, plus all the conventional weapons, such as chemical energy powered guns.

Thus, the power to enforce the payment of taxes, in the legal tender of the national fiat, faith-based "money" made out of nothing, as debts, grew out of the barrel of a gun, but has been astronomically amplified in size. The original history of how paper money was substituted for gold and silver money was always backed up by gunpowder, in rifles and cannons. The current electronic fiat money is backed up by weapons of mass destruction, like atomic bombs.

The combined MADness of those overall systems of military Mutual Assured Destruction, and Money As Debt, are in their dynamic equilibria of the balancing of the rates of making "money" out of nothing, versus the disappearance of "money" back to nothing, as force backed frauds, in a globalized mathemagical illusion show, put on by the banksters, and enforced by governments.

My personal sense of the overall situation at the present time is that the inflation due to creating more "money" out of nothing is slightly losing ground against the deflation due to "money" disappearing back to nothing. Of course, I do not believe that anybody can really know about those things for sure, since there are no overall good sources of data, and all lesser sources of data appear to be biased. But nevertheless, at the present time, I tend more towards the position of Fekete, than that of Macleod.

Moreover, I tend to believe that this overall delicate balancing of mathemagical creation and destruction of "money" out of nothing and back to nothing, as forced backed frauds, is extremely unstable, far worse than we can possibly imagine, since it ultimately is that the MAD Money As Debt system is as unstable as the MAD Mutual Assured Destruction military situation!

Alasdair Macleod's attempt to measure the amount of fiat money demonstrates that the real situation shows that the numbers are even more NUTS than previously estimated!  While I agree with that view, I also believe that the overall degree of collective social insanity that we are trapped within, by being forced to be worshipers in the state religion of faith-based mathemagical "money," is many orders of magnitude more insane that we are actually able to comprehend, since we are talking about quadrillions of units of "money" backed by quadrillions of possible murders.

Mon, 10/21/2013 - 06:45 | 4075387 mrpxsytin
mrpxsytin's picture

Thanks for taking the time to write this. I agree with your assessment. I also think that as the 'mass' of money in the cyber casinos increases, so does its gravitational pull. Such that, not only will it command an ever greater flow of printed money to maintain its rate of growth, but it will also suck existing money out of the other sectors of the economy. So as you point out, this may actually have a deflationary effect on many sectors of the economy. 

Mon, 10/21/2013 - 17:02 | 4077202 Radical Marijuana
Radical Marijuana's picture

"... as the 'mass' of money in the cyber casinos increases, so does its gravitational pull ..."

Good point, mrpxstin. That may mean we have already passed the metaphorical "event horizon" of a social black hole!

Mon, 10/21/2013 - 10:59 | 4075847 kenezen
kenezen's picture

I was going to respond to this article. Yours was far superior to what I could have written. I live in Florida, in paradise, and yet I have to have multiple strategies for wealth retention and escape. What a sad state of affairs as I've watched America lose its competitive capability of manufacturing as a percentage of jobs since the early seventies which made us great in the past. Now I see a disappearance of middle class. Blue collar Private sector. Wages flattened since the seventies and government took dominant roles especially in the last 10 years. Do you see anyway a private sector capitalistic resurgence can reappear without socialism being tried first and fail as it has for many countries? 

Mon, 10/21/2013 - 16:56 | 4077233 Radical Marijuana
Radical Marijuana's picture

"Do you see anyway a private sector capitalistic resurgence can reappear without socialism being tried first and fail as it has for many countries?"

Unfortunately, I do not, kenezen. Although I believe that there are lot of good creative alternatives, which could theoretically be assembled into viable systems, I think that we are going to have to go through the social insanities of the centralizing, or monopolizing, political powers destroying themselves, and their current systems, through the paradox of final failure from too much of their kind of "success," before more diversified creativity has enough freedom to reassert itself.

As many Zero Hedge articles have repeatedly predicted, the spiraling entanglements of currency wars, trade wars, and hot wars, have happened again and again in history, and appear to playing through on a greater than ever scale now ...

To paraphrase Einstein, who said that human stupidity seems limitless, and that compound interest was the greatest social power, our current systems are empowered to drive themselves through to the maximum possible compounded stupidities ... on the other side of which events I can not predict what may still be possible ...

Sun, 10/20/2013 - 23:23 | 4074954 PacOps
PacOps's picture

Good read along the line.

 

http://www.ftense.com/2013/10/how-qe-will-end-why-commodities-are.html

 

 

How QE Will End & Why Commodities Are Still In A Secular Bull Market

 

We are rapidly approaching the point of "peak debt" globally. This has been referred to here on this site as the end of the debt super cycle, which began over 70 years ago.

The end of the debt super cycle means that many of the developed economies that have used debt to create growth will no longer have the ability to service their current debt or take on additional leverage. The debt of a country can be seen at the individual (consumer), corporate, banking, and government level.

In the United States the total debt in relation to the size of the overall economy (debt to GDP ratio) reached  370% in 2008 before it peaked.

This chart is certainly troublesome as it shows how far the United States still has remaining in the deleveraging process to bring the debt back to healthy/manageable levels. A reduction of just 20 basis points on this 370% debt to GDP ratio has put the country into a depression, temporarily masked by government spending and quantitative easing . Imagine what would occur if real a deleveraging took place? Here is the chart again with banking (financial) debt removed, showing the three remaining categories (GSE's are Fannie Mae, Freddie Mac, and Sallie Mae which can be considered part of government debt). Click for larger image.

 

Sun, 10/20/2013 - 23:29 | 4074967 Rick64
Rick64's picture

 As long as there is worldwide demand for the reserve currency/USD they can keep expanding the money supply. They have increased the demand by stopping Libya and Iraq from selling oil or any other resources in any other currency. Next is Iran. When the pipeline through Syria is built the gas will be sold in USDs. Then there is the Afghanistan pipeline. We need to keep fighting those terrorists or creating them.

Mon, 10/21/2013 - 03:20 | 4075257 Urban Redneck
Urban Redneck's picture

The settlement currency of the physical oil trade is already migrating away from the dollar, and has been since long before the US invaded Libya. The important thing is that the oil FLOWS, which rebellion in Libya and Oil-for-Food in Iraq impeded.

The US government isn't playing to win, they're playing to postpone the inevitable, and doing a rather poor job at even that, except with regards to the paper-oil game that they outsourced to certain bankers.

That's why, when, not just the Saudi's, but all of OPEC talks about repricing a certain benchmark to currency baskets, you hear crickets from both the peanut gallery and the professionals.

Mon, 10/21/2013 - 05:30 | 4075314 Sufiy
Sufiy's picture


Max Keiser: Alasdair Macleod Investigates The $640 Million Sell Order Of Gold.


  We continue to follow The Crime Of The Century - Gold market manipulations. Today we have Max Keiser who investigates with Alasdair Macleod the 640 million Sell order of Gold which disrupted the trading session on Friday 11th and was supposed to Kill the rest of the confidence in Gold safe heaven status. Chinese are not buying into it any more and moving fast now with their state level long term plan of diversification its Reserves out of US Dollar denominated assets. http://sufiy.blogspot.co.uk/2013/10/max-keiser-alasdair-macleod.html#

Mon, 10/21/2013 - 06:38 | 4075318 Dr. Engali
Dr. Engali's picture

Come on Chris, stock has nothing to do with it. It's all about the flow, and money velocity is dead. I would have thought you figured that out by now.

http://m.research.stlouisfed.org/fred/series.php?sid=M2V

As long as they can control the velocity of money we won't see any major inflation , and they can print until their eyeballs bleed. If they ever lose control of the velocity of money then we have a problem.

Mon, 10/21/2013 - 09:07 | 4075590 Bay of Pigs
Bay of Pigs's picture

That chart is crazy. Money velocity is at all time lows on the long term chart. This at a time when US money supply and gov't debt is exploding expotentially.

We have a problem alright.

Mon, 10/21/2013 - 13:36 | 4076553 halfawake
halfawake's picture

wut omg this is so surprising great insight

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