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Former Fed Governor, Hedge Fund Billionaire Slam Fed: "Government Fiat Does Not Create Wealth"

Tyler Durden's picture




 

"Balance-sheet wealth is sustainable only when it comes from earned success, not government fiat," is the ugly truth that former Fed governor Kevin Warsh (amazing what truths come out after their terms are up) and hedge fund billionaire Stan Druckenmiller deliver in the following WSJ Op-Ed. The aggregate wealth of U.S. households, including stocks and real-estate holdings, just hit a new high of $81.8 trillion. No wonder most on Wall Street applaud the Fed's unrelenting balance-sheet recovery strategy.The Fed's extraordinary tools are far more potent in goosing balance-sheet wealth than spurring real income growth. Corporate chieftains rationally choose financial engineering - debt-financed share buybacks, for example - over capital investment in property, plants and equipment. The country needs an exit from the 2% growth trap. There are no short-cuts through Fed-engineered balance-sheet wealth creation. The sooner and more predictably the Fed exits its extraordinary monetary accommodation, the sooner businesses can get back to business and labor can get back to work.

 

Originally posted at WSJ

The Asset-Rich, Income-Poor Economy

By Kevin Warsh and Stanley Druckenmiller,

Economist Richard Koo diagnosed Japan's crash in the early 1990s and subsequent two decades of economic malaise as a "balance-sheet recession." That conclusion wasn't lost on the Federal Reserve during the financial crisis of 2008-09. The Fed engineered an emergency response to craft what can best be described as a balance-sheet recovery.

At its policy meeting earlier this week, the Fed made clear that it's scarred, if no longer scared, by the crisis. Extraordinarily loose monetary policy will continue in force. While the Fed's monthly asset purchases will decline, short-term interest rates will remain pinned near zero. And long-term rates need not move higher—the Fed assures us—even with improving inflation dynamics, credit markets priced-for-perfection, and stock prices at record levels.

The aggregate wealth of U.S. households, including stocks and real-estate holdings, just hit a new high of $81.8 trillion. That's more than $26 trillion in wealth added since 2009. No wonder most on Wall Street applaud the Fed's unrelenting balance-sheet recovery strategy. It's great news for those households and businesses with large asset holdings, high risk tolerances and easy access to credit.

Yet it provides little solace for families and small businesses that must rely on their income statements to pay the bills. About half of American households do not own any stocks and more than one-third don't own a residence. Never mind the retirees who are straining to make the most of their golden years on bond returns.

The Fed's extraordinary tools are far more potent in goosing balance-sheet wealth than spurring real income growth. The most recent employment report reveals the troubling story for Main Street. While 217,000 jobs were created in May, incomes for most Americans remain under stress, with only modest improvements in hours worked and average hourly earnings.

It's taken a full 76 months for the number of people working to get back to its previous peak, a discomfiting postwar record. Unfortunately, during the same period the U.S. working-age population increased by more than 15 million people. That's why the share of the working-age population out of work is now at a 36-year low. There are now more Americans on disability insurance than are working in construction and education, combined.

Meanwhile, corporate chieftains rationally choose financial engineering—debt-financed share buybacks, for example—over capital investment in property, plants and equipment. Financial markets reward shareholder activism. Institutional investors extend their risk parameters to beat their benchmarks. And retail investors belatedly participate in the rising asset-price environment.

All of this lifts balance-sheet wealth, at least for a while. But real economic growth—averaging just a bit above 2% for the fifth year in a row—remains sorely lacking.

Higher asset prices are not translating into meaningful increases in capital expenditures, and the weak growth in business investment is proving to be an opportunity-killer for workers. Those with jobs have some job security. But they are less willing to run the risk of finding a better opportunity, or negotiating for higher wages.

Those without jobs, especially in the younger cohorts without a post-high school education, do not attach to the workforce, thus never gaining the entry-level skills and discipline to build a career. The malaise in the labor markets—and muted business investment—help explain why productivity measures are a full percentage point below historical norms.

The Fed's latest forecast has the economy growing above 3% during the balance of this year and next, and the unemployment rate falling to about 5.5% by the end of 2015. If the Fed's sanguine scenario finally comes to pass, interest rates are likely to move meaningfully higher across the yield curve. The money pouring into the financial markets may be redirected, in part, to the real economy. Stocks, leveraged loans and real estate are likely to re-price in a higher interest-rate environment. If rates move quickly or unexpectedly, the vaunted balance-sheet recovery could suffer a blow.

What if there is an unexpected shock that causes the economy to slow in the next year or two? The Fed would surely be called upon to bolster asset prices and stimulate the real economy. But would a return to $85 billion per month of bond-buying really be effective? We are skeptical that either Wall Street or Main Street would be comforted by quantitative-easing redux.

Balance-sheet wealth is sustainable only when it comes from earned success, not government fiat. Wealth creation comes from strong, sustainable growth that turns a proper mix of labor, capital and know-how into productivity, productivity into labor income, income into savings, savings into capital, capital into investment, and investment into asset appreciation.

The country needs an exit from the 2% growth trap. There are no short-cuts through Fed-engineered balance-sheet wealth creation. The sooner and more predictably the Fed exits its extraordinary monetary accommodation, the sooner businesses can get back to business and labor can get back to work.

What is the difference between 2% growth and 3% growth in the U.S. economy? As the late economist Herb Stein recounted, the answer is 50%. And the real difference is one between a balance-sheet recovery that helps the well-to-do and an income-statement recovery that advances the interests of all Americans.

 

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Fri, 06/20/2014 - 09:07 | 4877495 Peter Pan
Peter Pan's picture

Balance sheet wealth can only be sustained and grown by positive cash flow and savings arising from a market that is not constantly pumped and primed by central bank and government interference.

Fri, 06/20/2014 - 09:21 | 4877534 GetZeeGold
GetZeeGold's picture

 

 

 

Where has all that fiat gone again?

 

I haven't seen a damn dime of that money....and yest my grandkids are on the hook to pay it back.

Fri, 06/20/2014 - 09:21 | 4877541 dryam
dryam's picture

Government fiat does not create wealth, it transfers wealth.

Fri, 06/20/2014 - 09:26 | 4877544 CH1
CH1's picture

We already have the tools we need to bypass the Fed for a lot of our business: Silver, gold and Bitcoin.

We just need to USE them, rather than sitting around bitching.

God forbid that anyone should ever risk anything in their terrified little lives.

Fri, 06/20/2014 - 09:26 | 4877555 pods
pods's picture

Why is it when I hear "billionaire hedge fund guy" I start to dream of them being in that basement at the end of The Girl with the Dragon Tattoo?

pods

Fri, 06/20/2014 - 09:41 | 4877569 Occident Mortal
Occident Mortal's picture

90% of all Americans would be richer and enjoy a higher standard of living if they lived in Europe.

 

FACT.

 

Median Disposable Income

 Norway

52,575

 Luxembourg

47,936

  Switzerland

47,237

 Denmark

39,742

 Australia

38,570

 Canada

34,929

 Sweden

31,878

 Finland

31,482

 Austria

31,357

 Ireland

30,287

 Belgium

29,221

 Netherlands

29,155

 United States

29,056

 France

27,835

 Iceland

27,748

 Germany

27,213

 

http://stats.oecd.org/Index.aspx?DataSetCode=IDD

 

 Also, Healthcare in Europe is typically $5,000 per year cheaper than the US and Europeans have a higher life expectancy.

 

 

Strip out the huge inequality of the top 10% and the US is very average.

Fri, 06/20/2014 - 09:58 | 4877663 JRobby
JRobby's picture

Junked by Troll. Some can't handle the truth.

Fri, 06/20/2014 - 10:54 | 4877811 dryam
dryam's picture

I did not junk the post, but I disagree with the short-sighted analysis. The real cost of living is fairly high in several of those countries listed. Also, the U.S.'s welfare system is quite robust and provides a lot to many who are not deserving (e.g. numerous people on disability who could clearly work, etc). In regards to our healthcare system, it's extremely expensive to society, but not to a majority of poor people. Poor people go to the E.R., get admitted to the hospital, run up a high bill, and then simply do not pay it. That's one main reason why healthcare seems so expensive; those with insurance & others who actually pay their bill without insurance end up paying for the large percentage who don't pay anything. I would suggest that this applies to Americans in general: the top 49% are getting an increasingly raw deal as they are supporting the bottom 51%. I strongly disagree that 90% of Americans would have higher standards of living in those countries listed. A huge chunk of Americans are poorly educated, fat, lazy, and full of a sense of entitlement. This wasn't the case in the past, but things have changed.

Additionally, looking at life expectancy is very shortsighted when comparing healthcare systems. There's a lot more that goes into life expectancy such as type of lifestyles people live & and what they put in their mouths.

However, after saying all that I do agree that the standard of living is in the United States is going to drop much more in the future in relative terms than anywhere else in the world.

Fri, 06/20/2014 - 11:46 | 4878100 whotookmyalias
whotookmyalias's picture

Back on point. Balance sheet wealth only works as long as the people have confidence in the entity.  Many of us do not, but the majority of Americans have no clue how rigged the casino really is.  No way people would have allowed this to happen 200 years ago.  In today's world, the central banks create wealth to line the pockets of themselves and their cronies. The banksters and the media all tell us how wonderful our lives are and how strong the economy is.  

 

Sometimes confidence is gained based on sound practices, controls, and transparency. Sometimes it is created through smoke, mirrors, deception, the media, and slight of hand.  The Fed's balance sheet will create wealth for the lucky as long as they can convince the world that the US dollar is worth something.

Fri, 06/20/2014 - 10:01 | 4877674 venturen
venturen's picture

Sorry you are wrong...I lived in the UK and Holland....and have friends across europe. The healthcare isn't good....long waits and lots of deaths. If you compared regular people...not the democrat voting inner city scum, and included the 20% VAT taxes....you find they are quit poorer. We do need to get rid of the government worker aristocracy here though. No government workers in europe make as much at the truly rich fireman, cops, teachers, state and federal workers. Was looking at the pay for VA workers....making $350000 for part time doctor work and pensions in the $100k. Europeans have much lower pay scale...and they live much more frugally! 

Fri, 06/20/2014 - 10:10 | 4877708 Flakmeister
Flakmeister's picture

Yawn...

Fri, 06/20/2014 - 12:39 | 4878313 NidStyles
NidStyles's picture

Simply not true, those systems in Europe do not allow for choice in their markets. Their wealth is merely a by-product of not having to pay for their own defense for 60 years.

Fri, 06/20/2014 - 09:31 | 4877573 eclectic syncretist
eclectic syncretist's picture

One need look no further than to the right on the screen and see the ad for a high-yield savings account at less than 1% to know how much the country is fucking savers.  One would need to have saved several million dollars to live off that in retirement.

Fri, 06/20/2014 - 10:01 | 4877675 JRobby
JRobby's picture

Which some people might have done if they had knowledge in advance of the derivative / CDO time bomb and the eventuality of ZIRP that they caused.

 

No warning, you are fucked. Thanks for playing.

Fri, 06/20/2014 - 12:17 | 4877817 Flakmeister
Flakmeister's picture

You realize that this is the first time that cheap money has not been able to result in new sources of cheap oil...

And that is the real problem....

Edit: There are at least 6 people here that are completely clueless about how an economy really works...

No doubt they worship at the altar of Von Mises and posit praxeological reasoning will produce the required manna..

Either that or they are simply hedgetards living in denial...

Possibly both....

Fri, 06/20/2014 - 12:37 | 4878303 NidStyles
NidStyles's picture

LOL! This guy thinks this has never happened before....

Fri, 06/20/2014 - 09:28 | 4877560 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

explain to average joe why he should trade 1 manipulated 'currency' for any of those other manipulated and far more volatile 'currencies'

that's why they don't risk it

Fri, 06/20/2014 - 09:49 | 4877622 ThirteenthFloor
ThirteenthFloor's picture

I often wonder why more businesses/people just start taking PM coins for payment.  I sold a used car once and the buyer offered to pay gold eagles...why not, nothing to fear here. 

Fri, 06/20/2014 - 10:04 | 4877656 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

The idea one should have a job instead of a small business is decades old now. It will take a long, long time to convince people otherwise. And then it will take a long, long time for people to acquire the skills of small business and small scale production. It's basically a lost art. Creating or rediscovering an alternative currency is easy, being able to use it effectively in a micro-economy with The Empire still around is much harder.

Fri, 06/20/2014 - 09:27 | 4877557 Downtoolong
Downtoolong's picture

It has effectively been transferred from savers and small investors to billionaire hedge fund managers and their ilk.

 

Fri, 06/20/2014 - 09:32 | 4877577 Pee Wee
Pee Wee's picture

Tell your grandkids the same thing I tell mine, "shock and awe, baby, shock and awe."

Fri, 06/20/2014 - 11:35 | 4878060 ejmoosa
ejmoosa's picture

Even better, tell your grand kids that they have no moral obligation to pay back that debt.  Those that loaned it knew there was gonna be a problem.  

How in the hell is it Constitutional to force those not yet born to pay off someone else's debt?

And what will be the best way to end that debt slavery altogether?

I think most of us already know the answer.

 

Fri, 06/20/2014 - 09:59 | 4877668 Da Yooper
Da Yooper's picture

Where has all that fiat gone again?

 

Oy  such an easy answer

 

you can find it in the bankers bonus's 

 

For the rest of you

 

nothing

Fri, 06/20/2014 - 12:08 | 4878174 kita27
kita27's picture

What even is wealth? Who even knows anymore, humans are all so different and place different values on different things.

Not everyone perceives gold as worth anything at all, yet value social services as far more important.

Sex for example is a prime candidate. No commodity exchange required, no resources exploited, yet, 100 % satisfaction ( sometimes) is almost guaranteed. It is a trade in domestic human service only, and keeps millions of ppl happy and satisfied, this is true wealth! And if we were truly tied to a limited supply of fiat, far fewer than these millions would be enjoying this form of wealth that hurts nobody.

The beauty of a fiat system is it allows markets to form and wealth to be created, ( or desires if you will, to be satisfied to a much larger extent than a system tied to a gold standard.

The bad part is the economy expands at a rapid clip and is very hard on the environment.

We cannot deny today's world is much more advanced and wealthy due not only global trade, but the ability to expand the monetary base and to leverage it.

True, it's a form of cheating, musical chairs even, but in the short term it is effective and keeps us all happy and motivated and employed. After all, the institutions, infrastructure, art etc cannot be taken back once the price of fiat returns to a more intrinsic value. We thus get people off their lazy assess and get shit done with fiat. And in the end, it is only the ignorant usually that gets fucked over and who cares about them anyway.

Personally, I'm a hard gold man, and I also believe this current system will inevitably collapse. But shit it has been fun while it lasted I guess.

It is a system whereby the weak are permitted to survive off other weak eg ( living in cities in a perpetually useless never ending circulation of money through menial and Mind numbing service sector work) while having their pockets picked by the smart and the strong and being none the wiser :)

Ultimately,

Just make sure you cash your paper in for things that are truly, undeniably, universally valuable to all, Food, water, shelter, Guns, ammo etc before shit hits the proverbial.

Ps, remember that the interests of the individual, and the interests of the state he is a part of are not the same, indeed , they can be mutually opposing. If you cannot understand this simple fact, what are you even arguing for? Your arguments become completely contradictory.

I need only mention importers vs exporters, or exporters wanting cheap currency versus travellers who want a strong currency, both are part of the same system, but both want the system to represent their own selfish behaviours.

Economics and political economy are the most complex issues and I'm tired of one eyed people just putting across the same shit and not understanding the positives and negatives of each type of system. If you want everything YOUR way you are advocating a system based on power and force, so don't blame people with power when they force the system into a direction that is opposed to yours.

That would make you a hypocrite.

Fri, 06/20/2014 - 09:07 | 4877496 MFL8240
MFL8240's picture

Tell that to Dimon and his courrpt cartel!

Fri, 06/20/2014 - 09:09 | 4877499 Space Animatoltipap
Space Animatoltipap's picture

Haha, in other words we have been bailed out have become wealthier and we don't care the stupid labour slaves. That's for the government to deal with. Just tax these stupid slaves and give them some illusions. 

Fri, 06/20/2014 - 09:09 | 4877503 SDRII
SDRII's picture

Fed issues response: so

Fri, 06/20/2014 - 09:09 | 4877504 fonzannoon
fonzannoon's picture

How great is this chart? Starts to get you all misty eyed remembering 2008...

http://finance.yahoo.com/q/bc?s=DB&t=6m&l=on&z=l&q=l&c=

Fri, 06/20/2014 - 09:29 | 4877568 Dr. Engali
Dr. Engali's picture

Should it bother me that yahoo is telling me to buy gold?

Gold at $1,300 is still worth buying: Kilburg

 

http://finance.yahoo.com/blogs/breakout/gold-at--1-300-is-still-worth-bu...

Fri, 06/20/2014 - 09:32 | 4877576 fonzannoon
fonzannoon's picture

Yahoo and Barrons pimping gold....

http://blogs.barrons.com/focusonfunds/2014/06/20/what-the-heck-just-happ...

 

The Lindsey Group’s Peter Boockvar writes this morning that he’s watching gold and TIPS as a baromoter of the market’s view of the Fed’s credibility — and he reads the Thursday trading as a note of doubt:

Because of my amazement and surprise that the Fed didn’t alter one bit its comments on inflation in their official statement, barely changed its PCE forecasts and Janet Yellen referred to the recent higher inflation data as ‘noise’, I felt it important to mention yesterday morning that watching gold and inflation break evens were the two key indicators to watch as I believe going forward they will be a valid vote in giving their opinion on the Fed’s credibility with their policy relative to the reality of the data (in addition to the recent consumer price data, the CRB index is a ½ pt from the highest since September ’12) . While it was just one day, gold certainly spoke loud and clear on its thought of the new Fed forecasts with its biggest one day percentage rally since September and inflation break evens went up for a 3rd straight day with the 5 yr implied inflation rate at the highest level since May 2013. Based on this market response from both asset classes, I’m declaring Janet Yellen’s honeymoon as Federal Reserve Chair as officially over. This is not because I expect an imminent revolt in inflation sensitive markets to her inflation forecasts as this is always a process but because yesterday was the 1st time in her tenure that the market came out and blatantly disagreed with her and the committee as I believe they correctly should have. I expect this divergence to continue.

Fri, 06/20/2014 - 09:09 | 4877506 Notsobadwlad
Notsobadwlad's picture

One of the biggest tragedies is that the banks do not need savers and do not want them. They can get an infinite amount of free fiat from the Fed or by creating it out of thin air themselves.

It sure does devalue that which is already in circulation though.

Fri, 06/20/2014 - 09:37 | 4877591 Pee Wee
Pee Wee's picture

Fiat saving is extinct, as is wealth creation for the vast majority that need it. 

ZIRP is the biggest bailout of them all - might as well be deposit confiscation.

Fri, 06/20/2014 - 09:59 | 4877667 Puncher75
Puncher75's picture

That process can only last for a time

Fri, 06/20/2014 - 10:01 | 4877678 venturen
venturen's picture

A ReHypo a day keeps the savers away!

Fri, 06/20/2014 - 09:09 | 4877507 Peter Pan
Peter Pan's picture

The FED has also made the tragic error of trying to restore the economy by inflating the balance sheet values. This is the equivalent of trying to make a car go faster by looking for the downhills.

Fri, 06/20/2014 - 09:20 | 4877539 gcjohns1971
gcjohns1971's picture

It would be more accurate to say that they are making a car go faster buy digging out "downhills" in front of it.

Everything seems to be going fine, and speed picking up, until you figure out that A) you can't dig forever and B) Now you have to get out of the hole.

Fri, 06/20/2014 - 09:12 | 4877517 youngman
youngman's picture

It used to be if you had a shovel..you would dig a hole to improve something...putting a sewer in for example...and then you company would get paid for doing that work..and your company would grow in value....now with the printed money...your company just grows for no reason...you dont need the shovel anymore....its fake growth...

Fri, 06/20/2014 - 09:18 | 4877532 eclectic syncretist
eclectic syncretist's picture

It is inflation of the sort that Thomas Jefferson warned about.

Fri, 06/20/2014 - 09:15 | 4877523 pods
pods's picture

Sorry, Op-Eds from a FED guy and hedge fund guy don't really have the GRAVITAS that make my thing tingle.

It is cute how these skimmers are looking out for us.  How magnanimous.

pods

 

Fri, 06/20/2014 - 10:11 | 4877712 Flakmeister
Flakmeister's picture

Yes, skimming off 2/20 is a surefire way to wealth, at least for a few...

Fri, 06/20/2014 - 13:36 | 4878510 Colonel Klink
Colonel Klink's picture

And we all know who the majority of those few are.

Fri, 06/20/2014 - 09:15 | 4877525 eclectic syncretist
eclectic syncretist's picture

We are well past the point of no return.  IMHO the FED, in collusion with their bankster owners, will buy up all the shares the banksters can sell to them, driving prices as high as possible, then let it all crash, blaming government policies for the resultant devastation.  At the same time the banksters will reap enormous profits on short positions that will later be deployed in picking up everything that had to be sold during a well-planned margin hell desperation, for bargain basement prices.  The shares that the FED bought will be worthless, but no more worthless than the imaginary notes that have not yet been printed into existence.  So the FED will lose nothing, as always, and the banksters will have maximal profits.

This of course assumes that the banksters are fully aware that the endgame is upon us and they have to go for it all at one fell swoop now.

Fri, 06/20/2014 - 09:18 | 4877531 ms8172
ms8172's picture

When is this shit going to go down... I'm tired of reading Doom and Gloom news and the markets keep running up........ WTF?

Fri, 06/20/2014 - 09:56 | 4877657 ThirteenthFloor
ThirteenthFloor's picture

In case you haven't notice the "slow burn" is working quite nice for the Elite.  Take 'em out slowly, one city one demographic at a time....behind the scenes they laugh it up, lite up more cigars and toast to small victories.  Doom and gloom is a small business but growing business of folks betting the elite will get mad one day and overturn the tables....not likely while the slow burn works so well and is not easily spotted by Americans with an IQ under 90.

Fri, 06/20/2014 - 10:09 | 4877707 BeetleBailey
BeetleBailey's picture

Here's my thinking on that.

It's getting to the point - regardless of the doom and gloomers - that the next leg of money to be made/sheeple to be shorn/profits to be banked.....

is on the downside....

the planet Blue Orb is over-due for a;

false flag/natural disaster/another FOOKasheemer/asinine assasination/calamity

The YOU-kraine - EEEEE-rack and Bananastan not withstanding....some shit's gotta blow up (likely....on cue)

takes months sometimes to "rinse" the market....prep....

in this case...rigged...years....they've ran the count to 3 and 2 and the hitter keeps fouling off pitches....

but the next leg to make coin is the downside....

cue the event....

Fri, 06/20/2014 - 11:38 | 4878078 ThirteenthFloor
ThirteenthFloor's picture

Beetle, agree the juice is about all out of this pump cycle (no pun intended).  They will meet quietly on a Sunday morning as they did on 9.14.2008 and 9.9.2001 decide to dump(sell) or burn paper(eliminate obligation) and ride(buy into) next big swell into the beach.  Of course leaving their wreckage along the way.  They are getting smarter, like locking out shorts on financials in the middle of the dump, in '08.

50 to 1 long shot, someone breaks through and makes it to the endzone before plan is executed.

Fri, 06/20/2014 - 09:19 | 4877536 Seasmoke
Seasmoke's picture

If I book your bets. And you lose $2000 this week, but only are able to pay me $1200.....How much did I "lose" ???

Fri, 06/20/2014 - 09:21 | 4877540 MrBoompi
MrBoompi's picture

A balance sheet recovery for the benefit of the wealthy can be engineered by the Fed. An income statement recovery cannot. The Fed has never been in the business of helping the middle class or poor, unless one considers putting them in greater amounts of debt "help". If you read The Creature From Jekyll Island, you'll see the real reasons the Fed was formed, and you'll see they have been successful at doing what they are supposed to do.

Fri, 06/20/2014 - 11:47 | 4878103 intric8
intric8's picture

A V shaped recovery, with the tip of the V creeping in to the fires of hell

Fri, 06/20/2014 - 09:22 | 4877543 yogibear
yogibear's picture

Tell us what we don't know.

The next plan is to keep destroying the US dollar until the sheeple figure out what's going on and do everything to dump the US dollar.

Then it's on to Plan B for the PhD Fed banksters., SDRs.

Devalue happens on a weekend when the media, CNBC has time to spin the news. Just like Goldman becoming a bank during a weekend so they had access to TARP funds.

Fri, 06/20/2014 - 10:13 | 4877724 Flakmeister
Flakmeister's picture

Devalue relative to exactly what?

Whether you like it or not, the USD will be the last fiat standing...

Get over it and as LoP says, hedge accordingly....

Fri, 06/20/2014 - 11:57 | 4878137 NidStyles
NidStyles's picture

So your explanation should be accepted why now? The US is just going to threaten Russia and China to keep propping them up how?

Fri, 06/20/2014 - 12:17 | 4878219 Flakmeister
Flakmeister's picture

Go play in the traffic...

Fri, 06/20/2014 - 12:36 | 4878288 Colonel Klink
Colonel Klink's picture

Go die in a fire...

Fri, 06/20/2014 - 12:36 | 4878292 NidStyles
NidStyles's picture

Still not willing to be honest with us....

Fri, 06/20/2014 - 13:52 | 4878400 Flakmeister
Flakmeister's picture

Still clueless as what a quarter yard means, eh?

And lets not even get into your "understanding" of physics, oh self-proclaimed one....

Fri, 06/20/2014 - 09:27 | 4877545 Dr. Engali
Dr. Engali's picture

Okay I'll say it again. There will be no capital expenditure until the over capacity issues are addressed that are plaguing  just about every sector of the economy.  We have too much retail space, office space, too many houses, too many roads that can't be maintained... the list goes on. This will be a problem that continues for  a long time. Welcome to Japan 2.0, where we 'fix' nothing and keep a dying system on life support.

Fri, 06/20/2014 - 09:29 | 4877566 El Hosel
El Hosel's picture

Thats why extend an pretend is the only "Plan".... The mess is too big to bail, so keep bailing anyway.

Fri, 06/20/2014 - 09:36 | 4877590 eclectic syncretist
eclectic syncretist's picture

And lets not ignore the possibility that the innovations in personal electronics over the past couple of decades appears to be over, unless you want to buy new versions of the same old thing to be "fashionable".

Fri, 06/20/2014 - 12:07 | 4878170 ThirteenthFloor
ThirteenthFloor's picture

What supply and demand cannot quantify is real science breakthroughs.  I see China is close to Nuclear Fusion via H3 fuel, which is a real breakthrough, as it would give 1000 fold energy availability increase per capita per CNY.  At Apple they have 25 guys in a room trying to "discover" the next followup to the iPod/iTunes...ha ha.  

This is why the juice is about out of this pump cycle, the consumer has been consumed.  

Fri, 06/20/2014 - 13:22 | 4878463 Cthonic
Cthonic's picture

Nearly, but not quite.  The big players continue to try to lock everyone into their black box platforms, be they phones, game boxes, smart teevees, social networks, shopping sites or whatever.  I expect (and actively work to support) a surge in open systems, from open hardware (all the way down to the vhdl and chip masks) to higher order social systems (exchanges, communication fabrics, escrow and arbitration services etc).  People tire of the surreptitious surveillance, tracking and shadow deprivileging/classification foisted upon us and enabled in part by closed devices.

Fri, 06/20/2014 - 12:15 | 4878204 Seer
Seer's picture

Exactly, Doc!

AND, people are and will continue to be BROKE, in which case the ability to buy shit to support "business" just ain't going to happen.  Of course, there's the issue of folks like this wanting us to work for nothing so that they can skim off of sales abroad- same as it ever was...

Fri, 06/20/2014 - 09:24 | 4877549 techstrategy
techstrategy's picture

We can end the games forever by squeezing the Fed and its owners.  Divest financial assets which have grown exponentially for decades, particularly low float trading scams like NFLX and raise FRN, which cannot be abused for prop trades, and buy gold.  Convert a few percent of the obvious bubbles per week... The Fed and its owners are trapped if we all start practicing the lost art of investing rather than simply doing technical trading.

Fri, 06/20/2014 - 09:28 | 4877559 BeetleBailey
BeetleBailey's picture
Former Fed Governor, Hedge Fund Billionaire Slam Fed: "Government Fiat Does Not Create Wealth"

 

It does if you know what to BUY with the clown bucks -

paper "assets" to hard assets.....

indeed.....

 

MOAR.....BUYBUYBUY....you sheeple...

 

lather....rinse................REPEAT!

Fri, 06/20/2014 - 09:28 | 4877561 UTICA CLUB XX PURE
UTICA CLUB XX PURE's picture

BARF:

I could'nt read that...

no/sarc

Fri, 06/20/2014 - 09:34 | 4877586 firstdivision
firstdivision's picture

"If the Fed's sanguine scenario finally comes to pass, interest rates are likely to move meaningfully higher across the yield curve. The money pouring into the financial markets may be redirected, in part, to the real economy. "

This koolaid hasn't worked on the real economy for the past 5 years, so no, it will never happen as it would mean paying income earners more at the expense of asset price riders. 

Fri, 06/20/2014 - 09:36 | 4877592 canonball
canonball's picture

Belgium and the new fed repo tool will fix it all....

Fri, 06/20/2014 - 09:38 | 4877597 lynnybee
lynnybee's picture

ASSET RICH / INCOME POOR ....... yes, that exactly describes my meager little situation.  i'm one of the lucky few who actually has a paid - off home, small & run-down, but, paid off.   & i'm barely holding on.   not to mention my kids who look to me as the responsible stable person who was in a position to shove some food & utility bill money their way.  

INTEREST ON MY DAMN SAVINGS ACC'T !!   I WANT MY DAMN INTEREST LIKE THE OLD DAYS !  

Fri, 06/20/2014 - 09:45 | 4877613 buzzsaw99
buzzsaw99's picture

ungrateful bastard

Fri, 06/20/2014 - 09:53 | 4877632 gcjohns1971
gcjohns1971's picture

HYPOTHESIS:

Could the bond fund fee-gates be intended to crash the bond market for the purpose of enabling the principal issuers of that debt to buy it back at a discount with newly-printed "FED-GIFT" money?

Could the Fed possibly be that naive, to think that wiped out, indebted producers could be made whole in this way?  Could they possibly have convinced themselves that confidence in the currency could survive an event like that?

Could they possibly have blanked out the fact that it is not productive organizations in the form of debt-issuing governments and companies that create material wealth, but productive individuals working at those companies that actually create material wealth, and whose debts cannot be extinguished in this way?

If so, then this is a recipe for total collapse.   While the "FED-GIFT" dollars are imaginary, the real wealth they represent in the economy is not.  This simply would shift the burden of debt-issuers' debt onto already-over-debted workers and consumers.

"Companies" would be whole.  The individuals that comprise them would be bankrupt, imobile, and with little incentive to effort. 

And if the now-whole companies were to raise wages enough to make working for them worth the effort they would rapidly be back in the same economic kettle they are in now.

You can't extinguish debt by passing it around.  This would just contract the money supply by an amount equal to the quantity of the debt extinguished, and be highly preferential to corporate vs private debt, and shift the real burden of the debt from collectives to the individuals that comprize them.

Fri, 06/20/2014 - 09:53 | 4877641 ejmoosa
ejmoosa's picture

The Fed contines to promote the idea that they are "tapering".

Yet they also say that they are taking all the matured holdings and purchasing additional bonds.  What they have tapered is the amount above and beyond that known as QE3.

Every dollar of QE3 will be used to purchase additional bonds when they mature, so they will still be out there.

Do I understand this correcty, or am I missing something?

When the additonal injections come to an end, the Fed is still going to be buying billions of dollars worth of paper.  That is not a neutral stance.

 

Fri, 06/20/2014 - 13:02 | 4878314 ThirteenthFloor
ThirteenthFloor's picture

The FRB and QE is just a "public statement", marketing BS.  It is not connected to anything they really trade behind closed doors.  For example, on 12.28.06 the FRB traded: 10b in the 14 day, 5.95b treasuries with a 5.13 stopout, 1.45b in agencies with a 5.27 stopout, mortgage 3.6b with a 5.29 stopout.  There was NO QE in place, yet they were buying mortgages and treasuries...ummmm 

What they say and what they do is not CLOSE to being the same.

We live in a world of PR statements, and they live in the real world.  Tapering is BS to the public, see guys "we are effective and we can exit effectively".

 

Fri, 06/20/2014 - 09:55 | 4877654 Colonel Klink
Colonel Klink's picture

Funny how these former fed members/government workers/CEOs all start telling the truth AFTER they've left their positions.  It still makes them liars guilty of criminal offenses which should be prosecuted.  They should all be in "bang you in the ass" prison for a very long time.

Fri, 06/20/2014 - 10:16 | 4877734 Flakmeister
Flakmeister's picture

Between your fixation with Jews and anal intercourse, it is all starting to make sense...

PTSD is treatable to some extent, I suggest you seek help...

Poor thing, it must have really hurt...

Fri, 06/20/2014 - 10:46 | 4877820 Colonel Klink
Colonel Klink's picture

Yep, I'd like to see everyone of the criminal ones fucked right in the ass.  Using YOUR dick.  However considering how tiny it must be, that would hardly be a punishment and you'd derive too much enjoyment from it.

Good morning Felchmeister!

EDIT:  Funny I didn't say anything about jews, but now that you mention it, how is it a majority of those folks seem to be!

Fri, 06/20/2014 - 11:12 | 4877965 Comte d'herblay
Comte d'herblay's picture

One correction:  Not a majority.  It's 100% Jewish for 30 years and counting.

Fri, 06/20/2014 - 11:19 | 4877998 Colonel Klink
Colonel Klink's picture

I was referring to the entire group, not only Fed chairman.  But yes, you would be correct regarding that.

Fri, 06/20/2014 - 10:51 | 4877874 Colonel Klink
Colonel Klink's picture

Dear Fuckwithmeister, it's not just me:

http://www.washingtonpost.com/world/a-new-anti-semitism-rising-in-france...

Once again history is about to rhyme, all because the exhaulted ones never do anything to deserve it.  Read it and weep dipshit.

Klink out

Fri, 06/20/2014 - 11:11 | 4877960 Flakmeister
Flakmeister's picture

Zzzzzz...

Fri, 06/20/2014 - 11:19 | 4877995 Colonel Klink
Colonel Klink's picture

Did I loose (sic) you?

Fri, 06/20/2014 - 11:10 | 4877955 Comte d'herblay
Comte d'herblay's picture

Fixation????  Yer a fuckin ostrich or apologist:

Rubin, greenspan, J Yell, Summers, Orszag, Geithner, Bernanke, Gensler, Lew  ----------------over 30 yrs of Jewish monopoly------if those names were instead Corleone, Rocco, Lucca, Gotti, DeNunzio, Pacino, Mastroianni, Caputo, over the same 30 years and counting, the media would be screaming that the Mafia is in the most powerful financial positions in the World.

The Jewish Mafia in this instance has a complete control over Treasury, and the FED, as well as those like Blankfein in the Financial services industry in New York, who have been given printed trillions and still counting for doing NOTHING, their trillions in losses totally restored.  

In any objective sense to ignore this conspiracy is tantamount to turning ones back on Jihad. 

It's real, it's more than coincidence, and in other countries, several of them would be beheaded, and rightfully so. 

 

Fri, 06/20/2014 - 10:12 | 4877721 NIETSNEREM
NIETSNEREM's picture

Is it just me or does it seem as if every story here appears on CNBC 20 minutes later?

Fri, 06/20/2014 - 11:29 | 4878048 Flakmeister
Flakmeister's picture

Considering they use the same feed, why are you surprised?

Fri, 06/20/2014 - 11:53 | 4878125 Colonel Klink
Colonel Klink's picture

And which same feed would that be Flaky?

Fri, 06/20/2014 - 12:00 | 4878151 NidStyles
NidStyles's picture

This is what I have been wanting to know, his positions match the media's very closely, so who does he work for...

Fri, 06/20/2014 - 12:14 | 4878165 Colonel Klink
Colonel Klink's picture

I simply see little similarity between the MSM and the information I get here at ZH.  Most of the important matters are simply ignored completely, or are a mere 10 second mention, followed by SQUIRREL!

Just so you're aware, I agree with you Nids.  My first guess is he's hasbara, and if not, one ignorant motherfucker.

Fri, 06/20/2014 - 12:36 | 4878287 NidStyles
NidStyles's picture

Even the people I know heavily invested in the system do not push the BS he does...

Fri, 06/20/2014 - 12:39 | 4878312 Flakmeister
Flakmeister's picture

Perfect...

You two were truly made for each other...

Klink and Klunk...

Fri, 06/20/2014 - 12:45 | 4878323 Colonel Klink
Colonel Klink's picture

I guess no one ever told you it's impolite to speak with your mouth full, Felcher.

And we all know who you've been felching.  Tell me, does tribal sperm taste different from the others?

https://en.wikipedia.org/wiki/Felching

EDIT:  And that lame comeback was the best you could do?  You fail on SO many levels.

Fri, 06/20/2014 - 13:14 | 4878437 Colonel Klink
Colonel Klink's picture

Still never answered my question Flakey!

Fri, 06/20/2014 - 13:38 | 4878524 Flakmeister
Flakmeister's picture

Probably a Bloomberg terminal, Associated Press, other wire services etc.... All depends on the budget ABC Media cares to devote to it...

Ask Tyler if you really want to know...

BTW, you are so cute when you play stupid Klinkie....

Fri, 06/20/2014 - 14:11 | 4878655 Colonel Klink
Colonel Klink's picture

Thanks for the answer.  So in other words, ZH pulls its stories from all the same MSM sources?  From the majority of what I read, it doesn't seem like much of it would make the wire.  Frequently it looks like independent analysis.  Interesting, I wonder if a Tyler would care to elaborate.

And thanks Flak, you have the sweetest ZH pillow talk.  For the record, according to all the ladies, I'm cute regardless.  I'm off to host a group of them later this evening.  Should be a fun night.  Enjoy the basement of your mom's house.

Fri, 06/20/2014 - 15:16 | 4878924 Flakmeister
Flakmeister's picture

They can pull a headline and write their own commentary...

Very simple really...

Fri, 06/20/2014 - 10:18 | 4877742 Hohum
Hohum's picture

All I know is whatever the Fed does, some group has to accumulate debt rapidly.

Fri, 06/20/2014 - 10:18 | 4877743 studfinder
studfinder's picture

When did common sense disappear in this country?  Duh!  Of course you can't produce wealth out of thin air by entering digits in a computer.  You don't produce wealth by having overpaid WalMart greeters  either.  You need producers.  Factories, minerals, energy production, farmers, etc to produce real wealth.   This country is toast if we don't start producing real goods.   This bullshit "Green" economy stuff is just science fiction...it exports all the pollution to China.  Once that slave labor over there gets their shit together (and get older) that well will dry up too.

Fri, 06/20/2014 - 11:20 | 4878009 Comte d'herblay
Comte d'herblay's picture

If you don't think more wealth than has ever been known to man, wasn't created in just 6 years,  by giving a Quadrillion dollars to the Jewish MAfia in New York then you need to have your economics lessons all over again. 

 

Don't believe everything you read in the blog headlines here.  It's very hazardous to your mental health, AND your own income.

Fri, 06/20/2014 - 14:04 | 4878622 Bemused Observer
Bemused Observer's picture

You're confusing the thing itself with the thing being used to measure it.
Yes, more 'dollar wealth' has been created. Millionaires are now billionaires. But are they really 'wealthier' at the end of the day? If I decide to measure my height in half-inches instead of inches, have I actually gotten any taller?

Fri, 06/20/2014 - 10:23 | 4877757 The Duke of New...
The Duke of New York A No.1's picture

They are just jealous they don't have their own printing press where they can get their "Money for Nothing, and their Chicks for Free!"

Fri, 06/20/2014 - 10:41 | 4877828 Colonel Klink
Colonel Klink's picture

Considering how ugly some of the people are, that should be corrected to "chicks for a fee!"

Fri, 06/20/2014 - 10:45 | 4877836 Billy Shears
Billy Shears's picture

Yes, this is all happening beacause a world-wide shift in the collective unconcious is taking place, in real-time, because the "Truth" has been revealed:

http://www.truthcontest.com/entries/the-present-universal-truth/

Please pass it along!

 

All the forces in the world are not so powerful as an idea whose time has come.

Victor Hugo

 

Fri, 06/20/2014 - 13:10 | 4878423 acetinker
acetinker's picture

Site offline?

Fri, 06/20/2014 - 11:07 | 4877947 Cycle
Cycle's picture

Apparently, the Fed ideology regarding the pricing of capital is far removed from the free market.  Their success over the past 6 years in hiding an economic "Minsky moment" by ballooning their balance sheet has given them confidence that this path will allow the US and others to exit the debt trap. In fact, and I think it will be revealed in time, it is precisely their obfuscation of economic signals that has encouraged a large amount of (mal)investments that make financial sense only within the ZIRP structure. The longer the policy continues, the larger the percentage of economic output is made dependent on ZIRP. When ZIRP falls apart as the bond markets begin to question the possibility that the Fed balance sheet will be monetized rather than sterilized, a proportionately larger percentge of the economy will be brought to a grinding halt, making the lock up of money markets after Lehman look like a very minor preview of the future.

Fri, 06/20/2014 - 11:18 | 4877990 Comte d'herblay
Comte d'herblay's picture
"Government Fiat Does Not Create Wealth".

 

(overheard in the men's room at Goldman Sucks right after this was posted here:

"BWAHAHAHHHH|AAAAAAHAHHHHHAAAAAAAAAAAA!!!!!!!!!  OO M FMM OG!!!! That guy is an idiot to say that out loud!!.  Lloyd, how much, in hunnerts of millions of that in bonuses did you get the last 5 years"???  

Fri, 06/20/2014 - 11:21 | 4878017 island
island's picture

DUH.

Do they not think The Fed knows this?  They think The Fed are idi0ts? 

Please, The Fed knows what they are doing: Their sole goal is to make the rich richer.  Nothing more.  Watch what they do, not what they say.

Fri, 06/20/2014 - 11:22 | 4878024 boattrash
boattrash's picture

Kevin & Stan, Thanks for sharing that wisdom. We'd have never effin known without ya!

(do I need to put /sarc?)

Fri, 06/20/2014 - 12:04 | 4878045 TomGa
TomGa's picture

Where have we heard this before? Let's see,  Oh yeah, NYTimes article published in April 1930 titled

 "Cheap Money a Costly Panacea"  

"Cheap money is a stimulant, but also an intoxicant," the article warned. "If the dose is large enough, a very substantial temporary effect can be brought about, but the headache will follow. It is not the way to do it. It is a costly means to buy temporary prosperity."

-- Special to the NYTimes, April 13, 1930, p.9

The article  warned that the 1930 Fed's pumping of cash into banks would quickly be used by bankers to speculate in the markets and for capital appreciation, rather than being directed to business loans for the purposes of re-igniting the productive base of the economy as intended.

Yeah, history really does repeats itself.

 

Article Text:

Dr. Anderson of Chemical Bank Says Remedy for Business Slump is Only Temporary

"Cheap Money is a stimulant, also an intoxicant," warned Dr. Benjamin M. Anderson Jr., economist of the Chase National Bank of New York City, in an address here tonight. "If the dose is large enough," he said,"a very substantial temporary effect can be brought about, but headaches will follow. It is not the sound way to do it."

Dr. Anderson, who is author of several books on finance and economy, said States and municipalities increased their debts with great rapidity in times of cheap money, borrowing more than was necessary because it was easy to do. This, he said, was a costly method of buying temporary prosperity.

Dr. Anderson's Address.

After saying that cheap money was a costly and temporary panacea for business depression, Dr., Anderson said:

"It is definitely undesirable that we should employ this costly method of buying temporary prosperity again. The world's business is not a moribund invalid that needs continuous galvanizing by an artificial stimulant."

"The Federal Reserve System and the central banks of Europe are under heavy pressure from advocates of the cheap money panacea, Dr. Anderson said. The matter is exceedingly simple in the minds of its advocates, he added."

"Cheap money makes good business, firm interest rates make bad business, and the whole thing is in the hands of the Federal Reserve System," Dr.Anderson said. "If the matter really were as simple as this, everybody could be an economist, and only the perversity of the central banks would keep us from being endlessly prosperous. But when we analyze the reasoning upon which this doctrine rests, difficulties present themselves."

...

"Cheap money will not induce manufacturers and merchants to increase their borrowings in an unsatisfactory business situation, Dr.Anderson declared. He cited the figures for commercial loans as reported by member banks of the Federal Reserve System in support of this contention."

"But if merchants and

Fri, 06/20/2014 - 12:09 | 4878177 TomGa
TomGa's picture

"But if merchants and manufacturers will not use cheap money, he said, speculators will. They will use cheap money in buying stocks, for the prospect of capital appreciation. Security loans of the reporting member banks stood on April 2 at the highest point in history, with the exception of the stock slump period ended Nov. 13 last and the year-end week ended Dec.31."

"In the second place, such methods are extremely costly in their effect upon the quality of bank credit. The ideal employment of bank credit is in financing the movements of goods, in financing short, self-liquidating commercial transactions. We have gone much too far in the substitution of bank investments in bonds, collateral loans against securities, bank holdings of real estate mortgages, and bank holdings of instalment finance paper for the normal bank credit that represents goods in movement and that adjusts itself automatically to the volume of trade."

NYTimes, April 1930

Fri, 06/20/2014 - 11:29 | 4878047 Bemused Observer
Bemused Observer's picture

"The sooner and more predictably the Fed exits its extraordinary monetary accommodation, the sooner businesses can get back to business and labor can get back to work."

Assuming that all the infrastructure for those jobs and businesses is still there, which it won't be. It's not as if those things were just put on some kind of hold, you know. Actual factories have been relocated, actual jobs have been eliminated. It's not like you can just flip the switch back to 'on', and the machinery starts humming again.

It takes time and money to re-build factories...workers who have been downsized or outsourced lose skills, markets that have been neglected lose their share in that economy. All these things take time to rebuild. And there has to be a REASON for businesses to make that investment.

Does anyone see any such reasons in our current economy?

Fri, 06/20/2014 - 12:00 | 4878150 CharlieMike
CharlieMike's picture

Foreign auto makers seem to have such reasons.

Fri, 06/20/2014 - 12:17 | 4878216 moneybots
moneybots's picture

"Actual factories have been relocated, actual jobs have been eliminated. It's not like you can just flip the switch back to 'on', and the machinery starts humming again."

 

In an age of robotics, what skills will be needed in a U.S. factory of the future?

Fri, 06/20/2014 - 13:25 | 4878475 Bemused Observer
Bemused Observer's picture

You're assuming that such a factory of the future will even BE there...
Now tell me this...WHO in their right mind would invest the considerable sums needed to open such a factory? What "demand" would they be responding to?

It doesn't MATTER how cheaply and efficiently you can MAKE stuff if there are no customers who can BUY your stuff. Spending lots of money to build such a business would be incredibly stupid without a good answer to that question.

Fri, 06/20/2014 - 12:22 | 4878238 RMolineaux
RMolineaux's picture

Bemused has made some excellent points.  I would add one more obstacle to a return to "normalcy" in our economic life:  the persistence of libertarian/"free market" ideology.  Will new capital investment be directed into the areas most necessary for real improvement in the lives of most Americans without government applied incentives?  Most emphatically not.  All it can do is to invent new and ingenious toys to an already cluttered marketplace.  Maturing capitalism will require greater investment in the replacement of existing investment and infrastructure.  Such investment will not yield the profits desired by bonus-hungry executives.  A good argument can be made that fiscal deficits preclude a role for government in making such necessary transformation to investment.  But I would reply that the useless and destructive channeling of funds into "defense" and spying has blocked government from making more productive use of its revenues.

Fri, 06/20/2014 - 11:32 | 4878062 nostromo17
nostromo17's picture

Like I have said all along.

 

Fri, 06/20/2014 - 11:38 | 4878079 Gringo Viejo
Gringo Viejo's picture

It's not meant to create wealth. It's meant to destroy the middle clas and by extension America in it's present form.
Easy Peasey....

Fri, 06/20/2014 - 11:54 | 4878126 magnumpk
magnumpk's picture

It's quite simple - money is not wealth, it is a claim on wealth.  Creating (printing) more money does not create wealth.  Even worse, it creates distortions and malinvestments that ultimately are wealth destroyers.  It is impossible for the Fed to create wealth.  These truths will become self evident, even to the guys on CNBC, sooner rather than later.

Fri, 06/20/2014 - 12:01 | 4878149 moneybots
moneybots's picture

"Former Fed Governor, Hedge Fund Billionaire Slam Fed: "Government Fiat Does Not Create Wealth"

 

Aren't they like late to the party?  They wait until global debt has been run up another 30 TRILLION dollars, then complain about it?

Fri, 06/20/2014 - 12:10 | 4878185 khaproperty
khaproperty's picture

Warsh is absolutely right. And it ist very easy to understand - with a little bit of common sense.

That´s what I say since the confirmation of QE by the Fed.

Same procedere as every year is really not good for people and country.

Fri, 06/20/2014 - 12:13 | 4878196 moneybots
moneybots's picture

"It's taken a full 76 months for the number of people working to get back to its previous peak, a discomfiting postwar record. Unfortunately, during the same period the U.S. working-age population increased by more than 15 million people."

 

Socialism is a failure. 

If the economy had been allowed to naturally crash and eliminate the excesses of the boom, debt would no longer be a drag on the economy.  Instead, the central planners have racked up even more debt, creating an even larger debt bubble.  The governments are now looking to tax every dime they can out of pockets of the people, which will be of no benefit to the economy, as it will destroy disposable income, driving down consumption and production.

Fri, 06/20/2014 - 12:26 | 4878252 Seer
Seer's picture

"Socialism is a failure. "

I could point out that there's been no "true" socialism, just as there's been no "true" capitalism.  But this is all moot , as NO "system" will/can avoid collapse as long as its underlying premise is that of perpetual growth (on a finite planet).

It doesn't matter, as Sir John Glubb wrote, what ideology or premise that a given empire operates under- they ALL collapse:

http://www.rexresearch.com/glubb/glubb-empire.pdf

Glubb fails, however, to connect the dots to the built-in verdict of collapse being due to perpetual growth.  For us today, however, it's a bit easier to spot as we read his accounting of research on 3,000 of empires and their collapses.  This writing, however, clearly shows the patterns... (how we scapegoat our failures)

Fri, 06/20/2014 - 17:30 | 4879275 Random_Robert
Random_Robert's picture

Correct-  economies must expand, and contract, just as populations (and empires) expand and contract, just as ecosystems expand and contract, all over periods of time...

I mean, what exactly is an economy, but a complex system comprised of the aggregate willpower, greed, fear, hate, lust, love and desire of its systemic constituents.

the premise that economc growth can be "willed" into a system is no more valid than the equally erroneous premise that water can be "willed" into the roots of a dying tree.  

Nature uber alles, Bitchez....

 

 

 

Fri, 06/20/2014 - 12:17 | 4878215 Seer
Seer's picture

"The country needs an exit from the 2% growth trap."

Another one that needs to be flogged for NOT understanding the Exponential Function!  Please, can we strive to pin these fuckers on this every time they open up their pie holes sucking wealth off the working lot?

Fri, 06/20/2014 - 15:26 | 4878969 Ban KKiller
Ban KKiller's picture

Just another argument for decentralization. The ultimate in being accountable. 

Fri, 06/20/2014 - 17:12 | 4879246 Random_Robert
Random_Robert's picture

"Higher asset prices are not translating into meaningful increases in capital expenditures"

That's a big DUH - Corporations are applying their earned income to share buybacks, which is the primary reason for their higher asset prices...

corporates are choosing share price preservation, over capital investment, because capital is not necessary, due to there being zero new sales channels opening up... due to the real economy failing to provide growth in "aggegate demand"  for anything non-essential.

You'll all know shit's getting serious when an ear of corn costs as much as an iPhone

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