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Bill Gross Warns "Global Economy & Financial Markets Are Insecurely Grounded"

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Authored by Bill Gross via Janus Capital,

“We’re all one thing, Lieutenant. That’s what I’ve come to realize. Like cells in a body. ’Cept we can’t see the body. The way fish can’t see the ocean. And so we envy each other. Hurt each other. Hate each other. How silly is that? A heart cell hating a lung cell?”

 

-"Cassie" in the novel The Three

I am a philosophical nomad disguised in Western clothing, a wondering drifter, masquerading in a suit near a California beach. Sand forms the foundation of my being and its porosity is at once my greatest strength and deepest wound. I have become after 70 years, a man who believes that no belief is sacred. I have ideals and moral standards, but I believe them specific to me. Had I inherited your body and ego, “I” could just as clearly have assumed “yours.” If so, I wonder, if values are relative, then what are mortals to make of them, and what would a judging God make of us? If a collective humanity is to be rooted in sandy loam, spreading its ideological seeds through howling winds only to root in mutant form at different places and different times, can we judge an individual life?

I despair that my only answer is “not easily.” The conclusion at its logical end makes us all innocent and equal. We are born innocent, falter, but no matter, we remain mostly innocent. My problem, however, is that if there are no absolute standards, it may minimize life’s value. Concrete, as opposed to porous sand, provides a firmer foundation for judgment, but sand I suspect is the soil into which we are insecurely grounded. All one thing, masquerading as ourselves.

The global economy and its financial markets are insecurely grounded as well. Decades and indeed centuries have taught us that both inflation and deflation are the enemies of stability and growth, but knowing which one is just around the corner can be difficult. Before the advent of central banks in the early 20th century, prices were just as likely to go up as down. A bountiful harvest or supply shock miracle could sink prices just as easily as the discovery of gold and silver in the New World could raise them. Even after the miraculous “discovery” of the modern central banks printing press, a miscue or fat fingered mistake by one of the “wise men” could lead to depression and accompany deflation. The world of the 1930s and the more recent lost decades of Japan give testament. Prices change – and while they usually go up these days, sometimes they do not. We are at such a moment of uncertainty.

That one or the other should be favored, is a fascinating debate. Currently, almost all central bankers have a targeted level of inflation that approaches 2%. Some even argue for higher levels now that deflationary demons approach in peripheral Euroland. They argue that the 2% level is sort of like a firebreak. Once inflation approaches zero, goes their theory, the deflationary firestorm is difficult to stop. With interest rates at zero and quantitative easing approaching potential political maximums, there is little water left to pour on the flames. Best then to keep inflation at a reasonable 2% so that the zero hour never comes. They have a point, but then how to explain to the average 30-year-old citizen that if so, his/her retirement dollar will only be worth half as much come 65, and if inflation averages 3%, it will only be worth a third. Actually, a 30-year-old citizen of the 1970s (yours truly), has experienced a 75% depreciation of his purchasing power. The cost of a firebreak can be expensive insurance.

And why, goes the argument, are lower prices so bad? Didn’t Wal-Mart get famous by featuring everyday low prices, and what’s so bad about 3-buck-a-gallon gas at the pump? More dollars in consumer pocketbooks suggests more spending, stronger growth rates and ultimately more jobs. Jim Grant, one of the most gifted financial historians of our day, has long argued that economies did just fine during bouts of deflation in the 18th and 19th centuries – in fact, in many cases, they did better. America in the 1880s was a period of good deflation with output rising by 2% to 3% from 1873 to 1893. Two percent targeted inflation, he would argue, is the “con” of central bankers who know nothing better than to create money during a financial crisis and then to keep creating it during the inevitable recovery. Grant has a point. If that is their job, then indeed they have been good at it.

But Grant must know, I suspect, that our modern finance based economy is not your 19th century Oldsmobile, if there had been one. “That indeed is the problem,” he might counter. In fact, Grant has even written a book supporting that thesis titled “The Trouble with Prosperity.” Prosperity has created inflation and excess, he would argue. My problem though (getting back to the introductory quote’s reference to a heart cell as opposed to the lung cell) is that much of our 21st century economy has been planted in the sandy loam of finance as opposed to the concrete foundation of investment and innovation. Stopping the printing press sounds like a great solution to the depreciation of our purchasing power but today’s printing is simply something that the global finance based economy cannot live without. Going home again, to paraphrase Thomas Wolfe, is something you just can’t do. Modern economies have grown used to inflationary sand and cannot grow in the concrete based economy that Grant eulogizes in his magnificently written histories.

Why not? Simple math, I suppose. Our 2014 U.S. Oldsmobile requires 4% nominal growth just to keep it running, and Euroland economies need at least 3%. Having created outstanding official and shadow banking credit of nearly $100 trillion with an average imbedded interest rate of 4% to 5%, the Fed presses must crank out new credit (nominal growth) of approximately the same 4% to 5% just to pay the interest rate tab. That of course wasn’t the case in Grant’s 19th century version – there was very little debt to service. But now at 500% to 600% of GDP (shadow debt included), it’s a Sisyphean struggle just to stay above water. Inflation, in other words – or in simple math – is required to pay for prior inflation. Deflation is no longer acceptable.

Such is the dilemma facing central bankers (and supposedly fiscal authorities) in 2014 and beyond: How to create inflation. They’ve made a damn fine attempt at it – have they not? Four trillion dollars in the U.S., two trillion U.S. dollar equivalents in Japan, and a trillion U.S. dollars coming from the ECB’s Draghi in the eurozone. Not working like it used to, the trillions seem to seep through the sandy loam of investment and innovation straight into the cement mixer of the marketplace. Prices go up, but not the right prices. Alibaba’s stock goes from $68 on opening day to $92 in the first minute, but wages simply sit there for years on end. One economy (the financial one) thrives while the other economy (the real one) withers.

Perhaps sooner rather than later, investors must recognize that modern day inflation, while a necessary condition for survival, is not a sufficient condition for increasing wealth at a rate necessary to satisfy future liabilities associated with education, health care, and a satisfactory retirement. The real economy needs money printing, yes, but money spending more so, and that must come from the fiscal side – from the dreaded government side – where deficits are anathema and balanced budgets are increasingly in vogue. Until then, Grant’s deflation remains a growing possibility – not the kind that creates prosperity but the kind that’s the trouble for prosperity.

 

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Mon, 11/03/2014 - 13:09 | 5407118 Pinto Currency
Pinto Currency's picture

 

 

Because government spending creates true wealth.

But you also need to print money.

Wisdom from Bill Gross.

Mon, 11/03/2014 - 13:19 | 5407131 Tao 4 the Show
Tao 4 the Show's picture

Post modernism at its most undecisive.

"If so, I wonder, if values are relative, then what are mortals to make of them..." 

Man, this guy must have missed Post modernism in school. Those guys were already boring. But burping up half digested pieces of the same is just too much.

This type of "nowhere" thinking has almost completely infiltrated the social mindset, but what people do not yet know is that if nothing matters, neither do they. Hence, the world as we currently know it.

Mon, 11/03/2014 - 13:26 | 5407182 Manthong
Manthong's picture

A freaking genius.

He probably would have been critical of the Continental Currency if he had lived in the late 1700’s, too.

Mon, 11/03/2014 - 13:48 | 5407207 jbvtme
jbvtme's picture

this isn't about money, inflated or deflated.  it's about living meaningful lives.

Mon, 11/03/2014 - 13:52 | 5407282 J S Bach
J S Bach's picture

With a head shaped like a light bulb, how could Gross be wrong?

Mon, 11/03/2014 - 13:53 | 5407289 Tao 4 the Show
Tao 4 the Show's picture

How can he be wrong and gross?

Mon, 11/03/2014 - 14:16 | 5407365 Colonel Klink
Colonel Klink's picture

Duh Bill!  Tell us something else that isn't un-fucking-obvious too.

Mon, 11/03/2014 - 22:26 | 5409177 Inverseview
Inverseview's picture

Thank you .. that's pretty much the case!

Mon, 11/03/2014 - 22:27 | 5409184 Inverseview
Inverseview's picture

Thank you .. that's pretty much the case!

Mon, 11/03/2014 - 13:18 | 5407154 Canadian Dirtlump
Canadian Dirtlump's picture

Bill Gross learned at Pimco that rooting your thought in rational lucidity can be harmful to your portfolio. As long as he isn't talking his book here he should be fine.. He is right theoretically.

Mon, 11/03/2014 - 13:58 | 5407304 Pairadimes
Pairadimes's picture

How can a man this wealthy be this fucking obtuse? How many times have we had to read these sophomoric musings from so-called financial wizards trying to rationalize their own deeply hidden feelings of mediocrity with the guilt that comes from all the wealth they have done so little to obtain?

The monetary system we operate in was deliberately built to socialize losses in the banking system and to facilitate the gradual transfer of wealth from the producers within the economy to the banking interests who financialize their productivity through debt creation and inflation. Gross is one of the men who have benefited greatly from this structure, sometimes directly.

There is no feature of the modern global economy that prevents us from using a system of money that protects all the owners of wealth equally. The problem is that the current system does not, and Gross and others obviously like it that way.

Mon, 11/03/2014 - 14:15 | 5407366 NotApplicable
NotApplicable's picture

And he does all of this in order to woo in even more senseless clients. What's funny is that it's all phrased within systemic disconnects (heart and lung cells, for instance).

So, the entire article is a parody of itself.

Brilliant!

Mon, 11/03/2014 - 19:06 | 5408597 NihilistZero
NihilistZero's picture

Because government spending creates true wealth.

It's kind of a true statement in that government spending of inflationary dollars can create a rise in wages that can maintain growing asset prices.  Now if you're trying to make this work in the real world, well, the USSR rotted out for a reason Bill.

All these Wall Street types have all the financial knowledge of the ages yet they understand jack and shit about human nature.  Milton Friedman's adoration of markets combined with his total inability to understand that corruption of those markets through the political process is INEVITABLE comes to mind.

Mon, 11/03/2014 - 13:08 | 5407119 dracos_ghost
dracos_ghost's picture

Anyone else throw up a little in their mouth after reading this self-serving tripe? Gotta love the new age of self-absolution. Pimco's Gross had nothing to do with current instability of the markets. Nothing I tellz ya.

Mon, 11/03/2014 - 13:51 | 5407278 RaceToTheBottom
RaceToTheBottom's picture

I was expecting his writeup to be about the war.  When in doubt, pull up a war story...

Mon, 11/03/2014 - 14:54 | 5407526 SeattleBruce
SeattleBruce's picture

And don't you love how he gives the little blurb about his own personal 'loss of purchasing power.'  Aw Bill, you should setup a charity for yourself!

Mon, 11/03/2014 - 13:19 | 5407121 Quinvarius
Quinvarius's picture

Are they actually going to let the Yen implode?  If that worthless turd keeps rocketing into the floor like this, it is going to break a lot of stuff and put a lot of FOREX shops out of business.  Talk about a shakey foundation.  This might be the big one.  If they want to play the crazy printing game where every central banker in the West cooperates, they cannot let a single currency die or have a tail event.  One bank prints, the rest buy up the currency.  Those are the rules they play by.  Can you imagine what gold at infinity vs the Yen would do to gold everywhere?  That alone should make the central bankers dump a load in their pants.

Mon, 11/03/2014 - 14:18 | 5407245 dracos_ghost
dracos_ghost's picture

But the carry trade will be exciting. NOT. It's not just Western bankers anymore is it. China is structuring a QE like monster that will make all of them look like panty-waist dilettantes.

Globalization has saturated everything -- I don't see how the other CB sop up the excess of the printing entity at this point. There is no wiggle room to maneuver.The entire 'lean' management style including financials have seized the entire system. How do you even determine an equilibrium point at this stage of the game?

Hold on baby Jesus, it's gonna get bumpy.

Mon, 11/03/2014 - 14:21 | 5407386 NotApplicable
NotApplicable's picture

They'll get equilibrium by selectively breaking things, then redefine the "new normal" rules in the aftermath.

It just won't be any sort that's recognizable in advance.

Mon, 11/03/2014 - 13:11 | 5407126 Yen Cross
Yen Cross's picture

    Gross you're such a pathetic fucking leech.

Mon, 11/03/2014 - 13:19 | 5407163 hoist the bs flag
hoist the bs flag's picture

now he symbolically works for a "two faced" company...how syncromystic.

Mon, 11/03/2014 - 13:11 | 5407129 firstdivision
firstdivision's picture

Really he could just some this up by just being honest.  One line commentary, "Give me your money so I can buy shit and sell shit.  It'll create zero value and be a net loss for you after my fees.  Here are some pretty Bloomberg screen shots"

Mon, 11/03/2014 - 13:13 | 5407136 wmbz
wmbz's picture

I just don't understand how there could ever be a problem?

"We have this thing called a printing press" ~ The Bernake

 

Mon, 11/03/2014 - 13:14 | 5407139 Danno Anderson
Danno Anderson's picture

No wonder Gross got canned from PIMCO. 

Mon, 11/03/2014 - 13:16 | 5407148 yogibear
yogibear's picture

LOL, Greedscam said something similair last week. QE didn't work.

Easy money created the bubbles. We just need more easy money and everything is fixed. 

Nice F-up Fed PhDs. Make the problem bigger.

Mon, 11/03/2014 - 15:10 | 5407592 SeattleBruce
SeattleBruce's picture

"Nice F-up Fed PhDs. Make the problem bigger."

They work for others who are pulling the strings.  Those others have skimmed off the top with their FED counterfeiting operation in full swing since just after WWII (and before Fall 1929).  1929 - 1946 was a deflationary anomoly.  Oops.  Or perhaps they were still tweaking the levers.  One thing we know, debt was WAY lower (except during WWII).  But now the inflation switch is ceasing to work it's .01%er magic, we are inundated, saturated, oversaturated with debt, and the nominal impact of each additional dollar of debt has gone down to negative levels (see here!) and so why not pursue a captured agenda of deflationary default (who's gunna pick up real assets at dimes or pennies on the dollar?) followed by high or hyper-inflation into the reset (as the .01%ers try to hold on for the ride into the reset.)

Only question is whether they be able to hang on, or whether they're go down like the crew of the The Perfect Storm.  Sorry Gloucester.

Mon, 11/03/2014 - 13:17 | 5407150 KnuckleDragger-X
KnuckleDragger-X's picture

Bill Gross developing a moral center... yet another sign of the apocolypse....

Mon, 11/03/2014 - 13:18 | 5407153 JustObserving
JustObserving's picture
Bill Gross Warns "Global Economy & Financial Markets Are Insecurely Grounded"

But they are grounded in the integrity and honesty of the US Fed. Are you biting the hand that has made you a billionaire, Gross?

Mon, 11/03/2014 - 13:18 | 5407155 ThroxxOfVron
ThroxxOfVron's picture

Gross grosses me out.

Mon, 11/03/2014 - 13:18 | 5407156 CRYBABY
CRYBABY's picture

what a total c*nt

Mon, 11/03/2014 - 13:23 | 5407176 ucde
ucde's picture

"Decades and indeed centuries have taught us that both inflation and deflation are the enemies of stability and growth, but knowing which one is just around the corner can be difficult."

for difficult subtitute the word: useless. 

We don't live in a Keynesian experiment where people push levers up or down to produce inflation, deflation. Crafting an economic equilibrium like a barista at Starbucks might create an expresso. Inflation and deflation are technical markers relating to currency movements, they aren't fundamentals. Looking at price signals to assess the fundamental state of an economy is misguided.

As per Richard Vague's analysis in 'The Next Economic Disaster', the largest economic crashes of the last century were traceable not to government spending, but to increases in the levels of private debt.

A maximally indebted economy, such as ours, spends all of its surplus to pay the interest on its debts. That's where our "growth" went -- into interest payments on our debts! That's also where all of our future growth is going to go -- until the debts are cancelled. 

What "growth" do these people want or expect? Student, auto, mortgage --> that's where your growth went. It disappeared into compound interest owed to some nameless, faceless banker. 

Mon, 11/03/2014 - 14:00 | 5407310 disabledvet
disabledvet's picture

Not possible to have too much private debt.

Can't have bailouts though.  Look at how much "private debt" has been created as a result!  Dow! 20,000! Yippee!

Overlay those Bailout Tycoons with trillion dollar deficits...talk about asphixiation.  

The problem is of course deficits.  "You gotta pay for that." One way is through outright default. In short you better have excellent OVERSIGHT of all that spending.

Or else.

Mon, 11/03/2014 - 14:05 | 5407327 new game
new game's picture

what surplusses? the surpluis you mention doesn't exist. we are financing everything to minus 700+billion. so take your pick; millitary, interest or transfer payments. doesn't matter anymore because, following the math it is impossible to pay it down without inflating it away. but that rate would kill the economy. say it bill gross, just say it with your phd jargon,OK- i will for you-WE ARE FUCKED NO MATTER WTF WE DO...

Mon, 11/03/2014 - 13:29 | 5407185 viator
viator's picture

Jeeze, and I thought the Japanese were doing all they could to run up deficits.

Mon, 11/03/2014 - 14:08 | 5407336 disabledvet
disabledvet's picture

EXACTLY MY POINT!

If the solution is just more printing..WHY HAVE ANY TAXES AT ALL?????

But nooooo.....Japan RAISED their taxes. That says to me they haven't lost control of their money (although clearly they have done that) but their MONIES.

In short...ZERO OVERSIGHT.

USA has the most liquid and deep cash markets in the world.  Go ahead...raise taxes.  See what happens here.

Mon, 11/03/2014 - 13:31 | 5407194 khakuda
khakuda's picture

Good piece, but you can't go on like this forever with interest costs sucking up all the growth.  You are going to need some debt defaults.  Inflation can't do it all without causing huge societal problems and wealth disparities.

Sorry, you bought a bond and you don't get you money back this time.  Your credit analysis was bad.  It happens.

Mon, 11/03/2014 - 14:26 | 5407401 NotApplicable
NotApplicable's picture

"We're gonna need a bigger ZIRP!"

Mon, 11/03/2014 - 13:37 | 5407197 joego1
joego1's picture

I'm not part of the "one gross human kind" that he speaks of. Throw his ass into the financial cement mixer with the rest of the thugs.

Mon, 11/03/2014 - 13:31 | 5407198 Bell's 2 hearted
Bell's 2 hearted's picture

as someone who has some funds in pimco

 

Thank you Janus!

Mon, 11/03/2014 - 13:31 | 5407200 Next to Arch Stanton
Next to Arch Stanton's picture

And now, Deep Thoughts by Bill Gross.....

Mon, 11/03/2014 - 14:27 | 5407416 NotApplicable
NotApplicable's picture

Duuuuuuude, this Purple Kush is the best ever!

Mon, 11/03/2014 - 13:33 | 5407202 viator
viator's picture

Get to work nations of the world. Bill wants you to catch up to Japan.

http://2.bp.blogspot.com/-Tt0rkCKwsFM/UN_GFf0V4pI/AAAAAAAACfM/0WOpOjFxkA...

 

Mon, 11/03/2014 - 13:32 | 5407204 Bangalore Equit...
Bangalore Equity Trader's picture

Listen.

When is Bill going to start trading structured debt? Maybe MBS this time?

`Gross Mortgages`, or some such? Capitalize on the name to reflect true feelings.

GO!

Mon, 11/03/2014 - 13:33 | 5407211 Callz d Ballz
Callz d Ballz's picture

So eloquently wrong.  Next!

Mon, 11/03/2014 - 13:34 | 5407215 Bell's 2 hearted
Bell's 2 hearted's picture

 Stopping the printing press sounds like a great solution to the depreciation of our purchasing power but today’s printing is simply something that the global finance based economy cannot live without

 

hogwash

 

QE/ZIRP disinflationary ... deflationary when the (INEVITABLE) assets bubbles burst

 

moron

Mon, 11/03/2014 - 14:31 | 5407428 NotApplicable
NotApplicable's picture

I for one, could live without a "finance based" economy.

Mon, 11/03/2014 - 13:34 | 5407217 Vooter
Vooter's picture

"Deflation is no longer acceptable."

LOL...well, I bet the folks at the Fed would argue that them being hanged from a tree isn't acceptable, either--but that doesn't mean it isn't going to happen...

Mon, 11/03/2014 - 13:38 | 5407228 The Most Intere...
The Most Interesting Frog in the World's picture

BILL GROSS, GO FUCK OFF PIG!  LET'S BE CLEAR, DEFLATION IS BAD FOR YOU, THE WEALTHY, AND THE GOVERNMENT TIT YOU SUCK FROM, PERIOD.  DEFLATION IS NOT BAD FOR EVERYONE.

Mon, 11/03/2014 - 13:38 | 5407232 Bell's 2 hearted
Bell's 2 hearted's picture

not a word on wealth inequality from "printing"

 

imagine that ... oh, that is right ... he's a billionaire (talking HIS book)

 

party on

Mon, 11/03/2014 - 13:42 | 5407248 ebworthen
ebworthen's picture

"Castles Made of Sand" - Jimi Hendrix and the Experience:

http://www.youtube.com/watch?v=PiBF_hJ3sSE

Mon, 11/03/2014 - 13:43 | 5407258 limacon
limacon's picture

He disguises himself all too well . 

One wonders where he keeps the common sense hidden . 

 

Maybe here :

Where to hide something everyone is looking for ?

See one old method :

https://www.academia.edu/9094752/Why_is_the_Parthenon_not_round_

 

But leave it to Shakespeare to really hide something :

https://www.academia.edu/9095548/Shakespeares_Secret_Diaries_

Mon, 11/03/2014 - 13:50 | 5407267 falak pema
falak pema's picture

Bill Gross is basically saying : we're damned to print and avoid deflation, as THAT will bring the whole WS wealth bubble down. Our civilization goes back to 1930s dystopia...

Well, given the future ecological menace, and conventional oil plateau, our millennials generation has no more options open to it : Damned to deflation pains and damned to pollution pains.

2008 was one hellva wake up call ! 

 

Mon, 11/03/2014 - 13:49 | 5407272 Grinder74
Grinder74's picture

How can someone so rich have such a horrible haircut?

Mon, 11/03/2014 - 13:49 | 5407274 limacon
limacon's picture

And that 2% inflation is not cast in stone . 

You can calculate it easily .

See 

http://andreswhy.blogspot.com/2009/03/optimal-tax.html

 

An Optimal tax does not necessitate a 2% inflation rate . This used to be the case about 2000 AD .

Circumstances have changed .

 

Recalculate .

Mon, 11/03/2014 - 14:20 | 5407380 GernB
GernB's picture

Sorry, but I just find it humerous. Have we so lost the concept that this tax we are talking about is money most people bought by exchanging precious hours of life for wages. How many years is it optimal to force someone to work for someone elses benefit 33% of their life? I guess it is necessary because you can't trust people to pend their own money in ways that enrich them and society, we need elites to spend it for them.

Mon, 11/03/2014 - 13:50 | 5407275 sschu
sschu's picture

We are born innocent, falter, but no matter, we remain mostly innocent. My problem, however, is that if there are no absolute standards, it may minimize life’s value. Concrete, as opposed to porous sand, provides a firmer foundation for judgment, but sand I suspect is the soil into which we are insecurely grounded. All one thing, masquerading as ourselves.

Hey Bill, stick to investing.  This is a terrific example of the psyco-babble we hear in our current culture.  You want objective truth?  It is in one place only, the Word of God.

These statements are simply nonsensical.

sschu

Mon, 11/03/2014 - 13:51 | 5407279 Solio
Solio's picture

Everything is as secure and real as digital integrity can offer!

Digital men and digital women do some skimmin"!

Fooed you!

Mon, 11/03/2014 - 13:57 | 5407298 Pareto
Pareto's picture

This statement:  Such is the dilemma facing central bankers (and supposedly fiscal authorities) in 2014 and beyond: How to create inflation.....as well as his last paragraph - demarcates every reason why we no longer need to listen to the pontifications of this elitist pseudo intellectual twit.

 

Indeed Bill, a Central Bankers delimma created by Central Bankers.  How fucking stupid do you have to be to write something like that!  Price deflation - ALWAYS  a silver lining to a recession.  ALWAYS for fuck sakes.  It puts EVERYBODY  on a level playing field.  It precludes moral hazard that arises where a select bunch of asshats get free money to put a bid under EVERYTHING at no cost to themselves - a playing field that arises from Central Bank debasement of currency, and evisceration of the middle class.  Thats right.  More of the same is the answer - for it is sure to keep your bond prices up aint it (and keep those pesky interest rates to zero right Bill?  and continue suppressing the only fucking price signal that matters most.

You're no better than the fucking Keynesians who are want to ensure that the middle class (if any of it is left actually), never realizes or crystalizes their savings with the promise that the value their purchasing power has today will be the same tomorrow - and that through prudence, hard work, and savings can actually grow real wealth.  JFC!  More of the same, only lets have government piss it away instead of the primary dealers.

It is my hope that treasuries held by all the internationals take a coordinated concerted dump and we see yields sky rocket - OR- we see your FED fucking monetize it and kill the currency - either works for me.  Neither works for you.

 

Mon, 11/03/2014 - 13:56 | 5407299 the grateful un...
the grateful unemployed's picture

the secret if you're bearish is to follow Hussman's rhetoric, which is to say, we are aggressively bullish, at valuations well below what they are now. and to that end the gold mining stocks are looking very attractive, although they might fall even further, they won't fall as hard or as far as the rest of the market.

Mon, 11/03/2014 - 13:58 | 5407305 NuYawkFrankie
NuYawkFrankie's picture

Bill Gross Warns: "Global Ecomomy & Markets Insecurely Grounded"

So's his toupée  by the looks of things.

Mon, 11/03/2014 - 14:59 | 5407324 Bdelande
Bdelande's picture

How convenient Bill.  

 

Let me paraphrase what he wrote:  

 

"The monetary abomination that our financial class has created is actually quick sand, but that's all we know, so let's spend even more and simply keep slowly sinking under because that is how I make my money."  

"BTW, I'm uncertain of my own values...........maybe if I take a long walk on a sunny private California beach, I'll feel better about myself."

 

What unmitigated self seeking drivel.............. 

Mon, 11/03/2014 - 14:12 | 5407344 GernB
GernB's picture

This pathological fear of lower prices is insane. It is only deadly to a debt laden society where your ability to pay back your debts was engineered with inflation as a prerequisite. So to prevent prices from falling we penalize savers and force them into bubble markets where they can risk it all. That's what we need central banks for, to bail out those who accumulated debt they cannot pay back (without inflation) at the expense of the prudent investor.

Mon, 11/03/2014 - 14:11 | 5407350 Solio
Solio's picture

The digital dilemma: nothing is real!

Now what did you think that the reason was for setting up the rules on digital docs, transfers and what not?

It was/is to make what was yours, now theirs!

Thank you very much! Thank you very much!!

Mon, 11/03/2014 - 14:25 | 5407404 Ewtman
Ewtman's picture

"Until then, Grant’s deflation remains a growing possibility – not the kind that creates prosperity but the kind that’s the trouble for prosperity."

As was been cited here long ago...

http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...

 

Mon, 11/03/2014 - 14:26 | 5407407 vegas
vegas's picture

Translation: "It's a bitch making money as an insider crony captialist when my "guy" at the FED won't give me any information."

 

www.traderzoo.mobi

Mon, 11/03/2014 - 14:39 | 5407457 bugs_
bugs_'s picture

I remember when they told us cholesterol was bad - killer bad.

Then later they had to revise and extend their remarks and we found out there was bad cholesterol and good cholesterol.

We have heard that deflation was bad, now Gross informs us that there is bad deflation and good deflation.

It sounds like some elites have concluded that deflation is enough of a probable outcome that the keynesian party line must be modified.  Down with BAD Deflation!  We need Central Bankers to guide us with Good Deflation!

Mon, 11/03/2014 - 15:06 | 5407550 withglee
withglee's picture

Pretty amazing! Gross knows how to make a lot of money but is clueless as to what money actually is.

"Money is a promise to complete a trade" ... always has been ... always will be. This fact is obvious by looking at trade.

Trade is a three step process: (1) Negotiation; (2) Promise to trade; (3) Delivery on promise. In simple barter, steps (2) and (3) happen simultaneously on the spot. Money allows them to happen over time and space ... and that brings a huge efficiency to trading and thus to any economy.

So money is "created" by traders making trading promises. The manager of the Medium of Exchange (MOE), freely certifies the promises by issuing accounting entries and certificates (e.g. Federal Reserve Notes) that document the promise. These then circulate as the "most" desirable object of barter. How can they do this? They are (1) Guaranteed to hold their value perfectly (i.e. zero Inflation); (2) supply and demand for them is always in perfect balance (it's the nature of a trading promise) and (3) They are very very widely accepted in all forms of trade (attribute (3) deriving from attributes (1) and (2)).

So how is this zero inflation guarantee assured? Through monitoring of DEFAULTS. If the trading promise fails to deliver and the certificates are not returned and extinguished, a DEFAULT occurs. The certificates must be immediately recovered via an INTEREST collection or they will forever circulate and dilute the value of all other certificates in the economy. The operative relation is:

INFLATION = DEFAULT - INTEREST

DEFAULTS can be measured with precision and the amount of INTEREST can be collected with precision. Percentages are of no use in this context. These numbers are actual amounts measured in the units of the MOE. And note, a roll-over is a DEFAULT. This naturally takes the punch bowl away from governments that never keep their trading promises and depend on INFLATION for their survival. Remember, taxes only pay interest. There will never be enough to apply to principal.

Since INTEREST is applied after the fact (i.e. after DEFAULTs), actuarial tools can be used to bring them into coincidence (as actuaries bring claims and premiums into coincidence for insurance).

INFLATION cannot be "measured" at all. It can only be estimated and those estimates are great opportunities for gaming the system. But by the operative relation, INFLATION can be "known" to be zero without any measurement in a properly managed MOE.

We can have zero INFLATION. We must have zero INFLATION if we ever expect an economy that is fair to all traders. When the current system dies with the explosion of INFLATION (the accumulation of QEs is just fuel that is reaching critical mass and will explode), we need to know what to do next ... when the collapse calls for a reset.

Proposed so-called "strong" money (backed by gold or capital or pork bellies) is not strong at all because it is not guaranteed to be in free and balanced supply and it is not guaranteed to exhibit zero inflation. There is only one proper way to manage an MOE and that is as described above.

As an aside, notice that proper management of the MOE has no concern at all for employment, GDP, prices, velocity, savings, capital accumulation, supply and demand, or any of the myriad other unmeasurable and uncontrollable measures, policies, tools and inputs so-called "modern" economists employ. Any third grader has the tools to properly manage an MOE. Also notice that reliable traders enjoy zero INTEREST and deadbeats like governments are toast (their INTEREST burden makes all their trading promises unfeasible on their face).

Knowing this, read the following excerpts from this article and comment on how silly they are and why, now that you know what money really is; how it can and should be managed; and the attributes it exhibits when properly managed.

 

  • The global economy and its financial markets are insecurely grounded as well. Decades and indeed centuries have taught us that both inflation and deflation are the enemies of stability and growth, but knowing which one is just around the corner can be difficult.
  • Even after the miraculous “discovery” of the modern central banks printing press, a miscue or fat fingered mistake by one of the “wise men” could lead to depression and accompany deflation
  • They argue that the 2% level is sort of like a firebreak. Once inflation approaches zero, goes their theory, the deflationary firestorm is difficult to stop.
  • Two percent targeted inflation, he would argue, is the “con” of central bankers who know nothing better than to create money during a financial crisis and then to keep creating it during the inevitable recovery.
  • Prosperity has created inflation and excess, he would argue. 
  • Stopping the printing press sounds like a great solution to the depreciation of our purchasing power but today’s printing is simply something that the global finance based economy cannot live without.
  •  Our 2014 U.S. Oldsmobile requires 4% nominal growth just to keep it running, and Euroland economies need at least 3%.
  • Inflation, in other words – or in simple math – is required to pay for prior inflation. Deflation is no longer acceptable.
  • Such is the dilemma facing central bankers (and supposedly fiscal authorities) in 2014 and beyond: How to create inflation.
  • Prices go up, but not the right prices. Alibaba’s stock goes from $68 on opening day to $92 in the first minute, but wages simply sit there for years on end. One economy (the financial one) thrives while the other economy (the real one) withers.
  • Perhaps sooner rather than later, investors must recognize that modern day inflation, while a necessary condition for survival, is not a sufficient condition for increasing wealth at a rate necessary to satisfy future liabilities associated with education, health care, and a satisfactory retirement.

All the excerpts enumerated above, you now recognize to be silly on their face ... and dangerous if put into practice. Try it yourself. Comment on each of these excerpts knowing that INFLATION can and should be zero everywhere all the time and that a freely available, perfectly balanced MOE, is easily attainable.

Todd Marshall
Plantersville, TX

Mon, 11/03/2014 - 15:05 | 5407576 Clesthenes
Clesthenes's picture

“deflation remains a growing possibility – not the kind that creates prosperity but the kind that’s the trouble for prosperity.”

Really… have you been sniffing fabric softener?

Your assessment overlooks basic attributes of inflation and deflation.

Inflation is the means by which criminal and useful-idiot classes thrive by plundering productive and thrifty classes.  Deflation is just the opposite.

That is, when a currency unit is cheapened by x percent, all contracts based on that unit are impaired x percent in favor of the consumer at the expense of productive and thrifty classes.  Thus, while the thrifty may have gained x percent on his purchase, he simultaneously loses a x percent on his savings; or, he gained x on the purchase while losing 1000x on his savings.

The only people who gain without loss on such purchases are those who have no savings and those who collect booty from government contracts (and share that booty with legislators and judge, editors, educators, actors and pimps).

Further, inflation is not the engine of progress that collectivists imagine it to be: it is the means by which following generations are financially cannibalized.  According to data, assumptions and formulas provided by Financial Reports of the US Government.

I have very bad news for those who subscribe to collectivism: civilized men do not allow it.

So what’s the solution?  We have to duplicate what American Founders did.  We have the same power they had: the power to redress any grievance that could be named – and thus, exercise sovereignty; but they REFUSE to use that power. There are three main reasons for this failure: one is that they have no knowledge of such power; the second, they’ve been herded into a kind of impotent stupor by medication and indoctrination; the third, that they aid, benefit or were complicit in such evil.

There’s a remedy for all three of these failures: 1) learn, and use, the law and procedures of redress (full article); 2) follow a health regimen that has REDUCED – not slowed – my biological age 50 years; and, 3) see number one.

This health regimen has given me the coordination, health and physical condition of a professional athlete around the age of 20; I’m 70 years of age (for validation, video and webpage – each leads to the other).

Not only do Americans not use such power, they also know practically nothing about ideals won/confirmed by the Revolution.

For example, Founders repeatedly declared that “no man is obligated to obey any law or pay any tax unless he has given consent to it”.  Did they mean this literally?  Of course they did.  From the first English settlement to the Revolution this was how affairs of the colonies were managed.  Every “law” and every “tax” had its origin in contracts between colonial assemblies and those who petitioned for redress of grievances.  The terms of the contract were sometimes referred to as “laws” of the contract while its money payments were treated as “taxes”.  And only petitioners were obligated to obey such “laws” and pay such “taxes”.  When redress was completed, related “laws” and “taxes” expired.

There, in one paragraph I conveyed to you more real history than you learned in 12 years of elementary and high schools, and 4-6 years of university indoctrination.  You won’t learn this and other lessons from professors, or judges, or lawyers; the first two depend on continued grievances for their pensions, the third never learned such history, or law.

This right of consent was won with the Revolution… and who knows it?

Further, it is our legacy to declare it a capital crime if anyone should impose or collect a tax without our consent.  For this we owe a debt to John Elliot.  Parliament passed his resolution and then used it to bring down judges and tax collectors, clergy and kings who thot they could preach the divine right (impunity) of kings and impose taxes without the consent of those taxed.

Again, who knows it?

Further, Americans have the constitutionally-protected right to withhold taxes until government redresses their grievances.  This right was declared by the Continental Congress without a dissenting vote, and also declared to be a prime reason for the Revolution.

Let us try again, who knows it?

A WORD OF CAUTION: DO NOT attempt to assert rights mentioned above until you have studied my research pertaining to each (available here).  Otherwise you’ll only launch on a mission of suicide.

Mon, 11/03/2014 - 15:28 | 5407655 Ariadne
Ariadne's picture

Disclaims all beliefs as subjective, then proselytizes a grim panacea based wholly on the schooling he believes in. He is Peter Keating.

Mon, 11/03/2014 - 16:11 | 5407902 Catullus
Catullus's picture

Alan Greenspan just said the same thing in New Orleans last week.

Greenspan said the myth of the independent fed is naive. And that this was always about supporting the welfare state. Without the money printing, the government would have crowded out private investment. Very interesting speech indeed. I'm not really going to accept his mea culpa that there was nothing he could have done. He could have just resigned.

"Survival" is a code word right now for the current status quo and the attendant power structure around it.

I think bill knows the Washington establishment would have made him into the bond vigilante villain in the coming interest rate blowout.

Mon, 11/03/2014 - 16:41 | 5408093 orez65
orez65's picture

"Inflation, in other words – or in simple math – is required to pay for prior inflation. Deflation is no longer acceptable."

You are a fuck.ing lying thief!

Deflation will bankrupt you and your fellow banker thieves.

The present fiat money system needs to collapse so that we can return to an honest money system: gold and silver.

After the fiat money system collapses all of the hard assets, such as factories, farms, buildings, people with skills ... will be there. 

They just won't be owned by scum bags like you!

Mon, 11/03/2014 - 17:33 | 5408326 withglee
withglee's picture

The present fiat money system needs to collapse so that we can return to an honest money system: gold and silver.

Can you describe such a system?

Please do not refer to the history of the USA. No such system has ever worked and seldom been operational. The history is vivid at the end of the 19th century with the bi-metal disputes. Gold won and silver got shoved up the holders hind ends. However, both, by your implication, were "honest money".

They point to Nixon getting off the gold standard (when the official price of gold was $35/ounce and the real price was double that). Essentially he said "I cannot tell a lie". He may have been tricky, but that wasn't one of his tricks. Further he said he was a Keynesian. That speaks volumes of misunderstanding and misguidance.

Commodity backed money and capital backed money has always mistreated one set of traders in favor of another. A correctly managed Medium of Exchange (MOE) doesn't do that.

Mon, 11/03/2014 - 17:20 | 5408269 Otto Zitte
Otto Zitte's picture

Next time you go for a walk to [philosophize] walk over to the gas station and read the tax statement on the pumps. Then extrapolate what that means. Then get a 40 inside the gas station & ponder the 10% sales tax. You don't need Huffman lenses to read the signs.

Mon, 11/03/2014 - 18:47 | 5408537 Yancey Ward
Yancey Ward's picture

The striking thing here is that Gross seems to know what the ultimate solution is going to be, but can't really be the advocate for it.  All he can do is advocate for the process of getting to the endgame as quickly as possible.

At some point, the debts get repudiated and you get a new monetary regime.  And hopefully nearly all the economists are hanging from lampposts next to the politicians.

Mon, 11/03/2014 - 18:53 | 5408553 SmittyinLA
SmittyinLA's picture

from the federal reserve in the AIG trial, everything is so good we need you to keep the door open to future thefts judge: 

"Such a ruling could limit the tools available to the government in a future economic crisis"

 

http://www.insurancejournal.com/news/national/2014/11/03/345689.htm



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