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Interest Rates Cannot Rise - Here's Why
Submitted by Thad Beversdorf via First Rebuttal blog,
I wrote an article recently over at Voices of Liberty that lays out the very dire picture for those of us who have yet to retire. The gist of the article is that the Fed has effectively robbed the retired class of any hope for having enough of a nest egg to live off through the end of their lives if they want to retire at 65.
Some may argue well this past 10 years has just been an anomaly of low interest rates but they will come back i.e. normalize to higher levels here in the next couple years. Well let me show you why that is simply wrong.
Here is why interest rates will be perpetually low for the rest of our lives, why the inflation calculation has been changed to a dynamic formula (meaning they now change the inputs each quarter) and why those of us yet to retire are screwed.
What I have laid out here is a green line that represents our total debt as a percentage of GDP. The purple line is the historic 10 yr Treasury Note rate which we are using as a proxy for the average interest rate on total debt (AIR). And the blue line is the interest payment on our total debt as a percentage of GDP (again using the 10 yr rate as a proxy for average interest rate on total debt) let’s call it DSGDP.
Do note that total debt as a percentage of GDP (green line) recently exceeded 100%. Also note that as the green line increases the spread between the purple and blue lines gets smaller. This is really just an algebraic principle. Historically the blue line is essentially a fixed rate (within a range) and so as the green line moves up the purple line (AIR) must move down so the DSGDP stays within the fixed range. As total debt became a higher percentage of GDP the average interest rate on debt must move down toward that 2.5% line that we’ve held for 15 years. As the total debt to GDP moves above 100% we should start to see the average interest rate on total debt (the purple line) move below 2.5% in order to keep the DSGDP around the 2.5% 15 year average. As a side, I did regress these relationships and found both statistical significance and good explanatory properties.
Now even the CBO is forecasting debt to GDP to continue rising for as far as the eye can see and so there must be a negative slope on interest rates. If average interest rates on debt were to move back to let’s say the 20 yr average of 7.5% our interest payments would take up 7.5% to 10% of our GDP. And that is something we simply cannot afford. The most our average interest on total debt can move in the near term is to around 4% which would take us to the high end of the historic DSGDP range. Fortunately I suppose that would also crush what little demand is left in the economy and so there is much incentive to do so. In 5 or 10 years time total debt will be sufficiently more than GDP that even 4% will be unsustainably high.
You will see from the chart above we’ve had a fairly steady decline in interest rates since the late 1970′s about the same time that total debt began rising as a percentage of GDP. The inverse relationship between these two metrics is not coincidence, but of necessity. So you start to understand that interest rates are locked into a very low range forever or at least until total debt gets paid down, which none of us expect to ever happen. So with total debt greater than GDP and rising it’s SOL for future retirees and all other savers. Next stop will be negative interest rates which of course will need to be monetized. In chess they have a term called Zugzwang; a situation in which no matter what move you make you will be worse off than you are currently. I believe we may be in a Zugzwang now.
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Low interest rates are guaranteed to continue only until the currency collapse event.
Feels comfy.
Risk off ! (until the End, then its horrorshow over the cliff)
Keeping eye on SRTY.
FUCKING BULLSHIT!
Next big bank failures are right around the corner and rates will explode!
Yep! I can see the bail in's taking place with modified rates to make the "savers", et al, feel like they did not get the full monty up the kazoo...
www.gunsgrubandgold.com
Come JOIN for FREE!!
"He said, "We're just going to kill the dollar."
~ Kyle Bass repeating what a "senior" obama admin official told him once...widely believed to have been Tim-Timm-Timmay "Tax Cheat" Gueithner.
What is a low interest rate worth if I cannot borrow and buy a house
interest rates are not artifically low and kept there in order for you to buy a house my friend.
sorry to be bearer of that bad news.
cheers.
jb
The Author is missing a key point. He thinks that because the system requires low interest rates to have any chance of survival that we will continue to have low interest rates in perpetuity. What he fails to understand is there is no guaranteed survival for the current system.
You could have said the same thing in 1967, when foreign countries were repatriating gold from the US to the effect of: If foreign countries will stop trading dollars for gold held by the US, because if they don’t stop, the US will run out of gold and the system will collapse. A few years later the Brenton Woods system did collapse.
Or the Richsbank in Germany 1919: The allies cannot demand repayment in gold or we will default. Then they did default and the system collapsed.
Just because an event will spell the end of the current monetary system does not mean it won’t happen.
"The Author is missing a key point. He thinks that because the system requires low interest rates to have any chance of survival that we will continue to have low interest rates in perpetuity. What he fails to understand is there is no guaranteed survival for the current system. "
Exactly.
The biggest lie going is: "our grandchildren will saddled with the debt". No thinking person could possibly believe that a generation with $100,000 in student debt, living with their parents because they can't find a job, is going to pay off shit. The boomers are going to pay by having their wealth evaporated and they fucking deserve it.
I agree completely with the first statement. That boomers deserve it is incorrect. The people who deserve to be wiped out are going to ride off into the sunset with tremendous wealth and laughing about it.
Thank you for remembering who the real enemy is here: the ruling-class.
Don't fall for the divide & conquer bullshit, pitting us all against one another, when in reality we're all being screwed by the same puppetmasters.
Because everyone including corporate personhood depends on ability to roll over debt.
Bank of Japan has been doing ZIRP for QUARTER OF A CENTURY ever since the bubble pop in 1990.
http://www.tradingeconomics.com/charts/japan-interest-rate.png?s=bojdtr&...
They are way ahead of America.....doing QQE....Quantitative and Qualitative monetary easing
Japan Money Last Previous Highest Lowest Unit Interest Rate 0.00 0.00 9.00 0.00 PercentThe idea of "we" is a fallacy.
The bankers are going to take what they want, because the boomers on average were stupid enough to let them get away with it.
The author assumes that economic collapse isn't on the agenda.
I have news for him - it is. It is the final "goody" that will convert trillions in oligarch debt paper and trillions in oligarch cash into ownership of most of planet Earth.
That was their goal from the begining - to own and control planet Earth.
Jesus turned down the Satan, but the Debt Money Monopolists accepted the offer.
>>The idea of "we" is a fallacy.<<
This is a VERY important point. No group exists as a monolithic entity. Everyone exists as an individual.
Yeah, Boomers are establishment worshiping gobemouches, but most people are establishment gobemouches.
The Cult of the Establishment is HUGE.
The Cult of the Establishment controlled counter culture is much smaller but, between the two, there aren't many people who don't fall into the perception management of the Debt Money Monopoly Oligarchical Fabian "Collectivists" (they collect all wealth and power for themselves while lying to the ignorati about doing it "for the children" they want dead - even if it is a post birth abortion! Your children, that is.).
"gobemouches"
I am naive about gobemouches
"as words here cost nothing, the gulping is plentifully supplied"
— Richard Ford
Glad to see that somebody else sees that it is not the boomers fault. The problem belongs to the government. I don't know if anybody knows.
But real interest rates paid by everybody else are going up. Wells Fargo pays me 4% interest on my checking account with a 25k plus balance.
Think about that. "4%" They are not giving out loans for less. This I'm sure of. They don't operate that way. The people who really need a haircut are the TBTF Banksters, their CEOs and the wealth class who were millionaires, now billionaires. It is the FED who bailed them all out.
you forgot the decimal point before the 4
Trivial things like decimal points beggar the broader statement.
Interest rates cannot rise (and I have some chart to 'prove it').
'This ship CANNOT sink!'
'She's made of iron. I assure you she can!'
What's the going rate on a credit card in the CONUS right now? For the broader unwashed masses, what's the going rate on a PAYDAY LOAN right now? There was a time when the Mafia wouldn't charge so much (but now, they went 'legitimate' and opened Payday Loan companies).
OH. This must be talking about the amount of interest that is paid to savers in the E.U., or the amount of interest that the supernational bankers charge to each other for overnight loans (like the London InterBank Overnight Rate).
For everyone else, there's MASTERCARD (with a low, low 22.99% annual interest rate if your Fair Issac credit score deems you 'worthy' of such a low, low BARGAIN rate).
PAH...
Anyone know why the dumb bastards running the USSA don't just balance the budget? How hard can it be? I could do it in Excel 1997.
they don't have to as printers of reserve currency
best military to enforce the petrodollar system upon the world.
balancing the budget is for 3rd world countries.
.
Oh and I hope anyone who thought that a balanced budget amendment might be the answer to the nation’s woes now understands that it is just not possible without undoing 100 years of monetary inertia. Turning a ship that size around will cause a lot of pain, and by pain I mean millions would die in the economic destruction. There will be pain one way or another when these imbalances are reconciled but thinking that if we just pay off all of our debt in a debt based monetary system all will be well is about the worst way to way to go about it. That path will maximize the turmoil. I am all for the government living within its means but it simply is not possible independent of major monetary reform, so any discussion of a balanced budget must be done in the same breath, and after, a plan for a monetary overhaul.
To pay off all of the debt in a debt based monetary system is similar to having an economy that uses gold as money; millions of contracts written with gold as payment, millions of daily transactions done in gold, all of peoples savings held in gold, and some brilliant politicians saying we need to gather up all of the gold, put it on a ship (it would easily fit by the way) sending it to the middle of the ocean and sinking it in the Marianas trench with no way to recover it. How do you think that economy would do going forward? Do you think I’m being overdramatic saying millions would perish? This is what I hear when I hear politicians saying we should pay off our national debt or balance the budget when I know there is little to no chance of the private sector picking up the slack in creating new loans. Not that private loan creation would be the solution it would just postpone the inevitable. If we accept that the longer a credit created boom lasts the larger the crash will be, it must be considered that we have been in the current boom for over 70 years.
4%? The fuck? You're telling me Wells Fargo will pay someone to take a 30 year mortgage?
I call bullshit on 4% interest on your checking account
"Some may argue well this past 10 years has just been an anomaly of low interest rates but they will come back i.e. normalize to higher levels here in the next couple years. Well let me show you why that is simply wrong."
Can we overlay this with German public debt and interest rates from....say.... 1910 through 1930?
Yeah yeah.....different this time.
It IS DIFFERENT!
Germany doesn't use Deutschemarks any more (they went for the fucking Europaper trash), and most people who will be directly effected don't speak German.
SEE?
Germany doesn't use Deutschemarks any more (they went for the fucking Europaper trash), and most people who will be directly effected don't speak German.
http://en.wikipedia.org/wiki/Weimar_Republic#mediaviewer/File:Arbeitslos...
Was actually DEFLATION that ruined Germany- Germany had switched to a stable currency in 1924. And as a sidenote, Hitler turned the printing press on again in 1933.
Yep, and you can do the same with the US during the Great Depression.
Real interest rates skyrocketed from 1929 to 1932.
http://thehardtrade.com/tag/1930s-interest-rates
Doug Kass at Real Money notes “The only time that yields have consistently been below current levels was WWII — 1941-44 — and and immediately after, to 1951, when the U.S. enforced a ceiling on yields. Even during the 1930s when the great Depression contracted the economy 25%, deflation drove yields to 2.5-4.0%.” (my note: I believe he is talking nominal interest rates in the comment)
http://www.ritholtz.com/blog/2010/08/history-of-us-interest-rates-1790-p...
Very convenient for the author of this article only to go back to the 1950s to capture the high rates of the 1960-70s. That seems to be a big problem with some analyst. They only take parts of history that fit their argument and leave out the rest.
Well, the boomers that I know don't have assets. They have debts which are far greater than their savings. I could give examples, but it's really depressing to know that people 20 years older than me could be so short sighted. As the gov. debases their SS checks, they will likely be forced into bankruptcy.
the simple and streamlined point is that when rates go up significantly for any lengthy period of time it's definitely game over for the American economy, if it wasn't over already.
If ONLY interest rates would go up now, the end of the U.S. economy would be like taking a ride on a sled in the middle of winter down a gradual slope. Eventually, the landscape would level off, and the rider would be left at the bottom of a long hill, and with effort would be able to regain his former altitude.
THIS would be a BLESSING.
If OPEC and the WORLD suddenly refuse to take USD -denominated currency (DESPITE whatever cursory 'interest rate rise' there was), it would be more like Wile E. Coyote on his Acme rocket sled, suddenly finding himself up in space over the cliff, the ravine beckoning like the inevitable desctruction that it is when gravity takes hold. When to bottom hits (quite suddenly), there will be no sled left, no way to climb back, and no Coyote to do so.
Discussions about why the interest rates 'CANNOT' rise is akin to the discussions over which deck chair is more comfortable and affords the best view of the final plunge of the Titanic.
True. But they will move Heaven and Earth to keep the current System going. I have been saying this about interest rates for years--which is why I chuckle at the mention of "Bond Vigilantees". The Fed is now the only buyer of bonds that matters. At some point, they will get desperate enough to start disappearing the like of Bass and other purveyors of economic common sense. Maybe even the most vocal of us on ZH will have to start checking six as well.
One thing for sure, the death throes of the System won't be pretty. Our cities will burn.
Agreed however I think that once Japan proves that a modern western economy that has the ability to print it's own money can fail, the "Bond Vigilantes" may materialize. The BoJ will lose control of their bond market and the market participants should conclude that there is no reason the Fed could also fail. I emphasize should because there will be a major campaign to try and convince the nation why 'we are not like Japan'.
Once the Bank of Japan monetizes 100% of JGBs (Japanese Govt Bonds), there will not be any Japanese bond market for bond vigilantes to trade. Japanese interest rates will become irrelevant. Therefore, the ultimate outcome will be the collapse of the Yen.
My view is that the US, UK and Europe will ultimately follow a similar path. Heavily indebted advanced economies cannot restart real economic growth without substantial new pools of debt to inflate. In the US, we have seen that even massive growth in student loan debt and subprime auto debt is utterly insufficient to bring about economic "escape velocity" when compared to the economic effect of the housing ATM (mortgage equity withdrawal) of the past decade.
Central banks will never voluntarily accept the kind of cleansing economic depression that would be necessary to purge economic systems of unpayable debt via default. As such, we can expect central banks to continue the charade of financial repression (ZIRP) and money-printing (QE) until the bitter end, which will be currency collapse.
We are worse than Japan. They have a 10 year head start over us. Just watch and see our own future.
All the First World countries have the same fundamental problem: too many promises, not enough real $$ to back it up. All these promises were predicated on linear, never ending growth--and its been apparent for some time that that ain't happening. So, since the early 1980s, we've been creating the illusion through smoke, mirrors and DEBT...lots and lots of it. The millions of foreigners, many of them illegal, we've been importing are a last gasp attempt to make the System work. Unfortunately, many of these suck additional capital from the System vs. the creation of true wealth. In the short term, they serve some purpose as mechanisms for covert distribution of Government funds to Oligarchs (like the Walmart family). However, when the collapse is near, they will become the eqivalent of gasoline on the fire.
Ultimately, we are all fuked. The Powers-that-Be know what's coming and will do whatever it takes to suppress & forestall it.
The one thing that will save Japan in the end is its homogenous population. They were smart not to imbibe on the mother's milk of diversity. We, however, were not so wise.
one thing Japan doesn't have....
nukes and boots on the ground in oil rich countries.
Japanese government bonds backed by Toyota and Sony which are being surpassed by Korean and soon Chinese manufacturers.
One thing you are missing that that ALL the machinery of First World Governments and Central Banks, plus their enablers (e.g., Saudis) will collude to keep this from happening. And by machinery, I refer to all means: financial, legal, bureaucratic, political, social and technological (especially surveillance assets). Any country who breaks ranks (like Russia) will be out of the Global club. For all of China's saber rattling about the Petro dollar, at the end of the day they are in precarious shape too and have too much to lose to destroy the status quo. Let's face it, the Petro dollar implicitly includes the Euro, the Pound and the Yen under its umbrella.
Any media outlet or individual that throws sand in the gears will become an Enemy of the State.
There is some potential for the global currency crisis to come to lead to a shiny new 'global government' with equal (lack of) rights for all. Would you choose to work the collective farm?
If they do establish a Global government, where are you going to run to? The only alternative will be revolt.
WHy would you run? You would be in a traget rich environment with their goons everywhere. You wouldn't have to run anywhere to fight them.
Did you not see that I said the other alternative was revolt?
That being said, revolt is not a great alternative. I much prefer a peaceful, prosperous (albeit boring) life to some Syrian civil war type scenario.
The Bank of Japan will never monetize 100% of outstanding JGB's. Maybe they will get to 50%. Markets are set at the margin. With the risk of default or devaluation the margin will panic and dump their JGB's and dump the Yen -- when that happens the Herd will panic. But they will never get their money back. Meanwhile even the dullest money manager will discover that they may indeed lose money in sovereign bonds - with any luck this will force reform as global interest rates rise to reflect the risk of default. Of course, if we slip into complete financial Fascism .... than all bets are off .... as we all enter the next global dark age.....
This post should be kept around as a reminder when the cities do burn...
Default, it's what's for dinner. Bon Apetit, debt ravaged retirees.
Why would you buy a house now? Prices are historically too high and will revert to the mean. They always do. If you buy now you will lose your down payment and end up upside down in your mortgage. The house will be a huge burden and you can't even sell it.
I always thought interest rates were kept low to recapitalize the banks and rich vis a vis middle class tax payers. You know borrow at zero and then have Uncle Sam treat with 3% treasuries.
Listen.
"Give them some medical and recreational marijuana engineered for heroine-like potency by our tribesmen at Harvard and CIA. It will ease their pain".
~ Guess who [hint: Roth.....]
Headbanger,
at some point yes confidence goes and so rates explode. however as it is already just perfectly clear and has been for years how fucked the US and everyone else is and this has not happened yet, one has to wonder whether the bulk of humanity has been captured by aliens and replaced by sock puppets. or whether the whole of fucking humanity is in some kind of magicians trance or something, like penn and teller in charge of the fed. the collapse should already have happened and rates should already be at stratospheric levels.
all that aside, that has to be the best animated gif I have ever seen. Do you have a larger version? I would like to have it
Circenses et panem, circenses et panem. Most people are fucking dumb and will fall prey to circenses et panem. Or NFL and EBT.
and election night coverages ... yawn
simple make it an erection night cuz we gonna get fucked again.
Viagra only makes Blue pills.
They should start marketing Red ones (think of the political persuasion that is being discriminated against!).
Why do you say t hat; your quotation is from 2000 years ago and it's pretty clear that nothing has changed.
one has to wonder whether the bulk of humanity has been captured by aliens and replaced by sock puppets.
Ever watch a movie titled "Idiocracy"? We are now living it - and President Camacho is in the White House. "Brawndo with Electrolites", anyone? ("It's what plants crave!")
This:
like penn and teller in charge of the fed
This would be a dream come true! Penn would end the Fed instantly and Teller would just keep his mouth shut about it!
t0mmyBerg
Try this:
http://i142.photobucket.com/albums/r108/Mixylplix/Gifs/Vandalism_zpsdcbm...
The only way they can keep rates down forever is to print, print, print. Sooner or later the only major market for US debt will be the US government. Gold is the long-term answer.
pretty soon? how about now? but actually the US has the sinking western triad of print, they have their respective central banks who have the IMF who is merely the beard for the BIS who is backstopped by satan himself.
The Fed already owns >50% of all 10-years outstanding. Do negative interest rates on German bonds make any sense at all? Is the risk-free rate (as historically defined by the US 10-year) credible? The world doesn't need to be this fucked up. The US still grows a TON of food, produces a ton of energy, possesses a lot of skilled labor, and a military that can rock'n'roll. That flashing red 'reset via default' button, someone needs to reach between their legs and find the balls required to push that button.
Agreed. After the latest round of money printing Japan looks to be the model to aspire for - for other central banks. No one will ever know quite what the aftermath of the currency printing armageddon looks like. Gold is the long-term answer - not quite sure - how it can be protected against government confiscation though...
Agreed. After the latest round of money printing Japan looks to be the model to aspire for - for other central banks. No one will ever know quite what the aftermath of the currency printing armageddon looks like. Gold is the long-term answer - not quite sure - how it can be protected against government confiscation though...
I don't think pounding your head on the keyboard is clarifying your thinking. You know very well that it's not necessary for banks to fail; that was in t he real world, not the new normal; which resembles Alice in Wonderland.
"Next big bank failures are right around the corner..."
Ever heard of TBTF? TBTJ? Or big banks eating little banks?
No, at the next Bank Crisis, the little fish will all be gobbled up for "lack or liquidity", and only a handful of the biggest fish will be left to... "provide stability".
This assumes that the Fed will continue to get what it wants with increasingly unsustainable policy.
Real estate, among other things, is about to monkey hammer their expectations.
Yeah, I want to see how another real estate crash is going to monkey hammer their MBS loaded balance sheet.
PRINT MOAR, BITCHEZ!
Hjalmar Schacht
MEFO bills
Hjalmar Schacht
MEFO bills
It has no effect on their balance sheet as it is not marked to market; but rather marked to imagination; or "perfection"; or "our model".
I just realized that a lot of people probably think I iwas being sarcastic; but i wasn't; it really isn't marked to market value.
Yep. No actual market for your asset? Okay, just take your best guess.
That was my thinkign too. When? I don't know. But this shit show can't go on forever.
I have no doubt I will still be fucked when the new system comes around, but same as it ever was I guess.
Regards,
Cooter
Retirement??!?!? HAHAHAHAHAHAHAHAHA!!!!
It's over-rated anyway.
Besides, it's a lot more fun being an old fart messing with the assholes you always wanted to fuck up years ago.
TO George for an explanation.
https://www.youtube.com/watch?v=Yi6XV8yBFoU
RIPS
TO George for an explanation.
https://www.youtube.com/watch?v=Yi6XV8yBFoU
RIPS
I enjoy being the young asshole messing with the old farts about how their boomer economy will go bust and I'll fuckem up in the thunderdome. Good times were had by all born after 1980.
Will we get free chicken when the dollar collapses?
or free pot?
Free Fema camping
What about an MRAP ride?
Fried Chicken. That's what Michelle said we could eat after voting democrat. She's so culturally insensitive to non-african-american-earth-humans
I was waiting for her to allow collard greens and chitterlings.
...which if Japan is used as a model we have another 20 years or so at most.
"...aaaaaannndd it's gone!"
Thanks Team Red & Team Blue
Twenty years!?!? that would be fantastic! I'd be a drooler by then and wouldn't care about any of it!
YAY TEAM red YAY team blue...... I am in a hotel doing a job and there is a tv here :-(.
I turned it on yesterday morning. on the lineup was all kinds of stories covering shopping! hahaha... I mean, they talked about how shoppers might save some extra money by doing this or that....... how long it was till black friday... blah blah blah.... oh yes.......... and the last day the US postal service says you can mail a package for "overseas" in order to insure Christmas delivery. haha
I'm sorry, but I'm wondering.... just how many people are there out there who still believe that this economy is doing fine. I guess they are all team BLUE with government jobs.
I wish i knew then what I know now........... that's all i have to say
The price of oil is the "interest rate" for the economy. The Feds have lost control of traditional interest rates so now they manipulate the pirce of oil.
They control all prices, aye. Interest rates (the price of money) is just a single part of a huge mechanism.
With regard to the article; I already know why; but it's a useful effort, anyway. The more people who understand it the better. I've been telling people for many years that the future is cancelled due to lack of interest; when they ask what I mean, I reply; "Interest on the national debt"; then they tell me I'm crazy; but I'm used to it.
There is two types of crazy....the good kind and the bad kind
You go to a movie theater and start blowing people away....you are the bad kind
If you tell people the truth and they don't want to know or don't believe you....YOU ARE THE GOOD KIND
The currency has been collapsing for decades. It's a process rather than a one-off event.
I tend to agree that this won't last and the international monetary system will have tried to move onto ADRs or even possibly a gold backed regime if ADRs fails (as Jim Rickards believes) after the currency wars are over.
There also exists a possibility that the markets overcorrect and the Fed steps in at some astronomical number to oversteer the market back into stability and we could start seeing inflation. However, for the forseable future (1-2 years) we shouldn't really expect hyperinfaltion with the rest of the world in worse shape than we are, putting downward pressure on what has been traditionally safe-haven treasuries.
Lets all give a big shout out to Nelson Aldrich, the fellas from Jeckyll Island, and king douche bag fuck tard greenspan, for dropping the bomb on us....baby
http://www.youtube.com/watch?v=17lkdqoLt44
Rates will stay low until AFTER the collapse.
A Tale of Two Metrics | philosophyofmetrics
How far negative can they go?
-100%, when they simply seize all accounts and exchange them for new dollars.
Exchange? There will be no exchange. Just take.
I agree with "Seek".
Brazil is the model here. They routinely drop three decimal points from their currency after hyperinflating the snot out of it. Then when they get the new currency hyper-inflated, they drop another three zeroes of the value of the new, rename it, and issue the new stuff. They've been doing that for 40 plus years that I know of! (I was there in 1970 during the transition from Cruzieros to Novo Cruizieros.) :-D
Did land prices (from which a rent could be earned either through agriculture or real rent) smoothly adjust to the 'drop 3 zeros' game?
Couldn't say. That info might be available somewhere, but it wasn't a concern of mine at the time. I was too busy getting tossed out of the place for "consorting with known revolutionaries" (they said) - which I didn't do. It's kind of a funny story... but only because I didn't have to join the 10,000 political prisoners they were holding in Sao Paolo at the time.Getting thrown out of Brazil is one of the high points of my life... I mean, don't ALL the best people get thrown out of Brazil? ;-D
"I mean, don't ALL the best people get thrown out of Brazil?"
Either that, or thrown out of helicopters.
I was there [in Brazil] in late summer '87 when it was Cruzados. I was scheduled to return in March of the next year [5 months later], so, not knowing anything, I decided to NOT exchange the 40 or so bucks I had back to USD, figuring I'd still have some local currency when I got back.
When I returned, my Cruzados were worth a nickle [USD] in the new currency
It did in Mexico' where I watched apprx. a one zero devaluation take place. Wiith some exceptions, I'm sure. It was well telegraphed in advance; I got down there for my winter stay and was able to negotiat e a room rent of $6 US Dollars a night for 4 months; in 20$ bills on the managers desk. It was a very nice older hotel and a nice room t hat had just been completely renovated and had a view of La Paz Bay. It was right on the waterfront. People on the friend of lt he Bank, friend of the government list; who actually had some money, could buy Silver Coins at the National Bank; which they did; then they sold them back again in about a month; at an entirely different "number". so there's always details and some local knowledge comes in handy. no-one knew i had a personal stash of $20's, of course. one would just appear every now and then to pay my bar bill or something.
Why bother with rates or taxes at all? Why don't they just print the dollars that they need to fund government spend it,, and we will all be taxed through inflation-those in the US and those outside of the US.
This shell game has become a lot more complex than it needs to be. They will soon run out of accounting gimmicks to fool us.
Ejmoosa
Actually Ron Paul said that some time ago. What bother with income tax, they can print all they want.
Taxes create demand for the currency. That's the only purpose of taxes. If you could pay the government its tax in your own product, what power would government have? A government can't take a farmer's rutabegas and turn them into war machines without a mandatory denomination that serves to compare the values of rutabegas and war machines and the various transmutations of value in that progression from rutabegas to war machines. Taxes are a masturbatory act, much like war is a masturbatory act.
ejmoosa - <applause> - I agree, this is the kind of question that we should be raising -- why go through the charade of "paying taxes" when the Federal Reserve can print whatever the government needs/wants/craves. Japan will fully monetize it's debt - why stop there? Why not monetize the base of funding in addition to the debt?
We're just going through the motions now. Debt will never be repaid.
Debt was/is never supposed to be repaid. Right?
Not if the goal is to move from a representative democracy to communism and/or facism. Then the purpose is for leaders to hold the lever on all money supply. sound familiar?
What you are discussing is NOT debt. The Governments are selling off the citizenry via perpetual income tax sharing bonds.
In Great Britain some of these feudalist bonds that are designed to pay 'interest' forever but never be paid off are even sometimes called such: perpetuals. These are also known as consols -a term that might be Roman in origin...
http://en.wikipedia.org/wiki/Perpetual_bond
There are good reasons to tax us instead of just printing the money. If we have to pay taxes then they have control of us. We have to lodge tax returns, report our incomes and our deductions. That is a set of reins on us. We also have to work (in their system) to make the money to pay our property tax, car tax (registration) etc and that stops us going outside their system (you can't pay property tax with barter or the black economy).
The income tax was partially instated so we would have to report on our earnings and transfers of money could much more easily be tracked. Sure they can print money for what they need, but they also threaten us to accurately report the sources of our income or face jail.
So, it also comes down to control over the population.
It's one the economists have been asking. The answer lies in the faith you have in your currency.
Or one could say the answer is whether we have debt-based, private currency like FRNs or public, sovereign currency like greenbacks. Sovereign currency=no debt=no income tax.
Taxes and Taxes alone create the value of fiat currency. If there were no taxes Fiat would be worthless.
Example: If you were to go to jail unless you can come up with $100k then there is suddenly implied value on accumulating $100k.
Supply of fiat has nothing to do with inflation (except increasing the monetary base).
Govt demand (of citizens fiat money) has everything to do with inflation. The more the Gov't demands of the fiat base, the more valuable it becomes. The less they demand of the fiat the less valuable it becomes hence deflationary pressures.
Taxes and Taxes alone create the value of fiat currency. If there were no taxes Fiat would be worthless.
Example: If you were to go to jail unless you can come up with $100k then there is suddenly implied value on accumulating $100k.
Supply of fiat has nothing to do with inflation (except increasing the monetary base).
Govt demand (of citizens fiat money) has everything to do with inflation. The more the Gov't demands of the fiat base, the more valuable it becomes. The less they demand of the fiat the less valuable it becomes hence deflationary pressures.
sqrt of -1
And why not? QE was using imaginary numbers anyways.
Low rates will continue until all the pensioners are dead
the beatings will continue until morale improves.
Warning: beating to fotos of Kim Kardashian's @ss may not improve morale
Retirement is a silly notion - new to most of the world in the last 100 years, built on the back of fiat and (cheap) oil. Plan accordingly.
I disagree. Retirement would be completely possible if there was a sound store of value. One wouldn't need a financial planner if a dollar was worth a dollaw in the future. Think of how eay it would be to save if you had even a marginal inclination of what prices would be in down the road or if you could calculate required savings on a broad basis. The fact is, the measuring stick just keeps changing.
However, in this fiat world there is no safe store of one's excess capital anywhere.
Convert one dime of every Dollar earned into metals and you might have a chance.
One thing I'm truly going to enjoy are the surprised looks on the faces of millions of public "servants" who won't be able to buy themselves a loaf of bread with their magic pensions that supposedly last an eternity long after they stopped "working".
I used to think the same thing until I saw the entire world's gold production in paper sold every afternoon to drive the price lower.
"Retirement is a silly notion - new to most of the world in the last 100 years,"
Um, back when families were multi-generational and the young often took care of the old?
Correct, and the old did what they could to help support the family. You are describing family - not retirement as the above article is speaking of. Retirement as this article is addressing is a silly, short-lived aberration.
We're going to be like an indian family (feather, not a dot). When gramps gets too old to be helpful. he's getting shoved outside the teepee on the first freezing night of winter. It takes a village, sure as shit!
Well, that paper game is about to end and then a new paper game starts with new dice. Timing is on our side.
So you disagree in theory, but agree in practice. Got it - and unfortunately we live our lives in the practice part (how things are), not the theory part (how things could, should, would, might be if...).
+1 Doc Dick...
Work until you cannot physically do so and save what you can. When you're in your 80's or 90's and have toquit, buy a life annuity with whatever you have.
Enjoy!
or blow your savings on hookers in thailand and go out with a bang
your choice.
Government destroys the deflationary benefit of increased technological efficiencies and the value of your earnings.
Cost of government is greater than 50% of the working year.
One Word: SILVER. Safe store of capital. Seriously.
Farmable land, gold, and lead is a good place. Build up a community of like minded people. See What Gerald Celente is doing:
occupypeace.us
Body parts could be sold on e-bay.
They have rules against selling flesh related stuff...
Disaster (unforeseen of course) - default - chaos - martial law. In said order. Hail Mary play is war in lieu of disaster. Subsequent steps stay the same though.
Mostly agree - and martial law will be spotty and short-lived, imo. Too complex to sustain for long. Better to practice self-sufficiency now, because you will need it later!
Is a possibility for sure. Social complexity is a real bitch. In most major US population centers (as well as in Europe), just the daily dance of food, water, and fuel is an amazing display of interwoven specialization... very energy dependent. And become more fragile every day. At the same time, people are becoming more intolerant, violent, etc. Lots of bad combinations here.
All eyes on Detroit
moved out of town a few years ago into the country in rural Texas..... having solar put in before Christmas.... then digging my well..... everything else is already in placeWon't be any martial law out here with 7mi to the closest store.... there are only like 4 cars to patrol the entire county at any one time.
completely agree.
ISIS/ISIL will be more than happy to do it.... They've got a lot of resources to devote to our destruction and, it wouldn't be that hard to do with a few dedicated folks.
3 or 4 teams to attack our transformers with a 50 cal... if they pick the right ones, our entire power grid is down.... a few sick folks with ebola in our malls and train stations..... something big in D.C. and NYC....
viola.
I predict that our country will be in shambles by this time next year. You can quote me on that.... and, I hope I'm wrong.... I really hope I'm wrong.
US debt may be only $17.9 trillion and rising at $1 trillion a year. But US unfunded liabilities are between $130 trillion to $244 trillion (Kotlikoff) and rising at $7 to $9 trillion a year. Sooner or later these unfunded liabilities become real liabilities.
There is no way interest rates can ever be allowed to rise as US deficits will skyrocket. As Bernanke revealed in his $250,000 lunch, interest rates will remain low in his lifetime.
And people worry that there won't be enough government bonds for the Fed to buy in QE 7, 8, 9, and 22. I have no such worries because you're exactly right.
Just tell Benny Boy to eat a bug and die already.
Optimist.
The current deficit using GAAP is $5+ trillion per year.
Is it me or is the dynamic inflation thing not there?