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A Signal of Coming Collapse
by Keith Weiner
I proposed seven drivers of financial implosion in my dissertation. My recent writing has focused on two of them. One is the falling rate of interest on the 10-year government bond. As interest falls, the burden of debt rises. Since the falling rate incentivized more and more people to borrow, the number of indebted people, businesses, corporations, and of course governments is large. When the rate gets to zero, the burden of debt becomes theoretically infinite.
In the US, the downward trend is still in a deceptively mild phase (though there was a vicious spike down on Oct 15 to 1.87%). The rate on the 10-year Treasury is 2.3% today. In Germany, it is down to 0.82% and in Japan the metastatic cancer is much closer to causing multiple organ failures, with a yield of just 0.46%.
Two is gold backwardation, which has also been quiescent of late. Although it is worth noting that with these lower gold prices, temporary backwardation has returned. The December gold cobasis is over +0.2%).
I haven’t written much about a third indicator yet. What proportion of government bond issuance does the central bank have to buy? I theorized that when the central bank is buying all of the bonds issued by the government, that this is another sign of imminent collapse. I phrased it, as with the other indicators, as a value that is falling. Collapse happens when it hits zero, if not earlier. Here is what I wrote:
“the average amount of new Treasury bond issuance minus new central bank Treasury bonds falling towards zero (i.e. the central bank is buying a greater and greater proportion of Treasury bonds issued).”
Bloomberg recently published an article about the Bank of Japan’s announcement of a new bond-buying program. Bloomberg presents two facts. One, the Bank plans to buy ¥8 to ¥12 trillion per month. Two, the government is selling ¥10 trillion per month in new bonds. This is an astonishing development.
The Bank of Japan will buy 100 percent of the new government bond issuance.
Popular theory holds that a currency’s value falls as the quantity issued rises. In this view, the yen falls as the yen supply increases. While admittedly not scientific, here are graphs of the Japanese yen supply and the price of the yen in dollars from 1970 through present.


The yen has been falling since 2012, but not because of its quantity. It has been falling because the market is questioning its quality. One way to do this is to borrow yen, trade the yen for another currency, and buy an asset in that currency. This carry trade is equivalent to shorting the yen. So long as the yen is falling, and the interest rate on the bond in the other currency is higher than the interest rate paid to borrow the yen, this is a good trade.
What happens as the yen falls faster? Contrary to populist economics, it’s not good for Japanese businesses. However, it is a free transfer of wealth to those engaged in the carry trade. They can repay the borrowed yen at a cheaper and cheaper cost. When the yen goes to zero (which may take a while to play out), their debt is wiped out.
That’s what a currency collapse is. It’s a total wipeout of debt denominated in that currency. Since the currency itself is just a slice of debt, the currency itself loses all value. While on the surface it may seem good for debtors, it’s a horrific catastrophe. No one who understands the human toll, the cost in terms of the lives wrecked (and lost) would look forward to this with anything but dread.
The objective of my writing is to try to prevent it from happening. We need a graceful transition to gold, not an abrupt collapse like 476AD. It may be too late for the hapless Japanese. I hope it’s not too late for the rest of the civilized world.
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10 YR yields are about to rise significantly. The idea that falling rates will create any kind of economic problems does not square with this analysis...
http://www.globaldeflationnews.com/10-yr-treasury-index-yieldelliott-wav...
The dollar is getting ready to take a short break from it's recent rise, but long term it will continue to skyrocket along with bond yields.
http://www.globaldeflationnews.com/u-s-dollar-indexelliott-wave-update-f...
kamikazes running the show
let 'em sink
The objective of my writing is to try to prevent it from happening. We need a graceful transition to gold, not an abrupt collapse like 476AD. It may be too late for the hapless Japanese. I hope it’s not too late for the rest of the civilized world.
The trend is your friend until it fucks your girlfriend and posts it in the internet.
The world is fucked.
Gold has been done. It sucked bad.
Think scale. No way gold would work right these days.
"The objective of my writing is to try to prevent it from happening. We need a graceful transition to gold..."
One of you gold bugs needs to explain to me how the answer to a debt-based currency is gold. It really won't matter what the currency is denominated in, if it's debt-based, it will collapse at some point. You can denominate it in fiat paper dollars, gold dubloons or purple Fruit Loops. It won't matter. It will always end in massive debts owed to banker parasites.
Wouldn't it be wiser to devise a non-debt based currency instead? If you do that, its base won't matter.
Yes a non debt base currency would be better. And a gold backed currency is just that. GOLD backed NOT debt backed. Do you see the difference? If more currency is created than you have gold then the currency loses value.
Incidently Im not a gold "bug" I just don't see anything else that isn't going to explode.
A gold-backed currency, or direct gold coinage can not be debt based. Debt is based on printed paper. What happened in the 1800's was banks would issue gold-backed certificates, which created money and debt, but it was reigned in with every financial panic - as people sought to redeem their gold certificates, those who printed too much money went bankrupt. So there was always a natural leash on paper-based debt.
With a Federal Reserve printing currency backed by nothing - there is no limit to amounts of debt that can be issued.
Like George Carlin, I love chaos. Bring it on. Glad him and my mom, who died last night, are well out of it.
RIP
There's a civilized world? Please tell me where this "civilized" world is so I can go live there, as a civilized human being.
Gold, just shiny lead, is not an investment, but a sinkhole. I would never put even 1 cent into shiny lead, no matter how much I believe that the monetary-financial-economic system is screwed up - which it is - fragile & vulnerable to abrupt steep declines - which it is.
Instead I invest in real things that have enduring value, eg income-boosting education, training & credentials, income-producing businesses (eg partnerships, franchises, etc), productive farms (esp organic produce farms), and even things to just enjoy life (ie NOT to produce monetary profit) (eg recreational homes, fishing boats, RVs, etc).
I think that the only forms of shiny lead that might possibly be reasonable investments are unique (rare) pieces of jewelry (workmanship is invested) or rare coins, but definitely NOT bulk bars of shiny lead ! You will be better off buying lead bars (very much cheaper) and just applying the shine with paint :-)
There are certain times when Gold is what you must hold, these are one of those times brother.............
With all respect: you should re-educate yourself on precious metals.
Jewellery? Nope. Look at the markup from spot on Indian or SE Asian jewellery. It's next to nothing. And that is seriously beautiful shit. Way more beautiful than the garbage sold in the west. But the labor is worth almost nothing. It's the gold that has the value.
Today you win, tamale you lose.
No, it won't be just the Japanese. It's now a race for every country to copy the fad of generating a good feeling for a few weeks by playing the paper game. It will continue to its logical conclusion.
The decline and fall of empires may follow what Ernest Hemingway wrote in The Sun Also Rises:
“How did you go bankrupt? Two ways. Gradually, then suddenly.”
The decline and fall of Neolithic styles of civilization, of which the Anglo-American (Zionist) Empire was the greatest previous manifestation, will be gradual, until it happens more suddenly. I REPEAT this link to a video that is only 87 seconds long, which provides a good metaphorical image for what is going to happen to the USA, as the heart of the beast of the globally dominate Anglo-American (Zionist) Empire:
http://www.youtube.com/watch?v=wvcGM6maGGk
Exploding iceberg in Antarctica!
Bit by bit, the people that control the people that control the government of the USA have been hollowing the system out. They appear to want to destroy the republic, and they are clearly succeeding in doing so. I can not think of anything but implausible series of political miracles that could change the path that we are on … therefore, there MUST come some time in the future when that video above is a good metaphor for what finally has to happen, a relatively fast change of state from what was previously built and standing, to the collapsed ruins that may still stand after that collapse. However, the difference is that the collapse of the American economic system is on an astronomically amplified scale, with consequences that are quite impossible to imagine. (I also think that there are correlations between nature going nuts, at the same time as civilization goes crazy.)
We have very rapidly (within the lifetime of one generation) built systems of globalized electronic fiat money frauds, backed up by atomic weapons: MAD Money As Debt backed by MAD Mutual Assured Destruction. The collapse of a system of that ASTRONOMICAL SIZE no longer fits within any kind of common sense comprehension. Rather, we are looking at the magnification of lies, backed by violence, by trillions of times, … until the collapse into chaos of such an incomprehensible system is a psychotic breakdown somewhere around quadrillions of times more insane than we can actually imagine. The magnitude of the triumph of the frauds, backed up with violence, that built the currently established systems, seems to have become the only thing keeping them going … Nobody can imagine what happens after the American Dollar and American Military became like flying unicorns and dragons, whose sheer unintelligibility was the only thing keeping them in the air ...
Meanwhile, I regard the article above as ending by indulging in old-fashioned irrational hopes based on nostalgic nonsense, as stated in its conclusion: "The objective of my writing is to try to prevent it from happening. We need a graceful transition to gold, not an abrupt collapse ..."
Money is measurement backed by murder. Money backed by gold is the measurement of gold backed by murder. There is no way to avoid the problem that the social debt controls depend upon the social death controls. That problem is now amplified to ASTRONOMICAL SIZES by electronics and atomic energy, etc. ... The problems that social pyramid systems face are how to keep themselves going on the basis of legalized lies, backed by legalized violence, AFTER the development of weapons of mass destruction.
Nobody has any coherent answers to that, since the vast majority of human beings continue to deliberately ignore that problem, while they presume that they understand, while the ways that they understand everything is almost totally BACKWARDS. There is nothing in the realms of social engineering and political science to compare to the progress in basic physical and biological sciences, because in order to make progress understanding human beings we would have to go through much more profound paradigm shifts in political sciences than those which have already happened in physical sciences, such as the development of quantum mechanics and the special theory of relativity, which made possible the technologies that have been applied to create globalized systems of electronic fiat money, backed up by atomic bombs.
Anybody who thinks we could go back to the conservation of matter found in gold and silver, or any other physically real commodities, is still living in the past, and looking backwards. Rather, we are rushing faster and faster towards the future. There is really nothing less that would be possible than for human beings to develop better systems of artificial selection, which respected natural selection, in which the human death controls, or the human murder systems, which backed up the debt controls in the money systems, were resolved better, through profound paradigm shifts in the ways that we think about those things.
Such paradigm shifts would have to pretty well totally reverse the ways that we think about everything now, because those paradigm shifts would be based upon recognizing the ways in which we already have reversed the meaning of everything, like how the meaning of the word "money" was effectively reversed during the previous 200 or so years. However, that reversal goes way, way past that! We live in a Bizarro Mirror World, where everything appears proportionately backwards and perverted. The biggest bullies' bullshit world view dominated the philosophy of science, the same as it did every other social enterprise. One of the ways that happened was that an arbitrary minus sign was inserted into the entropy equations of thermodynamics and information theory, so that the measurements of power and energy would have positive values, rather than the negative values which the mathematical physics itself revealed was the case.
All private property is based on backing up claims with coercions, with money being the most abstract form of that, because money is measurement backed by murder. All human realities are operating as entropic pumps of energy, but that is being presented by the biggest bullies' bullshit world view in nearly perfectly and totally inverted ways. The technologies based on theories like quantum mechanics and special relativity have PROVEN that our common sense notions of time and space were WRONG. That includes that the ways that we think about entropy are BACKWARDS. Therefore, we pretty well understand everything we are doing in the most backwards ways possible. That is manifesting as human murder systems operating through the maximum possible deceits, in order to back up human money systems based on the maximum possible frauds, which systems have become criminally insane, due their trending towards paradoxical final failure from too much success.
In that context, articles like the one above are still grossly superficial regarding the problems that the established systems have, as their inherent contradictions drive them towards the own MADNESSES becoming self-destructive, whereby the established systems of legalized lies, backed by legalized violence, are headed towards psychotic breakdowns, and crazy collapses into chaos, as the energy of enforced frauds is pumped up and UP into social pyramid systems, amplified by technologies trillions of times more capable and powerful, towards developing sever social storms.
The idea that going back to old-fashioned notions about principle of the conservation of matter, as manifested, for instance, as gold, to back up a better monetary system, is RIDICULOUSLY old-fashioned. Rather, we should be going forwards towards monetary systems which are based on the concepts of general energy systems (which includes the idea that matter is a form of energy as a special case.) However, we can not have a better combined money/murder system that is consistent with the laws of nature until we go through the paradigm shifts in the philosophy of science which would be necessary to up-date that, so that a radically revolutionized philosophy of science could then be applied to political science, in order to be able to better reconcile human systems of artificial selection with natural selection systems.
The basic obstacle in the way is that social success in the past was based on successful warfare being waged through backing up deceits with destruction, where spies were the most important soldiers, and that became the foundation for a political economy which was based on enforced frauds, in the form of fundamentally fraudulent financial accounting systems, which systems were defended and promoted by intellectual mercenaries. Our basic problems are that governments are NECESSARILY the biggest form of organized crime, controlled by the best organized gangs of criminals, who have been able to control their opposition to spout the same kind of bullshit as the biggest bullies, based on false fundamental dichotomies, and the related impossible ideals, which actually cause the opposite to happen in the real world!
The established social pyramid systems should be perceived to be what they actually are, which is as toroidal vortices. The changes I am am recommending amount to a creative synthesis of ancient mysticism, within post-modernizing science, where the basic idea we asymptotically approach is that ENERGY IS SPIRIT, which idea requires that we accept that our previous common sense ideas of time and space were backwards, and therefore, our understanding of entropy was backwards, which then resulted in all of the ways that we understood human beings and human civilizations as energy systems, manifesting evolutionary ecologies, also being BACKWARDS.
As long as we continue to approach the problems with our political economy in ways that are based on the same old-fashioned false fundamental dichotomies, and their related impossible ideals, then our bogus "solutions" based on that bullshit will continue to actually cause the opposite to happen in the real world. While many people are becoming more painfully aware of the ways that the established social systems based on backing up lies with violence are becoming more problematic, there is barely any deeper understanding of those problems emerging in any publicly significant ways.
In order to better understand that the monetary system is based on measurements backed up by murder systems, intellectual scientific revolutions are needed, which appear at the present time to require a series of political miracles. The Grand Canyon Chasm is growing and growing, between progress in sciences such as physics and biology, while nothing like that has happened in the public realms of political sciences, because doing so requires facing the NECESSARY social facts that governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals, and the only genuinely possible better resolutions to those problems requires better organized crime, since that is what better government must necessarily be.
Right now, we have the runaway paradoxical ways that public powers have been effectively privatized, by the best organized gangs of criminals capturing control over governments, in order to legalize the fictions which enable corporations to be special persons that can make the public money supply out of nothing as debts for all the rest of the flesh and blood human beings. So far, none of the controlled opposition groups present an analysis of that situation which then proposes a realistic set of solutions, which are consistent with that analysis. Rather, one gets articles like the one above, that mostly presents good analysis, which then collapses back to bullshit, bogus "solutions" at the end, in its conclusions which contradict everything else that it previously demonstrated were the case.
"That’s what a currency collapse is.... No one who understands the human toll, the cost in terms of the lives wrecked (and lost) would look forward to this with anything but dread."
Look forward to? How about looking at the cost right now? Over 100 million in America alone with no jobs, most of them not even bothering to look for one anymore. It's even worse in Europe - see Spain, Portugal, Greece....
Most of those people might welcome a "collapse" of the current system. Yet instead of this epic avalance everyone keeps writing about, we seem to be getting more of a steady, subtle erosion, more akin to the Grand Canyon forming...
Where's that guy who always post the "dailyjobcuts" link when you need him?
Wait: aren't you enjoying the reduced amount of traffic on the roads as people just sit home instead of driving someplace? No job, no money to waste, so fewer shopping trips. Start a garden in your living room after kicking out your picture window. After all, soon you won't be able to afford heat anyway.
In 2008 the Fed bought up piles of worthless $US denominated shit from commercial banks. What makes you think the Fed will not buy up Yen denominated shit, thus bouying the Yen/USD exchange rate.
Works as long as the credit of the Fed is money good, & looking at the price of gold, you can't say the $US is about to fall.
What you say has merit. The only problem is that at a "logistical" level society is already breaking down with unfunded liabilities, unemployment, poverty etc, so it doesn't matter what the indicators show if the real economy and real people are in the dumps.
It does matter what the price of gold says, & the price of gold says that the $ is not about to collapse.
So does one avoid collapse of the dollar by outlawing the buying or selling of gold?
Via proxies .. the FED sells gold, silver with printed dollars to maintain 'stability'. The price keeps falling but supply keeps dwindling.
Zerohedge is on this more than most but it's fascinating. If you're the dollar or the yen and 1) your gov't spends more money than it takes in in taxes 2) you borrow the difference and 3) Your central bank buys the gov't bonds with funny electronic money and there are no bad affects. The main thing I would expect to see is bad inflation. Most agree there is not high inflation. You might expect to see high interest rates and we don't have them. You might expect to see foreign currrencies gain on your currency and I guess that is happening to the yen and they like that. But I find the no inflation fascinating. The latest Reason magazine has Schiff and 3 others talking about it. This is what I said about it: http://seekingalpha.com/article/1448811-why-inflation-never-came
ALL inflation is bad inflation. Just like all robbery is bad robbery.
real inflation in america is 10%. Real inflation in Japan is 20%. I hope you dont buy the optomistically 'selective' and non-essential items that go into the official CPI figures
Most agree there is not high inflation.
"Most" meaning people who do not buy things, right?
Wait a bit .
This baby is still live and kicking .
This is good !
Taking in each other's washing is working .
See
https://www.academia.edu/9160541/Laundry_Economics_
or
http://andreswhy.blogspot.com/2014/11/laundry-economics.html
Just so we're clear, is the author's last name pronounced: "weener" or "whiner"?
economists have been saying it forever and always been right. they have always been ignored also.
http://covert.co.nr
Remember remember to buy gold in november. There's no reason why buying gold in november should ever be forgot.
Good luck with your writing.
I guess I'm a cynic.
I'm pretty sure it's too late for writing and theorizing.
Pretty sure it was over years ago. Just waiting for that final push to sink it all.
Wait for it...
@DantheMan,
Richer in terms of what? The currency they are giving you to buy your stuff? Assets like gold and stuff definitely good to have during crisis, but I'm not sure it makes one richer. Real wealth occurs when capital is put forth in productive assets, like a business that grows. Unfortunately, there are few opportunities when the economy is no longer free, and controlled by a central source. Hang on to assets to weather the storm, then maybe after a free economy returns, one can grow their wealth.
Taking in each other's washing as an economy .
This is simple to describe :
http://www.economicshelp.org/blog/glossary/comparative-advantage/
Now simply use "money" as the good and we have the present situation . Capital sloshes around , following the cheapest printing presses .
Tried and tested .
http://books.google.com/books?id=kDc_AQAAIAAJ&q=Scilly#v=snippet&
"... Scilly Islands. The natives of that group, before Mr. Smith's time, are popularly said to have eked out a precarious livelihood by taking in each other's washing. "See
http://andreswhy.blogspot.com/2008/10/financial-crisis-2008-exchange-rat...
http://andreswhy.blogspot.com/2009/03/transactional-physics-exchange-rat...
If you wish to be a memeber of the 1%'ers...OWN SHIT!! The poor 99%'ers have to BUY SHIT!!
So if inflation runs and prices rise, the stuff 1%'ers own will be worth more to SELL (they get richer)
...and the stuff 99%'ers NEED will be worth more to BUY (they get poorer)
So, have more quality shit to sell, than you need!
That is the whole game.
DtM
"Invest in Peace"
Peace is just another word for when Justice prevails.
"That’s what a currency collapse is. It’s a total wipeout of debt denominated in that currency. While on the surface it may seem good for debtors, it’s a horrific catastrophe. No one who understands the human toll, the cost in terms of the lives wrecked (and lost) would look forward to this with anything but dread."
Hmmm...I'd like to hear more details!
I was going to post the exact same question. Vague fear mongering to sell gold. Does he "understand the human toll"?
To me, it sounds pretty good for debtors. Who wouldn't want their debts wiped away?
Oh, that guy who lent me the money is now broke and he jumped off a building?
Yeah, big human toll. Now, what time does Dancing With The Stars go on?
Where's uncle Corzine when you need him. I could use an extra Billion in my back pocket, just for emergencies.
Does this mean that the Japanese government is going to issue lots of electronic funny-money (thereby decreasing the value of the yen) to pay its bills?
Is that some kind of trick question?
No, I have to admit it wasn't. I guess I'm still naive enough to think there must be SOME country, SOMEwhere in the world, brave enough to try something different.
There are/were a few. Iraq, Libya, Iran and Russia.
Well, if you find such a country, please post their residency requirements!!
Contact Iceland
were being forced to sell them raw materials and energy products
.
while they sell us less expensive high end electronics and fabricated materials and products
.
you have to go to a nuclear ghost town half way around the world to spend your yen, problem is that's where the Japanese hide their schools, factories, and weapons of war
The Japanese aren't all hapless. I just saw a couple of Japanese people yesterday, they were happing all over the place!
In addition to manipulation by the government-financial complex other forces have converged to further distort and disconnect Wall Street from the American economy. Why American equities are rising is very important as we worked through a pre-election and post-election rally. We are experiencing a double down and let it ride mentality that has been ratcheted higher by media hype.
Most analysts agree that money from countries with weakening currencies is flowing out of the troubled areas and the U.S. is receiving most of the benefit. The Japanese as well as many Chinese and Europeans know with so much money floating around and few safe harbors America is becoming the most comfortable option for temporary investing their money. More on why this should be viewed as a sign of instability rather than a reason to celebrate in the article below.
http://brucewilds.blogspot.com/2014/11/why-american-equities-are-rising.html