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The Global Monetary Reset Is Under Way
Via Zero Hedge comments from AI Tinfoil,
The Global Monetary Reset is under way, but people have not noticed it yet. The key is the move to zero interest rates.
Government debt almost everywhere is too high to ever pay off, let alone pay a traditional rate of interest on. As debts come due, including as bond issues mature, the only option governments have is to roll over the debt and accumulated interest, and the only way they can afford to do that is if money printing is a continued practice and interest rates are at or near zero. QE is the latest name for money-printing, inflating the amount of currency available. Logically, QE dilutes the value of a currency by inflating the number of currency units in circulation, and, theoretically, should lead to price inflation. However, if all nations engage in monetary expansion, the effects of money printing on exchange rates may be effectively concealed by a balance of expansion. Or, as in the case of the US dollar, a currency with the status of world reserve currency may be expanded with relative impunity by the nation creating that currency, effectively exporting its inflation to the rest of the world that continues to sell to that nation, or trades in a monetary system based on that currency. Injections of QE into an economy with weak fundamentals is likely to result in speculative bubbles as QE funds show up in investors' hands and not in the hands of general consumers.
Inflation has become a necessary element of economic life according to the mainstream meme of economists. Inflation is a key strategy in coping with immense and increasing debts. Debt so large that it cannot be paid must be inflated away or governments must default. Deflation makes current debt increasingly difficult to pay or service out of deflating GDP and tax revenue.
Exporting nations have engaged in competitive exchange rate reductions to gain or maintain competitiveness for their exports. A strong currency hurts export competitiveness but lowers the cost of imports. A weak currency raises the cost of living of residents who must buy imports - a common feature for nations that import oil, for example. There is a necessary balancing act between export competitiveness and consumer price inflation, regulated often through exchange rate manipulation. Some of the Euro zone nations are learning the painful effects of locking themselves into one currency and losing the ability to use exchange rates to maintain export competitiveness.
The monetary expansions of the past ( done to re-inflate the world economy when it met a crunch - thank you Greenspan and successors) have flooded the world with currency. That currency has expanded speculation portfolios to the extent that the volume of currency sloshing around in search of returns or safety can quickly overwhelm a country's financial system and trade relations (competitiveness impaired, artificial investment bubbles, sudden debt crises when money is withdrawn, etc.).
The international trade and financial systems have made most countries relatively defenceless against trade and, more critically, capital flows. Vast sums can flow in or out of a country and its currencies almost instantaneously via computer clicks. Huge profits and losses can be made betting on exchange rate fluctuations, and on manipulating those exchange rates. ZIRP and NIRP are now regularly employed, ostensibly to dissuade residents from hoarding cash rather than adding to monetary velocity by spending, but ZIRP and NIRP are also used to dissuade speculators from buying a country's currency and hence raising its exchange rate.
Traditional stores of value and media of exchange among central banks - precious metals- have been debased through price manipulation in paper markets.
The strategies that seem unique and strange, and contrary to tradition - rampant money printing, the monetizing of debt through central banks buying government bonds, ZIRP, NIRP, and the suppression of precious metal prices, are the necessary strategies of a new monetary system set up to cope with the problems arising from monetary excesses of the past. They are the new normal. By disabusing the public of the notion that currency should be a stable store of value, that saving is a virtue, and that money borrowers should pay a reasonable rent on the money borrowed, the monetary authorities are conditioning the public to the new normal. In the paradigm of Modern Monetary Theory, currency creation can continue to infinity without destructive inflation since interest rates and expectation of return on lent money can be maintained at or near Zero. Any interest rate significantly above zero will crash the system, so do not expect interest rate increases except as a short-term emergency strategy to counter a fall in the exchange rate of a currency.
Necessity is the mother of invention, and the necessity of coping with overwhelming debt and unfunded liabilities has led us to the invention of Modern Monetary Theory. Add to this the new rule of bank bail-ins, the rule that bank deposits are part of a bank's capital, and the pledging of the public purse to bail out bank losses. This is the public/government debt side of the strategy. For those with large sums of currency who wish to continue to speculate, there are the stock and commodities markets, and the casino is open for derivatives bets. To accomodate the speculators, we have seen the insulation of Wall Street from criminal liability for fraud, the repeal of Glass Steagall, the weakening of Dodd Frank, the delay of the Volker Rule, the use of the public purse to bail out Wall Street losses in 2008, and the recent pledging of the public purse to cover Wall Street losses from any future derivative bets losses - all in the CRomnibus bill.
Welcome to the New Normal. We shall see how long it lasts.
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China Offers Enhanced Cooperation as Russia Struggles
http://www.bloomberg.com/news/2014-12-19/did-china-float-a-bailout-offer...
I'll believe it when the 30 year yield is at 0.5%
I'll wager that you are far more likely to see .5% on the 30yr than 5% on the 10.
I'm a believer...hit the "max" button
http://research.stlouisfed.org/fred2/graph/?g=NUh
reset is an obvious pilar of the ponzi, consisting of very subtle point of view in which interest rate will never be paid, just coz at the end of the chain you do not have cashier, but printers.
from this point, this make em very relax whatever the situation.
reset... lol... why the fuck you wanna reset something that is stable rocksolid....
Well this isn't the reset then is it?
Great comments AI Tinfoil! Well done.
Agreed. 0% and QE and bailouts until they have to default on the debt.
Who knows how long it can go on, but as a waning industrial and military superpower - a decade would be optimistic.
If default and reset is the goal, then the Citibank budget rider foisting derivitive losses onto the taxpayer as additional debt has made default the only possible outcome.
If you are doing the laundry, might as well throw every dirty little thing that you have into the machine.
In the apropos and immortal words of Buck Henry, "the dirtier the better".
P < P + i
Until it broke.
RT @WorldsApart_RT US interventions in Syria & Libya failed, made things worse in Syria: @BrookingsFP Research Director https://www.youtube.com/watch?v=Gx4ZUQj6GjU&feature=youtu.be&list=UUMItG...
Just like my 4 year old daughter, they make up the rules as they go along and no matter what ,they always seem to come out ahead in whatever game they create.
How much longer??
Timmay's Daughter for President 2016
Yep , and the funny thing is his daughter will probably be more qualified than the joker we have now. The country will be less devided and the stories the goverment comes up with to cover their crap pile will be much more rational and believable. 2016 it is............
I missed the sarcasm in this.
Truer words are seldom spoken. As someone here recently said (Latina Lover, I think), we waited for this for so long, that won't believe it that it's happening until our butts are on fire.
TEOTWAWKI-fatigue eventually sets in with almost everyone, but the most ardent/fervent. Especially if one has missed out on 5 years of a Bull market.
A Realist is as a realist does.
It was NoDebt who said it, and I concur.
Just like Calvinball.
"... the reason for this unusual booming was the exact opposite. It happened due to the massive exercise of political power, from an elite thousand miles away. The Chinese government kept the exchange rate of the country at a low level. Therefore, the Chinese products became cheap and flooded America. And to pay for them, the US dollars flooded China. But rather than spend this money for the population, the Chinese leaders loaned them immediately back to America by buying government bonds. It was a perfect system of cheap goods and cheap money inflow in the US, all controlled by the Chinese political power. And that’s what created stability. From this, came an orgy of lending from banks to even most unreliable borrowers in the US. Although this time, the deregulated market had been stabilized thanks to the political intervention of China, the bankers wanted to make more money."
http://failedevolution.blogspot.gr/2012/07/the-illusion-of-self-regulati...
Like I said before, if you can't hit 2% inflation, maybe you can get it done with -2% interest rates on deposits.
I really hate to tell you this.
Adjusted for inflation interest rates on bank deposits are -2%.
Sorry :(
Good news is if you get 12,000,000 reward points on your credit card you can get a basketball. So there's always that.
I'm all in when they start offering the Spiderman towels
You're an optimist. It's worse than -2% until you factor in the cost of energy the last few months (the rest has been going up for decades). I'm just glad I haven't had a bank deposit in 15 years. Let the beatings continue.
Negative interest rates will just pump the stock market more. Everyone else will just stuff the mattress.
Can someone please explain to me the "logic" behind negative interest rates? I mean, doesn't that simply mean we have to PAY the banks for the privilege of depositing our money there? And if this is the case, what's to prevent the masses withdrawing all that they can from said institutions?
I don't get it.
Debit cards are crack to the American consumer.
"Can someone please explain to me the "logic" behind negative interest rates? "
It's this easy : The business model for positive interest rates, where banking instutions could expect to pay you back your deposit plus some interest (growth) is now broken. Hence the need to charge fees for everything and to explore Zirp/Nirp/Bail Ins in order to keep the banks on a functioning business mode.
You explained it yourself.
The Central Bank doesn't want you to keep your money in the bank. They create the incentive for you to not have deposits and instead take risks by buying stocks.
Why have a savings account yielding .09% when oil can crash and you can own Exxon at $90 paying a 2% dividend? Buy bonds in bankrupt countries, buy stocks with no revenue that are worth billions upon billions of dollars, fuck...buy stock in Enron, whatever you do DON'T keep your money in the bank.
Also, fractional reserve banking doesn't really matter with ZIRP and bond buying programs like QE. Credit used to be created when banks loaned out deposits. Now the CB essentially does that, which creates inflation, which allows the government to pay down past debt with inflated currency. Shit if you're Japan the Central Bank buys all the bonds of the country. The reason Walmart supports things like food stamps (provided by government paid for by printed money) isn't because they're altruistic it's because the more people who have food stamps the more people buy their shit. Tax revenue gets recirculated and that's how the ponzi works.
Wow. More insane than I thought possible.
I, being a more conservative person, don't even think about gambling my savings away in the stock market... especially because it's totally rigged. For the average Joe just wanting to save his money, there's no intelligent incentive other than to buy hard assets.
I hope I live to see this whole corrupt system burn to the ground and sanity return.
"there's no intelligent incentive other than to buy hard assets"
And there ya have it. The central bank has convinced you to spend your money and not keep it in the bank.
This experiment has been concluded.
PM or land. Both can be taxes and/or confiscated. You can move and hide PM. But land requires occupation to truly take it away from the private owner. And that comes with costs and risks. Food grows on land, and so can businesses. It's about putting yourself into the best asymmetric risk/reward versus .gov.
This is only true for large deposits, not for the average Joe.
Since no-one wants their currency to appreciate they implement ZIRP or NIRP.
The average Joe will have the luxury of cash taken away from him soon, so you will be forced to keep your money in a bank (or put it in the stock market).
Greetings from Davos
The best you can do is this.
Take your money or deposits from the bank and pay down immediately all debt. That has two effects.
First you receive an interest rate that you will never be able to make on a deposit
Secondly you reduce the balancesheet of your bank by this. They need your deposit as capital and are forced to deleverage.
We are living in one of the sadest times for honest and prudent people caring for their savings. Let them all suffer the fate they try to put on us.
"pay down immediately all debt"
If people could just pay down their debt they wouldn't be in debt....
Savings? Who still has savings?
The trap has been closed...
Greetings from Davos
Many Credit Unions are what Banks used to be.
Yes, before the banking coup of 1913. Now all major banks that are part of the Federal Reserve can create money by deposits x 10?. Credit Unions have to operate how people "think" banks work by only lending money they actually have deposits for.
In the new digital world, they will get you when you have a bill due to someone somewhere. Hardly anyone takes cash payments.
I thought that if you offer an FRN as payment, that your debt is settled - whether or not the vendor takes it. That's the way "legal tender" works.
Most people are to stupid to realise that and so carry on using a bank.
Already in some countries there are limits to the amount of cash that can be used in day-to-day transactions.
Soon there won't be any cash at all, you will be forced to use a bank.
Greetings from Davos
Already it is viewed as questionable to pay in cash and withdraw cash... heck even a $5K cash withdrawal can be a challenge
It's worse than you think. Now that "bail ins" are legal, they don't even have to give back your money if they figure they need it more than you do.
Why would anybody put money in a bank? Tradition.
Also significant misinformation, people are not being told what their 'deposits' really are in a bank, bail in reporting is so propogandized people cannot help but be fooled.
No Debt, your a great poster keep going. The problem again is in definition. Inflation relative to what?, price of a basket of food for a family thats at 10% YOY easy, quite possibly more, increase in the price of a 100 ft yacht or a 5 million dollar manhattan apartment.... couldnt tell you. The market basket being used as a measure is so synthetic is unbelievable.
The issue was that debt was supposed to be inflated away, and tax revenues increase. What we have in general is a wicked case of stagflation, or biflation (things you need (food, medical care, skyrocketing, things you own Fiat for most of us, houses etc, plummeting).
The only shot at a way out is isolationism (30% cut (minimum in defense, 90% cut in giveaways to others), 30-40% cut in giverment jobs, monumental reforms to entitlements, starting with giverment pensions (nice way to say cuts), tax increases, on individuals, tax cuts for corporations (we need to get the corporate centers back, these were high paying white collar jobs), and true enforcement of anti-dumping tarrifs, and securing our borders, to stem the flow of freeloaders.... Medical in this country also needs to be fixed, big pharma is an obvious low hanging fruit.... I could ramble for a while. its irrelevant as none of it will happen.....
yes, you are correct, none of it will happen. there are too many vested interests who each get their little slice of the pie. The crybabying about that bullshit sequestration, which didnt even come close to cutting anything by a meaningful ammount, should answer any questions regarding our ability to make any cuts. Before too long interest on the debt will be taking up half of our tax revenue just like japan, even if interest rates stay low. How long this can continue is anyones guess. I wouldn't have thought japan could go on as long as it has, but I do believe they will be the 'canary in the coal mine'. Once the inevitable default occurs, wiping out one of the largest economies and most traded currencies in the world, it will spread throughout the rest of the developed world.
"The crybabying about that bullshit sequestration, which didnt even come close to cutting anything by a meaningful ammount, should answer any questions regarding our ability to make any cuts."
True, especially with 'baseline budgeting". Any cut below 7% is still a budget increase.
gatorengineer,
the neoLiberal program you advocate does not and will not work.
(layoffs, pension cuts, higher taxes on individuals, lower taxes on corporations, more policing, ...)
... except to the advantage of TPTB.
Some good ideas Gat... but my prescripton is
1. Default. (Completely)
2. Deflate - Reissue US "Currency" as "New Dollars" currency by doing a "Brazililian reset" - which is to drop about 3 zeroes from the denomination and print new currency with a new design. So a $1 bill becomes $.001. A $10 bill becomes 1 cent. A $100 bill becomes $1, $1,000,000 becomes $1,000, and so on.) Brazil has done this again and again, being a country that never saw a budget it couldn't break, or a currency it couldn't inflate to destruction... which is where we are today.
This would provide an ORDERLY transition to a path to financial reform, and raise the "value" of the US dollar in global trade, putting the US on top of the world trade/exchange markets.Of course, it would help if the new currency had something of value to back it up - like, oh... maybe gold?
As for MMT (mentioned in the thread above?) - it's naught but pure unadulterated BS. It has a fatal flaw - which is yes, a nation can print and print without reatraint or limit - but there is NO REASON for any other nation or business or person to be willing to TAKE your mega-zero currency in exchange for anything of value. (Witness Zimbabwe's unlimited printing and the termination of their ability to buy bank note paper to print on... and their economic/financial crash and burn. Zimbabwe was MMT's poster child - until it CRASHED spectacularly!)
Fiat money sucks as a store of value. ;-)
They call it Fiat because it depreciates like a rusty Italian car.
The car brand has nothing to do with the word "Fiat".
Fiat is an acronym of Fabbrica Italiana Automobili Torino.
Now you know from Mr. Knowitall, a very wise guy.
I thought Fiat stood for "Fix it again, Tony"...
Thats wrong. FIAT stands for "Fix It Again Tony !"
FIAT owns Chrysler
suckers
Some folks are going to get gunned down before that happens.
Constitutional law reset comes first. Money is just a counterfeit medium of exchange for goods and services.
From the last economic meltdown we’ve had a bailout for the banks, and additional supports for them in the form of quantitative easing and the direct injection of funds through the fed’s discount window. For main street we’ve had a few provisions in the stimulus directed at them (with limited actual effect), but no real bailout. Debt is concentrated among the lower income percentages much as wealth is concentrated in the hands of the very top percentage. Debt levels that were high prior to the crises were heightened by the financial crises which hurt the average households net worth in real estate or investments, while even more additional debt was accumulated by people losing jobs, etc. Debt seems to be a real drag on real growth and it seems to me at least that the only way to improve the economy for the majority of players would be widespread and comprehensive debt forgiveness. A “bailout” for Main Street. During the depression the fed actually had authority (which they still have) to lend to non-bank entities, which they actually used. Imagine that the Fed were able to use similar powers such that Main Street had access to the discount window for long term, low interest loans to replace those currently held by the majority of Americans at high interest rates. Imagine if the effect of inflation were tempered by a per capita limit on borrowing and by the closing of the same discount to Wall Street where the recipients either use the money for gambling on increasingly convoluted financial instruments or just holding the funds in the dollar carry trade. Imagine banks actively courting depositors again and offering a real return on the average saving account.
Thing is, TPTB are not into actually helping Main Street. If they do, it's only incidental on their way to enriching themselves.
When the pie was growing, it was easy to incidentally support the hoi polloi. Now that the pie is shrinking, their true colors come out and the middle class shrinks yet TPTB continue to benefit.
The data tells the tale.
I know the TPTB don't want to help Main Street. That's why I am trying to start the conversation that things could be another way. Because, maybe, someday, we can replace TPTB with a different TPTB. I would like to see a new populist party arise as a repudiation of the two party system, money in politics and regulatory capture.
Maybe with enough prophets coming in from the wilderness, telling tales, the hoi polloi might learn to take better care of their own livelihood by throwing the bums out and doing a rethink of this whole Neoliberal-Neoconservative Friedmanite corporatist fever dream.
"Imagine if the effect of inflation were tempered by a per capita limit on borrowing and by the closing of the same discount to Wall Street where the recipients either use the money for gambling on increasingly convoluted financial instruments or just holding the funds in the dollar carry trade."
That would work one way, and one way only: If it were backed by a legitimate threat of murder. That (and, well, okay--prison rape) is the ONLY thing that these vermin understand...
When FDR took office, much of the New Deal legislation was enacted IN THE FIRST 100 DAYS OF HIS ADMINISTRATION ....
I wish to justpose two different pictures: The first shows FDR sitting at a desk, signing the Glas Stiegal bill. Around him are gathered the various congressional leaders.... a sober faced group with not a single smile.
Cue to Clinton signing the bill to repeal the Glas Stiegal ...gathered around him are various congressional leaders, and EVERYONE IS SMILING AND LAUGHING.
(PERHAPS HE WAS GETTING A bj UNDER THE TABLE).
Can't wait to see millions of Skimmers drowning because they can't produce anything of value. Imagine the panic waking up in your million dollar apartment and staring into the mirror and finally realizing you're a zit on the left ass cheek of humanity.
The meek shall inherit the world and all that jazz.
Way to go ZH to identify insightful comments from the readership!
Luvin' it!
.
http://philosophyofmetrics.com/2014/12/17/the-sdr-purpose-of-brics/#more-1897
And the next move is a dollar dump by China according to JCC.
I agree, but for different reasons.
"Peak bullshit"?
So the quantity theory of money doesn't apply to the $US, but does apply to every other currency? What a stupid argument.
It's not that the theory doesn't apply, but rather that so long as instablity and risk is as great or greater elsewhere, there are no other options for the volume needed.
No stupider than "They hate us for our freedom"...
It seems to me that Triffins Law only apllies up to the point where there is enuf reserve currency floating around to grease world commerce. When that point is reached, the issuer of that currency no longer has to suffer trade deficits . I suppose the weakness in this argument is that the world economy keepd growing, and further injections of reserve currency are required.
Thoughts?
so what's the point of all the gobbleygook? it's pretty apparent the whole goddamm apparatus needs to come tumblin' down.
"Traditional stores of value and media of exchange among central banks - precious metals- have been debased through price manipulation in paper markets."
It's not just PMs. The banks have a finger in manipulate everything that is being traded on the stock market and then some, like politics.
Traditional stores of value and media of exchange among central banks - precious metals- have been debased through price manipulation in paper markets."
You're trying to see the ears from the ass end of the donkey. PMs are not "debased". It's the fiat that is debased. PMs are one of the few things that have intrinsic value - ie the value of PMs remains stable while the "value" of fiat goes up and down against the stable PMs. As the price of PMs goes down, they may be acquired with less fiat - but that is an artificial "price" - NOT a "value." When the price resets to real-world value, you'll see the dollar price of PMs skyrocket - but the "value" of the PMs will remain constant.
...we negative interest-rated some folks
"As debts come due, including as bond issues mature, the only option governments have is to roll over the debt and accumulated interest, and the only way they can afford to do that is if money printing is a continued practice and interest rates are at or near zero."
There it is.
Consuelo - you're only telling part of the story. When the rest of the story is told, the government won't be able to "roll over" the debt" because no one will want to take it. At that point, government spending stops. Print all you like, but as with my comment on MMT above, it's what happens when your fiat is so worthless no one will take it. That's when the government has no choice - it is forced to default and start over. Zimbabwe ended up doing that, and issued new fiat pegged to the US dollar (The dollar was supposed to fix/give the new Zimbabwe currency "value". Kind of ironic, eh?)
The key indicator is isolation...those that wanted their gold back got some. Most got none (or all of it if it was guaranteed to not be tested for Tungsten). Countries are drawing in and that is healthy but it probably wont last. The global slave trade will not be stopped.
The global monetary reset has been underway for 7 years.
It's much different than 7 years ago. We are wiser.
Structured investment vehicle (SIV)
And then the collecting up of the people behind this. It has happened before and will happen again. People are slow to act...but brutal when they do!
A key point that wasn't mentioned is that ZIRP applies only to the Chosen Asset classes. If you look you will find plenty of areas where interest rates are in double digits.
What this achieves is further concentration of human activity in the Chosen Assets and less activity in areas outside them. In my city the lowest interest rates can be had for purchasing houses, which produce nothing. However, farmers are paying double digits rates. Needless to say, house construction is booming and country towns are becoming ghost towns.
What does it mea when ZIRP applies to the nnon-productive human activities while the productive activities are paying double digit interest rates? Do we end up building houses and eating our own shit?
How to Start a Prepaid Credit Card Company
ZIRP and X% mark-up. /LOL
More to it, just basics.
It seems that saving in gold is perfect now. If they lower the price (sorry if the market sells more paper and the price goes down) third world folks will buy up physical and drain the US/London folks of their ability to price gold. It may be a wait until the system breaks but for true long term savings it will work. This is of course not so good for traders as I supect the volatility of gold is going lower. It won't rise much but they can't let it fall much either.
The lack of bullion will zirp up their ( ! ) and explode.
i fold. a friend at the irs just told that the corruption there is massive and that he is afraid to say anything. he said that they are going after churches now with a vengence.
christian churches that is. obama won't allow the irs to harass any mosques.
about time they went after christian churches. what a sham. Religion is as much a compensation scheme as a ponzi is a fraud. Its all utter bullshit. Theres no way those assholes in the church should ever get a tax break.
I'm tired of taking it up the: ( 0 )
There must be another place. Let me think.
I'll get back to you
do be brief, sir
I call it "Synchronized Printing" by the Club of Central Banks.
MMT was the "economic school" (theory) created to give academic cachet to pure unadulterated BS, otherwise known as fiscal suicide.
The only modern economic theorist for me is George Orwell. In his great work, '1984' (whose forecasts are becoming more palpable every day), he applies the saying "children should be seen and not heard to the economy of Oceania:
2 Minutes Hate and Junior Anti-Sex league meetings should be enough on our plates without worrying about consumer sentiment. No?
Bonds should be viewed as the Achilles heel of this low interest rate but inflationary period. Anyway you look at it I have a problem lending my hard earned money out for a long period of time based on predictions of future government deficits.
These forecast are often formed and made on assumptions based on rosy scenarios or politically skewed to benefit those in power. Like many investors I think the bond market is a bubble ready to pop and won't touch bonds with a ten foot pole. Knowing what we know about the effect that interest rates have on the value of bonds one might deduce that the 30 year bull run on bonds will have to come to an end the moment rates are expected to go up.
To give you a sense of what this may mean to U.S. Treasury Bond investors a 10 year treasury bond issued at a 2.82% interest rate could see a 42% loss in value from a mere 3% rise in interest rates. This means if you’d held $100,000 in these bonds prior to the rise in rates, you would only be able to sell those bonds for $58,000 in the secondary market after the 3% rise. Not only would bond holders be stripped of wealth if rates rise or even worse soar, but it would magnify the nations debt service and rapidly impact our deficit in a negative way. The article below delves into just how big a problem it could cause.
http://brucewilds.blogspot.com/2014/12/bond-market-bubble-has-ugly.html
What will cause interest rates to rise? Timing is the problem. Rates are still low in Japan.
At some point the return on loaning money is simply not worth the risk! Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless?
When this happens the only safe place to store wealth will be in "tangible assets" and the only lenders will be those who print the money that nobody wants. It might soon become apparent the economic efficiency of credit is beginning to collapse and the additional money poured into the system coupled with lower rates can no longer drive the economy forward.
When this happens we are at the end game. The collapse of credit can pose major problems such as what we saw when many sellers were forced to demand payment up front before shipping goods in 2008. More on this subject below.
http://brucewilds.blogspot.com/2014/06/the-economic-efficiency-of-credit-can.html
it is just a n other phase, ending in sordid sublimation.
nice, well written, thanks.
What could possibly go wrong?
Now this is more like it. Succinct, sensible, coherent, no charts, no graphs
What is the reset that is underway?
I'm waiting the brand new brillant economist who will theorized this "new normal" economy, which will be teach in all the university around teh world. Keynes and Friedman did in the past, no?
After years of reading, watching and listening to everyone who thinks they know what's going on trying to make my own sense of things I've come to one conclusion.
A small group of people know where they are taking us for a ride and the road we take to get to grandmas house is getting narrower by the day.
This new normal we are being shoved into, I believe, is the attempt to complete the circle on the elimination of our nations sovereignty.
I thank you all for your insightful and constructive comments to help us all make sense of this partial birth abortion we call the economy/ market.
The only winning strategy is to not play their game. The only game in town is the one they discourage you from playing.
How about a nice game of chess?
One final thought for the night. I believe congress has to continue to print and spend until this reset happens. If the government starts to be fiscally responsible it will cause a deflationary event which will collapse our dollar which is why the Fed is doing what it is doing and congress is spending like mad.
The Fed has basically been put in a box and has two options print or collapse. Congress knows this which would explain their insane policies and spending.
What goes on in DC is just theater by those who know they are on a sinking ship and are doing everything they can to find a lifeboat that keeps them from getting their heads chopped off.
Congress can't tell us this because righ after they did that anyone with half a brain would take every last cent out of the system and do what? That's right buy fucking gold.
They can't and won't let that happen for as long as they can keep it up. So just beat them to the punch and hold on for dear life.
If printing money could solve problems then Japan would be considered Nirvana.
So to understand the nature of the problem just ask yourself why all this money printing has not reversed the downward slide.
The answer in part lies in the need for various components of the economy to be in some sort of balance. These include physical
money, land, labour and other reources as well as a population pyramid that has the right mix of young, workers and retirees.
If any one of the above is missing or in too much supply, the economy begins to falter as it has.
Agree with all that PP.
I would add two more crucially important ingredients which are AWOL.
They are: "trust" and "confidence" in many of the very institutions set up to manage it all: government, central banking and banking etc. But without them, risk, investment and corporate expansion and any semblance of economic growth all evaporate or get reigned back and the economy slides further into the vortex.
This is compounded by the massive debt overhang - personal/corporate/sovereign - from pre-2008. They collectively seal the fate of a healthy economy for the foreseeable future.
It isn't that hard. All you need is a system of government that encourages capitalism. The young/old mix, resources, bla bla didn't stop Japan from becoming an economic powerhouse after the war. Today, capitalism is viewed by all progressive countries as a necessary evil, tolerated to feed the endless benefits promised by government and its union cronies.
Yep the ratio of productive output to debt that those all creating the fake value to issue ever more debt never figured. NO BALANCE and think if you applied half decnet mathematics to this you would find their is a limit to this.
Then just to add icing to the cake all this mass production of everything all of a sudden you killed the price as stockpiles build up as demand falls.
Now with no demand becomes even harder to issue more debt you can't stop the price collapsing.
To sum it all up for me a US franchise operator found their turnover in Dec 2014 is 20% down on Dec 2015 that is a big drop and wonder how many others are finding the same yet they are told their is a recovery under way? Really!
"why all this money printing has not reversed the downward slide ?"
because money printing was in exchange for obligations to repay back and not for free
silver or gold? silver or gold?
Why not both?
http://m.youtube.com/watch?v=CirrRY_6aaU
Here:http://christmas-specials.wikia.com/wiki/Silver_and_Gold
Since leaving the gold standard in 1971, not that it wasn't already gone, our debt based system requires that we keep spending. The printing is inflationary so government and Wall Street are constantly looking for yield and profit as to make all the debt instruments stay afloat.
It amazes me that my parents generation who are retired now that depend on their fixed income strategies don't see that something is wrong. My aunt and uncle were both in banking for savings and loans their entire lives and even they have no clue about how the monetary system works.
With just a madicum of reading about the history of banking one should quickly come to the conclusion that we all have and protect yourself, but they don't.
It's back to the teevee and all the other distractions and I can't for the life of me understand why. It's very depressing when family won't listen to family.
"It's very depressing when family won't listen to family."
Family never listens to family. They KNOW you, and they also know that you might think you're special, but you're not... 'cause after all, you're just family. Didn't your brother feed you a worm when you were little and you believed it was a chocolate stick? And that time while you were being potty trained that you sat on the pot and crapped in your pants 'cause you weren't smart enough to pull them down? Yeah... you'll get NO respect from family.
Well, just keep buying S&P futs... the only place to make money is still the US market. Nevermind 'bout fundamentals, eh?
Won't last forever and fully expect not being able to generate a return the policy of tax avoidance by all crippling the government tax take to be most important.
Like start tax avoidance now, you will save each year going forward under the new economic regime of zirp / nirp and that is your profit / return.
Under this kind of regime the best place for money to be is in paper form in your pocket and not in a bank anywhere because under the electronic system if it can be seen IT CAN BE BAILED IN.
There is no such thing as "electronic money". There is no 'money' in any deposit account, anywhere, it is all BANK DEBT, I.O.U.s, euphemistically referred to as CREDIT.
Has someone beat the shit out of Harry Reid yet?
Well fuckin GET TO IT!
I keep wondering when Boner is going to declare that he's REALLY a Democrap and get all the pretending over with.
Economic damage through contagion lurks as a problem because we are all interconnected for better or worse. Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity and catalyst to advance this agenda down the field.
Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. Even with some countries not participating in such a currency dislodging the American dollar as the world reserve currency represents such a shift. Calls for a new world currency may grow over the coming years, if the world stumbles into an economic hell the noise could become deafening because people and their leaders tend to look for easy answers. More about how chaos in the currencies might bring about a new world wide currency in the article below.
http://brucewilds.blogspot.com/2014/02/contagion-may-lead-to-new-world-currency.html
Pump stocks and FX trading to the moon. Federal tax on assets to balance the budget and pay off debt. First banks, now wall street TBTF. How high would IBM be if freemoney was used to buy up all but 100 outstanding shares.
Absolutely one of the best commentaries I've read on ZH in a long time. SPOT ON.
Absolutely one of the best commentaries I've read on ZH in a long time. SPOT ON.
Agreed. Very clear and coherent. Fires me up. Makes me think maybe I'm not crazy afterall.
The important thing is that the ponzi will last another 10-20 years.
How many times has ZH printed this same type of article?
Over and over and over and over....
Quit pegging currencies to the dollar. Peg currencies to a basket of hard assets - wheat, oil, minerals, metals etc. Even include a measured amount of select currencies in the basket that reflect a country's value - unused resources, economy, human value and services, and other assets. Make politicians and economists do their job based on real goods and production rather then the distorted fiction that they have created.
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But, but ... isn't a -2% interest rate just as good as 2% inflation for running down government debt? Better even?
Screw it... Im going to run up all of my credit cards and buy me one of those Russian women I see in the ads here on ZH...