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Economist Cover: "Watch Out"
One of the recurring explanations given why the Fed is eager to hike rates is so it has some dry powder ahead of the next recession which, some 6 years after the last one ended is overdue (especially with a negative GDP Q1). Which, incidentally, is just the topic of the next Economist cover titled simply "Watch out" adding that the world is not ready for the next recession...
There is, of course, the question of just how much dry powder does a 25 bps increase in the Fed Funds rate provide, especially considering that Europe tried precisely that in the summer of 2011 only to unleash a crippling recession on the continent that required yet another Fed bailout in November 2011.
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None of us will live long enough to see the next officially declared recession. Hell, we're living through a Depression right now, but they'll never admit it.
Exactly, and why are 'emergency' interest rates so low after so many years....
Why is GM still open? LOL
To build trucks for The Man. Check out the new Chevy 1500 Dissident Pick Up.
Just made this as I waited for tech support to show up. I found it funny.
http://de.tinypic.com/r/152bwwx/8
As it pertains to SILVER, Something Big It Taking Place In India:
INDIAN SILVER IMPORTS: On Track To Smash All Recordshttp://srsroccoreport.com/indian-silver-imports-on-track-to-smash-all-records-2/indian-silver-imports-on-track-to-smash-all-records-2/
Huzza! Indian's know what is UP.
Or do they? I trust no NUMBers anymore. It is perhaps for india's now soon to be burgeoning defence/missile industries that are going to pop up as Israel and USSA and France decide to benevolently move their factories here.
The first move by our now not so new Prime Minister was to sign a $35 billion deal with Israel.
All that said, AG is it.
This, might be pure gold though ;-)
https://www.youtube.com/watch?v=OsrCg7rwcqA
But isnt the economist ALWAYS worng? havent countless cover articles predicted one thing, and then had the exact opposite happen. This article is the first thing Ive seen in a while that makes me optomistic.... If the economist says we're doomed, everythings gonna be ok....
That's right.
Once secret TPP goes into effect everyone will be saved by their new awesome job as copper top at Earth Industries, Inc. Plus...we've got Jade Helm to look forward to. I'm going out to finance a nice new car!
The steak tastes good too.
pods
Of course the Economist is wrong here. They're just one step closer to correct than normal. We're not about to enter a recession. We're not in a recession. We're not in a depression. We've been in a state of collapse for the past 15 years.
Even though we love it here we were starting to wonder if relocationg to the eastern redoubt was really necessary. TPP has got me spooked Vaq, we've deciided to double-down on the hugelkultur beds and make a bunch moar. The amount of stuff we've got going already is incredible.
It's all coming down. It's just a matter of timing and who comes down when. I'm US centric because I'm in the US, but the rest of the world is also in a similar situation. Some may be able last a few years longer than others. So carry on with your hueglkultur. Try other things too, and expect some failures in the process.
Of course the Economist is wrong here. They're just one step closer to correct than normal. We're not about to enter a recession. We're not in a recession. We're not in a depression."
Double-Dip, or is triple-Dip. just becuase your already in a recession or depression does not mean things can get even worse.
" We've been in a state of collapse for the past 15 years. "
Slow stagnation collapse.
"But isnt the economist always wrong?"
They are hedging their editorial bets. Which is quite a tell from The Economist, which has been a dishonest bootlicking bunch for years now, just with higher brow writing. For fuck's sake, of course the enormous government debt and ZIRP forerevah have set the world up for Nemesis to do its tragic job. But The Economist sucks central planning dick and cleans out its partners' well humped hole week in and week out since more than a decade now. It's impressive they go ahead and bring up the obvious one article out of a thousand.
This was my first thougth as well
I remember when the Economist Magazine (1999) had a cover when crude was in the $10 range, and that it might go to $5 a barrel.
I went long crude futures with every dollar I could.
http://www.economist.com/node/188181
http://www.greenbuildingadvisor.com/sites/default/files/Drowning%20in%20...
This time WILL be different
The beast is further up the creek.
.
Chopping off its tentacle is completely useless as it will just regenerate a new one.
.
We need to cut the beasts head right the fuck off.
.
Now what?
The Rothschilds are diligently complying with the rules of occult by announcing that which they and their bretheren have created to inflict upon the goyim.
"I do what I'm told..."
So creative aren't they?
Why is GM still open?
Because "You Got It, Pontiac! "
UAW Motors supports the government party, that's why.
A better question IS...why is Chrysler still open? Bailouts...and for whom?
Could it be Cerberus? With lead partners John Snow ( ex US Treasurer) or Danny Qualle ( ex VP USA). Can't have them mowing lawns now can we.
GM is still open to build the rolling sarcophagus for the idiocracy.
GM vehicles should be required to be lemon colored.
Because bankers and financiers have gotten use to the free money and have bought congress to keep it coming.
It really kind of was the perfect storm
We had a government that was bought and paid for, mostly by big bankers...
We had a financial system that was lying compulsively...
We had a monetary system that was staffed by bankers...
We had public that believed distractive issues like gay marriage were more important than the crooks they were electing for their pet distractions.
Up next, more and more overt Tyranny, with grander distractions.
Was? Hell this storm has just begun, Tyranny is only one piece of it, and this is a multi-faceted storm, with more than one storm meeting up...
World War 3, Economic Collapse, and Bank Bail-Ins are all real threats...
Banker/financier bail-ins are ongoing, in "modern finance" these people are nothing but useless overcompensated middle-men between the printer/computer and the real economay consumer/producer.
If they were smart, they would start spending all their ill-gotten gains and make themselves useful...
http://thehill.com/policy/finance/241366-record-number-of-american-expat...
Yeah, I'd be willing to wager many of them are headed to London or Tel Aviv too...
If you're not planning on coming back for good, why have the IRS look at your foreign Income and Assets?
Besides, should you change your mind, you just know that you can come in as a Free Trade worker (NAFTA, TTP...). Except now (after some years of not being a USC anymore and not having filed taxes), your Foreign Holdings have been buried too deep for DC to find or grab.
Which makes me wonder why Simon still has his USC. You need to practice what you preach, Black. It's not as though you don't have your assets visible or accessible by TPTB.
I have a salutory tale for you Captain.
My father always opened bank accounts in every country he visited.
Strictly illegal as a UK resident during the time of Sterling capital controls.
One of his strokes obliterated his momory of the numbers,names and account numbers of
those deposits. Our family was SOL trying to recover the monies.
You can be too clever.
Not only that, but what places are going to be immune from the massive economic shocks yet to come? Places you don't want to be right now, that's where. Foreign governments are not going to be kind to recent transplants when SHTF.
Dry Powder? There is no powder until they keystroke it into existance. What yacky BS?
Imitation is the sincerest form of flattery.
The correct cover would have just one dragon, who was just distracted for a second by bernanke and janet waving a stick...only to be devoured seconds later.
The Oligarchs and their syschophants aren't ready for the next recession. Majority of working people have been living a CONSTANT recession since around 2001...
Speaking of Fed bailouts.....it is the FED that "provides" the money to house ALL of the US prisoners. Authorities simply say "taxpayers" pay for the millions of US incarcerations though it has come to pass that the FED loans the money at a 10:1 fractional reserve. So.....with the most people in prison in earths history it should come as no surprise that the FED is lending for it.
We will see the revolution.
Liberty is a demand. Tyranny is submission.
Slaying the western financial system and straight into the eastern bloodline (dragon) system [aka BRICS]. Out with the old and in with the new. Unfortunately the new is a trap and part of the NWO totalitarian system.
The dragon on the right isn't large enough.
There's a bigger one behind him.
That's the Grim Reaper
At least he still wears the armor.
The dragon on the left is just sedated by bullshit!
he's playing dead....waiting for the Knight's grandchildren to come along.
Economist magazine, owned by Rothschild Inc is of course a propaganda mouthpiece for the system of monetary enslavement we endure.
The one thing I'll say for that magazine is that they do actually cover the entire world. I buy it when I have a longer plane ride, and I read about places I never see mentioned anywhere else. Of course, one has to set one's bullshit filter properly to understand what one is reading, in the way that Soviet Russians used to say "You have to know how to read Pravda." But that's the same for all media. I prefer openly biased media; makes it easier to get past that, consider the actual information presented, and opens one's mind to discern what isn't being presented.
The lack of global coverage in most media is utterly shameful.
I am always looking for 'boots on the ground' reports from Greece, Cyprus, Spain, Portugal, Argentina, Venezuela, etc. You have to go directly to Reuters website, RT, or once in a while get lucky on Zero Hedge. I also check some Expat forums. The whole fucking world is in a Depression, and all we hear about it in the USA is crickets chirping. The suffering people are going thru in those countries is almost unimaginable.
Our Mainstream press is at best a joke, and are derelict in their duty. The lack of good and truthful information is putting USA citizens in harms way, and is preventing them from being able to see what is coming, and preparing for it.
Maverick
+1. People are lazy, or have been made so over time.
Agree that you need to get your news from multiple sources (and read ALL of them with the BS filter on), just as you need multiple revenue streams, and diversified assets in multiple places.
"The whole fucking world is in a Depression," -- yes, don't tell me that you actually believed that growth could continue forever and ever in a single biosphere with finite resources?
There never has been a economic, fiscal, monetary or political solution to resource scarcity. Time to find out who dies and who lives... ...again.
Same as it ever was...
Resources tend not to get exploited at all the more they are "shared" and/or centrally planned. Private property and markets make deserts bloom and the reverse make resource rich places abject hell holes. Bb
So, it's your opinion that the world has in fact been investing resources and capital wisely as of late? LOL!
You would also contend that allowing only bankers and financier access to free money (ZIRP) has been a "good" thing"
Is that you John Corzine?
watch out for what? QE 4?
Watch out for the cashless, mark of the beast type solution, more and more. We have to sacrifice our little freedoms for the sake of everyone's safety, and especially the childrens'
"the Fed is eager to hike rates is so it has some dry powder ahead of the next recession"
dry powder? aka, QE. aka, peasant raping.
Hard landing or soft?
the "powder" they are warming us up to is forgiveness of loans (means tested, of course).
that's a trillion "stimulus" right there. (and millions of guaranteed votes)
Won't work because of moral hazard. The equiable thing would be to simply give every taxpayer $100,000. If they have debt, they must pay it off or down first.
You can see the other problem with this approach. Fewer people would actually be debt slaves.
We cannot have that now can we...
The terminology is ill applied. Moving on a downward depressionary slope to a steeper downward depressionary slope.
Fuck that Rothschild propaganda rag.
The problem with “Rothchild Thinking” is the Rothchild ‘s are protected. Only after all the local police are dead – or they resign – can progress be made by continuing up the chain of commend o their doorstep.
Notice people who are afraid of black people and cheer on the police. The above won’t be resolved until after the police sympathizers are dead.
We are in suspension.
once the police see that their pay won't buy shit and the pension obligations will not be met, Nature and the laws of physics will reassert themselves...
same as it ever was...
Then the police will be discarded and the mercenaries will get a raise.
Astute observation....unpleasantly true.
It worked for the Sheriff Of Nottingham.
So there's precedent and experience that the Aristocracy can draw upon. And until a new Robin Hood comes along, "They be robbin da 'hood".
Yes, again, same as it ever was...
Then the former police form gangs and come and take your stuff and kill you for real.
Why are you such a pussy? At least it will (finally) be a fair fight, if it actually came to that.
Sympathize with the police or feel sorry for black people - which is more pointless?
Or rate hikes of the target federal funds rate are meaningless because the Fed is paying interest on reserves.
Raising the fed funds rate without increasing the interest paid on reserve just causes banks to take money out of the Fed and start lending to each other, fueling the inflationary fire. They've flipped the signal on what a rate increase means. It doesn't mean they're trying to take away the punch bowl, it means they want banks to lend more to each other.
Pushing bullshit paper/digital promises around does nothing for the real economy.
Get long black markets, sharecropping and guillotine manufacturers, beat the rush.
We should pay no interest on fiat reserves and Congress should amend the 6% divy Fed member banks receive. It is a outdated sham.
Imitation is the sincerest form of flattery.
I like these sorts of comments.
Everyone refuses to accept that a rising interest rate trajectory might be inflationary.
The Economist is a POS just like FED / CB stocked academia. All propaganda.
thanks for the warning zio rothchilds. know how much you guys love symbolism and twisted foreshadowing. is the china dragon going to slay the western knight? was kind of hoping a couple of those dragon teeth would be gold or silver.
Plant those dragon teeth. You'll be amazed at what comes up.
Another feature article today (this time in CNN/Money) about the danger of a liquidity crisis due to the post-2008 finanical regulations. I'm not a finance guy. I understand some of the concepts but don't feel like I grok the whole thing yet. Does anyone here have a link to a good for-dummies version of this whole problem? Either point me somewhere that talks about it for lay people, or you could point me towards some text that teaches me underlying concepts that would make me understand the shorthand version better. Help an engineer out here. Thanks
trav7777, Mako, francis_sawyer..........the 3 wise men...go back and read them.......
the long view from Mako..
- System starts
- System expands at the rate needed
- System peaks
- System unable to expand at rate needed
- System collapses
- System liquidates
- Rinse and repeat if choosen
And by liquidate he meant 7 billion useless eaters. That line always made me smile.
pods
trav7777 on Mako
Fri, 11/11/2011 - 20:44 | 1871334 trav7777
Mako wasn't the only one.
He and I differed only in that I don't see the effing apocalypse and madmax as a result. the lizards have been doing this since their holy texts were written, always to outsiders.
There's a lot of history people don't know and the history of chosen participation in the basest vice trades, to a point of dominance of them, is but one aspect that has been whitewashed. Carpetbagger interest lending to freed slaves was another source of income, as was the financing and trade in the slaves themselves. If you repeat this history, you are marginalized and smeared.
However, these cycles run longer than human lifespans; there is no particular planning in them, just how to work with clan power to dominate any particular phase.
http://www.zerohedge.com/news/turd-ferguson-inexorable-march-higher-precious-metals
I believe it was trav777 who posted this back in the day -
"Exactly. Which is why most people I know think they can ignore the math and everything will be okay. They fight the very idea that there is a real decline in quality of life, that it is permanent, and that it will continue to deteriorate. As Michele added above: "Apres moi, le deluge." Everyone else will get screwed but not me, I got mine.
It's a tsunami. Previous paradigms no longer apply.
Teevee, junkfood-addled Amerika could not withstand a currency collapse. The Black Plague made human capital valuable again - in modern application we have tens of millions on the gov't teat with no recovery.
http://www.martinarmstrong.org/files/Are-We-Running-Out-of-Other-People-...
All those 99-weekers waiting for jobs. What jobs? Doing what? The service economy is a fiat lie and our infrastructure is based on a constant flow of cheap oil.
Mortgage? WTF for? Prices are artificially high because of 1) shadow inventory 2) who can say they will be employed in their profession to make payments for 30 years anymore - no man is an island.
Stay nimble. Stay quick. This is no time for white picket fences. Going back to the sad, miserable, drugged-up state of our Nation it ain't a stretch to imagine that the Mandarin speakers are planning to make use of their raw (war) materials and spouse-less young men for "real estate acquisition". Hasn't anyone read a history book around here? The Chi-Coms have openly spoken of how they deserve North America. This kind of scenario isn't discussed because it is the worst-case scenario outside of nuc-bio-chem warfare, and then subsequent invasion.
"Oh, but China needs us and we need them." Bullshit. Everyone is buying time. The Chinese aren't stupid and they know they aren't getting their money back. Some finance guy over there said US bonds are not safe medium and long. In other words "We are trying to buy as much time as possible to acquire tangible assets that matter!"
All the survivalists from the 70's were wrong because they didn't understand the "Nixon" trick/effect of taking us off the gold standard and taking paper money to its extreme utility. It would have been better to face this shitstorm back then. Back when Americans were still eating meals that had real nutrition, no obesity epidemic, actual human interaction, strong infrastructure with less bureaucracy. Today it's all bloated beyond recognition.
When the Fed finally makes a move that has a visible and real effect on Amerika even rationing of supplies won't keep the interurban areas content. We are at the brink of a f.u.n.d.a.m.e.n.t.a.l. shift. Be far away from the millions that require a weekly check for their very survival. Do you think the owners of the Fed care if millions starve? "
Start by read a book called : The Creature From Jekyll Island.
An excellent read.
Google Rothbard The Mystery of Banking.
Here is a basic straightforward outline of the problem....
http://www.project-syndicate.org/commentary/liquidity-market-volatility-...
OK, I'll try this and LOP's response to see if that solves the immediate need (not saying I won't read the book recommendations but ... I've already got a standing list of books I have no time to read, more books are going to have to stand in line.) Thanks
It's cool, in the near future I think we will all have a "bit" more time on our hands.
Toss in Mullin's EXCELLENT book on that list. I would read it first.
http://www.amazon.com/Secrets-Federal-Reserve-Eustace-Mullins/dp/0979917...
Be careful though, it talks about joos.
pods
allow me to simplify for you. In 1971, the very last remaining shred of a connection between fiat money and the real world was cut. The Chinese were diligently buying our debt and stock ever since then, when in 2001, the biotech bubble blew up. The Chinese actually bought more government bonds/treasuries after that. In 2008, BOTH the treasury and stock markets had done quite well, many people (especially in dark pools) wanted to sell. In particular though, the Chinese wanted to sell much of that government debt in 2008 (think of how well government debt has been doing from 1980-2008, a 20+ year bull market). BOTH of these factors caused a huge crisis as that money does not actually exist (learn how fractional reserve banking works), also remember new money creation has not require real collateral for quite some time now.
So in 2008/2009, the powers that be had a choice to make, hold people accountable for the greatest "margin call" in history, send all those "arsonists" to prison who had engineered and profitted from the blatant paper fraud, pay the Chinese and others cashing out of U.S. debt etc. OR go "fuller retard" and print like never before to maintain the status quo and ongoing fraud.
They chose the latter.
Hyperinflation and a global currency crisis is assured, it's only a matter of time now. At least in the 80's, the first time the bankers tried a major fraud (S&L "crisis") by separating property titles from owners, we sent a fair amount of them to prison. The oligarchs are not even pretending anymore.
Interesting times.
Gold.
(Well a type of it, at any rate.)
a type of it? How about the real thing, in your hands?
The core problem is twofold:
1. Trading volumes are down while quote-stuffing and spoofing (submitting fake bids to push the price around with no intention of actually executing a trade) are way up. It LOOKS like there's a lot of buyers and sellers when, in fact, there are actually very few.
2. There are no "market makers" any more. A market maker, by definition, MUST stay in the market for a given security or securities regarless of conditions- up, down, rain, sleet, snow, dark of night- and continue matching buyers and sellers in trades. They also act as a "buffer" in times of market stress, buying or selling securities from their own book to keep an orderly, functioning market.
This was all set up years ago specifically so markets wouldn't hit an "air pocket" where suddenly you can't find a counterparty to trade with at any price. That's all been thrown out the window in favor of HFT shops that claim to provide "liquidity", negating the need for traditional market-makers. In times of normal market functioning they DO provide liquidity. But in times of stress they aren't require to be in the market, so they step out (stop trading) and the bid stack that looked deep and healthy 10 milliseconds ago, evaporates. Prices plunge as matching programs on the exchanges can't find a bid an any price. In the "flash crash" some stocks hit literal ZERO for a few seconds.
Or google "how does the NYSE work" and start reading (NASDAQ operates a little different, but similar).
More gold (of the non-bullion kind).
Its a slow learn. ZH is a good place to get opinion, though its often ridiculous and political. Its this process of learning how to weed out foolshsness that allows you too home-in on reasonable points of view - from all sides. Check the various videos (youtube and otherwise) of the likes of Kyle Bass, Raoul Pal, Howard Marks, Spitznagel, and a few more.
Here's a good site... http://usdebtclock.org/
Try to comprehend the number "trillion" then when you realize you can't you'll be interested in digging even deeper for information.
One good starting question" What will happen to our debt service payments when interest rates rise? (They will go up - and yet we're already printing money out of thin air) And another...Is the Fed always in control of interest rates? (No)
Consider how much better off the US would be if the river of money flowing out of the country as we buy foreign goods was reduced and we bought increasing amounts of goods made here, breathing life into our withered manufacturing sector.
Learn what the word "liquidity" means and what it implies for efficient markets, and hwta happens when its not there.
And there's so much more!
Yes, but it all can be simplified...
trillions and trillions of paper/digital promises that only a select few have had the power to "create" have been pushed into the the real world.
These are nothing but paper/digital claims on real assets that do not exist.
any or some combination of the following is guarranteed, like always the timing is a mystery; hyperinflation, currency collapse, world war III.... etc.
Liquidity is basicly a credit card with a 0% interest rate, that only banks can use. This low interest credit is used to issue even more credit to those who want to dubble down on cosino bets.
This Liquidity works untill the interest rate moves up, causeing some of those bets to be pulled off the table.
This is not a bad thing normaly but with all the out right fraud in the finacial system no one knows how many or how big the off the books bets really are. So many bets are tied to each other that if one goes south it may pull everything with it.
There is no liquidity crisis today. There was no liquidity crisis in 2007/2008.
Lack of liquidity is a symptom, not sickness.
What the problem is, is a solvency problem.
So much shit doesn't have any real value, and eventually even banks start looking for what's real and only buying what's real...when that happens, 'liquidity' dries up not because the money isn't there to buy things with, but because nobody wants to buy insolvent junk.
I think a number of the replies to your post have been helpful and have illustrated different aspects of the problem. For example, NoDebt discussed market illiquidity and LawsofPhysics addressed some of the macroeconomic monetary concerns.
As to how to protect ourselves in the future, which may be the crux of your concern, it is important to focus on tangible assets, as opposed to paper. This is easy to say, and sometimes hard to do, because people who have diligently been stacking silver and gold for the past couple of years have had to deal with a lot of pain as prices have not cooperated with this strategy – yet. This has largely been due to the artificial suppression of PM prices by central and money center bankers through illegal trading on the futures markets in violation of position size limits that should have been enforced by the CFTC (but which were not because they are part of the same collusive cabal).
To get a really sharp picture of the situation, imagine yourself as a corrupt central or money center banker, whose buddies all depend on you continuing to feed them insider information about your future market actions, and that have in the past been dependent on your ability to print money in essentially unlimited quantities.
An entire empire has been built up for you and your cronies based on this ability to print unlimited amounts of money – and have that money be honored on world markets. Suddenly you are faced with the reality that your world is crumbling, because the people you have abused in the past are becoming wise to your scheme.
You will desperately attempt to hang on to power (at least if you have the same ethical standards as these scum) until your last breath (see QE1, QE2, QE3, QE4?) using the same tactics that you have used in the past – even though you know that these tactics will be increasingly less effective – because in the long run the laws of economics dictate that they must fail.
Welcome to the cabalist central bankers’ hell of their own creation.
Unfortunately we have to share this hell with them for a while – that is until history gives them what they deserve.
And it will.
There is in fact plenty of "liquidity". Solvency (real assets/collateral) is the fucking problem.
I agree with you. What you have characterized as the “solvency problem” is the primary problem. However, illiquidity is also a problem because it increases uncertainty and promotes instability of the financial system – a system that is already vulnerable because of this more fundamental primary problem.
My characterization of the “solvency problem” and the most likely scenarios for its eventual resolution are state below, and I apologize in advance to the readers for the length of this post.
Before I continue, let me define the term “collapse” as I understand it, because I don’t want to be accused of claiming that the sky is falling – there is too much irrational analysis of what is going on already – and I don’t want to fuel that fire. In the context of this discussion, if the price of something “collapses”, that means that it undergoes a “dramatic and sustained reduction in value over time”. It does not necessarily mean that this reduction in value occurs in a matter of a few days – it may take more time than that. It also does not mean that the process will be uninterrupted and never have any “false rallies” along the way.
By funding current consumption with debt that must be repaid (and thereby artificially creating demand to attempt to avoid recession, consistent with Keynesian economic dogma), the fed has in essence robbed the balance sheet of the citizens of the US (which is also sometimes called “the full faith and credit of the United States government”). The only thing that has prevented the collapse of this system is the promise that US taxpayers will eventually be able to repay that debt in US dollars – WHATEVER THE REAL VALUE OF THOSE DOLLARS MAY BE AT THE TIME OF REPAYMENT. Unless the US government defaults on its debts by refusing to pay them, everything that it spends must eventually be paid for by US citizens through taxes.
A collapse of the market for these US-issued "junk bonds" (which no individual investor would buy, unless they trusted that this ponzi scheme will continue) has been prevented by "instructing" the Federal Reserve Bank or “Fed” (that is privately owned, and not part of the government) to artificially support their price by buying a large portion of them up (a process known as quantitative easing, it is a bit more complicated than that, but that is its essence). If the Fed had not been "instructed" to purchase this debt, the market would have priced it much lower (no individual investor would ever pay the same price, if they knew the true risks of default), and interest rates would be much higher (because interest rates go up when bond prices go down).
When the system eventually collapses (which mathematically must happen at some point, because the US government is unable to pay off its current debt at current artificially suppressed interest rates, and things will only get worse when rates move up to more normal levels) there are a number of scenarios that could occur including (but not necessarily limited to) the following:
Scenario 1) US could default on its debt (simply declare that all or a portion of its debt will never be repaid).
Scenario 2) US could dramatically reduce its expenditures on government programs and redirect that tax revenue toward paying off its debt over time.
Scenario 3) US could allow the value of the US$ to fall dramatically to devalue the outstanding debt in real terms, making it easier to pay off over time.
or a combination of the above.
At the risk of being accused of oversimplifying the problem, because these scenarios are not mutually exclusive, I think it is somewhat productive to discuss them individually.
Scenario 1) US could default on its debt (simply declare that all or a portion of its debt will never be repaid).
While this solution is superficially the easiest to implement, the consequences of this scenario (at least if it is executed on a large scale) would be devastating to the financial system (both domestically and internationally). Retirees would lose interest income that they are dependent on, foreign investors in US debt would be outraged, and many banks that have US debt on their balance sheets would collapse. Faith in the dollar as the world-wide exchange currency would also collapse (as opposed to gradually declining, as it is now doing) which would have massive unintended consequences for the world economy.
My opinion is that this extremely unlikely to happen – at least by design. I say this because the leaders of the cabal are the only ones at this point that could approve such a decision (since the central and money center bank leaders and politicians are merely their puppets at this point) and this would not allow them to continue to transfer wealth to themselves. A parasite needs a host. This destabilizing scenario would undermine their ability to continue to parasitically feed on the system.
This scenario would probably only happened if it is precipitated by a dramatic external shock – such as a world war that is not initiated by the US or another cabal-controlled government.
Scenario 2) US could dramatically reduce its expenditures on government programs and redirect that tax revenue toward paying off its debt over time.
This is the hardest solution to implement, because it requires that the growing hoards of special interests that currently depend on government expenditure simultaneously agree to massive cuts - which is contrary to human nature – and even more contrary to the nature of the current political regime (which is cabalist controlled) that would lose power without their votes.
This scenario is also extremely unlikely to happen because the cabal is one of the biggest beneficiaries of government welfare (through the corporations and special interest groups that it controls). Also because of the public visibility of this type of event, the cabalist controlled politicians would be held accountable for the change – and their power would be diminished. Again, a parasite needs a host. Like Scenario 1), this destabilizing scenario would also undermine their ability to continue to parasitically feed on the system.
This scenario would probably only happened indirectly as a result of Scenario 3)'s occurrence, since the real value of the welfare payments made to corporations and special interest would be reduced as the value of the US dollars in which those payments are made falls.
Scenario 3) US could allow the value of the US$ to collapse to devalue the outstanding debt in real terms, making it easier to pay off over time.
This is the most likely scenario. In fact, one could argue that, but for the distortions in the reporting mechanism used by the government to report inflation, it is already happening. Evidence of its occurrence is increasing: the buying power of the dollar has decreased dramatically over the last few years, despite government statistics; foreign governments are continuing to deemphasize the role of the dollar as the primary exchange currency for international trade; and wages are not keeping up – resulting in a real but hidden tax increase on the public.
This is the “least undesirable” of the three scenarios from the cabal's perspective – which contributes to the likelihood of its occurrence. I say this because it prolongs the period during which the cabal can continue to feed, while disguising the adverse effects that the host perceives – even though the adverse effects are very real. Inflation gradually robs the host of vitality, without setting off the alarm bells that come with the other two scenarios.
I think this scenario is in fact already occurring to some degree now, and will accelerate. The only real debate in my mind is at what point the rate of devaluation constitutes a “collapse” within the meaning of the term as I defined it earlier.
Georgia Boy - We live in a debt based monetary system. There is a theory about called 'the marginal utility of debt'. When debt is issued for productive purposes such as business enterprise a bank can lend out say $50,000 with that $500,000 of economic activity can be created.
When debt is used for consumption, there is a much smaller amount of activity say issuing $50,000 and $75,000 of activity generated. The loans are serviced with interest so over time economic activity is zero or negative.
The housing bubble was such a mass issuance of debt. It masked that America's industrial base was being hollowed out and sent east. Corporations that also received debt to grow did so by expanding east. Very little productive capacity is recycled back into the American economy.
The housing bubble kicked the can until 2008 when consumers became debt saturated. Government blessed unbalanced trade and politicians profited on this trade.
Government policy in corporate and consumer welfare created a massive budget deficit. Ongoing cuts are now beginning, subsidies being slowly cut to balance the budget. This hurts in the short term now but is necessary to return to a normal market. Think of a pig having to fit through a python.
Trade rebalancing also is hurts in the short term but is very necessary. America has funded our competitors for far too long. Last, the empire building and maintenance is very expensive and non-sustainable. The current global banking model is 'pass the baton' so as one big national reserve gets debt saturated a new one is already being funded as the next reserve (China). The global reserve currency also becomes the next empire and gets an increasing burden of policing the globe.
Absolute power corrupts absolutely, politicians with a modicum of decency become increasingly corrupt, bribed and bought. Change comes the hard way and slowly as such have less geopolitical power and focus domestically on making cuts that should have never been funded at such levels to begin with.
Hope this helps.
"Liquidity" is a term mostly used to describe an endless supply of free or almost free money, given to people so rich that they hardly need any more money for any good reason, so much money that they are stuffed to the gills with it, puke it, shit it, and sweat it out of every pore in their bodies.
Not having the foggiest idea what to do with this abundance, and not needing it for living expenses, these folks go out and bid up the value of every freakin' thing that looks vaguely like something that might hold value as time passes by. This provides liquidity in financial markets because there is always a bigger idiot willing to buy anything put up for sale regardless of its true value and its inherent risk.
The buyers buy this crap because once they acquire title, they immediately turn around and pledge it as collateral to obtain even more money to buy something else, which they immediately pledge as collateral to obtain even more money, ad infinitum.
Any financial regulation which makes it harder to conjur up worthless securities to be sold and then pledged as collateral in this process hurts this liquidity machine. Any financial regulation which intends to limit leverage hurts this liquidity machine.
Liquidity is neither inherently good nor bad. But if you own a $100 billion of stuff, the thought that nobody will come forward and buy it from you (meaning that it becomes worthless and you will have to get a job) is somewhat disturbing, so you hire magazines, newspapers, and academics to talk about a looming "liquidity crisis" as if it were something to be avoided at all costs (as opposed to it being long-delayed justice for con-artists and fools), even if every other person in the universe has to liquidate everything they own and put that money into the markets where you are long, a process best commenced by enlisting your cadre of mewling, piddling, boot-licking amoral legislators to pass laws requiring it.
You can never let anybody explain all of this in plain and simple terms. Instead, you call it "finance" and develop a new set of arcane terms to obfuscate and conceal what is really going on.
The Fed could have started with 5 basis points a while back. Get past the bug-a-boo and raise slowly.
No way we have a recession. It looks like we have reached a permanently high plateau.
Remember the "Drowning in oil" cover marking the bottom of Brent?...same here - BTFD bitchez
lots of saber rattling all across the news these days about trouble ahead. we all know its coming, they are just playing "CYA" about it so they can say, see we told ya. prepare accordingly.
We live in an "upsidedown" world that stands on the verge of an 180 degree spin.
And that will be the demise of many.
I know a guy who is a banker. He can't comprehend why most people can't afford to go on 15 vacations a year. I thought about warning him that he should start putting barbed wire around his "humble abode". But then I thought, why should I be doing HIM a favor?
LOL. Yeah right. You hang with a banker? He can't comprehend? Let me get this straight. Who does he think should be taking 15 vacations? You? Believe me, he knows or damn well should know how much excess cash flow people in general have. And then he probably knows how much you have to the fucking T.
But you are correct, don't do that fucker any favors, as he sure as shit won't do any for you. Hanging with him or not.
But that is why our politicians are working so hard to create a jobless world reliant on digitally transmitted entitlements. Endless vacation. Well actually "vacationing in place" as while we won't have to go to work anymore, we won't really have the money to travel either, other than to the local food pantry or a minimal services "affordable healthcare" clinic for our Ebola vaccine (the only thing our government can protect us from are those threats which really aren't real).
Oh the humanity!!! If a .25% increase in FED FUNDS is going to cause the world to go into a tailspin, then the system is fubar, but we already know this. Hell even the FED knows that QE has hurt more than its helped. Its not about the economy or your well being it's about consolidation of wealth and power.
The discussion over interest rates is just a market hype and a cruel jibe at savers to confuse the vast unwashed public into believing that Banker Ben and Banker Jan have a legitimate reason for taking savers' money other than stealing it.
yeah, they have to make the stock market go down so they can make it go up again /s
Valerie: What, Humperdinck?
Miracle Max: Aahaahh!
Valerie: Humperdinck! Humperdinck! Humperdinck!
All the world powers are positioning for a fight. Just a matter of time now until someone blinks, and it won't be Puppet Obama. He's just a bad joke that nobody on the world stage finds funny anymore. Like all great empires, world hegemony won via WWII will eventually slip through it's grasp.
The most NOTICEABLE thing about America today - is how pointless most of the discvussions are ... about policy, finance, economics. There is a huge change taking place in the world, and Americans are largely oblivious about what it really means. All these discussions about "what the Fed might do", or "America's role in re-shaping Europe" blah blah blah ... are not nearly as relevant as policy makers think.
The point is this - America will no longer be the country that "sets the rules". America will be a player, but not always the "game changer". This change in roles is really difficult for Americans to grasp now. But the change is coming quickly.
And by the way, I am an American.
"And by the way, I am an American."
Welcome to Americans Anonymous. Thanks for sharing.
Thank you so much for your comment. I was just having this conversation with my wife this morning. All Americans want to talk or think about is Americans, and only in the terms and parameters we have established and accepted for talking about Americans. It's like the classic Monty Python sketch, "The News For Parrots."
All systems of authority ultimately rely on consent. Even slaves consent; of couurse, if they don't consent they will be killed, but it's still a choice. You can choose to not consent and be killed, and some do and have done. There are reasons the rest of the world has consented to America's self-appointed role. Many of those reasons are increasingly clearly outdated and no longer applicable. At that point, consent wanes and ultimately fails. We can threaten to kill everybody, and that will work for a while, but ultimately it will fail. It always has and it won't be any different for us.
I like living in a near-provincial backwater of the seat of Imperium; nobody really wants the bother of messing with me. But one has to be aware of the narcissism of the culture. At one critical juncture of Roman history, people in Rome were most concerned about whether it was blasphemy to use a public toilet by paying for it with a coin displaying the face of a recently died-and-deified Emperor. If it was blasphemy, then the perpetrator had to be killed and his entire estate seized by the State. If it wasn't blasphemy, didn't that devalue the deification of the (late, lamented) Emperor? Meanwhile the Barbarians were sharpening up their spears.
THE ECONOMIST: is "Islamic State's war on culture" one more reason The Economist needs the USA to keep bombing Iraq and Syria? Because, what else can the USA do, besides bomb? Is bombing helpful to culture? And how about Iraq's national museum being looted while Bremer was in charge of Iraq? Was that a war on culture? How about removing the mote from your own eye first?
next recession which, some 6 years after the last one ended.
And turned into a DEPRESSION. There I fixed it.
but the uber rich have much MOAR. doesn't that make you happy?
Denial is more like it.
Just shut down the telecom system, specifically the microwave towers for the cellphones and you'll see a depression alright. That is the only thing holding people from going bat shit crazy and holding their emotions in check right now.
We're just now walking into the lava from the first erupting volcano; Those who have lost their homes and/or home equity, their savings, their pensions, their livelihoods, their 401(k)s in the 2000 and 2008 busts, their futures... already are covered with debris. The concept of representative government for the people is only a memory; the US Congress represents the globalists.
Here's a refreshing idea; at least one in 100 comments on here provides some actual insightful information on speculation. Nearly all of you need to keep off your keyboards as you have absolutely nothing important to say but you waste the time of thousands of people who have to read your stupidity.
Fuck you. Go back to the comment section on Yahoo news.
Sounds like truthscrotum is playing the wrong side of bet.
Well, lets look at your coment shall we?? No evidence, no reasoning, nothing but ass vomit.
Way to go Mr 18 weeks.
Old Irish saying "If you want to go to there, if I were you I wouldn't start from here"
Only 25 basis points for the next recession? Clearly, ZH doesn't yet understand this Fed. No, this Fed will just go negative interest rates with the next recession, and they'll go back to buying up MBS till the 30 year mortgage is under 2%.
So, if we aren't already in a recession in the US, the Fed's hike rates which will surely put us into one and then immediately lower them and we're right back to where we are now except it will be an official recession.
Please tell me there's another planet I can move to.
Lovely day today here in the Netherlands.
https://www.youtube.com/watch?v=dL8CzluvqnE
What are those old grannies smoking?
Dammit Dutch, I wanted to see that young woman in the black dress mount her bicycle!
the fed can raise rates and provide ample liquidity. but the fed will have less of a role in the economy going forward. the banks are ready to assume that role of leadership, that includes setting interest rates (competitively)... for the fed managing money growth (new credit) will continue to be a problem. no one is more aware of the credit bubble than the fed. their method is to recycle old credit, UST bonds which are locked up as reserves. but as the economy improves those reserves are no longer needed. i fully expect controls on credit as an alternative to raising rates. so if the bank wont give that new homeowner a loan the seller will choose to carry the note.
it amuses me that usury and loan sharking are now respectable businesses, (CC rates of 20%, payday loans), the internet may provide a one on one ebay style solution. individuals lending money to individuals at lower rates of interest (because the rate at which depositors are paid off will be always low) want a fair return on your money, join a crowdfunding group which bundles payday loans to low end consumers.
Yes.
“Ants” that toil and save the fruits of their labors in the summer for the coming winter are losing faith in a government that redistributes those fruits to the grasshoppers who toil not and store not for the winter, but instead rely on wealth redistribution in the winter via free money and government subsidies created out of thin air by the Fed.
Yes, the Fed can create paper money out of nothing but it cannot create value. The day of America’s reckoning is coming when there is more free money available than resources, when inflation, taxes and ZIRP take their final toll on the producers..
It’s called economic collapse.
“The boom is unsustainable because the imbalance between savings and investment will eventually necessitate a market correction when it is discovered that the resources available are not enough to produce all the consumer goods people want to buy, as well as all the investment projects borrowers have begun with the newly created money for which real savings does not exist to complete or fully sustain them.”
--Dr. Richard Ebeling via EpicTimes.com, Markets, Not Yellen, Should Set Interest Rates
http://www.zerohedge.com/news/2015-06-08/markets-not-janet-yellen-should-set-interest-rates
What about tinkering with the rate of interest charged on reserves and the size of the balance sheet as an alternative to rate rises?
“The manipulators will do everything that they can. They know that to keep the system running that they created based on fiat money, a system that has made them fabulously rich, then they need to do everything they can to keep real money out of the system.
“Take heart though, for those who stand by and do the right thing, for those that stack and continue to add to their portfolio month after month, year after year. One day you will be rewarded for counting your hard earned saving not in fiat, but in ounces. One day precious metals will break free and when that happens, look out.” – Nathan McDonald, The Battle Between Corrupt and Honest Money Goes on (06/11/15).
http://www.zerohedge.com/news/2015-06-10/battle-between-corrupt-and-honest-money-goes
yeah but all these things are increasing secondary to their role. which tells me the fed is irrelevant, if the fed can project policy through marginal means that would a great achievement. at least from their point of view promoting that wizard of oz man behind the curtain persona will help stabilize the markets EVEN IF IT ISNT TRUE. on the other hand investors will see the free market functioning as it should, with banks and the markets setting rates. real question when the recession hits will the president calls the fed and nobody is home, just a note tacked to the door, here is a statement of our balance sheet, which belongs to you and all the taxpayers, have a nice day.
"individuals lending money to individuals" -- If there was a real justice system and respect set of enforcable laws, yes, this would work.
That you John Corzine?
How does raising rates provide liquidity? Or did you mean raise rates and provide liquidity via QE?
I'm a little confused (sincerely want to know/understand).
I don't know why the Fed just won't raise rates. It's not like anyone can't get a free loan (or paid to take a loan) from the Bank of Japan.
Gosh!
The BNDEs bank in Brazil wil save everyone! Doens't Brail Petrobias owe us anyways for the loan they took out from the ExIm when Duhbamma was electeD?
After the BP accident in the Gulf and the Bath House prohibition on drilling, all those rigs went to Brazil, where Soros has a heavy investment.
Don't fret, the clowns in the TEA PARTY will defund all the wars and defund Obamacare.
/not
The "tea party" was a nebulous concept, ripe for the picking by TPTB. "Taxed Enough Already" sums up the smaller government message that was its original appeal. Hard to find that now, especially since the IRS purge of actual grass-roots tea party organizations. Most of them could not fight the IRS delays and ultra-intrusive questioning, and so just called it quits. The Ron-Paul-oriented Campaign for Liberty is one that did not and continues to fight the IRS demands. Cheer them on; don't diss them just because media coverage is so completely biased away from authentic groups.
The answer is World War 3
No matter the question