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"The Top's In" David Stockman Warns Of "Epochal Deflation"
The truth hurts... especially permabullish CNBC anchors. But when David Stockman explained why "the top is in," and warned that the world is overdue for an "epochal deflation, like nothing it has ever seen," one should listen. The "debt supernova" of the last decade or two has created massive over-capacity and this commodity deflation "is not temporary, it's the end of the central bank bubble." The catalyst has already happened -"It's China," Stockman exclaims, "China is the most lunatic pyramid of credit and speculation.. and capital is now fleeing the swaying towers of the China ponzi."
Well worth the price of admission...
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So we can expect much more central bank printing to 'combat' the coming deflation?
<Time to turn the inkjet up to 99 on a 1 to 10 scale.>
Yep. Deflation... followed by skyrocketing inflation once the trillions of stimulus (and dumped treasury) dollars hit the shores of America. Ain't fiat grand?
Good news is you have a million dollars, bad news is you can't buy a wheelbarrow with a million dollars. Fuck You Bernanke
And the thing is.....it would be a Chinese made wheelbarrow that would break once you put any weight in it.
Pro tip: This will be a log scale
https://www.youtube.com/watch?v=4xgx4k83zzc
Deflation, deflation, deflation. This will be the death of gold. The American Dolla is still the undisputed king. Sell your precious metal.
not that i disagree but stockman has been talking this shit since the 90's.
so what?what is 20 to 25 years in the scheme of things and are you suggesting just because it doesn't happen according to your expectations of time that it's not going to happen at all?
flee to safe zones of food is not an option for billions of the doomed.
The "developing world" (not my word for it) has sucked up a lot of wealth from the industrial west. That is where "our" jobs went, a lot of real production happened there, a few people got really rich including in China. As the peripheral economies implode that wealth -- and some of it is liquid -- will come back to the west and probably in particular, to the US, probably mostly to the US west coast states where Asians of all stripes can disappear without a trace.
I'm not a flag waving American jingo-ist. That's just my frank analysis.
And it's already happening. I live in the Bay Area, it's as big a land area as some US states, and as rich and economically diverse as a lot of countries. And the amount of Asian money (China, India mostly) sloshing around here is epic bordering insane. The resulting rate of inflation in housing at least is ruinous. Nobody actual born here can afford to buy a house now, and you better have 100% cash. You can't sell your home to harvest the equity value unless you are ready to move to Utah, and nobody here wants to do that. Even rent is crazy ... if you can find a place. This situation is not going to ease but become worse once the periphery starts to implode. Can you imagine even 1% of China moving suddenly in the middle of the night to the US? And settling on the west coast? It would be a tsunami of rich native Chinese people all hitting the shores with suitcases of cash and trying to make a new life in maybe 5 or 6 cities here. And if you think for an instant they will be held back by immigration laws, you just watch what money will do to that scenario.
And then, India. At least they speak English.
Nobody stops and thinks about what happens when people start to move around during a crisis. In particular, when rich people start to move around. They usually don't move at all -- rich boat people? no ... but this time it will happen that way. Money will make it happen, they will come in by commercial jet and move into new suburbs build with cash, and buy up businesses and local government until there is no substantial resistance.
Not that there needs to be any resistance. Some people will resist it on "nativist" grounds, ironic because this is just a second wave of overpowering foreign invaders. The first group came from the Atlantic. The next round, from the Pacific. It's just more of the same.
And just like the last time, nothing will remain the same. Nothing at all. Half a billion Chinese and Indian upper middle-class people -- and their money -- will change the global face of human civilization forever.
In that case he's already been correct at least twice - the tech bubble burst and the sub prime bubble burst. Not bad.
DavidC
Yes, sell it to me!
As he points out, this is debt deflation. Since banks literally create money through loans and there's no more loans to be made since private sector debt is too high, as loans are paid off money in the economy actually contracts. The Fed wont be able to push against this without straight out buying government debt with printed money combined with fiscal deficit spending.
hmmm, sounds like euro land, a trillion to keep the ponzi of debt serviced. moar power to da banker, in the ending fiat times bankers will be served justice; they will lose it all-power, wealth and maybe there right to breathe....
Umm...jim, the Fed has been doing that for a long time now. EXACTLY that. "...straight out buying of government debt with printed money..."
Winner. They don't call the Fed the "lender of last resort" for nothing.
So the fed is exporting inflation and the Chinese are exporting deflation?
Sounds like a a trade agreement from hell to get traction on the otherwise-purposed TPP.
Technically, no. It's illegal for the Fed to buy directly from the Treasury. They're required to buy from the market/primary dealers.
But effectively you're right.
Good news is you have a million dollars, bad news is you can't buy a wheelbarrow with a million dollars.
Really bad news is, none of this will happen until we implement "tax the rich" income tax rates, and just after that the currency blows up and we all become "millionaires".
Whaaaat... are you babbling about? Some kind of 1980's urban legend?
Margina income tax rates will be raised under the banner of "tax the rich"....and soon thereafter, the currency will blow up, putting ALL of us into the higher tax brackets.
Marginal income tax rates will be raised under the banner of "tax the rich"....and soon thereafter, the currency will blow up, putting ALL of us into the higher tax brackets.
Watch carefully what happens with the Yuan pegged to the dollar. The Chinese will go all in very soon.
Eventually, but not yet. The Fed is always a few years late to the game. They were late in containing the dotcom bubble and housing bubble. They were late in containing the 2007-2008 crash. Commodities, RE, and stocks got smashed before they started QE. The same will happen again. sometime in 2016 at the bottom of an epic crash, the Fed and other central banks will start off QE4ever.
They're never late. It's all by design. Blow bubble, crash, repeat. They must have the intermittent crash to justify the next round. The politicians start clamoring for relief like a junkie. Then, the banksters can step in, like the benevolent drug dealer, to give them their next fix(bailout).
Quotation: "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Jefferson
I agree with your timing; ahead of the next election, of course.
Or the fed is no where as smart as many think. Maybe most people don't want the pain of creative destruction so the fed tries to prevent pain. Thus the fed buffers the pain that would get people to fix things so nothing gets fixed.
As evil as ZIRP appears perhaps it is just stupid and cowardly behavior wrapped up in a do gooder blanket, like most socialist schemes.
the feds true dual mandate for 100 years
capture all assets through boom and bust
enslave a free people to debt.
its all part of the plan by the owners, if they want to hand off to china they will. there's nobody here that cares, or isn't paid off.
the system called fed, is either incompetent in the managing of the legacy congress gave it in 1913,
or a criminal organization determined to steal all of america and enslave its people to unrepayable debt.
either way the fed is a no longer welcome guest the american house. a madman dead set on destroying our home.
ps i did leave out the current climate, where the tentacles (the tbtf) has used all the new money
to buy the market with zero risk zirp funds, which is clearly the only thing driving the market.
I will be happy to put Bernanke under the guillotine but I'd rather see him die slowly and painfully while being fed FRN's
Article V or continue to boil like frogs. Guillotine rollers will be descended upon by drones like a plague of locusts.
"Get to work" - Chuck
and not Greenspan? wow
Every town and city needs to allocate sufficeint LYNCHING LAMPOSTS to handle the coming load of work they will be require to handle. Milestones
Screw lynching and guillotines. Wood chippers are the answer. They are fast, and good for the environment. Plus, highly mobile.
Got one! A nice Vermeer 6" with hydraulic feed and a 30hp v twin! You would have to do a little up front work to get them into workable sizes but the hydraulic infeed makes the work easy!
Most revealing is no matter what method used to eliminate the vermin, the components are all made in China.
How about fed FRN's with our shiny new PITCHFORKS!
"The action of the market is reason enough."
A trillion here, a trillion there, pretty soon it adds up to real money.
If it never was, how could it ever be?
The bigger they are, the harder they fall, Mr Geithner.
First deflation then the printers run till they catch fire. No political / banking system dies a deflationary death.. You can take that to the bank, of course they will keep it in the bail-in. Have a great weekend.
Depends on what your definition of "first deflation" is. Seems to me that we've been in a defationary nightmare for years since Obama promised to "take care of the culprits responsible for the financial crisis."
What a coincidence so many elite wealthy hedge fund managers, execs are regurgitating massive deflation at this time...kind of makes me wonder if they know more than they are letting on.
Can the FED raise rates? What happens when all the USD's come home from Iraq and other places we bribed?
I thought you were gonna say "regurgitating massive" campaign contributions.
The future is plastic..... I mean plastic.
Did Ben Braddock heed that guys advice?
"Seems to me that we've been in a defationary nightmare for years since Obama promised to "take care of the culprits responsible for the financial crisis."
Really? what sector? commods? housing? basic staples? gas, oh right, gasoline. pfffft
bone crunching blood in the streets deflation has not been experienced since the twenties. The problem is that aside from the dollar being priceless (deflation) and worthless (inflation) the effects are the same, producers stop producing, transporters stop transporting, growers stop growing, stupified people go through the daily motions of their existence. I won't be surprised a bit to see people sitting on the pavement in front of starbucks pretending to dring a cup of coffe and look at a dead iphone screen. Once that gets old they start forming groups and tearing shit up. In the twenties they got in their cars loaded with everything they owned and drove west on the rumor that there was work out there.
The Great Depression started with the stock market crash 29 Oct 1929. It didn't get really bad until the thirties. We were lucky, my dad had a job. I was born in '33 and I can remember relatives coming over because we had food. Must have been ~ '39 and things had been bad for a long time. We don't see soup lines now because of ETB cards. The dust bowl in the mid west due to drought and farming practices made many people go west to California, "Grapes of Wrath" etc. We haven't seen anything like that lately.
My mom's family owned a farm next to a railroad. You guessed it. A never ending stream of hobo's begging for food every morning, 2 or 3 at the time. Grandma would usually give them a day old biscuit each, the least she could give and get them to leave. They were always begging for work, too. Then, along came FDR's war and food vouchers(the original EBT).
We don't have to migrate for work now. Government pays us to shelter in place.
On EBT. A few hours ago my wfie and I went to buy 40 pounds of chicken at Albertson's. (Don't normally go there, but at $1.88/lb it was a steal.) We also bought two cantelopes at $0.88 each. Called a friend that we knew who also bulk buys chicken and agreed to split 50/50.
Standing in line, I'm in front of our cart with this 40lb box of chicken, and put the lid on the conveyor. The lady ahead of me is buying oysters, crab, salmon, and rib-eyes. Add a couple bottles of wine. I casually mention "Party at your house? Can I come?" She laughed and said "No!"
Rings it up on the screen that I can see. Pays EBT, around $186. $20 or so, debit for the wine.
Party?! Fuck me.
I get rung up, little less than $80. Pay cash. The sales tax is not near enough to cover a dozen oysters for EBT party lady.
Oh, and she was white, so I'm not a racist.
You're lying.
You're lying.
Regardless, it's plausible.
Any other pointers from your experience that you could share with the rest of us?
Not the same old, well known rules that all ZHers know by heart, staking, food, etc...
I will believe hyper inflation when my boss pays me with wheelbarrow loads of cash.
As a Armstrong correctly states that hyper inflation never happened in a reserve currency nation.
Deflation all the way down. Hyper inflation in the out side countries sure.
Of course you are right. Because the US dollar will be the reserve currency forever and ever. Just like every reserve currency before it.
And, the sooner they were to allow real deflation to set in, the sooner the dollar would be replaced. So, they will only allow it when they have a replacement lined up(SDR?). Judging by their actions in Libya, Syria, Ukraine and Iran, I don't think they're gonna replace it. The world repudiation of dollars will eventually bring about HI but, only after a long period of abuse by the Central Counterfeiter. This means they will do everything to keep the US budget expanding, their conduit for more counterfeiting. War and/or assassinations(Trump beware!) ahead.
Stockman is corrrect. All the money printing is going to cause 'stagflation'.
The high prices we pay aren't global warming, or droughts. They're central devaluation destroying purchasing power.
Not only is global demand sinking through higher commodity prices (FOOD)... Adding more liquidity to the mix just exacerbates the problem.
Demand is created from value at low prices. Econ 101.
Please explain to the class how money is printed.
ctrl+P
Banks have open balance sheets. Everytime a loan is created, an offsetting line item is created on the banks balance sheet.
For you and me those 'line items' are expenses, or debt obligations.
For banks, those items are part of the 'Reserve Ratio' requirement.
Banks take the levered borrowed(fed)and depositors monies and park them at the Fed. for 10-25 basis points OIS. (excess reserves).
Shall we continue?
Sure, but so far you are identifying counterfeiting and not money.
Fiat?
A decree of what?
Noise.
YC. Ignore him, nothing comes from it
Sure, but so far you are identifying counterfeiting and not money.
Awesome comment.
Meaningless comment. Think what you like, but The Fed is allowed to do this.
OC Sure, That's because Money has real intrinsnic Value, Currency Doesn't! Look it up :) Marty
The FED and the Treasury are counterfeiter's; hollow people with hollow promises.
The same is true of Wall Street and their Casino.
The tragedy being they gamble with people's lives.
Do you work for Blythe Masters?
You know there's so many ways banks use ZIRP to profit.
So you have chosen not to discuss the topic which you invite me to continue?
It is ok, YC. No need to continue.
I agree with the five mission points of Zero Hedge's Manifesto. I find them to be honorable and justified.
However, I often find that there are problems with the regulars understanding points 3 and 5.
So, I ask questions.
I'm BBQing pork chops.
I've seen nothing that signifies(indicates) any understanding of banking from you.
How's the weather in your NSA cubicle?
If you want to go into debt, I can recommend a few NINJA lenders.
Based on your questions> you're either looking for a FREE education, or you're just a disgruntled Walmart employee.
Those student loans can be overwhelming.
We decided what we're going to do with the IRA...invest it here to improve the farm.
/
http://littlehouseonthehill.weebly.com/finishing-touches-and-living-our-...
Good Idea Chunga.{ as long as the little chungas agree}
He updated the site.I have to look at all the new improvments.
I have it bookmarked from the original link you gave me a couple years ago. http://littlehouseonthehill.weebly.com/
Best wishes.
Hey Chunga,
I truly enjoyed looking at your start-to-finish cabin documentation (I looked at every picture and read almost every word in about an hour), nicely done and I trust that you are happy in your little cabin on the hill.
Someday, I would like to tackle such a project myself.
Thanks for posting.
I'm glad you enjoyed it but I can't take credit for that. He really did a nice job!
He did mention that he joined ZH but never stepped up for an ovation as far as I know. Awesome job by him.
Well, the shop steward gives the nod to the head printer, who pushes the big red button that nobody with less than 28 years of experience is allowed to touch.
The startup bell rings for 10 seconds to alert everyone, and then the presses kick into action.
Sheet after sheet falls into the tray, which are then transferred over to the cutting and wrapping department. But that is not really a matter of interest to the printers themselves.
The only beef I have with your statement is the "going to" part. I think we're in stagflation already. When Shadowstats talks about inflation at a minimum of 7.5% and other sites saying more like 12% (which, based on food and housing and, at least in California, energy), as well as Shadowstats' unemployment of between 11% and 22%, I'd argue that it already has caused stagflation.
That's a a pretty good post. Nice work.
Stagflation is based on lack of demand and money supply.
Hyperstagflation sounds better. When gas is almost $4.00 gallon in Kalifornia and CL is trading the 45 handle, some serious manipulation is happening.
Airlines pull the same shit. When something serious happens, heads are going to ROLL hard! Bitchez.
Free Markets? LOL
It's not manipulation. People are trapped in their lifestyles. Crude could trade at $10/bbl and the oil companies could go on charging $4/gal for gasoline in California, because ours is a freeway culture and people have to pay to play. Then, if a populist ever tries to point out what is happening Big Oil shows up with a campaign contribution, and our whores are cheap $5k will buy anyone. Worse than that, the State gets a healthy %age on the gas sales, and that my niggas is serious money for nothing, if they allow the price to go down they reduce their income. Not happening. Just not ever happening.
I think people here would probably pay $5 without a fuss. The Asians certainly will. Maybe $6. The freeways will empty as middle-class people take the train, but that's double-plus good for the cash-enabled immigrants.
This is a game already lost. There are no rules except pillage.
May as well sit back and watch the strip-mining of the economic world.
Argentina declares victory over vulture hedge funds.
https://www.facebook.com/photo.php?fbid=10207646526468168&set=gm.4088233...
Except the biggest central bank bubble is government debt & that is doing fine
Dont get me wrong. I respect Mr. Stockman. but he like many others has been crying the sky is falling for a long time now. I think it was almost ten years ago he was warning about the CBO numbers. Its a new day and age with ones and zeroes and a MIC where you can just add to the account with the click of a keyboard...thats why the implosion is almost impossible to call, thats why gold is where it is. Thats why all of the hockey stick graphs dont seem to matter...
I agree; however they (they being the deep state) will pull it when maximum profits and social "reforms" are to be had.
Disaster capitalism. Distressed assets being easy pickings' and plausible subterfuge for imposition of a global, digital
currency being the play. Nothing overnight, baby steps into the brave new world order.
I hate the "it was almost ten years ago he was warning about the CBO numbers" type answers. And ya know why? Its because its a non-substantive criticism, because, if you aint sold out of this yet, then you don't own it, you haven't capitalized on it yet. A great trader once told me that "anybody can buy a stock, but, lets see them sell it." My second argument, on the so-called doomsdayer timing is simply this: the call has to start somewhere - sometime. Schiff was but 2 years off as I recall. How perfect does the timing have to be before its credible? Two weeks? The day before? Does the duration of the timing make the call less correct?
Seriously, does it make any sense to criticize the logic just because the event has yet to materialize? I think the converse actually answers the arm chair critics: "would you buy this market now?" If you say "no I would not buy this market now", then doesn't that enforce the idea that a correction is due, or that there is doubt about the credibility of the longevity or tenure of the market itself? If the doomsdayers are wrong, then why not long the market all day long? You are either with the bulls, or you're with the bears (unless you're an options trader he he).
And besides, if the doomsdayer actually knew the precise timing, then wouldn't everybody? Thats the point!!
Most of us here, see the market for what it is - and that is that none of it is free and unfettered price discovery. There is all sorts of manipulation, data manipulation, HFT, Financial statement shinnanigans, an so on. And for those of us who have been around a while know that even its intraday price action, is nothing like what it used to be 25 years ago. And how often have we heard that "charts and indicators no longer matter" - thats about the only truth that is real. Fibinocci(s) are based on things and actions occurring in their natural state - a scientific predictor that can hardly be thought to be accurate under a manipulated, coordinated, or, interfered environment.
So lets give the Stockman's and the Schiff's and the Paul's and the whboevers of the world - those guys that, for whatever reason, have a sick shitty feeling in their gut that's telling them that shit don't add up - that things are wrong - that trouble is looming - perhaps just over the horizon. Frankly, I'm grateful for at least just being made aware of it. What I do, or don't do is another matter.
I tried to tell a relative last week about the accelerating US debt. For example, about $5 in '99, 10 in '08, 18-something now. Ho Hum, so what? People have no clue and just don't want to know. Better to be years ahead with the call and called 'chicken little'.
https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm
And yet, I think, there has been a gradual awakening the last couple of years. Certainly nothing of a large scale enlightenment. Still, people I talk to are nervous and have never felt this uneasy about the future than they are right now. Ordinary folk. They recognize the contradictions - debt is good, savings are bad, black is white, and so on. They see it and it unsettles them even though they don't understand the mechanics.
You're right. People still, don't really want to know. They still believe that somehow it will all just work out....hopefully. But, the last couple of years I have noticed that doubt is starting to show up, and as a result, they are starting to become more open to ideas and alternative explanations to what they have been used to hearing.
Time will tell of course. Always does. But, my impression is that people are starting to figure shit out, because they are feeling it in their wallet. That at the end of the day, they don't have enough to make it all just work out - ultimately leading to an "attendant sensation of unease" (Michelman).
well said
Damn, I may have to start watching CNBC more often.
That little gal knocks my rod into my watch pocket.
I felt compelled to share. I'm sure y'all care.
thank you for sharing
Get with your sponser after the meeting.
Keep coming back...
Hi, I'muhnutjahb and I'm a ZHaholic.
Everybody else in unison: "Hi Nutjahb"
I would suggest gold, SDR denial by the IMF, an aircraft carrier battle group and something hot along Russia's border. Toss those ingredients into a mixing bowl and see what rises out of it... I think 'epochal deflation' is gonna be the least of worries.
that is the wild card. war was the receipe that extricated the world from the last global deflation.
Yeah, but with endless war going on now, what do they do? Get warer?
Exactly. The scale of war right now is de minimus compared to the potential. Masses of unemployed youth press ganged into
service of porcine war lords. Sagging hard commodity prices resuscitated as the machine ramps up. A restless populace in
need of a distraction on a grand scale, and a common cause to rally 'round to defuse domestic tensions. And ultimately,
a culling of mouth breathers to buy humanity a little more time. Unless we nuke ourselves to oblivion
,then it'll be a win for the earth long term.
Not such a good idea this time around tho.
https://www.youtube.com/watch?v=aDoM3FGw6xs
They may be able to keep it zipped up enough to not resort to nukes, nobody makes money when they're dead.
Well, except for Elvis and Michael Jackson.
The US and Russian militaries have huge underground bunkers stocked with years of food, etc. They'll go into Dr Strangelove mode and to hell with everyone else.
You may very well be correct, but how long can they live underground? Till they evolve into Morlocks? I think not.
The half life on the radiation from those nukes lasts for many, many years. But they may not mind eating three eyed fish.
Post-WW2, you could get a young, refined Japanese girl all night, in exchange for one can of condensed milk.
And I believe those days can come again!
I think Stockman is correct. Balloons do seem to be bursting. And I would expect deflation to be followed by high inflation as the FED goes ape shit on QE, just as sure as the sun also rises.
Sorry. Can't take Stockman seriously.
If Jesus appeared on cnbc and stated the same case, cnbc and all those long equities would depict him as a "lunatic." The difference between John Paulson and Stockman is that Stockman is ten times as smart as Paulson. Paulson made several billion dollars in the last crash. All you "don't bet against the fed-ers" better look down deep and see what you really can afford to lose.
OK, why is that? Care to identify the flaw in his logic? Please explain.
Funny how just a few short years ago deflations were being mocked and marginalized.
Stockman seems to have forgotten about the Fed's ability to print currency ad infinitum. Sounds like he thinks Yellen is going to morph into the second coming of Paul Volcker. Does he really think they're going to let Citigroup, BAC, J.P. Morgan, Goldman and all those big boys hangin out to dry? Is he really that naive? They have ZIRP in perpetuity for a reason. They implemented QE for a reason. And, unbeknownst to Mr. Stockman, they can do QE again and again and again for as long and as big as they want. As the stock market and economy begins to dive into the abyss, I suppose the FOMC is just going to sit back and watch it all unfold while all those bankers lose their shirts. I don't understand why he thinks they are going to find religion.
Using history as our guide, the more likely scenario is when the stock market begins its descent in earnest, the Fed implements more QE of whatever sort they find necessary. Then the markets finally begin to understand what all of us have understood for years; that the Fed has no choice but to keep this up forever. Commodities, i.e. real goods, which are the most underpriced assets currently, begin to get bid up. The more they print, the more commodities rise. The price rises are explained to the sheep as speculators acting in an irresponsible and unpatriotic manner. Retailers are demonized as colluding with the evil speculators. The producers, speculators, and retailers are the real enemy. They must be stopped. Price controls are eventually implemented to protect the consumer, the common man. Venezuela anyone? What I don't know is if the masses will buy the government's BS this time around. Things will get nasty. I do not envy anyone living in a large metropolitan area when it goes down. Rural folk in 2nd amendment friendly states will be the new cool kids who manage to avoid getting the biggest shaft in all this in my view. Just my two cents. Maybe I'm wrong, but that's my bet.
You may very well be correct. One thing to consider is that a large portion of the fiat created by the successive rounds of QE ended up
as excess interest paying reserves at the Fed. The big banks can sit back and watch commodities free fall, and watch as distressed assets
default to them, or are bought up by them at fire sale prices. Further more as rates rise so does their book, and the strain on servicing debt
by the muppets increases. Another thing to consider is that the Fed. is sitting on approx. 1.3 trillion of home titles, and who owns the Fed?
Well the banks they bought the MBS from, and to whom they are paying taxpayer funded interest. So, essentially what I'm saying
is that the Fed. may not jump through their ass to stop a deflation if it is financially advantageous not to. Now the potential fly in their
deflation ointment would be if civil unrest seriously intensified--then all bets are off on their reaction.
I think also people have not put this together. Printing money into a hyperinflationary scenario does not help the wealthy. It does help debtors though. So therefore hyperinflation is not an option. All previous societies that had hyperinflation had no where near the debt in the hands of the average man. Most people have zero net positive equity. Hyperinflation helps them. Masses will not win will get fucked. Deflation drives it in their ass.
I think you're spot on. Also, I think we would have to lose or much further degrade our reserve currency status.
Typically reserve currencies do not hyperinflate. The Triffin dilima counteracts the hyperinflation, in fact,
counter intuitively, I think the emerging markets will appeal for favorable currency swap ratios ASAP, which we
won't accommodate unless absolutely necessary.
I think what you're saying makes sense, but if that is the plan, why didn't they just let the whole thing go down in 2008? I don't think they can let the deflationary scenario unfold without blowing up the derivatives and destroying the banks along with the entire system.
I have a different view of the inflationary route. The banks benefit from it because they are the ones with initial access to the newly created currency. Think how beneficial it would be to you if the Fed created a trillion dollars and deposited it into your account. The inflationary impact would only be felt after you bought whatever it was you wanted to buy at the price point that was precirculation of said dollars. The inflation would happen after you bought. Does this sound right?
That is exactly correct, The reason '07/'08 wasn't allowed to become a derivative chain reaction melt down is because the "wrong" people were on the hook.
That has since been addressed and the sword of Damocles can gut the "unimportant" folk. The excess reserves of the big banks, held by the Fed.
are poised to gobble up assets. The prop. desks were shut down, then commodities started coming off. Now the big banks will buy through the back channels
of private equity through the making of selective loans, but not before the assets are at fire sale prices. Once this money is injected then you'll
eventually get some inflation. here's a link I'd encourage every body to watch the entirety of, but I highlighted the part that addresses the
derivatives issue you mentioned. https://youtu.be/MN4drI2CLEQ?t=26m3s Listen closely to what he says about Citi Bank.
No, the Fed cannot print ad infinitum. The Fed cannot print money that has no purpose. The Fed is a private institution. It has no right to just print money for no reason any more than you or I do. Any money the Fed prints has to be used to buy something legal. All they can buy with it are government bonds. This is exactly what all the QEs were for... to buy the bond market and hold rates down.
In fact, remember how horrified the world became as the curtain was slowly drawn back and we all found out that it was the Fed who was basically the sole buyer of treasuries? The Fed isn't supposed to be in the business of buying debt. Japanese bond buyers are. Chinese bond buyers. Citizens... anybody who didn't mind owning US government debt. But these days NOBODY wants it because the world is awash in US debt and it doesn't pay squat to own it. So either the Fed buys it or the government has to cut spending since they can't raise any money by borrowing.
If the government issued no debt (sold no bonds) in 2016 for example, then there would be nothing for the Fed to buy... so they couldn't print a penny. By the way, all this "printing" of QE in order to buy up treasuries isn't actually printing of money at all. It is just held in reserve... on the books... of the Fed's minion banks... Citi, Goldman, JPM, BAC. That's where they got all their fun money from to jack the stock markets to the moon for no reason whatsoever.
Total non gov. debt is around $60 Trillion. Seems to me, the FED could buy some of this off the banks. Bernanke bought a lot junk MBS off the banks. That way, the banks get props while everyone else drops. Yea, just like the last several years.
You could be right. I don't pretend to have expert knowledge about it all. Except that "the banks" in essence "are branches of" the Fed anyway. At least the primary dealers like Goldman are. In fact, Goldman pretty much runs the Fed.
But I do know that the Fed can't just print any time it wants to. I needs a reason, and that reason would to be to buy some form of government debt. Years ago that's how the government borrowed money... by selling bonds to Germans or Japanese... but not to the Fed. The Fed buying up all the debt to this degree is just a recent development... and a very bad one. Because that's exactly how they entrap countries and enslave them forever. Greece is a prime example. We're going the exact same route as Greece is. This phenomenon was planned decades ago... it's deliberate entrapment... and Rotschild is behind it all.
I'm not sure where you're getting your information, but you have been clearly misled. Not only have you been misled, but you apparently aren't even aware of what has been going on since 2008. For instance, you say that all the Fed can buy with printed money is government bonds. Really? They can't buy mortgage backed securities (MBS)? In case you don't know, the Fed has been buying MBS by the truckload and they continue to do so to this very day. The Fed can even create Special Purpose Vehicles that purchase stocks and ETF's. And just so you know, the Fed can always find a reason to print money to buy stuff with. The reason is usually called saving the world financial system from totally imploding.
You're right. I should have said "all they can buy is debt".
End Result... $US Dollar HyperInflation, no?
Epochal deflation will never happen since the dollar waas hyperinflated, but assets are overpriced. A reversion to the mean - DJ 10k - and some moar money printing. The show must go on!
The "reversion to the mean" usually goes beyond the mean to at least half the magnitude of the previous amplitude.
I looked at a few Blowhorn (CNBS) threads earlier, and even the die-hard bulls are getting hammered.
It must suck to own the product and not be able to short it because of the premium. (Guido knocking at your door for the margin call)
Will be interesting to see how it all plays out. People who bought inflated RE with large mortgages will sink first I guess.
Deflation? Where? Sure aint seeing it here...
Not yet. But since 97% of every dollar, euro, yen, yuan on the planet was created out of thin air, it can just as easily vanish right back into that imaginary void that it was created from in the first place. That's exactly what Stockman is talking about. That's exactly what DEflation is... the disappearance of money right off the face of the earth.
It has barely begun. Where is the deflation? Well one thing is certain... the greatest beneficiary of the INflation will be the sector that is hardest hit by the DEflation cycle. And that will be the stock and bond markets. Hang in there... you're about to see the deflation. You'll recognize it when the S&P is at 500 and the Dow is at 5000. With interest rates soaring and a dead economy. The worst of all worlds.
You throw a baseball straight up into the air as far as you can... you know what's going to happen to it. But don't despair... it's totally natural and absolutely has to happen. We will come out of this very dark cycle 15 years from now and start all over again. Hopefully all the Rotschilds are dead by then though, so we can do it properly next time.
It is pure insanity that the central bank of the United States of America is a privately owned mafia. They own the money supply and Americans rent it. How fucking insane is that? Abolish the Fed and create its equal, owned outright by the people of the USA. In that scenario, it would work beautifully.
(Sarcasm) Well, aren't you in for a treat. When the deflation comes just sit back and enjoy all the cheap stuff that is coming your way. Remember that $0.99 gasoline from when you were a kid? It's coming back brother. Filet mignon for 3.99 a pound on sale. And Starbucks is lowering their prices so you can get a gourmet cup of coffee for what you used to pay at Sheetz or Wawa. The good news is, that while all these prices are deflating, your government hand outs will probably stay the same. Times are getting good my friend.
so how does one survive this? stock up on canned goods and ammo?
Deflation means "the disappearance of money". Therefore, money becomes more and more scarce, and therefore more and more valuable. Cash is king in a deflationary cycle.
So the answer is to know which currency will be the strongest. And logically, that would be the one that the greatest amount of global debt is denominated in. And clearly, that is US dollars.
So if the deflation that Mr. Stockman talks about truly happens (as it MUST, sooner or later), then the best bet would be to stock up on food items, ammo, and definitely CASH. imagine what you can buy with that cash once the bottom is in, a decade from now. 40 acres of land for $1000? Maybe... because as late as 1939 good farmland was selling for $22 per acre. In an epic deflationary scenario, not only "could we" go back to those prices... logically we "should".
I think there will be a concerted, global effort to transition to a digital currency. If this comes to pass then physical currencies will be phased out.
They will still be redeemed up to some arbitrary date, but beyond that I don't think it will be honored. In an effort to counter black market activity
during the Viet Nam "police action", the military PX would issue vouchers of differing colors periodically. Something akin to this will happen, except
it will be a phase out of physical currency all together.
Then that is epochal deflation. How much of the real economy operates on cash? Think landscapers will be accepting debit cards?
Now smart phones have credit card swiping capabilities. Banks have apps. where you simply take a picture of a check to make a deposit.
So virtually anyone with a "legit" business will be able to transact digitally. Don't get me wrong, I'm not in favor of this, I simply see it coming
and folks need to strategize accordingly.
and what stands out to me is that the average citizen does not have any cash- and the people that have "saved" by putting their money in the market, when it is cut in half will feel the pinnch and will only be spending their cash on nessities--debt has been pushed to its limits or near to it
I hope you are not telling me to sell my gold. It goes to 10000, goddamnit
To be honest I'm very torn about that. I have been buying silver. I'm a technical analyst so I rely on charts and don't pretend to understand all the fundamental stuff as well as I would like. It's very complex.
Technically, I see gold and silver continuing to fall for a while yet... but not for long. On the other hand, I 'do' see the US dollar potentially rising in value for years. So maybe the fear factor kicks in. If there is deflation in US dollar terms, then people who use most of the other currencies will be seeing the US dollar strengthening and their own currencies weakening relative to USD. So many of them will actually be experiencing INflation (or more correctly, "rising prices") while the US dollar goes through its deflationary cycle (where the US dollar strengthens). So to a great portion of the global population, they'll be looking for something to save them from their own weakening currency. To them, the USD will look pretty darned attractive. So they too will be buyers of US dollars... and gold.
So as I proposed in a couple of articles I wrote a couple of years ago, I can see the day arrive when we see the US dollar and gold rising at the same time. Some readers declared "that is impossible". No it isn't impossible... because the USD and gold are also both seen through the eyes of the users of other currencies... the Yen for example.
Imagine you could put all the major global currencies in a basket along with gold and silver. You stand over that basket and watch the battle that's going on inside. You watch to see which currency is devaluing the fastest. Which currency is strengthening the most? Is it the US dollar? Is it gold? Are the US dollar and gold both holding up very well at the same time? That's totally possible.
Now... you pick up that basket and take to your balcony on the 1200th floor of the high rise you live in... and you drop it over the edge. The battle inside the basket still rages on. But ALL the currencies in that basket are falling relative to the rest of the world. In essense then, all the currencies would be in a wicked race to the bottom... actually to their own demise. And yet, if you were inside that basket you would be seeing the USD strengthening against all other currencies. In that regard it is indeed in a deflationary cycle, relative to other 'money'. But because the basket itself is falling, the net result would still be "rising prices" of some items like food, heat, insurance. All the things we need would be rising in price and all the things we don't need, like a personal yacht, would be falling in price. There will be fear and panic everywhere.
The net result I think is that the US dollar and gold emerge as the strongest currencies... until the day arrives that even the US dollar must finally succumb and vanish. That would be right about the time the basket you dropped was about 500' above the pavement. Once the USD has finished its deflationary phase and begins to drop toward its ultimate death (in the final 500' flight of the falling basket), all that would be left at that point is gold. So I'm quite convinced that your gold is a great purchase. Hang onto it for sure. Buy more if you can get it cheaper.
But as I said, I'd be buying silver instead since the gold silver ratio is currently at 74:1. Throughout history (over the past 5000 years at least) that ratio has averaged about 14:1. In other words, right now silver is dirt cheap. When precious metals finally take off for the moon, silver will outperform gold by probably triple the gains.
I wish I had an answer for you bro. But if I knew the answer with certainty I'd be a lot richer than I am.
Thanks for your interesting comments. Take note that gold has remained pretty stable in many currencies. For example in Australian dollars, gold is A$1475 but at the peak when gold was US$1900+ it was around A$1900 as well. So gold down A$500 from the highs but in US$ it's down $900. Similar deal for C$. In Euro, gold was €1150 at peak but now it's €1000. Not a huge drop. I believe these figures are correct. So this tends to support your prediction of gold rising in unison with US$. For now gold has dropped dramatically in US$ but much less in other currencies.
In '38 and '39 good farmland in Illinois didn't pay rent, but by '42 land values where well over $250/ac. Depression and drought. Land is a long term play and never should be considered short term and now try to get that land at any price under $15k (even though over 1/4 of the output ends up going out a tailpipe).
In '38 and '39 good farmland in Illinois didn't pay rent, but by '42 land values where well over $250/ac. Depression and drought. Land is a long term play and never should be considered short term and now try to get that land at any price under $15k (even though over 1/4 of the output ends up going out a tailpipe).
Time to squeeze the sponge.
Deflation is an invitation to print money, which is just what we've been doing, so Stockman is seeing ghosts.
And the Chinese yen or renminbi or whatever it is may deflate, as it should, but should we laugh or cry?
Stockman is a fine fellow, but he doesn't seem to grok the New World.
Central banks don't print money, they issue credit on the full faith and trust of their sovereign governments. Where does that credit go, what is it used for? Most of it is used in speculation in the markets or real esate. Some of it winds it's way into production. The amount that did wind it's way into production ended up mostly in emerging markets. That is the Chinese bubble and other EM bubbles that are currently collapsing.
The credit can wind it's way all through the production line finally to the shelf where it is up to the consumer to purchase. That credit chain takes what, anywhere between 3-7 years? That is how these cycles are created and then bust as the mal-investments aren't sold. Consumers are tapped out, peak debt they have been using their savings and existing on credit cards.
Maybe you read a book that said that, but that was then and this is now. Our central bank does print money, hands it to the administration, who put it immediately into circulation for consumption, not production.
The world has too much production, that is the deflationary threat if there is one. We're rich in goods, actually, what we lack is a way to distribute them "fairly". It is pretty much an inversion of what they taught you in college, if they taught any capitalism at all. It is very nearly a communist's wet dream.
But you may have a point, which is that our Chinese brothers decided to play the producer role, thinking that would earn them money. Well it did, but they kept their currency artificially weak so we could buy from them. So they only got half of what they really needed to get, and when the Fed dilutes the currency it taxes their dollar holdings right through their fingers. But if the Fed didn't print, nobody would buy Chinese production. They are caught in one of those Chinese finger traps. Heh.
Distribute them fairly--what in the fuck does that mean
The central bank does not print money and give it to the administration--also an ignorant comment
They buy tbonds at inflated prices to establish ZIRP and QE, enabling Treasury to run billion dollar deficits. That is printing money and giving it to the administration, by the trillion.
Fairly means whatever you want it to, that's half the issue.
Just to be clear, the Fed creates currency (prints money) and then purchases treasuries, mortgage backed securities, and potentially other securiites through primary dealers. The Fed thereby loans newly printed money to the government and banks.
Virtual printing.. Issues, creates.. (whatever).. They don't roll the presses, the Treasury does and that is to the tune of only a fraction of the 'money' in the finacial system.
silver
Plata y Oro! Pura Dinero!
All I know is slow and steady wins the race. Putting about 5% of our income into silver rounds every month. It adds up fast. I wish the price would drop even more.
"They shot their wad..." I'm in awe he said that and that slut reporter didn't flinch !!
https://www.washingtonpost.com/opinions/respectable-uses-for-shooting-yo...
That idiom didn't always have a sexual connotation, but honestly she would make a feller envision shooting his wad.
I think it has to do with old guns and cannons that had to be wadded and then fired.