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Mark Spitznagel Warns: If Investors Thought August Was Scary, "They Ain't Seen Nothin' Yet"
The man who made a billion dollars on Black Monday sums up his strategy perfectly in this excellent FOX Business clip with the money-honey, "I'm a hedge fund manager that actually hedges for his clients. This is something of an old fashioned idea in this day of just gambling on the next Fed bailout." Spitznagel, who is wholly unapologetic in his criticism of The Fed (and any central planner), unleashes eight minutes of awful truthiness on what is going on under the surface of the so-called 'market', concluding ominously, "if August was scary for people, they ain't seen nothin’ yet."
Grab a beer and relax...
Some key excerpts:
On Universa's tail-risk strategy..
"We tend to lose or draw—most of the time—these small battles or skirmished. But, ultimately, we win the wars."
On the Great Myth of centrally planned economies..
"Great myths die hard. And I think what we're witnessing today is the slow death of one of the great myths of human history: this idea that centrally planned command economies work, that they're even feasible, and that they can be successful.
It's one of these enigmatic mythologies of the last hundred years in particular that we've been grappling with, and here we are today yet again thinking about this. Let's remember that in the last hundred years a lot of blood has been shed over this mythology. And here we are today, how did we get here again?
On today's "all alpha is beta" hedge fund community...
There was this notion not long ago of the Bernanke put, the Greenspan put. It was sort of a dirty thing to admit that it was part of our investment strategy. But today, it's everyone’s investment strategy."
On "it's different this time"...
"I think that another generation will look back and say 'how could you have made that mistake all over again? How could you have failed to understand Hayek's notion of the fatal conceit, that central planners can't do better than the dispersed knowledge and signals of free market processes?'"
On the crazy world in which we live...
"There's something self-fulfilling about this mythology, only in the short run.
But in the long run we know that it is ultimately self-defeating. When bureaucrats mandate low interest rates it doesn't spawn long term productive investment. What it spawns is this short term gambling, punting on momentum-driven moves, on levered buybacks. This is the world we're in today."
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"Great myths die hard. And I think what we're witnessing today is the slow death of one of the great myths of human history: this idea that centrally planned command economies work, that they're even feasible, and that they can be successful.
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How about an even greater myth that money needs to be hedged; it is a whopper of a myth that money should have “insurance” on it as hedging. Nobody questions insurance on money such as interest rate swaps, derivative games, and hedging? Of course goods can be hedged to prevent losses from pricing, but why does pricing move around so much? The money system itself is unstable which causes false pricing signals.
We are so immersed in our false system that we cannot see out of it. Humans respond to pricing and money signals like a fish responds to pressure changes and salinity in water.
So, Mark Spiznagel made a billion dollars in one day. Most people will work their lives and make a fraction of that.
These sorts of schemes are pure rent extraction…zero and negative sum activity. How many regular producing people have had their output stolen from them in false pricing due to finance schemes, to then pay for Mark and his clients. When Mark dies, his epitaph should read, “I did not add to humanity, I took from it instead; And, I was admired for it.. Hah hah suckers. He who dies with the most wins!”
Think carefully on this: Banker Credit money comes into being as loans. It then is spent into money supply and used for transactions. This type of money has an accounting periodicity that is defined by its debt instrument. It gets recalled on an accounting basis. The future must pay past debts.
If Joe cannot pay Maria, then Maria cannot pay Frank. Frank then cannot pay Joe; and Joe then cannot pay Steven.
Credit/Debt systems DEPEND on future to have money in supply to pay past debt instruments. They shift from the future to the past, and demand more from futurity than was created in past. If Mark sucks away a billion dollars in a day, then he has a chunk of the money supply moved toward himself.
Basically it is fraud, and it has dominoes of counterparties. When Lehman collapsed, then its counterparties were not getting paid, and this then caused contagion.
This sort of contagion is “hedged” with insurance, and insurance is a numbers game. Credit as money was somewhat contained from contagion with Glass Steagall Firewalls. Graham Leach Blily act overturned Glass Steagall, so now defects of credit money are easier to see.
A real money system has legal money in it, which is of a type that floats without an accounting periodicity. That means that it HAS NO COUNTERPARTIES, nor is it destined for destruction.
This money type DOES NOT NEED HEDGING. It also serves well as a transaction medium at low cost, so it does not steal just to come into existence. It does not need insurance because it represents current wealth. By contrast, debt money represents debt instruments and their ability to extract.
Why are most family’s now dual income and or working ever harder, despite improved productivity from information revolution?
It is because of rent seeking and stealing in the form of prices. Pricing is driven high due to “insurance” on credit as money, and the needs of finance to parasitize working economy.
Private banking credit systems were fraud in the beginning and they are still fraud. They cannot be fixed or patched.
www.sovereignmoney.eu
Mark made a billion for his clients, if you listened to him or knew about hedging you'd understand it comes at cost and is simply any activity to help offset the downside of any investments. Companies, individuals, generals and gamblers at the craps table all hedge, if they're smart that is. Not sure about all your points above but the issue is gov't is far too involved in our markets and we have crony capitalism and that is the problem not free markets.
You mean if I bet hard 6 I should put down a safe bet against myself to cover, or at least HEDGE my bet? Imagine the logic if you were trying to insulate yourself against loss. :)
All very, very true. I would like to add that the ideal of perpetual growth is inextricably linked with debt-backed money systems - because current monetary systems must grow exponentially, economic growth must go in parallel in order to pay off the ever-rising interest payments. Technological growth is either linear or comes in rapid spurts; the in-betweens and the temporary sags in a normal economy must be absorbed by consumerism in our current system.
Unfortunately, for a community that is supposed to be aware of the coming financial and economic collapse of the world economy, ZHers take the perpetual growth system far too seriously. Increased productivity of workers should lead to reduced hours, not the spewing out of more iCrap for the world. ZHers moreover tend not to realize that we are on a finite planet that cannot sustain more than linear growth: we can sustain 7 billion people, but we sure can't sustain 7 billion hamburger-eating, SUV-driving, suburban-dwelling, iCrap-buying Amurikans around the world without completely depleting our resources.
"These sorts of schemes are pure rent extraction…zero and negative sum activity. How many regular producing people have had their output stolen from them in false pricing due to finance schemes, to then pay for Mark and his clients. When Mark dies, his epitaph should read, “I did not add to humanity, I took from it instead; And, I was admired for it.. Hah hah suckers. He who dies with the most wins!”
- I think this is very pertinent to the Discussion even though I drink or am drunk.
Maybe ZH Readers and Posters are not largely Samaritans.
- I need to keep reading
It is all bullshit, you and I know it.
There is only one benefit to all of this, many people are employed in the extraction of coin from your wallet.
Without all these layers of regulation, people selling and buying these insurance schemes and more, can you imagine the unemployment that the USA would be facing?
From bureaucrats, enforcers, accountants, lawyers, hedge fund guys, traders, their support groups et al.
They would have nothing to do.
This is the biggest make work project the world has known as there are not enough jobs or opportunities out there to satisfy the needs of the population and technology is responsible for much of that.
We can bitch and complain all we want, but there never was a perfect economic model on this planet except for maybe a small localized area, where people set up their own business with savings or help from family and go from there.
Is it any wonder the nation's entrepreneurs have declined dramatically as a percentage of the total population in the last century?
Except if you are selling yourself as the keepers of another person's coin.
And this:
Is why increasing the minimum wage is getting airtime. The base pay level needs to rise and (hopefully) bump the levels just above that to inflate incomes to pay that past debt. I don't think TPTB care about the increasing percentage of low wage/part time employment because they give a crap about the people. Of course each one wants to keep the expense of human resources as low as possible.
It makes total sense, the QE printed money went to Baks then lent at ZIRP to hedge funds. The hedge funds nought AAPL and the S+P. They have had their run.... wy hang around any longer ?
Sell and let the rest try to locate the liquidity.
I was not aware that Maria is a juvenile Hutt...
.
If this guy made a billion dollars he was NOT hedging.
....making a billion dollars is the antithesis of hedging. Hedging is curtailing risk, in particular tail risk, but if "hedged" little profit should be made.
He made a speculative bet and was right. I don't want to hear "hedge" in any of this. Your "hedges" are always losers if you are truly hedging.
August was no scarier than any month since January 2009.
Except for the legions of Americans who have recently come out of the woodwork to say that it is.
Although I should add, at the end of August, not 3 three weeks ago, I iwas suddenly struck by a compulsion to load up on canned goods.
I had a whiskey and it was gone.
When we worry about Central Planning do we worry about Centrally Planned global corporations?
I see the market is rushing to deal with California's drought problems.
No corporation is stupid enough to get involved with the progs.
We know what un-regulated Capitalism look like because this is how it started.
The early businessman seeking profit ........
1) I need cheap labour to work on my sugar plantations to maximise profit.
Slavery, ideal.
2) I need cheap labour to work in my factories to maximise profit.
Men, women and children all paid enough just to keep them alive to work.
The beginnings of regulation to deal with the inhuman monster that is the businessman seeking to maximise profit, ban slavery and child labour.
Where regulation is lax today?
Apple factories with suicide nets in China.
A leopard never changes its spots.
It was collective Labour movements and not Capitalism that got the majority a larger slice of the pie.
This is the history of Capitalism, the rich are very greedy.
What were those women and children doing before they CHOSE to work for pittance in this new "business" that didn't exist prior? I know history has largely validated your statement but it is because most people have no capacity to stand their ground. If a majority of people refused to be "enslaved" by inadequate wages for what they bring to the equation the businesses would have to up the offer.
Formerly royal lands that farmers and herders worked on was enclosed by well-connected aristocracy who forced these formerly independent producers to become wage laborers. Since enclosed farms had only a limited demand for wage labor (enough to maximize the profit of the feudal lord), people were forced to the cities to work in factories for low wages. Thanks to the debt-backed monetary system no other opportunities existed and capitalism was we know it was born.
In saner times, when demand was recognised as the driver of the economy, the US consumer was seen as the engine of the global economy.
With growing inequality, the US consumer has seen real wages stagnate since the 1970s. His consumption was maintained, first with debt, and then the illusion of wealth due to a house price bubble. He used his ever increasing house price as an ATM to borrow against to maintain consumption.
In 2008 things changed, the US consumer was maxed out on debt and his house was falling in price.
The once wealthy Western consumers have all had a similar experience.
Demand for Chinese products collapsed and China tried to keep things going with debt, hoping the West would soon be back on its feet.
With supply side economic theory being the order of the day, all the help has been put in at the top with nothing trickling down, because it doesn’t.
Capitalism trickles up though the following mechanism:
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
With almost no welfare state in China its consumers constantly have to save for a rainy day, limiting their own consumption.
The world’s belief in supply side economics and trickle down is exactly the opposite of how Capitalism actually works, its demand driven and money trickles up.
Prepare for more solutions based on the opposite of how Capitalism actually works.
QE puts money in at the top, where it stays, blowing asset bubbles.
There is an inherent trickle up in the current system that allows the rich to take from the poor:
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
This is the mechanism within Capitalism that looks after the idle rich.
The Duke of Westminster can inherit a vast fortune, get an investment banker to invest it wisely, live a life of luxury and leisure and leave an even greater fortune to the next generation, all thanks to Capitalism itself with no work whatsoever.
Capitalism is the benefit system of the wealthy.
To combat the massive trickle up inherent within Capitalism you need the following:
1) Those at the bottom have to be paid enough to keep the whole food chain above going.
2) There is a redistribution from the rich to the poor via taxes.
3) Helicopter money fed in at the bottom.
With none of the above currently sufficient to curb the trickle up, the system is dying through lack of demand.
Yawn ...
When Yellen "could not raise the interest rates", maintaining this loose monetary policy kind of leaves nothing else to say ... fail, fail, fail as so many ZH'ers have been saying. That how this guy made 1B on black monday under the current system does not really mean anything no more because more and more are realising how they are playing the game.
The puzzle and anything else now is becoming irrelevant ... is it going to be QE or NIRP.
NIRP is stupidity of a central banker it totally crushes the concept of banking even if it does bail out banks once again. In reality they are being supported to OPERATE AT A LOSS that is not capitalism, it would be BANKS ON BENEFITS call it BOB and banks not governments have just had their debts socialised = socialism.
QE it should be then, but can anybody else see the QE rape circle. FED uses QE, suspends it so others have a go at raping populations by making the others look too expensive. That circle of passing the QE around coukd last for a real long time except for "USA and CHINA must become equivalent in value terms for it to begin". Then in the closed circle game you are good for a decade, broke for the next in the perpetual cycle of FOREVER excluded for elites of course.
Any other ideas out there? Besides WW3 to reset the debt entirely.
In all the sef interest economic poicies of elites the QE action did reveal one thing perfectly if you want to use QE for the masses there has to be a major cap on the movement of wealth to the top who being in a great position to extract all the QE were the only ones to benefit.
From tall tom
There is not one example in all of human history where there is a long standing benevolent society.
Hungary, just after Magna carta was signed till Austro Hungarian empire dismembered Hungary.
(Timewise it was about 20 years after magna carta, but not influenced by it, near as I can tell. Hungary had their own evolution.)
About 900 years. Their "king' was elected, and they had a parliament like system where special interests were represented. Their system could not go off the rails due to its design, plus the population was instilled with Christian morality.
(Note that Putin is attempting the same with Orthodox Church, essentially resurecting Byzantine empire. Ooops there is another one - long term.)
Hungary was the bulwark that kept Western Europe safe, so that western civilization could develop.
I think 900 years is a pretty good example of a benevolent society. Humans CAN evolve to be better than what we are now
What we are now is predicated by money, as I explained earlier.
Make money moral, and the outputs will change.
All systems predicate their outputs.
www.sovereignmoney.eu
Money is the problem. Nobody sees it for what it really is, digits on a computer or pieces of paper. Are humans this stupid? A 'college girl' would do nothing for a bunch of 5"x7" pieces of paper, but print 100 on those pieces of paper and 'federal reserve note' and you've got yourself a horribly immoral slave for the next little while.
From Great Uncle:
Any other ideas out there? Besides WW3 to reset the debt entirely
Damn already!
It is legal sovereign money. That is the answer.
Yawn!
History is very clear on this. It is not some sort of crap flying out of my ass. The experiments have been run repeatedly. It just gets no press, because there is no rental gains to be made by special interests. Plus the press are bought and paid for shills who respond to their paymasters.
In fact the rent seekers get cut out.....they lose. It is best to not discuss and ignore the real fix.
Let's just argue endlessly about symptoms and not the disease.
With a name that literally means, "Sharp nail" he should know what he's doing. He's not a Kein hertz, name of a guest once on CNBS.
I thought six months ago that every scientient creature on the planet had got this message. Not so! Sad to have to hear it again, good to have it so well done.
any system that allows a putz like that to make that much money is fubar
Basically you've got a 16,000 dow that should be about 5,000. How do you get there without wiping out the 1% who have done every fucking thing they can in the last 10 years to accumulate all the wealth in the world and put it into the market and it's associated futures, derivatives, etc. Those with nothing, ie the middle class will lose the least as they're closer to the earth. The rest, well they become fertilizer. Good luck, pass the popcorn.
I thought six months ago that every scientient creature on the planet had got this message. Not so! Sad to have to hear it again, good to have it so well done.
I was impressed. Couldn't have said those things better. That man will never be invited to do a TV interview again.
Subtract the past fifty years of central bank intervention means that prices would have to come down to at least that low. To be in these markets today is like siting on the caldera of an active volcano on the eve before it blows.
I was impressed. Couldn't have said those things better. That man will never be invited to do a TV interview again.
He's a Mises Monk. He correctly identifies that no "controlled economy" can work. He gives no indication what "can" work.
I submit that a properly managed MOE process can work ... and that implies control. What they're doing is like driving a car by looking at the rear view mirror.
If they monitored real time DEFAULTs and immediately reclaimed them with real time INTEREST collections, an MOE exhibiting zero INFLATION would result. It is a control mechanism that is responsive to what is going on. It doesn't wait long periods and then adjust to what they think actually did go on. No one can show you a DEFAULT time series so it is obvious they aren't doing their job right.
With zero INFLATION guaranteed and a very stable platform (assured by this negative feedback loop) "all" the problems he talks about (e.g. volatility and uncertainty of controller behavior) go away. Traders could trade and only have to pay attention to the dynamics of the trade itself. They wouldn't have to worry about the rug they're standing on.
You missed his point, you're too focused on which economic theory jersey one is wearing, Austrian School or the Socialists/Progressive big gov't central planners. "With zero INFLATION guaranteed and a very stable platform..." I guess you missed the whole premise for creating fiat money systems...TVM. Central banks today have essentially destroyed that with interbank rates below 1%, you have basically free money. Their ZIRP, near ZIRP and now NIRP are actually creating deflationary forces and as has been proven the only thing inflating significantly is stocks not inflation rates.
Not entirely true....ZIRP has also created huge inflation in housing costs (both ownership and rental). Given the amount of income that the average american spends on housing costs, it is another elephant in the room.
We are experiencing a very odd mix of deflation and inflation simultaneously. The end result will be hyperinflation...the timing is the real question.
Tick tock, motherfuckers...tick tock...
We are experiencing a very odd mix of deflation and inflation simultaneously. The end result will be hyperinflation...the timing is the real question.
You are exactly right. And we don't have homogeneity out there. I have a home equity loan that made sense at the 3.25% I paid for it. It was bought in the collapse by Chase. They pulled the plug on it, bouncing the rate to 8.25% ... which was their contractual right and my risk.
But with ZIRP, I should have been able to just refinance the whole property ... at below the 6% of the underlying mortgage "and" the 3.25% of the second.
But what do you know. I don't qualify for any financing at all ... none!. Yet I have never, in 71 years, defaulted on any trading promise I have ever made. What's worse, I am rejected because I don't want to make a bigger ... longer term ... trading promise.
I have not sold the property because an unusual real estate market has emerged (locally) that makes sitting tight the right behavior ... even though I'm being screwed over royally.
Go figure.
I guess you missed the whole premise for creating fiat money systems...TVM.
I do not. I let TVM be whatever the buyer and seller agree it to be. I suggest a process that guarantees zero inflation of the MOE itself.
Since any reliable trader can make a trading promise and get it certified; can deliver on that process and return the certificates; and pay no INTEREST load because he has "no propensity to default", then he has obviously enjoyed a time value of money of one. And (1+i)^n where "i" is zero proves it doesn't matter what "n" is. Thus, for this trader (and all reliable traders), the TVM is one.
For deadbeat traders, the TVM is whatever they can negotiate. If they come to the MOE process for the money, they're going to pay exactly according to their "propensity to default". It's obviously an actuarial process.
He's a Mises Monk.
I resemble that remark.
He gives no indication what "can" work.
That wasn't the focus of the interview.
I submit that a properly managed MOE process can work ... and that implies control.
You haven't discovered what price discovery means to a market economy, and why bureacratic meddling cannot replace it without doing severe damage. In a nutshell, that's why with all the high powered computers and PhDs, this economy is collapsing. You sound like Krugman. With every failure, he says they didn't do enough.
You haven't discovered what price discovery means to a market economy, and why bureaucratic meddling cannot replace it without doing severe damage.
And that is Mises' principle failing and wasted effort. He focuses on prices and why people trade. Proper management of the Medium of Exchange has no interest in prices what-so-ever. It doesn't care why people trade. It is only interested in freely certifying traders' delivery promises; monitoring them for default; making interest collections equal to those defaults; and destroying the certificates on delivery. In the interim, the certificates (records) circulate as the most valued object of "virtually every" simple barter exchange.
Before the subject trade, no money exists pertaining to it. After the subject trade, no money exists pertaining to it. Thus there is no inflation related to that trade ... or any trade. So inflation is guaranteed to be zero.
It is up to the traders to decide the value of their certificates. It is they who must eventually return them. If they're buying corn with the expectation they'll sell fat pigs some time and place later, it's up to them to make the numbers work.
If I sound like Krugman, you clearly aren't listening. Krugman talks of open government counterfeiting. Governments make trading promises with no intention of delivery ... they just roll them over, which is default. Counterfeiting is DOA (default on arrival). If it isn't countered by like interest collections, non-zero inflation results. And a properly managed MOE process "guarantees" zero inflation ... all the time and everywhere.
I state "exactly" what "is enough". "Enough" is when interest collections exactly equal defaults on a continuous basis.
And, as a typical Mises Monk, you totally fail to identify the real issue ... defaults.
But since you have identified yourself as a bonafide Mises Monk, please answer this question ... which every single Mises Monk has failed to do.
How does your so-called "sound money" (supposedly backed or based on gold) work? Since there is only 1oz of the stuff per person on Earth, and miners are very willing to produce new ounces at under $2,000 per ounce, were are talking chump change on a per person basis.
"Proper management of the Medium of Exchange has no interest in prices what-so-ever. It doesn't care why people trade."
I think you're that nutball Mike Montagne, very similar style of econo-gibberish. Dude seriously needs help.
I think you're that nutball Mike Montagne, very similar style of econo-gibberish. Dude seriously needs help.
I'm neither a nut ball nor am I Mike Montagne. If you think this is econo-gibberish you are the one that needs help.
Everything I describe is very obvious, very logical, and very simple. It will obviously work in splendid fashion.
It will cause major disruptions in government, banking, and real estate to name just three. It will be a glorious and welcome change to reliable traders ... like you who more than likely have bought a house and/or a car on time ... and returned payments as promised. Picture doing that without an INTEREST load. Picture doing that without buying insurance to protect the capitalist that demands he be part of the deal. Picture doing that without first waiting for someone to dig up and refine an adequate amount of gold to back the trade.
Todd Marshall
Plantersville, TX
Ok you're not Mike, but you're still a legend in your own mind.
but you're still a legend in your own mind.
Great slur. A necessary arrow in the quiver of the inept.
Proper management of the Medium of Exchange has no interest in prices what-so-ever.
It is impossible for any central authority to predetermine the price of anything. This is not a trivial matter.
And, as a typical Mises Monk, you totally fail to identify the real issue ... defaults.
Markets couldn't function without trust; no government authority is required. Default is a special case when trust is lost.
How does your so-called "sound money" (supposedly backed or based on gold) work? Since there is only 1oz of the stuff per person on Earth, and miners are very willing to produce new ounces at under $2,000 per ounce, were are talking chump change on a per person basis.
What's the problem? The scenario you describe sounds like a stable money supply. A gold system or any other system cannot make people honest if they are disposed to being dishonest. A stable monetary system is symptomatic of an honest system; it cannot be the cause.
It is impossible for any central authority to predetermine the price of anything. This is not a trivial matter.
It's also unnecessary as I clearly explained. If I were going to institute a properly managed MOE process right now from scratch, I would favor a base unit of one Hour of Unskilled Labor. I'd call the unit a HUL. I personally can relate back 55 years to highschool summer jobs. I know what a HUL was worth then in dollars (it was $1.50) and I know what it could buy (1/10th of a whole shopping basket of groceries ... or 6 gallons of gasoline). If I were a business I would alert my people to record all prices at the time the new process was instituted and convert them to HULs. Just as with a switch from inches to centimeters, it would take people a little while to become fluent in the new units. People who travel to different countries get fluent in new units FX pretty quickly. This process would be as easy as a change of length units because, unlike today, the constant of proportionality would be "constant". The exchange rate between various properly managed MOE processes would also be constant forever after. I would hope they would adopt the same HUL units ... but they wouldn't have to.
But again ... it's of absolutely zero interest to the central authority. That "so-called" authority is just tasked with certifying (recording) the specific trading promise and monitoring delivery (or collecting equal interest in the event of default) in the numbers determined by the trader. A trader doesn't say "give me certificates for 2000 bushels of corn". He says "I will be purchasing 2000 bushels of corn. I will create 1280 HUL certificates. I promise to return them in 150 days after I sell my mature herd of pigs.
Markets couldn't function without trust; no government authority is required. Default is a special case when trust is lost.
Your comment is not relevant to my captioned comment. I'll address it anyway. Traders creating money with a certified trading promise are "not" anonymous. Their trading promises are "not" secret ... not from the underwriter and not from the public. Users of the circulating certificates "are" anonymous and their trades "are" secret.
If the creator of the money defaults, his default lives with him. It affects the interest he pays until he clears the default. That is the major stimulus to being reliable vs a deadbeat. Default is "not" a special case of lost trust. Default is a simple case of failure to deliver ... for whatever reason... and being marked down for it. Governments have been defaulting with abandon and have never been marked down for it. That will stop abruptly with this process.
What's the problem? The scenario you describe sounds like a stable money supply. A gold system or any other system cannot make people honest if they are disposed to being dishonest. A stable monetary system is symptomatic of an honest system; it cannot be the cause.
What is the purpose of the gold if not because you take people to be dishonest? And what is it about gold that would bring stability? If you want stability, relate your money to Hours of Unskilled Labor (HUL). The value of that hasn't changed in all of history. The value of gold has changed dramatically in the last four years ... dropping dramatically while the value of land, gasoline and steaks has increased dramatically over the same period ... all related to dollars.
The process I describe must be resistant to countefeiting which must be treated as defaults. Defaults must be identifiable and assignable. And like amount interest collections must be made immediately. All this process must be totally transparent. Nothing is secret. The process is obviously stable. Where is the "honesty" parameter?
As to "what is the problem?" I asked you to tell me how a gold backed or gold based system works. You haven't shown me. I view that as a problem since I can easily illustrate how it "can not" work.
As to "what is the problem?" I asked you to tell me how a gold backed or gold based system works. You haven't shown me.
I have not been defending a gold standard. Gold has properties that were ideal for money in another time. In the computer age, it's conceivable that even paper may be replaced by computer digits. For sure, government authorities will not go back to a gold standard. We'll have to wait and see how it develops.
You are lost in the details. As I previously explained, I don't waste my time trying to conjure ideas how markets should work. I'm interested in how they function. What we call the "market" is composed of the economic decisions of millions of people every moment of every day. It is impossible for any central authority to improve on. That's why every attempt has ended in disaster.
What we call the "market" is composed of the economic decisions of millions of people every moment of every day. It is impossible for any central authority to improve on. That's why every attempt has ended in disaster.
You debate like any other religious zealot. Never being able to grasp the principles you preach, you spout the same nonsense longer and louder.
As I have illustrated to you, your focus on prices is totally misguided.
Prices are set in the first step of the three step trading process ... that being negotiation. No money exists pertaining to the trade at that stage.
To review trading: (1) Negotiation; (2) Promise to Deliver; (3) Delivery.
Money works because of the integrity of "a" process. That process guarantees perpetual zero inflation of the in-process trade agreement itself ... that which we commonly refer to as money.
As you correctly note, every attempt "has ended in disaster", as will (and has) the Mises Monk attempt.This is because none have been based on a process. All have been based on special (elite) interest control.
The gold/silver (Mises) thesis has been vividly shown to fail multiple times in the last 150 years which are our best documented history. I had first hand accounts from my Grandparents. Perfect evidence is obtained by reviewing the bullion wars of the late 1800's. Evidence also abounds with the gold rushes in California and Alaska and the silver strikes in Nevada. Go back further and study the plunder of the Americas by the Spanish and Portuguese for those natives' gold and silver. What more evidence do you need?
A properly operating process has "no" central control, just as nature has no central control.
You are cognitive dissonance personified. You can't even describe your case, let alone prove it. Yet you won't budge from it in face of the obvious.
Why did WTC7 fall down?
"How does your so-called "sound money" (supposedly backed or based on gold) work? Since there is only 1oz of the stuff per person on Earth, and miners are very willing to produce new ounces at under $2,000 per ounce, were are talking chump change on a per person basis."
Murray Rothbard does an excellent job in the book "What has the Government Done to Our Money?". The simple answer is that the size of the money stock isn't actually a big deal, it can be infinitely subdivided. It's VERY simple actually, where gold is not present it can be subsituted with silver, copper for silver and on and on. Basically any commodity which is fungible can be used as money, accepting that soft commodities aren't very good because they tend to rot.
As for just using gold, well, think about electronic gold, we could trade gold grammes, milligrams, microgrammes if we wanted to! Technology is a beautiful thing.
A Mises Monk x
Murray Rothbard does an excellent job in the book "What has the Government Done to Our Money?". The simple answer is that the size of the money stock isn't actually a big deal, it can be infinitely subdivided.
Give me an example. Sub-divide to your hearts delight. As you do, don't neglect to describe how it affects people now holding some value in gold vs. those holding equal value in some other form ... say dollars ... or barrels of oil. And don't neglect to show how it affects the behavior of miners who are willing to apply $2,000 worth of current energy, labor, and other resources to yield one new ounce. What will they do at your subdivided state?
I'm sick of going to your reading assignments. If you're going to worship at that alter, at least learn the dogma and be able to succinctly describe the principles.
As for just using gold, well, think about electronic gold, we could trade gold grammes, milligrams, microgrammes if we wanted to! Technology is a beautiful thing.
And when I apply my right to have my electronic gold in physical form, and everyone else makes the same election at the same time, what are you going to do with your beautiful technological thing?
Please please respond. This is where the line always goes dead.
I'll give it a try.
There is nothing magical about gold, silver or any other commodity. It could be electronic money for all I care. As long as whatever it is has an exchange value that remains reasonably constant. Whatever form money takes is best decided in a competitive marketplace. However, I don't care if money is fiat or produced by a private bank, as long there is no fraud.
In an honest monetary system, prices should go down. What the Keynesians did by expanding the money supply, they masked the deflationary effects of productivity improvements and the expansion of products and services. Once they unleashed monetary expansion, they couldn't stop themselves. It's like a drug that requires ever increasing doses to get the same effect. It continues until it dies.
There is nothing magical about gold, silver or any other commodity. It could be electronic money for all I care. As long as whatever it is has an exchange value that remains reasonably constant.
Then adopt an Hour of Unskilled Labor (HUL) as a unit. It has remained "absolutely" constant over "all" history.
I don't care if money is fiat or produced by a private bank, as long there is no fraud.
So you're not one of those who uses "fiat" as a derogatory modifier? You're not one who refers to "sound money" as if such a thing exists?
In an honest monetary system, prices should go down.
Why? And from what reference state?
In the steady state of a properly managed MOE process, prices only change due to supply/demand changes of the object itself. Never due to the perceived value of the MOE. That is known and guaranteed to be constant by virtue of the process.
What the Keynesians did by expanding the money supply, they masked the deflationary effects of productivity improvements and the expansion of products and services.
The Keynesians have no idea what they did ... nor what they are doing now. They have been driving by looking in the rear view mirror or wetting their finger and sticking it in the air. They have been financing government with INFLATION, driving for 2%, delivering 4%, and hiding what is really over 10% and ready to go hyper. They have run up against the stops. Nothing they do now is predictable. It's like a run away engine. Either shut off the fuel or wait for it to destroy itself. The Mises Monks can be expected to do the opposite. They will strangle the marketplace. They are equally clueless. The marketplace and the MOE process is the traders' process. Let them have a good one that is "guaranteed" to deliver what they need ... a zero INFLATION playing field.
Once they unleashed monetary expansion, they couldn't stop themselves. It's like a drug that requires ever increasing doses to get the same effect. It continues until it dies.
It has been going on my entire lifetime. They have been dodging and weaving my entire lifetime. They are now fully exposed and all the skeletons are being uncovered. They are trying to monetize their irresponsibility. QE is just a humorous label for it. But if we're not careful, we're going to get a dose of just as bad a system from the Mises Monks after the reset. They are surprisingly well funded given their level of incompetence. And that leads me to believe they are no more incompetent than our current Fed. Just as the Fed is getting exactly the results it is working toward, so will the Mises Monks ... if given a chance.
In an honest monetary system, prices should go down.
Why? And from what reference state?
As I explained. Because the expansion of production has a deflationary effect. So does savings.
In the steady state of a properly managed MOE process, prices only change due to supply/demand changes of the object itself.
A market is a dynamic process; a steady state cannot exist. The quantity theory of prices is obsolete. Prices change because human valuations are always changing.
The Mises Monks can be expected to do the opposite.
Not exactly. The Mises Monks argue that the Keynesians have backed themselves into a corner from which there is no escape. Either let the market correct its imbalances in the present or accept a collapse of greater magnitude in the future. Looks like the Keynesians opted for door #2.
And that leads me to believe they are no more incompetent than our current Fed.
Mises Monks humbly agree. Markets are self-correcting. That's why we argue that monetary authorities shouldn't fuck with something they are incapable of understanding.
As I explained. Because the expansion of production has a deflationary effect. So does savings.
But what does that have to do with a properly managed MOE process. In such a process, the inflation or deflation of the MOE itself is obviously zero. Savings only has a deflationary effect in a Mises managed MOE process. That is because if someone takes money out of the game, it makes money remaining in the game more dear. That's because money in such a process is not money at all. It is just a reference to a "commodity" rather than it's real purpose "documentation of an in-process trading promise". You're not getting it. And for sure you're not explaining it.
A market is a dynamic process; a steady state cannot exist. The quantity theory of prices is obsolete. Prices change because human valuations are always changing.
Even in a dynamic process (e.g. AC electricity) there is a steady state. In a properly managed MOE process there is obviously a steady state that is crucial. That steady state is the obvious characteristic that inflation of the MOE itself is perpetually zero. It has nothing to do with human valuations. They're called trading negotiations and happen before the money is ever created.
The Mises Monks argue that the Keynesians have backed themselves into a corner from which there is no escape.
Right. They are correct on that one point. But beyond that they are just being opportunists. They are preying on the stupid to buy into their system which works the opposite of the Keynesian system. Rather than flooding the traders' marketplace with counterfeit money, they demand the traders use their commodity. That then strangles the marketplace ... but makes the producers and holders of their commodity very wealthy. Remember me asking you what happens when you start to change the value of the units to fit the scarcity problem? I asked what effect it had on miners. I asked what effect it had on holders of "your" commodity of choice vs. holders of like value in other commodities. You "never" have answered ... and neither have any of the other Mises Monks.
That's why we argue that monetary authorities shouldn't fuck with something they are incapable of understanding.
They also why there shouldn't be monetary authorities at all. They are unnecessary. We don't have an "authority" over a refinery. We have a well optimized process that runs itself.
Well obviously you redeem certain amounts like a quarter ounce coin etc. It's not that difficult.
I just did give you an example of vaulted gold which can be traded electronically. I doesn't affect anyone when you subdivide, that's what fungibility is.
I'm sorry you don't like reading assignments, but I'm not your tutor anyway and don't in any way care to read your crazy ideas! You asked a question and the question has been answered.
You said nobody ever explained it to you, obviously they did, so If the line goes dead it could be because of other reasons...? Think about it.
I just did give you an example of vaulted gold which can be traded electronically. I doesn't affect anyone when you subdivide, that's what fungibility is.
It sure affects miners. Where they once were able to buy a full month's housing for 1oz production of gold, if you say 1/100th ounce is worth that, then they can buy 100 month's of housing for the same effort. That "is" an effect.
And if I am holding 1oz of gold which I can trade for 1 month of housing, and you are holding 40 barrels of oil which you can trade for one month of housing, after you subdivide, I can buy 100 month's of housing. Yet you can still only buy 1 months' housing with your oil. That "is" an effect.
Address the effect sir!
I'm sorry you don't like reading assignments, but I'm not your tutor anyway and don't in any way care to read your crazy ideas! You asked a question and the question has been answered.
I've wasted inordinate amounts of time on Mises Monk reading assignments. When I point out the obvious fallacies of their thinking and writing, the line goes dead. This isn't about reading "my" crazy ideas. I'm just describing an obvious working process. I'm just describing the obvious failings of the current Keynesian process and the supposed only (and false) choice of the Mises process.
It's about you defending ideas that are fallacious on their face. You can't ... so you give reading assignments, then run away when your student returns with the book report.
You are correct. I asked a question. You are incorrect about answering it. And for the proof you need only review this short transcript (and this reply which capitions a particular instance). You will quickly see that you haven't touched the issue at all.
You said nobody ever explained it to you, obviously they did, so If the line goes dead it could be because of other reasons...? Think about it.
Watch the line go dead here in obvious proof of what I say. There is an open question here. It's not answered in any of your reading assignments. It's not addressed by you in your reply. Think about it.
To restate it:
There are at least two sides to the fungibility coin. Try to get it! If you need a contemporary illustration into the answers to these questions, look at BitCoins.
Early BitCoin miners obtained them for a pittance. Current miners earn even more for their efforts. Early holders gained enormous wealth. Current acquirers may gain wealth if the ruse continues, or they may lose everything when the fleece is realized by the cognitive dissonant participants ... in dramatic fashion. And when it all falls down, watch them run to the "law" for help and relief.
Why did WTC7 fall down?
In www.survivalblog.com for 9/19, an article, on educational financing, explains the government has changed the rules for applying for college financial aid. According to the author, the government knows things will be "much, much worse" in 2016 and 2017 and the government is trying to pay less toward your education. One more voice.
From your link you see that is also the day the first Federal Budget was approved. If you read Maclay's Journal you will know that the Republic was purposly screwed on that day and got progressively worse in the two years he served as Senator from Pennsylvania. He lays most of the blame on Hamilton but has few good things to say about George Washington either.
All of Maclay's reservations and fears have come to pass. And just like today when someone points out the obvious that threatens the elites, he was spurned. His reelection was subverted.
You can't expect large systems with inherently high entropy to be "contolled" or directed by relativley miniscule low entopric systems, it's just plain physics. This is releveant when it comes to economics, society, large amounts of water, air, the sun, baterial poplulations, etc. It just plain will not work no matter how hard you try unless you can metaphorically bolt every factor down. Think about it for a minute, the majority of people in the world want peace and prosperity, therefore, with no adjustments to the natural system alone, ie no government, economists, prisons, etc. society will ever progress towards that main goal with the median peace and prosperity factors increasing with every generation. So, simple, yet it alludes everyone. When you try to control, direct or serve a small number of interests/factors within a large system you end up doing more damage (increasing entropy) rather than good in the long run. Dirty thy brains and obfuscate those mental chains!
antonina, high praise indeed..speaking for the all of humanity ..all those billions of islam who slit a daughters throat for being seen in public with a man not related to her, are they those people who want world peace?? but I also wish it to be so, life is not always kind to those with kind hearts.
"billions of islam who slit a daughters throat"
Billions? Really? And then you talk about people with kind hearts!
Apart from being totally off topic and off the wall, you're a miserable bastard, more like "undermedicated" than over.
bombdog i up voted you, bastard i am..but off topic? well you know i was pointing out the generalization of a poster who said: "majority of the world wants peace and prosperity"..wish it were so, does not make it so.
there are lots of bastards like me. as for honor killings you are willing to turn a blind eye, it obviously hurts your world view, so must be put out of mind, you remind me of a pampered princess of the 18th century. carry perfume to mask the stench of the poor no doubt.
It's called proportion, you should try it some time. Indeed there are lots like you, easily fooled, long on tough talk and clash of civilizations bullshit but with no actual clue about a real civilization. Honor killings are real alright, I have heard of them and I do know what they are. I just use a higher sampling rate than you do, and know that muslims live in many different countries with varied traditions. Straight fact of the matter is most victims of islamic terror are the people that live in the Middle East. But anyway, you just crack on with your retard comments, like calling me a pampered princess... just as odd as everything else you write and totally unrelated to this article, but I undersand that it's compulsive for you, kind of like a keyboard form of tourettes.
Tell me again how we'uns get that free Bubble-up and eats that Rainbow stew without joinin one of them hippie communes.
Central bank interventions are not "planning." They are reactions to systemic failures. There have been many of them lately because of protracted crisis.
Returns on capital are paper-thin everywhere. "Return on capital" is only real if it is based on new capital formation. New capital springs from the hand of living labor. It is created at the point of production, and nowhere else. The problem is that labor productivity has skyrocketed. In terms of physical quantities of stuff. The U.S. manufacturing worker of today makes eight times as much stuff in a given amount of time as the manufacturing worker of 1947 (BEA and BLS stats.)
Fewer workers, more stuff! That's great! Well, um, not actually. It means there are fewer days of labor time from which to extract surplus-value, i.e., new capital. (If that sounds like Marx it's because I am trying to.) Which means: higher rates of productivity tend to form less new capital.
Obviously, printing up a lot of money is not the answer. But I'll grant you, capitalists are not dumb. Why can't they come up with a better solution? Because, "The problem with capitalism is - capitalism." - you know who.
leuther, perhaps you should define "capital" in todays world of fiat..I am kinda foggy on that one.
"Capital" is money, taken as a store of value, used to create expanded value: M --> C --> M', where the aim is M' > M. The capitalist uses money to buy commodities, thus to create more commodities that will have more value. Surplus-value is simply S = M' - M.
Marx shares with Smith and Ricardo the principle of equal exchange of value in the market place. How then can capital expand?
Marx' answer, his theory of surplus-value, is that the capitalist purchases a commodity that creates more value than its cost. This commodity is labor-power, the ability of the proletarian to work. For example, under modern conditions a factory worker may neeed $300/day to live and raise a family. However, the forces of production are so developed that the worker creates $1200 from the day's labor. In an eight-hour day, the worker is paid for 2 hours of labor and works unpaid for 6 hours. The $900 unpaid value-product belongs to the capitalist and is new capital. Capital, Vol. I, chapters 1-7.
For the role of a central bank in the class transformation of produiction, see Lenin, "The Tax in Kind." Astounding mind, that fellow. https://www.marxists.org/archive/lenin/works/1921/apr/21.htm
In an eight-hour day, the worker is paid for 2 hours of labor and works unpaid for 6 hours.
Unpaid??? Classic Marxist poppycock!
Workers are paid exactly the wages they agreed to at the time of hire. If they think they are being screwed, then they should quit. It's that kind of antagonistic mentality which has been causing unions to self-destruct.
The simple fact of the matter is that workers are paid less than the market value of what they produce. If wages were equalized there would be no surplus profit for capitalists to extract. Whether they "voluntarily agreed" (given no other options) to the arrangement is a different matter altogether.
Of course, paying workers 100% of what they produce leaves nothing over for necessary savings or investment. But equally there is no need to give such large quantities of total national income (now 48%) to rent, interest, and profit for the top 0.01%. Any system that eats up half of what producers create is an inefficient and unjust one that deserves to be abolished instantly. Capitalist ownership has only been the "best" system in churning out large quantities of needless consumer goods without actually raising the standard of living.
The simple fact of the matter is that workers are paid less than the market value of what they produce.
Of course. Do you expect an owner to take personal risks, supply the capital, the organization and the ideas to produce things of value, to do those things for nothing?
If wages were equalized there would be no surplus profit for capitalists to extract.
And you think you are competent to judge when a company makes too much profit. That's laughably stupid.
needless consumer goods without actually raising the standard of living.
And you think you are smart enough to decide how consumers should spend their money.
I've come to the conclusion that inside the head of Marxists are frustrated dictators who believe the world owes them a living. Most likely, they have a government job.
Money is not capital, it is a mere token that allows for capital to be accumulated. Ironically, the employees bring more (human) capital to the table than any "investors". "Personal risks" are borne by employees as well, the moment they are hired by a company. And "organization and ideas" are a service that can be compensated for with a salary, and something that all employees have in some respect; there is no need to single them out just to justify capitalist reasoning.
You haven't even refuted my points, just asserted "who are you to judge blah blah". Corporate profits, beyond savings cushions and money saved for investment, are just piles of tokens that can be utilized to maintaining or expanding market position (buying out competitors, underpricing goods, etc.) or returned to shareholders to do the same. They do nothing to expand the stock of available wealth. The sooner these unnecessary hoards are diminished the better.
You open with a great point with "reactions to systemic failures", but then you wander off into Marxism. Marxism is in essence the problem. Marxist style actions got us here, big gov't central planning philosophy akin to Marxism coupled with the San Francisco blue suit, red book carrying baby boomer Mao devotees like Anita Dunn...Education Department posts, then removes quote by Mao ... who've permeated every part of our all powerful central gov't in DC.
Here are some examples...
Too big to fail and the bank bailouts
Massive near trillion dollar shovel ready stimulus spending bills
ZIRP and QE
Dood Frank
and the list goes on and on
"Obviously, printing up a lot of money is not the answer."
Nice to agree on something, but since creating a central bank is like the fifth demand in the communist manifesto, I can appreciate your sentiment, but very much doubt your commitment.
The "Ten Demands" are temporary demands that create social democracy as exists in Europe. The long-term cause of communism is the abolition of control over means of production by private owners who contribute no value to it, and the institution of direct democracy wherever possible. Under communism states are to be made small and the existing monetary system is to be thrown out the window with money becoming merely a means by which workers can freely exchange the products of their labor without a banker/entrepreneur interloper.
Central banking is central planning, end of story.
Calling an entrepreneur an interloper is as retarded as it gets. So you'll just abolish the whole investment cycle and live in some kind of utopia? Wake up!
FINANCE is THE PROBLEM. But Govt's capture is the REASON fraudulent, fractional reserve, Off Bal Sht Derivativited Frauds even exist. They are fraudulent on their face.
OH, and let's not forget that the system itself is set up to protect these very people. Don't beleive it? WHy does the SEC or any other regulatory entity even exist if they did not prosecute a single entity nor person in the last 8 years of rampant, in-your-face fraud?
Well. to protect the markets from entreprenuers and true investors of course. And when those SEC thugs trample on not only the Consitutional rights of entreprenuers but on the sense of fairness in any objective observers' eyes, they claim they are needed to protect teh "investor". Really. Then why not do just htat when it comes to Public Company and Bankster Rehypothecated frauds?
Well, surely I've not put you to sleep with this simple example of THE sleight of hand that has now transformed teh USSA from the entreprenuerial free market Capitalist utopia into teh biggest Govt-controlled fascist Warring State man has ever known. We make Rome look like Venezuela by comparison.
It spawns more investment in central planner fore-running and less in everything else...making it both directly and indirectly corrosive to the economy.
https://www.youtube.com/watch?v=2IH8tNQAzSs&index=3&list=RDMMO-fyNgHdmLI
lollypop
Our problem is the counter culture spoiled rotten brat baby boomers carrying their little red books and in love with Marxism are in control.
How the west embraced Chairman Mao's Little Red Book
When we talk about CB 'interventionism' in the present context, we largely miss the point.
We do not have a currency system in which central banks periodically intervene. The fundamental design of the Debt-based Currency System requires CONTINUOUS CB interevention.
It has been going on since WWI.
Since then non-fiat has at best been a secondary appendage to the system where it has e isted at all.
The only apparent exceptional factor of current intervention is its scale. But in fact the scale is structural in nature, and an inevitable feature of the design.
We simply did not understand the previous unpublicized interventions: multi-income households, consumer credit, and abandonment of even theoretical constraints.
The system requires that total debt must always grow, and grow faster than assets. All the evils (and benefits to bankers) of such a system spring from that fundamental imbalance.
Outstanding analysis !!!
This "systemic problem" has been a long time coming, and created exclusively by the CB's for their owners!!
ONLY solution is to break up the Big Banks, and eliminate the FED, and go to a gold, silver based currency.
There are many other solutions that would be much better. Gold and silver are finite and as has happened so many times in the past, the banksters will create more paper riding on top of the gold and silver to expand their claims on gold and silver and thus, the real economy. We need a mutual credit/sovereign money system that is elastic with the real economy and does not encourage concentration of economic power.
I forgot to add one important "must have".
As you pointed out, there is always a way of breaking a system. Fundamental--actually the cornerstone-- to capitalism is ethical behavior.Without it capitalism simply won't work. Too many ways to break it. With the decline in a belief in God, we have gotten a decline in ethics.
No ethics, No functional capitalism....
Money babe has gained some inches around the waist....
Anyone who has played sports well knows the lessons of Laoism. Watch Wayne Gretzky. He isn't the fastest nor strongest. He waits for opportunities to develop. All is moving revealing paths as time proceeds.
This is all Devil talk ...
Satanic mumblings ...
https://www.youtube.com/watch?v=XCDTzqbCOuY
Money is not metal. Trying to force this is as absurd as saying money is debt instruments.
An economy has many tributaries, similar to a human body. If blood vectors toward a cancerous tumor, then that tumor will grow.
In case of private capitalism finance, tumor is nourished by where new "capital" is aimed. In finance capitalism, it is aimed at FIRE ...finance insurance and real estate.
Most of credit money supply is FIRE, therefore tumor has money directed at it, hence high prices in fire sector.
In a gold system, finance becomes those who manage to hoard gold supply. Who controls and owns physical supply ends up taking tithes from everybody else in the form of usury. You must pay me so much for my precious if you want to use it. Gold deforms relations between creditors and debtor, making creditor superior. This power relation is usury, and mises crowd ignores it, making their theology so much junk economics. It is junk economics because Mises is a banker funded project. Remember, the original goldmen created paper riding on top of gold, and that then morphed into credit systems. And yes, many if not all of the people who invented and pushed this system onto humanity were Jews. This is absolutely the case, and one has to wonder why our Jewish friends are so intent on usury, when it is supposed to be a mortal sin. It is also the case that when sovereign systems were attempted they were always sabotaged, and we find promulgators of this sabotage also many of our money powered Jewish friends.
Psycophathic constructs need to be eliminated from the face of humanity.
All relations between humans can be viewed as creditor/debtor. Even services rendered, one can go into debts or one can have goodwill credits built up. This is not money, but part of our evolutionary heritage. We evolved working with each other, so YES there is moral part of humanity. but is is obscured now due to money and how that makes things impersonal...all is reduced to price. How much can I get from you, especially if gold is scarce?
In case of industrial capitalism sovereign credit was issued usually via state banks and would be directed at industry. This is one reason why Japan and Germany did so well...actually the main reason. This type of credit upset private credit markets and those who issue transaction medium.....private banks. Hence world wars, all so a psychopathic minority can hold onto rental gains.
Sorry, money is law, and once it is recognized by its true nature, will be an epiphany. Until then, enjoy the hidden hands in your pockets, doing a reach around and grabbing your jewels, and stealing your life energy. This is especially true if your life energy is only labor, and life energy is all you have to trade.
on the other hand fiat is selling for close to its intrinsic value, essentially nothing. so is zero cost the logical end of a fiat system before collapse? before the face value of the fiat is meaningless?
besnok,
Fiat money of which you speak is private credit. Fiat can take on law form, which is actually a superior form of money. Did history have 100% raping, pillage, murder in all socities ...no of course not. Consenual civilization did exist and has existed, and others are trying to ressurect it. It is just the case that Western civilization has slid into abyss.
Below is a sovereign system that ran in Canada from 38 to 74. THIS IS ACTUAL HISTORY, and not a-priori theorizing and bullshit as spewed by Austrian dialectic monks. Yes, human's are rent-seekers, which is why civilizational constructs need to have morality encoded in law - including money. Moral humans have always tried to band together and limit power mad psychos.
Note that PUTIN has stated many times that Russia cannot stand without morality as a pillar of civilization. Putins speaches are on youtube ...go ahead and watch them. Their recent bolsheveik history has taught both Russia and China lessons. Also, China is resurrecting Budhism as a mental control means for thieir sheeple. Are budhists going to go around stealing and raping? These former communist countries will soon become the advanced societies, and are not encoding theft as operating principles.
___________________
The nature of money means far more than Communism or Capitalism. Canada’s Sovereign money system 38-74.
From 1938 to 1974 Canada had little to no price inflation. Canada had a quasi- Sovereign money system, where their money pumped into channels and was non usurious. Private Banks were part of Canada’s mixed money supply. However, private credit emission was a small component, and was held to four year loans only, and limited to 6%. Further, private banks were jawboned by Bank of Canada (BOC) to keep them from emitting bad debts.
BOC became a crown bank in 1938 and was initially was privately incorporated in 1935. A crown bank means that BOC had its stocks fully owned in trust by Ministry of Finance (MOF).
In 1945, private banknotes are ordered removed from circulation. Private banks emit credit, and their banknotes then represent high cost interest bearing loans. After 1945 only bills issued by bank of Canada were allowed. This issuance of BOC bills represents seigniorage and profits received thus lowered taxes. Seigniorage should not go to rent seeking private banking corporations.
After first seigniorage, then old bills are replaced with new, and no additional inflation of money supply is necessary.
BOC after 1938 was a State Bank that emitted debt free money. The downside is that this money power was not protected by good law, and ultimately BOC was returned to a debt spreading type of bank in 1974. This conversion was at behest of Bank of International Settlements (BIS). There was also coercion and bribery against parliament to convert BOC in 74. Thus 1974 is the date that Canada became subordinated to private money power.
Bank of Canada was structured as follows: Shares are held in a Trust by MOF, Minister of Finance. In other words, BOC is incorporated as a company with shares, however the shares are wholly owned. Said shares are put in a trust, and MOF is trustee. It would be interesting to see what the trust specifies as to the actions of trustees.
Prior to 1974 MOF would tell Governor of BOC to create money debt free. This isn’t a real clean way to make debt free, and is still a corporate structure, which is why it was co-opted.
This debt free would be injected into the commons. Commons, when they are used by everybody, has a multiplying effect, where every dollar in creates much more than a dollar out. Think clean water, it makes everybody healthy so they can then labor and create. Not clean water? Then people get sick, and you have economic collapse.
Debt Free is recalled by taxes, and then is re-spent by government, so it flows in a loop that has no interest. In this way, money becomes a tool that the people use to labor with and create wealth. It has zero cost, and hence production chain does not have to add price to cover usury. This type of money can be saved to then be used to form small business, so it is entrepreneurial.
Canada’s population in 1939 was only 12 million people, in 74 it was 23 million. It is astonishing what Canada was able to do with this small population and a sovereign money system.
These things netted out of this system, the time period of 38-74:
1)
Beginning in WW2, sovereign money funded war effort without debt. Canada contributed greatly to WW2 effort. By end of WW2, RCN was fifth largest navy in world.
2)
Free Education, especially for returning WW2 Veterans. Improving labor in this way improves productivity.
3)
Business loans. Business loans allows small to medium enterprises to form.
4)
Land Grants. (Land Grants are a way of keeping land from being grabbed by monopoly forces. This was easy in Canada given the amount of land available.)
5)
St Lawrence Seaway was dredged and improved and added locks. (Note that Canada spends into their commons, as all governments should.) This is something like Panama Canal and a significant engineering feat. It allowed an inland seaway to get from Montreal and Lake Ontario.
6)
Welland Canal is another waterway link between Lake Ontario and Lake Erie. It is eight locks and lifts ships 326 feet over the Niagra Escarpment.
7)
Trans Canada Highway was built, about 4,000 miles
8)
Universal Health Care. Free health care. Since economy was efficient, health care could be afforded. (Note: the U.S. private health care system is 3X more expensive than Japan’s. Only after 1974 did Canada’s health care system go bad.)
9)
Pensions and Direct Injections
a.
This is Social Credit Theory similar to that advocated by Major C.H. Douglas. These direct injects are debt free money being collected in taxes, and then spent (injected) back down into the base of the population. This creates a pumping action, and the money goes on to create consumption and wealth. It also overcomes losses from waste in industry, so labor can buy their output. (Wages never equal the actual value of production as waste and overhead is captured in prices.) Canada may not have not understood this action, that injections are proper economics and needed, as shown by Gap theory. They injected as a response to the Depression.
b.
Family Allowances: This is another direct injection, usually for kids up to age 16, about $5 in the 1960’s money, per month.
10)
Private Banks are Restricted to four year loans only.
a.
This is private creation of credit by banking corporations, but a four year loan at 6% interest means that the interest does not go exponential. Note: In 1974 BIS coerced and removed these restrictions, so private Banker could make profits. His profits are usurious and also change the nature of Canada’s money supply. Canada’s money supply ratio then shifts, making it predominantly private credit and less debt free.
The nature of money means far more than Communism of Capitalism. Communism vs Capitalism is dialectic. This dialectic means people have their attention diverted away from money, its creation, and how a country’s wealth vectors.
In 1974 Debt stood at only 18 Billion, easily supported by a Continental Country of 23 million people.
Runaway inflation in late 1970 was created by Bankers, especially since the money had changed to become private credit. After 1974 Governor of Bank of Canada only controls the overnight rate for reserves. Control of overnight reserves is control of the price of Credit, and in no way allows volume and path control of wealth type law money (debt free).
How did Canada provide for mortgages?
Answer: They used trusts, which were similar to Savings and Loans in the U.S. This would be intermediated money, that already exists. A saver would loan their savings to a new debtor. In this way, the population held debt instruments against each other. Debts were NOT held by banks for housing. Since inflation was low, trust would offer loans at very low rates in the 1 to 3 percent range. Retirees used their savings as income, as young people paid the loans off. Trust loans would not be for 30 years, and had to be renegotiated periodically. CD’s were for 5 years.
After 74 private banks offered loans structured in such a way as it was low down payment, but long term. The entry point was all usury up front in the loan, and hence borrower would be forever in debt. This then pushed housing costs in asset inflation, and also destroyed the Trust intermediated banking model.
When the trusts collapsed, bankers swooped in and bought up the remnants, which also happened with Savings and Loans in U.S.
Asset backed commercial paper. This is working capital used by business in order to operate. It is usually issued by non bank entities and is intermediated EXISTING money, not new credit.
These sort of financial entities, shadow banks were usurped after 74, so savers were then disallowed access to have “capital” returns from industry. Instead returns of productivity then went to bankers, who created new credit as loans. Banksters now use credit default swaps to insure toxic asset backed short term loans. Therefore, FIRE (finance insurance and real estate) have usurped the money supply.
There are many proper ways to volume and channel control an economy. No one is talking about these methods:
1)
Sovereign money as in Canada’s model
2)
Self funding loans, which go into inelastic markets, to then create wealth, to then pay off their loan over time.
3)
Rent taxes. Free lunch should be taxed. Why the giveaways and welfare to the rich? Income should be untaxed.
4)
Interest free loans to municipalities, so they can then inject into commons. This money also goes on to be used for local transactions, savings, and is used to pay off private debts.
5)
If one must have credit emitting banks, then they should be modeled on Sparkassen Municipal Banks of Germany. These banks return their profits and their debt instruments stay local. Their costs are low because they are public.
what a cion job, spitz and taleb, in the funds that have they ran and closed down, like to know how cumulative money they have lost.
According to Bank of America Merrill Lynch:
https://app.box.com/s/2x1jqc1901tv8v00mbqnqjfbu8rrqzzp
The HY Note
Global growth concerns spread from us to Fed
A slow moving train wreck
Today’s Fed decision was the second worst outcome for risk markets, in our view. We have written on numerous occasions that if the Fed didn’t hike rates today initially markets would rally modestly before selling off. The realization that global growth concerns are not only real, but very dangerous right now should cause a risk off environment. And with no room to cut rates, we question the Fed’s ability to manage any further slowdown through what would have to be QE4. However, we can’t see how additional quantitative easing will help, as the goals of QE have already played out: the banking system has recovered, rates are low, investors have driven debt issuance and asset prices to uncomfortable levels, and the housing market has recovered enough to not be a concern.
Furthermore, lower rates don’t help high yield at this point. Whether the 10y is at 2.20% or 2.0%, does the asset class really look all that more compelling? Not in the slightest. In fact, outside of hiking while sounding very hawkish, not hiking and sounding very dovish while expressing concern about the global economy may be the worst thing that could have happened today.
We have been saying for months that the global economy is weak and the Fed’s dovish disposition today only bolsters our view. Europe is about to enter QE2 as inflation and growth remains poor. Japan and Brazil were just downgraded. Commodities remain under pressure and we think, at some point, the narrative could turn from a supply driven story to a demand driven one. Domestically it becomes harder to argue that a strong dollar and the lack of inflation can be viewed as transitory and this headwind is continuing to hurt high yield corporates. Manufacturing is uneven, consumer spending hasn’t improved in a year, and 2014 real median income was down 6.5% versus 8 years ago (and down 7.2% from the 1999 level). Although auto sales remain strong, we would expect as much given low gas prices, an aging fleet and the fact that auto loans are one of the few places in the economy where it’s easy to obtain credit.
Additionally, high yield corporate earnings remain incredibly weak, with yoy earnings growth negative for the first time since the recession (even ex: commodities EBITDA growth is only slightly positive). Leverage is at all-time highs (again, even ex- commodities) and the High Yield index is more globally exposed than it has ever been (35% of the market generates 45% of its revenue from outside of the United States, and that doesn’t include Energy, which is globally exposed despite not realizing significant direct sales abroad).
Not only are earnings weak, but there has been next to no capex investment, debt issuance has been massive, and buybacks and dividends have driven equity valuations as CEOs and CFOs, afraid to invest in organic growth, have chosen to buy growth instead. And as a result, recovery rates are 10-15ppt below historical norms and defaults and downgrades are creeping into the market. Although we understand many will say its just commodities, is it really? What started as coal weakness 18 months ago became coal and energy weakness. But it wasn’t really just the commodity sectors, as retail was also already weak. Now it’s the commodity sectors, retail and wireline (but definitely not all of telecom). The situation almost seems unbelieveable, as everything that seems to go wrong is explained as being isolated (AMD, well, of course semiconductors are in a secular decline) and treated as a surprise (Sprint).
In our view, the makings are there for a risk off environment for some time to come. For non-commodity spreads to be 400bp tighter than in 2011 makes little sense to us. Replace Greece for a much bigger problem: China. Replace Washington dysfunction and debt downgrade with uncertainty about monetary policy and EM weakness (though we may see Washington dysfunction very soon between this fall’s budget talks and the presidential race looming). Replace US QE with European QE. Additionally, replace strong earnings growth and margin expansion in 2011 with no earnings growth, a stronger dollar, and higher leverage today. Replace decent liquidity back then with poor liquidity now. And replace the fears of a double dip recession with the potential for fears of a global recession. Though this last point has yet to play out, we think it’s only a matter of time before investors begin to feel as bearish as we do.
The Fed had an opportunity today to hike rates and begin to build a cushion should the global slowdown be so severe it can’t be ignored. Instead, they chose to wait. In our view, this has left them in a predicament as now the rumbles of never being able to increase rates will become even more exaggerated, and when they ultimately do, we think it will be more painful than if they had gone today. We expect as a consequence for there to be more market volatility, more uncertainty around the Fed’s motives and belief in the economy, and therefore more downside risk. Most importantly, however, the acknowledgment of weakness only bolsters our view that we are in the midst of the beginning of the end of this credit cycle, and we warn investors to tread carefully not try to be a hero into year end.
Now is the time that investors need to be managing risk rather than looking for alpha. 1 or 2 names will destroy the performance for what has otherwise been a good set of holdings. Remember what many have forgotten over the last 7 years, credit returns are skewed to the downside. The best case scenario is to earn coupon and the ultimate payment of principle. The worst case scenario is 40, 50, 60 or more points of loss.
We’re in the midst of watching a slow-moving train wreck, and in our view the Fed confirmed as much today.
Anyone who takes a billion out of the economy without adding any value is a thief and a parasite and should be prosecuted.
He should not be made a hero on any web site.
In my opinion, people think it refreshing to see someone making money in the market who isn't a Keynsian.
Think in EM my Food Products from USA or Western Countries last longer on the Shelf than in the USA???
- Hell Yes, I think food and other Products in the USA are programmed to implode, get stale, become crap, after all we have this meme of Planned Obsolescence.
Planned Product expiration, for food, nice right? or Fascist in concept??!!
- Question: What kind of Sick Fuck would plan to make food products Stale and obsolete??
- Bankers on Wall Street
- Investors that are Fascist
- Communist Activists working for a revolution
- Socialist Activist working for a revolution
- Your fathers Oldsmobile
- Your MIC-Security-Prison Industry
- Your Big Agra-Chemical Industry
What'd I leave out?
- Congressional Insiders, owners, investors in congress
What kind of Sick Fuck would plan to make food products Stale and obsolete??
That shouldn't be a concern. Foods with a long shelf life are stripped of nutrients and larded with chemical additives.
Maraschino cherries are a classic case. They have an indefinite shelf life. Even the bugs don't like them. Now I drink my manhattans without maraschino cherries.
Red Dye #2 is a carcinogen
Forward Guidance should include something about Prince getting natural boobs and wider hips from hormone therapy, right?
I mean for the Entertainment Industry.
But well I don't see that kind of Auditing or Financial Ratings or Financial Statements.
They have known this for 7 years. The Fed / Golman leaked comig QE1,2, and 3 to "important" hedge funds.
Now all see it all ending as the Fed runs out of landing strip. NOW... trhey all become Fed "critics".
Thought it was good interview. Not much help for retail investors, other than the move to cash suggestion.
If only to remind people that the standard MSM Cramer Go-Go isn't the only option.
+1
Stawks
Maria Bartiromo is 48 fucking years old. And this fucker is saying to her "you're probably too young to remember the Greenspan put".
Goddamn. He needs some glasses to go over those other glasses doesn't he. Moral of the story: Even a blind squirrel finds a nut sometimes.
Since it was Sunday morning when I watched, I had a bloody mary with a double shot of Absolut while I watched. Central planners suck indeed. Like the vampire squid they are.
Woody has predicted exact Stock Market reversal dates for over 1300 SPX points - IN JUST THE 9 MONTHS ALONE! If you are serious about making money, then you need to know when the Markets are going to reverese, weeks before they turn! There is nobody better than Woody Dorse. Here is the link for tow black holes coming, he aready gave dates for August big drop and now another two are coming.
Black Hole