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The Endgame Takes Shape: "Banning Capitalism And Bypassing Capital Markets"
One month ago we presented to readers that in the first official "serious" mention of "Helicopter Money" as the next (and final) form of monetary stimulus, Australia's Macquarie Bank said that there is now about 12-18 months before this "unorthodox" policy is implemented. We also predicted that now that the seal has been broken, other banks would quickly jump on board with an idea that is the only possible endgame to 8 years of monetary lunacy, and sure enough, both Citigroup and Deutsche Bank within days brought up the Fed's monetary paradrop as the up and coming form of monetary policy.
So while the rest of the street is undergoing revulsion therapy, as it cracks its "the Fed will hike rates any minute" cognitive dissonance and is finally asking, as Morgan Stanley did last week, whether the Fed will first do QE4 or NIRP (something we have said since January), here is what is really coming down the line, with the heretic thought experiment of the endgame once again coming from an unexpected, if increasingly credibly source, Australia's Macquarie bank.
* * *
Would more QE make a difference? Have to move to different types of QE or allow nature to take its course
It seems that over the last week investor consensus swung from expecting Fed tightening and some form of normalization of monetary policy to delaying expectation of any tightening until 2016 and possibly beyond whilst discussion of a possibility of QE4 has gone mainstream.
Although “QE forever” and no tightening has been our base case for at least the last 12-18 months, we also tend to emphasize the diminishing impact of conventional QE policies. As the latest Fed paper (San Francisco) highlighted, “There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed-inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation”.
Whilst one could apply the same for BoJ and ECB QE policies, the above quote perhaps underestimates what could have happened to inflation if there was no QE. In other words, whilst it is true that both real GDP and inflation rates are undershooting CBs’ targets and have been lower than consensus expectations, would the global economies have undergone a severe case of deflation in the absence of QE? The answer is probably in the affirmative.
However, the challenge is that ongoing flow of QEs prevents rationalization of excess capacity (in turn created through the process of preceding three decades of leveraging) whilst also precluding acceleration of demand (both household and corporate), as private sector visibility declines. Hence declining velocity of money requires an ever rising level of monetary stimulus, which further depresses velocity of money, and requiring even further QEs. Also as countries compete in a diminishing pool by discounting currencies, global demand compresses, as current account surpluses in these countries rise not because of exports growing faster than imports but because imports decline faster than exports. This implies less demand for the global economy.
If the above fairly “bleak” picture is correct, then how much incremental QE do we need to arrest (at least temporarily) the decline in global liquidity and ensure that overall liquidity grows by at least ~10%+ to enable continuing leveraging? In the context of 2016, the numbers would suggest that we would require incremental QEs to the tune of at least US$700bn to replace declining FX reserves. However, if we were to aim for 10%+ rise in overall liquidity, incremental QEs need to be at least US$1.5-2 trillion, rising annually into perpetuity. As QEs rise, their efficacy would continue to drop.
Hence, there is an urgent need to either allow nature to take its course (i.e. re-set the business cycle by either closing excess capacity or writing down debt) or re-assess the nature and type of QEs used. We maintain our view that it is highly unlikely that CBs would be prepared to accept the inevitable and stop “managing business cycles”. If nothing else the consequences of re-setting the cycle (either demand or supply) are perceived to be socially and politically unacceptable.
We believe that the path of least resistance would be to effectively ban capitalism and by-pass banking and capital markets altogether. We gave this policy change several names (such as “Cuba alternative”, “British Leyland”) but the essence of the new form of QE would be using central banks and public instrumentalities to directly inject “heroin into blood stream” rather than relying on system of incentives to drive investor behaviour.
Instead of capital markets, it would be governments that would decide on capital allocation, its direction and cost (hence reference to British Leyland and policies of the 1960s). It could involve a variety of policy tools, with wholesome titles (i.e. “Giving the economy a competitive edge”, “Helping hard working American families” or indeed recent ideas from the British Labour party of “People’s QE”). Who can possibly object to helping hard working families or improving productivity?
However as the title of our previous note suggested (“Back to the Future”), most of these policies have already been tried before (such as Britain in the 1960-70s or China over the last 15 years) and they ultimately led to lower ROE and ROIC as well as either stagflationary or deflationary outcomes. Whilst the proponents of new attempts of steering capital could argue
that we have learned from the lessons of the past and economists would start debating “multiplier effects” and “private-public partnerships”, the essence of these policies remain the same (i.e. forcing re-allocation of capital, outside normal capital market norms), and could include various policies, such as:
- Central banks directly funding expansion of fiscal spending;
- Central banks and public instrumentalities funding direct investment in soft (R&D, education) and hard (i.e. infrastructure) projects; and
- Outright nationalization of various capital activities (such as mortgages, student loans, SME financing, picking industry winners etc).
Whilst, these policies would ultimately further misallocate resources, they could initially result in a significant boost to nominal GDP and given that capital markets are now populated by highly leveraged financial instruments, the impact on various financial asset classes would be immediate and considerable. In other words, neither China nor Eurozone need to spend one dime for copper prices to potentially surge 30%+.
Are we close to such a dramatic shift in government and CB policies?
We maintain our view that for CBs to accept this new form of QE, we need to have two key prerequisites:
- Undisputed evidence that it is needed. The combination of a major accident in several asset classes and/or sharp global slowdown would be sufficient; and
- There has to be academic evidence (hopefully supported by sophisticated algebra and calculus) that there are alternatives to traditional QEs.
At the current juncture, none of these conditions are satisfied. However, we maintain that as investors progress through 2016-17, there is a very high probability that both conditions would fall into place.
What about short-term (say next three-to-six months)?
Whilst we believe that it is indisputable that the Fed needs to ease rather than tighten, the hurdle rate for Fed to embark on QE4 in an election year is far greater than doing nothing. At the same time, both ECB and BoJ are likely to maintain their current policies, perhaps somewhat expanding the scope but they are unlikely to embark on anything more dramatic. In terms of PBoC, it is currently attempting to fine tune its policies and avoid what it perceives to be excessive policy shifts (as it tries to reconcile short-term liquidity and a long-term structural agenda). Ultimately, we maintain that China is at the very early stages of massive stimulus (both monetary and fiscal). However, it probably lies beyond the next three-to-six months.
If the above policy choices are made, then we believe that global liquidity would continue to contract, creating ever greater deflationary pressures and potentially causing both “accidents” as well as slower growth.
However, this assumes perpetuation of perceived policy errors, which is always a dangerous assumption to make. We maintain that it is likely that prior to trying extremely unorthodox measures, Central Banks are likely to have another try of more traditional monetary stimulus measures. However, as outlined above, in order to make a difference, the incremental increase in the size has to be significant. Small and incremental changes are unlikely to make much difference.
* * *
Thank you Macquarie for stating what most "fringe" blogs have been saying for years.
To summarize what Australia's biggest investment bank just said, in a nutshell, "small and incremental is out", and will be replaced by big and "paradroppy", a step which as Macquarie succinctly puts it, will "ban capitalism and by-pass banking and capital markets altogether."
Crazy? Not at all: since the status quo will be fighting for its life, this step is all too likely if it means perpetuating a broken system, and an economic orders based on textbook after textbook of lies. In fact, we would go further and say war (of the global variety) is also inevitable, as the global "1%" loses control. It won't go quietly.
Finally, we most certainly agree that the catalyst to unleash the "endgame" cycle will be some "combination of a major accident in several asset classes and/or sharp global slowdown." But long before that even, keep an eye on gold: having provided a tremendous buying opportunity for the past 4 years because for some idiotic reason "conventional wisdom" decided that central banks are in control, have credibility and can fix a problem they created and make worse with each passing day, soon the global monetary debasement genie will be out of the bottle, and not even the entire BIS trading floor will be able to suppress the price of paper (as physical gold has not only decoupled from paper prices but long since departed on a one-way trip to China) for much longer.
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Boy that QE sure is an inflation booster, let's do moar of it.
I swear - these fucking fucks can't leave anything alone!!! $&^##&^^%$$#!
"The .Gov "broken window", mantra.
" If it's working lets fuckTAX with it"
I see long bread lines in your future
Greenspan: "We can guarantee cash, but we cannot guarantee purchasing power!" (2005)
http://www.merkfunds.com/merk-perspective/insights/2005-02-16.html
Central Banking is the big lie, and the 1st lie takes 1,000 more to cover the first.
Don't be surpirsed, these sociopaths will ride the world to Hell for their mammon.
Hang the banksters and their corrupt political mandarin lackeys!
Kill the lie and the liars, end Central Banking!
I love the smell of the BIS in the morning
The western financial ”Just Us" system is unrepairable.
Cash is still fiat trash. Only useful as long as a counter-party (greater fool) will accept it in exchange for their goods and/or services.
Get off the hamster wheel. Invest in yourself.
Hey! Wall St junkies have been getting their fix mainlined to them every day, week and month for the last seven years....when do we get ours?
I just want one fix, one huge one if they decide to continue financial and corporate welfare...where do I sign up to get on their gravy train?
"Taxi!"
Note how over the last several years, Capitalism is viewed more and more as something evil...now even Stephen Hawking is jumping on the bandwagon. The one thing that would fix all of this - unfettered Capitalism - is carefully being demagogued into extinction. Truly a sad state of affairs. I posted something in FB recently about the out of control growth of government and was shocked at the venemous responses from millennials who are "fed up" with all the talk of "government is evil," or "social welfare" is wrong. It occurs to me that this group will be ripe for what Macquarie is suggesting here.
Well, the 'government' of the US is certainly evil, no doubt about that. Despite all of your constitutiona protections it has been hijacked by psychopaths intent on suppressing and enslaving the population, over and over again. But few other governments outside of dismal middle east dictatorships show as much violence towards their citzens. Europe for instance continually refines and reinforces human rights. Certainly there are exceptions, but by an large I would trust a European any day far more than I would any Yankee.
"Capitalism is the fullest expression of anarchism, and anarchism is the fullest expression of capitalism. Not only are they compatible, but you can't really have one without the other. True anarchism will be capitalism, and true capitalism will be anarchism." -- Rothbard
Yes.
Everything is proceeding exactly as Hayek foresaw in "The Road to Serfdom."
When the next leg of the disaster hits, the volk will start clamoring for the Strongman to step in and take care of "the problem."
"It's your turn in the barrel"
Now that's funny.
Capitalism like Communism is an edifice constructed by human intelligence.All we need is a synthesis. We cannot let the big banks go unchecked. There is no capitalism in the US like there were no Communism in USSR. All we have socialism for capitalists(Bankers).
Overhauling capitalism must come with direct democracy. If not, our representatives will not allow it. Referendums and internet voting may be the most democratic things we have. We should put them to good use.
Democracy is mob rule. A republic, based on the rule of law, works. That is, until the laws stop being followed.
Well, Read this:
http://www.project-syndicate.org/commentary/trans-pacific-partnership-ch...
They will never direct inject to people. They ( the NWO communist movment) will ban capitalism what little there is left of it.
These people are certifiably insane, they are pathologically incapable of stopping,
and notice the more and more brazen, entitled language spewed every day....
Gee sounds just like that govt spook Jim Rickards constant speil about the SDRs
ALL SDRS WILL DO is take money printing out of the hands of individual central banks and give it to one huge central bank who can print them without any restriction whatsoever in any amouts they please. This is supposedly being sold as the way to fix the problems of having a reserve currency and having to run trade deficits.
IN REALITY all it really does is give the power to print money to one gigantic GLOBAL NWO bank who will control everything. It will then allow ALL governments to spend recklessly and live way outside their means. This is the very factor that allows govts to wage incesstant wars on the populations with money they dont have. A few of the larger more powerful countries will take over its powers just like the UN.
Leaving the global elite with total control, even more power and the ultimate tool to steal your poorer nations commodities and worldwide labor, deflate your savings and constant war even worse through SDR than they do Now.
FUCK THAT AND THE SDR you rode in on.
HARD MONEY based on any combination of things that have allways been MONEY for 6000 years. PERIOD
Make Govt Live with a budget made possible by what they are able to Produce. Its the only way forward for HUMANITY or everyone will constantly be fighting one long perpetual war just like now.
OK, hold on a second. I understand your feelings about SDR's as being nothing more than the other side of the coin of the same problem, but for the rest of the world outside of the US, the problem is this. The US, formerly the world's biggest proponent of 'free marker capitlism' has used their currency for anything BUT free market capitalism. It has been used as a tool of foreign policy, a piece of bait for corrupt foreign dictators and can, at any time, be completely manipulated by Wall Street, the Fed, the US Treasury. The world has what, 8 Billion people in it and there are 300 Million in America. Who says that America gets to have the world's reserve currency, especially when you defaulted on your dollar conversions in 1971?
Sorry, but if there is going to be a continued fiat system then control of that money stock HAS to be beyond the touch of any one government.
I'm no expert, but I think that was a rant. Better than my rants so it was okay. I'll be sure to watch gold do nothing so it follows suit with the fiat, and does not upstage it in the minds of the ignorant masses.
p.s. It's much better to just accept that Ponzi Casino Capitalism is dead and then move on, methinks.
Lol, yea I get mad.
You Know it really does not matter on Iota.
They invented the Model T in about 1910. IN a hundred years time we are already talking about Peak oil, right or wrong it is already a concern. Best I can tell knowing perpetual growth implies compounding and eventually an exponential function, I give all known oil about another 40 years. Yes, there will still be plenty but it will not be affordable.
This is when all this GLOBAL trade and global wage arbitration BS comes to a screeching ass halt and maybe to the level of the East India Company Days, so you are looking at things on a more local level anyway IMHO in 50 years max. At least I can hope this for my grandchildren, as the one world pipe dream these fuckers envision is not what I would want for them AT ALL
This globalisation is probably the hardest thing to ever stop because everyone has a price, wants to work and becomes part of it whether they want to or not.
AT least I can dream about a better world, because what they want is a disaster before it starts for everone but The .0001% and will never work in the end peacefully. People like Tribal, an identity and being around like kind. Ask Europe.
Kiss off John Rockefeller and Soros, You suck.
I don't have any children, let alone grandchildren, so, I, for one, don't have to fret about global economics imploding, but I do worry about all the families, and parents, that have to carry the burden of knowing that young people today don't really stand a chance to have any semblance of 'a future' like we grew up with. At least when we were young we could dream about a future. Kids today stand no chance whatsoever of attaining any sort of happiness through the prospect of a future when previous generations have rung up the bill to the tune of $18 trillion in deficit spending, and counting this November. America's debts cannot be repaid, and the deficit spending passed the point of no return trillions ago. Ergo, hug your kids, and grandkids, tell them you are worried for their futures, and pray to God that Scottie beams us up to the bridge of the Enterprise because some serious shit is just about to hit the fan all over the world. EM is crashing as we write here. Once EM crashes the other dominos will follow suit right away. Not a nice thought, but better than wishing on a pipe dream too, eh.
master of the universe and no sons !
Man, even Zeus sired!
Zeus was not raised by a Chartered Accountant that worked for Senior Rulings National Revenue CANADA, Oil, Mines, & Resource Taxation. Moreover, Zeus did not have to secure employment so that he could house & feed the little bastards at the same time. Frankly, only people that actually want children should procreate if they have a secure life with gainful employment, and money to burn. In brief, for a guy like me a family is out of the question in terms of financing alone. I would not want to burden children with the stress that I go through due to finances. If I had children they would be raised to absolutely fear poverty, lack of employment, and an economy that is disfunctional. My father passed his fear of a lack of finances onto myself when he died.
When my father was alive I never worried about money, ever. Now I worry about money in my sleep, every waking hour, and even when I am stoned, or drunk. Children deserve an upbringing that is not fraught with excessive worry about money IMHO.
Check your horizons. If democracy is the future framework, what about a certain religion that will grow majorities in just a few decades. (in very many countries) Any system you create will be quickly dismantled and Theocrasized. Look carefully into that future of human blood. Peace ? You want peace ? Sorry, just more blood.
Every time I read the word "whilst" I just want to choke the author until his head pops off. And this author used it 7 times. Every time I see that word I get so steamed I can't read any further. It damned near makes my Tourettes kick in. Just one of my pet peaves I guess.
The brits (and a lot of australians) prefer whilst to while, especially in written english. I'm pretty sure the meaning is the same but it never made it over to american english. American english is more old school in a lot of ways than english-english. I studied english in England but I had to relearn a lot of stuff to get through the gmat, especially plural nouns like government, company and team etc. The english say, "The team are doing well."
I know. I just dislike the word with a passion.
while rhymes with guile whereas whilst rhymes with nothing. Nada
Very unsexy and unforgiving. Using sexy guile to seduce a whistling erstwhile ghost whose skin is not hot toast is no fun. All that jam and no hot bun.
Down with whilst which is untoastable even with bubbly chardonnay.
Money is a proxy for labor. A persons savings, investments and personal possessions represents the results of a lifetime of labor. The US dollar is a fiat currency that has gradually, but constantly lost value since the establishment of the Federal Reserve System in 1913. The Fed's target of 2% inflation, if met! would halve the purchasing power of the dollar in 35 years. Most people don't especially notice a very gradual decline in the value of the dollar. But, everyone will notice and be extremely angered by the sudden destruction of the dollar in a hyper-inflationary blowoff. That would be an extremely destabilizing event for entire US population, and the population of the world, especially considering that the US has a massive nuclear arsenal.
So, the most important question is, "Will the United States' Deep State will allow the US Federal Reserve to destroy the US dollar in a hyper-inflationary blow off?"
The US deleveraged throughout the Great Depression without violent revolution. There was massive unemployment as malinvestments that created excess industrial capacity were purged. Times were very hard. Many family farmers lost both their farms and homes. Many of the unemployed lost their homes. But, the currency was not destroyed. Some people lost their Investments or savings. But because the majority of the people were able to keep their homes, savings or investments, stability was maintained.
Hopefully some of those in the Deep State see the inherent perils and uncertainties to the United States if they allow the Fed to continue policies that resulted in Weimar Germany's hyperinflation of the early 1920's. A hyper-inflation destroys the currency and everyone's savings and investments. It is extremely destabilizing to society because the vast majority of the people lose everything. Only those with free and clear titles to their possessions and their savings in a true store of value come out ahead.
So, will the Deep State allow the Fed to destabilize the entire country in a hyper-inflationary blowoff with all of the perils and uncertainties for them as well? Or will, they follow the less painful and less destabilizing path of a massive and depression-inducing deleveraging and purging of more than four decades of malinvestments?
Capitalism is not the problem, nor is Communism , both will work as intended as long as they stay pure.
Capitalism died the day TBTF was born and Capitalism started leaning to Communism with privatising Profits and socializing the loses.
What really needs to be BANNED is Fractional Reserve Banking, Privatly owned Central Banks and Printing Money, Fractional Reserve Gold/Silver.These are all responible for Worlds financial problems, there are more, but these are the root causes, not Capitalism.
>a step which as Macquarie succinctly puts it, will
>"ban capitalism and by-pass banking and
>capital markets altogether."
OK, get a grip. Just maybe the point of the helicopter drop is to preserve as much of capitalism as it can, and it can hardly be worse than dropping endless money on banksters anyway.
It especially does not by-pass banking and capital markets, if you dump spending cash on the bottom 10%, or 50%, or even 99%. They don't put money into banking and capital, anyway. Certainly not anymore under ZIRP.
It's ugly, but it's here, and it's been happening in the US since 2009 to one extent or another. It's like Obama's nirvana anyway, for the 53% of the public who think the sun shines out of his butt. Just sing the Obama theme song and win another $200 to get you through the next week. What could go wrong with that?
Maybe unfettered government is the problem.
Bingo! Too many arrogant half-wits who love power, not affected by the consequences of their dictates, who don't know what the fuck they are doing, who can't admit a mistake - ever!
Why go through the market theatrics. Just chuck the facade and monetize the system directly.
Obama is on the take. He would sell this nation into slavery for another mil or so.
He took the job to get rich, plain and simple.
He's not a president, he's a seller.
Has there even been a president since 1913 that was not on the take? The only one who stood up to the CB mafia was JFK and we know what was the outcome.
I'm so sick of this, "hey let's rape the natural mechanisms of supply and demand with monetary policy" talk. I'll take my litecoins and go my own way. This fiat nonsense is getting more and more convoluted by the day.
Nobody can "ban" capitalism. People will always trade, to survive.
It's good to see someone gets it. Ignoramuses think of capitalism as if it was a god or an ideology. It is neither. A rational system of production is impossible without money, land, labor and private ownership. It's not complicated.
What went wrong is when debt became a substitute for savings. Now the world economy is awash in debt and almost no savings.
Respectfully, no.
When debt became an anesthetic for outsourced middle class income.
Not only did this enable spending sprees actual savers would NEVER have engaged, but, as with lost physical, tangible manufacturing of those income-producing goods, we also lost our work ethic AND our prudence and patience for savings.
When the bills came due, and we continued to be severely income-challenged, our thinking about integrity and honor to commitments became corrupt too.
The hapless anesthetic of easy credit also pacified us into going along with mindless and ill-conceived monetary policies and fiscal gimmicks (eg the first-time shack buyer credit, and cash-for-clunkers anathemas we borrowed to fund---costing ALL of us, but immorally benefiting a few), without much complaint until we now find ourselves so hopelessly indebted, still outsourced into poor employment, and actually mumbling about dropping even MORE "liquidity" from a fucking helicopter...
The truth is, we've NEVER needed a complete meltdown like we do today.
All else is pissing in the wind.
m
Does have anyone have link to the source document that this came from?
Is this satire?
Cuba and British Leyland ... really?
I was privileged to experience British Leyland and hope never to see its like again.
Mrs. Hogwallup done R-U-N-N-O-F-T
How you been, Wash?
Been what, 12, 13 years?
Yeah...
I expect you want them chains knocked off.
They foreclosed on cousin Bishop.
He hanged hisself a year come May.
And Uncle Radcliffe?
The anthrax took most of his cows.
The rest don't milk.
He lost a boy to mumps.
Where's Cora, Cousin Wash?
Couldn't say.
Mrs Hogwallop up and R-U-N-N-O-F-T.
She must have been lookin' for answers.
Possibly. Good riddance, as far as I'm concerned.
I do miss her cooking, though.
- This stew's awful good. - Think so?
I slaughtered this horse last Tuesday.
I'm afraid she's startin' to turn.
https://www.youtube.com/watch?v=tsAZ0RweVxk
the Soggy Bottom Boys.
https://www.youtube.com/watch?v=R-C_HVoiJpY
Ralph Stanley O Death
https://www.youtube.com/watch?v=2xmRWj7gJEU
At the being of the this GFC AU's gov sent out cheques for approx $950 and they believe that saved the economy (not the Chinese stimulus!).
So what form will the next form of QE be INCOME TAX CUTS. Gov will spin out as you get to keep more of your money so go out and spend. What about loss gov revenue and how to cover the deficit PRINT BABY PRINT!
Chronic over-supply is today’s problem leading to deflation.
We have armies of advertising and marketing people trying to get consumers to buy products that they neither wanted nor needed in the first place.
Modern scarcity is the scarcity of consumers for all the stuff that is produced.
We need more consumers, or more affluent consumers, for all the stuff that is produced already, we don’t need businessmen producing more stuff that no one wanted or needed in the first place.
Debt was a stop gap solution to insufficient consumption and demand as it allowed consumers to purchase more stuff.
But the consumer has now maxed out on debt and weighed down with the repayments on that debt.
There is already an acknowledgement that lack of demand is the problem with ever rising minimum wages, but it doesn’t go far enough.
Helicopter money is the only solution, in this world of chronic over-supply.
Obviously, raising taxes on those that can consume no more, to give to those who could is another solution.
Unfortunately, the wealthy are now global citizens that will run to the lowest tax regime to hoard their wealth.
Global businesses that used to pay the wages necessary to maintain demand are now constantly looking to keep wage costs to a minimum, killing the demand for their products and services.
They also use global tax laws to keep their taxes to a minimum, curtailing the necessary re-distribution to potential consumers.
So, helicopter money it is.
Chronic over-supply is today’s problem leading to deflation.
Wrong again Chronic imbalances produced by chronic government interventions are what is leading to inflation. Deflation is a consequence of excess debt brought on by a host of government programs that promote debt.
Helicopter money is the only solution, in this world of chronic over-supply.
Yeah sure. More debt to solve the problem of excess debt. Especially because it worked so well for Japan </sarc>
Money is just one's and zero's residing in a memory location.
Type some more numbers in and distribute them to consumers to increase demand.
Money is officially debt based, but Central Banks are financial black holes where anything goes.
Just type it in and there it is, ones and zeros corresponding to any number you like.
Money is just one's and zero's residing in a memory location.
That is true as far as it goes. Providing there is popular acceptance.
Money is officially debt based, but Central Banks are financial black holes where anything goes.
Debt based money is designed to fail as the compounding of interest expands the money supply to the point where total debt becomes too massive to sustain.
This deflationary collapse cannot be stopped. It's best not to own debt nor owe debt. Without debt, prices would be somewhere on the order of where they were a hundred years ago.
Look, at long as each new dollar/pound/yen/euro printed is only a note against debt, which it is, printing more notes for whatever reason is NOT going to fix anything. You have to look at WHY currency notes are created against debt in the first place. That is the starting point. When you get there you will realize that it is nothing more than social control on a massive scale. When they removed the right of citizens to own a real asset as wealth (gold/silver) they created a system in which you can never win. Even if you have 100 Billion of fiat you still only have 100 Billion of debt that somebody else owes to the system, which does nobody any good at all.
The whole concept of a debt is that once the debt is paid, it is extinguished, or that is the way it should be. But that is not what happens in a fiat system. In a fiat system you are just trading debt notes and although nominally when a currency unit goes from one person to another that debt is paid, overall, the entire money stock still represents a total debt of the society.
How can that be? Well, it is pure evil. There is no other word for it.
Communism collapsed in 1989.
Capitalism collapsed in 2008.
What's next?
What's next?
Government collapse in not many more years. It cannot survive without free market capitalism.
Huxley said this would be the "final revolution." The failure of the current system could be part of the plan. Get as far away from the anticipated debris field as you can.
Only authentic Capitalism with the necessary attendant Freedom can create wealth. All other systems steal and redistribute wealth, but wealth needs to be created first, otherwise there is nothing to steal and redistribute. And don't equate mixed economy, socialism, fascism, cronyism, and feudalism with capitalism, stick with the meanings, not the words. The capitalism part that sustained the redistribution part of the mixed economy was finally strangled in 2008, the arsonists are dealing with the escalating consequences now, by pouring more gas on the fire. I'm hoping what's next is a Phoenix to rise from the ashes but with the sheeple that populate the earth we will probably get some kind of dystopian nightmare.
soon the global monetary debasement genie will be out of the bottle
I assume thats what this useless article is about, hyper inflation, the wet dream of a gold bug. The problem I have with most gold bugs on ZH is they wish the system will collapse. The most likely outcome of a collapse would be a NWO, where the UN, Worldbank, IMF and the Security Council have absolute power or some kind of Mad Max world with total break down of public order.
If they would enact "Peoples QE", i.e. sending each citizen interest free money from the CB, it would not necessarily cause inflation in this world of overcapacity and poor demographis in the G8 countries. However, might prevent the collapse. AUs experience proves this may work. And iff the citizens decide how they are going to spend that money its not exactly central planning, but unconventional measures dont fit on the gold ideologists radar screens.
Of course THEY will never do it, because the "paper money illusion" must be maintained.
You have it all wrong. Owning gold, or gold backed money is all about exiting a system that has an inherent, and uncontrollable decay factor built into it. Owning gold, or gold backed money/notes is about earning wealth that does not deteriorate. It is as simple as that and if you don't understand that then don't take shots at other people for wanting a fair system of weath ownership.
Just one small problem I see with banning price discovery and socialising it... Weimar Republic / Zimbabwe. Kthnxbai.
QE does not cause inflation if it is never spent! That is why handing the 1% all of the QE was pointless and Mr Central Banker you can apply a tax on the 1% to get it all back because I am not paying for that worthless crap. Never got it, not my debt and if you say you can't, that debt it not my problem it is yours. Go on start selling all those assets you bought now, see how much you lose if the demand is not there for it.
Velocity of money, well it never moved so you are only going to get the current effect which is a slowing velocity. Wish sometimes people would extrapolate future states when what happens if you do or do not QE in a slowing velocity system. THE DOOZY IN BOTH CASES THE 1% END UP WITH IT ALL IT IS UNAVOIDABLE.
The helicopter drop, will look good at first, inflation will rise because many will spend the money but they seem reluctant to consider the end points in monetary theory. I am one point and a 1%'er another can you see whatever you hand to me if I spend ends up in the hands of a 1%,er anyway. The consumer society perfected income streams to the 1%'ers who once they get it never spend it so eventually as in QE1,QE2,QE3 ... soon QE4 ... then QE infinity.
What the central bankers also created with QE was asset bubbles, the asset bubbles is where 1%'ers park there excess value property, stocks, shares etc.Go on justify the earnings in those classes, falling and very difficult? Not surprised there was not an increase economic activity it is just a park-your-worth issue.
So let me sum this up...
The central banker artifically attempts to force genenrate inflation whilst keeping me out of the income stream to the detriment of my economic quality of life in this monetary world. That this was an utter fail they also blew the asset bubbles in stocks and shares, supporting property values again to my financial detriment.
So how many Zh'ers are in the protected 1%, can't be many so chances are you will be feeling the same in some shape or form.
THE ONE THING THAT CAN BE DETERMINED FROM THE ABOVE CONSIDERING THE END POINTS IS THE TRANSPORT LAYER WHERE YOU MEASURE VELOCITY NEEDS TO CHANGE AND THE EQUIVALENT PARTNER OF AN INCREASING VELOCITY OF MONEY THEY CRAVE IS KEEPING THE MONEY IN THE TRANSPORT LAYER LONGER. Means 1% find if harder to tap into it, their best friends or themselves!
The Highest Human Potential remains undiscovered and unknown. No political/economic system has developed a credit system that allows us to go there, only closer, to our Potential. This article shows some humility in this respect and I like it.
Sending money out the Treasury Door for minimum maintenance of the Human Potential cannot ever, nor never has, been a cause for devaluation of paper currency while money spent on non production or spent in ways proven to degrade production has always proven to degrade its value. There cannot be any worse use of new currency than bank welfare, unimaginable now, it is the only use of new money.
Spent on human abilities to create qualities of production methods, qualities of education, health, transportation, infrastructure, etc. allways covers the production of currency money, as certainly as value backed systems of gold/silver currency money, etc.
First of all, don't give any new money to banks. Lend it to The People direct, each getting the same amount minus amount proportional to citizen's wealth already possessed (FDR's Bill of Rights realized, Lincoln's Income Tax fulfilled/Hamilton's Dream restored). Let the banks make small money from collecting and accounting, never from lending.
Instead of banning capitalism, why not consider just a ban of evictions, foreclosures and the patronizing of what people is forced to pay for.
Equality, here it is.
Each one decides for himself who and what is worth to be paid and what not. This right, airdropped, could be seen like a christening to jack up the ordinary slave of the barbarian system to a to respect human, finally.
If coercion is the problem - will you be able to solve it alike.
The endgame of capitalism is the following: tell people what it really is.
The habit to cheat another in the belief to get an advantage cannot be cured by any ism as it has come out that every such a strategy is cheating the average people which is not exactly a representation of the average self.
The proposal comes along with the benefit of a gross reduction of governmental demagogic stratagems which are carefully dedicated to the matter as it were the pet occupation.
To make sure that "it" hurts mismatches the proposed equilibrium offered for equality and the peace with that.
The hurting but is the most valuable information to the history data pool. From the hurting come wisdom and the names too.
Why capitalism and damned fuckers can be the same in time then, if not come together to hinder you of the adequate human reaction in case of realizing you are getting fooled.
My humble idea to safe the issue at source that is spending the infinity of troubles respectfully pays tribute to the comfort of habitualness.
If you like your capitalism you can keep it.
Interesting, theoretically. But what about that works to build workable societies?
Lay this all at the feet of Hank Paulson, Timmy Guietner, Lloyd Blankfein, Robert Rubin, Ben Bernanke, Janet Yellen, Steve Freidman, all the Goldman Sachs partners (operatives).....Countryside's Mozilla, Franklin Raines, and all the others who too liberties and profited from government backed ANYTHING....and used the Federal Reserve as their money machine and get out of jail free card.
That's only a start. Then investigate voting districts, counties, states, etc. The rot begins at home, literally.
What I have never seen but would like to see is some sort of detailed analysis of the effects of not doing QE, helicoptor money and abandoning capitalism. Yes, we talk about excess capacity, misallocation of investment, maxxed out debt, ZIRP, NIRP, inflation, hyper-inflation, deflation and all the rest of it - and this article does a good job of that - but is anybody actually looking at the full range of consequences to (say) the US or European economies if free market capitalism was introduced and the imbalances allowed to be cleared instead of pursuing all this funny money which is pushing up certain asset values etc and making the 1% even wealthier whilst not solving anything.
We know the consequences would be significant but exactly how bad would it be if supply was turned down to approximate demand etc?
And how many governments would survive such a rout?
so many questions, so few answers...................................
so many questions, so few answers...................................
So many bad questions that have no answers. The State in any carnation is ill suited to manage a market economy. It can't even manage its own spending without running up inordinate amounts of debt. When the State is the cause of our economic problems, it can't possibly be the cure.
There is perhaps only one answer: prepare for impact.
"When the State is the cause of our economic problems, it can't possibly be the cure."
Very true.
Examining smoke and mirrors tells us anything about nothing? Sorry, doesn't work for me. Endless halls of endless mirrors.
UN agenda 2030.
Technocracy rising.
Doctor Medieval sez we need more leeches, the patient is not doing well. Call the consulting physician Dr. Krapman and tell him to bring all his leech textbooks with him.
Read my latest post: for the ones that are interested in the stock market/S&P500, cyclical and candle stick analysis.
http://tripstrading.com/2015/10/10/sp500-suffering-from-low-energy/
http://tripstrading.com/2015/10/09/sp500-how-cycles-take-their-time/
Enjoy the day and good luck trading this week!
The demise of American capitalism has consequences for its "free markets" flagship and all that goes with it.
Live with it as it contorts. Its convulsions are now front page along with body parts being blown up like useless human flesh. We call it collateral damage.
Thus attributable to fate not to human design. Some sleight of hand there and betrayal of Mind.
Global Capital needs to sell guns to all for its purchase of oily butter in foreign lands. But capital cannot stay the way it is in its current nexus of WS/DC and Empire's vision of the world.
And that makes it cannibalistic for the unwashed. Those who are NOT in the power loop of the 1% elites.
Whence the migrations. Running from land of Oil and cannibalism of capitalism's over-reach. Run to where the streets of Capitalism's scions lodge their own.
Like the New Barbarians converging on corrupted ROme.
Run like rats to the lands of civilized on a Genoese boat to seemingly spread the barbarous disease; BUT in fact to the land of civilized barbarians to whom the return on investment is the only TRUE yardstick, whatever be the product sold.
Doesn't matter what we sell. All we need is for demand to meet supply and price to be decided by those who are the global creators of this mega show, the Internet Coliseum; Googling the world to Iphone and Facebook Amazon's playbook. We are all on this hook, line and sinker.
We can sell ANYTHING even CYANIDE or toxic plutonium. As long as the Market is INVISIBLE HANDED.
As it is totally amoral. Yes Siree!
All we need is a market and a gullible bunch of consumers who have forgotten the lessons of history, of self survival; ready to be cannibalized ! And Ethics be Damned like Jaures's bone marrow.
Perfect ! Like in 1914 !
Pax Britannia swan song of "white man's burden" behind its tinsel curtain of colonialism's "civilization mantra" , lay dying in the fields of France like the bullet ridden sons of three guilty European blood brothers whose hubristic nationalistic zeitgeist of the times was the true problem.
Queen Victoria mothered a real bunch of scoundrels, all over the bloody continent that ran the world.
Pax Americana has done a good repeat job a century later!
Looks like the bells now begin to chime again.
Like they did in Leopoldville gone Kinshasa, in those past halcyon days to celebrate Lumumba's death--the dirty Commie-- at the CIA's hands; the first of Africa's sons paying with his blood.
Now they chime to sing the awesome reflux of that CIA predatory influx like its previous plays in Iran and Central America, then in Nam and Afghan Talibanism. Oh the killing fields of Poppy.
Is Syrac the beginnings of the end of America's dirty games around the globe?
And America's flagship of Capital's hegemony, like the British Navy and its legendary gunboat diplomacy, now look like going in the same direction of rotting corruption; A Habsburgian dream built on the Inquistion for an Empire on which the sun never sets.
But Patience is a virtue in troubled times.
As although the future may rhyme with the past, Nemesis has a bite that is a double edged sword. She can kill both ways; winners and losers alike; deemed equally culpable in her eyes.
Alas! Victoria was a weak sucker from a dying tree; the blood of Royalty run so thin that in her grandsons it literally ran out in hemophilia. But that was intentional, from the moment that rebellious London merchants negotiated in secret for William of Orange to take the throne in his wife's name, but only after signing a Bill of Rights for those merchants that permanently crippled the ability of Royalty to rule.
Royalty must be cruel to govern, yet Democracy is too weak to survive adversity. Government is best which governs least, yet the greater the numbers of Man, the more government is required to manage His inevitable bad behaviour. It is the nature of Man which is the fundamental problem, and the only longterm solution to this or any other modern woe is to reduce the human population, preferably with a decided bias towards minimizing the proportion of males. The best genetic and social results are achieved by a ratio of 20% males to 80% females.
Capitalism works great when its done with all small businesses and theres plenty of competition.
But when Corporations take over because investors are giving companies so much money they can eat up all the competition, thats when Capitalism becomes Corporatism. AKA the TTP.
The Corporate CEO's want you to believe that Corporatism is Capitalism but what it really is, is Corrupt Capitalism.
Under Corrupt Capitalism/Corporatism you will have to pay a $20 free to the the one and only too big to fail bank for making an on time payment on your credit card.
Ahhhh, Good Grasshopper. The US Public Equity Markets are the Hub that allow the Frauds to be created and perpetuated. The US Govt likes this small, centralized, monopolistic system becuase it is easy to command and control and extract their tribute from!
within days brought up the Fed's monetary paradrop as the up and coming form of monetary policy.
This problem won't be solved until the word "policy" is removed from the discourse.
Just as you don't govern an internal combustion engine with policy, you don't manage a Medium of Exchange (MOE) with policy.
Proper MOE management is a "process" ... not a "policy".
Traders make delivery promises and get them certified. We who have ever bought something with time payments know this process. These certificates we know as money and they circulate as the most valued object in virtually every simple barter exchange. When the trader delivers, he returns the certificates and they are destroyed. If he fails to deliver, the defaulted certificates are immediately reclaimed with like interest collections.
This process "guarantees" zero inflation by the relation: INFLATION = DEFAULT - INTEREST = zero.
Here's my beef. It relates to the Constitution. If you accept the notion that when written it represented the accumulated wisdom of over 2,000 years of human experience on the European continent, and you also accept that it represented inviolable guidelines on the 'how' of how we should organize ourselves and conduct our affairs, then I have the following to say.
Successive Presidents (both Democrat, Republican and Independant) have whittled away at the document. We no longer have money 'coined in gold and silver'. We don't 'avoid foreign entanglements/intrigues'. We ignore the instruction that 'all men are created equal' and we contest that 'all men are imbued with certain inalienable rights'.
A president is required to swear an oath that they will 'protect and defend' the Constitution. That oath is meant to be binding and the moment that oath is broken is the moment when first Congress, then the Judiciary, and finally the people have to take action to remedy it. But action was never taken by any of the parties. The breach was allowed to continue and naturally, unscrupulous people and private enterprises moved in and exploited the breach for their own ends.
The result is, that if you take a look at where things stand today, you are very close to having recreated exactly the situations in society that the Constitution was meant to keep away. Debt hangs around the nation like an albatross. Privacy is routinely violated. Illegal search and seisure is commonplace, in fact it is encouraged by local, state and national governments as an easy way of stealing wealth for the state. The right to a fair and impartial hearing has been upended. Torture is sanctioned. Habeas corpus is ignored and most certainly the concept that all men have certain inalienable rights is toast.
Unless and until you correct the breaches, you will be plagued with chaos, conflicts and servitude.
Franklin said it most succinctly: "Those who give up essential liberty to purchase a little temporary saftey deserve neither Liberty nor Safety".
He was a great thinker as were they all. You should read them. And by the way, the Constitution was never just meant only for the citizens of the US, in every real sense it was the original Universal Declaration of Human Rights.
God grant, that not only the Love of Liberty, but a thorough Knowledge of the Rights of Man, may pervade all the Nations of the Earth, so that a Philosopher may set his Foot anywhere on its Surface, and say, 'This is my Country.'
The constitution itself was finagled to replace confederation (which was tax free).
Return to confederation.
Return to confederation, solve all the abuses of constitution. http://ocw.usu.edu/university-studies/u-s-institutions/comparison-of-constitution-and-articles-of-confederation.htmlYou are absolutely right Dark Daze. I have come to the same conclusion and have written a book on a way to return our republic to Constitutional limits. You can read the book at this link. 80% is free and 80% is more than sufficient to understand the concept. No need to pay for it, I didn't write it to make money anyway but to save the world, but if you do I appreciate it.
https://www.smashwords.com/books/view/277193
A great post. Save and repost as often as necessary.
The problem here is simple. The majority of US citizens no longer understand what is at stake. There are few original thinkers to remind them of what they have lost and continue to lose.
Nothing short of a great privation, much pain and catastrophe will change anything. The few of us in the know are cursed to watch the bullet train travel towards oblivion.
Whilst.
Awesome word.
Hence, there is an urgent need to either allow nature to take its course (i.e. re-set the business cycle by either closing excess capacity or writing down debt) or re-assess the nature and type of QEs used. We maintain our view that it is highly unlikely that CBs would be prepared to accept the inevitable and stop “managing business cycles”. If nothing else the consequences of re-setting the cycle (either demand or supply) are perceived to be socially and politically unacceptable."
Then its time to end central banks, and NOT to allow them to further warp an economic disaster that western corporate outsourcing CAUSED.
If the Fed doesn't raise rates, NO ONE is going to allow yet another round of QE.
Folks, look, it's already game over.
We do not need some kind of "reset"...
...we need a very cathartic depression AND a long-overdue round of accountability and punishment for those who've led us here.
Whatever we come up with, post collapse, CAN'T EVER include the likes of current corporate, central bank, or government big shots we have today--or it NEVER ends...
The target should no longer be "recovery", unless we like the effects and the result of the last 40+ years.
m
Too intelligent for this country. Seriously.
Those studpid people in the North again! Tiny Iceland is doing it exactly how banking must be done: http://t.co/iB4HUJfspQ Good Luck FED!
http://investmentresearchdynamics.com/a-liquidity-crisis-hit-the-banking...
the net effect of the nuclear reverse repo was to restrict credit, though not lending between the fed and the bank to build reserves, (money which ultimately ends up in the stock market). say goodbye to the free market, capitalism and the private economy. once the fed has their attention, they can start to charge them to play, right now they earn 25 basis pts. whats the point of that? why would banks continue to accept the reverse repo money if they were being charged? because once you effectively kill off the competition from the private economy they have no choice. the banks in turn charge their customers to keep money on account, while the actual lending rate goes up. good for them huh? in the end the banks take reverse repo money and pay 25 basis points, which they charge you to hold money and they raise lending rates a few percentage points. meanwhile their reserves are being pumped up, which means they put that money to work in buybacks and M&A but those playing on main street pay more, and find less money to borrow. thats how you create wealth and inflation, but none for the rest of you, sorry.
"Hence, there is an urgent need to either allow nature to take its course (i.e. re-set the business cycle by either closing excess capacity or writing down debt) or re-assess the nature and type of QEs used."
Nature is going to take its course, anyway.
Any cycle will complete itself. Math always wins, as 1+1 always = 2.
You do not need to ban Capitalism as it is already captured by the Predators. You do not need to bypass Capital Markets that is already an extractive contracption (trap) of the Predators. Something in the genes of the Preys that prevent any congeal in survival through unity and that is another knowledge that the Predators exploit.