Trapped Inside The Zero-Bound: Crossing The Economic "Event Horizon"

Tyler Durden's picture

Submitted by Mark Jeftovic via Rebooting Capitalism blog,

A friend of mine, a very successful tech CEO who is also profoundly astute in matters of finance, once asked his economics prof during a lecture on interest rates in his university days “could interest rates ever go negative?”.

Screen Shot 2016-01-12 at 11.45.19 AM

The professor, gazing over his glasses and down his nose at what obviously had to be an imbecile in his lecture hall calmly set aside a second of his podium time to shoot the idea down: “No.”, he said quite simply, as if he couldn’t believe he had to be explaining this to university level students, “it has to be a positive number….”.

My colleague believed him. After all, being in technology he was familiar with the computer code analogy of a negative interest rate, that being the dreaded divide by zero error. Coders take great pains to avoid these because if it actually happens, the currently running program basically “shits the bed” and all bets are off.

If the currently running program was generating a balance sheet, it may set the line printer on fire instead. If it’s deploying an airplane’s landing gear it may jettison everything in the cargo bay. It’s impossible to guess what will happen. So when people who viscerally understand the kind of consequences the ERR:DIV0 can cause extrapolate it out to an entire economy, they’re the ones that end up “shitting the bed”. It’s really bad.

I always knew that ZIRP was bad, but I just thought it would be normal, run-of-the-mill bad. You know, where most normal people get screwed for a long time, and then “suddenly” everything comes unglued and the financial system implodes, followed by a government intervention while the usual suspects (free markets and capitalism) get hung from telephone poles.

…and then everything would mean revert and overshoot. In this case, interest rates north of 15% (a la 1980), massive debt default, another economic depression, followed by a grand new government intervention, and the blame would be placed squarely at the feet of runaway free markets and capitalism.

In other words, I have long thought we have been existing at a cyclical extreme on the spectrum of financial repression, which would eventually become untenable and then we’d swing up to the other extreme (of financial repression).

However lately I have been hearing and reading things that put this scenario, this comfortable (in it’s familiarity) expectation of central bankster boots stomping on my face forever, into doubt. It might end up being a lot worse than that.

People who are lot smarter than I think that rates can not be normalized in our lifetimes. Ever, in fact.

It’s could be that once a financial market hits the zero bound in interest rates, it’s like crossing the event horizon of a black hole – there is no going back, not even light can escape it.

For years I blogged that ZIRP was grossly unfair to savers, especially seniors and that it would introduce all sorts of distortions into the economy that would render it dysfunctional.

When I looked at the chart of the Fed funds rate, I was struck with the foreboding flatline pattern that is ZIRP:

Fed funds rate.

Looking at Japan (who’s been trying to suppress interest rates and inflate their way out of this for 30+ years) it looks the same (just longer):

Screen Shot 2016-01-09 at 9.54.56 PM

And for artistic symmetry, here’s an echo-cardiogram of a patient who died on the operating table (He was a computer programmer that realized he’d coded a divide-by-zero error into the firmware for a nuclear reactor near his home town).


Notice the similarities?  The “financial pulse” of the economy (that being the price of money) has flatlined. Notwithstanding the faux-rate-hike of December, since the market reactions since then make it clear:

  • The Fed cannot undertake four more rate hikes this year
  • As Zerohedge reported, odds are favouring a rate cut at the next meeting on Jan 27th are currently implied at 8% – with the accompanying odds of another hike come at …zero.


We’ve been at the zero-bound for 7 years and all indications are we can’t break free of it stateside. Europe (and possibly Canada) are headed down the rabbit hole of negative rates – and after the attempt at rate hikes in the US fail, they will likely follow (at least one FOMC member already predicted as much before the December hike).

Now it’s time to examine how these policies go beyond being mere economic abstractions and impact us in the real world:

#1 Financialization Trumps Real Economic Activity

Yield is dead. Long live yield. Alas the only way to get it these days is to simulate it through speculation. Make no mistake, the objective by policy makers is to punish savers and chase their evil savings into discretionary spending (yachts, flat screens and facelifts) or better, the stock market. This “pent up demand” becomes “green shoots” and when you get enough of them it achieves “escape velocity” which then benevolently alchemies into “trickle down” and then everybody should enjoy above average “wealth effect”. Get it?

The reality is all gains are made through financialization and thus the participants in those gains are confined to those who are in a position to play that game: well connected banksters, hedge funds, private equity funds and VC’s.

The ostensible reason to own a publicly traded equity historically was to participate in a share of the profits, traditionally distributed via dividends.

Here we see the dividend yield in a downtrend since 1880. The effect of dividends on total returns has been in secular decline since about the 1980′s (around the time the great bull market of 1982-2000 got underway)



According to somebody I once studied under (not the same prof who scolded my colleague above), the dividend yield itself is at historic lows: 1.6% from 2000 thru 2014 compared to 130 year historical average of 4.4%

This begs the question then, with the stock market at or near ALL TIME HIGHS then where are all the gains coming from? Is it because businesses are that much more profitable?

Not really – today most of the gains are coming from stock buybacks – and many of those are leveraged, paid for with borrowed money at (you guessed it), artificially low interest rates.

Where I live, in tech-land, financialization plays out amongst pre-IPO unicorn pageant contestants and  800lb gorillas, leaving independent, non-financialized businesses in a vice. I always used to joke “we do business the old fashioned way …at a profit”, however as we get further past the event horizon and deeper down the rabbit hole, this actually puts us at a competitive disadvantage to “New Economy” ventures .

Such companies aren’t in business to actually earn anything. They create value for their backers and shareholders via serial funding rounds, doing whatever it takes to gobble up market share, including operating at a loss for extended periods, if not their entire lifespans.

In other words, if you’re operating an independent tech business along old school business rules (earn profits or die, don’t run out of cash or die, satisfy your customers, or die), you find yourself today competing against financialized zombie companies on a suicide mission: burning cash and cannibilizing the entire market so that they can be ingested by the nearest unicorn with the deepest pockets.

Speaking from personal experience, my company’s largest head-to-head competitor loses between 200 to 300 million a year and has never earned a profit. But they have 35% of the domain name market and they recently went public with nearly all the funds raised going to pay off loans to the private equity firms who backed it (and who also floated their shares in the IPO).

Then last year, both Amazon and Google entered our market as direct competitors as well. Do I feel massively outgunned? I do. So does everybody. Everybody that is, who isn’t relying on hot money and participating in the manic game of liquidity-events-as-a-business-model.

Which brings us to:

#2 Absolute Dependence on Intervention

It seems patently absurd that people spend a lot of energy blaming “free market capitalism” for the world’s ills when every possible market is so heavily manipulated that price discovery is completely broken and asset allocation decisions are inherently foundationless.

Now it’s all about “The Fed Put” and the utterances of central bankers. Entire media frenzies erupt over the slightest shift in timbre of the wording of an FOMC statement.

Market participants don’t do fundamental analysis anymore. Why bother? It doesn’t matter what the fundamentals are because if a microscopic number of appointed committee members (a few dozen worldwide?) decide that the fundamentals (a.k.a “reality”) won’t suit the agenda, they’ll simply issue some policy to override it. That’s why we’re here in the rabbit hole.

#3 War on Cash

By this I not only mean paper currency we carry around with us, but after the current round of central bank initiatives fail, the next logical step will be to target money velocity and discourage any uninvested bank balances. This would imply that negative rates won’t just be a matter between the money center banks and the Fed window, it’ll creep into depositor accounts (which has already started happening in Europe)
Screen Shot 2016-01-13 at 6.31.06 PM

To our left we see Sam Benson (a.k.a rapper “Blac Youngsta”) being arrested and handcuffed in the parking lot of a Wells Fargo bank in Atlanta earlier this week, after he withdrew $200,000 of his own money from one of his bank accounts and took it in cash (later revisions of the story claim he was mistaken for a person fraudulently cashing a forged cheque.)

While I haven’t had direct experiences like the above (after all, I’m white), I do find it harder to deal with even larger bank deposits, and this is in Canada:

  • One bank (RBC) tried to put a 30 day hold on a certified bank draft I was  depositing into one of my accounts. A certified bank draft is technically indistinguishable from a briefcase full of cash.
  • Another bank (CIBC) did put a 30 day hold on a certified cheque which was also a deposit, the funny thing, I was both the payer and the payee – I was writing a cheque from one of my business accounts to another in order to move funds ahead of a business transaction. The bank froze the funds for 30 days (after I raised hell about it, they  ended up extending my credit line for the funds until the hold on my certified cheque elapsed).

Is the war on cash real? Aside from getting perp-walked for withdrawing it (above) or having any cash on your possession confiscated by police under civil asset forfeiture debacles, I notice a couple of data points that have me wondering if Big Institutional Money (Inc.) also sees the writing on the wall…

Screen Shot 2016-01-13 at 7.49.01 PM

Like when I see something like the above… with yield pretty much in the toilet across the entire world and this thing (Directcash Payments Inc.) paying out near 13% in dividends, which they never seem to miss, my first thought is “what the hell is wrong with it?”

I’ll tell you what’s wrong with it: they’re in the business of operating ATM machines. That dispense… cash. Contrast with the yield on Spanish 10-year bonds (1.77%) or Portugal (2.77%) – hell compare it to Greek 10-year at 8.22% what is the always efficient “free market” telling us about the risk? 

One of the largest ATM manufacturers in the world (NCR) has been trying in vein to sell itself off, finally securing an investment from Blackstone ($820M in preferred shares) to “accelerate the company’s transformation into an integrated software and services company. ” Translation: “We’re pivoting the hell out of ATMs”.

Left to itself, NIRP would eventually give “cash” a built-in premium, and we can’t have that. Every body has to play. No exceptions.

Thus any form of currency which can preserve it’s buying power and has no counter-party risk will be anathema to the central planners.

I fully expect to see wholesale gold confiscation and banning of precious metals before all of this plays out, and bitcoin? Forget about it. You’ll end up like this guy just for thinking about it.


#4 Result: The Two-Tier Society


This trend of liquidity events crowding out old school business profits and capital formation inexorably pushes toward consolidation across every sector.

Any independent businesses, who choose eschew financialization find themselves at a competitive disadvantage, unable to operate at the same scale as the consolidated giants, many of which don’t even have to earn actual operating profits in order to reward their backers (mainly investment banks and various funds), it’s a pretty lopsided fight.

The scenario unfolding is one where wealth is increasingly sucked from the wider base of an economy and society (formerly known as “the middle class” and “small business”) into what I call “the capstone class”, that much smaller, well connected cabal on top that directly benefits from credit creation and enjoys the fruits of the market distortions now playing out.

(Many may equate this with the fabled “1%”, although I find that meme inaccurate. Statistically speaking I’m “of the 1%” and believe me, I’m not some anointed blue blood sitting here in a dark robe manipulating the world economy. I wish. I’m getting my nuts squeezed just like everybody else.)

The “benefits of capitalism” are extolled from the top, but the aforementioned dynamics insulate them from the vagaries of true competition, meanwhile the base of the pyramid is increasingly entrained with a perverse disenchantment of so-called “free markets” that is making soft-socialism increasingly palatable.

This is understandable: the game is hopelessly rigged against the middle class, and the blame is unfailingly laid at the feet of “runaway free markets”. It’s no wonder the masses will repudiate so-called “capitalism” and seek to band together under various collectivist mechanisms as a survival mechanism.

Being “rich” will be disdained and redistribution applauded. What makes it diabolical is that it will never be the capstone class whose wealth is redistributed, it’ll just be the assets of the upper middle class (those aren’t living hand-to-mouth …yet), essentially encouraging the rabble to redistribute the scraps of societal wealth amongst themselves whilst those on top continue to further consolidate the major assets and set the policies which feed the cycle.

In other words, it’ll be “capitalism at the top / socialism for the serfs” – a bifurcated society where the “haves” are the equity holders of all the wealth and the have nots end up holding the bag with all the debt.

More on the unfolding two-tier society (a.k.a “The Great Bifurcation”) in another post.

Now What?

After reviewing the post I thought “I can’t just leave it there. Where’s the hope?”, I often close my posts with a few bullet points “what can I do?” which are fairly consistent:

Get out of debt

But then again, if interest rates are truly trapped below at or near zero bound, why would you? Unless you were being punished for saving the money, then maybe it does make sense to liquidate your debt after all. In a climate of NIRP liquidating any debt with a positive rate of interest would approximate a yield on your cash.

Own gold.

Maybe not. Given what we’ve examined above, precious metals would not escape a “war on cash”. It’s not like it hasn’t happened before. Americans are up in arms because “Obama wants your guns”. I think what’s more likely to happen is that Hillary, or Jeb Bush, will come after your gold. And nobody will care.

About the only staples of advice I could offer that still stand up under this bizarro world we’re living in are personal choice Sovereign Individual type stuff:

  • Kick any addictions you might have
  • Watch less television, read more books
  • Diversify geopolitically – own land, businesses and passports in different localities.

Alas, I don’t have any answers, not anymore. Everybody is being forced to play a game we’ll call “Mr Global” (not my phrase). If somebody comes up with a defense mechanism that preserves wealth under negative rates, cash verbotten, no gold, capital-controlled zero-yield economy, that sidesteps the game, they will simply change the rules to make whatever that is unprofitable or retroactively illegal.

That’s where we’re at. Sorry.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
hedgeless_horseman's picture



And for artistic symmetry, here’s an echo-cardiogram of a patient who died on the operating table

Instant classic.

“what can I do?”

  • Own gold 

  • Kick any addictions you might have 

  • Watch less television, read more books

My feelings, almost exactly...  hedgeless_horseman's Revolutionary Call to Arms

OldPhart's picture

As a thought experiment, weren't most of these programs written pre-Y2K with simple date code changes made in them?  Is it possible that the programmers of the trading platforms took pains to avoid the X/0 and wrote hard code to prevent it?  is it possible that the trading software cannot even RECOGNIZE negative interest rates on all sorts of commonly used financial support software?


Greater Fool's picture

It was true--five years ago or more, anyway--that much financial software and many "standard" models had a built-in assumption that interest rates could never be negative. (Indeed, less than two years ago I had a very well respected Big Deal in credit dismiss a model as unrealistic because it allowed negative interest rates.)

But those of us who deal with that code have been in the Brave New World for years now, so although I'm sure there are still many bits and pieces scattered about that can't, their whereabouts are known and they're not doing anything of tremendous business importance, or the limitation is compensated for by the other bits that call that code.

Not Victor E. Overbanks's picture





nuubee's picture

Are you saying what I think you're saying? That you actually work on coding financial analysis software and you've seen the change over the past few years in the algorithm to allow for sub-zero interest rates?

vq1's picture

do i really have to get out of debt? I had this question once before and got some good answers.

Im tired of renting. Im employed. Im 100% debt free. I want to buy 5 acres and a <600 sq ft house.

Is this an okay idea (as long as I am able to pay it off without raiding my savings)?

sleigher's picture

Not a bad idea if you ask me.  Definitely want your own land.  Then work on getting the patent.

Use the land to support yourself so you aren't dependent on others for anything.  Work with like minded people to help one another prosper.


TheDanimal's picture

Would it reall be that bad to keep smoking weed?  I mean I can easily grow it myself outdoors, I've got decent seeds on me right now.  I could use it as currency around my city, almost everyone smokes including some of the senior citizens.

daveO's picture

Right. That's an unstated reason (taxes) why some states have already decriminalized it even though the Feds have not. The states are slowly separating themselves from the dying dollar(peak debt) to keep their operations running. Weimar Germany used alcohol. 

Also, the author talks about the Feds grabbing gold when it hasn't been used as a dollar backer since 1971. He's fighting the old war. Now, DC's equivalent of grabbing gold is bombing Iraq, Lybia, ISIS, etc. 

Scooby Dooby Doo's picture

This is preposterous. Just like in the article above, you can't just go to a bank and withdraw $200,000 cash. They don't keep anywhere near that, plus the FED would freak out and sick their Treasury goons on you, calling you all the time, literally phucking with you on the phone.

explosivo's picture

The counterfitters (bankers) only get the ammunition to do these things because they steal capital from honest working people. The problem with this article's assumption that the bankers can do whatever they want in perpetuity is that  it is an assumption that the bankers can steal into perpetuity. They cannot. They will run into a wall. Eventually there will either be a revolution or there will be nothing left inside the system to steal in great enough quantities to  perpetuate the system. 


Relax, it's all going to crash.

Dr. Engali's picture

"People who are lot smarter than I think that rates ca not be normalized in our lifetimes. Ever in fact"


I swear, I don't know where people like this contributor have been. It's like Japan never existed to them. Do they really think that the debt levels will go down along with spending level so that rates can rise? I've got news for you pal, rates will never be above 1% on the front end and we too will see NIRP before this is all over with.

Temporalist's picture

Muppets need to buy moar!

Apple's slowing iPhone sales weigh on suppliers

Dragon HAwk's picture

And that Summary is the GOOD news..

Scooby Dooby Doo's picture

I didn't read it, I got to the first occurrence of profanity and could not go on. Tyler never performs profanity. Ever.

Baby Bladeface's picture
Baby Bladeface (not verified) Scooby Dooby Doo Jan 14, 2016 2:22 PM

And the Old Yeller treatment Shaggy should give you...

MayIMommaDogFace2theBananaPatch's picture

Negative Interest Rates are profane!

Arnold's picture

Name the Prof and Student .

Credibility is everything for our crowd.

hungrydweller's picture

Gold won't be confiscated because it is no longer part of the "formal" monetary system.  All the more reason to own it and possess it.

daveO's picture

Amen! As China craters, gold will get discounted even further. The bankers may be positioning themselves for a future where the dollar is eventually repudiated, but their current scheme in India ain't flying with the peasants.  

balanced's picture

Agreed. Even if it was, people will always find substitutes for cash. I remember reading about how welfare recipients in Tennessee would buy cases of soda with their monthly funds. There was an entire economy built on sodas. A given number of sodas would get you a certain amount of drugs. Even prostitutes accepted soda cans as payment (likely to be spent on drugs I suppose). It was a really sad article actually. Anyway, the point is that the tighter the restrictions become, the more people will find and use alternatives.

SelfGov's picture

This guy knows dick about programming.

Probably only slightly more about how real economies work.

lordbyroniv's picture

they say you have no right to a gun,..AND THAT FUCKER is enumerated in the 2nd Amendment.

all bets are off ,...

they will tell you what your rights are when they want to.

Consuelo's picture

But only with the complicity of a citizenry who approves it, en masse.   We're almost there...

Yen Cross's picture

 This a good article, and I hope it opened some eyes. Times are going to get turbulent when pension funds become so underfunded through lack of yield, that the .Gov teet milkers start revolting.

GRDguy's picture

@yen-cross: Just wondering where the American refugees will go, and who will accept them with no money and no skills.

Yen Cross's picture

 They can move to Kanukistan. The $usd might still have some value there.


Naahh. We already got our quota of immigrants, thanks.

First, the 1997 Hongcouver wave escaping before the Commies took over.

The age old Caribbean migration to Montreal, mostly Jamaican, mon.

The East Indian / Pakistani / Afghanistani invasion of Toronto for decades.

And, lastly, the Chinese mainland invasion of money looking for safe haven before the Chinese Communist party finds out how much dough the Glorious Working Class has robbed the country blind for.

So, take off, eh ? Yankee, stay home.

You Americans gotta suck up your fair share of international deadbeats, losers, and criminals - with the odd pearl of an outstanding citizen thrown in to keep your hope for humanity up and running.

Just like we did already.

LawsofPhysics's picture

In essence the Fed is already printing to directly backstop all those pension funds. But remind us, aside from .gov workers who has a real pension anymore?

One can avoid reality for a while, but certainly not the consequences of doing so.

Now jump you fuckers!!!

Yen Cross's picture

 Roll the guillotines Bitchez. The natives are growing restless. ;-)

Baron Munchausen's picture

Effectively weve had neg rates of course for years.

But neg rates wont save the system - just a way to optimize wealth extraction by 'finance' of productive labor as the fiat ends its life cycle.

enloe creek's picture

I like a good axe handle, the old walking tall movie had a big stick but if you attach a nice baton handle to an axe handle it will swing with tremendous force, knee elbow are good targets head is bad you might get it stuck in there

jakesdad's picture

I don't know that they need bother actually phsically confescating au & ag.  why take the pr hit when you can simply prohibit transacting in it & have the nsa to help enforce?  couple that w/a pr campaign vilifying the "evil rich" who have pm & offen bounties for turning in anyone to transacts in anything other than approved e-currency ("johnny traded an oz of ag for antibiotics for his kid!!!"  "good muppet!  have a loaf of bread!")  as I understand it fdr actually confiscating was necessary to increase $ supply under au standard & that ship obviously sailed nearly 1/2 century ago...

Budd aka Sidewinder's picture

Reminds me of the old COBOL days...except instead of ERR:DIV0 it was the dreaded 'terminal loop' where the program you wrote ended up containing instructions that just kept pointing to each other...if they ran your cards and no one was minding the shop, you could go through a whole pallet of 11X14 printer paper in a couple hours


Guys who got rebuffed by the lady computer techs would do it on purpose

MayIMommaDogFace2theBananaPatch's picture

Q: Why does it take a programmer so long to shower?

A: Because the instructions on the shampoo say: 'Lather, Rinse, Repeat'

Iam_Silverman's picture

"the dreaded 'terminal loop' where the program you wrote ended up containing instructions that just kept pointing to each other..."

Pretty much similar to SAS (running on IBM mainframe) except you'd get a message - ABENDED, TOO MANY ERRORS TO LIST.  Many times I'd left off a semicolon at the end of a line of instruction.  Of course this was in the late 80's.  I only dabbled in coding to try and get around the backlog our "wizard" was facing.

eyesofpelosi's picture

Ize eminatin.


Beverly Hillbillies

This post was just noise.

LawsofPhysics's picture

Please, the event horizan was crossed a long time ago. Something about keep a solid connection between money creation and the creation of REAL VALUE or REAL COLLATERAL!!!

Roll the motherfucking guilltines, NOTHING changes otherwise.

Thanks god we have such a clear digital record of all the perps this time around. Should make the blood-letting a bit easier...

PapiBoboSeekusMulch's picture

Quick fellas, can someone tell me whether va jay jay is considered an addiction? I really don't want to abandon it . . .

Bryan's picture

I really like Kyle Bass and his opinions.  He may not always be right (who is?) but he seems to have an even temper and reasonable expectations and projections.

conraddobler's picture

The rubicon is crossed when morality gets tossed to the wind.

It's not moral to rig a market and crush traders who have bet correctly but that is done all the time now.

It's not moral to bail out failures with blank checks.

It's not moral to starve investors of yield to push them out on a plank of risk they have no business being on taking all of us with them systemically.

NONE of this is moral and that's where the lines were crossed and once crossed there is no return until it all falls down but to fall down and fail is itself in essence a moral activity it's where reality wins and prevails over lies.

If you don't value reality over lies when will it ever prevail?

The answer is you can lock people in the darkness essentially forever if they won't stand up for something then there is NOTHING you can not get away with.

We all either tell them to knock this off now or we get locked away in frenzy of evil for as long as they can keep us there and I might remind everyone that a normal lifetime is essentially forever for those of us who are alive right now.

vega113's picture

Buy Bitcoins. Really. They can't take it from you - contrary to physical things like gold and cash. And there's no way to prevent you from transacting in bitcoins. People that don't understand what bitcoin is, but make statements about it and do seem to look smart. 

Now, bitcoin cannot be confiscated. It is money that cannot be confiscated. Moreoever, you control something if you can destroy it. And since you can destroy your bitcoins - you really control them. Something that people don't understand, at least not yet.

Scooby Dooby Doo's picture

Scooby is smart! I have a MikeTyson Wallet and I stick it into the Bitcoin ATM in Las Vegas @ The LINQ. Then Scooby take his money and plays hold'em for about 20 maybe 26 hours then Scooby puts his fraud fiat back into his wallet using the MikeTyson ATM in Las Vegas.

Good Scooby! Good!

Scooby usually is in Vegas once per month.

gcjohns1971's picture

The answer to Mr Global is Mr Moorlock and Mr StoneAge.


andrewp111's picture

Once rates become seriously negative, there is no going back. It will feed on itself, with rates getting ever more negative in an accelating death spiral, until they approach negative infinity and all monetary units are sucked down a hyperdeflationary vortex and all wealth is confiscated by creditors. The Government (as ultimate creditor) ends up owning all property without exception.

Hyperinflation inflates the currency to worthlessness, and hyperdeflation removes all monetary units from circulation until nothing remains - no matter how fast money is electronically printed. They are mirror images of each-other, and have the same final result.

Wahooo's picture

Well, there is another way to fix this, but some folks will have to die.

jack stephan's picture

ill put my smoke out in this tallboy

you surprised?

Bemused Observer's picture

No son, I don't play "Mr. Global"...good luck to any of you who decide to try.

And no, you really don't have to, regardless of what TPTB try to pull. Just watch from the sidelines if you must.

The only people who will have their gold taken are those who bought it through the 'official channels', and they wouldn't come and TAKE it...they'd just freeze your fiat accounts till you turned it in.

And at that point you ought to be smart enough to know that you should keep the gold, and tell them to take the fiat.

draego's picture

>> It seems patently absurd that people spend a lot of energy blaming “free market capitalism” for the world’s ills when every possible market is so heavily manipulated that price discovery is completely broken


But who exactly is DOING that manipulation? What IS "free market capitalism" if it's not the participants who are supposed to both benefit from AND safeguard the integrity of that free market? In this respect, free market capitalism is exactly like communism in that it's one of those systems which would work perfectly if only people were good enough. The failure of free market capitalism (and communism) is that it is composed of humans, who are crap, and who eventually learn how to juke the system and screw over all the other participants. Even Greenspan said he never thought that the bankers would screw the system with the freedom they were given when it was obvious what the long term consequences of their actions would be - SURPRISE! The greedy bastards did it anyway.  (NOTE: The economy isn't like the legal system where if you can get away with it, then it must be OK. In the economy, if it's bad and you get away with it enough times you will wreck the system.)

But don't sweat it - it's a cycle that repeats itself over and over - our inner caveman is hardcoded to GET GET GET, and doesn't have a brain circuit that recognizes when enough is enough.

So again, the best poker players will accumulate all the chips, the rest of us will be pushed into a corner, and we will eventually lash out and introduce the 1% to a short rope and a long tree. Civilzation will probably be brought down in the process, then we start it all over again. Deal.