Think JPM is the "whale" in the market? Think again. Bill Gross exposes the real food chains on Wall Street, and you may be surprised just who is truly the biggest "whale" in the "developed" world. Hint- it is the creature controlled by a Princeton economics professor.
From Pimco's Bill Gross
Wall Street Food Chain
- Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors.
- Both the lower quality and lower yields of such previously sacrosanct debt represent a potential breaking point in our now 40-year-old global monetary system.
- Bond investors should favor quality and “clean dirty shirt” sovereigns (U.S., Mexico and Brazil), for example, as well as emphasize intermediate maturities that gradually shorten over the next few years. Equity investors should likewise favor stable cash flow global companies and ones exposed to high growth markets.?

The whales of our current economic society swim mainly in financial market oceans. Innovators such as Jobs and Gates are as rare within the privileged 1% as giant squid are to sharks, because the 1% feed primarily off of money, not invention. They would have you believe that stocks, bonds and real estate move higher because of their wisdom, when in fact, prices float on an ocean of credit, a sea in which all fish and mammals are now increasingly at risk because of high debt and its delevering consequences. Still, as the system delevers, there are winners and losers, a Wall Street food chain in effect.
These economic and/or financial food chains depend on lots of little fishes in the sea for their longevity. Decades ago, one of my first Investment Outlooks introduced “The Plankton Theory” which hypothesized that the mighty whale depends on the lowly plankton for its survival. The same applies in my view to Wall, or even Main Street. When examining the well-known wealth distribution triangle of land/labor/capital, the Wall Street food chain segregates capital between the haves and have-nots: The Fed and its member banks are the metaphorical whales, the small investors earning .01% on their money market funds are the plankton. Yet similar comparisons can be drawn between capital and labor. We are at a point in time where profits and compensation of the fortunate 1% – both financial and non-financial – dominate wages of the 99% and the imbalances between the two are as distorted as those within the capital food chain itself. “Ninety-nine for the one” and “one for the ninety-nine” characterizes our global economy and its financial markets in 2012, with the obvious understanding that it is better to be a whale than a plankton. Not only do Wall Street and Newport Beach whales like myself have blowholes where they can express their omnipotence as they occasionally surface for public comment, but they don’t have to worry as yet about being someone else’s lunch.
Delevering Threatens Global Monetary System
Yet while the whales have no immediate worries about extinction, their environment is changing – and changing for the worse. The global monetary system which has evolved and morphed over the past century but always in the direction of easier, cheaper and more abundant credit, may have reached a point at which it can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits. Future changes, which lie on a visible horizon, may not be so beneficial for our ocean’s oversized creatures.
The balance between financial whales and plankton – powerful creditors and much smaller debtors – is significantly dependent on the successful functioning of our global monetary system. What is a global monetary system? It is basically how the world conducts and pays for commerce. Historically, several different systems have been employed but basically they have either been commodity-based systems – gold and silver primarily – or a fiat system – paper money. After rejecting the gold standard at Bretton Woods in 1945, developed nations accepted a hybrid based on dollar convertibility and the fixing of the greenback at $35.00 per ounce. When that was overwhelmed by U.S. fiscal deficits and dollar printing in the late 1960s, President Nixon ushered in a new, rather loosely defined system that was still dollar dependent for trade and monetary transactions but relied on the consolidated “good behavior” of G-7 central banks to print money parsimoniously and to target inflation close to 2%. Heartened by Paul Volcker in 1979, markets and economies gradually accepted this implicit promise and global credit markets and their economies grew like baby whales, swallowing up tons of debt-related plankton as they matured. The global monetary system seemed to be working smoothly, and instead of Shamu, it was labeled the “great moderation.” The laws of natural selection and modern day finance seemed to be functioning as anticipated, and the whales were ascendant.
Too Much Risk, Too Little Return
Functioning yes, but perhaps not so moderately or smoothly – especially since 2008. Policy responses by fiscal and monetary authorities have managed to prevent substantial haircutting of the $200 trillion or so of financial assets that comprise our global monetary system, yet in the process have increased the risk and lowered the return of sovereign securities which represent its core. Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. QEs and LTROs totaling trillions have been publically spawned in recent years. In the process, however, yields and future returns have plunged, presenting not a warm Pacific Ocean of positive real interest rates, but a frigid, Arctic ice-ladened sea when compared to 2–3% inflation now commonplace in developed economies.
Both the lower quality an d lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. Neither condition was considered feasible as recently as five years ago. Now, however, with even the United States suffering a credit downgrade to AA+ and offering negative 200 basis point real policy rates for the privilege of investing in Treasury bills, the willingness of creditor whales – as opposed to debtors – to support the existing system may soon descend. Such a transition occurs because lenders either perceive too much risk or refuse to accept near zero-based returns on their investments. As they question the value of much of the $200 trillion which comprises our current system, they move marginally elsewhere – to real assets such as land, gold and tangible things, or to cash and a figurative mattress where at least their money is readily accessible. “There she blows,” screamed Captain Ahab and similarly intentioned debt holders may soon follow suit, presenting the possibility of a new global monetary system in future years, or if not, one which is stagnant, dysfunctional and ill-equipped to facilitate the process of productive investment.
While all monetary systems are a balance between debtors and creditors, absent voluntary defaults, it is usually creditors that establish the rules for transitions to new regimes. Such was the case in the late 1960s as France’s de Gaulle threatened to empty Ft. Knox unless a new standard was imposed. Now, with dollar reserves widely dispersed in Chinese, Japanese, Brazilian and other surplus nations, it is likely to assume that there will come a point where 2% negative real interest rates fail to compensate for the advantages heretofore gained in buying sovereign bonds. China, for instance, may at the margin shift incremental Treasury holdings to higher returning commodity/real assets which might usher in a gradual or somewhat sudden reconfiguration of our current dollar-based credit system. Having a reduced incentive to purchase Treasuries and curtail Yuan appreciation, the Chinese and their act-alikes may look elsewhere for returns. In addition, previously feared but now tamed private market bond vigilantes like PIMCO have similar choices, if clients with their index-bounded holdings begin to broaden their guidelines. Together, there is the potential for both public and private market creditors to effect a change in how credit is funded and dispersed – our global monetary system. What that will look like is conjectural, but it is likely to be more hard money as opposed to fiat-based, or if still fiat-centric, less oriented to a dollar-based reserve currency. In either case, the transition is likely to be disruptive and an ill omen for seafaring investors.
Reflationary Potential, Low Asset Returns
This transition continues to point towards higher global inflation as a solution to overextended debt-ladened balance sheets – be they public or private. Bond investors therefore should favor quality and “clean dirty shirt” sovereigns (U.S., Mexico and Brazil), for example, as well as emphasize intermediate maturities that gradually shorten over the next few years. Equity investors should likewise favor stable cash flow global companies and ones exposed to high growth markets. Investors in general, however, will be hard pressed to repeat the rather right-tailed performance of the past 30 years, a whale rather than plankton-dominated era based on excessive credit expansion. Deleveraging economies and financial markets present a different and lower returning kettle of fish than did recent credit-dominated decades.
That is because historical leverage was almost always applied by borrowing at a short-term rate and lending longer and riskier at a higher yield. That “spread” practically guaranteed levered returns over and above the policy lending rate during the past 30 years. No matter whether it was at 10%, 5% or eventually approaching 0% the lending spread at a higher yield was threatened only on a temporary basis during cyclical economic contractions brought about by temporary periods of tight money on the part of the Federal Reserve. As long as the economy bounced back, credit extension and its profitability were never threatened.
All of that changed, however, as deleveraging produced narrower yield margins, asset price exhaustion, and a reluctance on the part of lenders to lend (and in many cases – borrowers to borrow). Combined with now negative real interest rates of 200–300 basis points on the front end of the lending curve, the ability to successfully lever financial market returns has been jeopardized. Bond, equity and all financial assets which are structurally bound together by this dynamic must lower return expectations. Maintain a vigilant watch matey!
Plankton Disappearing, Food Chain at Risk
The world’s financial markets currently seem obsessed with daily monetary and fiscal policy evolutions in Euroland which form the basis for risk on/risk off days in the marketplace and the overall successful deployment of carry and risk strategies so important to asset market total returns. Euroland is just a localized tumor however. The developing credit cancer may be metastasized, and the global monetary system fatally flawed by increasingly risky and unacceptably low yields, produced by the debt crisis and policy responses to it. The great white whale lies waiting on the horizon. Investors should sail carefully and the Wall Street 1% should put on their life vests if they expect to weather the inevitable storm that may threaten the first-class cabins they have come to enjoy.
just bring on the new money already. and if possible, have hockey on the new $5 like canada does.
I also think the picture is missing a fish.
Where is the largest (and most important) fish? - The one the swallows the Fed?
"Euroland is just a localized tumor however. The developing credit cancer may be metastasized,"
Ooh... I liked that. Obligatory:
http://www.youtube.com/watch?v=OaTO8_KNcuo
One revision suggestion to Mr. Gross’s otherwise excellent piece:
“The world’s financial markets currently seem obsessed with daily monetary and fiscal policy evolutions in Euroland”
to
The world’s financial markets currently seem obsessed with daily monetary and fiscal policy obfuscations, deceptions and spasms in Euroland
"Where is the largest (and most important) fish? - The one the swallows the Fed?"
Relevant question indeed.
The answer would be the Leviathan
(ref Hobbes http://en.wikipedia.org/wiki/Leviathan_(book))
What an excellent piece indeed! Unless my eyes are cheating me, Mr. Bond himself are now directly warning his 1%'er clients, that they will not return to the old normal of being profitable bondholders, and that they should not linger for too long before they allow him to buy Gold:
"Yet while the whales have no immediate worries about extinction, their environment is changing – and changing for the worse"
"Future changes, which lie on a visible horizon, may not be so beneficial for our ocean’s oversized creatures."
Recalling that the word "may" is an expression of something probable as opposed to the word "might", that is more hypothetical in nature.
He is definitely urging the clients to allow him to broaden his toolbox to enable him to do better asset protection, because he has been castrated by negative real interest rates in the current environment:
"As they question the value of much of the $200 trillion which comprises our current system, they move marginally elsewhere – to real assets such as land, gold and tangible things, or to cash and a figurative mattress where at least their money is readily accessible." "China, for instance, may at the margin shift incremental Treasury holdings to higher returning commodity/real assets which might usher in a gradual or somewhat sudden reconfiguration of our current dollar-based credit system."
"In addition, previously feared but now tamed private market bond vigilantes like PIMCO have similar choices, if clients with their index-bounded holdings begin to broaden their guidelines."
He is warning that these will not be subtle changes but rather substantial and possibly violent/volatile changes. "She", is Pimco itself, as Mr. Bond will lead the way to safer waves, if the clients allow the tools to do so:
“There she blows,” screamed Captain Ahab and similarly intentioned debt holders may soon follow suit, presenting the possibility of a new global monetary system in future years".
"Together, there is the potential for both public and private market creditors to effect a change in how credit is funded and dispersed – our global monetary system."
"..it is likely to be more hard money as opposed to fiat-based, or if still fiat-centric, less oriented to a dollar-based reserve currency."
If the clients are not ready to change his charter the warned result is clear, and it is not isolated to stay across the pond:
"Bond, equity and all financial assets which are structurally bound together by this dynamic must lower return expectations. Maintain a vigilant watch matey!"
"Euroland is just a localized tumor however. The developing credit cancer may be metastasized"
He is telling his 1%'er papertigers, that they too must buy Gold, because they will not be immune to that which is now within sight:
"The great white whale lies waiting on the horizon. Investors should sail carefully and the Wall Street 1% should put on their life vests if they expect to weather the inevitable storm that may threaten the first-class cabins they have come to enjoy."
What a thoroughly enjoyable read that was! It can't be long now, folks!
So does this mean my bankers still gets his $50 million Bonus?
Nay.
It dies from starvation.
Where is the largest (and most important) fish? - The one the swallows the Fed?
It's composed of all the little fish finally ganging up and rebelling.
No worries. They were literally passing around copies of Bernanke's helicopter speech on CNBC this morning. Did you know that man's a genius?
Did you know CNBC's ratings are plummeting?
All mainstream news is plummeting, especially CNN.
It's kind of fuckin' awesome.
Interesting, while mainstream is plummeting zerohedge is rallying.... 10% more pageviews than last month, bravo editors, bravo!!! I'll stick with you. :)
Daily Pageview 545094
Of course all main stream media is plummetting. The people have no money and therefore have no interest in the things they can no longer buy.
That's because enough people have realized what a sham mainstream media is--it's all propaganda and agenda setting. Most people just don't pay any attention to anything at all. For the few who are engaged, the media looks like a bunch of self-serving useful idiots who pander to the 1%.
everytime i see/hear Bob Pissanti I want to pull an Elvis and shoot the tv. The only ything that stops me is that I would have to go buy a new tv and that would add a percent to GDP #s
It's just too bad that we are the 1 or 2% of people in the 99% who actually know what's going on. When another Adolf or at least a financial system Adolf appears on the scene, do you think our screaming "No!" is going to make any difference? I don't. Because I don't think that nearly enough people realize what the scam actually is.
Why do you think so many very clever people choose to side with the unethical winners in the money game? Because they realize the hopelessness of getting American Idol viewers to resist the scam or, for that matter, to even realize that there's a scam going on and decide "if you can't beat them, join them"?
I love the fact that CNN is becoming The Oxygen network of news programs (i.e. it's always on but no one watches it). What do they expect. Every bit of the "news" they provide is tangential crap we don't really need to know and is intended only to upset us. Do they really think people want to watch constant Election 2012 coverage for the 12 months leading up to the election? If I want news these days, I turn to rt.com, which is ironic in itself that the Russians provide the best news these days.
Yep, on their report there's only C's aNd B's and more C's...
Yes, I did know that. What's more, he's the world's absolute authority on the great depression as he's studied it and is a history buff.
I'm going back to bed. My world is safe with Benny's firm masculine hands at the wheel
Of the first one only; in the second one he proves to be as clueless as Dimon is about his London team's hedging trades.
Benny is just a captain in the mob who knows how to take orders from the Don.
This is where he completely loses the little remaining sanity he has left:
Problem is there are no laws of 'natural selection' neither in finance nor in nature. What he is referring to is that idiot Spencer or Butler who clearly needed to justify exploitation of the poor. Sociobiology.
That's a good point--whales aren't that successful a species, they need to eat too much. Maybe that's part of the law of nature he's talking about. When something gets too big and consumes everything until nothing is left, it then dies. I do think a lot of this type of work exists only to justify unconscionable acts. The people on Wall Street have absolutely raped the US middle class, sold us all a bogus concept of "retirement" and used government in every cynical manner possible to elevate themselves. And now that whale has nothing left to eat.
1000 years of world wide private enterprise and private capital blown to pieces in a mere 5 by poser bureaucrats and TBTF government. Well done!
That could well be...but, people are so exhausted from selling their soon to be worthless equities. I mean, it's a bitch selling every single day.
Gotta have a 'gone fishin' day now and then.
The sooner we wipe these central bankers off the face of the earth and return to government created debt free money the sooner we can start investing in manufacturing, agriculture, research and technology. They bring no benefit to mankind and are a siphon to suck of our prosperity and load it into a shitty rigged casino to the benefit of a select few.
I've been noticing your posts as of late, and they all are on point.
I also see you're a newcomer, welcome to fight club. It's looks like you will fit right in.
Thanks, I am sick of this bullshit paradigm and want a large hand in creating the next. The more of us like minded individuals that unite and band together the better chance we have at taking back our prosperity and future.
Reply posted under wrong thread and moved.
Governments and the people they represent have a financial arrangement with the Jewish mafia known as Central banking to act as a middle man to create their money. All the while skimming the wealth from the Nations and there people while the government and the mafia grow wealthier and more powerful. Nice business. How do they stay in business, murder,war ,intimidation, consolidation, media control, energy control.
Declare war on the corporation? Governments will only work for the middleman until the corporation,cartel,monopoly is destroyed. Steal back what was stolen?
"government created debt free money" I gave that concept the thumbs down because you will replace one tyrant with another because you do not understand money. There is no such thing as debt-free money and if the government creates, what in truth, will become government debt-backed money, then they will do what banks are doing to us - inflating and debasing the currency to finance their command and control, central planning.
"government created debt free money" I gave that concept the thumbs down because you will replace one tyrant with another because you do not understand money.
I understand the concepts of money, and I also understand that money can be created both through debt or as credit. All the money that is created today for government by central banks is at a debt with interest that has to be paid back to the central bank. This debt is in the form of bonds and treasuries which need to repayed with interest that is taken from the people. Every dollar you hold has an interest bearing debt to the central bank which created the money from FUCKING NOTHING. In short we pay massive amounts of interest to a private institution to create money when we the people can create it at no charge and at no debt. A governments treasury can create this money without interest and without cost to the taxpayer.
There is no such thing as debt-free money and if the government creates, what in truth, will become government debt-backed money, then they will do what banks are doing to us - inflating and debasing the currency to finance their command and control, central planning.
Government treasuries can create the money from nothing at no cost to the people. The best way to stop the inflation and debasement of a government created currency is to back it by silver and gold. This will eliminate the ability to inflate and debase the sovereign debt free currency and holds the government accountable for every dollar created.
Learn your economics son!
Well, I completely flushed you out with your statement here: "Government treasuries can create the money from nothing at no cost to the people".
The cost to the people is inflation. That is the old Social Credit Party baloney that you are espousing.
You flushed nothing except your own ignorance. It is not who makes the money that causes the inflation IT IS the amount of money in circulation and its velocity. You didn't even attempt to rebuttle my response intelligently you just turned to the good old central banking quote "governments create inflation" what a crock of shit. Gold and silver backed government created currency is very difficult to inflate because it is tied to a finite and precious resource.
Try promoting some positive change and/or add constructive criticism to this discussion instead of bashing it and fullfilling the central banker strawman phallacy...
Sooner or later they will break the anchor to the commodity money, even if it works for longer period. If I have to grade what I preffer it will be in the following order :
1. Ability of anybody to create currency in a competitive manner (why the money bussness should be the only one w/o competition)
2. Government created anchored to commodity
Both options preclude that no taxes are set on gold and silver as they are the most probably candidate for anchoring currencies.
1. is great idea
Despite being seemingly likeness between the US and Europe with regards to shabby economics, in Europe there is no capital gains tax nor VAT on physical gold, because it has always been regarded as money here.
Another good idea implemented in Europe is that the gold is updated quaterly on the ECB balance sheet i.e. it is not like the gold-standard where the exchange rate between the gold and the currency is rigidly set.
It is set by the market.
This act as a balance, because as the ECB prints more euros the price of gold climes up and it accounts for bigger and bigger portion of the Balance sheet... thus balancing it.
This to some extends makes currency more stable in the long run cause the anchor is more elastic to chnages in economic climate.
Of course it still does not save the holders of euros from outright devaluation, but is a step in the right direction
It's true, there's no free lunch there. Government is mostly a curse on humanity--anytime you give bureaucrats and bozos the ability to print money, they get in over their heads and then print to infinity because they are the first users of that money. That it destroys entire civilizations is not really any of their concern.
It is our utmost concern and all it takes is the people to stand up and demand a commodity backed currency in the control of the people thereby disabling governments ability to print to their hearts content. We need to fight to take back what is rightfully ours.
I hate to break it to you, but the majority tryanny gives rise to the central banker, not the other way around. If we don't shake ourselves of that, it really doesn't matter what monetary system we have.
I tend to disagree I believe it to be the opposite, as indicated in Mayer Amschel Rothschilds famous quote "Give me control of a nation's money and I care not who makes the laws." Also in that most of the worlds problems could be solvable once the central banker is removed. In terms of solving central bank tyranny we may have to turn to solving most of the other tyranny as you indicated, the most important part is that we engage in open discussion and find the solutions together.
I'm with up until that idea of "return to government created debt free money"
"Government created" is the part I object to.
Let's go with real money instead.
I'm with you brother, governments are so corrupt that it would be near impossible to "return to government created debt free money". The scenario I was proposing was after dealing with the corruption and taking back control.
How could we as civil society return to real money without government or side step them? It would most definately involve gold, silver, copper and black markets but how to get started, how to get the ball rolling?
If you have any ideas please post them, these are the things that keep me up at night. At heart I am a problem solver, always have been we need open dialect to get this thing rolling. I have often thought of a $1000 mass produced gold/silver money kit that anyone could buy consisting of grams half grams of silver gold etc..is that too out there or is that what you are in line with?
I remember reading a few posts by George Selgin, an economics professor at the University of Georgia, talking about historical instances where governments were completely out of the money business, other than perhaps to regulate companies that melted metal into coins for people for a price. They were free market businesses and the most honest, efficient and cost effective ones thrived, of course.
He said that it worked very well and provided a very stable base for an economy to thrive.
He apparently had written a book or two on the topic. I just looked in the "Books Written" section of his bio and see a few there that might be of interest to you.
Not sure if this is the one someone had alluded to in the discussion forums, but here is a review of his book, The Theory of Free Banking: Money Supply under Competitive Note Issue
and here is a webinar of his on Money under Laissez Faire
and here's a video of his entitled The Private Supply of Money over on the Mises.org site.
I first "met" him over on on the Ludwig von Mises discussion forums. I was a little surprised he had showed up and participated there, though it sounds like he used to be quite active there years ago. I was also amazed that when I brought up someone mouthing off over on Seeking Alpha on some history topic, he offered to go over there and set them straight. and he registered over there and went into some historical detail and gave references for what some of the current administration officials had said &/or written on the topic in the past. Although he was very polite about it, it completely shut down the other person's line of reasoning. I think they were a little blown away and realized he really knew his stuff.
that would take out the stock market- which is bs anyways.
My patience with this bullshit is reaching a breaking point.
It's us or them.......you pick.
They claim to be systemically important -- and advantage we all sorely lack. :(
Lord Acton
I disagree. None of this is an accident. This scheme has been well thought out by the central bankers and politicians. ZIRP will continue and will get far worse. Why? Simply because big investors, funds and banks have no where else to put their money that's safe. In the end, the desire for capital preservation will outweigh the desire for yield. Even if there is an appetite for risk, no one is going to put ALL their money in risky instruments. So a substantial portion will still be in "safe" sovereign debt. And, yes, I understand that US Treasuries carry risk, but (on a relative scale) its far less risky than all the other instruments out there. The only alternative is to keep your physical cash (or gold) in a well guarded vault. I also think that the recent GAO announcement that the US has more recoverable oil than all known reserves was/is a preemptive move to make USTs seem even safer than they already did.
Of course, the endgame here is for USTs to have negative yield. That is, the Government will get paid for its capital preservation (or, more accurately, slow motion capital evaporation) services. Deficit problem solved. And, yes, its a backdoor tax on the 1% -- and anyone who saves for that matter.
i do agree if you're a high level employee of Chase Morgan "you'd do well to recommend a million mattresses with Jamie Dimon at the helm." I must say "turning New York City into a museum piece" will be quite the epitath. It has been argued "the last ice age stopped just outside where New York City now resides" but i'm starting to have my doubts.
I think the mathematics would preclude something like that every working out, and I would imagine even TPTB aren't stupid enough to believe they could continue to fund the continual expansion of their debts at an exponentially rising rate out of their citizen's savings.
It's impossible. The debt becomes a black hole for savings, soon leaving no capital whatsoever for the private economy. Eventually, 100% of savings couldn't even fund the federal debt alone.
If this is all some sort of master plan, it's a plan to
1). First, crash the world economy...
Except that a lot of the capital is being created out of thin air by the FED. And Bernake has plenty more room to print thanks to Europe's woes. You have to understand that more than 50% of the population depends on the Government for support, either directly (entitlement or employment at all leves: Fed, state, local) or indirectly (contractors). Therefore, the priority is enabling continued deficit spending at all cost. Do you think its an accident that interest rates have gone down as Government debt has exploded? That is counterintuitive, yet its happening. Its all part of the plan. Because if interest rates rise, the Government can't pay its bills and we're all hosed.
I don't think that most of what you wrote is incompatible with what I wrote.
My main point was that I don't think this is some grand plan by TPTB to get to this point... which necessarily involves a systemic collapse or some sort of reset... unless that collapse/reset is a part of their plans.
Printing money is not a viable solution to their massive debt and deficit problems. It will at best kick the can down the road a bit.
I do use the word "capital" a little differently than you do here. I'm thinking along the lines of this Wikipedia article on capital:
"In economics, capital, capital goods, or real capital are those already-produced durable goods that are used in production of goods or services. ..."
In other words, the Fed can't "print capital out of thin air".
They can print their fiat, of course, but that's a different matter. That's just a measuring stick for keeping score.
--
"Its all part of the plan. Because if interest rates rise, the Government can't pay its bills and we're all hosed."
We're still all hosed even if they print a lot more money. Right now people are in a delusional phase and "running to safety" and the government is sucking up more and more of the world's savings. But it's simultaneously draining the economy of those capital resources. They can't be used to fund the government's capital consumption AND fund new factories and other needs of the private economy. As the government grows, the rest of the economy shrinks.
But that can't go on forever. As more and more resources get sucked into that black hole eventually everything will be government and the private sector will be wiped out, unless it collapses first. But it will assuredly collapse first. The shrinking private sector will eventually no longer be able to support the morbidly obese and rapidly growing government.
Printing more green pieces of paper with pictures of famous people on them will not change that fact. They're trying to print more money to make up for the true capital being sucked out of the economy, but that isn't something that can be papered over.
Even printing "money" to pay their bills is at best a kick the can down the road strategy of a desperate nation. It cannot work in the long run. It has been tried many times in the past, and has always resulted in a hyperinflationary crash.
I realize that TPTB seem to be pretty dumb at times, but there are plenty of economists and historians in power that would have to know that this type of spending a nation into unpayable debt Ponzi scheme will always and everywhere end in disaster. They wouldn't do it as part of some grand master scheme unless they wanted a collapse.
There are two competing collapse scenarios. The one you warn against, which is the slow, theoretical collapse and the one that occur when the Government can't pay its bills, which is the fast & sure collapse. If our leaders are given the choice between choosing between one or the other, they will always pick the former. If the Government checks (transfers) stop, you'll have an immediate social collapse (panic, riots, looting, martial law -- very bad things). That is to be avoided at all cost. The former is slow, so it may take years, even decades. Its also theoretical because it should happen, but other things could occur to slow or reverse the trend (like someone invents a new, unlimted energy source). So, our leaders do what 99% of human beings do: they put off the hard decisions to stay in power, hoping they'll be safely retired or dead when the SHTF.
Bill Gross is a martyr. He is one of the biggest mainstream voices of Austrian theories. More awarness will bring about change!
Buy gold peeps.
I forget who said it, but:
There was a time when banks were a tool for business. Now, businesses are a tool for banks.
Call me Fishmeal. Screw it. I'm just gonna go fishing on the Peaquod charter boat til it all blows over.
I don't disagree with a lot of what Gross says, but what has he ever done except clip coupons?
He's part of the problem, not any solution.
Affirmative.
If you've read his stuff over a longer period you can see the subtle way he is trying to distance himself from the very system he suckled to get that 'Bond King' title.
Apparently getting high on the money supply is in itself transitory. Who knew.
We must rid the world of Private for profit central banks that steal our labor and property. Once you do this things change for the better. It does not matter if you have a gold standard if these blood suckers control the issuance of money.
Exactly!
As we run an debt-based system, THE PROFIT OF ANY INTEREST PAID should be PUBLIC, so we, the people, get the money back one way or another. The system, as it works today, only benefit a few bankers.
Every production, growth, labor, etc - ultimately goes to the hand of the bankers, who yes control the system.
We live in a stupid financial system, that unfortunately most people don`t have any clue about it. If they did, we would have a revolution overnight.
I think I'm in agreement with you, although you're leaving a lot unsaid, so it's hard to be sure.
I meant that, if the debt based system continues, that is the minimum that needs to be done.
My dream is a currency without any debt attached. Not a gold standard, not any variation of a fiat ponzi scheme.
But that is an utopia as the world is today. We are closer to a full collapse then great change for the best of mankind.
You either have profit or you don't, but it's tough to prevent sectors from participating in a profit system while everyone else is. Why would / should they?
Central banks are always a problem, whether private, for profit, or government owned. The issuance of fiat money is the problem. Fractional reserve banking can also be a problem.
I hope anyone who hasn't done so will check out the book, The Creature From Jekyll Island
or check out the video clips of talks the author gave (scroll down the page a little).
It gives a history of how the banksters were able to eventually ramrod the Federal Reserve down our throats over significant opposition, using deceipt and by purchasing the services of professors to back them up.
Throw the banksters overboard.
Mayswell toss Hillary and Barry Soetoro while your at it.
Better check with the EPA first in the case of Hillary.
"All heat and no light" as they say. The fact of the matter is "having a policy of hoovering up all the cash" has implications for "all the rest of us cash strapped humans." Not the least of which is say...ahhhhh...New York City or Atlanta or Chicago come to mind! Of course why would they need money with all their rich banks and property developers raking in the.....uh ohhhhh.
"The ragged army, fixin' bayonets to fight the other line
Spanish bonds rock the province
I'm hearing music from another time"
Apologies to “The Clash”
So in other words Bill likes to be right.. So, we get whales and plankton and maybe this and horizon that. No one knows when or if massive printing brought on by systemic failure of the system occurs. No one knows if CB's just weather the deflationary storm. The complexity is part of the strength and weakness of the system. Nothing new happens under the sun until the supply chain is affected, swollen bellies make for pissed off plankton.
Bingo! It is all about the Supply Chain. If these fuckers finally kill the current shape of money how can it not disrupt the the Supply Chain. If that ocurrs the world shifts to panic mode and all bets are off. Derivatives of Derivatives of Derivatives will evaporate first and then the fuse will be lit leading to God knows where.
While all monetary systems are a balance between debtors and creditors, absent voluntary defaults, it is usually creditors that establish the rules for transitions to new regimes.
That's Bill Gross saying to Bilderburg that whatever they come up with, ultimately, Bond fund managers are going to determine which way this breaks.
The real and financial world are more similar than i thought mr Gross.
only in the real world the plankton is gone/ useless because of the great invention called nuclear energy.
When are we going to realize that money means nothing without clean water and land to live on? I hope very soon, or i fear the consequences.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” L. Von Mises
It looks to me like the world-destroying catastrophe is already baked in. It's only a matter of when.
What the bald genius (just ask him) is trying to say......WHAT WE ALL LEARNED IN 6TH GRADE WHEN WE TRIED TO TRADE A TWINKI FOR AN APPLE......IT AINT WORTH IT!
Or, what we learned in high school......RISK/RETURN....
RISK VS. RETURN......im not getting SHIT for the huge RISK I take.......bottom line...simple shit.
THAT is what the fuck-tard tried to say......
Sooner it collapses the better. We will then have the new international reserve currency - globally uniform governed by an international reserve bank. Totally paperless and electronic, taxes and government fees will be collected automatically. A totally stable money system and no more of this nonsense. With this will come a real world government with real power. We are entering a new age.
I doubt it simply because it would give the crooks nowhere to hide. There's hundreds of billions, if not trillions of dollars in illicit drug monies to consider, as well as a million other scams of various shapes and sizes. They would have to have some kind of two-tiered cashless system--one that is completely anonymous for the criminal class and the other one for the rest of us farm animals. Taxes and fees colllected automatically? Again, you don't understand who the tax evaders are, do you?
The only reason that the drugs are illegal is to keep the margins up for CIA Corp and its stockholders. Once the lockdown is complete, the CIA can easily eliminate any newblood competition and would no longer require anonymous fiat money to maintain prices thousands of percent above production costs.
Hey Bill:
So the Global Monetary System that you have gotten rich off of gaming is coming unglued?
Well no shit, sherlock. Is this your attempt to appear prescient? IF so, EPIC FAIL.
This has been obvious to any economist with a brain (read: Austrian) for many years.
You can't even bring yourself to call for a gold standard or an investigation of the corruption. (of which you are a part)
Tell it to someone else Bill. All your money and position will not keep you from the lamppost. You reap what you sow Bill.
The whale surfacing to spit air and water out of his blow hole! Perfect metaphor bill. Only your whale is going to be extinct as we drink your milkshake.
Agree 100%, a rather stilted attempt to appear prescient. What a knob.
Implausible deniability indeed.
What bill says is true--The whales in this financial system are jews they dont produce anything but they feed on innovation of gentiles
Its jews at top of every banking sector and Ponzi popped uo companies like Facebook
Now Americans must understand the kind of harm that jews cause to a well organized nation
Previously they were hated not for their sub-human life, no one called them sub-human its only jews who call themselves as sub-human
In fact if you read the Book written by Adolf--He referred them as dangerous parasites in their Aryan nation hood
Thats exactly true- they are clever, rich, educated but that doesnt change a Crooked hooked nose parasite's life
USA today is invaded by parasites from Arabian desert whose sole purpose of living is to feed on their hosts
They have been doing this job and successfully able to prolong their geneology since thousands of years, since 19th early century, liberalism destroyed Western nations and their societies .now these parasites have impregnated many Women and have spread their parasite gene across human race
After this parasite attack , USA since 1990 started receiving another bunch of locusts from india
Now it looks as if complete immune system of USA has been destroyed by indians and hooked nose guys
All the best americans , you have underestimated the potential of these destructive nation who single handedly destroyed every great civilization since the dawn of human civilization.
From egypt to todays USA, they left no stone unturned
Every great human acheivement has been destroyed by them, you accepted them with open hands and allowed your women to fornicate with them now you have a new generation of Parasites
Because scapegoating worked so well in the 1930s...
Although that polio vaccine, well....
The doctor will see you next
The world has been feasting for years on seed that should have been set aside for planting.
It's fun while it lasts, but portends famine when the savings are exhausted and there's nothing left for next year's crops.
One of the remarkable aspects of civilization is that if you are anywhere on the planet and have an internal combustion engine, you can most likely get gasoline for it any day of the week. This system seems to run flawlessly for the most part and is quite an achievement. Now the question is: If this level of organization as complex as it is can run seemingly on autopilot 24x7x365, why does our global financial system seem to be in such disrepair? Probably, because gas is simply gas while another commodity, money, can take many and varied forms and be turned into many different derivatives which hardly resemble the original product. Let's keep money as money and paper as paper!
It runs flawlessly in the sense that everything financial is one way or another a conduit for the wealthy to pick everyone else's pockets, strip their bones clean these days, in fact.
"may have reached a point at which it can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits"
May have? And how long has it been since it has "equitably" allowed "fair distribution of its benefits"?
Funny how Greenspan and Bernanke set out to prove Marx was right !
They have made the Western economic model absurd
I'm not familiar with Marx's theories, but if he predicted that capitalism, an efficient evolutionary system where the best survive and the incompetent go bankrupt, would DEvolve into crony capitalism where the biggest survive because the governments they own protect them from going bankrupt with public money, he was correct.
Firstly, there is no such thing as 'efficient evolutionary system' and second Marx saw a simple fact: underpinning the capitalist ideal was the eventuality that it carried the seed of its own destruction, nothing more really. All else was a derivative more or less.
Capitalism IF it doesn't devolve into crony capitalism where those who deserve to fail aren't allowed to do so due to political connections, IS the most efficient system simply because effects very similar to biological evolution cause the organizations which provide the best services at the best price to flourish while those who perform poorly die out. Not a perfect system by any means, but much better than anything else I know of and certainly much better than anything involving governments picking the "winners."
The Credit River Decision is interesting in that a jury of peers finds the modern financial system and one of its roots - Null and Void:
http://www.rumormillnews.com/cgi-bin/archive.cgi/noframes/read/113358
Did you learn about this while in school?
Bill Gross is just looking for another Government bailout to make his enormous pile of MBS or whatever he's holding these days worth more.
The global monetary system ... can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits.
I don't think fair distribution was ever part of this system, by construction or intent. A consistent 2% inflation is simply a theft of 2% on a consistent and ongoing basis, and the returns of that theft are not fairly distributed.
may have reached a point at which it can no longer operate efficiently and equitably to promote economic growth and the fair distribution of its benefits
Which universe is he living in?!
now THAT's stretchin a metaphor!
props to my west-coast homie, B Gross!
eastcoast/westcoast killahs!
http://www.youtube.com/watch?v=4Jmev7l03to&feature=related
yes indeedie/
lyrical graphitti...
big fish in a small pond!,
janus
@ALL
Gross touches reality early on but then returns to just noise and distraction, to placte his prospects and clients, I suppose.
"When examining the well-known wealth distribution triangle of land/labor/capital, the Wall Street food chain segregates capital between the haves and have-nots: The Fed and its member banks are the metaphorical whales, the small investors earning .01% on their money market funds are the plankton. Yet similar comparisons can be drawn between capital and labor. We are at a point in time where profits and compensation of the fortunate 1% – both financial and non-financial – dominate wages of the 99% and the imbalances between the two are as distorted as those within the capital food chain itself. “Ninety-nine for the one” and “one for the ninety-nine” characterizes our global economy and its financial markets in 2012, with the obvious understanding that it is better to be a whale than a plankton. Not only do Wall Street and Newport Beach whales like myself have blowholes where they can express their omnipotence as they occasionally surface for public comment, but they don’t have to worry as yet about being someone else’s lunch."
It is being said often these days because it is so obvious that that the distribution of income is absurdly out-of-balance; a truly 'balance of payments' problem, and not just numbers on the board. If there were 99 slaves for who were adequately paid for their time by the 'whales' thern the game could continue.
I won't belabor this rhetoric---it's boring to go over the same ground so often when even the 'whales' know the income distribution of the global society is screaming for re-distribution of income, if not wealth as well.
I just wanted to call attention to the obvious to an audience that jumps to the noise and distraction rather than admit the obvious because it is contrary to the positions and postures of that audience. For me, I have little, but enough to sustain a human being, and we have to put some chips on the table if the game is to continue
or
the game is over om
i basically agree with you, om...but:
Gross, and many like him, are constrained by their clients. when i read a piece like this, i try to look past the institutional-investment language, and i also take into account the nature of the audience. and regarding the latter, it's fair to assume that bond investors, especially the insitutional clients, ARE the american economic orthodoxy. were he writing to ZH readers, under any nom de gurre, you could expect more direct language and a more nuanced appreciation of the situation at hand. we really cannot expect the world's largest bond trader to commit hari-kari by scaring the living shit out of his investors.
and if my alternatives are morons like wozniak, who advised everyone to buy as much faceberg as they could get their grubby lil paws on....or every other 'value' investor who pimped that pathetic proxy for our pervasive despair; then, well, in that context, Gross is a bit of a hero.
i'd also like to say that i've been reading Gross carefully for a couple of years, and i am more than satisfied with the arc of his evolution.
good to see you, btw.
janus
oh, i almost forgot...
the game is over.
http://www.youtube.com/watch?v=hBiwMT77Csg
but whatever you wish to keep/
you better grab it fast/
yonder stands your orphan with his gun/
crying like a fire in the sun,
janus
Yes, janus
the game is over
and
Cookies are for eating!
So let's not forget the lightness of hard times
and thamks for playing om
Ditto:
PIMpCO's Gross: When Will The Admission Come?
http://market-ticker.org/akcs-www?post=206665
Excerpt:
"Really? Ever-cheaper and more abundant credit has promoted economic growth?
When and where did this take place?
I'm truly interested because I know where it didn't take place -- over the last 30 years in the United States!"
[chart - debt vs GDP change]
Another monetary system?
Because the last game of monopoly made everyone broke, even the banker, and he wants another?
So rather than end the game and move to something real, let's just start another round of something inherently broken and oligarchical self-serving!
Glass-Steagall
Arrr, have you ever been to sea Billy? Bend over and I will drive you there.
I like Bill, smart guy, and he has been doing what smart sales people do, set exceptions early and repeat them often.
he is basically saying America is fucked, buy debt of companies where they have a foothold in a place that is not fucked because china will be looking else where for yield than holding shitty treasuries of a pooched country.
This type of candidness is refreshing, even if it is in institution speak even if the message is not all that uplifting.