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Charting The WTF Economy

Tyler Durden's picture


America's WTF (certainly not to be confused with Winning The Future) economy summarized in one easy chart.

Conclusion: go long the WTF economy by shorting BAC which is a proud sponsor (courtesy of not having received one cash payment for hundreds of billions in inversely overwater mortgages) of the WTF spread.

h/t John Lohman


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Fri, 08/12/2011 - 14:46 | 1555046 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

Retail sales, more lies... to be revised later. What was Q1 GDP revised to in the end...?

America = Fascism No 1.

Let the festering fascist stink hole crumble.

Fri, 08/12/2011 - 14:53 | 1555098 Popo
Popo's picture

Retail sales includes gasoline and cars.   The latter are bought almost entirely on credit.   The former is partially inelastic and a rise in the price per gallon results in a rise in retail sales.   Take those two elements out, and retail sales are down.


Fri, 08/12/2011 - 15:00 | 1555128 TruthInSunshine
TruthInSunshine's picture

The Bernank says: "I can get growth by doubling or tripling the price of goods, because as distressed and increasingly unemployed/underemployed consumers cut back consumption by 15%, 25% or more, I'm still wringing out growth in expenditures."

This is highly sustainable, won't catch up with even large businesses in terms of margin compression (wait until consumption drops off the cliff), and carries with it no 'unvirtuous circle' boomerang (lined with a razor blade) affects.


The Bernank is smart, did well on standardized testing, went to Hahhhvad & MIT, got very good grades, taught at Princeton, studied the causes of Great Depression I (even as he now is sowing the seeds for Great Depression II) and will save the economy and world financial markets.



Fri, 08/12/2011 - 15:10 | 1555165 hedgeless_horseman
hedgeless_horseman's picture

The Bernank was a National Merit Scholar.  He won a National Merit Scholarship based on merit, not the "Merit" scholarship based on race.

Fri, 08/12/2011 - 15:12 | 1555182 FOC 1183
FOC 1183's picture

Ex-Food & Auto for the curious

Fri, 08/12/2011 - 15:21 | 1555216 flacon
flacon's picture

Thanks. Not much difference in those charts. 

Fri, 08/12/2011 - 15:50 | 1555317 Cursive
Cursive's picture


And don't forget that consumer spending is NOT adjusted for price canges, i.e. Inflation. Truly WTF.

Fri, 08/12/2011 - 15:56 | 1555340 JW n FL
JW n FL's picture

Uploaded by on Aug 12, 2011

Unveiling a new 6-Step pathway to free ourselves from the shackles of the national debt system.

Fri, 08/12/2011 - 20:43 | 1556055 11b40
11b40's picture

Excellent video, JW. 

I had never heard Bill Still, but this one of the clearest, best sumations of a very complicated subject that I have ever heard.  The fact that he also offers solutions and a pathway, all in about 5 minutes, is icing on the cake.  This video should go viral.

Fri, 08/12/2011 - 20:58 | 1556103 Cursive
Cursive's picture


You never heard of Bill Still? Check out Google video of "The Money Masters" or his more recent "The Secret of Oz." Excellent works. Thanks, JW, for the link.

Fri, 08/12/2011 - 22:08 | 1556236 JW n FL
JW n FL's picture

I posted Bill Still here for the first time over a year ago..

I am glad he is begining to catch on..

common sense is not so common!

heres a new story! YOU! ALL WILL LOVE THIS ONE!!


Amidst a financial and economic crisis, Congress has reached its summer recess and many representatives are going to Israel.


Altogether, 81 Congressmen and women have announced their one-week trips, paid for by the American Israel Education Fund, a non-profit affiliate of the American Israel Public Affairs Committee.

Sat, 08/13/2011 - 10:51 | 1557002 gall batter
gall batter's picture

I received an email from a friend who wanted people to call their Congressmen and women to find out if they are going to Israel.  She wanted all to let these "reps" KNOW that they should be staying here to listen to their constituents.  I wrote and told her that our Congress's constituents live in Israel.  

Sat, 08/13/2011 - 14:00 | 1557300 DeathCabfoKulaks
DeathCabfoKulaks's picture

We have to Kill the Kulaks at some point and Congress is going to get their marching orders.,7340,L-3342999,00.html

Sat, 08/13/2011 - 15:18 | 1557408 spiral_eyes
spiral_eyes's picture

buy treasuries, problem solved

roubinistan, bitchez 

Sat, 08/13/2011 - 11:06 | 1557015 Hulk
Hulk's picture

Ya done good JW!

Sat, 08/13/2011 - 12:23 | 1557151 JW n FL
JW n FL's picture

AIPAC Sends 81 Members of the US Congress on Vacation!

1/5th of Congress! is going to Israel the Largest single recipient of US AID!!

Forr many years the American media said that “Israel receives $1.8 billion in military aid” or that “Israel receives $1.2 billion in economic aid.” Both statements were true, but since they were never combined to give us the complete total of annual U.S. aid to Israel, they also were lies—true lies.

Recently Americans have begun to read and hear that “Israel receives $3 billion in annual U.S. foreign aid.” That's true. But it's still a lie. The problem is that in fiscal 1997 alone, Israel received from a variety of other U.S. federal budgets at least $525.8 million above and beyond its $3 billion from the foreign aid budget, and yet another $2 billion in federal loan guarantees. So the complete total of U.S. grants and loan guarantees to Israel for fiscal 1997 was $5,525,800,000.

Sat, 08/13/2011 - 15:40 | 1557426 Reese Bobby
Reese Bobby's picture

An equation even an anti-Semite like you might understand:

Islam = Satan.

Israel = #1 Islam enemy.

Satan = Enemy.

#1 Satan Enemy = Friend.

Israel = Friend.


If you lived in a country the size of New Jersey with your back to the sea and surrounded by unwitting Satanists dedicated to your "elimination" would you be as patient and measured as Israel?  I think not.


Not Jewish.  Not Imperialist.  Just Reese Bobby.

Sat, 08/13/2011 - 15:50 | 1557440 tip e. canoe
Sat, 08/13/2011 - 21:55 | 1558103 Reese Bobby
Reese Bobby's picture

Life becomes clearer once you understand pure evil, e.g. Satan.  Until then you are a little happy sissy boy, but I can't hope you live your whole life that way because you will end up lost.  Good Journey.  God Bless.

Sun, 08/14/2011 - 22:14 | 1560338 tip e. canoe
tip e. canoe's picture

life became clearer for me once i realized i was lost, for that is the day i truly noticed the bees and the trees, but that's me.  we all have our own journeys, yes?   please accept my apologies for trampling on yours in the quest for a cheap joke.   godspeed to you as well friend.

Sat, 08/13/2011 - 07:27 | 1556868 11b40
11b40's picture

Thanks for the other video suggestions, Cursive. 

Just to be clear, I have heard "of" Bill Still, just never bothered to watch one of his videos.  Finding the time to skim through ZH is difficult; chasing auxillary links is something I rarely do.  This one was very well worth the few minutes invested.  He delivers his message with such clarity that the average Joe can start to get it.

Sat, 08/13/2011 - 07:44 | 1556874 Jimmy Carter wa...
Jimmy Carter was right's picture

The thing I don't get with Bill Still is he says that when the Banksters shout for the return to the gold standard, that is the time they mean to take total control.  While people like Ron Paul want a gold standard to prevent total control.  Which is it?  Like most people here I'm into PM's.  Can anyone dissect the gold standard/Bill Still/ Ron Paul positions?  (I'm on my 3rd beer)

Sat, 08/13/2011 - 10:41 | 1556907 Cursive
Cursive's picture

@Jimmy Carter was right


You can boil Bill Still's position down to this simple maxim, "Whoever controls the money supply controls the economy (and by extension, the government and the people)."  As we've seen since the creation of the FRB in 1913, prosperity is not dependent on what backs a currency, but on the quantity of that currency.  So, it could be anything, including debt, that backs a currency.  A common mistake made on this site and other sites is that the FRN is fiat.  If it were only so.  Fiat (or nothing) would be preferable to debt, for debt-backed money tends to create a nation of debt slaves.  The most recent example of a true fiat currency was the Greenback issued by the U.S. during the War Betweeen the States.

The main problem with FRN's is that the quantity is exclusively controlled by the FRB, i.e. a group of unelected, unaccountable private bankers who are thereby allowed to control the global economy.  The main problem with gold is that it is a limited resource and the vast majority of it is not held by private individuals, thus making it easy to manipulate the gold price, which would cause many of the same problems that we encounter with debt backed money.  I agree with Bill Still about the ability to manipulate gold prices, but there are clearly problems with a strictly fiat currency controlled by a government body (although still preferable to our current debt-backed FRN's).

The beauty of Ron Paul's position is that he advocates a dual standard or multi-standard where currencies are allowed to trade alongside each other and it would not be illegal to accept currency other than FRN's or for private individuals or institutions to issue their own currency.  So, under Ron Paul's way, a gold-backed currency would be one way to keep a fiat-based currency honest.  If the UST were printing to many fiatscos, consumers and investors could seek safety in the alternate gold-backed currency.  Conversely, a fiat-based currency controlled by elected representatives rather thanprivate bankers would give citizens more power over the money supply and, thus, the economy.  I know many will say that would be a nightmare, but I prefer my current existence to that of a medieval surf and I appreciate the freedoms I've reaped from historical movements for individual liberty.

Sat, 08/13/2011 - 10:48 | 1556993 MsCreant
MsCreant's picture

I have not heard the debt based vs. fiat argument. I will need to let that percolate for a bit, not sure I buy it. All currencies including gold are fiat if you take it far enough.


Edit: Still percolating. Debt backed = counterparty risk, WILL default eventually (printing or no pay). Gold, it is there or it is not, same with a basket of goods. What is fiat then? By decree, but we declare what we declare, is that dependent on what we claim backs it? Or is the difference "stuff" vs. "good faith?"

Sat, 08/13/2011 - 14:37 | 1557346 Cursive
Cursive's picture



Haven't talked to you in awhile.  I hope things are good with the home and all.  First, any discussion of money is going to lead to problems with any "solution."  It's somewhat like the quote on Democracy - it sucks but it's the best alternative.  You are right, debt-backed money brings with it the responsibility to pay back.  More importantly, actually servicing the debt is nigh impossible without a major contraction in GDP and that doesn't even contemplate that we ever pay the principal down (thus, the Ponzi argument for our current predicament).  Fiat is different from debt-backed in that it is completely based on "good faith."

There are some examples of pure fiat, the Greenback being one of them and early American Continental Scrip another.  The Greenback allowed the U.S. to finance and win it's war against the CSA.  Hard money advocates revile both of these examples and I understand the argument against, but it is preferable to debt-backed currency.  Ron Paul's dual money or multi-money system would be a great check on potential abuses of fiat money.  I would just caution anyone who wants a pure return to a gold, silver or bi-metal backing to look at the major deflation that wreaked havoc on the agrarian and undeveloped parts of the U.S. (mainly everywhere except the Northeastern money centers) after the War Between the States.  That probelm eventually created the conditions for the creation of the Federal Reserve.

Sat, 08/13/2011 - 16:13 | 1557455 MsCreant
MsCreant's picture



The real problem is that we want a formula (democracy, a republic, gold backed, or basket, etc) and then we want to go on auto pilot. What is becoming abundantly clear is that we have all become so specialized in the knowledges that we each posess, that we are too overwhelmed too stay mindful of what is going on with the system itself. We trust auto pilot when we should not. The founding fathers were always, first and foremost, about vigilance.

Thanks for your answer, hope mine makes you feel like you communicated you point!!!

Sat, 08/13/2011 - 18:07 | 1557596 Cursive
Cursive's picture


A tenet of the new fiat currency board would be to fix the growth of the current money supply to the population growth.  Population growth up 1%, money supply up 1%.  That would be a good standard, but we'd have to be vigilant to keep that standard.

Sat, 08/13/2011 - 09:07 | 1556909 11b40
11b40's picture

Are you drinking Billy Beer?  What time zone are you in?  I'm on second cup of coffee.

Sat, 08/13/2011 - 09:14 | 1556918 Cursive
Cursive's picture


LOL.  Second cup here, too.  About to head out for the day.

Sat, 08/13/2011 - 10:35 | 1556983 Jimmy Carter wa...
Jimmy Carter was right's picture

lol, Japan


Fri, 08/12/2011 - 21:15 | 1556135 cranky-old-geezer
cranky-old-geezer's picture

Bill Still advocades the very same thing Ron Paul and others advocate, getting rid of the Fed and their FRNs, going back to currency issued by the federal government.

Of course this will never happen.  The banking & Wall Street oligarchy won't allow it.

He advocates states controlling the money supply, giving Congress what the states feel Congress needs.

This will never happen.  The banking & Wall Street oligarchy won't allow it.

He advocates paying off the existing national debt by creating enough currency to pay it off.

This will never happen.  Same reason.  The banking & Wall Street oligarchy won't allow another currency besides FRNs.

It should be clear by now that no real solution(s) will be allowed.  The banking & Wall Street oligarchy won't give up any control.

The only solution is for America to collapse into anarchy where geogrphical regions throw off federal government control (seceede from the union).   Nothing short of that will work.

Fri, 08/12/2011 - 21:18 | 1556144 FEDbuster
FEDbuster's picture

Reality is a bitch!

Hasten the Collapse, OBAMA 2012

Fri, 08/12/2011 - 23:53 | 1556425 JW n FL
JW n FL's picture

I think the republicans will fuck with social security and push austerity measures..

I am voting for them!

lets get the fires going!

 the sooner the fires start the sooner we can rebuild and get our country in order again!

Fuck the Banker Owners!

Sat, 08/13/2011 - 11:51 | 1557091 sun tzu
sun tzu's picture

Austerity is coming whether the republicans push for them or not. It's just a question of when. 

Sat, 08/13/2011 - 12:04 | 1557115 JW n FL
JW n FL's picture

continuing austerity for the Poor..

and then more Austerity for the Poor..

ALL THE WHILE! the Job Creators! get Trillions More Dollars that "We the People" back stop.

Corporate America will get Trillions from Red Team or Blue Team.. there is NO! Difference between the two, NONE!

The Lobby OWNS America! thats not true! the Lobby OWNS Washington DC!

The Lobby OWNS both the Red Team and the Blue Team!

Thusly! the Lobby Dollars, The Tax Breaks for the Rich (who already dont pay any fucking Taxes) and the Subsidies for the Rich! and EVERY Other kind of Corporate Welfare and Hand Out! that those blood sucking leeches can Dream Up! to help Their Lobby Pimps!


I want Republicans in!

I want more Tax Breaks for the Rich!

I want more Austerity for the Poor!

I want the Fires to get fucking burning! so we can throw these Bums Out!

Fuck Washington DC Lobby Whores!


Sat, 08/13/2011 - 12:09 | 1557126 JW n FL
JW n FL's picture


Lets Cut Grandma's Social Seciruty so that the Rich dont have to pay their fair share!

Fuckin Bring that shit on!!

Lets GO!



Sat, 08/13/2011 - 12:12 | 1557135 JW n FL
JW n FL's picture

and lets NOT Forget the Democrats had control of the House and the Senate and DID NOT DO A FUCKING THING! to Help Grandma!

Social Security is going to get cut!

What Wall Street wants! Wall Street gets!

It will not happen soon enough for me!

Slow Boil My ASS!

Fri, 08/12/2011 - 22:38 | 1556253 Zero Govt
Zero Govt's picture

Cranky Old Geezer

"The only solution is for America to collapse into anarchy where geogrphical regions throw off federal government control (seceede from the union).   Nothing short of that will work."

I agree with you Mr Still doesn't 'get it' but neither do you. Replacing a national monopoly (US Govt) with State-by-State Govt is the same idiocy as Ron Paul and the Tea Parties solution: making Govt smaller

I suggest you look at local State Govt, and indeed Town Council Govt. They all display all the exact same problems as National Govt (over-spending, over-indebted, absolutely incompetent, riddled with parasites and extremist groups trying to ratchet their delusions over society and totally corrupt). That's because they are all monopolies (of authority).

Mr. Still also believes in the voting system, "democracy". But elections can be rigged because they are a monopoly authroity system. This authroity also defines the question to be voted on which can (will) be corrupted. And elections are also every 4 years or so. In a free market competition distributes power every day to society versus a monopoly market which hoards power for 4 years between elections.

And has Mr Still (or anyone!) got any evidence whatsoever people that vote make wise decisions? I think the proof is throughout every voting system in history the people who vote are deranged. The sane ones are the people that do not vote "because it doesn't change anything". They are absolutely right of course. Why would any ingratiated system (Depts like the Judiciary etc) allow people to change their system?

Society does not work by 'democracy' or majority vote. It works best when one or a handful of people have a bright idea, then fringe groups like it and pick it up and then the rest of the herd follows. That's has the new latest best thing developes in business, technology, engineering, science, music, fashion, you name it.

The majority of people just want to get on with their lives, not become 'experts' in money or science or the latest fashion. They prefer to follow others leads (risk takers on the edge of society) once it is proven a success. That's the way nature also works change and the way free (competitive) markets work best too

The problem with the world is problem solving. Govt (monopoly power) is no way to go about it. The 'Democracy' of mass voting is also no way to go about it.

So monoplising authority, including money, in society is a dumb failed idea. And majority voting systems are also a dumb failed idea.

But I offer a simple solution: Zero Govt. Bin the monoply authority of Govt and bin voting and bin the 1 solution Mr Still wants. Leave it to a free society with free (competitive) markets in money. Because what history shows is nobody has got 1 answer on anything, there is no '1 Right' answer. Human history (like nature) shows the only constant is change and Mr Still doesn't want change, he wants a new monopoly to to replace an old monopoly

But as you detail the powerbrokers and vested interests will not let this happen (more wishful thinking by Mr Still) throught he democratic voting process. So my solution is even more simple: Zero Tax.

'Vote' by Stop Paying Your Taxes ...that bypasses Govt and power systems and Govt will very quickly implode (take-down the monopoly system the parasites have control of). When Govt implodes all the monopolists very quickly run out of their money because their protection racket (Govt) is funded by your money

With Govt gone a free society and free markets will work their miracles, eat alive monopolists and big bankrupt banks, and come up with many solutions for money. All 'powerless' you need do is to Stop Paying Your Taxes. Pretty simple solution don't you agree? 

Sat, 08/13/2011 - 07:54 | 1556878 Absinthe Minded
Absinthe Minded's picture

"Stop paying your taxes."

They lie about all other statistics, what's to keep them from lying about what our actual tax receipts are and just printing what they want? I believe the computer has ruined our society. Yeah, I know, why don't I throw mine in the trash. Think about it, since computers have come into existence everything has gone into overdrive. Stock markets, video games, news. The instant gratification crowd has never been more hungry for more. When you click on a link if it takes more than a second to load you're looking at the page saying WTF. Worst of all, it's allowed the creation of electronic money, voting systems, weapons systems, you name it. They can all be manipulated or hacked. If we, I should say when we have a major loss of life event, I would bet that it will have to do with a system being hacked rather than a natural disaster.

Sat, 08/13/2011 - 10:09 | 1556960 RockyRacoon
RockyRacoon's picture

A computer is merely a tool, not the spawn of the devil.  I can poke my eye out with a screwdriver but that's not its highest and best use.   I can do that with a stick... if that's my goal.

Sat, 08/13/2011 - 10:28 | 1556977 Absinthe Minded
Absinthe Minded's picture

Yes, but a computer does things so much faster. Imagine that screwdriver in a giant sewing machine plunging in and out of your skull.

Sat, 08/13/2011 - 13:02 | 1557212 John_Coltrane
John_Coltrane's picture

The problem with your argument is I could say the same thing about the invention of the power drill, circular saw, or car to replace the horse etc.  These are simply tools to leverage human labor.  Would I rather access a database on my computer for my research or go to the library and find the right source book and photocopy the relevent pages, or download a .pdf or .tif file for immediate use?  I can find every research article in my field in a couple hours, for example.  Which is the better use of my time-drilling holes for my deck by hand or using my rechargable dril?  Well I voted with my wallet for the power drill years ago.

Sat, 08/13/2011 - 17:49 | 1557557 GFKjunior
GFKjunior's picture

Excellent! Total elimination of the state should be the next step for humanity.

Sat, 08/13/2011 - 08:01 | 1556881 11b40
11b40's picture

I don't pretend to know what will work or what can or cannot happen, and try to steer clear of such big words as never, always, etc. 

I also understand the arguments for and against the FED, and good cases can be made by well intentioned people on both sides of the issue.

What is glaringly obvious is that what's happening now is not working very well, and there is no leadership on either side of the aisle seriously challenging the status quo.  This leads me to assume there won't be - until voters start demanding some very SPECIFIC changes.  Simply to call for or to offer up some vague concept of "change" is a fool's game.  In fact, it's come to the point where the word scares me, as most the changes I have seen for the past several decades have been negative ones.

The point I want to make regarding that little Bill Still video is that he lays it out in layman's terms.  It is the kind of thing you could show to your wife, brother, or friends and they might actually get it.  He may not have all the answers, but he does offer up some stimulating ideas to build upon. 

This article is about our WTF economy.  For every 100 people who watched this video, some factor of 'x' just might have their personal WTF moment.  It is only when there are enough people who have come to understand these basic concepts that any honest debate will be possible.  What Wall St. and the Oligarch's will or will not allow depends on what the people demand.  After all, the financial reforms put in place in the 30's served us well for about 50 years.....until they were repealed over the past 30 years.  Gradually at first, then the floodgates opened starting with the repeal of Glass-Stegall.



Sat, 08/13/2011 - 11:27 | 1557052 gall batter
gall batter's picture

But Still says call your Congressman.  Call Congress.  Well, I have.  And I've signed peititions.  Nothing changes because I'm powerless.  I'm not a multinational corporation with a huge donation to offer as a bribe.  

Sat, 08/13/2011 - 10:26 | 1556974 RockyRacoon
RockyRacoon's picture

Unveiling a new 6-Step pathway to free ourselves from the shackles of the national debt system.

Yeah, give Congress the power to create this "legislative reform".  That's using the same system that created the mess to clean up the mess.   Sorry.   Try again.

Fri, 08/12/2011 - 15:59 | 1555352 Manthong
Manthong's picture

"I can get growth by doubling or tripling the price of goods,"

Did he really say that?

Revolutions have happened for less offensive things.


Fri, 08/12/2011 - 16:15 | 1555408 schizo321437
schizo321437's picture

The figures is a lie.

Fri, 08/12/2011 - 16:15 | 1555412 A Lunatic
A Lunatic's picture

This is nothing that a giant (thing really fucking big here) vat of Blue Bonnet Margarine can't fix.

Fri, 08/12/2011 - 16:41 | 1555513 JeffB
JeffB's picture

"Did he really say that?"


If he did, I'm sure it was behind closed doors. Even he's not a big enough idiot to say that in public.


Fri, 08/12/2011 - 17:35 | 1555684 Anonymouse
Anonymouse's picture

I wondered exactly the same thing.  Google the first clause of the quote and got nothing.  Not sure if that was an inexact quote or was this a point of view the poster attributed to the Bernank to demonstrate his mindset.  It rings true, but an exact quote (and its source) would be preferable here

Fri, 08/12/2011 - 18:55 | 1555873 marsdefIAnCe
marsdefIAnCe's picture

this ^


are we supposed to be surprised confidence is down when nominal spending is rising less than inflation, tyler?

Fri, 08/12/2011 - 23:00 | 1556318 TruthInSunshine
TruthInSunshine's picture

Sorry for the confusion.

That wasn't an exact quote of The Bernank, but my extrapolation of his mentality, and conjuring up an hyperbolic. fictitious quote to demonstrate my view of the warped approach to economics that I feel The Bernank takes.

I should've put in /sarc/ tags.

At any rate, the raw figures do work in the way described, to wit; if inflation runs at a 7% per annum rate for two years (which I believe to be probable, if not too conservative a figure, actually), then it would take 14% more USD to buy the same basket of things.

Under such a scenario, consumers could cut back their consumption of, well, everything by 7% over that two year period, and consumption would grow by 7%.

That's a very rough example, but hopefully everyone gets the gist of it.

Fri, 08/12/2011 - 17:34 | 1555686 Caviar Emptor
Caviar Emptor's picture

Cheap dollar bolsters retail sales to foreigners: NYC flaship retail stores packed with tourists on shopping sprees

Fri, 08/12/2011 - 18:14 | 1555780 NumberNone
NumberNone's picture

How about this...the UOM survey is phone interview most likely calling people with land lines.  If you still have a land line chances are you are probably older, more educated, more conservative, and see the world more pessimistically.  The consumer is everybody else in the population that could give a fuck about what's going on. 

Fri, 08/12/2011 - 23:34 | 1556390 snowball777
snowball777's picture

1) start from dubious premise

2) build castle of sand on dubious conclusion derived from dubious premise

3) logic fail!

Sat, 08/13/2011 - 09:12 | 1556917 NumberNone
NumberNone's picture

Love this site.  Off-the-cuff comments meet the woodshed. 

I did a little homework on the above slides and found some incredible analysis done by a guy named Doug Short (how appropriate).  He actually takes the retail sales report and adjusts it for inflation and population growth.  If this is done, the two lines between Consumer Sentiment and YOY retail sales are not quite as far apart as the above slide suggests.  If you just take the Retail Sales numbers at face value it does look like the US consumer is on an endless buying binge...but adjusted it shows our per capita spending is the same as it was in 1999.

Link to article: 

Sat, 08/13/2011 - 09:30 | 1556927 TruthInSunshine
TruthInSunshine's picture

Yeah, bitchez!!!

THAT'S what I'm talking about.

Thanks to Doug Short & #1 for linking that.

The Bernank works in mysterious ways.

Sat, 08/13/2011 - 12:11 | 1557130 snowball777
snowball777's picture

Yup...plenty of obfuscation to be had in aggregation. If it was good enough for Reagan (another big beneficiary of population growth masquerading as economic growth), it's good enough for MSM goal-seeking.

It's only gonna get more ugly from here on in as the squatters need to start paying rent and inflation in staples further erodes discretionary spending.

Let them eat ZIRP!

Fri, 08/12/2011 - 15:17 | 1555190 TruthInSunshine
TruthInSunshine's picture

***OT, but truly WTF.

Shit's about to hit the fan?

Can someone send this to ZH for posting?

Shit actually, finally is about to get real?


FT Alphaville


Weren’t we all conditioned to think that reverse-repo operations were meant to be an exit strategy? Weren’t they supposed to be deployed as a way to soak up all those excess reserves?

Why on earth would the Fed be choosing to soak up excess reserves at a time when the panic in the markets has reached highs not seen since 2008, and at a time when most of the market is calling for more liquidity and quantitative easing?

Well, we would argue it’s because the Fed believs the financial system may have crashed through a critically important juncture. Actually perhaps a rabbit hole or a looking glass are more accurate.

QE is no longer the cure. It has now become a poison.

Which would explain why the Fed did not announce more QE at the last FOMC meeting, despite rampant calls for the opposite.

It’s now very possible that the majority of the FOMC voting committee believes more QE could plunge the system into a desperate capital preservation frenzy, resulting in nothing else than self-imposed and voluntary capital destruction.

That the system is so broken, it doesn’t matter how much liquidity the Fed creates because it won’t be able to get any further than the immediate banking community. And that’s because banks still can’t find enough credit worthy people to lend to. That the majority of loans still have a greater default risk than the banks are prepared to weather. That loans equal capital deterioration. And only loans to the most credit worthy people (of which there are not enough) are worthwhile.

If banks do indeed perceive that capital deterioration risk from lending is much greater than a self-imposed haircut on the most liquid and safe security, they’re prepared to take that haircut — especially in a world with no alternative — because it guarantees some sort of remaining capital preservation. The haircut, of course, is the negative interest rate.

If that is the case, the worse thing the Fed could do is more asset purchases. It would only take out more supply of quality collateral out of the market, heightening the pressure to take a self-imposed haircut just in order to get your hands on the security. A fact echoed by the number of above par bids at this week’s 30-year Treasury auction.

As we’ve already noted, Ben Bernanke discussed that the Great Depression was arguably catlaysed by a move towards voluntary capital destruction via a frenzied fight for the remaining quality collateral.

Back then, the Fed also deployed so-called quantitative easing to flood the system with liquidity. It only made the situation worse.

Fri, 08/12/2011 - 15:26 | 1555239 SheepDog-One
SheepDog-One's picture


Probably shits about to really hit the fan, I feel it,  just as soon as theyve now got everyone believing we just coast along calmly, a bit up here, a down there but immediately recovered of course...then one Monday morning the planted nukes go off in major US cities. Who knows! But something is VERY wrong here.

Fri, 08/12/2011 - 15:47 | 1555310 TruthInSunshine
TruthInSunshine's picture

If this is close to correct, a lot of QE3 hopefuls, especially if positioned long, are about to get steamrolled.

I'm sure Jon Hisenrath has been tipped off, so that means that JP Morgan and Goldman Sachs have been tipped off, also, and if this is correct, than they've probably got their ultra-3050xleverage shorts on.

Fri, 08/12/2011 - 16:36 | 1555485 UGrev
UGrev's picture

Is that your way of saying DOW 5000?

Fri, 08/12/2011 - 17:41 | 1555701 Caviar Emptor
Caviar Emptor's picture

Been sayin' it for 2 years here: QE spawned biflation, which is an endgame checkmate to Modern Monetary Theory. Fed can't fight asset deflation anymore with liquidity because the birpoduct is a biflationary vicious spiral where the cost structure of the economy rises and actually trebles the negative effects of asset deflation. 

It was an unforseen consequence of bold, reckless policy decisions. 

Checkmate, baby

Fri, 08/12/2011 - 20:14 | 1555998 trav7777
trav7777's picture

I wrote years ago, think it was on TF, that the Liquidity Trap that Japan encountered and has been trying to QE out of for decades, was not even acknowledged as real by contemporary economic theory.

The basic theories that the economists live by do not take into account the inability of something to grow further.  Yields in Japan are zero.  Real yields.  There's a point at which all things saturate and you cannot just pump in more catalyst to make the reaction move faster

Fri, 08/12/2011 - 23:37 | 1556396 snowball777
snowball777's picture

Especially when old Japanese farts own 95% of your public debt and run to the bank to deposit every yen of stimulus. Their problem is demographic and cultural, not fiscal.

If they started taxing wealth in Japan, it would clear up their growth problem in a not-so-lost decade.


Sat, 08/13/2011 - 11:55 | 1557102 sun tzu
sun tzu's picture

How dare they save their money instead of buying more ipods and other gadgets and going into debt

Sat, 08/13/2011 - 12:14 | 1557139 snowball777
snowball777's picture

Because there's nothing in-between saving everything and going into debt?

You're a really big fan of false dichotomies, but they're a sad substitute for actual logic.

Sat, 08/13/2011 - 17:24 | 1557507 mkkby
mkkby's picture

Forcing people to behave the way you like doesn't fix anything.  That will just cause capital flight.  The savings would just go stimulate someone else's economy, or into commodities.

Try borrowing a brain cell from a worm or mosquito.  You need it more than they do.

Sat, 08/13/2011 - 17:58 | 1557575 snowball777
snowball777's picture

Oh, that's why they've been monetizing debt for two decades, because they didn't want to tell people how to behave.

I can't tell if you're the worm or the mosquito, but you're obviously not using yours much.

Sat, 08/13/2011 - 11:14 | 1557028 centerline
centerline's picture

Any system based on perpetual growth will fail.  One could argue that modern economic systems have mechanisms that allow for contraction - but the failure is in economics to get out of the equations and account for human behavior.  Greed and ego prevent contraction.  The concentration of power that has occurred over time guarantees that proper economic behavior will not be allowed.  At this point, it has gone so far as to create a social dependancy that would make the ancient Romans blush.  And for this reason, the system is doomed.  And in it's failure, there is strong chance that the life expectacy averages are going to plummet in upcoming decades.

I am so sick of every economic fucktard always talking about "growing the economy."   And if anyone calls my attitude "doomer" mentatily... I would propose you take a look at the historic population growth charts and tell me if that one chart looks sustainable.  You will also find part of the reason we think of economies as having to "grow" to survive (the other also being rooted in human behavior, imo... keeping the hamsters on the wheel).  Anyhow, anything moving on such a trajectory is at some point going to experience a significant shock (ceiling).  Welcome to the top of the rollercoaster...the ratcheting noise has now ended...  the first drop was a teaser... and we are gliding smoothly now across the top of the hill.  You know what comes next.  Hands up if your not a pussy.  No crying either.

Sat, 08/13/2011 - 03:52 | 1556653 Jack Sheet
Jack Sheet's picture

How's about Mish's latest deflation diatribe

anyone commenting on the CPI (official or unofficial) gest flattened

Sat, 08/13/2011 - 04:49 | 1556699 alexwest
alexwest's picture

mish is an idiot..

he came up w/ own inflation/defaltion definition..
so according stupid one, higher prices dont matter, as long as %rates low and credit is contracting..

he has no clue about real economy and how realife households operates..

he's got short term thinking.. he thinks if house prices are down 50% of top,its deflation..

idiots like him always forget that prices were growing since 80x, but incomes were stagnant since 1970x..
so housing is still pretty expensive to incomes.. so prices reflect inflation...

when avg house price will be priced less 1 year income, then its deflation..

stupid ones alway forget THAT PRICES DONT MEAN A THING, ratio price_ANYTHING/income is IMPORTANT...

rich dont care about food price , they're rich...
poor dont care about price of yacht/jets.. they cant afford..

according Mish if price of yacht/jet is down , this somehow benefits to poor aka 80% of popualation..

so he doesnt pay attention that prices of basic stuff double in 2 years ..


Sat, 08/13/2011 - 05:43 | 1556739 Jack Sheet
Jack Sheet's picture

Absolutely. Mish's discussion is completely academic. Shadowstats has the alternate CPI (calculated according to 1980 methodology) currently at over 10%. The other thing he fails to come across with is how to invest based on his macro picture. He says he has gold (having sold his silver) but not the % of portfolio and nothing about eny other investment. Treasuries ?? with the dollar being trashed (he disputes the latter also)- LOL. He is obsessed with discrediting hyperinflationary scenarios, when even 6% price inflation can halve your purcahsing power in 11 years.

Sat, 08/13/2011 - 10:14 | 1556964 RockyRacoon
RockyRacoon's picture

Any discussion of inflation/deflation is academic in nature.   Mish's analysis of debt marked-to-market is worth a look.   Some of the comments about his article show that they did not actually READ the article and the associated links.   He admits to being wrong in the past; have any of the others who bash his view admitted that?   I don't buy into his full world-view but, like most people, he has a clear view of some aspects of the economy and financial markets.

Sat, 08/13/2011 - 14:52 | 1557372 DeathCabfoKulaks
DeathCabfoKulaks's picture

Are people really confused by the inflation/deflation "dilemma"?

The shit that the chinese can buy is subject to inflation, like gold and oil and corn.

The shit they wont buy ,like our McMansions and labor, is subject to deflation.

Sat, 08/13/2011 - 18:52 | 1557665 snowball777
snowball777's picture

Mish is right about credit being an important component of monetary inflation
and completely wrong about the irrelevance of price inflation and also wrong about
whether or not some economists are as confused about the differences between the two as he seems to be.

Fri, 08/12/2011 - 16:28 | 1555453 Henry Chinaski
Henry Chinaski's picture

Nukes would be overkill.  A "cyberterrorist attack" on the financial system would do the trick.  Perfect excuse to shut down the internent and reset the financial system. 

Fri, 08/12/2011 - 17:45 | 1555710 ElvisDog
ElvisDog's picture

Don't know if I just kidding about this or not, but if "they" nuked the top 25 cities in terms of population on planet Earth it would probably be a great boon to humanity. Just think of all the shit holes that would no longer be a worry.

Fri, 08/12/2011 - 20:29 | 1556024 mynhair
mynhair's picture

Make it 26.  Don't want to leave out Seattle.

Fri, 08/12/2011 - 21:30 | 1556171 Matte_Black
Matte_Black's picture

Holy jesus fckn christ. really? pike place? greenlake inn for brunch on sundays? pioneer square on friday night? I feel like you just stabbed me.

Sat, 08/13/2011 - 02:59 | 1556609 slewie the pi-rat
slewie the pi-rat's picture

when my kids were younger, we took a train trip from sacramento to seattle.  and we had reservations to stay at the hotel built over the water, where you can "fish out the windows".

so, we sack out on the train, slewie-style, all over the seats.  the next morning i look out, and we're only 1/2 way up mt shasta!  they didn't have the extra locomotiove to get us up this fuker, and i coulda walked it faster! 

so the train ride turns into a freaking ordeal, we finally get to the styoooopid stupor dome/train station, and when i get outa the cab and to the hotel desk, the guy says:  we didn't hold your reservation;  we are full;  we will cheerfully take you, at our expense in a white van to another hotel... 

this poor bastard got slewie's FUK YOU heard 'round the world!  more and better managers kept arriving to handle the slewie family scenario of "we're camping in your damned lobby, then, till we get our room.  or:  arrest me and take my 5 & 10-year-oldz into family custody.  your choice, asswipes!"  and give us some free food while you get our room ready, ok?

after fishing out the windows for a few days, we took a boat to vancouver island, and no one has any memory of how we got home. 

Sat, 08/13/2011 - 03:05 | 1556613 KowPie
KowPie's picture

"this poor bastard got slewie's FUK YOU heard 'round the world! ...."


Holy shit! What a line! That whole paragraph and the next has me spewing iced tea on my keyboard. Where are the damn green buttons when you need them?!?!?!

Sat, 08/13/2011 - 11:20 | 1557040 Hulk
Hulk's picture

+1 Pi-Rat

Sat, 08/13/2011 - 12:10 | 1557127 Cathartes Aura
Cathartes Aura's picture

vivid enough to almost have the memory myself!  hilarious slewie!

speaking of memory, wasn't that the infamous hotel the Zepplin lads got up to major shenanigans at?  it's been a few decades since I read that book, but the antics of rawk stars always live on. . . perhaps that's why they call 'em "stars" - the light still shines even after they've burnt out. . .

Sat, 08/13/2011 - 12:32 | 1557161 Sunshine n Lollipops
Sunshine n Lollipops's picture

"Make it 26.  Don't want to leave out Seattle."


Are you fucking insane?

Sat, 08/13/2011 - 18:56 | 1557673 snowball777
snowball777's picture

While you'd take out a good chunk of the less utilitarian members of society, you would also wipe out the majority of the productive people on the planet and be left with legions of fat, stupid agrarians. While that might be a minor boon to the planet, it would definitely not be a net win for the dregs of humanity "left behind".

Call it "The Unrapture".

Fri, 08/12/2011 - 17:49 | 1555721 macholatte
macholatte's picture

There are any number of ways to completely freak the American Sheeple, none of which I will mention herein, that require very little expertise, relatively little money and nothing even remotely close to a nuke. Terrorism is, afterall, not an end in itself. It is only a means to disrupt, aggitate and distress the victim. Within that context, sticks & stones are much more effective than a Trident submarine as has been illustrated by Bin Laden. You don't need to punch the giant in the jaw. If you can cut off one or two of his toes, he goes down.

Fri, 08/12/2011 - 20:38 | 1556045 Pay Day Today
Pay Day Today's picture

Whatever they do, it must be a dramatic visual televisable spectacle that Americans can get a grasp on. Dropping bombs in Libya is a fail on all counts for instance.

Fri, 08/12/2011 - 21:16 | 1556134 FEDbuster
FEDbuster's picture

Macholatte, you want a toe? I can get you a toe....  Fucking amateurs.

Sat, 08/13/2011 - 11:28 | 1557053 macholatte
macholatte's picture

Hat Tip to you Fedbuster.  Thanks!

Fri, 08/12/2011 - 23:02 | 1556323 DeadFred
DeadFred's picture

When choosing toes aim for the ones made of clay, not the iron ones. PIIGS, there's five toes for targets.

Fri, 08/12/2011 - 23:38 | 1556398 snowball777
snowball777's picture

They're called HFT houses.

Fri, 08/12/2011 - 15:56 | 1555336 RobD
RobD's picture

If this is true what is the plan? The Bernank gives his speech at Jackson Hole and says no QE for you! The market tanks and the dollar shoots up? We have massive deflation and a depression to end all depression or is it SD-1s option-false flag attack WWIII?

Fri, 08/12/2011 - 16:03 | 1555367 TruthInSunshine
TruthInSunshine's picture

It may be a sign that Trichet needs to prepare for an EU credit crisis of massive proportions, and that The Bernank is telegraphing to him that there will be no open currency swap options this time, as there were in 2008, so Trichet needs to get Merkel on board for the Great EU bailout of 2011.

Fri, 08/12/2011 - 17:51 | 1555730 macholatte
macholatte's picture

The Bernank is telegraphing to him ...........

My guess is that they talk on the phone nearly every day.

Fri, 08/12/2011 - 23:05 | 1556330 TruthInSunshine
TruthInSunshine's picture

Tu che.

Fri, 08/12/2011 - 23:18 | 1556360 Founders Keeper
Founders Keeper's picture

[It may be a sign that Trichet needs to prepare for an EU credit crisis of massive proportions, and that The Bernank is telegraphing to him that there will be no open currency swap options...]---TIS

I was shocked S&P downgraded US. 

I was shocked the Feds did not hint QE3 at last Tuesday's meeting.

The market swings this week were shocking.  The only thing more shocking than a 600pt DOWN day is one followed by a 400pt UP day.  This week was no ordinary week.  I think maybe a wheel fell off last week.  BIG moves are in the works.


TIS, thanks for the FT link.  Very interesting.  Regarding the Fed signaling ECB about swaps, why not just make a phone call. 


Fri, 08/12/2011 - 20:43 | 1556057 ActionFive
ActionFive's picture

At the doorstep of POTUS election campaign.

Going to be a hard one with no QE- unless we have come to the point where elections don't matter to TPTB/fixed. 

Fri, 08/12/2011 - 22:53 | 1556305 Creepy Lurker
Creepy Lurker's picture

TPTB have already decided the election. Of course it's going to be Mitt 'used car salesman' Romney so the sheeple will think they "elected" him. Seriously, you could see it 6 months ago.

Fri, 08/12/2011 - 23:39 | 1556402 snowball777
snowball777's picture sides...oww.

Sat, 08/13/2011 - 00:40 | 1556487 Cathartes Aura
Cathartes Aura's picture

hahahh, that'll be priceless, Mormon-Mitt can appoint his fellow co-religious-er Glenn "I'm holding a RALLY in Israel!!!" Beck to play Karl Rove's role, let the surreality (begin) continue!!!

(grrr for broken strikethrough. . .)

Sat, 08/13/2011 - 11:51 | 1557092 Creepy Lurker
Creepy Lurker's picture

Haha, disbelieve me if you choose, but the MSM has already crowned the latter-day used car salesman.

Sat, 08/13/2011 - 12:23 | 1557153 Cathartes Aura
Cathartes Aura's picture

oh no, I wasn't diss-ing your belief, I was jumping into your scenario!  I think if we last long enough to actually play elect-ums again, Mitt will Fit quite nicely - Mormons have the Masonic special-secrets as part of their beliefs, and are encouraged to do prepper style food stores, among other things - I can see it playing out as another Daddy-style Pres looks to "save" the masses. . . that Beck has vid & pics with his 16th dg Mason tour T-shirt on, and is rallying the Zionists in their home field just fits so well, doesn't it?

hell, meet handbasket -------->  going dooooowwwwwwnnnn!

Sat, 08/13/2011 - 12:00 | 1557109 sun tzu
sun tzu's picture

Don't forget Rick Perry. He's wholly owned by the global elitists too

Sat, 08/13/2011 - 12:18 | 1557140 Founders Keeper
Founders Keeper's picture


[Of course it's going to be Mitt 'used car salesman' Romney...]---Creepy Lurker

So, the leftist MSM protects a mainstream Republican like Romney to run against Obama (or Hillary, as the case may be). 

As a Tea Party member, I will never back a same-old same-old Republican candidate like Romney.  The MSM knows this.  So, the leftist MSM also promotes a Republican split-ticket spoiler, a Tea Party-like candidate.  Repub ticket is split, the leftist MSM walks Obama or Hillary to an easy win.

That's assuming we have free and fair elections come Fall 2012.


Sat, 08/13/2011 - 12:31 | 1557160 Cathartes Aura
Cathartes Aura's picture

don't hold your breath - "free 'n' fair" elections haven't happened stateside in decades. . .

though I'm sure you know that - your split ticket thoughts are spot on though. . . I also wouldn't be surprised if the stage wasn't being set for another lineage revenge story, ala babyBush avenging Daddy's war. . . Paul family baton-passing & all that. . .

Sat, 08/13/2011 - 13:59 | 1557299 Creepy Lurker
Creepy Lurker's picture

Agree with all 3 of you above. TPTB still have make the sham elections look plausible. (At least for now.)

I can see Perry doing the Regan Redux too. Even looks like him, a little.

Sat, 08/13/2011 - 15:44 | 1557431 Cathartes Aura
Cathartes Aura's picture

aye, plays right into those who keep repeating "the Raygun was the last best patriot President who never did nuthin bad we need him back!" crowd, they just love Father-Figures . . sounds like WINNING.


Fri, 08/12/2011 - 16:14 | 1555405 Smiddywesson
Smiddywesson's picture

And that’s because banks still can’t find enough credit worthy people to lend to.

Partly right.  Another reason they won't lend to even credit worthy people is that they know the currency is being destroyed and they know those loans will be paid back partly in funny money.  The game is to kick the can and stack gold.  When they can't get cheap gold, they will switch us to a gold standard and ramp the price of the gold in their vaults.  They will not run the dollar to zero, the turnover point will be reached long before that, so they will get something from the loans they have outstanding.  They take a partial loss on those loans, but make a bundle on the gold standard.   

Fri, 08/12/2011 - 16:20 | 1555427 TruthInSunshine
TruthInSunshine's picture

Let us not forget about the hazard of loaning money to *currently* credit worthy people, who are buying assets with that loan that may depreciate more in value, and the lender could face a situation, given the deteriorating fundamentals of the economy, where the borrower becomes not so credit worthy and/or the asset purchased with the loan erodes in value (to the point where even the bank's LTV ratio used becomes moot).

Fri, 08/12/2011 - 18:25 | 1555803 Caviar Emptor
Caviar Emptor's picture

Exactly. Simple deflationary economics: you don't lend at today's price when you believe tomorrow's price will be lower. Collateral won't be sufficient, owner will be underwater or defaulting on loan

Fri, 08/12/2011 - 20:20 | 1556009 trav7777
trav7777's picture

deeper than that:  at a basic level, you neither lend nor borrow at 2% when 1% is the best ROI you can achieve.

This is where we are.  I wrote extensively on this and the principles of synthetic debt on TF back in 07/08.  People think CDSs were "reckless" wagers; they weren't.  They were the only thing forwarding growth of the credit base once the real economy achieved an inflection point.

Fri, 08/12/2011 - 21:39 | 1556186 Caviar Emptor
Caviar Emptor's picture

the real economy achieved an inflection point.

Agree, trav. The Fed and mainstream economists are stymied by the hall of mirrors they're in: where their actions no longer have the expected reaction. Where things no longer move in linear fashion. And what seems to be contradictory outcomes are the norm. And the calculus of negative real yields is an integral piece of the puzzle. But it's not the whole story.  But there's internal consistency to it all. Their biggest mistake: putting the US economy under a microscope and in a test tube. They failed to grasp the bigger picture. 

Sat, 08/13/2011 - 11:23 | 1557043 centerline
centerline's picture

Bingo... both you and Trav are spot on.  Debt saturation...inflection point.  Yield extraction can only occur now via cannabalizing the system.

Sat, 08/13/2011 - 14:43 | 1557348 B9K9
B9K9's picture

The Fed and mainstream economists are stymied

Please, you've been around here long enough to know that no one is 'stymied'. What, you think only you, Denninger, Trav, me, and some others are the only ones brilliant enough to understand this conundrum? LOL - really, you're too much.

This shit was known 40 years ago - actually, over 100 years ago. You don't think people 100, 500, 1,000, 50,000 years ago weren't familiar with populatoin overshoot & resource depletion? Crap man, what drove the emigration to the New World? (Or, for that matter, the original hominids out of Africa?) A brand new, virgin continent inhabited by a handful of stone age primitives. In a nut shell, the entire history of all species is one involving competition over scarce resources - it's Darwin writ large.

It was always known that eventually the oil would run out. It was the ultimate "kick the can" in terms of hoping humanity would come up with some miracle breakthrough far off in the "future" before the SHTF. In fact, as everyone now knows, it isn't declining production that has killed the economy, it is in fact merely flat production. That is, how do you pay compounding interest of 2-3% if you can't increase (fossil fuel driven) economic output by the same degree? Year- on-year forever?

But you're free to believe the authorities are 'stymied' or otherwise 'don't have a clue'. What it will get you is severe impoverishment - those who know the score are sizing up probabilities in terms of survivability.

Sat, 08/13/2011 - 23:13 | 1558229 Prometheus418
Prometheus418's picture

That's the thinking of a bean-counter, Trav.  Those are the folks who got us into this mess in the first place, and emulating them will not save a single soul.

We need to restart our system from first principles, and for that to happen, common sense in relation to matters both social and financial needs to make a comeback.

As an example- I am a primary producer.  Specifically, there is nothing that can be made from metal that I cannot make, even with limited tools and equipment.  That is a traditionally American (and German) skill set.  So, even though I am actually gaining a negative ROI in my employment- I still show up to work every day.  In fact, I just finished a grueling 110-hour two week pay period to ensure that the company I work for can keep it's doors open, and I expect more of those to come.  I will face it, not because I want to- but because there is no other rational choice.

Right now, unfortunately, we have allowed a layer of shit to fall over the world, and that is harrowing- but it is not in and of itself a reason to give up and allow the world to decline into dust and chaos.  Even if it tears the flesh from our bones, it is not acceptable to allow all that we have inherited to slip away into darkness.  If you have working capital, you need to put it to work- not to get rich, but to survive as an individual who is part of a socially-oriented species.  

As sure as anything, the sun will rise again in the east tomorrow.  The choices we make as groups and individuals can only determine whether those rays fall on a thriving society, or a land of smoke and ruin.  That is not to say that you should waste your money on fruitless endevors- I am no socialist, and do not believe that largess should be apportioned in accordance with need.  Capital should follow production, and if we can return to that basic tenet, we can rebuild all those things which have been stolen from us through deception.  It is time to throw off the old market system, and return to one in which capital provides the fuel for productive activity, rather than stripping the innocent of assets.

All semantics aside, you know as well as anyone what the requirements for survival are.  You can invest, and wisely, using that knowledge.  Even if you lose money for a year... or ten, it does not really matter.  Supporting those who transform natural resources into food or necessary durable goods, or transport said resources or goods to the locations in which they are needed now will pay future dividends.

So what if you lose for a while- all of us are.  We still need to have a functioning social structure tomorrow or, so sorry, you will be dead.  Your death is likely to be particularly nasty, and devoid of even comfort or sympathy, if you are the few "haves" in a world of "have nots."

Hedge accordingly.

Fri, 08/12/2011 - 20:18 | 1556008 trav7777
trav7777's picture

partially true.

On the flipside, question why there is "nobody" that is is because there is nothing to DO anymore in an aggregate economic sense in the USA or Japan that can earn a real profit.

Businesspeople, the potential lenders, realize this, which is why there is NO DEMAND for credit.  Housing was a synthethic economy.  It has been THE economy here for a decade at least...a classic ponzi of flipping to a bigger idiot.  Before that it was stocks.

We've been in a direct ponzi since at least the mid 90s.  At each crash point, demand for credit crashed and the Fed was forced to decrease the price of credit.  While there was still surplus oil capacity, that succeeded at various points at animating the corpse.  Then we hit C&C peak in 2005.

Fri, 08/12/2011 - 21:50 | 1556199 Caviar Emptor
Caviar Emptor's picture

It's supply and demand for credit that are both impaired. In biflation, the theme is always Scylla and Charybdis. Tyler is even getting hip to that one this week. 

There is only weak demand, yes. Supply side economics gutted the economy like a fish by offshoring productive industries in return for a seller-financed trade deficit. That's now looking more unhealthy by the day. 

But there will be week supply of credit: banks won't lend into deflation. That's an old playbook. Their main concern is preserving capital. They fear defaults, haircuts, underwater properties, short sales. The vortex is taking under businesses too. So they make money by not losing. Especially since the Fed itself has reinforced this behavior by advancing them ZIRP money and handing over free taxpayer cash during QE LSAPs. 

Sat, 08/13/2011 - 15:14 | 1557405 jimijon
jimijon's picture

Well then let's nominate Ponzi for a Nobel in Economics post humously!



Fri, 08/12/2011 - 17:37 | 1555690 MachoMan
MachoMan's picture

So where exactly do we get the money to pay back the loans?  If wages were increasing or remotely set to increase or if nationwide distributions of funny money were planned, then I could see where a creditor would be apprehensive of getting repaid in devalued currency...  but, I don't see any chance of a rise in wages and I see a helicopter drop of cash for every household as an incredibly slight possibility (aside from being self defeating).

What is the mechanism that takes us from stag/bi-flation to pure inflation?  Even if we have hyperinflation, that does not mean there will necessarily be any more money printed than presently exists...

Fri, 08/12/2011 - 18:28 | 1555808 Caviar Emptor
Caviar Emptor's picture

Currently, lenders aren't worried about inflaton. They can hedge that and they recover their capital. They're worried about asset deflation which is the spookiest situation of all because loans will outright default and capital gets wiped out or only recovers pennies on the dollar. 

Because we actually have created bifaltion, there is no remedy that's viable (see my other comment)

Fri, 08/12/2011 - 22:18 | 1556254 disabledvet
disabledvet's picture

U know i just realized if u replace the word "inflation" with the word "sex" these comments would be highly entertaining.

Sat, 08/13/2011 - 03:15 | 1556620 KowPie
KowPie's picture

..."What is the mechanism that takes us from stag/bi-flation to pure sex?  Even if we have hypersex, that does not mean there will necessarily be any more money printed than presently exists."...

"U know i just realized if u replace the word "inflation" with the word "sex" these comments would be highly entertaining."

You're right!

Sat, 08/13/2011 - 12:48 | 1557187 Cathartes Aura
Cathartes Aura's picture

don't forget to vote lads!

Sat, 08/13/2011 - 23:39 | 1558264 Prometheus418
Prometheus418's picture

The mechanism is a relatively old one- collective bargaining.

Of couse, employers do not want to raise their labor costs- but when it comes down to it, people will simply refuse to work when their efforts will not support a basic standard of living.  I am seeing this happening right now because of the inflation- what are whispers in the breakroom today are bound to become shouts on a picket line tomorrow.  

Even those who are anti-union (full disclosure- I am one of that number myself) will turn with enough pressure, and when that happens, employers will either have to raise prices to offset the new costs, or close their doors.  I'm assuming they will make at least a token effort to remain viable, and so I am in the hyperinflation camp.

Of course, I could be wrong.  With the insanity that is the present financial situation, I am no more likely to be right than anyone else who is knowledgable enough to hold any position in the matter.

Mon, 08/15/2011 - 10:31 | 1561421 MachoMan
MachoMan's picture

When jobs are being lost and economic activity declining, collective bargaining flies out the window...  it's an employer's market...  having the pick of the litter so to speak of people who are vastly overqualified for their respective jobs...  there will be no solidarity from those who are lucky enough to find employment.  If collective bargaining occurs, it would be more accurately described as revolution...  and it will act to hinder the standard of living for all and ensure centrally planning to wash each others' clothes becomes an economic mainstay, aka "shared misery."

Ultimately, cutting costs is not a viable business model and many/most will fail.  When employers can no longer make marginal profit, they will shut the doors. (however, not before individuals run away with a shit ton of money).

PS, we can (will) have hyperinflation through either deflation or inflation given our present financial/economic condition.

Fri, 08/12/2011 - 18:54 | 1555855 B9K9
B9K9's picture

You keep referring to $USD re(de)-valuation based on gold, but I think that over complicates the issue (in terms of having to first acquire the goods). Not only that, but gold also fails to leverage the existing core strengths which the US currently possess.

Just to be clear, I wholeheartedly agree that there will be $USD re(de)-valuation based on some existing asset class. So, lets noodle out what/which asset(s) the US can claim as a core advantage: the military. OK, that was easy, we'll leverage our military advantage.

Now, how do you do that? Well, how about "goodwill" as in "going concern"? Let us review accounting 101: A=L+C. We need to boost assets by a factor of 10-100x in order to enable the $USD to be re(de)-valued by a like amount. No need to acquire gold, no need to store anything in a vault, no need to do anything other than just issue a decree.

As a side issue, whether re(de)-valuation takes place by ramping up the price of gold, or simply by decreeing that military control over the world's oil resources is worth X ka-zillion, the immediate effect of hyper-inflation will require price controls. Price controls of course usher in shortages, which is where TPTB have us over the barrel, since they will control both dispensing & crowd control.

As I keep saying, winning.

Sat, 08/13/2011 - 17:34 | 1557524 mkkby
mkkby's picture

The bankers will never allow a gold standard. It takes away their power.  Fiat is how they rule.  They may try to make a profit on trading gold though.

Gold believers are missing a few key points.  TPTB will never allow it to be a standard again.  They will tax it heavily and make it illegal to use in trade.  Currency holders will take their haircut on any new reserve issuance, of course, but gold holders will take theirs as well.

And yes, I know you can cheat.  But you take a risk there as well.

Fri, 08/12/2011 - 17:58 | 1555743 Freewheelin Franklin
Freewheelin Franklin's picture

Sounds like helicopter time to me. Got hefty?

Fri, 08/12/2011 - 19:59 | 1555973 Shell Game
Shell Game's picture

— especially in a world with no alternative —

Printing is always an alternaitve.  Capital markets will never stop chasing yield if they perceive printing.  Couple that with perceived, and real, systemic risk and you have hot money chasing yield through relentless buying of tangible goods.  All that money on balance sheets is the gateway to hyperinflating all of the elite's problems away.  That's probably the edge there, that deflation will hurt the big boyz, while hyperinflation gives them first crack at that newly digitized $.

Fri, 08/12/2011 - 22:27 | 1556272 disabledvet
disabledvet's picture

EXCELLENT! Since there is no such thing as liquidity we now get to kill those people. Wait 'till you see me raise the imperious financial dead to deal with the idol worshipers once and for all. U WILL PAY FOR YOUR INSOLENCE!

Fri, 08/12/2011 - 20:03 | 1555983 OldPhart
OldPhart's picture

Also off topic, but pretty funny.


Felonius Monk Joins TEA Party


Fri, 08/12/2011 - 20:23 | 1556013 Shell Game
Shell Game's picture

'Stop bein' a Dickhead and Balance the Fucking budget!!'

Great rant and LOLZ

Fri, 08/12/2011 - 23:43 | 1556406 snowball777
snowball777's picture

Ron Paul / Felonius Munk 2012, B!

Fri, 08/12/2011 - 20:11 | 1555995 trav7777
trav7777's picture

it's a nice theory, but it runs into the inexorable math of the compound interest function on the existing money supply.

It also doesn't gel well with the spending habits of sovereigns.  Look, Japan hit the wall of economic saturation 30 years ago and they are still buying bonds with QE.

I continue to reiterate this point:  there is NO DEMAND for credit in the US, even at ZIRP.  Think about this.  What business could you start now with a low-interest loan in this economic climate that has a chance at earning a positive ROI?  Without subsidies. 

Open a factory?  LOL.  Mine?  LOL.  The basic things that go on in a growth-stage economy have all been tapped out.  The oil is depleted, the mines are depleted; we moved from hematite to lower-grade ores long ago.  Production of everything in the US except bullshit has been in decline for decades.

All these things are not the sign of an economy that is motivated any longer by credit offered even at 0%.  The world economy, in the aggregate, is facing this same scenario due to the oil peak.

Fri, 08/12/2011 - 22:32 | 1556283 disabledvet
disabledvet's picture

I've just changed my monopoly board replacing "prison" with inflation. I've also changed all my 'chance' cards to 'by all means pass inflation and go straight to 30% interest rates! Now thank you...have a nice day.

Fri, 08/12/2011 - 23:45 | 1556410 snowball777
snowball777's picture

Somehow they don't seem hip to my biz plan to by a motorhome and precursors. I even made charts!

Sat, 08/13/2011 - 17:03 | 1557494 schizo321437
schizo321437's picture

Escapism and over religousness will all be growth industries.

Sun, 08/14/2011 - 01:33 | 1558379 gmj
gmj's picture

Hard liquor is counter-cyclical.

Fri, 08/12/2011 - 21:00 | 1556106 Yes_Questions
Yes_Questions's picture

it doesn’t matter how much liquidity the Fed creates because it won’t be able to get any further than the immediate banking community.

Said the Banskters:

Yeah, and?

Fri, 08/12/2011 - 22:59 | 1556315 Founders Keeper
Founders Keeper's picture

Great OT post, TIS.

This is from the NY Feds website about REPOS:

  • The Fed uses repurchase agreements, also called "RPs" or "repos", to make collateralized loans to primary dealers. In a reverse repo or “RRP”, the Fed borrows money from primary dealers. The typical term of these operations is overnight, but the Fed can conduct these operations with terms out to 65 business days.
  • The Fed uses these two types of transactions to offset temporary swings in bank reserves; a repo temporarily adds reserve balances to the banking system, while reverse repos temporarily drains balances from the system.
  • Repos and reverse repos are conducted with primary dealers via auction. In a repo, dealers bid on borrowing money versus various types of general collateral. In a reverse repo, dealers offer interest rates at which they would lend money to the Fed versus the Fed’s Treasury general collateral, typically Treasury bills.


Sat, 08/13/2011 - 02:52 | 1556596 1984
1984's picture

"If that is the case, the worse thing the Fed could do is more asset purchases. It would only take out more supply of quality collateral out of the market, heightening the pressure to take a self-imposed haircut just in order to get your hands on the security. A fact echoed by the number of above par bids at this week’s 30-year Treasury auction."


Ha ha ha!  The joke's on you.  What make you think Bernanke is limiting himself to "quality"?  What's wrong with buying the rock from your backyard, or the trash you put out on the curb?  Maybe he'll dispense with any pesky transaction altogether.  He did say something about dropping $$ from helicopter, right?

Sat, 08/13/2011 - 09:49 | 1556932 ViewfromUnderth...
ViewfromUndertheBridge's picture

Great catch TiS, thanks for the link.

I would encourage everyone to read and absorb TiS's linked article (and then each link within it to previous FT Alphaville articles by Izabella Kaminska), for those that want to go down this rabbit hole she lays it out step by step:

Welcome at last to Bernanke's hell.

Edit: reply got bounced to down here, here is TruthinSunshine's must read & absorb link.

Sat, 08/13/2011 - 10:18 | 1556966 DosZap
DosZap's picture

"And that’s because banks still can’t find enough credit worthy people to lend to. That the majority of loans still have a greater default risk than the banks are prepared to weather."   

I disagee with this to a degree, the reason the Banks are getting poor risk appications are the folks(vast majority)that  have money, and are credit worthy,but are SO afraid of what this Admins policies are GOING to do later,have done, and what NEW one's it may spring on them no one is willing to take any risk.

Hence near, basically ZERO job creation, and layoffs.

People have lost ALL faith/confidence in their Government's abilities, and are fearful of the onerous regs,they have  pulled  in their horns, and  are on HOLD.( this is not an accident either).

(Example The gang of Six), we have 435 House Members, and a 100 Senators,and they have Unconsitutionally turned thier power over to the Gang of Six to do the job of ALL the people on the Hill.This ought not be, it's an abomination.

When I saw the radical elected, I knew there would be NO discretionary spending from my house,and there hasn't been.

Even though I would like to replace a vehicle,and do a couple of home upgrades, I refuse, and only purchase basics and preparatory items.

 The way I se e it we are ALL  in a Glass House, waiting for the next Rock to be thrown.

Sat, 08/13/2011 - 10:45 | 1556995 disabledvet
disabledvet's picture

Hyper inflate! Hyper inflate!

Sat, 08/13/2011 - 10:54 | 1557003 Tyler Durden
Tyler Durden's picture

It would appear our colleagues at the FT are truly hitting the conspiracy theory desperation wall. The reverse repo announcement is nothing but what it is: an announcement of tiny reverse repos over the next 2 months to present to congress during the next grilling as a preparation for unwinding liquidity. In case you forgot, the Chairman just announced 2 years of ZIRP. Against that background, $20 billion in monthly overnight-unwindable repos is like a drop in the bucket.

Furthermore, their conclusion about the M2 spike is wrong (see our post on the topic from Thursday). Little if anything to do with money markets which are already capacity constrained due to massive unwinding in Euro-facing paper.

Sat, 08/13/2011 - 14:19 | 1557321 JW n FL
JW n FL's picture

Mainstream is desensitizing the Sheep to the FED causing a Crisis?

Fri, 08/12/2011 - 20:01 | 1555978 trav7777
trav7777's picture

I was also a NMS; I received a tiny check.  That plus $.25 back then got me a dialtone.  One of my former business partners went to school in a time when it meant admission to places like Harvard.  Bernank too. 

The entire Atlanta school system was dedicated to closing an achievement gap that despite 30 years of trillions in spending, hasn't BUDGED AN INCH (except by cheating).  There are a myriad of programs like the NASP set up to reward even the mediocre so long as they are the appropriate color.

We will lower the standards of everything so we can have adequate participation by those who cannot otherwise make the grade.  This is suicidal.

And we will denigrate the people who invented the car, airplane, modern medicine, refrigeration and literally everything else, with collective guilt.

Fri, 08/12/2011 - 20:40 | 1556047 CompassionateFascist
CompassionateFascist's picture

s'Truth. Imaginary unjunks to all imaginary junks.

Do NOT follow this link or you will be banned from the site!