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Crushed Consumption: The Unintended Consequence Of Bernanke's Arrogance
With the Fed lowering interest rates and flattening the curve in an effort to squeeze any- and every-one into risk-assets and mal-investment; the sad truth of this action is that it forces a drastic unintended consequence on the growing population of people that actually care about the future. Critically, as Citi points out, lower yields require much higher rates of saving (both corporates and households) and while 10% of salary allocated to 'retirement savings' will meet its goals with a 4% return hurdle, at current low yields, the average-joe in the street will need to 'save' 25% of his income - cutting heavily into his current consumptive and discretionary iPad needs.
This seems apparent in the NSA retail sales data we noted yesterday and this year to date...
Source: Citi
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Retirement age now moved to four years after death.
They'll still find a way to take from you after the 4 years......no worries
the destruction of economies and individuals courtesy of mal-central policy.
There is no conventional solution.
And on the 4th day, The Bernank did sayeth unto the plebes (those who hadeth actual savings & weren't already subsisting off of credit cards, EBT Swipes and/or other such means):
Ben always knows what's best for "democracy". His mentors tell him so.
"Live for today"
Krugman and Bernake .... 'peace in our time' guys. Reality is their Hitler.
Whisper rumor that Krugman is buying 270 million shares of Facebook tomorrow.
Why doesn't everyone just borrow at low rates and gamble invest it in the markets?
Dammit, the strikethrough on gamble doesn't show up!
See Ben?? The blue line is your inflation gauge, that's why it wont move. Up..
So tell us how ZIRP is working out?
Yeah 25% rate needed right now. Hmm... do I project that the required savings/investment rate will go up or down based on what we've see over the past 15 years? Oh well, any luck and I won't care because hordes of zombies will dine on my brains in a year or two.
That's alright because the savings rate for the average US household is probably right around 25% right? Right guys?
(crickets)
Say, I saw that...
The FDA just released the New Cricket Cookbook.
They're a great source of protein....
Was that on the ready.gov website?
ready.gov/getset/go/wherethere'smore than one/fuckingplague/whatchoutheybite/allergicreactions/socialsecurity/blistersandothermaladies/cockroachprotein.html
Or trust SS, which in my case will return LESS than I paid in, even without the Republicans "reform" ideas.
Can I file a claim for 'disability' for being a zombie in the interim?
It's hard to consume full time when you work part time.
That doesn't make sense. The less you work, the MORE time you have to consume.
Mmmmm....cheetohs..
So that means I'll live to collect my death benefits, huh?
"lower yields require much higher rates of saving (both corporates and households)"
Duh..... a double dose of deleveraging.
Law of Unintended Consequence again comes home to roots.
Plus, if it's a deleveraging cycle allowed to take it's full course, lower rates don't matter as debt is net being paid down>
And hoping to defer the pain through lower rates just makes matters...
Oh, neverthefuckmind...
Nothing that a few ass-rapings in jail couldn't do to fix Bernanke's arrogance.
MANBERNKRUG!
the only person's retirement the bernank worries about is lloyd blankfein's.
He isn't the only one The Ben Bernank worries about. There's Jaime Dimon. The doofus that runs Shittybank. I'm sure I'm missing 3 or 4 others.
You definitely missed John "you ain't putting me in chains" Corzine.
Is the answer different if we save in gold?
For awhile.
Then once inflation gets bad enough one of two things:
Either we will see Gold confiscation like in the 1930's (which will set off a powder keg).
Or, the US Government will relent and allow Gold coins to be used as money again and our $2000 1oz Eagle will be worth $50 face value and it will be illegal to destory them or trade them on the open gold market as raw gold. I could even see them try to use some kind of BS assay tax in case you try to melt your coins into bullion so they can "overcome the rampant gold fraud epidemic" for us.
Hugh, no I don't think there will be any confiscation. Not one that will last too long. We are going to need gold as capital to deploy after the reset. They may try to to confiscate/tax/or regulate gold, but all that will not work. FOFOA discusses the low probability of confiscation:
fofoa.blogspot.com
***
Mickey Fulp (aka "The Mercenary Geologist") recently put up a NICE article on the "rest of the metals" that I post as the last of my series of blog articles (gold, platinum group metals and the rare earths). They have allowed me to be a syndicator of Mr. Fulp's "Musings", if interested in iron, aluminum, copper, titanium, etc., have a look:
http://tinyurl.com/8o35gd4
The only one left is SILVER. Which I do not have expertise in. Mr Lennon Hendrix, tekhneek or anyone else who knows silver well want to write "The Case for Silver" at my blog? gmail me at my name if interested.
Confiscation is not hugely likely, what I do expect is a massive "windfall profit tax". There would be all of no mainline backlash, people only complain about taxes they pay. As to not working, it's about financial repression, why wouldn't it? People wouldn't move gold in, well it's insane for foreigners to move gold into the US now, so what change would there be in that regard? There isn't much gold in private hands in US, it would be more about being able to use the existing anti tax bureaucrats on gold, and forcing those still trying to save into far worse assets. Down this road leads to the tragic comedy of buying goods as savings and praying they hold value.
After all gold revaluation or "freegold" would only be in a post dollar collapse. I'd love to hear a argument that as things get crazier that hte government, which exists to consume resources, will become freedom oriented and promote the free flow of gold and savings. And the "Other countries will do it" that doesn't seem to be working on old NKorea.
Shameful, good seeing you around as well as your carefully reasoned responses.
A high windfall profits tax on gold would indeed mean no more imports of gold to the USA. The opposite would happen, people would find a way to get their gold OUT.
Gold would also be traded fairly freely in the Black/Gray Markets at some point as well.
As to future governments, IF they want their countries to advance (as opposed to a clique maintaining their power being MUCH more important than everyting else, like in N. Korea), then gold will probably be necessary component as capital.
1. Correct. But I argue that importing to the US makes no sense now with it's already sky high gold tax rate, only for us still stuck here in the "Land of the Free". This has not hurt the US on the global level thus far. This also does nothing about local mining or the central bank buy/holding it. The tax would of course only apply to the little guy. And sure some will try to get their gold out, but by making it illegal/sizable as a tax evasion that will put a damper on that. Smuggle a roll of American Eagles out past the TSA (Total Sexual Assault)? Hell at that point wouldn't surprise me if the TSA was running full cavity searches. Which moves to more professional smugglers, and overland into say Mexico, hardly safe.
2. By passing legislation about massively taxing gold and barter, while at in the same legislation granting material rewards for whistle blowers would strongly negatively impact black markets, and the attempt to move away from Uncle Ben's Fun Bux. Sure some people will still do it, but imagine how many more drug dealers would get caught if they had to worry about every buying turning them in for a reward?
3. Governments looking out for the best interest of the masses? Where is this land of magical unicorns? The governing classes exist to enrich themselves. It that means the people are living in mud huts they live in mud huts. Now it may come to pass that all the wealth has been consumed and they want another meal which means that yes they would have to let market forces being working once more. However this would be long after the country had been stripped of all tangible wealth, and even the natural resources fully pillaged. Probably after a foreign investment phase the likes we have seen in the developing/3rd world, where the political class of course gets their beak wet.
It's in the governing classes best interest to run the financial repression as long as possible and mine out all possible wealth. It is likely the dollar will give out before all the wealth is 'vaporized' so it would be in their best interest to force the masses to stay on the system while the harvest continues. Of course this assumes no successful uprisings by the masses. I have previously written about this and I find the possibility exceedingly remote.
There once was a boy in the former Soviet Union, at the time when Stalin was cornering the market on food and butchering the kulaks. This boy turned in his parents as hoarders. The government praised him and lauded him a hero for his actions. But his village, not wishing to harbor a viper in their midst, killed the child. The government named him a martyr of the revolution and held him up as an example, but I imagine the people took him as an example of what happens if you are a traitor to your own.
I'm not so sure that gold confiscation will set off the proverbial powder keg. What percent of Americans own gold coins? Most don't. A little domestic propaganda to quickly label gold owners as "hoarders," and the public is all convinced that our friendly government will be better able to supply them with EBT cards if only they could get that gold out of the clutches of those evil hoarders. Besides, most gold owners also have lots of guns and ammo. They're EVIL.
Bullish for boating accidents.
Ben's wishlist:
- If you're old... DIE
- If you're retiring... Get a reverse mortgage on your house... Then DIE
- If you're in the workforce... Keep pedaling
- If you're young... Take out a student loan & buy an I-Pod on credit
- If you're not born yet... Quit loafing around in there and become a tax unit
Sheesh! Don't give him so much credit!
The plain fact is that more and more of us were just getting fed up with stuff!
Just overwhelmed with it, tired of getting it, of having it, of taking care of it,
of cleaning it, of hauling it, and of giving it or throwing it away ....
http://www.storyofstuff.org/movies-all/story-of-stuff/
It amazes me how such simple things are profundities in America today. Are we all that collectively stupid that we can't graps that low rates destroy equity. Things that would be obvious to a Bengali bus driver are considered brillaince in the US.
When is a lon not a loan? When you figure out it's never going to be paid back.
Saving for retirement would mean thinking about the future, something that isn't too vogue right now.
'I need to save HOW much?'
Forget it, dont save at 0% thats just retarded, just trade in worthless Fiatsco's in for some Roscoe's like the Gubment is doing....nice .45 cal pistol 12 guage shotguns .223 rifles the best to have.
When Sam Colt introduced the Peacemaker in the 1800's, you could buy a new one for a $20 gold piece.
Today that same goldpiece will buy you a .45 a 12ga and a good .223 along with a little ammo if you shop around.
Long Firearms, Bitchez!
That's the problem with reality, it's so much more complicated than the economist's models. Nature has a balance, much like free markets.
what's really unbelievable is that some thinkless congress people keep praising this idiot.
Bernanke does not want you to save...he wants you to spend...spend foolishly...buy a new mcmansion....car...toy or two......and Obama wants the same..so you come begging to the government for help when you are out of money......then he has your soul......forever
Bernanke does not want you to save ... he wants you to spend ... spend foolishly ...
Don't forget W.'s response to 9/11. He said to go shopping.
Why save when you can pay off your debts first?
If they want to penalize you for saving, Fark them! You can put all your money at risk in the market. You can put all your money at risk in the bank. You can watch your money lose value to inflation while it's parked in bonds or MM accounts. OR, you can rob the bank of their income stream by paying off your mortgage. WHY give them 4% interest for 30 years while you play in the market with card sharks and snake oil salesmen? Pay off your debts and put them out of business.
Tunnel vision. You obviously have negative net worth.
I haven't bought a thing all summer other then food. Don't need any more Geegaws and Thingamajgs. My buddy owns a retial shop. Says sales volume is down over 70% form last year and profits are even worse since the ONLY stuff that sells is discounted 60% at least. He said customers nowadays walk right by things reduced 90%. Amazing! Amazingly bad, he says and will close up shop shortly.
But more importantly, I'm scared and saving every penny. I thought I was well off a few years ago---that's before we lost another 50% of purchasing power the last few years.
Anyone with any sense is saving every penny or at least buying a hard asset like oil, PMs, etc. All the other Crap is depreciating so fast my head spins.
BTW, did Barry break yet another promise; this time about that there $3,000 ?
Tell your buddy that seasonal adjustments from the government have made his sales volume 110%. The IRS will be looking for their cut of the 110% in sales volume.
I sell a product on the internet and oh, God, you should see my graph. It has been going steadily up all year and looked like a hockey stick in June. I thought that maybe I was finally going to take off, but right after the 4th of July it just crashed and I am not even getting any traffic.
There is no "retirement." Even if there was, would you genuinely want that? To gradually watch your body and mind waste away, while your friends die off and you watch the future increasingly belong to a bunch of mindless kids? To watch your country and everything you worked for disappear? To need Viagra just to get a boner? To keep on hoping and praying that your "nest egg" will make a return that will enable you to pay off the mortgage on that second home, a hip replacement, and another trip to the golf course?
Retirement is one of the biggest lies in a world full of lies.
Live, work, do what you want to do, contribute something, pass on something to your kids if you have any, and then die. Forget retirement.
Correct, with one caveat;
In order to "pass on something to your kids", that would require that your savings are not stolen.
Viagra would help though...
Who wants to retire? Sweeping the floors at McDs or being a Walmart Greeter is great fun and tremendously satisfying, not to mention the bright future of advancement.
Milton wanted to end to the Fed back in the 80's.
Hard to imagine what the world would be like today if it had happened.
If only....
What if I don't want to comment?
I can't believe i have scrolled this far down and not one single 'Fuck You Bernanke'. So, FUCK YOU BERNANKE!
The Bernank is a pawn. Nothing more. Have you not heard of the council of 2? Of course not. They control everthing! Everything! I tell you! Their names?.............Pinky and the Brain.
...at current low yields, the average-joe in the street will need to 'save' 25% of his income - cutting heavily into his current consumptive and discretionary iPad needs.
Corporate pensions are getting killed and they're having to set aside more and more as their assumed discount rate gets smaller and smaller.
This aggression will not stand, man....
Actually, they "fixed" it. The latest highway bill has a tuck-in that allows corporate pension managers to use an average return from the past 25 years instead of more current corp. bond rates.
http://www.pionline.com/article/20120629/REG/120629855
http://online.wsj.com/article/SB10001424052702303561504577496751283749524.html
"Unintended consequence"
You are far too kind.
A good way to fuck Bernanke and his bankster buddies is to quit consuming, quit buying crap, quit swiping credit/debit cards, pay cash only and load up on silver. Fuck you Bernanke.
Consumers are saving more because of anxiety. The recession showed everyone how close we all are to living hand-to-mouth. People wish to have a larger cushion for the next recession, but it looks like they also realize that they will need more savings for future actions.
These graphs show the futility of attempting to control the economy with monetary policy. The Fed may be able to create some movement in the short-term, but these gains are wiped out by people adjusting their spending and saving preferences in the long-term.
http://dareconomics.wordpress.com/
Retirement works in a growing society. Western civilization is not growing. When any organization (company, country etc.) is growing they can get away with a lot of bad ideas because the growth covers up the mistakes. (i.e. pensions, welfare, medical benefits for retirees, etc.) When you stop growing your mistakes leap out at you. Look at the auto or airline industries as an example or, of course, all of the modern economies with the entitlement disasters.
Nailed it.
In other words, a Ponzi works as long as the inflow of capital is greater than the outflow. Everything in between is gimmicks to keep the inflow greater than the outflow.
so wrong. retirement works fine in a country with growing wealth is only one type of growth and is not the growth we have experienced over the last 10 -20 years. retirement doesnt work in a country with growing wealth consumption.
Infinite growth works in an infinite universe. Maybe we are there, but we can't utilize it until we are freely able to leave spaceship Earth. Until then, Ponzi schemes WILL BLOW UP sooner or later.
Private retirement never works under any conditions, it's impossible in credit economies.
Theres and old joke amonst mathematicians about a fellow who found mathematics
too exciting,so he became an actuary.
Actuary's may be about to find life exciting.
Just think what is going to happen when Mitt and Ryan get elected? The notion that people can save for their retirement is a Wall Street myth.
The minute Mitt and Ryan get elected is the minute that this country plunges into depression. This Citi article presents a one-sided argument(not a surprise for ZH). What do you think will happen when interests rates rise? I can tell you with absolute certainty that USA economy will go into a very long retirement.
System Failure:¡Red Alert
Anyone with binoculars been watching container movements in Long Beach, Ca?? Might be worth a look.
http://www.polb.com/economics/stats/latest_teus.asp
My brother in law works for a company (software/services) that tracks global shipping in real time. I pinged him recently on what he is seeing with shipping trends world wide. Here's his repsonse:
"Not a lot more of a shift from traditional exporters such as China and South Korea to southeast Asia in places such as Vietnam & Indonesia as well as growth in Brazil, Chile and Argentina. Overall with the Euro crisis and our economy stumbling along, we're the two largest consuming economies and with our economies sagging it affects the whole industry to a degree but we're not seeing a significant downward trend but more of a shift. Other economies are growing so they're picking up some of the slack."
Make of it what you will.
http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-gho...
This from Daily Mail 3 years ago showing ghost fleet of ships laid up off Singapore due to world recession/depression
Good chart at Baltic exchange
show big drop off in shipping in last three years
http://navigatemag.ru/indices/
What was CPI assumption?
So as interest rates go lower, demand for bonds goes higher? That savings chart should be extended to show negative real interest rates.
I don't know whether low interest rates have caused 40 year olds to save more, but some retirees that I know have certainly reduced spending as their munis are called and they are forced to replace them with ones yielding a lot less.
Imagine how much one would need to save for retirement when rates are -1% or lower.
….and while 10% of salary allocated to 'retirement savings' will meet its goals with a 4% return hurdle…
Sooooo “new normal.” In the 90s (and who knows how long before), the IRS forced you to use an 8% return on investments in figuring defined benefit plan contribution limitations.
Not to mention that Grandma has to buy generic dogfood now instead of the premium brand.
I am a bit confused about the complaint. For many, many years it was apparent that Americans were some of the worst "savers" in the Western world. Driving their consumerist economy ever higher on the back of eaiser and easier credit, Yanks felt no motivation to put money away or pay down debts. Now, if I understand this....American's are well on their way to paying down debt, finally, and there is a problem with this? Certainly you guys cannot possibly be worried that the American consumer is going to turn into a Japanese consumer any time this century?
Loaning money at negative real interest rates to a spendthrift government with a 100% debt/GDP ratio that is rapidly rising is not "saving". It is paying a tax. Saving consists of buying real assets at fair prices or loaning sound currency to someone who has at least a reasonable chance of being able to pay it back. Since the US doesn't have a sound currency anymore, US dollar loans do not qualify as savings.
But real rates are negative 1%. You need to be saving 125% of your salary!
mispost- moved
Anyone ever wonder if fuckers like Dimon or Blankfein wear bullet proof vests under their suits?
That's why the compound bow was invented
Crushed consumption is exactly correct. As Bernanke keeps reminding us each month, he has no intention of changing anytime soon, which lets the average Joe know he needs to continue cutting back just to stay close to even.
The mal-investment created by CB 0% policies worldwide took money from CD savers that deserved to be rewarded for their work and thrift, and gave it to banks that deserved to fail.
With only several months till the collapse I figure it is more like 100 times my weekly income.
Millenials have been blaming Bush/Obama for their troubles...where really they need to be looking, is at the Federal Reserve.
I cannot wait until 5-10 years from now, when these rich, plutocratic assholes ask that no one is buying anything anymore, why economic and consumer confidence is in the shitter, and why the volumes on the stock market are so low. And then complain that we aren't paying our debts (which were built on a mountain of fraud).
And if, by some grace of god, we do get discretionary capital....we certainly won't "play the market". We have fathers, uncles, older friends who got cleaned out in 2008. My dad's friend lost 87K on Lehman ALONE.
We are governed by cannibals. And like the last empire that did so (Aztecs/Mayans), this empire too, shall pass.
Wake up, people, this is your PENSION FUND calling......This is why Municipalities are/will be having so much trouble. San Bernandino listed CALPERS as an unsecured creditor, thus the future is not secure. Thanks, Bennie the Douche...