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Exclusive Interview With Diapason's Sean Corrigan

Tyler Durden's picture




 

Zero Hedge has the pleasure to bring its readers this extensive Q&A with one of the most prominent voices of "Austrian" economic sensibility, and foremost experts on capital markets and commodities: Diapason's Sean Corrigan, who has repeatedly graced our pages in the past and who always provides a much needed 'on the ground' perspective on his native Europe. Among the numerous topics discussed are the Eurozone, its collapse, its insolvent banks, and the EFSF as the Swiss Army Knife ex Machina; the 3rd year anniversary of Lehman's failure and what lessons have been learned (if any); how to fix the US economy; on Goldman's relentless attempts to intervene in, and define, US monetary policy; what the Fed's role should be (if any) in the economy and capital markets; his views on the Occupy Wall Street movement; his advice to an inexperienced 25 year old looking to make their way in the world; And lastly, the $64K question: what is the endgame. A fascinating must read.

Interview with Sean Corrigan:

1. Q1 EFSF.

We here at ZeroHedge have labelled the EFSF as an off balance sheet CDO, whose purpose is to buy the toxic assets (in this case sovereign bonds) of the ECB and the EU, all under the safety of a AAA rating. The amended EFSF of July 21, 2011 will aim at having a lending capacity of €440B. With rumors about bank recapitalization and monoline type guarantees that will leverage the fund to €2T. The EU/ECB has been committed to “avoiding contagion” since the Greece issue started 2 years ago, and as of October 2011 we are now talking about France losing its AAA rating. Do you believe that this expansion of the EFSF both in Euro terms and the mandate of the fund, will be enough to contain the debt contagion worries? Or is it actually necessary for what is currently implicit, that Germany is the de facto leader of Europe for the third time in 100 years, to become explicit?

Answer: The best answer to worries about ‘debt contagion’ is to make clear to all the counterparties concerned just what exactly is on whose balance sheet and at what price and to stop playing accounting tricks in order to paper over the holes created by all the bad lending practices indulged in during the Boom – missteps since repeated in some cases in the attempt to game the Eurozone’s initial bail-out procedures in its aftermath! 

It is also a little ironic that the entities most likely to spread any such ‘contagion’ are largely the same ones who are hoping that they can get a huge slug of Other People’s Money – without too many onerous conditions attached – poured in to prevent said contagion from impacting their bonus pools too adversely– namely the trading desks of the selfsame European banks! 

As for the EFSF/ESM, insofar as we even need a ‘rescue fund’ at all, why do we need anything more than a temporary bridging mechanism – a kind of cash-rich clearing house where failing businesses – banks above all! – can transfer their assets to the thriving ones as rapidly as possible and where debt to equity conversions can be undertaken (not least by overstretched state borrowers) at a price consistent with their continued employment in an independent, self-reliant, going concern?

Will we get any of this detached minimalism in practice? Highly unlikely, of course, for our fat political turkeys will not willingly vote for a Poujadist Christmas! So we are left with trying all the idiot savant ways we can transfer from the playbooks of AIG, Enron and Lehman (and maybe Madoff!) to preserve the status quo ante.

What we have to hope is that the very fact that the debate has become so contentiously aired outside the smoke-filled rooms of Brussels; that national Parliaments are refusing to be presented with yet another executive fait accompli; and that respected figures like Otmar Issing are warning against the seduction of financial ‘alchemy’ while making overt references to their conduciveness to a rerun of Weimar, might be enough to see that the Beast is sufficiently starved that it does not allow the adoption of genuine solutions to the problem to be deferred any longer.

As we know, the aim of the game to this point has been only to do the self-evidently right thing after every last, Collectivist. reality-denial alternative has been exhausted – but it might just be that the Franco-German schism sets us up for just such an outcome.  Daumen drücken, as they say, across the Rhine!

2. EU Bank Recapitalizations

As part of the recognition that their will be a “liability management exercise” in Greece, perhaps with haircuts exceeding 50%, attention has turned to the under-capitalized EU banks. The numbers about how much capital these banks need range from €100B to €1T. The question is where does that capital come from? Is it possible or banks to raise that capital without a)nationalization & b) losses for senior bondholder? Is this issue of capital and where it comes from even relevant if the banks are going to be given a year (as is rumored) to raise the capital?

Answer: Well, in the first place, if we realize that European banks are trading on price/book ratios of as little as 30%, we can see that the farce of pretending the balance sheet is sounder than it actually is has already been repudiated by the market itself, so why not take the hit and restore faith in the company and the integrity of its management?

Secondly, if we note that some 30% of European bank assets take the form of loans to, or securities holdings in, other – mainly European – banks, we can see that some grand, mutual ‘tear-up’ of all this I’ll-lend-you-if–you-lend-me, economically otiose duplication would immediately free up a sizeable chunk of capital without actually having to go to market and beg for it.

Incidentally, the Victorians used to scorn the practice of such financial incest as ‘pig on pork’ and regarded it as beyond the remit of a proper banker. It might not hurt if we started to do likewise.

Thirdly, why are capital-poor banks still paying dividends? Why is executive compensation in what are effectively failing enterprises still so elevated? The most reliable source of capital to a business has to be that portion of the difference between income and outgo its retains within the business (though it might also help if central banks were not doing their best to eradicate net interest margin at the same time!). Why is that principle so difficult to apply to the banking industry?

Moreover, there are currently more the 7,700 ‘monetary financial institutions’ in the Eurozone, with another 2,000-odd in the rest of the EU. In a world of teraflop data management, ubiquitous smartphones and always-on internet connection, do we really need one bank for every 50,000 people? Consolidate, consolidate, consolidate – and then we’ll see if there’s enough capital to go around!

Finally, as for the question of whether senior bondholders should be involved, what other, more effective mode of instilling a semblance of discipline and self-restraint into the system could we wish for? Caveat commendator – let the lender beware!

3. Three years later

We celebrated the 3rd anniversary of Lehman brothers bankruptcy just over a month ago. Yet three years later, we are again talking about a TARP program for Europe. Again we are subverting the interests of the majority to keep the Banks (not the financial system but the Banks that make up that system) alive. The status quo elites, all take for granted that a TARP like program is the only solution. That Lehman 2.0 cannot happen. We wonder if there is not another way. Is there a way to shore up the EU financial system that does not include recourse to either the ECB or a TARP program?

Answer: If we had done some of the above from the off, the original recession may well have been deeper, but it would also have long since ended and now - actually more than four years, not three - since the first cracks appeared, we could have been well along the path of genuine recovery and not struggling along the money-illusion travesty of one we have since been following.

But, no – we had to apply the mindless, Keynesian pass-the-parcel approach instead, under the rules of which when A (quintessentially a house buyer, this time around) suddenly finds he can no longer borrow money to buy more than he can actually afford, then B (usually the state) must step in and take his place as a spendthrift lest C has to find another customer for whatever it is he has grown over reliant on peddling to A and also so that Bank D, whose bosses have paid themselves handsomely for financing all these errors, can avoid having to bear the consequences of their poor decision making.

In the case of the public sector, this should be a time to write off whatever debt cannot conceivably be repaid with the proviso that all the member states – not just the defaulting ones - will guarantee not to add a single cent to their remaining stock of obligations but that they will balance their budgets henceforth.

This will not mean the defaulters will get off scot-free – they will still have to live within their means without resort to the kind of profligacy to which they have become accustomed, but at least they will be unshackled. Moreover, it have the added bonus of teaching everyone else (including regulators!) the historically unavoidable lesson that sovereign debt is anything but risk free, so reigning in the state’s ability to subvert its duty of accountability, everywhere.

Preferentially, this new budgetary rectitude should be brought about, not by raising taxes, but by shrinking the greatly overexpanded scope of the state’s activities – by privatising assets, reducing the deadweight of the various bureaucratic agencies, and by drastically pruning all debilitating and demoralising interventions to a bare minimum of social provision.

That way, we would immediately free up the maximum possible opportunity for private sector wealth creation to expand into the gap we leave and it would simultaneously impose the least costs on both the entrepreneurs who must be encouraged to lead this regeneration and on the workers and savers on whose efforts and funds they will rely on to carry out their ideas.

This would not only ensure that the inevitable drop in people’s real incomes will be minimised in the here and now – a shortfall which has arisen because of what we did in the Boom, not the Bust, remember - but it would offer the best prospect of rebuilding them as rapidly as can possibly be envisaged. 

Think of it as a Berlin Wall moment for the whole of Europe as the deadweight of inflationary Welfare State Corporatism was removed from – or at least lightened upon – the backs of 400 million people.  

4. The Euro

This is a simple question of whether or not you see the Euro as a common currency of 17 different countries surviving the next decade? Can you envision a scenario whereby a country leaves the Euro, yet the Euro doesn’t collapse as a result?

Answer: Contrary to popular belief, there is no need for a fiscal transfer union, much less an overarching political supersovereignty, to guarantee the viability of a currency union. Mankind managed pretty well from the time of Croesus’ first Lydian coins to the beginning of the Great War by swapping shiny bits of gold and silver – not to mention cowries and other such exotica – for goods and services where there was not an immediate coincidence of wants between buyer and seller.

Money is a medium of exchange, that’s all, so why can it not ‘survive’ by the mutual consent of its users across, as well as within, those artificial barriers we call borders without eradicating all cultural, legal, and institutional differences between the peoples contained within them? 

Of course, if that consent is withdrawn, that is another issue. If, for instance the northern Europeans feel that they only want to exchange monies freely among themselves or if their erstwhile southern co-unionists suppose that they will confer some tangible competitive advantage upon themselves by leaving (presumably with a view to treating themselves to the highly elusive benefits of a currency devaluation), the boundaries around the existing membership might change – and even become so small as to be practically purposeless and so expire.

I do think, however, that if there’s one thing which, at the moment, passes for a minimal level of consensus among a heavy majority of European decision makers, it is that the benefits of a single currency outweigh its drawbacks – though whether that warm glow of confraternity would survive the very transfer mechanisms which many see as its saviour is, to me, very much a moot point, since it would further identify the currency with the resentment of those who consider themselves diligent at having to subsidise those they see as indolent.

5. Goldman and Targeted GDP

In the last day Goldman's Jan Hatzius has suggested that “Fed officials to ease policy significantly further would be to target a nominal GDP path...indicating that they will use additional asset purchases to help bring actual nominal GDP back to trend overtime.” This justification for additional QE is that it will assist the “full employment” part of the Federal Reserves mandate. We would like to hear you comments on a) whether targeting a nominal GDP level is possible? and b) will such targeting actually benefit employment in the USA?

Anwer: The instinctive reaction when an institution like that comes up with a wizard wheeze to solve the world’s ills is to reach instantly for one’s pocketbook!

Facetiousness aside, as a card-carrying Austrian of long-standing, the emergence of this whole subject as some kind of startling breakthrough actually makes me smile since the basic idea was long since foreshadowed by Hayek and is actively promoted today by the fractional reserve, free-bankers (FRFBers) among the School.

Go and read the works of George Selgin, Larry White, or Steve Horwitz (e.g., at freebanking.org and coordinationproblem.org) for further elucidation, or consult cobdencentre.org to get a flavour of the arguments advanced against it by 100%-reservers like me.

What we must be clear on here, though, is that the suggestions of Hatzius and his ilk are all very much at one with the prevailing top-down planner, central bank-lever pulling mode and so are very much subject to Fatal Conceit/Knowledge Problem objections. In addition, they all seem to think their should be a ‘target’ - i.e., some divinely-ordained number, plucked out of the entrails of some DGSE ritual calculation; one which, of course, must be a bigger number than the one we have today and, worse, one which must be driven to increase at an arbitrarily determined rate thereafter.

This is a VERY different kettle of fish to what even the FRFBers propose which is simply that Free Banks – that is, those institutions which issue private money on the strength of their own competence and reserve base, absent all support from the state (whether explicit or implicit) and bereft of all legal favouritism before the courts – should be allowed to issue extra monetary claims on themselves whenever it becomes apparent to them that the holding of such is the overwhelming preference of their customers.

Another crucial point of difference is that the converse must also apply - i.e., that the Free Banks will pro-actively retire such claims when it later emerges that their customers’ tastes have changed. 

This, the FRFBers argue, is what their system will in fact ensure in a wholly automatic fashion so that, if there is any sudden rush to hold more money for its own sake (loosely, if there is a downward change in that money’s ‘velocity of circulation’), this will not exert any destabilising influence upon the real economy at large.

Furthermore, the FRFBers contend that, thanks to the fact that an unsupported Free Bank is one which is subject to a reputational competition with its peers, as well as to the more concrete constraint of the need to reach a balance with them during their mutual clearings, and that these attributes -  coupled to an insurance company-like threat to its privately-subscribed equity capital should it ever misread the intentions, or forfeit the trust of its customers – will similarly prevent destabilisation through its undue expansion.

We must re-emphasize, however, that the point here is not to set omnipotent, Stalinist directives for what Nominal GDP ‘should’ be, much less to decree to what path its future trajectory should conform, but rather to allow the bottom-up, negative feedback of an emergent, systemic property to operate to maintain an even flux of money through the economy at all times, so as to make it as neutral an agent as possible in everyday business calculation.

Furthermore, where the FRFBers and we 100% reservist Austrians do agree – in marked contrast to the mainstream - is that money should NEVER be created merely to stop prices falling. On the contrary, we firmly believe that all productivity-led price declines – as opposed to those which are the results of an active monetary deflation (the perceptive reader might spot that we 100%ers are less fearful of any passive, quasi-deflation which arises through greater money hoarding)– are not only a benign, but, in fact, a necessary quality of a properly-functioning price mechanism, one whose suppression by today’s central banks is a highly disruptive element, very much conducive to the kind of wasteful boom and bust we have just endured.      

So, to sum up: there are some highly-regarded precedents for (if also some heart-felt objections to) the idea of looking to some broad measure such as nominal GDP as an anchor, but be aware that those who are arguing for it today are not really suggesting any radically better way of conducting policy, but simply seeking to rebottle their vinegary old plonk of chronic inflationism and Vampire Economy Führerprinzip under a shiny new label.

6. Macroeconomics vs. Microeconomics

You have repeatedly said that:

We must recognize that there are no workable macroeconomic solutions which can be laid down: that everything is a matter of functioning microeconomics building things up....

With governments and monetary policy authorities in the developed world continuing their love affair with macroeconomics, with models, pushing on levers, and central planning, more often that with disastrous consequences, can you actually imagine a circumstance whereby that same group start to embrace microeconomics solutions? That those with the most entrenched power, acting in their OWN best interest, will forgo the former and the latter, to actually effect change?

Answer: I refer my learned friend to what the estimable Ron Paul wrote in the WSJ recently, viz:-

“What exactly the Fed will do is anyone's guess, and it is no surprise that markets continue to founder as anticipation mounts. If the Fed would stop intervening and distorting the market, and would allow the functioning of a truly free market that deals with profit and loss, our economy could recover. The continued existence of an organization that can create trillions of dollars out of thin air to purchase financial assets and prop up a fundamentally insolvent banking system is a black mark on an economy that professes to be free.”

So, to answer your question: if Ron Paul gets the Republican nomination, much less wins the subsequent election, you know there is still hope but, since the mainstream media can barely bring themselves to mention the man’s name, I wouldn’t bet the farm on it, just yet!

7. The Federal Reserve: Should it exist?

In January of 2008 your wrote:

From their very first incarnations in 17th century Sweden and England, central banks have been purposeful mechanisms for shoring up profligate governments (whether these are buying guns or butter without properly funding the purchase) while serving as a backstop to the inherently flawed and highly unstable practice of fractional reserve banking”

Our question is simple, theoretical, and something that ZeroHedge readers think about often, Should the Federal Reserve (as conceptualized in the USA) be abolished? If so what do you replace it with?

Answer: Do you really need to ask??? I would abolish it as soon as can be arranged.

One possible mechanism to achieve this has been thrashed out by several of us at the Cobden Centre in the context of ridding the UK of that destructive 318-year old canker of monopoly and privilege which is Bank of England. For what it’s worth, my version of this was presented to an audience at the IEA in July of last year, the barebones of which are appended below.

As to what we should replace it with – why nothing of course! Just free banks, free to fail and free to flourish – just as there are free florists, free furniture makers, and free fashion houses - nothing more and nothing less.

8. OWS Movement, Arab Spring, Greek & UK Riots …...Collateral Damage

What started in January in 2011 in Tunisia, has In October of 2011, moved to the USA. The one constant thread in all of these movements is the profound lack of fairness in society and the profound lack of confidence in governments and the institutions  they represent.

How do you view the OWS movement? Does the movement cause you any concern?

Answer: To the extent that it provides a focus for left-wing disgust at the plutocracy, much as the Tea Party provides one for those who are considered as right wing, that is all to the good. My enemy’s enemy is my friend, after all.

 However, the problem is that many of the protestors see this as a failure of something they have heard fat-cat beneficiaries of the system, like Michael Moore and his kind, decry as ‘capitalism’ and so they are under the grave misapprehension that what is needed is a more activist government to take the reins, blissfully unaware that today’s Corporate Welfarism is more like something Mussolini - or his self-confessed admirer, FDR – would recognise as an alternative to, rather than an embodiment of, ‘capitalism’.

What they miss is that to be pro-market, is not to be pro-bank, much less pro-business since businessmen – especially Big Businessmen and ESOP guns-for-hire and Military-Industrial, US Treasury-Wall St. revolving door merchants, as opposed to real owner-entrepreneurs - are often just as inimical to the workings of the free market as any trade union militant or pink-tinged academic tritely disporting a Che T-shirt.

It is actually quite heartening to see that ordinary people are fed up with the pseudo-choice they are offered at the ballot box by two giant, entrenched, self-serving party machines which have far greater commonalities than differences. I think you see the same thing with the likes of the Pirate Party in Germany, the Real Finns, and Christoph Blocher’s Swiss SVP.

The worry, of course, is that these same people, through no fault of their own, have not been given the tools with which to analyse their plight properly, nor have they been educated in a rich enough vocabulary in which to properly articulate their dissent and so there is a distinct possibility that they become co-opted either by some fiery demagogue or, as in much of Europe, by the dangerously illiberal Khmer Verts who camouflage their despotism in the cuddly panda pyjamas of the Green movement.

On a more hopeful note, these protests show that the Establishment – and a post-1968 Establishment, no less – has lost both its power of command and its automatic right to respect and that can only give us in the libertarian Remnant greater opportunities to fill the void, too.

9. Of Being 25 in a Developed Nation

We here at Zero Hedge are labelled as fringe lunatics who thrive on bad news. We only take issue with this to the extent that the label allows “others” to dismiss us out of hand, while not debating us on the merits of our ideas and opinions. Central to our platform is the debunking of generally accepted conclusions of mainstream Wall Street Economist and Strategists. We do so, not only because it is sometimes fun, but because we want to encourage our readers and ourselves to think beyond what we are all being spoon fed. We are interested in what advice you would give a 25 year old graduating from University about the future. How should they think about money, how should they be investing, and what do you think their future will look like (10 year time horizon) in a developed nation? Would you give different advice to a 25 year old in an emerging nation?

Answer: The first thing I would say is that, from direct personal experience, he should not even begin to imagine that he has completed his education , just because he has been awarded his degree!

If he (I’m sufficiently advanced enough beyond the age of 25 to luxuriate in the presumption that ‘he’ is a non-gender specific pronoun in this context) is lucky enough, his university will not just have shepherded him though a few exams, but will have encouraged him to learn how to think for himself and to trust his judgement when he applies that ability rigorously enough.

If he has been astute enough, he will also have realised that he needs to be equipped with a few basic tools beyond his specific expertise in order to navigate his way through the sea of half-truths and lazy presuppositions which are likely to surround him.

Firstly, he needs basic numeracy skills so he can have a sense of magnitudes, costs, and probabilities. Secondly, he needs a sense of geography so he knows where he is and a sense of history so he knows when and who he is. Thirdly, he needs to be able to both understand an argument and to make one, so that he can spot the falsehoods he is constantly being sold (sometimes, it has to be said, wholly inadvertently) and so that he can make his own case in response, once he has framed it. Finally, he needs to realise that the state is a wolf, not a sheepdog and that his liberty and right to self-expression are much more at risk from the smiling, ballet-box tyrants at home than it ever is from the foaming-mouthed, comic opera dictators whom he is enjoined to hate abroad.

He should realise that money is a medium by which wealth is exchanged, it is not wealth itself, much like it is the information he trades over the web which is important, not the plumbing of routers and servers and cabling which transmits it.

He should also be aware that when it comes to matters of money and economics, most of the ostensibly-learned discussants are sadly espousing ideas no more advanced or well-founded than were those of sixteenth century alchemists and leeches in the science of metallurgy or medicine.

Let’s start with the fact that ‘investing’ is one of those undertakings which is simple in concept but very difficult of execution and that it requires effort.

Furthermore, it is a very distinct activity from trading. One may have a great deal of fun – and even make a very nice living – trading, once one understands that trading is as little about the ‘fundamentals’ of economies or businesses being traded as poker is about the specific cards one draws in a hand. But he should also know that investing is a longer game where the idea is to buy something valuable to which the market has temporarily attached too low a price, that the market often does exactly that – and hence that the classic ideas of ‘efficiency’ and ‘rationality’ are an exploitable artefact of academic vanity.

He should know, ultimately, that only entrepreneurs create wealth and that, short of being an entrepreneur himself, he should look for market-given opportunities to invest in other men and women who are, when he can do so at what he reckons is a discount to their likely potential to generate income. He should always bear in mind that genuine entrepreneurs are THE ‘active managers’, THE ‘generators of alpha’ to whom he needs to entrust his hard-earned money above all others.

I’m not sure I would presume to offer any different advice to a young man from the developing, as opposed to the developed world, except to urge that he pay lots of attention to what might be lucrative gaps between what goes on in his country and what we in the West do in ours and also that he resolves to learn not just from what we do well, but from what we do badly!
 
As for the call to indulge in futurology, that really is a fool’s game. Life moves too fast to be overly specific. In a Heraclitan universe of flux, the straight edge with which one extrapolates an existing trend is the most dangerous instrument in one’s tool kit.

All I can say is that, despite the age-old Malthusian pessimism which is currently enjoying such a vogue, I doubt we will run out of energy – or any other service provided by a material resource – on any foreseeable horizon, though politics and the cult of Gaia might make it seem that way. While I am resolutely despairing of the ability of or the incentive for politicians to make the right choices on any kind of consistent basis, but I am also quietly optimistic of the ability of the man in the street to find his way around the obstacles their incompetence and venality erect in front of him.

10. End Game

You have repeatedly stated that the “markets are broken” (something Zero Hedge agrees with and states daily). We would also add that most governments in the developed world are also broken. Previously we asked you what advice you would give to a 25 year old. Now we are asking you to comment on how you see this deleveraging cycle, superimposed on broken markets, and governments playing out over the next 5 -15 years. We speculate that part of what the monetary authorities in the developed world are trying to do is create a soft landing for western countries living standards, we wonder if this is a possible or even probable outcome?

Answer: There is a glimmer of a chance that we manage to spend the next ten years reliving a version of the past ten just as the authorities hope we will– a glimmer which avoids the question of whether any such remission of sentence would actually redound to our long-term benefit.

There is a slightly greater chance that in desperately trying to avoid a re-run of what our urban mythology tells us what went wrong in the 1930s, the misreading of what went wrong (especially in Depression America) is such that we actually condemn ourselves to enduring a repeat. I would say here that, eighty years ago, it took an almost uninterrupted succession of poor choices and the interplay of any number of aggravating factors to lead us into that particular Valley of the Shadow, that, to rejig the great cliché of those days, the only thing we have to fear is the fear of that fear itself.

There is a somewhat greater chance under the current institutional framework– but still a long odds shot – of moving straight to an episode of accelerating inflation, even of hyperinflation, as people lose all faith in their money and in the aims of those who manage it. The saving grace here is that such behaviour usually has to be learned over a period of time, unless policy is so determinedly and nakedly pointed in that direction, that we still have time to avoid this possibility.

Therefore, by a process of elimination, the scenario to which I would attach the greatest probability to is the one under which we slowly and successively ratchet ourselves up from one level of underemployment and overinflation to the neat, much as we did in the period from 1965-1983. This implies we become locked into a dreadful hysteresis of ever more desperate monetary fixes for wilfully unaddressed real-side problems and that this does then end up teaching people to anticipate the price inflationary side effects and to ignore the transient growth impulses at an earlier and earlier stage in each cycle of ‘stimulus’ to the point at which it is their own attempt at self-preservation which delivers all but the lucky or politically sheltered few into the jaws of this vast meat-grinder of wealth.

Somewhere along the line, we are going to have to recognise the losses we suffered in the Boom. The question is how unfairly those losses will be distributed, how much worse they will be made by our attempts to avoid them, and whether we will re-equilibrate the value of our outstanding obligations with our ability to generate the income to service and then discharge them by (a) pushing the monetary value of the assets up to those of the debts (as has been the thrust of policy to this point); (b) by writing the debt down to the worth of the underlying (a reckoning we have wasted so many trillions trying to avoid); or (c) by being lucky enough to hit upon enough new sources of income to be able to treat the overhang as a minor balancing item (the unspoken hope behind all that has happened these last four years).

Each of these outcomes has different consequences for different classes of investible assets, for different countries, for different industries, and for different companies within them. The trick will be to recognise which path we are indeed following sufficiently early to buy into it at a good price and then to identify where along that route the deepest pitfalls and most desirable prizes lie so as to keep our real wealth intact as far down it as we can.

Good luck with the challenge!

 

 

With extended thanks to Lizzie363

 

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Sun, 10/23/2011 - 13:32 | 1802137 X.inf.capt
X.inf.capt's picture

+1 

great article

ZH'ers are the fringe....

hell, they been pretty close to calling it all along...

its been a pretty good crystal ball, in my opinion...the comment section has some sharp people in it...

once you get past the disinformation trolls..or at least identify them...

but it is good to see what worries TPTB...

Sun, 10/23/2011 - 13:42 | 1802198 navy62802
navy62802's picture

I don't consider myself especially astute when it comes to economics (I'm an engineer by education). But the things that we talk about here seem like they should be common sense sort of things. ZH'ers are fringe according to the establishment business/financial media. However, I think what makes ZH different and "fringe" is that ZH's writers (the Durderns, Reggie Middleton, Bruce Krasting, et al) discuss reality and the truth. Sadly, reality and the truth are fringe in our contemporary political and economic environment.

Sun, 10/23/2011 - 13:47 | 1802211 X.inf.capt
X.inf.capt's picture

.

+1

Sun, 10/23/2011 - 13:28 | 1802150 buzzsaw99
buzzsaw99's picture

wordy and pointless

Sun, 10/23/2011 - 13:33 | 1802169 Corn1945
Corn1945's picture

Agreed. This guy said nothing.

Sun, 10/23/2011 - 15:00 | 1802354 Max Fischer
Max Fischer's picture

 

 

 

On Occupy Wall Street:

....nor have they been educated in a rich enough vocabulary in which to properly articulate their dissent and so there is a distinct possibility....

OH BARF!

Give me a break, Mr. Corrigan!  That is absolutely ridiculous.  Typical elitist shit.  Of all the ZH contributors, only YOU could possibly say something that pompous.  

While you have thoughtful and interesting things to say, you're so full of yourself and so overly pompous in your dialect (combination of Old English/Anglo Saxon and puke-worthy Ivory Tower), that it distracts from any message you're trying to make.  By the time I'm done reading any of your commentary, I typically feel exhausted - and not in a good way.  

You're discounting the effectiveness of OWS because their vocabulary isn't rich enough?  

Jeepers Creepers!

Max Fischer, Civis Mundi 

 

Sun, 10/23/2011 - 17:24 | 1802663 Major Priapus
Major Priapus's picture

"Ridiculous?!"  I beg to differ - Corrigan's "

....nor have they been educated in a rich enough vocabulary in which to properly articulate their dissent and so there is a distinct possibility....

...is if anything understated!

I refer everyone to The G&M's Slavoj Zizek: Superstar of the Occupy movement

http://www.theglobeandmail.com/news/world/americas/slavoj-zizek-superstar-of-the-occupy-movement/article2209984/

The Occupy Movement may be incohate - Zizek is incoherent but attaining Messianic adolation with nihil obstats from less-than-luminaries such as Michael Moore & imprimaturs from Hollywood intellectual lite-weights such as Susan Sarandon...  you know the kind I mean - cretins who think they can understand Kaballah from a book with pictures thereby making them so spiritual dontchya know!

Tue, 10/25/2011 - 01:21 | 1807181 francis_the_won...
francis_the_wonder_hamster's picture

"You're discounting the effectiveness of OWS because their vocabulary isn't rich enough?"

And you just discounted his points because his vocabulary was too rich?

OWS is correct when they point out that Wall Street's entitlements are a huge issue.  They are incorrect when they refuse to consider why this is so (hint: Washington DC?).

As for their effectiveness, I'd ask what they are trying to be effective at?  Are they trying to change a corrupt system?  If so, they need to go after the other part of the equation as well....which would make sense unless they were "orgnized" by someone with a different agenda......do the math.

Sun, 10/23/2011 - 15:32 | 1802437 pgarner
pgarner's picture

On the contrary, intelligent and insightful. Quite a relief, in fact, and in contrast to the frequent hyperbole and self-promotion we encounter here.

Sun, 10/23/2011 - 13:30 | 1802158 Belarus
Belarus's picture

Good luck with the challenge!

In other words, if you have any money left at all, you will be totally fucked trying to manage it. 

Sun, 10/23/2011 - 13:32 | 1802161 Corn1945
Corn1945's picture

This guy says a lot but says nothing at the same time. The entire "interview" is just a long stream of meaningless jibber jabber.

Sun, 10/23/2011 - 14:35 | 1802321 Kayman
Kayman's picture

Quixotic_Not

1. And in being consistent with your prior stated position that math trumps politics, where pray tell does Hegel's mushy philosophy become constrained by arithmetic ?

2. Marx and his patriarch Engels shamelessly borrowed concepts from the Utopians, abundant in industrialized Britain.

Communism, as practised by the 20th century czars, was but a repeat of the benefit to the few at the expense of the many. Same as our Crony Capitalism today.

Sun, 10/23/2011 - 15:08 | 1802365 falak pema
falak pema's picture

To his credit Marx was a 19 th century philosopher who understood before any body else what the industrial revolution entailed for human society; an acceleration of productive wealth accumulation as never seen before. He analysed its social consequences identifying correctly it base weaknesses, the inexorable impulse amongst the uber-class to concentrate wealth by milking the labour component. So he diagnosed its ills but proposed a totalitarian, utopic solution which has proved in reality to be worse than the evil it was supposed to correct. 

He was a philosopher not a political Oligarch. Don't blame him for EXECUTING his dream, he just dreamt it. Period. He died impoverished. 

Sun, 10/23/2011 - 16:07 | 1802499 Kayman
Kayman's picture

 

Falak

Far from recognizing before anyone else... Marx piggybacked on to the prior work of big "L" liberalism and enlightened Industrialists. 

He and Engels recognized the growing power of a class of Industrialists, starting to exceed that of the land-owning class (the source of most previous power dominated by the titled royalty).

Taking class division and adding violence, Marx begat the Communist Manifesto.

He started as a beggar, lived off the good graces of Engel and died a beggar.  Spending your adult life in the London Library can weaken your health, physical and mental. 

Just saying...

Best regards

K

Sun, 10/23/2011 - 17:07 | 1802608 falak pema
falak pema's picture

you forget he did write a book called 'das kapital', totally unreadable, as wading through it is like walking in heavy  winter fog; but considered by many as a water shed. Also, the notion of class struggle, as sociological concept, was original and like psycho analysis and Freud, was a new water shed. Now, belittling him is ok, if you don't agree with his philosophy; like psycho analysis it isn't exact science. But he did change the course of economic thinking, of philosophy and of politics. Big time.

Sun, 10/23/2011 - 17:26 | 1802670 Kayman
Kayman's picture

I did not forget.  Das Kapital, like Mein Kampf, is good for bedtime reading.  Guaranteed to put you out faster than Propanol.

From the Manifesto, "The bourgeoisie, during its scarce 100 years, has created more colossal productive forces than have all preceding generations together."

Adam Smith couldn't have said it better.

Regards

K

Mon, 10/24/2011 - 06:31 | 1803661 falak pema
falak pema's picture

adam smith and marx were on the opposite sides of the philosophical divide. That fact that you prefer Smith to Marx is probably a reflection of how events have played out. But Marx's critique of capitalism stays relevant, even if you don't buy his solution like most of us. He marked his age. Its not about being right or wrong, its about having brought original thoughts to the philosophical table. Thats the sense of the dialectical, Hegelian debate. We all progress when there is thesis and antithesis. Let the chips fall and history decide subsequently. Both Smith and Marx played very prominent parts in the 19 th century.

Mon, 10/24/2011 - 13:03 | 1804879 Kayman
Kayman's picture

I am only saying Marx helped himself to ideas that were the ideas of others.  He wasn't housed in the London Library courting librarians.

Further Marx as a Philosopher, Sociologist, and Political Scientist.... maybe. But as an Economist ?  The Labor Theory of Value is a distant cousin to the Market Theory of Value.

Sun, 10/23/2011 - 19:24 | 1802906 Billy Bob
Billy Bob's picture

Quixotic

I do agree with your basic insight.. as I also agree with the Hegelian dialectic.

My experience is that there are a number of ways to understand the dialectic..... Jung, and then others, talked about "Holding the Tension of the Opposites"

In terms of the dialectic, it is a matter of being able to hold two opposing ideas in suspense, while waiting for the third way to become obvious.

Or something like that.... but that idea has worked for me whenver I have found myself confused about which path to take.. bottom line, don't take either of the paths that seems like the only possible choices.. if you can hold the "tension of the opposites" an other choice will appear.

In a spiritual realm, consideration is often the "dualistic" choice...Either/Or.  However, there is still the "dialectic" choice.....  And/Both

 

Bill

 

3

Sun, 10/23/2011 - 13:32 | 1802165 Snakeeyes
Snakeeyes's picture

As an Austrian Economist myself at George Mason University, I have warning about the fallout of the Austrian Credit Bubble (government stimulated and selectively monitored/enforced). Or just read Von Hayek's "The Road to Serfdom."

This Week’s Reports: 3Q Real GDP Expected to Grow at +2.5%! (Or Is It Down -5.5%?), Case-Shiller Up +0.2%! (Or Is It Really Down 0.8%?)

http://confoundedinterest.wordpress.com

 

Sun, 10/23/2011 - 13:34 | 1802172 Wolferl
Wolferl's picture

Moron, we say "Daumen drücken" on both sides of the Rhine. Because only the stupid French and some of their friends are unable to look at a map.

Sun, 10/23/2011 - 16:09 | 1802503 Kayman
Kayman's picture

How long are you guys going to argue over Alsace-Lorraine ?

Sun, 10/23/2011 - 13:36 | 1802177 Harbourcity
Harbourcity's picture

Was disappointed with the article as nothing new here.  I agree with it all, don't get me wrong, I just didn't read anything... new.

Sun, 10/23/2011 - 15:06 | 1802383 defencev
defencev's picture

 I would disagree with that. While the author has a well-determined view-point ,he at leat wise enough (unlike what it pushed on this website) to indicate that various outcomes of the current crisis are possible. Therefore (unless one makes one concrete bet) the right way to invest is through portfolio which takes into consideration a variety of outcomes with probabilities based on concrete individual beliefs. Therefore, the idea that hoarding PM is the only way to go is a dangerous, simplistic nonsense which may lead to total lost of investment. My own approach is to choose the set of probabilities  of someone who has a proven investment record (like Marc Faber) rather than idiotic, based on prejudices and misconceptions, hysterical predictions promoted by this website.

Sun, 10/23/2011 - 16:10 | 1802506 DCFusor
DCFusor's picture

New is a rather bizzarre demand to make. 

Let's suppose there were some absolute truths.  And someone said them.  Unless there is a new creation, those old truths are still the truth, and pretty much all there is to say on the subject.

Sure, one could elaborate endlessly, and even give examples of specific cases, which would of course limit the understanding to those cases alone.  I suppose you might call that "new".  But it wouldn't be, just specific (and therefore very limited) examples of the big basic truths.  My point is that even an endless stream of specific examples doesn't convey the overall truth very well, and that thinking that understanding all the simplistic given examples gives you the overview is probably an error.  It depends on how good the teller is at parables, and how good the listener is at extrapolating them - correctly.  No small trick.

I'm not saying that is the case here -- just sayin that demanding "new" all the time might prompt someone to invent some "new pure bullshit" and you'd be buying it because it was "new".

Sun, 10/23/2011 - 13:37 | 1802186 Piranhanoia
Piranhanoia's picture

I wonder if we can pick and choose what will hold over after the chaos?   Aren't there too many variables to be able to do more than theorize using imperfect models and assumptions?  The deterioration that will cause the masses to leave their homes seeking sustenance for their familes and blood from their enemies never seems to be factored in. Is it too horrible for someone that knows a haircut is in their future to imagine?  Must it be ignored at all costs to make the models work?

Because in chaos we will find order.  (Ray Nitschke, as he separated an opponent from his consciousness) 

Sun, 10/23/2011 - 22:08 | 1803229 Milestones
Milestones's picture

Green Bay fan.       MIlestones

Sun, 10/23/2011 - 13:40 | 1802191 vast-dom
vast-dom's picture

Fantastic post.

 

Prepare for: a) CRASH b) CRASH c) CRASH

 

 

Sun, 10/23/2011 - 13:44 | 1802202 bigwavedave
bigwavedave's picture

We speculate that part of what the monetary authorities in the developed world are trying to do is create a soft landing for western countries living standards, we wonder if this is a possible or even probable outcome?

And that is exactly how it will be. A rebalancing of living standards between the developed and the developing world that continues for another 10-20 years. Simple. 

Sun, 10/23/2011 - 16:31 | 1802545 lincolnsteffens
lincolnsteffens's picture

Maybe they are trying to manage a soft landing but in the end though we may be nearer to the landing strip it will still be a hard landing. Per usual the manipulators are doing the best to prop up their favorites while the rest will just have to do their best  by making frequent trips to grocery store dumpsters (when the guards are asleep).

Sun, 10/23/2011 - 13:45 | 1802203 Joebloinvestor
Joebloinvestor's picture

OBS ?

Gee whiz, I thought all that stuff ended with ENRON.

If you want to hide debt, you might as well learn from the experts.

 

Sun, 10/23/2011 - 13:48 | 1802217 whoisjohngalt11
whoisjohngalt11's picture

Peter Schiff  pointing out the insanity and utter uslessness of listening to the new Nobel laureates from Princeston who are speechless on current economic issues hahaha  http://heavenbounf.blogspot.com/ like how to fix the us economy.......

Sun, 10/23/2011 - 13:48 | 1802218 falak pema
falak pema's picture

an academic's view of the world. Its coherent as it is self serving. FDR was an admirer of Mussolini...in 1940? 

The market economy described will never exist in reality. The political construct always pushes to dominant position and biases market function completely, time and again. WIthout strong governance/regulation the markets cannot function to serve the small entrepreneurs, the common man. Which leads us into the paradox of Charybdis/statism and Scylla/Corporate Oligarchy.

Human nature is a bitch. And tends to take the line of least resistance, not the hard steady virtuous climb up. Entropy's arrow then brings us down the slope. Only very rarely do we find the logic of power in tune with the logic of efficient progress, to serve humanity.

We had 30 years of war...1915-1945, then 30 years of progress, then 30 years of corruption. Now its payup time for those who live in first world, as rulers of planet. Reset coming fast by the looks of it.

Sun, 10/23/2011 - 18:51 | 1802873 topcallingtroll
topcallingtroll's picture

You forget that the dollar is the rock of Gibralter.

The euro looks like it might be a big pile of mud. Not very safe to stand on when the tide comes in.

Thanks to mercantilist philosophy the dollar will remain the major world currency and the third world will subsidize americans a while longer.

The world doesnt even dare let america catch a cold.......cuz they know what happens next to them.

We are so special. It will last a bit longer than you think, your wishful thinking notwithstanding.

Sun, 10/23/2011 - 14:26 | 1802257 PulauHantu29
PulauHantu29's picture

Thank you. It will take me a year to absorb ....a lifetime to understand your article...but I''ll definitely try. At least I now have the raw material to work with and ponder...

...as you state, the web is flooded with misinformation--some plain stupid but some intentionally misleading (like much of MSM).

...thanks again for sharing your insight!

Sun, 10/23/2011 - 14:42 | 1802332 Hulk
Hulk's picture

Try the Kyle Bass interview, Confessions of a Dangerous Mind" for a much more concrete view of things

based on solid, real world data analysis

http://www.youtube.com/watch?v=WWgtzwqWh60

Sun, 10/23/2011 - 15:10 | 1802268 TheSilverJournal
TheSilverJournal's picture

"the scenario to which I would attach the greatest probability to is the one under which we slowly and successively ratchet ourselves up from one level of underemployment and overinflation to the neat, much as we did in the period from 1965-1983. This implies we become locked into a dreadful hysteresis of ever more desperate monetary fixes for wilfully unaddressed real-side problems and that this does then end up teaching people to anticipate the price inflationary side effects and to ignore the transient growth impulses at an earlier and earlier stage in each cycle of ‘stimulus’ to the point at which it is their own attempt at self-preservation which delivers all but the lucky or politically sheltered few into the jaws of this vast meat-grinder of wealth."

 

Our situation is much different from 1965-1983. The US economy is in much worse shape. Entitlements are much larger. Taxes are much steeper. Regulation is much more burdensome. The trade deficit is much higher. The public is much larger amount of bank's bad assets. The economy today is 70% service sector. Many more people are dependent on the government. The unfunded liabilities are much larger. 1965-1983, Interest rates were raised to get ahead of inflation and through that period, gold and silver had immense gains and at the same time, unemployment rose drastically. Unemployment today is pretty high already. If rates are raised enough to get ahead of inflation now, unemployment would soar much higher and gold and silver would rocket up from here..I have serious doubts that the dollar would survive through a Volcker-like process. I only see hyperinflation as a realistic outcome.

Sun, 10/23/2011 - 18:57 | 1802880 topcallingtroll
topcallingtroll's picture

Hyperinflation is not the only outcome but I agree with your view of monetary policy. It is the perfect time for a contrarian.

If europe gets their shit together prepare for an amazing bull market to start the next cycle.

It is important to try to survive this as the few who maintain and grow theie wealth through this series cycles.

Sun, 10/23/2011 - 19:42 | 1802951 TheSilverJournal
TheSilverJournal's picture

The only other outcome is to allow depositors to lose their money. That's it. Either continue QE and hyperinflate and all dollar holder's lose their purchasing power or stop QE, leaving all depositors to lose their money, but allowing physical cash to maintain some purchasing power.

I agree with the bull run, but only in nominal terms, not real terms. I think when Europe solves their problems, the Euro will rise which will sink the dollar. In addition, the Fed is preparing more QE with purchasing MBS (it's actually doing more QE than it saying right now), which will further sink the dollar and boost stocks. Overall, I expect it to be much more of a story about a falling dollar.

Sun, 10/23/2011 - 14:18 | 1802293 Kayman
Kayman's picture

Worthwhile and priceless.

Sun, 10/23/2011 - 14:27 | 1802305 unununium
unununium's picture

"Contrary to popular belief, there is no need for a fiscal transfer union, much less an overarching political supersovereignty, to guarantee the viability of a currency union."

Bingo.  The existence of bailouts is the only reason the lack of fiscal union poses a problem.

Without bailouts, bailouts cannot possibly benefit the wrong countries.

Sun, 10/23/2011 - 15:02 | 1802374 hourglass86
hourglass86's picture

Im exaclty 25 years. Thank you Zero Hedge! You have changed my life in a positive way. Thank you. 

Sun, 10/23/2011 - 15:35 | 1802445 Monedas
Monedas's picture

Happy Birthday ! 25 years would be your Silver Anniversary of yourself ? Monedas 2011 Comedy Jihad Fishing Expedition

Sun, 10/23/2011 - 15:14 | 1802398 Monedas
Monedas's picture

I used to enjoy saying House of Cards when refering to the Worldwide Fiat Ponzi ! After observing the EU....I find that cliche is totally inadequate ! We are dealing with a House of Snowflakes ! We are one, hot bean fart away from meltdown ! Monedas 2011 Comedy Jihad Continental, Cosmopolitan, Chic Flatulescence

Sun, 10/23/2011 - 15:38 | 1802452 RiverRoad
RiverRoad's picture

We will still be decades away from the resolution of Financial WW3 here unless and until a financial atomic bomb of some type is dropped, whereupon a new financial Marshall Plan can then be drawn up for the world.  It is futile to hope that the present world leaders who serve and are controlled by the world's banksters will ever responsibly address the issues here on the own volition.  But the plane carrying that bomb has taken off, and hopefully for the rest of us, the drop will be sooner rather than later. 

Sun, 10/23/2011 - 16:12 | 1802509 Kayman
Kayman's picture

Uhh... sorry.  We couldn't afford the bomb.  But we packaged up a nice IOU to go with the plane.

Sun, 10/23/2011 - 15:59 | 1802484 CrashisOptimistic
CrashisOptimistic's picture

An article / post about "things" without a single mention of oil depletion = worthless.

 

Greece burns 400,000 barrels a day and produces zero.  At $110 Brent, that's 

FIVE PERCENT OF GDP THIS YEAR SENT ELSEWHERE.

How in God's name do these alleged pundits talk about solving problems without seeing what's heppening.

Mon, 10/24/2011 - 03:02 | 1803585 malek
malek's picture

You should read the post completely.

All I can say is that, despite the age-old Malthusian pessimism which is currently enjoying such a vogue, I doubt we will run out of energy

Sun, 10/23/2011 - 17:23 | 1802664 halflink123
halflink123's picture

How bout: govts get out of the way (entirely) and people take some pain (esp. and including banksters)? Don't like idea of gov't "facilitating" asset transfers from bad banks to good banks...to much potential for corruption. Just ge the govt the f*ck out of the way and let the chips fall where they may (except protecting depositors to the extent possible).

 

The fact is noone wants to take losses and no one even wants to admit to the possibility of there BEING any losses...

 

Finally I am so sick and tired of hearing about f*cking Lehman.  What happenned? Some bonds got written down?  Ohno!!! Who cares?  This is just another myth perpetrated by the TBTF.  

 

How bout it all goes down, write the derivates down to 0, write the bank bonds down to 0, write the bank stocks down to 0, take the pain and move on.

 

In other words just let the market work.

 

Sun, 10/23/2011 - 17:27 | 1802675 machineh
machineh's picture

'that destructive 318-year old canker of monopoly and privilege which is Bank of England'

Beautiful formulation -- Bernankster, the central-banker canker!

Mon, 10/24/2011 - 11:20 | 1804408 Major Priapus
Major Priapus's picture

...  or perhaps cantankerous central bankster?  ;-)

Sun, 10/23/2011 - 17:33 | 1802694 Major Priapus
Major Priapus's picture

Mr. Corrigan - I enjoy your purple prose - incadescent violet actually.

But then - I also enjoy reading Conrad Black.  ;-)

I have an unfair advantage given I can read the obtuse prose of academic German in the original.  I have always been a fan of yours, but academic friends of mine cannot follow you given their inexperience in Teutonic turns of phrase.

I humbly suggest that you would have a greater anglo-following if you were to vet your contributions by a uniligual anglophone editor who would chop your nested subordinate clauses into independent sentences.

But hey...  what do I know?!  Perhaps you would prefer to limit your fan base to ahippopotomonstrosesquipedaliophobiacs

Sun, 10/23/2011 - 18:08 | 1802791 AndreiC
AndreiC's picture

"He should realise that money is a medium by which wealth is exchanged, it is not wealth itself, much like it is the information he trades over the web which is important, not the plumbing of routers and servers and cabling which transmits it."

 

Is this a joke?

Before I can invest, I need to have SAVED money.

I can't invest and build something if I live from paycheck to paycheck... You see? Now the question of money becomes really important. Money is wealth (at least it should be - sound money).

I can't go and buy 100 sq. meters of agricultural land every month from my paycheck (as a means of saving). We need SOUND MONEY. And money IS wealth - otherwise SAVING for the purpose of investing would make no sense.

Sun, 10/23/2011 - 18:25 | 1802820 Kayman
Kayman's picture

 "Money is wealth (at least it should be - sound money)."

Commodity Money is wealth, Fiat Money is Faith. And Faith is fading.

Sun, 10/23/2011 - 21:59 | 1803204 catch edge ghost
catch edge ghost's picture

Yeah. He is kind of windy. I remember thinking the same thing while watching him on a video not long ago.  I think it's just old school.  People used to read and do all kinds of weird crap in the olden days. He's prolly ancient, like 30 years old or something. And foreign? <shudder>

Of course, the solution to any problem will fit into a Tweet. BTFD, End The Fed, STFU. etc.

Mon, 10/24/2011 - 02:10 | 1803556 shokdee
shokdee's picture

My attention was drawn to these words:

-- spend the next ten years reliving a version of the past ten.

-- avoid a re-run..misreading of what went wrong..we actually condemn ourselves to enduring a repeat.

I have developed a strong interest in this idea, of histroy repeating, how we condem ourselves to a repeat, and how we can escape a cycle, I repost an earlier post about the temporal resonance field:

Studying the past did you also notice the cycles, cycling cycles, history repeating, but will it repeat again? Looking at your favouriste cycle, where are we now? Bobbing up? Or sliding down?
There is obviously a temporal resonant field, much like a morphogenetic field, that ensures that  events that have happened will tend to happen again -  if there is resonance. Events will tend to happen, if they resonant with those that happened before. The more an event has happened the stronger its field. Powerful events from the future alter the field to that similar events will tend to happen in the past. The fractal properties of time create resonance at different time scales, an incident lasting days, might resonant with a process taking seconds. A split second event, could slow down into a months long process - if they resonant. Humans can tune into this field -  a psychic ability - and pick up a particulaiar resonating time  frame. Feelings of sympathetic vibration that indicate attunement, accompanied by a sense of wonder and exhilaration. Humans can also surf a timewave, much as a surfer rides in front of the big wave.  By creating a resonance in yourself for a future event - a strange attractor - you can surf in that direction, not just down a water tube.

Mon, 10/24/2011 - 03:00 | 1803584 malek
malek's picture

Excellent interview. Thank you!!

Mon, 10/24/2011 - 03:10 | 1803587 Peter K
Peter K's picture

Yes indeed. Excellant post:)

Mon, 10/24/2011 - 09:24 | 1803866 Cat On A Ledge
Cat On A Ledge's picture

A fine read! From the opening lines, it seems that Mr. Corrigan is an influential persona within the Austrian Economic circle? Having read such well-articulated thoughts, i'd very much like to express my own opinions on some of the more interesting points, no doubt in the process lay bare the limited extent of my knowledge of the Austrian school; nevertheless, here goes:

 2. EU Bank Recapitalizations
 Consolidate, consolidate, consolidate

So many TBTFs thusly created... bringing forth systemic risks of gargantuan proportions. This could only work if those megabanks that result from consolidation are rigorously regulated - to the point where they'd less resemble private enterprises than state-owned apparatuses.

As Gaudí would say, "Less is more." (In more ways than he meant it!)

3. Three years later
 by privatising assets, reducing the deadweight of the various bureaucratic agencies

Yes, although bureaucratic agencies tend to become bloated and wasteful over time, however i beg to differ on the necessity of privatisation. In fact, i'd go so far as to argue that, for the betterment of society as a whole, certain strategic industries and key social services should not fall prey to the false allure of profits.

Regarding the first (strategic industries), most present day governments are in agreement. Can anyone imagine the reverse? Say, rent-a-tank on the eve of war? No, it'd be unimaginable because it simply won't work.

So what about the second (key services)? Will we improve the profitability of, say, a hospital if it were privatised and left to compete on the open market? No doubt the bottom line will improve, and perhaps the top line as well under strong(-armed) management, but is it really better for the rest of society, as opposed to a national hospital that provides subsidised care to patients from all walks of life?

What about railroads? Toll roads? Ports? What is to prevent society from being blackmailed by collusion among actors in a sector, with too high a barrier of entry, and/or too small a size to support more than a tiny oligarchy?

What about banks? Now that is a point of contention, depending on one's views on the essential nature of banks and banking services. If memory serves, back in 2009 there was a lengthy discussion on this topic (banks & money) right here on ZH; although no conclusive consensus was reached among the participants (well, what else can we expect from internet debates?), it did make for a lively afternoon.

 4. The Euro
Contrary to popular belief, there is no need for a fiscal transfer union, much less an overarching political supersovereignty, to guarantee the viability of a currency union.

i strongly agree. The most pressing issue facing eurozone members, should be how to reduce governmental expenses without upsetting delicate social sensitivities. To best achieve this end, national governments should be given more autonomy, not less. Afterall, who understands the spanish better than spaniards? The french better than the french? Who even understands greek?! (not talking about 'alpha', 'beta' or 'theta' etc etc)

8. OWS Movement, Arab Spring, Greek & UK Riots …...Collateral Damage
It is actually quite heartening to see that ordinary people are fed up with the pseudo-choice they are offered at the ballot box by two giant, entrenched, self-serving party machines

Definitely. After some 2-odd years, it's also very heartening to see that the majority of fellow ZH'ers have finally reached a consensus on the very fundamental flaw in US politics, the so-called 'dual party system'. Coupled with the wondrous perk known as 'campaign contributions', this flaw basically guarantees that the most corruptible man wins. And once appointed into power, the corrupted will proceed to appoint judges most willing to turn a blind eye to their dirty dealings. How can a political system like that ever result in anything other than disaster?

 9. Of Being 25 in a Developed Nation
Finally, he needs to realise that the state is a wolf, not a sheepdog

Our lives and our properties were never ours to begin with. Let's do away with conscription and eminent domain laws, and maybe future generations might have a chance to be truly free.

 short of being an entrepreneur himself, he should look for market-given opportunities to invest in other men and women who are

Sir, are you advocating that those of us who lack the aptitude to become businessmen, should instead become leeches? Just kidding.

The stock market, indeed the very concept of stocks, is to me a thing of wonder. That said, the corporate structure as it exists in its current popular form, does lend itself to abuse from time to time. Maybe some bright young 25-yr old MBA graduate will come up with a new management philosophy that takes the corporate world by storm. The white swan.

 10. End Game
Somewhere along the line, we are going to have to recognise the losses we suffered in the Boom. The question is how unfairly those losses will be distributed, how much worse they will be made by our attempts to avoid them, and whether we will re-equilibrate the value of our outstanding obligations with our ability to generate the income to service and then discharge them by (a) pushing the monetary value of the assets up to those of the debts (as has been the thrust of policy to this point); (b) by writing the debt down to the worth of the underlying (a reckoning we have wasted so many trillions trying to avoid); or (c) by being lucky enough to hit upon enough new sources of income to be able to treat the overhang as a minor balancing item (the unspoken hope behind all that has happened these last four years).

i've taken the liberty to quote an entire passage because it is evident from reading this that Mr. Corrigan thinks on a higher level than most people, economists or not.

 

Thank you.

 

Mon, 10/24/2011 - 10:36 | 1804182 Major Priapus
Major Priapus's picture

Excellent synopsis!  I concur - Corrigan does think at a higher level than most people including all Fiscal and Monetary Necromancers that got us into this unholy mess!

Allow to me to add one last item to your list

<blockquote>What we must be clear on here, though, is that the suggestions of Hatzius and his ilk are all very much at one with the prevailing top-down planner, central bank-lever pulling mode and so are very much subject to Fatal Conceit/Knowledge Problem objections. In addition, they all seem to think their should be a ‘target’ - i.e., some divinely-ordained number, plucked out of the entrails of some DGSE ritual calculation; one which, of course, must be a bigger number than the one we have today and, worse, one which must be driven to increase at an arbitrarily determined rate thereafter. </blockquote>

If I had to choose one passage as a sound-bite to contradict the fallacy of orthodox-economistry as religion - the above would be it.

Corrigan does an excellent job of elucidating even further the urgent immediacy of our collective plight as we all peer over an unprecedented perilous edge of a precipice!

http://www.cobdencentre.org/2011/10/big-trouble-in-little-china/

 

Mon, 10/24/2011 - 16:24 | 1805801 Cat On A Ledge
Cat On A Ledge's picture

Thank you for your kind words and the link to his website. First impression: a place with heavyweight writing and lively debates! Will take the time to mull it through.

Mon, 10/24/2011 - 16:24 | 1805786 Cat On A Ledge
Cat On A Ledge's picture

<erroneous post>

Tue, 10/25/2011 - 07:07 | 1807420 monkeys.pick.bottoms
monkeys.pick.bottoms's picture

Am I crazy or what, but to me president Ron Paul 2012 is a certainty. The economic environment will only get worse and the worse it gets, the higher his chances. It's a no brainer. The mainstream media at this point are irrelevant.

Tue, 10/25/2011 - 14:21 | 1809274 Major Priapus
Major Priapus's picture

The one-eyed man in a country of blind men is king!  ... or should be!

You are not crazy - Fractional Reserve Banking is CRAZY - especially when the denominator becomes infinity!

I humbly submit that Ron Paul will be considered by far too many far too dangerous to elect - and therefore will be unelectable. 

Cui bono ? - whould be rephrased Qui desperet? All and any remotely associated or supportive of the Federal Reserve or the Treasury and all their minion or derivative banksters (commercial and investment) would despair at any Pauline grasp of the brass ring! 

Is America's media independent?  The only coverage of Ron Paul in American media I can ascertain, occurs only on Jon Stewart and Stephen Colbert!!!  ...  OK and zerohedge as well.

Ron Paul's election motto should be:

"Just because you're not paranoid doesn't mean they're not out to get you."

Tue, 12/13/2011 - 00:48 | 1972798 Yen Cross
Yen Cross's picture

 No offeence! ( Sp; intended)

    I must be a rookie? Influential? (sp?

Sat, 01/07/2012 - 16:00 | 2042494 Yen Cross
Yen Cross's picture

 Thanks for the clarification! ( SPOT ON)! I, wonder what is on the balance sheets of( swaps, OIS) EFSF, LTRO?

   This [ CIRCLE JERK }   has no end!!!  

 

   This shit reminds me of ( Ace Ventura ) , throwing that <  God Damned>  SLINKY , down the steps of that " Tibetan Monastery"!

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