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Goldman Justifies The Need For More QE3, And Even More Record Wall Street Bonuses
We end this busy day of economic buffoonery with Goldman's scorecard for August ("the US economy has not fallen off a cliff", which we translate as a B+, and "far better than expected"), which in turn explains why Goldman, and everyone else, now assumes QE3 (yes, Op Twist is QE3; get over it) is not only a given, but why in Goldman's esteemed opinion, the Fed has at least 3 rationales for pushing for more QEasing. Incidentally, these are as follows: "First, unemployment is far above the Fed’s long-term forecast in the low 5% range; the longer high unemployment persists, the greater the risk that an erosion of skills and labor force attachment will result in permanent supply-side damage. Second, economic growth has been woeful this year and there is no convincing sign of the second-half pickup in growth that the majority of Fed officials seem to expect. The payroll report in particular will weigh heavily in the minds of many Federal Open Market Committee members. Third, there is limited prospect for near-term fiscal stimulus from a gridlocked Washington." The only thing Goldman is avoiding, of course, is the wipe out in stocks that will make QE3 a virtual certainty, as we have been predicting ever since March. Goldman is also avoiding to mention that the only outcome of more QE will be another record year of Wall Street bonuses, all at the expense of more joblessness, higher gas prices, a 120% debt/GDP ratio, and overall sovereign insolvency. Oh well - in the meantime we continue, as we have for the past 2.5 years, to buy gold... or spam for the Econ PhDs out there.
Incidentally, just as amusing is our prediction from November 2010:
Zero Hedge now believes a $5 trillion QE3 program will be announced by July 2011, when gold is trading at $10,000, the entire Treasury curve is at zero, and stock prices are meaningless courtesy of a DXY sub 50, and every commodity opening limit up daily.
Oddly enough, it was supposed to be a grotesque form of hyperbole. We are stunned to reread just how close we came to predicting everything to the dot.
From Goldman's Keynesian acolytes:
- The US economy has not fallen off a cliff, despite the “confidence shock” precipitated by the debt ceiling impasse, the downgrade of the US sovereign rating, and the financial market turmoil of recent weeks.
- The August employment report was weak but not recessionary. The payroll survey was very disappointing, with no job growth, a drop in weekly hours, and a decline in hourly earnings. But the household survey posted a decent gain and the unemployment rate held steady at 9.1%.
- So far in the third quarter, “hard” indicators of economic activity look a tad better than our forecast of 1% real GDP growth (annualized), while “soft” measures such as business surveys look weaker. Recession remains a substantial risk but not our base case forecast.
- The economy’s growth performance so far in 2011 would be disappointing in any year, and is woefully unacceptable given the high level of unemployment. So we expect the Fed to take further action at its September 20-21 meeting, most likely by announcing that it will extend the duration of its securities holdings by selling shorter-dated securities for longer-dated Treasuries.
- We expect the impact of such a balance sheet “twist” to be similar to QE2. Given widespread speculation of further Fed action, and a very dovish set of minutes from the August meeting, we believe this impact is largely (though not completely) “priced in” to markets at this point.
In Search of Labor Day, Fed to Ease Further
The US economy has not fallen off a cliff, despite the “confidence shock” precipitated by the debt ceiling impasse, the downgrade of the US sovereign rating, and the financial market turmoil of recent weeks.
The August employment report was weak but not recessionary. The payroll survey was very disappointing, with no job growth, a drop in weekly hours, and a decline in hourly earnings. But the household survey posted a decent gain and the unemployment rate held steady at 9.1%.
So far in the third quarter, “hard” indicators of economic activity look a tad better than our forecast of 1% real GDP growth (annualized), while “soft” measures such as business surveys look weaker. Recession remains a substantial risk but not our base case forecast.
The economy’s growth performance so far in 2011 would be disappointing in any year, and is woefully unacceptable given the high level of unemployment. So we expect the Fed to take further action at its September 20-21 meeting, most likely by announcing that it will extend the duration of its securities holdings by selling shorter-dated securities for longer-dated Treasuries.
We expect the impact of such a balance sheet “twist” to be similar to QE2. Given widespread speculation of further Fed action, and a very dovish set of minutes from the August meeting, we believe this impact is largely (though not completely) “priced in” to markets at this point.
Despite a “confidence shock” precipitated by the debt ceiling impasse, the downgrade of the US sovereign rating, and the financial market turmoil of recent weeks, the economy seems to have staggered through August without a collapse. But with unemployment at unacceptable levels, growth below trend, and no clear evidence of a second-half pickup, we expect the Federal Reserve to take another substantial easing step at its September 20-21 meeting.
A Stagnant Labor Market
“Labor Day” is anything but in 2011, as the August employment report showed no growth whatsoever in nonfarm payrolls. The workweek shortened, average hourly earnings declined, and prior months’ payroll gains were revised down, making for a substantial disappointment that we would characterize as near-recessionary.
In contrast, the household employment survey was somewhat more encouraging, featuring a gain of 331,000 jobs in August (134,000 when adjusted to the payroll employment definition) and a slight uptick in the labor force participation rate. The unemployment rate was steady at 9.1% (see top exhibit on cover page).
Though the payroll and household surveys often diverge in a given month, both send an unambiguous message of weakness over the past few months, with household employment down slightly and payroll growth barely positive.
Little if Any Growth
A labor market in the doldrums is the natural result of listless GDP growth so far in 2011. We expect 1% growth for the third quarter, roughly the same pace as the first half of the year.
Recent economic news has offered a mixed picture of growth, roughly divided between “hard” indicators of economic activity and “soft” measures of sentiment. The “hard” measures—which include data such as retail activity, industrial production, and durable goods orders—currently imply a bit (though only a bit) of upside risk to our third-quarter growth estimate. Most surprisingly, reports from major retailers showed an uptick in August activity despite dismal confidence.
In contrast, “soft” indicators that focus more on sentiment or opinion have been weak for the most part. In particular, surveys of consumer confidence from the Conference Board and University of Michigan are at 30-year lows excluding the depths of the financial crisis. A number of business surveys have been extremely soft as well, in particular the Philadelphia Fed’s mid-month manufacturing survey, which fell to recessionary levels. But the bellwether business survey, the Institute for Supply Management’s manufacturing index, held roughly steady at 50.6 in August, a level more consistent with the soft-but-not-recessionary “hard” indicators.
Our Current Activity Indicator reads -0.5% with the August data in hand. Note, however, that the available indicators are skewed towards “soft” measures thus far.
Still Skirting Recession
On balance, the economy seems to have skirted recession so far. We recently evaluated a number of “rules of thumb” for recession as well as more formal regression models. The lower exhibit on the cover page shows a model incorporating indicators from the labor market (the change in the unrounded unemployment rate and the three-month change in payrolls), cyclical sectors (housing starts and the ISM manufacturing index), and financial markets (the S&P 500 equity index, the Treasury-Eurodollar spread, and the spread between the Moody’s BAA corporate yield index and long-term Treasury yields), as well as the trailing two-quarter real GDP growth rate. This model currently estimates a nearly 40% probability that the economy was in recession in August.
For estimating the likelihood of recession a few months from now, financial market variables take on greater importance. Exhibit 2 illustrates our financial conditions index, with and without an adjustment for oil prices. Despite the selloff in equities and widening in credit spreads, lower long-term interest rates and a weaker dollar have kept financial conditions slightly easier than early this year, with little net change in recent months. Thus, forward recession probabilities are lower if policymakers successfully evade additional near-term shocks from fiscal tightening (i.e. the yearend expiration of the payroll tax holiday) or financial stress (in particular, credit shocks related to the European debt crisis).
Fed to Try a Further Boost
We expect the Federal Reserve to launch another round of quantitative easing beginning at the September 20-21 meeting. Fed officials can offer several rationales for doing more. First, unemployment is far above the Fed’s long-term forecast in the low 5% range; the longer high unemployment persists, the greater the risk that an erosion of skills and labor force attachment will result in permanent supply-side damage. Second, economic growth has been woeful this year and there is no convincing sign of the second-half pickup in growth that the majority of Fed officials seem to expect. The payroll report in particular will weigh heavily in the minds of many Federal Open Market Committee members. Third, there is limited prospect for near-term fiscal stimulus from a gridlocked Washington.
Given the lack of unanimity on the FOMC and considerable opposition to asset purchases from some politicians, we think that “QE3” is likely to take the form of “going long” (extending the duration of the Fed’s balance sheet) rather than “going big” (expanding the balance sheet further), at least for now. We believe the impact of quantitative easing is proportional to the duration of Fed purchases. As we showed in a recent analysis, if the Fed sold all its securities maturing before mid-2013 and invested the proceeds in 10- and 30-year Treasuries based on the amounts available, it could achieve a market impact equal to 80%-90% that of QE2 without changing the size of the balance sheet. A further tilt towards 30-year securities could magnify the impact. Exhibit 3 (above) illustrates the current maturity structure of the Fed’s holdings and the market’s. Any manipulation of the portfolio is likely to take place over a period of a few months to minimize disruptions.
Further, QE is already priced into the market to a considerable extent. After all, the Fed went further than expected at its August 9 meeting, when it issued a conditional commitment to hold the funds rate at “exceptionally low” levels “at least through mid-2013”, and indicated the possibility of further action. The minutes from that meeting characterized this as a “measured” action and noted that “a few” members preferred a more aggressive move. A CNBC survey taken shortly after the meeting suggested that roughly half of market participants expected more QE; given the data flow since then and our subjective assessment from conversations with clients, a clear majority now expects it before the end of the year.
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if GS is gonna lie, cheat, and steal... they may as well go big.
They always go big. They call it the Big Deal.
Look at the 100 million dollar bonus Lord Blankfein got with Tax Payers money.
Then they parade the engineer of the bailout Neel Kashkari to sell why they should end Social Security.
What a joke.
Among the names ABC News was able to confirm on the list:
a vice president of NBC Universal
the part owner of a Major League Baseball team who "loves Kelsey"
the CEO of one of the country's largest private equity firms who met "Cameron" at the Peninsula Hotel
a major New York real estate developer who, according to the list, "will come to the door wearing women's panties," and who spent nearly $100,000
a partner at the Wall Street law firm Cravath Swaine Moore "looking for a party girl to come fully equipped" and spent a total of $20,000
an investment banker from Lehman Brothers who saw "Kelsey and Keely together" and later saw "Aria and Skyler at the same time"
an investment banker at JP Morgan Securities who "loves Brooke" and spent $41,600
an investment banker at Goldman Sachs who "only wanted all-American girls" and spent $27,000
a managing director from Merrill Lynch who saw "Lana" using the name "Nataly"
a managing director from Deutsche Bank "who called about seeing Nataly again"
Manhattan Madam Says Clients Had Payments DisguisedSome of the men contacted by ABC News denied they used their corporate cards, and ABC News could not independently confirm if the credit card numbers listed were corporate accounts. “I as the proprietor of a business get arrested and lose everything when no one that was frequenting my business or spending $200,000, $300,000 a year has been punished in any way or looked into,” Ms. Davis said, according to ABC.
http://abcnews.go.com/Blotter/WallStreet/story?id=6813806&page=1
Happy labor day!
So, a lot more lame Main streeters use whores too. Who the fuck cares, grow up.
Does it seem that only those who don't have Social Security/ don't need it/ don't want it, are the ones pushing to kill it for those who have it/ need it to eat/ want it so they don't have to work cradle to grave?
I'd love to opt out of social insecurity now. It's a massive ponzi scheme and anyone who thinks there is money in a "lockbox" is a fucking idiot
There better be money in the lockbox. And it better be your money and not mine.
Which reads better?
The economy’s growth performance so far in 2011 would be disappointing in any year, and is woefully unacceptable given the high level of -unemployment -
or
The economy’s growth performance so far in 2011 would be disappointing in any year, and is woefully unacceptable given the high level of -monetary stimulus-
"Oh well - in the meantime we continue, as we have for the past 2.5 years, to buy gold..."
Get f*cking real.. You talking about unemployment, debt and
bunch of people worry about fill up their gas tank to get
to work and perhaps get few sandwiches on the way
"we continue to buy gold", well f*ck you, OK, cause large % of
the population leaving from the pay check to the pay check..
Who needs f*cking GOLD, when you have no clue how to pay day to day
bills.. Keep buying your stupid Gold, morons..
Real world got you down? Pick up the times.
People who are trying to live day to day don't need gold because they can't afford it. You answered your own jaundiced post.
The rest of us who are either lucky, savers, or have some other means of disposable wealth have to find a way to protect ourselves.
What do you want those of us with cash to do, eat at McDonald's and buy Plasma screens we don't need?
Moneywise... isn't.
The paycheck to paycheck folks all too often have smart phones with dumb plans, and several "must have" toys around the house. Considering that Au is sold by the still affordable gram, and grams alone may make the difference one day, there is no excuse not to have the foresight to accumulate.
I think QE3 (or OT2) is so already priced in, if they don't do something at he next meeting the market will crash big time. The tapeworm needs his lemon cookie.
"I think QE3 (or OT2) is so already priced in, if they don't do something at he next meeting the market will crash big time." We can think all we want.. People change their minds quickly from one news line to the other, From Economy boom to depression, recession collapse, whatever.. Market running on nothing but emotions now, And I will continue to add to stocks, which are already have in my portfolio.. I don't care about noisy daytraders they are pushing Market up and down 300-400 points in one session. If you have a plan, stick to it.. GOLD? yes, that was part of my plan about 1000 points below, now it's just another crazy penny stock running on fear and emotions, overvalued by at least 50%.. Keep buying, what you think is right..
wow you're so much smarter than everyone else here
I think your right on. QE3 is fully priced in. As Marc Faber said, then they will do QE3,4,5,6...........until the whole thing blows up.
So, if the market goes down Monday it is dictating that they want QE4 or the HFTs will take all their money and quit playing.
I think the elitist who own the HFTs have a large supply of stocks. Because while they have been playing their games.
More people are leaving faster than they can dump the supply, ie, mutual fund redemptions and now hedge funds too.
european and asian markets?
"The tapeworm needs his lemon cookie."
OMG, that's my favorite joke of all time...and instructive of Banker bailout mentality... This guy went to see his doctor and was diagnosed as having a tapeworm. "They're not easy to get rid of, but we'll give it our best shot,"the doctor told him, and instructed him to come in every day for two weeks, and to bring a lemon cookie and a walnut. The guy agreed, and showed up the next morning with the two items. To his horror, the doctor shoved the walnut up his butt, followed it with the crumbled-up cookie, and sent him home. This went on for twelve more days, at which point the doctor's instructions were to forget the cookie and bring in the walnut and a hammer. On the last day the fellow dropped his pants in considerable apprehension, gritting his teeth as the doctor inserted the walnut up his ass and calmly sat back. A few minutes later the tapeworm stuck his head out and said, "Where's my lemon cookie?"Waiting for Phoenix Captial Research to set the record straight. Waiting. Waiting Waiting.
Sadly, the price of gold indictes that the global financial system is not going to make it this time. I don't know what the expect but I can tell you that the economists playing with themselves do not have a methodology for dealing with a deflationary depression and credit contrction. Its just 2-5% growth all day, all night. It never occured to these guys that there is an inverse algorithm to growth. Implosion.
"Sadly, the price of gold indicates"
Price of anything always indicates that "investors" are bunch
of pussies, which are acting as usual, buying high and selling low..
Anyone remembers 2008-2009? when Silver drop below $10/oz,
I get so sick about that sh*t that I don't even add anymore,
I was thinking about making my patio from Silver bricks..
This sh*t was completely worthless.. What really changed since then?
Think about it..
This sh*t was completely worthless.. What really changed since then?
Are you mentally retarded? What changed? Have you looked at the accumulated debt? Have you looked at the complete insolvency of Europe? Have you looked at QE?
Where the fuck are you mindless amoebas coming from?
'course it's not worthless
but gold is pricing in something like 50% currency debasement, and silver is about fair value IMHO
if you're 100% certain we face imminent total financial meltdown and in this case precious metals will not be confiscated then by all means fill your boots - but if not, I wouldn't bet the farm on it (land looks very tempting priced in gold)
All a person needs to do is look at the DOW/Gold ratio over the last 100 years (see Mike Maloney's presentation on YouTube) to see that now is NOT the time to be selling your gold. Not until the price of the DOW is the same as the price of gold. Then think about land. The housing bubble is still in effect. Gold will probably be confiscated (from idiots who trust safety deposit boxes), but silver won't be. Silver is suppressed by JP Morgan's naked shorts (kids look away!) and not only will the DOW/Gold ratio get down to 1:1 but the Gold/Silver ratio will get below 20:1. Don't be a tool.
The DOW/gold thing may or may not happen, but to be honest, you're in the realms of chartist astrology there. I don't disagree that gold could easily go a lot higher - it all depends on just how weak, irresponsible and incompetent officials are.
What I was trying to say is that gold is no longer a screaming buy in terms of other hard assets - silver is better I think (GSR probably should be 20ish as you say), spam represents the wisdom of having a good stock of long-lasting food, land is a very good bet, and non-perishable commodities like fuels and fertilizers will also hold their value. Oh and tools are always handy ;-)
They don't care if it was worthless or effective long term. The Junkies just want their next fix. That will continue until Rick Perry or Ron Paul or someone like them (unafraid to threaten the Fed and the Status Quo in Washington & Wall St.) gets power. Until then, the middle class Sheeple will get sheared into poverty until finally angered to revolt.
The dumbfucks like moneystupid crawl out of Bernanke's ass. Ignore the trolls
You are a troll.
'nuff said.
Please feel free to ignore $14TRILLION+ reasons and exponential functions, but my mathematical knowledge sez build up wealth insurance by buying the only commodities that will hold their value for decades -- ONLY PMs can fill the bill.
Economy has anemic growth despite the fact that everyone got 2% raise. We are going to have depression. It will not look like depression because of electronic fund transfer and food stamp.
Remind me again, why do Americans have the right to bear arms? Something about tyranny, foreign or domestic... or just for show?
But.....but.....but you can't eat Spam. (shoulder, pork and muscle?)
The cliff isn´t as high as it was in 2007/08. That might be a difference.
What?
The cliff is much higher now - and includes the whole damned world, too.
Sarge, put those "grunts" on report!
Record High Bonuses again!
Barry, Timmy and The Bernank guarantee it!
Just for shits & giggles, imagine for a moment that you are the chairsatan and are sane - the question is, how could you play twister and leave yourself the flexibility to exit the game at a time of your own choosing?
In a world where the US government carries on borrowing like a drunken NINJA, surely long-dated treasuries aren't the best thing to be stuck with. Hmmm, I suppose potential losses could be offset by hedging with some AAPL stock or PMs ... eminent domain anyone? now there's an idea ...
Imagine, Executive order 13666: All your Gold are belong to US.
:-O
Let's all quote and laugh:
"First, unemployment is far above the Fed’s long-term forecast in the low 5% range; the longer high unemployment persists, the greater the risk that an erosion of skills and labor force attachment will result in permanent supply-side damage."
And the first and second versions of QE have WHAT record on steering toward this lofty goal?
"Second, economic growth has been woeful this year and there is no convincing sign of the second-half pickup in growth that the majority of Fed officials seem to expect. The payroll report in particular will weigh heavily in the minds of many Federal Open Market Committee members."
And the first and second versions of QE have WHAT record on steering toward this lofty goal?
"Third, there is limited prospect for near-term fiscal stimulus from a gridlocked Washington."
Gotta get yer bonus from somewhere?
It is NOT the lies. It is the Quality of them.
/What this town needs is a better class of criminal./
"despite the “confidence shock” precipitated by the debt ceiling impasse, the downgrade of the US sovereign rating"
I keep seeing that mentioned, but doesn't 1st and 2nd quarter GDP indicate things were heading south long before the impasse? Also, the concern over the downgrade was that it would increase borrowing costs on the massive debt and the opposite has happened.
4) No QE, no hunert bazillion bonuses.
Nuff said?
B B B But GS execs NEED their big bonuses. They are entitled!
Uh huh. Fed action is all about improved employment. It has been a marvelous ride through QE1 and QE2 afterall. Just think of how bad it could have been. The dream team assembled by our President has really been taking care of the American people all right. Perhaps its time for the R's and some more "tinkle down" economics...
Good luck to all.
In other news, I got my electricity back. Life is good.
from Jim Rickards today
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/2_Jim_Rickards_-_Investors_Fleeing_GLD_into_Physical_Gold.html
“I spoke to (Former Federal Reserve Governor) Randy Crossner, Former Member of the Federal Open Market Committee and he said to me, ‘When the Fed does these meetings they spend about 10% of the time on policy and 90% of the time on communication.’ Now Randy calls it communication or messaging, but I call it propaganda.
"(yes, Op Twist is QE3; get over it)"
Lol Ok Tyler, I'll give you that Operation Twist is a sort of QE, but no new assets are being added to the Fed's balance sheet so it's not the same as QE1 or 2. I don't think it'll nearly have the same effect as a true QE program.
Fed's playing dangerous games. Does it go half ass, possibly failing to generate a sizable rally (likely to happen) and prove once and for all to the investment community that they've lost control of the situation? Or do they wait a little longer to save the one bullet they have left and use it when fiscal stimulus is being passed?
I'll agree, Operation Twist is a form of QE, but it's not the same as QE1 or 2 which actually added assets to the Fed's balance sheet.
Have a great weekend!
Balance sheet risk is expressed always and forever in terms of DV01 not notional. We are happy to post on this again if necessary. And since the Fed's DV01 is about to double from $1.5 billion to about $3 billion, and since rates have only one way to go from record lows, well... you get the picture.
actually, if you could, it would be great.
A kiss on the cheek may be quite continental
But banker bonuses are a girl's best friend :-).
So where is the evidence that money printing improves the labor situation?
Fuck Off and Die.Goldman Sucks.
off topic: i am reading a bible concordance, and ran across this list of babylonian prices, based on the silver shekel (0.53 oz). obviously, there has been male slave inflation..
1 sheep or goat = 2
1 ox = 15-20
1 donkey = 30
16 quarts wheat = 1
32 quarts barley = 1
6 pounds wool = 1
50-100 baked bricks = 1
1 male salve = 40-50
that's actually pretty interesting - chimes with some guesstimates I made recently about prices in terms of precious metals, oil & the value of unskilled human labour
UK's old shilling had a similar silver content to the shekel, and 12 pennies in a shilling, where a penny would buy you a loaf of bread (takes about a pound of flour, so your 1 shekel or 16 quarts would similarly make ~12 pennies' worth) - currently $42/20 (20 pennies/ozt) =$2 for a loaf
as for human labour, I came to the conclusion a day of unskilled labour is worth about 2 L oil (based on walking versus a small motorbike, digging a hole manually versus digger etc.); assuming your slave is good for 5 yrs' work, that makes 5*365*2=3650 L oil, or about 23 barrels, or $2300, which is 55 ozt silver at today's price, or 104 shekels (which leads to the unsurprising conclusion that oil is underpriced - or perhaps I should give our slave a longer lease on life)
incidentally, at current levels of oil production that means we have around 10 "oil slaves" for every man, woman and child on the planet - could be rather interesting if that situation changes, eh?
Blankfein would look good in a Columbian Necktie!
ZeroHedge is a fantastic blog, as i have said many times before. I rely on your perspective every day without fail, but I have to point out that, where you are wrong, you don't want to admit it. You guys are so hung up on the "hyperinflation" story, that you are doing yourselves and your readers a diservice by drying to spin everything in that direction. When Bill Gross came out short treasuries, I wrote on this blog many times that what was more significant was not his short position, but his 30+ percent cash position. The fact that he was sitting on so much cash was an indication that he was hedged for deflation, and not hyperinflation. In addition, and this is a point I made at the time on my own blog (http://www.coveringdelta.com/2011/05/10/pimco-adds-to-its-cash-position-...), being short long-term US government paper does not mean that one expects inflation. It simply means that one expects the price of these assets to drop, and for long-term borrowing costs to rise commensurately. You have rising rates in the Eurozone without a comensurate rise in the inflation rate.
Bill Gross has since come out and admited that he was wrong on his treasury short. Unless i missed it, you guys did not cover this. You also misintrupreted Jim Grant's position back in April as one expecting inflation. Here is what I wrote on the matter (http://www.coveringdelta.com/2011/04/17/jim-grant-expects-a-deflationary...)
I have probably made more mistakes and wrong calls during my time blogging than you guys have, but i always admit it when i get it wrong. Granted, you have multiple bloggers, and its hard to tell who is predicting or saying what, but you guys have such creative minds writing on ZH, its a shame that you don't lift the veil of ideology more often and allow yourselves to use that creativity to provide more insightful reasoning.
Personally, I have consistently stated the case for a deflation. I think it is the envitable result of a debt build up of epic proportions. I don't care if I get slammed for it. The USG MUST keep rates low and the only way to do that is to try to "manage" the deflation. This means, at best they will be able to prop up the debt pyramid as pay downs and defaults occur and they will do this through monetizing US Treasuries. But they are not going to be able to expand the money (debt) supply because we are at the point where interest payments are no longer servicable by the underlying production base of the economy. As the debt trap persists, the economy will shrink further, making the interest payments even more onerous.
Sorry but what is your point: that hyperinflation is not coming because you said so?
No recession. The issue is that very likely the US is in one already. Real GDP growth = Nominal GDP growth - Inflation. Where would growth be if we used different inflation measures? Inflation is likely higher than what government statisticians calculate and as a result Real GDP growth is much lower - negative most likely.
New DK,
You hit the tail on the donkey's head.
This blog is engulfed in vitriolic hatred, racism, envy, jealousy and ideological adoscolesence. Instead of really getting to the heart of the deficit and debt issues and offering places to profit from the strong headwinds, the agenda driven clowns insist on lashing out against big money bankers out of pure jealousy and pumping gold for inane and childish reasons.
Gold is so simply a massive bubble trade. Massive! Compare it's jump in value vs the jump in the growth of M3 in the past 18 months for no better evidence of it.
Is the US economy in big trouble? Yes.
Are stocks vulnerable? Yes.
Is the DXY headed for further trouble? Yes.
Is gold wildly overpriced at $1800/oz? You betcha!
I agree with your assessment of the community for the most part, but Tyler's posts help me keep a balanced perspective on what is happening. The MSM is so riddled with propoganda it is difficult to see through it all. I agree with your assessment of gold. If you adjust the price of gold to inflation, based on when we went off the gold standard, I think it is worth about $500 or $600 an ounce. The rest of the price is pure speculation on a scenario (Weimer) that is highly unlikely to occur, IMHO.
Are you saying you think its highly unlikely there will be a loss of confidence in the dollar?
There is still plenty of confidence in the Yen while their government debt/GDP is 200%, sustained by ZIRP for going on 21 years! So, yes, there is still plenty of confidence in the dollar. For how long is anybody's guess. The main reason I am a gold skeptic is because the USG, like the Japanese, must have low, low rates just to survive. That is what will keep the dollar viable, IMHO.
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QE is welfare for Wall St!
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