This page has been archived and commenting is disabled.

Guest Post: Are Treasuries The Worst Investment In The World?

Tyler Durden's picture


Submitted by John Aziz of Azizonomics,

I admit the headline is a little sensationalistic, but after Wednesday’s WTF bond auction, I feel like slapping the market around the face with a rotten fish. Now certainly there are plenty of penny stocks headed to greater losses far sooner. And certainly, lots of people have made good profits on Treasuries by buying them and flipping them to a greater fool or a central bank. On the other hand, so did many during the NASDAQ bubble, or during the ’00s ABS bubble. Bubbles are profitable for some, and that’s why there have been so many throughout history. But once the money starts to dry up they become excruciatingly painful.

Treasury yields are just going lower:

After a 30-year bull market, you’d think that the financial media might have cottoned onto the idea that there is little scope left for real gains, either by holding bonds to maturity (inflation is outrunning yields) and even by flipping it off to a greater fool (or the greatest fool of all — the central bank).

In theory, there are no limits to how low rates could go. In theory, nominal yields could go deeply negative, so long as there are buyers coming into the market ready to buy at a lower rate, and a push a profit to bond flippers. In reality, even Japan — a nation that has adopted desperate measures including forcing financial institutions to buy treasuries to keep rates depressed — has not managed to push nominal rates below zero. The scope for great profits from flipping bonds seems to be evaporating. And in any case, the latter case of flipping bonds to a greater fool or the central bank balance sheet is a classic characteristic of a bubble. The inherent value in a bond is its yield; everything else is speculation.

In the classic bubble mentality, more and more financial media — hastened on by the prospect of deflation (something which the Fed is absolutely obsessed with preventing, and is prepared to print an unlimited amount of money to do so) — are calling Treasuries something that you can’t afford to not own.

The reality, though, is that even recent years treasuries have not really been a good investment. Bond prices may have gone up, but they’ve been eclipsed by a harder kind of asset — gold:

Indeed, the real bull market in bonds ended in the ’90s. It’s not just that bond bulls are running out of steam; next to gold bulls they have made a relative loss. Here’s what I call the gold-denominated real interest rate (or the “real real interest rate”) on the 10-year treasury — rates minus the percent change in the gold price:

While the bond flippers have done well (just as the NASDAQ-era bubble merchants did well flipping to a greater fool), whoever is holding bonds to maturity is gradually pouring purchasing power down the drain. And that is the problem; the only way that the bond flippers can get their pound of flesh is for the Fed to print a whole swathe of money and buy the flippers flip-offed bonds. And however depressed the economy is, printing money to absorb treasuries is hazardous to the currency, and irritating to the largest treasury holders — who America happens to import a lot of goods and oil from — who hold treasuries to maturity instead of flipping them off. A trade war between America and her creditors seems inevitable and the bond flippers on Wall Street may end up being dragged under the bus by such an event — perhaps getting paid off in a heavily devalued dollar and losing their shirt on a bond-flipping trade where they initially only stood to make a sliver of a percent gain on their stake (made even riskier by concentrated ZIRP leverage).

It is hard to really call the timing on the end of a bubble. People and events can always get more irrational. Japan has kept the Treasury ball (painfully) rolling for far longer than most of us expected (through market rigging as much as anything else). But this cannot end well.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 07/13/2012 - 21:17 | 2614978 HAL 9000
HAL 9000's picture

Yes. It's puzzling. I don't think I've ever seen anything quite like this before. I would recommend that we put the unit back in operation and let it fail. It should then be a simple matter to track down the cause. We can certainly afford to be out of communication for the short time it will take to replace it.

Fri, 07/13/2012 - 21:57 | 2615042 The Monkey
The Monkey's picture

Treasuries. 30 year JGBs reached somtehing like 1.7%, so to say the treasury rally is over may be a bit of an early call.

Long JGBs on the other hand might be a horrible investment. At some point, and it could be sooner than one might imagine with all that is going on with the world, the Yen will fall and rates will begin to rise.

Fri, 07/13/2012 - 22:48 | 2615114 bigdumbnugly
bigdumbnugly's picture

no, treasuries aren't the worst.

i think those elvis commemorative plates might be though.

followed closely by beanie baby collections.

Fri, 07/13/2012 - 23:55 | 2615176 Max Fischer
Max Fischer's picture

The worst investment? GOLD. Except for short term t-bills which no one buys looking for yield.

Gold stayed somewhere near $20 from the mid 1800's until the early 1930's. Had you taken $100 and bought gold, you would have gotten about 5oz. Those 5oz's would be worth approx $8000 today. Remove the Bush administration from the history books, and those 5oz's would have been worth $1500 just like they were in 1979.

Here's a chart of what that same $100 would have yielded had you invested it in 1928 into 3 month t-bills, or the 10yr, or a basket of equities and did nothing for the next 85 years, except allow all the gains or losses to compound. Gold did better than the 3 month (no surprise). Little better than the 10yr, and no where close to equities.

Going forward, if you gotta buy a metal, buy lithium. Larry Fink is. Do some homework and find out why.


Sat, 07/14/2012 - 00:03 | 2615194 Praetor
Praetor's picture

Yeah funny thing that, those 5oz are still in existance, unlike 'equities' that just dissapear like a fart in the wind.

Only fools use the term INVESTMENT and GOLD in the same sentence.

So have you married Squeezy Fromme yet or is she the other half of your brain?

You have been judged a fool and a troll.


The Praetor


P.S I hope you do buy some lithium (not only for its bipolar pharmaceutical benefits) but so when you place it your pocket its burns your balls off.

Sat, 07/14/2012 - 00:58 | 2615246 Spitzer
Spitzer's picture

thats right. What he is saying is so fucking annoying because its bullshit.

He says buy equities. So lets assume he means the DOW for example. His bullshit theroy is false because it doesn't account for stocks that leave the index. His bullshit assumes that you sold every stock at the right time before it left an index and bought ones that just entered the index to infinity.

Sat, 07/14/2012 - 04:51 | 2615346 Max Fischer
Max Fischer's picture



No.  It's not bullshit.  Just because it's an opinion that differs from the pad-locked echo chamber in the comments section here doesn't subtract from its merit.  Of course there's an endless array of variables which could be thrown into the mix, but as many as there are to the downside, there's an equal number to the upside.  Those numbers for equities are AVERAGES, nothing more and nothing less.  Who knows what you would have purchased and sold over the course of 85 years? It's an average.... some duds and some 100X baggers.

All in all, the return on equity averages out to be vastly more than the return on gold and that's without even mentioning dividends.  Had someone given me 5oz of gold or a basket of $100 worth of equities in 1928, the choice is obvious despite whatever variables you can conjure. Maybe during the Great Depression, a band of robbers stole your coins.  The possible variables are endless for both investments. 

Perhaps if you guys were more open to other opinions, y'all hillbillies wouldn't be so underwater in your maniacal silver purchases. 


Sat, 07/14/2012 - 06:46 | 2615388 negative rates
negative rates's picture

Yours may go deeply negative, but once you start to lose money on a transaction, most don't continue that trade for to often because they can get a tax break from the gvt if they simply give it away to a non family member.

Sat, 07/14/2012 - 08:36 | 2615435 Praetor
Praetor's picture




Sat, 07/14/2012 - 12:03 | 2615735 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

Hi Praetor, there have been times in my life when I wish people would have said something to me.

Please consider this Bible verse.

"The Message" translation has it this way.


Sat, 07/14/2012 - 09:34 | 2615473 deez nutz
deez nutz's picture

Let me ask you Max: if everyone is buying silver, and they are, why is the price going down?


Sat, 07/14/2012 - 10:18 | 2615517 disabledvet
disabledvet's picture

perhaps some "silver ware" may be of interest to you then? i was just told the other day "nice silver call...too bad it was all wrong and you don't have any." yet i EAT with SILVER WARE.

Sat, 07/14/2012 - 11:33 | 2615691 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

Max..please go read this.

What does he say they will do if the price of Silver goes up.

Please go read that and then tell me.  Also tell me what you think about it?

That guy above shouldn't have called you a fool. 

Please just follow through this one little exercise w/ me.


Sat, 07/14/2012 - 11:58 | 2615728 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

If you are going back to 1928, you are looking at two completely different money systems.  The system changed in 1933 and then changed again in 1965 and again in 1971.

There was another change to the monetary system in 1982.  There have been many small changes in-between those.

When I say the system changed, I mean that the way the stocks were valued changed.  The unit for valuing the stocks (the dollar) changed.

  I don't think you are taking this into consideration.

The dollar was originally set up as both a weight and a measure of silver.  That fundamental unit did not really change until 1965.  From 1792 to 1965 the dollar was always the same amount of silver.

The other units used to 'regulate' the value of the dollar, the cent and the eagle, they changed in both size and composition.

How can you measure the value of the stocks if the stick you are using to measure is constantly changing length and weight?

How can you possibly know if your investment increased or decrased in relative value?


Sat, 07/14/2012 - 13:37 | 2615987 MeelionDollerBogus
MeelionDollerBogus's picture

It's bullshit for the precise reasons given that you deny.

Right now the best you can do is go long DIA, SPY and hope for the best. If you're a little more clever but buy-and-hold you can write calls off the peaks.

If you're really smart you just buy Calls on the dips, by Puts on the peaks, buy a Strangle in the middle and use all paper profits to buy TANGIBLE assets you need like water, food, fuel, bullets, guns, filtering systems, gold, silver and so on.

The best YIELDING bond today I can think of is from Royal Silver. You pay cash, they return the cash in 2 years and they pay a dividend in SILVER BULLION ROUNDS in the mean time every single month for 24 months. That's a built-in hedge as you still get the cash back.

Sat, 07/14/2012 - 00:16 | 2615212 ReactionToClose...
ReactionToClosedMinds's picture

so you think Larry Fink is a 'playaaah' .. is that it?  So why do 'homework' if that is your throw-in?  It never hurts to get advance notice of what Treasury or the Fed need as he controls one of the biggest purses .... naaaah .. that can't happen in crony capitalist free USA?  That only happend in Ukraine or Russia ... or Chicago ....

Sat, 07/14/2012 - 01:14 | 2615258 Uber Vandal
Uber Vandal's picture

In regards to the $100 and buying gold then, you could have bought 40 1848 $2.50 quarter eagle gold coins marked CAL on the back, for they were made of California gold from the Philadelphia Mint then, and kept them in a box for the next 164 years, and an heir could have them graded at a minimum of MS60 with a value of $75,000 per coin today.

$75,000 X 40 = $3,000,000.

If they graded MS65, you would have $195,000 per coin, for a total of $7,800,000

Or, you could have purchased 5 1927 D Double Eagles for that $100 from the Denver Mint in 1927 (One year before your 1928 point in time) and kept them in a box for the next 85 years, and if they graded MS65, you would have $1,812,500 per coin, or $9,062,500 for your $100 investment.

So, indeed, gold is poor investment.


Civic Honda

Sat, 07/14/2012 - 07:08 | 2615396 Marco
Marco's picture

Or you could have bought a Picasso ... what's the point of mixing collectablility with gold prices other than being disingengious?

Sat, 07/14/2012 - 10:37 | 2615535 disabledvet
disabledvet's picture

because when i buy a Picasso "everyone tells me it's worthless" at the time of purchase. With gold...even in "1927" (when gold was still considered money because "that was the way it had been during the Morgan years") was considered very valuable. Not now..."it's all about the flim-flam man" and "how to use the media to obliterate the American people and their economy." That's what makes Zero Hedge a fundamentally honest place. "The goal for the bad guys is always the same: steal zee gold." And whatever else those that care not for work let alone labor itself can get their hands on of course. I say break their phucking necks first. Only a fool doesn't consider gold an asset class. It is the ULTIMATE asset class because "it is an asset unto itself." If you find the people "attached to it" a "little weird" well...take a look at anybody with money. "You don't go there to find normalcy"...although surprisingly...sometimes you really do.

Sun, 07/15/2012 - 08:31 | 2617064 Marco
Marco's picture

The goal for the bad guy is always land and the power to keep it and derive rent from it.

Sat, 07/14/2012 - 11:53 | 2615726 andrewp111
andrewp111's picture

There are lots of things that have gone up tremendously in value on a timescale greater than the human lifetime. So?

Sat, 07/14/2012 - 02:59 | 2615306 HardAssets
HardAssets's picture

Max F - - I'll assume youre making a sincere inquiry into this subject rather than just taking some kind of stand, or trying to confuse people. For thousands of years, gold has been recognized as being money. Unlike paper money (invented a thousand years ago in China) gold could not easily be created - or printed - thus it maintained its value over time. Gold maintained its value for such a long time in American history, because it was defined that way. The US dollar was defined as approximately1/20th of an ounce of gold. The fact that gold remained the way it was defined, should be no surprise and definitely not a cause for alarm. We would be no more concerned that 1 foot rulers remained 12 inches long from the mid 1800s to early 1930s either. They were defined to be so. This defined stability is a desireable characteristic for one's monetary store of value, and for your measuring tools.

Its difficult to comment on the link to the chart you gave. It says that its based on 'raw data' which means it isn't real data so it hasnt been adjusted for inflation. In addition, they don't define how they came up with the equities figures. Did they use the S&P500, DOW, or cherry pick particular stocks ?  There's no way to know from what youve provided. And how can you just 'eliminate the Bush years' when making your case ?   Hmmmm.

I'm invested in gold now, but am not married to it. Like any investment, there are times & conditions that favor it and other times and conditions that do not. IMO now is a good time. Gold has appreciated well over the last decade.

Lithium may be a good investment, I havent looked into it deeply. I've heard  that some people were suggesting that it be introduced into municipal drinking water supplies to calm people. This sounds way out there (but websearch the topic). If this were to actually happen, I wouldnt want to profit from such a despicable act.

Sat, 07/14/2012 - 10:11 | 2615509 americanspirit
americanspirit's picture

El Paso Texas has high (natural, not introduced) concentrations of lithium in its water as well as one of the lowest rates of mental illness in the country - in spite of the fact that people are living in El Paso, which would drive me crazy for sure. However the lithium argument seems to fall apart when you consider the levels of insanity in Juarez, just across the mud flats from El Paso, and drinking from the same aquifer.

In fact a lot of West Texas has high lithium ( and arsenic) concentrations in the groundwater, and people out there do have a mighty relaxed way of speaking. Just don't scuff their cowboy boots or make fun of A&M.

Sat, 07/14/2012 - 13:32 | 2615975 MeelionDollerBogus
MeelionDollerBogus's picture

No more idiot statement - even compared to MillionDollarBonus_ - was ever made, Maxi-pad.

Gold is the most solid investment of all human history for it is always money, always useful, always rare and never rots nor can it be printed or declared into existence, legitimacy or the ruination of the same.

Regulated price of gold to 20 or 35 didn't last and couldn't last. The world tried to force gold to bend in a way it can not and gold bent the world aorund instead and rose in price as economies collapsed - then as now.

Nothing has changed. Gold, land, silver, food, bullets are the only real investment assets. Everything else is just paper-shuffling and broken deals.

Sun, 07/15/2012 - 19:37 | 2618798 emersonreturn
emersonreturn's picture

mf you suggest buying lithium, but if the economy stalls will people be inclined to buy electric cars and itoys?  mightn't lithium end up a little like tech's copper?

Sat, 07/14/2012 - 14:30 | 2616099 ToNYC
ToNYC's picture

ZIRP destroys the stored value of money as a tool to acquire and rest one's self on money's utility to earn money per se.

The FED, should it be allowed to continue in its terminal path of conage destruction, will make you beg for New Money that works. The Old Green stuff is broken and higher interest rates later will never be possible for the Green species. There is only one mathematics that proves this inevitability.

Fri, 07/13/2012 - 21:59 | 2615045 El Oregonian
El Oregonian's picture

It looks like I picked the wrong week...

Sat, 07/14/2012 - 18:36 | 2616464 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

I'm afraid I can't let you jeopardize the mission, Dave

Fri, 07/13/2012 - 21:18 | 2614982 fonzannoon
fonzannoon's picture

If the fed really wanted to avoid deflation they would literally send everyone a check. Why add trillion after trillion into the banking system that continually stays plugged up there, unless there are other intentions?

Fri, 07/13/2012 - 22:44 | 2615103 tjfxh
tjfxh's picture

Except that's fiscal, and the Fed is not permitted to usurp the fiscal power of Congress without Congress expressly delegating it.

Fri, 07/13/2012 - 22:53 | 2615124 wee-weed up
wee-weed up's picture

Big whoop! Obama usurps the power of Congress every day! Thinks nothing of it!

Sat, 07/14/2012 - 10:23 | 2615521 icanhasbailout
icanhasbailout's picture

the Fed is a literal institution of the usurpation of the powers of Congress

Sat, 07/14/2012 - 05:20 | 2615359 Elvis is Alive
Elvis is Alive's picture

<If the fed really wanted to avoid deflation they would literally send everyone a check.>

Great idea! Too bad it is illegal.

As for money printing, if that is always the answer for deflation, we should never have it. However, if people are worried about not having jobs and are seeing prices fall on everything, why would they spend it?

The inherent assumption is that the public is just going to spend any dollar the fed gives them on an Iphone. However, if the public sat on their money or paid down debt, it would do nothing to the inflation rate.

What the fed has tried to do is curb real estate deflation by creating inflation with an increased money supply, ZIRP, QE and QE2 ETC. Thing is that the fed can't target where the inflation is going to come from. What is ironic and why the fed's policy has been a totally failure is that they have inflation where they don't want it (oil and copper) and not where they do (wages and real estate).

That you have idiots like Krugman pounding the table for more money which IMO would just mean higher oil and copper prices. That would lower real take home pay for most people and higher oil prices mean fewer not more jobs. The Saudi shieks should be thanking Uncle Ben and Krugman as QE has been quite a boon for the Saudis.

The flaw in these projections is that people's needs (i.e. demand) goes down as they age, and the true cause of deflation is decreased demand. The notion that more money equals more demand isn't true.

Sat, 07/14/2012 - 07:24 | 2615405 Marco
Marco's picture

We will never have it again in the same situation as the great depression ... no matter how bought and paid for, politicians would do the same thing as FDR in the same situation, which is devaluation.

Unfortunately we aren't in the same situation of the great depression. TPTB got hugely burned by the solution FDR came up with (gold confiscation was the means to a cause ... he took gold from everybody up to and including the fucking federal banks because it was the only way to truly inflate away debt under a gold standard). So after they foresaw real growth stalling again they decided to manoeuvre the US into a trade deficit, a no win situation where by the time the results of debt overhang became obvious the solution FDR came up with became almost impossible and they could rely on politicians to just steam on ahead to oblivion (ie. neo-feudalism).

The ZH wish of austerity, deregulation and small government is coming ... and it's all as planned.

Sat, 07/14/2012 - 08:11 | 2615425 i-dog
i-dog's picture


"deregulation and small government is coming"

LOL ... Arrant nonsense!!!!!!!

There is absolutely no evidence, nor even a hint, of reduced regulation on its way ... quite the opposite! (hint: recent laws are now running to thousands of pages).

There is absolutely no evidence, nor even a hint, of smaller government on its way ... quite the opposite! (hint: not only is the EU desperately fighting to survive, but also to expand - with financial help from the Bernank, to boot!).

The only "small government" on the horizon is a single central government -- ruled from the back room by a hidden Politburo.

Sat, 07/14/2012 - 09:13 | 2615455 Marco
Marco's picture

The collapse isn't here yet, when there is nothing left to steal through government then and only then will it be reduced.

As long as the rich get richer and the poor get poorer government is allowed to get big ... on debt.

Sat, 07/14/2012 - 11:23 | 2615665 The Monkey
The Monkey's picture

Here is the rub. The Fed hasn't really devalued much; but, looking backward policies worldwide nearly guarantee a deep bear market. The only question is whether it begins before additional large scale asset purchases, or after.

If I were the Fed, I would want to send a message to fiscal authorities that they need to chip in (let markets correct now). However, with the election coming right up, the Fed may act before markets correct, proving the front runners right.

Congress does not have the will to act before the elections.

Think about what a top this might create. If the Fed goes balls out and we were to get another split congress, we may get ubber high prices in the face of deteriorating demand fundamentals. This is the same condition that set-up the giant top in 1929. Fed went balls out in 1928 when growth slowed, speculators piled in, the world economy continued to slow.

S&P is now 100% off it's lows and a little over 5% off it's cyclical highs. Should the Fed go balls out soon, it may set up a once in a generation short following the election, assuming security prices continue to climb.

Sat, 07/14/2012 - 10:48 | 2615568 The Monkey
The Monkey's picture

Good post. Open market purchases do levitate asset prices for a time. Higher prices for commodities serve as an incentives for producers to ramp output and consumers to seek alternatives or greater efficiency.

But, if commodity producers and their supply chain are running full tilt based on price signals and an inventory build, there is hell to pay later when it becomes apparent their is a glut.

So far, markets have periodically corrected, ensuring supply & demand signals do not get too out of kilter - however, with Europe contracting and China in a funk, increasingly the only thing holding up commodity prices is the greater fool.

If the Fed runs large-scale open ended QE near the top, they will bury important signals from the marketplace. We could get an even bigger glut. We could end up delaying fiscal action.

The central banks have been so active, that they now have a ponzi scheme to protect. They have effectively guaranteed returns on risk (at least speculators see it that way) and they have promised price stability. But, the underlying economy did not play ball.

As a result, we have a growing bubble on our hands.

Sat, 07/14/2012 - 13:25 | 2615962 MeelionDollerBogus
MeelionDollerBogus's picture

The Fed can open the lending window to whomever is chosen. It's not illegal but it's not going to happen.

The true cause of deflation is an excess of goods vs money supply, it is not age and it is not demand and it is not population.

Sat, 07/14/2012 - 12:13 | 2615755 cranky-old-geezer
cranky-old-geezer's picture



Because the role of the Fed is to steal all the wealth from the economy and give it to the banks. 

We're just 4 years into it.   Be patient.  It takes a while to loot the nation dry without anyone figuring it out.

Fri, 07/13/2012 - 21:26 | 2614997 nmewn
nmewn's picture

In the land of the blind, the one eyed man is king.

Fri, 07/13/2012 - 21:35 | 2615011 francis_sawyer
francis_sawyer's picture

In the land of the one eyed snake... [vote for king here]...

Sat, 07/14/2012 - 09:09 | 2615454 Biosci
Biosci's picture

...I am applying for an exit visa.

Sat, 07/14/2012 - 14:01 | 2616044 Amish Hacker
Amish Hacker's picture

"We are all in the gutter, but some of us are looking at the stars."  O. Wilde 

Fri, 07/13/2012 - 21:27 | 2615003 tjfxh
tjfxh's picture

It's a risk off signal. Rising gold prices and flight to tsys signals that a lot of big money is hedging against deflation. 

Fri, 07/13/2012 - 21:30 | 2615006 MeelionDollerBogus
MeelionDollerBogus's picture

Means no such thing. Cash and bonds, treasuries, are risk assets.

The truth is that bonds are the most liquid collateral being multiplied into existence using all tricks of margin including London rehypothecation.

That means negative yields are only a small additional cost to borrowing and trading.

Fri, 07/13/2012 - 22:17 | 2615062 tjfxh
tjfxh's picture

There is no risk-free financial asset. Every financial asset has corresponing liability. With govts the question is the degree to which there is solvency risk, devaluation risk and interest rate risk wrt to the entity whose liability it is. The risk of the US govt becoming insolvent is nil, since it the issuer of its currency and the liability is denominated in USD. The risk is inflation domestically and devaluation externally, and the market is discounting these risks hugely, which is an indicator of deflationary expectations both for the US and the ROW.

Fri, 07/13/2012 - 22:39 | 2615093 AUD
AUD's picture

Inflation is illiquidity, is insolvency.

Just because the US debt bubble can be inflated further doesn't mean it is solvent.

Fri, 07/13/2012 - 22:41 | 2615097 tjfxh
tjfxh's picture

You need to reveiw your definition, unless you want to redefine current use in economics and finance.

Fri, 07/13/2012 - 22:46 | 2615109 AUD
AUD's picture

You need know what you are talking about. Try Melchior Palyi's Liquidity from 1936. You'll find it on the 'net.

Sat, 07/14/2012 - 01:01 | 2615249 Spitzer
Spitzer's picture

Treasuries are return free risk.

Sat, 07/14/2012 - 13:24 | 2615957 MeelionDollerBogus
MeelionDollerBogus's picture

ALL assets have risk > 0, that I agree with. The US govt is TODAY insolvent, however, so I had to thumbs down your comment. Was nearly ready to do a thumbs up. Inflation globally is the real risk with higher inflation, then currency collapse in the USA. The currency will be issued as you say, then it will go to zero BECAUSE it was issued - hyperinflation. The action negates itself but it will proceed as you say.


Fri, 07/13/2012 - 22:00 | 2615047 The Monkey
The Monkey's picture

Some money is hedging against deflation, but most money is simply frontrunning Fed policy. If short term rates are going to be near zero for the next 5 years, and the Fed is buying, rates are going to fall.

Fri, 07/13/2012 - 21:34 | 2615010 palmereldritch
palmereldritch's picture

Worse than a North Korean Ferrari franchise?

Fri, 07/13/2012 - 21:36 | 2615013 francis_sawyer
francis_sawyer's picture

PAPER (cotton or electronic) is the worst investment in the world...

Fri, 07/13/2012 - 21:38 | 2615017 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Cash is the worst investment.  Hands down.

Fri, 07/13/2012 - 22:18 | 2615065 Aziz
Aziz's picture

Our Zimbabwean friends showed us cash can be used as toilet paper. Can't use electronic records held at the NY Fed as toilet paper.

Fri, 07/13/2012 - 22:49 | 2615112 CrashisOptimistic
CrashisOptimistic's picture

For whatever reason, people inextricably immersed in the Old Normal can't figure out what permanent means.

There is no growth.  This is a PERMANENT situation.  There is never going to be growth again.  Deflation is the order of the day . . . today . . . and tomorrow . . . and the next day . . . and forever.

Why would yields rise if there is no growth?  Ever.  How can there be growth in a world of oil scarcity?  How can an engine run faster than it runs today if you start pinching its fuel line more and more? 

This is deflation.  It is forever.  Why would yields rise if there is less economic activity each year?

Sat, 07/14/2012 - 01:04 | 2615252 Spitzer
Spitzer's picture

You are so brainwashed, its sickening.

Why are rates rising in Spain or Italy then ?



Sat, 07/14/2012 - 07:40 | 2615408 Marco
Marco's picture

Because the ECB allows it. As long as Saudi Arabia remains the 51st state (which won't be forever, but will be for a while) interest rates in the US won't go up unless the Fed allows it.

In a trade balance situation central banks can put interest rates anywhere they damn well please, without causing hyper-inflation.

Sat, 07/14/2012 - 08:15 | 2615429 Umh
Umh's picture

Because you may not get your money back.

Sat, 07/14/2012 - 03:22 | 2615313 vato poco
vato poco's picture

Poppycock. Lottery tickets; money spent on craps/baccarat systems; timeshares; weenie-growin' pills....all much worse than lovely wonderful erotic cash.

Fri, 07/13/2012 - 21:41 | 2615019 philipat
philipat's picture

These videos from Positive Money are well worth the time for a simple explanation of the problem. The views expressed are similar to those of Steve Keen and opposite to those of Krugman.

Sat, 07/14/2012 - 11:20 | 2615651 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

Why do they want to come up with a new system?  The original system that was invented in part by Sir Issac Newton that was in place when the Sun never set on the British Empire.  That is the one. 

It was awesome!  The one before they had a Central Bank.

He wants to use 'credit' type money.  First of all, credit is not money.  Look in a legal dictonary.  Money in ordinary acceptace does NOT include Notes!

Coin is Money!  Using Coin as money eliminates all the problems he is talking about. 

You get rid of all tax on labor.  Go back to the original system.  Move all taxing to the ports.  Imports and Exports.

You could learn something from these old guys.  They didn't have flouride in their water.  The system they were using was developed and refined over centuries.

Note the Trial of the Pyx in this film.

Why is it hard to accept that there is one right way to do certain things.



Fri, 07/13/2012 - 21:41 | 2615020 blindman
blindman's picture

i will read this but first
you must listen to THIS one ....
speaking of prophecy, man , it gets
no closer in this time frame ,
the way i think about this.
some hear it.
Tom Waits - All The World is Green with Lyric
strange and weird, i get it
but , so true. could be of the common
knowledge. ( do we still have that? )

that is a good segue to so much
someone needs post these lyrics ....

Fri, 07/13/2012 - 22:03 | 2615031 PulpCutter
PulpCutter's picture

"Japan has kept the Treasury ball... rolling for far longer than most of us expected..."

At least Aziz is honest; when do you think he figures out that American treasuries have also been lower for far longer than he predicted, as have corporate bonds, which are currently hitting record lows and can't be attributed to cental bank actions.

Wake up, folks: Keynes was right.  Krugman is right.   Austrian "economics"only works if you ignore part of the data; it can't predict it's way out of a paper bag.

Further, America is getting rid of private debt at the fastest rate since the 1950s, and America's total debt/GDP ratio has been dropping since 2010.  Horrors! What if the apocalyse is cancelled?!

Fri, 07/13/2012 - 22:05 | 2615051 Colonel
Colonel's picture

Logged in to junk your post. Keynes was a amoral idiot and so are his followers.

“Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.” - Keynes

John Maynard Keynes: Bolshevik, Lavender, Pervert, Pedophile -


 Not that any of that info would convince you.


 As for Krugman, nevermind you're obviously a "progressive", code word for a slobbering serf of TPTB.



Fri, 07/13/2012 - 22:11 | 2615054 PulpCutter
PulpCutter's picture

I notice that in "junking the post", nowhere did you refute my assertion: Austrians have been predicting "an hyperinflationary meltup within a year" for years now; yet IBM can sell 3yr bonds at 0.75%. Where's the inflation?

When you have no facts on your side I guess "junking" posts is all you can do.

Fri, 07/13/2012 - 22:13 | 2615059 Colonel
Colonel's picture

 There are plenty of books and articles disproving Keynes "theories" by Austrian scholars. So you want new insights into how Keynes was wrong? No you don't, so you might as well go back to watching The View flamer or circle jerking at Huff Po.

Fri, 07/13/2012 - 22:23 | 2615075 PulpCutter
PulpCutter's picture

There are two big reasons today's right loves the Austrians. One is that Austrian economists reject empirical analysis, and instead believe that you can reach conclusions about correct economic policies from a priori principles. It's philosophy dressed up as economics; with the Austrians, there is never any risk that real-world events will interfere with your ideology. The other big advantage is that the main Austrian thinkers, Friedrich Hayek and Ludwig von Mises, are dead, so they can't argue with your interpretation of their work. This is especially important with Hayek, who got sort of squishy later in life. And that is how so many on the right have pulled off the remarkable feat of going through the 2008 crisis and its aftermath without revisiting any of their policy views.

Fri, 07/13/2012 - 22:36 | 2615086 Colonel
Colonel's picture

"believe that you can reach conclusions about correct economic policies from a priori principles."

There's nothing wrong with a priori principles. Do you need "empirical analysis" to prove that people act?


 As for a priori...  "Not that any of that info would convince you..." Case in point.

Fri, 07/13/2012 - 22:45 | 2615106 Colonel
Colonel's picture

And what's the reason for so-called "socially conscious" leftists for being such bankster whores hmmm?

Fri, 07/13/2012 - 22:52 | 2615120 PulpCutter
PulpCutter's picture

If the "leftists" are "such bankster whores"...what's that make the rightists?

House roll call, Gramm-Leach-Bliley Act: 57 against; 51 Democrats, 5 Republicans

Senate roll call, Gramm-Leach-Bliley Act: 8 against; 7 Democrats, 1 Republican


Choose your theory based on the facts; otherwise you're stuck choosing your facts based on your theory.


Fri, 07/13/2012 - 22:57 | 2615125 Colonel
Colonel's picture

Bankster whores too? Duh. But you're so "enlightened" because you support the D jerseys.

Fri, 07/13/2012 - 22:59 | 2615135 PulpCutter
PulpCutter's picture

"Too"?  The vote tallies say it's the rightists who are the bigger bankster whores. 

Again, choose your theory based on the facts, otherwise you're stuck choosing facts to fit your theory. 

Fri, 07/13/2012 - 23:06 | 2615141 Colonel
Colonel's picture

Yeah they're "bigger". You're another leftist numbnut at least the public on the right is reachable and is concerned about the direction the country is heading. Not you clowns, everything is peaches and cream with Obozo or some other Dim in the WH.

Sat, 07/14/2012 - 01:47 | 2615279 CCanuck
CCanuck's picture

Respectfuly Colonel, peaches and cream died with disco, sometime in the 80's I think.

Today's Progressive envisions, Unicorns dancing in rainbow filled meadows, pooping skittles for everyone.



Fri, 07/13/2012 - 23:05 | 2615144 Colonel
Colonel's picture

Oh yeah and those vote "tallies" don't show the Dims to be the peaceniks they claim to be either.

Fri, 07/13/2012 - 23:50 | 2615189 Poor Grogman
Poor Grogman's picture

Voodoo economic theories work fine in a world of voodoo finance.

Why bother having rational expectations when you can just change the goal posts to make the outcome fit the theory.

To paraphrase...Keynes himself suggested that his theories would work better in command economy.

Well here we are in the new world order...

Just don't make the mistake of pretending that what we have now is in any way a normal free market system.

Sat, 07/14/2012 - 01:07 | 2615255 Spitzer
Spitzer's picture

Why are rates rising in Spain and Italy then ? Maybe because there is not a bubble in their bond markets......

Sat, 07/14/2012 - 01:31 | 2615266 CCanuck
CCanuck's picture

Big whores, little whores, is the difference a matter of size or weight?

I prefer my whores in the middle, left is too fat, right is too tight.

A whore, is a whore! You whine about who the bigger whore is?

Loopy Cuntter


Fri, 07/13/2012 - 23:34 | 2615172 IrritableBowels
IrritableBowels's picture

Pulpswallower- " philosophy dressed up as economics..."


Philosophy is the study of general and fundamental problems, such as those connected with reality, existence, knowledge, values, reason, mind, and language.



Sat, 07/14/2012 - 02:03 | 2615248 HardAssets
HardAssets's picture

"There are two big reasons today's right loves the Austrians. One is that Austrian economists reject empirical analysis, and instead believe that you can reach conclusions about correct economic policies from a priori principles. It's philosophy dressed up as economics; with the Austrians, there is never any risk that real-world events will interfere with your ideology. The other big advantage is that the main Austrian thinkers, Friedrich Hayek and Ludwig von Mises, are dead, so they can't argue with your interpretation of their work. This is especially important with Hayek, who got sort of squishy later in life. And that is how so many on the right have pulled off the remarkable feat of going through the 2008 crisis and its aftermath without revisiting any of their policy views."

Well, I don't consider myself on the 'right' or the 'left'. I find those labels to restrict open minded inquiry and have observed that those politiicians expousing one side or the other usually bring about the same results, no matter their label or rhetoric. I have studied quite a bit of Austrian economics. I agree with much of the views of some people identified with that school of thought, but not with all of them or on all economics issues.

To begin, in many ways it can be said that all knowledge is based on phiilosophy at its root. (Including the empirical tool of mathematics). Your statement that the Austrians promote 'philosophy' rather than 'economics' does not make sense; youre not really saying anything by that statement.  Though it is apparent that what you mean is that an approach cannot be 'economics' if isn't primarily driven by the use of mathematical methods. This is nothing but your assertion. The Austrians come from the view that, like in other offshoots from philosophy, economic principles can be built upon logical step-by-step thinking. One must start from the most basic, obvious observations and build from there.  - - Keynes and others after him sought to make economics seem more 'scientific' by trying to apply the methods of the physical sciences to it. The problem with this, recognized by the Austrians, is that unlike inanimate objects, human beings have motives and take action to try to achieve their goals. Unlike a iron sphere falling to earth, the actions of people arent so easily calculated. Unlike in the physical sciences, experiments cannot be used in the realm of macroeconomics and the various possible influences could not be isolated from such an experiment. Nor can they be isolated from macroeconomic data.- - - Mathematical methods have sometimes proven useful at the microeconomic level - - at the level of the firm. They havent been shown to be all that useful or predictive at the macroeconomic level. (Have you ever gone back and watched videos of Bernanke's various past predictions about the macroeconomy ?  And he's an 'expert' with the full resources of the Fed and the US government at his command.)

I could go on, but that would end up reading like a book -- and youre probably welded to your position anyway. But here's a few more quick notes in response to what you wrote:

'economics' - - your definition ? Has to be mathematical based ?  How has that approach been proven useful ?

'real world events' - - - like Keynes 'animal spirits'? Is that more 'scientific' ?

Hayek & von Mises dead ? - - - you may not have noticed, but so is Keynes. So what.

Hayek got squishy - - - I agree in regard to some areas. Knowledge isn't advanced by turning one individual into some kind of idol to worship. It moves on, and those that come after build upon those who came earlier.

2008 ?  - - - you gotta be kidding ?  The Keynesians and their off shoots had no clue what was coming. Only the Austrians predicted it and they are the only ones who understand its cause (the action of central banks to cause booms & busts through their control of money & credit.)

Looking back over your statements, they seem to be more about partisan political support for Dems, rather than economics. Does that political view encourage you to think that the economy is turning around now ? (I don't have confidence in the politicians from either national political party now.)

Sat, 07/14/2012 - 04:20 | 2615334 Escapeclaws
Escapeclaws's picture

Regarding mathematics applied to economics or finance, Didier Sornette has made some fascinating predictions of bubbles collapsing using logperiodic regression. You can Google his name and read some of his papers.

Also, do not overlook the work of Steve Keene who develops economic models using non-linear DE's. Keene seems to have been greatly inspired by the Minsky Instability Hypothesis. I like Keene partly because he is just pursuing his own ideas without backers. He is not a Keynesian or a neo-classical economist, nor yet a Marxist.

There is also a whole new school of economics called econophysics which is largely the offspring of unemployed former Russian physicists and engineers as I understand it.

Rather than making blanket statements about mathematics being applied to the social sciences, it is better to look at specific examples.

Sat, 07/14/2012 - 05:47 | 2615370 HardAssets
HardAssets's picture

Your references look interesting and I am familiar with some of them. I remain skeptical, (as should anyone.) Thank you,  I will check them out.

I dont make blanket statments about the use of mathematics in the social sciences. I recognize their value in some very limited circumstances at the microeconomics level, and doubt their effectiveness at the macroeconomic level.  IMO the measure of such work is whether they have consistent predictive value, with which sound decisions can be made.

If youre familiar with the story of Long Term Capital Management - - - they had all sorts of computers running mathematical models and guys with impressive Phds & a Nobel prize. Lots of very smart people with the arrogance to match. . . . . They crashed and burned.

Sat, 07/14/2012 - 09:40 | 2615477 Escapeclaws
Escapeclaws's picture

Your criticisms are fair. Again, in terms of macro economics, look at Keene and at econophysics. I have a feeling that even though the math was there--dynamic systems--in the 30s, this work was not plausible until we acquired computing power. Poincaré had even solved the 3 body problem but that type of dynamic modeling really came into its own after computers became widely available and cheap. Likewise, the math I've seen applied in a neoclassical setting is primarily things like bordered Hessians from multi-variable calculus and linear programming in the 40's. This dynamical systems modeling is a whole new ballgame. I understand what you are saying about LTCM, but I believe one of the founders was Scholes who invented the Black and Scholes formula which ushered in the entire derivatives revolution, for better or worse. Whether someone is an arrogant ass seems to me a little beside the point. Yes they crashed and burned, but B&S is an impressive achievement.

Regarding libertarianism, I've only had arguments with such people on an adhoc basis and the rest of what I know comes from reading ZH.  I have yet to read Hayek and von Mises.

I have an enormous amount of respect for Tarpley. I'm very impressed that he spotted the CIA plant Obama long before anyone else and he has also given what appears to be a very fair analysis of the goings-on in Syria.  Here a little cui bono analysis seems to back him up. They want to depose Bashar and make Syria a western puppet so that it can be used as a staging area for attacking Iran. Reason for attacking Iran--perhaps their oil, perhaps denying China access to their oil, perhaps the last peg for total constrol of the ME perhaps to encircle Russia and plant missles there. I have trouble believing the nuke stuff is more than a smokescreen.

Tarpley is quite open about being a statist--he does like Hamilton and FDR. I don't have an opinion on that. Nevertheless, I stick by what I said about that Koresh interview--you should watch it yourself and then tell me if Koresh has anything substantial to say that is non-ideological. I just find Tarpley extremely bright and a hell of a lot more interesting. I think the two are related.

Sat, 07/14/2012 - 10:45 | 2615510 HardAssets
HardAssets's picture

Thank you for your thoughtful comments.

There's alot of Tarpley's work that I like, - I have bought several of his books. And I admired when he went over to the Middle East during the turmoil in Libya to observe what was actually taking place on the ground. That took some courage. I try to look at things with a clean slate and open mind as much as humanly possible. I think the best aporoach with anything is to take what is useful and toss out what is not.

I'll have to look over that Koresh interview. Maybe the guy is a moron, and doesnt help his case. I don't know, having not seen it yet. But, I have run across people where I thought "Please don't try to help! You don't know what youre talking about, and am only hurting things."

You mentioned some of the strategic geo-political issues in the near East. If you havent already done so, I think you would find the work of F. William Engdahl extremely interesting & informative. He has written several books on such subjects as the role of international banking in the world, the history of oil geo-politics, Full Spectrum Dominance and global strategy, and the history and objectives of genetically modified food production (GMO). He is an excellent researcher who provides plenty of supporting references. He changed my viewpoint on many issues.  I bought his books on Amazon, and you can also read his articles at   and   

Regards, - - -

P.S. - - an excellent author to read as an introduction to Austrian thinking is Murray Rothbard. He is a wonderful writer. Check out his "What Has the Government Done To Our Money?" and his argument for a gold standard. Also check out his excellent book on libertarian philosophy "For a New Liberty:the Libertarian Manifesto". These works and many others can be downloaded from the Mises Institute for free. Here's one link to get this literature so that you may judge these philosophies for yourself. (And if time is short, you can also fiind shorter articles on these topics by this same author at the website):

Sat, 07/14/2012 - 11:01 | 2615605 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

Mises..pfft..  Coin Harvey.  That's our man.



Sat, 07/14/2012 - 12:18 | 2615764 Escapeclaws
Escapeclaws's picture

Thank you for your suggestions. I'll look at Rothbard and Engdahl--the same Engdahl who contributes to ZH, I presume. By the way, Tarpley was in Homs, Syria, when the "Nato death squads", as he calls them, were indiscriminantly killing innocent civilians--women, children, old people--from the roof tops. It is at least clear that the attacks origninated along the border of Syria, and not in the interior.

Sat, 07/14/2012 - 01:24 | 2615260 CitizenPete
CitizenPete's picture

Is every hack socialist Keynesian cutting and pasting the NPR interview with Richard Posner now?

Sat, 07/14/2012 - 03:12 | 2615301 Escapeclaws
Escapeclaws's picture

According to Webster Tarpley, I believe in "Against Oligarchy" (you can read this for free at, both Hayek and von Mise were commissioned by David Rockefeller to formulate their economic theories and create the Austrian School of economics. Tarpley also claimed in an interview with a Libertarian named Koresh (you can watch the interview at that libertarianism is a CIA psyop project that was designed to create a "false consciousness" so that people who espouse it would never be able to get to the root of the economic dominance of the elite and find effective ways to overcome that dominance.

If you actually watch the Koresh interview, which took place outside the pale of the Marriot hotel where the Bilderberger meeting took place, you do indeed see that Koresh would hardly let Tarpley espouse his own views and instead preached libertarian dogmatics to him--probably to impress his own disciples more than anything else, because it is clear that intellectually Koresh is incapable of grasping the fact that he cannot even conceive of the level of understanding enjoyed by Tarpley, much less grasp what Tarpley really means by "false consciousness". Libertarianism is a dogmatic closed system which is very effective at blocking out anything that contradicts it. It is not the least scientific in spirit, because science depends on falsifiability, a term invented by the philosopher Karl Popper. Science, by its very nature, is tentative. What we see a lot of nowadays are schools of thought (or rather ideology) that essentially claim to be able to explain everything and have all the answers, whether that be libertarianism à la Koresh or the anti-patriarchalism of Fem Lib exemplified by Gloria Steinem. A system that has all the answers is comforting and chases away the bogeyman of insecurity for those not inclined to think for themselves. These schools of ideology are hard to tear people away from, because we all feel existentially threatened by what we cannot understand, especially when everything appears to be going to Hell.

Thus, people choose their ideology for psychological reasons, and since this choice is not rational, Americans in particular tend to be pathologically unstable and respond violently to perceived threats. We are also easily manipulated. These ideological susceptibilities are a tyrant's best weapon.

Sat, 07/14/2012 - 06:05 | 2615356 HardAssets
HardAssets's picture

What rubbish by Tarpley.

Tarpley offers some interesting and valuable historical perspectives, but he goes ape when anyone challenges his hero FDRs big govt socialist programs.

Your comments are filled with ad hominem attacks on those who are of a libertarian mindset or have studied Austrian economics. You imply that those who disagree with you are psychologically suspect. (Would that include the classical liberal/libertarian Thomas Jefferson ?)  In this, youve overplayed your hand. Libertarian is the term used now for what was termed a 'classical liberal' before. That term has been distorted through time, and now 'liberal' refers to one who would have more socialist leanings. A different word was required.

Libertarianism isnt about 'science', but philosophy. Philosophy examines the nature of things including what is 'true' and 'just'. We can use a philosophical approach to make sound judgements & decisions about these matters.  When Jefferson wrote about the right of men to 'Life, Liberty, and the Pursuit of Happiness' he wasn't speaking of a scientific finding - - but about what was right.

I don't know if youre sincere about an open minded look at this, and just relayed what Tarpley said. Libertarians and Austrian economists have been extemely effective in the battle of ideas against Big Govt and Keynesian economics. So, every opportunity is taken to attack them- - and its usually in an ad hominem (personally attack the man, rather than his argument) tactic.

Are there specific libertarian ideas that you oppose ?  Are there specific Austrian economic views that you oppose ?  What evidence do you have to support your position ?

For those who woud like more balance, here's a chance to view the other side's position:


Fri, 07/13/2012 - 22:21 | 2615069 A Lunatic
A Lunatic's picture

If inflation shows up at the supermarket and the Bernanke is not around to acknowledge it, is a pound of shitty hamburger still $4?

Sat, 07/14/2012 - 11:16 | 2615645 post turtle saver
post turtle saver's picture

Good grief, where are you buying hamburger? I can get 100% lean (ground chuck) in my neck of the woods for less than $3 US per pound. Hell, I had USDA Prime aged ribeye for $7 US per pound on the grill last week.

Sounds like someone either needs to get the hell out of the city or start looking for specials and coupons. No one, and I mean no one, pays $4 US per pound for 80% lean ground beef where I'm from.

Sun, 07/15/2012 - 00:58 | 2616881 prodigious_idea
prodigious_idea's picture

And you're from . . .

Fri, 07/13/2012 - 22:28 | 2615079 Colonel
Colonel's picture

Austrian "economics"only works if you ignore part of the data;

You mean like how you "forgot" public debt? Carry on hypocrite.

Fri, 07/13/2012 - 22:36 | 2615090 PulpCutter
PulpCutter's picture

America's total (public & private) debt/GDP ratio has been dropping since 2010.

Here, try some of these; they may help you:



Fri, 07/13/2012 - 22:38 | 2615092 Colonel
Colonel's picture

Another a priori example. Well you sure did carry on.

Fri, 07/13/2012 - 22:45 | 2615108 PulpCutter
PulpCutter's picture

LMAO.  You probably want to look up the meaning of "a priori", before you embarass yourself further.

Fri, 07/13/2012 - 22:49 | 2615117 Colonel
Colonel's picture

And you might want to look up the word hypocrite not that it ever did a leftard any good.

Sat, 07/14/2012 - 02:30 | 2615296 Burnbright
Burnbright's picture

You know if I didn't know any better Pulp I would say you were a zombie. If you want to have a real debate though I would be more than happy to cut your useless assumptions down. Give me your best shot.

Fri, 07/13/2012 - 23:14 | 2615137 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

Where is the inflation?  LOL! Have you been to the store?  Priced a can of Coffee lately?

My 1909 Sears Catalog has it at 3 cents a pound.

Controlled inflation is still inflation.  Read this carefully.

What did they say they were going to do with the Silver?

Go have a look at Detroit.

Then read this from Keynes himself.

"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate _arbitrarily_; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers,", who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

You couldn't have done this much damage to Detroit with conventional weapons.  The damage is done to both the families who live there and the buildings.  Generations of knowledge and progress lost.  Pain and suffering of the people who live there beyond measure.  Division and oppression among people who would otherwise love and take care of each other under a just system.   

"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." - George Washington

What is the primary reason governments print paper money?  To pay soldiers and fund wars that the people would not otherwise fund.

I am reminded of an old song.  "Keep your Confederate money..even if it's made of tin..keep your Confederate money..the South will rise again".


Fri, 07/13/2012 - 23:17 | 2615155 Colonel
Colonel's picture

And yet he spouts the superiority of "empirical analysis" and doesn't see any inflation. *facepalm*

Fri, 07/13/2012 - 23:41 | 2615178 HardAssets
HardAssets's picture

Inflation ?  Its almost amusing how they 'adjust' portion sizes on all sorts of products nowadays.

As an example - - for years we've been buying chew stick doggie treats that you shove into a rubber toy for one of our dogs. One end of the chewstick goes into a hole in the rubber toy and the other end sticks out so the dog can slowly work it out of the toy and eat it. The chewsticks come 10 to a package.  Well I noticed that the last three packages had chewsticks about a third shorter than what they used to be. The price was a little higher.

Seems like the dog noticed too. He finished the shortened chewstick a lot sooner than usual and I swear he had a "WTF is this shit ?" expression on his face.

Fri, 07/13/2012 - 23:46 | 2615187 Colonel
Colonel's picture

It's either that or businesses have to raise prices but Pulpcutter knew that. LOL

Sat, 07/14/2012 - 04:23 | 2615335 Escapeclaws
Escapeclaws's picture

"Seems like the dog noticed too. He finished the shortened chewstick a lot sooner than usual and I swear he had a "WTF is this shit ?" expression on his face."

LOL Even animals are "waking up"!

Sat, 07/14/2012 - 09:18 | 2615459 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

LOL@your dog.

Reading this now, it seems like these gentlemen were able to predict the future. They were just educated in the real science of economics and art of banking.

The basic thing to grasp is that before this Act, banks had to supply their own assets to redeem their notes.  After it passed, their notes were allowed to be redeemed against all public wealth.

First the gold coin, then the silver, now the land and the people. 

Consider the National Debt in this light...who owes who?  The rest of the world has been living on backs of American Wealth for last 100 years.




Fri, 07/13/2012 - 22:51 | 2615122 CrashisOptimistic
CrashisOptimistic's picture

You might want to look into that "total" debt number making the rounds.

It excludes student loans.  It also excludes overnight lending.

And btw, GDP is not the parameter to compare to.  Population is.

Fri, 07/13/2012 - 22:54 | 2615128 PulpCutter
PulpCutter's picture

The number I cited includes student loans.  Explain why you think GDP is not the parameter to compare to.

Fri, 07/13/2012 - 23:09 | 2615148 MsCreant
MsCreant's picture

How many people working to pay off the debt. 

The left right divide and conquer thing is sad. 

BTW, language demands "prior assumptions." Thus every theory/school of thought has em'. It is an artificial debate inductive vs. deductive reasoning. All science is a manifestation of philosophy. No escaping that.  

Fri, 07/13/2012 - 23:30 | 2615167 PulpCutter
PulpCutter's picture

Pouring gas on a fire, but I have to mention: the country with the WORST record since 2010, in terms of total debt/GDP change, is the UK. Cameron put them on an austerity program, and threw them right back into a second recession - which Cameron called "surprising".

America, South Korea and Australia are the major countries currently dropping their total debt/GDP ratios the fastest.


The deleveraging processes in Sweden and Finland in the 1990s offer relevant lessons today. Both endured credit bubbles and collapses, followed by recession, debt reduction, and eventually a return to robust economic growth. Their experiences and other historical examples show two distinct phases of deleveraging. In the first phase, lasting several years, households, corporations, and financial institutions reduce debt significantly. While this happens, economic growth is negative or minimal and government debt rises. In the second phase of deleveraging, GDP growth rebounds and then government debt is gradually reduced over many years.
The historic deleveraging episodes reveal six critical markers of progress: the financial sector is stabilized and lending is rising; structural reforms unleash private-sector growth; credible medium-term public deficit reduction plans are in place; exports are growing; private investment has resumed; and the housing market is stabilized and residential construction revives.
As of January 2012, the United States is most closely following the Nordic path towards deleveraging. Debt in the financial sector has fallen back to levels last seen in 2000, before the credit bubble, and the ratio of corporate debt relative to GDP has also fallen. US households have made more progress in debt reduction than other countries, and may have roughly two more years before returning to sustainable levels of debt. Deleveraging in the United Kingdom and Spain is proceeding more slowly, and these countries could face many years of gradual debt reduction ahead.


Sat, 07/14/2012 - 01:11 | 2615257 Spitzer
Spitzer's picture

Hahaha funny how you forgot about the nordic bond BEAR markets...


Sat, 07/14/2012 - 01:32 | 2615268 adr
adr's picture

What if the GDP number is completely false? 

If GDP, as calculated, is based on false information and/or complete fabrications in order to prop up the stock market, then debt/GDP may not be declining at all.

Do you not find it odd that America's GDP somehow almost double the mass consuption period of the 1980s? It doesn't really seem possible. The wealth of the 90s was a complete fabrication financed through the expansion of debt and a rising stock market bubble. Much of that wealth disapeared in an instant. In reality it never existed.

Real tangible goods only make up 1/4 of our GDP, the rest is services and financial engineering, coupled with government spending. GDP is supposed to be the gross value of all goods and services produced in one year. Yet somehow the world produced far more than it actually consumed by the numbers. One of the numbers isn't right.

You can say your gross income is $65k a year, but that doesn't mean you've got $65k in the bank. Debts and taxes may take over 75% of that money. That 75% can't be spent to promote growth, so how can it count towards growing the economy? In many cases the service of debt takes nearly 100% of a person's income. Counting that $65k towards economic activity overstates consumption, considering much of it goes to pay for prior debt.

Sat, 07/14/2012 - 03:44 | 2615317 HardAssets
HardAssets's picture

GDP includes government spending, which is consumption. It diverts resources away from the productive economy and must be paid for by taxes or added debt. 'Debt' does not include long term liabilities, such as Soc Sec, etc. Futhermore, the methodology used to determine economic data has been drastically altered over the years. This change accelerated starting in the Clinton years, but has gone on under Dem & Repub administrations (birth-death model, hedonics, etc).

Sat, 07/14/2012 - 04:24 | 2615323 Escapeclaws
Escapeclaws's picture

In letting malfeasance go unpunished and corruption reach the very marrow of how we define ourselves as a country, are we also following the example of the Nordic countries?

Sun, 07/15/2012 - 01:03 | 2616889 prodigious_idea
prodigious_idea's picture

Why do you keep blathering about GDP?  Households don't have GDP.  THEY HAVE INCOME!  And the percentage of debt to household income is unchanged.  And it's a good thing we're ignoring inflation because the figures deteriorate.

Sat, 07/14/2012 - 09:37 | 2615464 Terrorist
Terrorist's picture

At the present rate of decline total debt to GDP will take how long to get to normal?

We won't talk about unfounded liabilities OK?

And whatever you do don't look at a chart of private income to total debt, and think about debt service.
And please don't you dare normalize interest rates and project future deficits-the horrors indeed.

Sun, 07/15/2012 - 00:55 | 2616877 prodigious_idea
prodigious_idea's picture

"Further, America is getting rid of private debt at the fastest rate since the 1950s, and America's total debt/GDP ratio has been dropping since 2010. Horrors! What if the apocalyse is cancelled?!"

GDP means nothing.  Debt as a percent of disposable income, now that's meaningful.  And guess what?  It's virtually unchanged over the last 30 years.

Fri, 07/13/2012 - 21:49 | 2615032 disabledvet
disabledvet's picture

"unpoppable bubble." Facebook comes to mind when speaking of "worst investment ever" right now....along with a lot of other companies in that space. (Groupon comes to mind.) The fact of the matter is we're sentencing our economy to decades of "lost growth" if we can't get out of "the Statist's trap" that we find ourselves in. Frankly i don't see it happening. There is no constituency left for actually paying for things in the USA. And in my view the USA is WILDING on the world stage...and has been for some time now. There are so many warships in the Eastern Med right now you could probably walk from Egypt to Italy and not get your feet wet. I'm not sure "what the plan is" but i have a sinking suspicion that "we don't have one."

Sat, 07/14/2012 - 00:05 | 2615205 GOLDTEETHSILVER...

A good plan? Follow the yellow brick road...

Fri, 07/13/2012 - 21:50 | 2615033 Snakeeyes
Snakeeyes's picture

Heresy! 2yr treasuries have a real yield of -1.75%. Be a Patriott!

Fri, 07/13/2012 - 21:53 | 2615034 HardAssets
HardAssets's picture

Its all complete bullshit, all of it. 

I get tied up in all the numbers & details, like everyone. But it comes down to the con men banksters&politicians passing off an illusion to the citizenry. We're loaned (individually or to 'our' government) fiat 'money' which is fabricated out of thin air, and on which the banksters charge 'interest'. This fake 'money' is nothing but claims on the physical goods & services that people themselves actually create in the real world.

Many people are concerned about future tough times. They are worried about not having enough to survive. But the land, physical productive machinery, and people with their skills and talents still exist. That hasnt changed. Whats changed is the level of made-up claims on the physical resources and peoples labor in the form of 'interest' on 'debt' to be handed over to  non producing banksters & their paid-for liar/lawyer/politicians.

The Icelanders got it right when they told the con men bankers & politicians to bugger off.  Those people who don't do this enslave themselves through their own ignorance.

Fri, 07/13/2012 - 21:51 | 2615036 Pancho Villa
Pancho Villa's picture

If you bought long bonds in the 60's, they were a terrible investment. If you bought them in the early 80's when no one wanted to touch them and people were calling them "certificates of confiscation", they were a great investment.

Now it seems that governments just can't issue them fast enough to satisfy demand, which seems like a bad sign to me.

But the real question is: If this is a bubble, when will it pop? My theory is that current bond demand is fueled by baby-boomers approaching retirement. They were burned by the dotcom bubble, then by the housing bubble, so now they are shoveling their savings into bonds. So demand for bonds would remain strong so long as the boomers continue to purchase bonds. But in a decade or so, about half the boomers will have retired and will have become bond sellers rather than bond purchasers. So I am looking for a major crisis sometime in the early 2020's, give or take 5 years.

Fri, 07/13/2012 - 21:57 | 2615039 Yen Cross
Yen Cross's picture

 U.S. Treasuies are the best until / They are the worst!  The "  Rubber Band" is getting closer to being SNAP'ed.

Sat, 07/14/2012 - 12:36 | 2615820 Tom Green Swedish
Tom Green Swedish's picture

The question is where did they find this rubber band.  Who let them use the rubber band, and once they run out of magic tricks (like now) what do they do?  QE after QE after QE?

Fri, 07/13/2012 - 21:57 | 2615041 MsCreant
MsCreant's picture

I have been away a bit, this may have been discussed here. Did anyone listen to the Pento interview on Kingworld news, and Mish's response to it? Pento thinks the Fed will do Zero interest rates to hold cash so that banks will be forced to loan out the money and that the money will move into ALL government paper.  Mish says bullshit because: 

Banks lend if and only if both of the following are true.

  1. They are not capital impaired
  2. They have credit-worthy borrowers willing to borrow.

That is not an opinion. Rather, that is a statement of fact. I discussed this at length many times.


Not sure what I think of Pento's assertion (interesting tho). But Mish keeps surprising me with how Naive he can be about these criminals.   

Fri, 07/13/2012 - 22:07 | 2615056 blindman
blindman's picture

and three.)
if they can unload or default swap
the loss, operate as the financial intermediary
of premier systemic import-(collapse-ance. ongoing baby
ps. it doesn't work, is repulsive and repugnant
stinking of malfeasance and what not...

Fri, 07/13/2012 - 22:31 | 2615083 TahoeBilly2012
TahoeBilly2012's picture

I followed that to, and it is an interesting debate....cant they force the banks to lend? Is there any data zehdge can dig up on how is getting what loans with waht ceridt scores? It looks like they really want to figure out how to lend anyone and everyone there data on this, charts, and most important can I now borrow, buy silver and head for Chile?

Fri, 07/13/2012 - 22:44 | 2615104 r00t61
r00t61's picture

Force banks to lend?

The solution is much simpler.  Just force people to borrow.

The SCOTUS ruling has set the stage.  Congress can pass any piece of legislation it wants, and that legislation can make a person buy anything the government wants - object 'X.'  If that person doesn't buy 'X,' then the government can hit him with a 'fine,' AKA, a 'tax,' which is completely "legal" under Congress' de jure power to tax.

The Affordable Personal Loan Act of 2013:

All people must carry, per year, an outstanding personal loan balance of at least $10,000, from one or more of the following approved banks (Chase, BAC, Citibank).  Those people that do not carry loan balances will be fined for their non-compliance.

Sat, 07/14/2012 - 08:35 | 2615442 Snakeeyes
Snakeeyes's picture

Let's see.

1. UST 2 yrs have a REAL yield of -1.75%.

2. Obama is turning the US into a massive welfare state where more people go on the dole than get jobs by a wide margin.

With such leadership from Obama and The Fed, how can anyone think that Treasuries are a good investment?

Sat, 07/14/2012 - 11:20 | 2615629 HardAssets
HardAssets's picture

Hi MisCreant - - I think we can view the BigBanks-FederalGovt-FederalReserve as one big combined entity. (Based on history & how they operate). The banks own the Fed and those running govt. Personnel move back & forth between them. Their actions are based on covering for each other when subjected to the scrutiny of the general public - - that is, those they leech off of.

Based on this viewpoint, I could see how Pento's scenario could take place, though the banks aren't 'forced' to do anything. That's just P.R. It would not surprise me if, under extremely dire conditions, banks were 'nationalized' and further proped up by the citizenry. (Perhaps even 401k and other retirement accounts would be directed into a new United States Bank - - - for 'safekeeping').  Their managment would come from the same quarters as before. After getting rescued using taxpayer money, 'free market capitalism' could eventually be 'rediscovered' and the bank 'privatized' once again. Socialization of losses on the backs of the citizenry taxpayers, privatization of gains for the banksters.

IMO both Pento & Mish either are naive regarding the ingrained criminal nature of the system, or they don't wish to go that far in public statements. I'm guessing that theyre not naive, they seem like pretty sharp guys.

Sat, 07/14/2012 - 20:12 | 2616541 MsCreant
MsCreant's picture

"I think we can view the BigBanks-FederalGovt-FederalReserve as one big combined entity. (Based on history & how they operate). The banks own the Fed and those running govt. Personnel move back & forth between them. Their actions are based on covering for each other when subjected to the scrutiny of the general public - - that is, those they leech off of."

I think you got the problem right there in a nice tight paragraph.

We need seperation of Bank and State to be overtly designed into our constitution. 

Fri, 07/13/2012 - 21:58 | 2615044 PMakoi
PMakoi's picture

I have some older treasuries that I am holding to maturity.  When interest rates were really high back in the Volker days, I decided to buy zero's thinking that interest rates would surely fall.  My thought was that if I could buy a 10K zero every 6 months, I could hold them for retirement and cash them in as they matured.  My broker thought this was a nutty idea.  I sold some, and made some money.  I've kept some and I'm satisfied.  Now, in this environment, one doesn't know if the dollar will survive in it's present form, but one also knows that the Govt. owns the printing press.  They will pay their bonds, even if in devalued dollars.  I'm wondering if there is a fund, ETF..., whatever that shorts treasuries?  Kind of the opposite of zero's.  If interest rates rise, I'd make money.  I'd just think that if we do survive, sort of USA is last man standing, interest rates will begin heading up by fall 2014.

Fri, 07/13/2012 - 22:24 | 2615073 francis_sawyer
francis_sawyer's picture

all the tinder is prepared... It's just waiting for a match... The match will be struck when the perps feel they have the best odds of NOT being branded as arsonists in the aftermath... The rest of this is all just trying to have some fun jacking off a mule (which is a favorite pasttime of banksters, I hear)...

Fri, 07/13/2012 - 22:43 | 2615100 blindman
blindman's picture

Tom Waits - Get Behind The Mule
..horrid little pistol and a lariat.." t.w.//?

Fri, 07/13/2012 - 22:54 | 2615126 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

I've got a mule, her name is Sal.

Erie Canal / Low Bridge

"We've hauled some barges in our day..filled with lumber, coal and hay."


Sat, 07/14/2012 - 14:57 | 2616166 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

"Some Rheumatism Pills for the Settlers in the Hills"

Mule Train - Tennessee Ernie Ford


Fri, 07/13/2012 - 22:49 | 2615116 Revert_Back_to_...
Revert_Back_to_1792_Act's picture

Tennessee Ernie Ford - 16 Tons


Fri, 07/13/2012 - 22:06 | 2615053 rbg81
rbg81's picture

The inherent value in a bond is its yield; everything else is speculation.

That is not quite true.  The very rich and institutions are buying USTs to preserve wealth because they think a crash is coming.  They are willing to pay a premium (penalty) to make sure the vast bulk of their wealth stays intact.

Sat, 07/14/2012 - 10:00 | 2615500 sablya
sablya's picture

Here is a penalty for 2 year security.  How does this make sense in a rational world??  Why not just pay for storage in a vault somewhere?? 

Switzerland 2-Year -0.339 -0.339 -0.313 -0.339 -0.006 1.81% 13/07
Fri, 07/13/2012 - 22:06 | 2615055 dolph9
dolph9's picture

Treasury bonds are not the single worst (major) investment in the world...euro denonimated bonds would have to take that title.

But Treasuries come close.  I wouldn't touch them with a radar gun much less a pole.

Fri, 07/13/2012 - 22:17 | 2615064 Yen Cross
Yen Cross's picture

 United States treasury notes are still the best option in a slowing " Global Economy".  Does anyone really believe those China numbers/based on Energy usage?

   We all know / supposing Z/H reader competience, that the Global economy is over built!  Just look at every cable (TV)  Channel trying to p[ump and dump Junk real estate!

   Let's get real!  A lot of shit is for sale, at any price!

Fri, 07/13/2012 - 22:19 | 2615066 AUD
AUD's picture

Why do you say the headline is a little sensationalistic?

There's no doubt Treasury bonds of all government stripes are the worst kind of junk. As long as the populace of the world is dumb enough to accept central bank credit in payment of debt, the central bank can monetise whatever junk it chooses.

You can't rationalise irrationality.

Fri, 07/13/2012 - 22:28 | 2615080 Yen Cross
Yen Cross's picture

 Stay locked in on this thread (AUD).

Fri, 07/13/2012 - 22:44 | 2615102 Revert_Back_to_...
Fri, 07/13/2012 - 23:03 | 2615140 Yen Cross
Yen Cross's picture

 Remember?  Share in a Mirror!

Fri, 07/13/2012 - 22:24 | 2615067 Yen Cross
Yen Cross's picture

  Hypothetically ? Bond yields should drive currency demand!  Ie; Investment.

   Bonds reflect the strength of Sovereign Funds! The United States is a global pimp!

Fri, 07/13/2012 - 22:32 | 2615085 Yen Cross
Yen Cross's picture

 Good GOD, These " divergent" overlays are getting old!   If Bill Gross lives long enough, I see his point!

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