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Guest Post: Eric Janszen: We Are Witnessing The Death Of The Dollar
Submitted by Adam Taggart of Chris Martenson.com
Eric Janszen: We Are Witnessing The Death Of The Dollar
What do you get when the producer of the world's reserve currency takes on too much debt? Nothing less than the end of the US Treasury-based monetary system.
So says Eric Jansen, economic and financial market analyst and proprietor of iTulip.com. In chronicling the decline of the global economy over the past decade, Eric has formulated a framework called the "Ka-POOM" theory, which endeavors to understand how the immense run-up in global debt will be resolved.
In short, it looks at the at the credit bubble that began in the early 1980's, started accelerating in 1995, and has now reached epic proportions. The amounts are so staggering at this stage that Eric believes it is too politically undesirable to let natural market adjustments clear them away - the magnitude of the deflationary pain this would create is simply unacceptable for politicians looking to get re-elected. The only other available option left is to service these debts via a dramatically devalued currency. Hence the key role the Fed is playing today.
The Fed is at the epicenter of this process, intervening heavily to keep the natural corrective market forces at bay. In this, it has a dual strategy. The first is to keep asset prices high (i.e., fight asset deflation), which it is doing by keeping interest rates historically low. The second is to keep wage and commodity costs under control, which it primarily does via devaluing the currency (maintaining a "weak dollar").
And, of course, through its intervention, the Fed is doing all it can to keep the current financial system in place to perpetuate the process for as long as possible. The end result is a fundamental shift in risk from Wall Street to the taxpayer.
So the big question is: how long can this last? Is there a point at which confidence in the system breaks and market forces finally overwhelm the intervention?
Eric's answers: "Much longer than most people expect." And "Yes."
First off, as the most important central bank in the world, the Fed has supernormal powers. In theory, it can expand its balance sheet infinitely. It's ability to absorb massive amounts of new liabilities is theoretically limitless - much of which can be easily concealed from an accounting standpoint.
And since the US is both the world's largest economy as well as the provider of its reserve currency, other countries are compelled to support the current regime. A mortal crack-up in the US economy would deliver undue pain to all its trading partners, so they continue to buy Treasuries in sufficient amount to fund US economic activity.
But that's not to say they're happy about it. And here's where attention should be paid (and where the importance of gold comes in).
For much of the past century, the United States comprised approximately 54-58% of the global economy. Today, it's share has shrunk down to about 18%. Meaning: it's relative importance to the global system has diminished.
Issuing the world's reserve currency is a privilege that must be continually earned through transparency and sound stewardship - qualities the US has been in flagrant lack of in the past several decades as it has been blowing asset bubbles and running trillion-dollar deficits via incurring massive debts and increasing its money supply tremendously. So, even as they continue to support the current Treasury-backed monetary regime, the world's central banks have begun hedging their exposure.
After several decades of being net sellers, the world's central banks became net buyers of gold in the second quarter of 2009. As Eric puts it:
There was no plan B in the global monetary system when it switched over to the US Dollar reserve basis for global monetary reserves. The only fallback is gold. Gold is the only reserve asset that central banks hold other than dollars and to some extent euros - but it is mostly gold. So gold is the fallback. What I thought was going to happen is that, over time gradually, that there would be an increase at some point in gold holdings by central banks as they hedged the marginal increase and the number of Treasury bonds that they needed to hold as a result of conducting trade with the US and also simply maintaining the US economy through low interest rates and providing sufficient investment to continue to offer the US government.
What is very interesting to me is starting in the second quarter of 2009, right after the financial crisis is when global central banks became net buyers of gold which to me indicated that they had as a group, determined that it was time to more seriously hedge their dollar assets, even as they continue to buy Treasury bonds to increase their hedging.
Before that there were effectively two teams, there were the buyers who were countries like India and Russia and China, and the sellers which are most of your European countries and that structure of the gold market occurred and was maintained until the second quarter of 2009 and it shifted to a much broader base increase in the number of governments participating in the gold market including Saudi Arabia, Mexico and other allies of the United States.
Eric sees this move by central banks of positioning themselves closer to the door as a natural step to the inevitable endgame here, which is the dissolution of the US Treasury dollar-based monetary system. Due to entrenched special interests, politics, escalating commodity scarcity, and other factors - he does not see the US taking necessary corrective action before confidence in the solvency of the US and its currency collapses.
As such, Eric advises investors position themselves into gold and assets that take advantage of rising rents and energy prices.
Click the play button below to listen to Chris' interview with Eric Janszen (runtime 43m:46s):
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Steve, you do realize that the BLS is making up all the numbers that are used with regard to the indexing don't you? Do you realize that derivatives are being used to cap interest rates? Check the massive growth of Interest rate swaps derivatives. Rob Kirby has done some decent work tracking this issue, google it.
Also, is there some law that US drivers must always have access to affordable fuel? Is that some sort of rule or something? Is there any possibility that this all comes crashing down in a manner that is not consistent with the world view that everything is going to be Okey Dokey afterwards for US citizens? Any chance we may have both unaffordable fuel coupled with hyper inflating prices of goods that we need to survive? Can't happen, right?
You do realize that the FED can print any amount of FRNs that it wants, in effect devaluing the dollar. That isn't to say that they WILL, just that they can. This comment is offered only to counter your statement above that the FED cannot devalue the dollar. I have no knowledge of their intentions.
I'd say you need to revisit some of your assumptions and question them. Peace, out.
interest rate swap derivatives, create an artificial demand, for treasuries
So true - decades ago I worked for a french bank and spent some time on their NY swap desk. On my first day there (on secondment from the London office) the USD book runner proudly showed me his positions in T Note futures. He was nett long 7% of the open interest!
it's over 70%+ service orientated now, last i checked
steve in viginia,
As I have said here over and over, if the dollar dies the US ceases to be an industrial nation. It's that simple.
America ceased to be an industrial nation 30yrs ago.
Correct analysis until the end. But the new competition will attempt to silence the rape victim. Lots of new industry then cranking out some really new interesting technologies. The climax will be really ugly and there will be a lot rebuilding and healing to be done afterward.
Advises gold? Clients should move toward gold?
They're grabbing everything not nailed down with eight sticky Squid tentacles. Galt Gultch's centerpiece is a very large golden statue in the shape of a dollar sign.
?????????????????????????????????????????????????????????????????????????????????????????????????????
There was a conference in Reykjavik Iceland where a number of economists talked about a number of things including the current status in the world economies.
This is Simon Johnson (MIT)
http://visir.is/section/MEDIA99&fileid=CLP7055
This is a rather cold but real view of a problem that is not going to go away.
Thanks for the link Griffin. Think I am beginning to understand what is gnawing at me . I normally dont pay much attention to money, the markets, economics, etc., its just not my thing. About 4 months ago i felt something was really wrong with our economy, started doing my own research. What i have learned in these few short months has changed my outlook on our government and economy. I have come to the conclusion the whole system is FUBAR, and we are all in a world of hurt. The wolves are comin, thats how i describe how i feel , and i hope i am wrong. I am just an average working guy, so I could be very wrong on how bad i think its gonna get. But something tells me I am not too far off on my conclusions. Anyhow, thanks to you, Tyler and all others on this site that have helped me sort all this out. I still dont really undertand a CDS, mortgage backed security, etc, and to be honest i dont really want to, i have other interests, but thanks to our current situation, i feel like i need to learn some basics at least.
Here is the CDS problem in basic-basic: Using a house as an example.
gminorkey (we will nickname him GK)
GK wants to buy a 100K house, so GK goes to Joe banker and says hey Joe can you lend me a 100K to buy this house. Joe says sure GK here is your 100K you can pay me back over time with interest.
Then Joe gets back from the closing and says to himself, Hey "what if GK doesn't pay me back, I will be out a 100K. So, Joe calls Allstate and talks to Al the broker and says, "Hey Al I want to buy a 100K insurance policy incase GK doesn't pay me back. Al says sure Joe here is your 100K default insurance policy (CDS). Then after Al gets off the phone with Joe, Al says to himself "wait a minute" "what if Joe doesn't pay me back" and Al quickly calls jerry at AIG and says hey jerry I need an insurance policy for 100K incase Joe doesn't pay me back. Jerry says sure Al here is you CDS for 100K incase Joe the banker doesn't pay you. Then Jerry gets off the phone with Al and says "wait a minute" "What if Al doesn't pay me back and then he quickly calls Zurich and talks to Chad and says "hey Chad" "I need to purchase a 100K policy against Al not paying incase GK defaults on his mortgage. Chad says here you go Jerry a 100K CDS for you and then Chad says to himself "hey wait a minute..............................you see where this is going.
So, let’s say this goes 20 CDS contracts deep. So what we have is 2,000,000 dollars worth of credit default swaps written on a 100K depreciating asset that is now only worth 60K. Now the leverage went from 20 to 33 because of the deflation in the housing prices. (That’s why there is no mark-to-market)
Now GK's employer just called and is laying GK off "permanently".
The problem is now that the financial institutions that wrote all these CDS's were only required to have a 6% reserve on this 100K worth of exposure (each). So, you see the money does not even exist-yet (our anti deflationary kriptonite backstop and tribute to JS for the saying "QE to infinity") to pay these claims and all these entities must be bailed out to stop the contagion before wiping out everybody.
Basic - basic
+++
The Tylers ought to give you posting privliges to explain this shutf.
Thank God for ZH professors..........
Yes, good explanation. Now the Fed's outlaw the payment of these CDS contracts and order an unwind, voila...
There is no contract, no law, no financial way to make this end. They cannot allow the honoring of these to be the trigger event or something as simple as GK's house could take it all down through a confidence unwind.. It will never happen they wil lwork on orderly unwinds to limit the exposure the paper trail for each of these contracts is available..
Calm,
You can't unwind these CDS/CDO's, because all of these institutions are carrying these as assets on their balance sheets for more leverage.
And just think, you didn't even touch upon CDOsquared!
If Chad pays Jerry and Jerry pays Al and Al pays Joe, only $100,000 ever moved at all. The only one out any money is Chad. Joe also gets DK's house once it forecloses (in a functioning system; possibly not in the current situation).
Having a CDS to insure a CDS to insure a CDS seems like grossly inefficient. The only way everyone in this chain makes money is if each person one further step away gets a smaller rate of return. I.E. Joe gets 4% on the mortgage but pays 3% to Al, who pays 2.5% to Jerry who pays 2% to Chad.
Since all of them are making less than inflation, they are all in fact getting poorer, while taking on risk.
Matt, I understand your conclusion but it is a little more complex. My explanation above is just a bare bones conversation for people to get a "basic" grasp as to what is going on.
I used a house as an example and it actually "is" a "physical" asset. Most of the CDO's and CDS's are written against debt (paper, but classified as an asset on balance sheets with "no" underlying physical nothing) Here is where the problems lay. Your scenario is a perfect "orderly" transaction (what is perfect and orderly in a panic once these start triggering). It's the reserve of 6% that is the problem. Let’s take our old friend JPM that has a leveraged balance sheet of 44 to 1. If they are in the wrong chain position on the CDS/CDO loop and let's say that they have to pay out 5x of that leverage but only receive 2x of the leverage back. ???????????????????
Where does the money come from to pay that net 3x's exposure? (it does not exist...yet, remember the 44 to 1 leverage) hence the bailouts to keep this thing from going full balls out.
There it is, and it's called "Contagion"
So, when you go to sell a CDS, you would need a diagram showing all the interconnected relations. Which would require that all CDS be listed in a central database, so that the true risk could be ascertained.
You would also need to see the full balance sheets of every party in the chain (which is now a web).
As more parties are added and more recursion occurs, the resources needed to sell the next CDS increases, until it takes an infinite amount of resources to determine the risk and accurately price the CDS. I'm guessing no one from a computer science background was consulted when CDS were invented.
Thanks Threeegg for the post. Wow, what a scheme this is. Its really hard to believe this is legal. If i tried something like this i would probably go to prision for fraud. Now i see the danger of such a thing. Like i said in my previous post, i am just an average working guy, never had a need to understand any of this stuff before now. But now that it has the possiblity of impacting my life and my family, i feel like i should learn what is going on. I appreciate ZH and all the people who post here. All i hear and read on mainstream media is "dont worry, be happy" , I know thats not true.
Thanks Threeegg for the post. Wow, what a scheme this is. Its really hard to believe this is legal. If i tried something like this i would probably go to prision for fraud. Now i see the danger of such a thing. Like i said in my previous post, i am just an average working guy, never had a need to understand any of this stuff before now. But now that it has the possiblity of impacting my life and my family, i feel like i should learn what is going on. I appreciate ZH and all the people who post here. All i hear and read on mainstream media is "dont worry, be happy" , I know thats not true.
nah...all this exposure nets out.
CDSs were used to drive credit growth via synthetic debt...that is the subject you need to research. It will twist your head around when you recognize that a CDS is like a bond in reverse, except without the capital upfront.
Best explanation of CDS and cascading effect I've ever read. Clear and concise. +1
Excellent post, Egg! The truth is that if ONLY GK defaults there is no real problem. The trouble starts because statist policies inflated the whole market. So the entire market everywhere sinks at once. It is exacerbated by the financial houses not doing due dilligence because the money was easy, quick and hugely profitable. After all, selling these CDS is easy. No one actually has to produce anything besides a piece of paper promising to pay in the event of default. I almost wish I had done it and run off with the cash and my Ferrari before the crash. I bet it was better than real work. Instead, I am one of the guys getting serially laid off.
It is an example of how in government managed currencies and economies playing with money, credit and financial vehicles pays far far better than making cars, planes, latte's and real stuff.
I dont think its cool of these sophisticated types to go around the world pumping up crowds of naive whale killers, where next? Japan... next on the whale killer tour 2011
Thanks for the link Griffin. Well worth a listen.
thank's for the link Griffen. Simon has condensed into a 15 minute speech two year's worth of reading ZH!
Here is a interview with Martin Wolf where he speaks briefly about the situation in Europe.
http://www.ruv.is/sarpurinn/kastljos/27102011/island-tharf-ekki-evru-eda-esb-martin-wolf
And Paul Krugman
http://visir.is/section/MEDIA99&fileid=CLP7024
Also interesting, a interview with Professor Richard Wilkinson who wrote the book "The Spirit level"
with Kate Pickett.
the interview starts at min 46:20 http://www.ruv.is/sarpurinn/silfur-egils/23102011
Thanks for the link. This should dull the faces of 'nonbelievers.'
Then again, maybe not.
Death of the Dollar? Must follow the Death of the Euro.
I guess the Canadian Loonie will be the new reserve currency.
It doesn't matter what what the reserve currency is, it matters what the agreed upon settlement options are.
Global trade is derivative bartering. Whatever happens, 2 parties have to make a deal. They will use whatever system they can agree upon.
US dollar lost 98% of value over 100 years. It can lose 1.99% over the next 100.
The Asians call it "going up the tip of the buffalo horn".
Do you see?
ORO (06/14/00; 12:09:27MT - usagold.com msg#: 32319)
A note on hyperinflation:
Hyperinflation in debt money systems is a result of a previous overexpansion debt collapsing. It is, paradoxically, a deflationary phenomenon. In a hyperinflationary currency collapse, the cause for the price rises is the injection of funds by the central bank. The reason such apparently foolish action is taken is the danger of a deflationary collapse of banking due to loan defaults. In the attempt to keep the banking system afloat, the central bank can inject enormous amounts of currency to replace currency that could "evaporate" with the accounts held at weaker banks. Once the price rise process begins, people hold less and less in currency and currency accounts relative to their incomes and expenditures. The reason for this is the tendency to avoid holding a significant portion of their assets in a devaluing medium. As a result, they are unprepared for income loss and for the rise in price of basic necessities for business and personal purposes. This causes deterioration in credit performance and eliminates bank assets.
The process is self-reinforcing as the speed of price rises causes lesser purchasing power to be held in currency and associated assets. Less currency results in a cash shortage and therefore will result in defaults. Defaults destroy bank assets and the banks must sell assets to obtain cash with which to settle. The defaulted loans are no longer a source of demand for currency, and so the value of the currency erodes further. The low cash levels cause a reduction in actual sales as inflation progresses. The central bank tries to replace lost funds from the banking system so as to maintain the ability of depositors to spend.
Check out the date of that post!
It was 1900, right, lol? What you say is true. However, the problem is that we have no economy really moving money right now. The cash has to come through the banking system and financial houses. It's parked there for now. So, there is no increasing demand and real wages are falling dramatically, far faster than the PRAVDA-press government stats say.
If Uncle Ben and Uncle Sam could actually drop the money out of helicopters we would see the start of hyperinflation. I think it will happen eventually but it is a contest between governments, especially the U.S. wrecking and economy and central banks trying to inflate it. In the short run, it is hard to call.
The government may not have as much control of the population as they think.
If the peons don’t buy their debt and play the ponzi patsy, then the whole thing comes down. Throw in a little visceral anger and you call it a revolution
The stop is usually abrupt
What we don’t have is a leader who isn’t one of them
In many Cultures Familys Borrow from within the Family. In many Cultures everyone puts all of the Money they make in a pot and each Family member gets enough to live on. The rest of the Money is used to give Loans to Family members or to help them start a Business. The interest from the Loans and the money from the Business goes back into the pot. This is how so many Imigrants became so Wealthy.
With the low interest rates on Savings it would be a good idea for Family Members pull together, lend Money to each other and take the Banks out of the middle.
America has gotten away from the Family Culture.
Thanks for pointing that out. I am curious as to "when" and "why" our American culture veered away from such practices. Is it our "rugged individualism"/Ego that drives this?
I hear folks deride Pakistanis (just a local example) for owning gas stations and "minimarts' in my area. "They own another 3 places in XXX (close by towns) too!" Folks complain.
These Paki families pool their money,manpower, and talent and buy legitimate businesses on the open market that you or I could. Are we Americans "too cool" to own or operate a gas station? Are we "too cool" to live in an older house next door to same station?
Apparantely, if you are not making money in 'banking', it does not spend the same...
Also, in many Cultures like China or Taiwan there is no Social Security or Retirement. It is expected that the Children will give a portion of their earnings to their Parents to support them in their old Age.
Yes, we have gotten into a Me Society. Maybe Social Security and Nursing Homes helped to relieve the younger Generation from caring for their Elderly Parents.
There was a time really not that long ago that whole Families lived in the same House. From the Grandparents to the Adult Parents and their Children. The House was passed down from one Generation to the next. It worked well especially on Farms. The Adult Parents worked the Farm while the Grandparents took care of the Children, Baked Bread and cooked. The Family was everything and the only thing really needed to survive.
Check out this Family that turned their back Yard Pool into a self sustaining mini Farm. It supplies all of their food needs.
http://www.youtube.com/watch?v=GKKKrJqqYmo&feature=autoplay&list=ULKMkmg...
Lots of other interesting videos about this pool.
I would settle for no safety net - no state healthcare - no state old age pension etc ect if I could pay the same rate of income tax that the citizens of HK enjoy.
dem damn furriners have an underground finance system that most mainstream people would scoff at. a few that i have run into. in the korean and jamaican community i found groups who were pooling money on a weekly or monthly basis on a handshake basis. each week or month some member of the group would get the pot. the korean group i ran into deposited 1000/month and had 40 plus members. when the family got their grub stake they would open some business. in the background there were money men (vc) willing to leverage the grubstake. the jamaican system was similar. the pakistani system was more traditional in the sense you had to save your money for your own grubstake but there were money men, well known in the community, who would leverage what you brought to the table.
the usa family and community structure is way too fractured for any of this to happen. the bottom line is immigrants are willing to take risks while established usa families see .gov jobs as the way to go.
And … this points out what has happened in America the last 50 plus years.
We … the 99%’er’s were told we weren’t as smart as those Wall Street boys. We were told we were dumb to manage our own investments and should give our money to them.
So … we sent our money to New York for parts unknown.
That translated into taking money that used to be invested locally in entrepreneurial efforts being siphon off. We starved Main Street to feed Wall Street.
Personally … I’ve set up a little VC company whose goal is to invest locally.
A side benefit … I can personally go kick somebody’s arse for doing something stupid versus waiting on the Main Stream Media or the SEC, FDIC, Congress, Washington et al to do it for me … or not.
Anjie. I understand why you might think this way but its wrong. The USA started as a decentralized system. So did the old Israeli experiment of a network of judges. The mold is more important than the filling. Sure imperfection will lead us to centralize and their are some benefits pf collective culture. But that also doesn't mean for a new mold that dynamic checks and balances aren't built in this time. The Founding Fathers had static checks and balances. Perhaps we'll get 300 years out of our next Republic because this one has disintegrated.
Ka-Poom Theory?
Print money, shift burden to taxpayers through financial repression - check.
Rip off UST bond holders through debasement -check.
Manipulate markts as long as possible to delay and maximize - check.
Defacto default of USD through debasement - check.
Loss of WRC of USD as everybody ultimately walks away and dumps USDs - check.
What part of this is new? I thought everybody knew. The Ka-Poom theory has been an open secret for a long time. That's what the Chi-knees have been skweeling about.
The Dollar Died.
Long Live the New Dollar!
do you remember when td posted that bullshit by the rat , hal turner, about the new dollar? ha ha ha
It is everywhere the same: cut a few zeros and rename it a new whatever.
When they will call it Goldar it might be different but not if it comes from the same source.
http://www.youtube.com/watch?v=KL1O01FccaA
here is hal turner, cointelpro agent for the fbi , who i guess got a little out of hand and they decided to reign him in and give to him what he caused others. now he sits in admin segregation for about 3 years since if he was in the general population, he might catch a shiv for being a snitch and a rat that he is and always was. so good riddance to hal turner....
HPDrifter... Curious video that!
I wonder where Turner got that 'Amero' coin? I suppose the Denver Mint sent him one?
It is more likely that the 'Amero' that Turner is holding up in the vid was made in China and ordered on the internet as a novelty item.
Look on Ebay and find thousands of Chinese fake old US coins in all denominations and mint dates. The flea mkts/farmers mkts around here are full of vendors selling that crap and it's indecernable from the genuine if one is a novice coin collector.
If China wanted 800billion 'Ameros' they certainly have the capability to mint them in China and do not need US help.
Interesting link, thanks.
Hey, it's all good. McDonalds is putting the McRib back on sale.
Nothin' like pig snouts and cow anuses extruded through a tube and pressed into the form of ribs to make one's heart skip a beat.
...or all of them in the long run.
Making me hungry.
Don 't leave out the lips. Lips are the best part.
The dollar has devalued by over 95% since 1913. It's really not the value of the dollar that's important, but instead, the value of labor [in real terms]. Cut out the parasites, and all will be much better.
two quotez from this:
1 = you noticed?
2 = who sez? under this criterion, who would issue the "reserve currency"? china? japan? the EU? the IMF? Hahaha! let's get the vatican involved, too, ok? just lQQk at all the sound, transparent stewards qualified to issue the "world's reserve fiatsco" ~~~//:s) = sarc
and, yes, gold is real money, and you can buy it anywhere, anytime (almost), for fiat paper. so is silver, BicHeZ!
This is all complete bullshit. Obama is going to bypass Congress thru Executive Orders for; Jobs Bill stimulus, and student loan programs. You cunts don't realize the great pains our President goes through each day to help you and the under-employed families of this great democracy called the United States of America.
Just today, NYFD removed gas, generators from the OWS protest site. Let me tell you first hand from my friends third cousin once removed, who heard from their second uncle who heard it from their sisters fourth step mother that is tied into a Facebook account of a WH insider. Apparently, Obama is supposed to call Bloomberg who will call the NYFD to install more heaters at all OWS locations.
/Sarcasm
26th October 2011: EFSF = TMOASP-CDO (European Financial Stability Fund = The Mother Of All Sub Prime CDOs)
Enjoy
does he think about us when he is getting blown by his personal secretary , reggie love ?
Obongo, President on the down low.
how slow motion is this trainwreck? At what point should I expect my power to go out, heat to stop functioning, and riots to break out?
this death of the dollar (which I agree is happening) is taking a while, and with the status quo's interest in maintaining the status quo, what type of realistic time frame are we looking at? I've heard everything from 6 months to 20 years....
Let it end already, christ... I'm sick of waiting.
I have plenty of ammo, can hunt and grow my own food... =-/
bring it on
http://printbuttonmoney.blogspot.com
"6 months to 20 years...."
That's my estimate too.(+/- 3 days)
P.S. It definitely won't be a Wednesday.
but may be a Friday!
"
Let it end already, christ... I'm sick of waiting.
I have plenty of ammo, can hunt and grow my own food... =-/
bring it on"
Very productive wish for peace, social stability, environmental health, future generations etc..
environmental health? where did that come from?
no one likes a commie....
This kind of wistful "death of the dollar" fantasizing is as likely as winning some lottery. At least he didn't say "Weimar".
Physical Gold, Physical Silver ... nuff said.
Maintaining a weak dollar is accomplished by inflating the currency. You cannot keep commodity prices down by inflating a currency.
I know I have that nuke around here somewhere.....
Really, this article is University of Zero Hedge first year econ. And he can't even commit to a timing other than "longer than you expect". Weak.
Comments were good, though!
help me out....
How far will the war department go to defend the dollar?
Think The Borg. They will literally go to south america and kill natives for their supper.
Seriously complex systems will literally destroy anything exteranal that can feed it and then turn inwards.
If you look at scientific data of the end of the roman empire theres a couple generations of really fucked up malnourished sick people followed by a return to health when they finally were barbarian invaded.
The death of free market capitalism and the rise of fascism next stop socialism-totolatarinism . If the anti- fascist wing of the OWS protestors can't stop them .
fool, we never had true free market capitalism.
Why don't you go wander off into your delusional world and try to get a clue.
how could you possibly think what we have is even close to, or ever has been close to, free market capitalism.... read up some more
It's good to see that ZH and iTulip kissed and made up.
When were they on the outs, and why?
By the way, good to see you E!
It happened a couple of years ago. If I remember correctly, Janszen made a smart ass comment about the original Tyler. After that, all links from iTulip were cut off on ZH.
Good to see you, Akak. Hope all's going well for you.
Janszen and Mish have a long running debate regarding inflation vs deflation. Still ongoing afaik.
They can't agree on definitions of inflation or deflation so their discussions are indecisive.
And I can't help but note that it is almost invariably the deflationists who keep changing and twisting the definition of "deflation" to suit their arguments --- particularly the ridiculous and specious definition of "a decline in the total supply of money AND CREDIT". Credit is NOT the same thing as money, not even remotely!
I have the utmost respect for EJ and have followed him for years but lately he seems to be talking out both sides of his charts. One day he is decrying the output gap and advocating more stimulus, the next he is warning of impending hyperinflation. He seems to think that if the tightrope had been walked correctly with due haste and competency that all could be well. Truth is, there is no rope, and no hope.
THE DOLLAR RALLY.
Bullish USD weekly/monthly and bearish SP500/DOW monthly charts will eventually ensure a reversal of the equity uptrend and a significant dollar rally.
Guaranteed.
http://stockmarket618.wordpress.com
The end result is a fundamental shift in risk from Wall Street to the taxpayer. – Eric Janszen
I don’t think so, Eric. Americans aren’t in the mood to play this bail-out-of-debt game much longer. The government can tear gas them, yes, but they can take the government out; it comes down to a handful of oligarchs versus 307,000,000 people.
It’s not just the risk; it’s the severe austerity. It might have been different, if it hadn’t been for Hank Paulson and his crocodile tears, coming back for more, and more, and more…
The people are in the streets now. Is Obama going to walk out there and tell them to tighten their belts further? Uh-uh.
Bernanke with his “supernormal” magical power can’t make something from nothing, no more than could Maestro Greenspan. In the end, the Fed is going to have to deliver value or else this monetary system isn’t going to fly and it’s sayonara Federal Reserve Central Bank. After all, the Fed is America’s fourth central bank.
The European situation is the perfect example. The problem is debt that can’t be covered; the banks want to be paid but there are so many complexities the banks can’t settle it on their own. Their problem is debt. The central banks can print boat loads, but if it’s not value-based, it becomes more and more like play money. Worthless. And people know it.
Greece is melting. They can’t fix it. The harbingers are right...but no one knows when the music stops. It’s just gets worse and worse…
Democrat Governor Jerry Brown of California came out today and told the public unions, including teachers, police, firemen, and state employees, that they were going to have to retire at 65 instead of 55. He’s up against the wall.
Period.
As ArkansasAngie put it: If the peons don’t buy their debt and play the ponzi patsy, then the whole thing comes down. Throw in a little visceral anger and you call it a revolution.
Paul: Do you think gold is money?
Bernanke: (pause) .. No.
Paul: Even if it’s been used as money for 6,000 years… somebody reversed that? Eliminated that economic law?
Bernanke: Well, it’s an asset. Would you say treasury bills are money? I don’t think they’re money either.
Paul: Why do central banks hold it? Why don’t they hold diamonds?
Bernanke: Well it’s tradition. Long term tradition.
Paul: Well, some people still think it’s money.
Also, diamonds can be synthetically created; they are made of carbon, one of the most abundant elements on Earth, thus being barely better than fiat money. Gold is far more finite.
And can you imagine the accounting complexity of using diamonds on a balance sheet? All gold is the same (assuming its not radioactive). Every diamond has a unique value based not only on size, but several other factors. Each one would be its own line item, rather than simply listing number of ounces of gold or number of $USD. It would be a real hassle.
gold can be created synthetically as well, just not in abundance.
Actually synthetic pure diamonds are going to be the future for semiconductors
Applied Quote of the Hour:
“The Federal Reserve Bank of New York is eager to enter into close relationship with the Bank for International Settlements....The conclusion is impossible to escape that the State and Treasury Departments are willing to pool the banking system of Europe and America, setting up a world financial power independent of and above the Government of the United States....The United States under present conditions will be transformed from the most active of manufacturing nations into a consuming and importing nation with a balance of trade against it.”
- Rep. Louis McFadden - Chairman of the House Committee on Banking and Currency quoted in the New York Times (June 1930)
hahaha i was like yah so what till i saw the date ...1930..... sounds current ...Bernum had it right there is always a supply of fools...
Don't you get it? It's going to be Austerity for 99%, Prosperity for the 1%
That's always been the plan. It's "trickle-down" just taken to the next level. Trickle 2.0
Your income is dropping, so is your net worth. Now your benefits are going tot get cut. And anythig publicly funded will go into the crapper: bridges, roads, dams, levies, transportation, education, and hospitals as well as judges, research etc...
But 1%ers will have it good because Fed policy is specifically aimed at them. It's boom times. Upper echelon pay and employment are at all time highs.
Fed weak dollar policy is a form of regressive taxation which affects the 99%ers disproportionately. And debt slavery will become a way of life for many, spanning generations.
Biflation is the outcome of Fed policy where the real economy is in overt deflationary spiral affecting the 99% and the paper economy is in an inflationary spiral with spiraling incomes baked in. Net result will be a continual rise in cost of living and doing business that will crush buying power just when median incomes are dropping. Good luck with that. At least they do wish you good luck, not bad. Well they do think you're a lazy moron.
Caviar E... "And anythig publicly funded will go into the crapper: bridges, roads, dams, levies, transportation, education, and hospitals as well as judges, research etc... "
As the bridges collapse the opportunity to set up ferries across rivers should bring opportunities for individuals. Same with the rest of the stuff on your list... perhaps 'states rights' will return and the only courts that will matter will be state courts?
When the EMU started I thought that Europe would soon become a near copy of the US. Now I think the US might become Europe, but without a common currency.
yeah, Argentinafication. That's how life is in most of the 3rd world; no middle class. Clockwork Orange kinda shit
The strength of EU is that there are a lot of choices for companies today. If Scandinavians don't like their high taxation rates, they can setup a company to Estonia. Flat income tax 21 percent and the same banks and supermarkets as back in home.
Due to low (but are steadily rising) salaries, many Estonians go to other EU countries to work. Win-win for both parties. Luxemburg is also an option for tax haven within eurozone, no need to move to Switzerland.
It is all very dynamic, things are changing all the time. Totally different business environment than in the 1980's. Every country must compete and taxation is one key component. If a country has high taxation then it must offer something better (like highly educated work force, excellent infrastructure) than low taxation countries.
Clinging to Their Guns: Firearm Ownership Soars to Multi-Decade Highs by Marc Slavo.
THE SECOND AMENDMENT IS MY GUN PERMIT. ISSUE DATE 12/15/1791. EXPIRATION DATE: NONE
http://lewrockwell.com/slavo/slavo69.1.html’
Yeah, your guns are going to solve crappy infrastructure and public education problems. Healthcare costs are also solved by 9mm. Guns are also going to solve lack of upward social mobility. Guns are also going to solve things like unwanted teenage pregnancies and lack of jobs. USA is so fubar...
Loved reading that Tim, like a vast field of strawmen falling before your scythe like intellect.. well done Sir..
Actually, guns do solve problems -- for the tyrants.
The tyrants’ guns will stop upward mobility, crack down on social interaction, stop advancement in education and income and community development and, of course, liberty.
Guns are carried by the FBI and the military, of course. But an astounding 44 other Federal agencies are armed against the citizens they “serve.”
IOW, guns are in the hands of the State, and for a reason -- to stop the people from exercising any activity the State deems threatening to the tyrants. In the minds of the Founders, there was one significant protection against this armed tyrant and that was an armed citizenry.
To believe that America can have freedom without the citizens having the right to bear arms is to believe in the most dangerous of myths concocted by the tyrants themselves. The laws and regulations against the right to bear arms are nothing more that the tyrants’ rules; they do not affect the constitutional guarantee which has never been repealed -- the crystal clear words of the Second Amendment.
Patrick Henry at the Virginia Ratification Debates:
As SWRichmond once put it on this blog:
“A cartel of private bankers owns the Fed, the Media, the Treasury, the Congress, the President, and every single function of the executive branch they choose to functionalize…from managing the Dow Jones average to bombing villages.
"It is time for force."
There is now intention to address the issues in the real economy.
In fact US is exporting industries, capital and jobs at a faster pace since the crisis.
It's abundantly clear that large multinaitonal US companies are contracting their US business and expanding overseas.
Domestic economy is deflating but Fed's inflationary policy pass for growth while actual business activity declines.
...[T]he magnitude of the deflationary pain this would create is simply unacceptable for politicians looking to get re-elected.
As if politicians could even count. Then again, with the Fed's magic printing press, they didn't have to.
The fundamental problem with this thesis is this: "The amounts are so staggering at this stage that Eric believes it is too politically undesirable to let natural market adjustments clear them away - the magnitude of the deflationary pain this would create is simply unacceptable for politicians looking to get re-elected. The only other available option left is to service these debts via a dramatically devalued currency."
Political ramifications of a deflationary depression would see political resistance, but so would a hyperinflation required to pay down debts with devalued money, and anyway all hyperinflations end in depressions so a hyperinflationary period only delays the inevitable. But more important than that is what we have all been talking about for weeks, wealth inequality in the 1% vs. the 99. Hyperinflation would essentially void the difference between the wealthy and the poor, do you really think those with all the money and power now are going to stand for having the same amount as a poor person?
On the other hand it is what we seem to be seeing happening in some ways. With all their power and vast riches the wealthy who have amassed a much larger share of national income over the last 30-40 years while income was rising now find that they are unable to make a return on all that wealth, bonds are paying less than zero interest in real terms, and so are equities essentially.
Still, if this is the intentional plan of the Fed then it will not work, hyperinflation can't work, will not ignite until it is broadly in the hands of the general population. By restricting it to market makers and bankers and the already super rich all you get is greater wealth disparity which as we know has it's own political consequences. And it only really diminishes the amount of debt held by bankers, it does nothing about debt held by the public. In fact it would tend to increase that problem because we have to go deeper into debt in order just to survive. It reduces revenues to government, so it's debt grows as well.
I say all that debt will be defaulted upon (which after all is just what inflation is, a form of default) but the amounts are really vast and the rich want the can kicked down the road until the debt is held by the sovereign, you and me, rather than them. They will be left with all the tangible assets and we will be left with all the bad debt used to buy it for them. That is how they got everything they have anyway.
Look at tits this way, the reason for a weak dollar is to support some highly dubious economic paradynes. On the other hand, a strong dollar would support Imports and contribute to global reserves stabiity. A rising dollar might even fund Treasury Issuance. ...those are the preeminent brush strokes. So, by continuing to eschew a weak dollar policy, New York is signalling that there 'is no fix in sight'. More than that, volatile and unstable markets favour the largest players, so the Banks continue to signal that they are in extraordinary trouble, and thanks to the noble profession of Accountancy - sell my sister if the price was right, eh- they may operate like this for 'an extended period'. ...
The absolute amounts (UST burden) in question are too high, in respect of current prices - however, in terms of a reserve currency pegged to the Yuan, in the context of massive purchasing of dollars by China - absent the financial crisis - and the absolute potential of China - then given the low i% - the issuance is, certainly not favourble, but neither is it entirely unmanageable. The Central Problem with this thesis is that, currently, China wants little part of the UST regime - in my opinion, primarily due to New York Banks having gone on a sugar-high with unlimited balance of Moral Hazard!
In some ways, China is observing Human Rights by not participating in the Dollar bait feeding-frenzy. In proportion to those UST issuance not finding their way to China, their natural home, the dollar ceases to be 'reserve'.
This is an absolute disaster. SDR is in no way a replacement for the ubiquitous dollar; its loss would damage SME, 99% of all businesses, nor has the IMF any illustrious history behind it. Even without a metric analysis, the globe lacks the systems to implement another form of 'reserve'. Aside from Gold, which would also wipe out the Banking Industry as it is today. I hope I'm wrong - but I don't see any other policy but that of a strong dollar as underpinning any successful strategy for return to global economic security.
You mean to tell me that deficits do matter??
Nothing wrong with this article, but it's ZH 101 and didn't teach me anything new.
the only interesting aspect of this article is to help determine, in this evolving, spiralling, psycho-financial thrilla, of race down to bottom, which of the two western reserve currencies cracks first and why. That will give us an insight of the relative financial strenghts of economic blocks in the fight to recoup after the reset; in the fight to define THE NEW BLUE PRINT OF THE COMING GEO-POLITICAL PARADIGM CHANGE. AFTER THE DELUGE.
Here is video evidence on who is more alert to the present economic problem Herman Cain or Ron Paul , not even close......http://heavenbounf.blogspot.com/2011/10/video-of-herman-cain-and-ron-paul-on.html
The sooner the enslaving fiat paper dollar dies the better.
http://www.financeinfo.us/blog/2011/10/28/analysis-bny-mellon-wrings-han...
Yes, the dollar is going to die, everybody knows that. There hasn't been a fiat currency in the history of the world that hasn't died. The question is WHEN? In a couple of months, a couple of years, a couple of decades? If you're not going to comment on that, then you've got nothing. (And no, sorry, I can't be bothered to listen through a 44 minute clip.)
Learn the tactics of the enemy within. This administration is creating your support to aid in the fall of the dollar. Have a look..
October 14, 2011 - Occupy Wall Street Movement Needs a Kent State Moment - Donny Deutsch
http://www.youtube.com/watch?v=5Ul4FCJ52ss
October 25, 2011 - You had better think twice before you commit the bullshit you committed against these peaceful protesters - Message to Oakland PD
http://www.youtube.com/watch?feature=player_embedded&v=ieeNvciXULM
Progs are placed on TV to enable acts of violence. Your media & US administration are encouraging the death of the dollar. Think about it. Progressives are in fight or flight mode. Many level headed American's will escort these individuals to the flight door.
Of course the dollar is dying. Bretton Woods was a meeting to determine specifically how the natural resources of the world would be plundered without resulting in World War. It was decided that the dollar would be used as economic dynamite to plunder oil and other natural resources. Thus the 'petro-dollar' was born and went to work very quickly. Iran and Iraq took the first beating. Then in the 60s we moved closer to our own hemisphere and started the plunder of South America. The late 70s and early 80s we plundered much of Asia. Bush Senior and Clinton went to work setting up the globalist infrastructure ( the entire fiber cable project that connected us to the countries we would soon outsource our jobs to was built with money laundered through Tyco Co. and Mitsubish Co. and the credit was made available through the insane NASDAQ bubble ).
The dollar is like any other tool. It is used until it is no longer needed and it doesn't matter how much damage the tool has incured if you had no intention of using it forever.
Most people I talk to believe that the 1987-2007 bubble era and the resulting economic damage was the result of poor economic management and greed. I don't think so. I think these credit expansions were deliberately engineered when a very expensive 'project' needed funding.
The Bush admin, or whoever controlled it, probably went to Greenspan in 2000 and said "Hell no we can't enter a recession right now. We got work to do that is going to cost a shit load of money. What else ya got?" and Greenspan said "Well we can inflate a housing bubble and I believe that is the only weapon potent enough to postpone the correction of the past two credit bubbles."
Make it so.....
Not very hard to believe given the Bush family's proclivity for globalist power, and moving money in the shadowy underworld:
http://www.guardian.co.uk/world/2004/sep/25/usa.secondworldwar
http://www.counterpunch.org/2003/01/31/bush-bin-laden-bcci-and-the-9-11-...
Chasing Billions Missing in Baghdad
Idiot...the US was the world's strongest oil producer in those days. At BW, they were still a decade away from laughing at Hubbert's prediction of a US peak 25 years hence.
We plundered those nations by introducing them to things like cars, air conditioning, and electric power, huh? JFC, we're the worst empire in history. Kinda like the Romans, everything got uplifted after they invaded.
BW was a GOLD standard, not a petrodollar, dipshit.
All that's happening is predictable, as there are 7 stages that any major economy goes through. Those who know how it works profit & massive wealth is transferred to them. You can see what one millionaire has to say about the 7 stages countries go through & how you can profit like the ultra-rich during these tough times.
His free video
"How To Create Incredible Wealth in Today's Economic Crisis"
is at:
http://theelevationgroup.net/presentation/register.php?a_aid=160667&a_bi...
Hope this info helps everyone as much as it has me.
Dr. Nancy
People like this make me sick to the stomach. 'The world and everyone in it is about to experience the biggest paradigm shift in 100 years! Millions will starve! Billions will fall below the poverty line! Energy, Food, and clean water will become scarce for 90% of the population on the planet and it will probably lead to another World War! Here is how you can try to increase your personal wealth so you can continue to live in luxury!'
Fucking morons.
you can't stop it, dude.
You can't prevent the population of deer on an island from crashing once they pass their peak food supply rate. Just be one that isn't caught up.
Africa is where a billion will die when western food aid and medicine inflows cease. We developed a vaccine for their fuckin malaria and we're still the evil whitey. We have oppressed them for 30 years with enough food and medicine to double their population and they're STILL starving.
Dr_Nancy = fuking adbot troll
check out this asswipe's posts: they're all the same
people respond to him, give him green; wake up, BiChez!
...the Fed has supernormal powers. In theory, it can expand its balance sheet infinitely. It's ability to absorb massive amounts of new liabilities is theoretically limitless - much of which can be easily concealed from an accountingstandpoint.
IOW, if it were not for the Reserve currency status,we would have long ago collapsed,as is stands another QE is coming and it will be massive.They are already discussing it.
Planning on staying,better prepare, leaving, get your arse in gear.
As Grandpa said, Daylights a burnin son.
We're not witnessing the death of the dollar. We're witnessing the death of the American Middle Class.
Dollar won't die. But the Fed's official policy to de-value the dollar (aka reflate the economy) is a regressive tax on the middle class since the cost of living, cost of working, cost of homeownership and cost of running a business goes up. At a time when median incomes, net worth and government benefits are dropping.
But the dollar will live because the cronies need it to reap more trillions. They live off the paper economy which is a parasite that lives off the real economy.
There was programmed dollar-devaluation in 1971 under Nixon. It lead to the near-death experience of the late 1970s-early1980s because of killer inflation. There was programmed dollar devaluation in the mid-late 1980s following Reagan's Plaza Accords. It lead straight to the 1987 crash when it looked like inflation was about to come back alive despite further central banker agreements and accords.
With that track record you can see that this is first of all one hell of a gamble. But that was then, this is now and the economy is nowhere near as robust with high structural unemployment, offshoring of jobs and industries, capital flight and a fulll-blown middle class deflationary spiral in progress.
@ There was programmed dollar-devaluation in 1971 under Nixon...
The killer inflation has been raging since the creation of the Federal Reserve System – which incidentally was the reason for the System. The value of a dollar issued in 1800 dipped below its original purchasing power only once, to $.93; in 1913, its purchasing power was $2.04 at the time the Federal Reserve took control of the U.S. monetary system. By 2005, the dollar’s purchasing power had dropped to $0.08. (See The Rise and Fall of the Dollar: 1800 to 2009, Ludwig von Mises Institute)
Fed chair Volcker, who served under Carter and Nixon, was and is a big proponent of a single global currency; it was Volcker who helped orchestrate the move to take the USD off the gold standard under Nixon; he now serves in the Obama Administration. Nixon, like Bush, like Obama were/are puppets whose wires are pulled by the bankers.
Jefferson, a ZH blogger, adds this: “Volcker was the prime mover at the Treasury in establishing Bretton Woods II. Not to mention the role Volcker played in moving the USD off the gold standard. Volcker, founder of the G30, and his buddies (e.g. see G-30 manual on derivatives published in 1993) have not only known about but have methodically planned the global monetary regime that is now being instituted in response to the GFC caused by the derivatives time bomb.”
http://blog.mises.org/10553/the-rise-and-fall-of-the-dollar-1800-2009/
Agree. I'll take it a step further: Volcker and Co were the masterminds of the Corporate Welfare State we are now living in. Complete with "TBTF" private enterprises aka cronies whom the taxpayer will be commanded to support. And huge under the table funding for ostensibly private enterprises including the biggest jobs exporters.
Since the Fed's creation, the economy evolved from capitalism to a centrally regulated (and in some areas controlled) economy which today can be called the corporate welfare state. It's the reverse of socialism: the middle class and productive economy supports the elites who are free to chose where to place their money and power (these days, usually overseas).
An excellent summary, Caviar. Thanks.
There will continue to be a run to the dollar.
""We Are Witnessing The Murder Of The Dollar"
There, fixed it for ya.
I been hearing the death of the dollar for 40 years.
As everyone here knows, the Fed has to steal your assets through inflation (and deflation) to cover the perpetual ponzi deficit. Gold is one way to get off the merry-go-round, but there are other ways too. Grow your own food. Fix your old Chevy pickup. Put your investments in Brazil, Australia, Norway. There's a million ways. In short, you have to "Go Galt" http://www.futurnamics.com/goinggalt.php
No comment whatsoever on the dollar crisis. Extremely poor & lopsided analysis.
If the purpose is to introduce Amero in US why should they bother to rescue Dollar
http://en.wikipedia.org/wiki/North_American_currency_union
For Europe they want to create depression and then "rescue" EU with new Federal Reserve
http://en.wikipedia.org/wiki/Central_bank
" I dont fuck anymore as the Greek Government is fucking me every day lately, the question is who is fucking my Government"
This is in great part why I continue to be bullish on gold and silver. Gold is real money, not fiat, and central banks recognize it as such and hold some percentage of it as a reserve asset. Now, with the Fed's balance sheet expanding geometrically, with ZIRP and TBTF sovereign bailouts the norm, they have to increase their single and best asset reserve to counterbalance their exploding balance sheets in order to have some financial credibility. Looking for gold over $2000 in the next 6 months.
Blah, blah, blah. People have been predicting a crash of the U.S. Dollar since 1971. Ain't gonna happen.
Seriously fuck all the politicians that screwed us over. motherfuckers!