Guest Post: The Final Countdown
Submitted by Tim Price, Director of Investment, PFP Wealth Management courtesy of Sovereign Man
The Final Countdown
“Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach.” Debt talks “have not produced a constructive response.”
- The Institute of International Finance, January 13, 2012
“The war situation has developed not necessarily to Japan’s advantage.”
- Japanese Emperor Hirohito after the atomic bombing of Hiroshima and Nagasaki, announcing Japan’s surrender to the Allies.
There is a terrible hubris at the heart of mankind. Like every other living thing on the planet we are products of nature, but we consider ourselves to be well above it. We are beset by regular reminders of our vulnerability, but quickly dismiss them off-handedly to a spiritual plane, calling them “acts of God” as if to show that we could never have prevented them.
In a significant essay for Foreign Affairs, “The Black Swan of Cairo,” Nassim Taleb shows how the efforts of our authorities to suppress volatility actually end up making the world less predictable and more dangerous.
“Although the stated intention of political leaders and economic policy makers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to “Black Swans” – that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.”
There is an analogy from the natural world. In the 1960s and 1970s, mid-western American states fell victim to scores of wildfires. Constant interventions by the US Forest Service appeared to have little positive impact – if anything, the problems seemed to worsen. Over time, foresters came to appreciate that fires were a normal and healthy element of the forest ecosystem.
By continually suppressing small fires, they were unwittingly creating the conditions for larger and less containable wildfires in the future. Naturally occurring fires are necessary to remove old forest cover, underbrush and debris. If they are suppressed, the inevitable fire to come has a far greater store of latent fuel at its disposal.
Economist Murray Rothbard jangled the sensibilities of the Keynesians when he wrote his classic study, “America’s Great Depression:”
“If government wishes to see a depression ended as quickly as possible, and the economy returned to normal prosperity, what course should it adopt? The first and clearest injunction is: don’t interfere with the market’s adjustment process. The more the government intervenes to delay the market’s adjustment, the longer and more gruelling the depression will be, and the more difficult will be the road to complete recovery.”
But politicians must be seen to be doing something – like encouraging the construction of a £33 billion white elephant rail link in the middle of an austerity recession.
Not interfering with the market’s adjustment process is simply allowing Schumpeterian “creative destruction” to operate, and cleanse the forest. But that process is anathema to well-compensated entrenched interests that suckle from the teat of the State. Banks, for example.
So while “laissez faire” would accelerate any banking crisis and shorten the resultant economic contraction, it would reveal the identity of too many naked swimmers when the tide retreats. Instead, courtesy of highly paid lobbyists, we get a long drawn out depression. The example of Japan’s zombie banks from the 1990s is still fresh, but ignored in the west.
Rothbard identified the ways in which government can hobble the adjustment process:
1. Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further.
2. Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments which, in their turn, will have to be liquidated in some later depression. A government’s “easy money” policy prevents the market’s return to the necessary high interest rates.
3. Keep wage rates up.
4. Keep prices up.
5. Stimulate consumption and discourage saving. More saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved capital even further.
6. Subsidize unemployment. Any subsidization of unemployment (via unemployment “insurance”, relief, etc.) will prolong unemployment indefinitely, and delay the shift of workers to the fields where jobs are available.
An iatrogenic illness is one caused by the doctor himself. The economies of the west now face policy measures of the sort highlighted by Rothbard that are stated to be in our interests, but which are more likely to do harm to the patient and prolong the recession.
Taleb uses the example of the turkey before Thanksgiving. The turkey is fed for 1,000 days and every day seems to reaffirm the farmer’s generosity of spirit. Until the last day, when the turkey’s confidence and contentment is at its maximum. The “turkey problem” occurs when “a naïve analysis of stability is derived from the absence of past variations”.
To put it another way, the US property market cannot decline because it hasn?t declined in living memory. As Taleb puts it, as humans we inhabit two systems simultaneously: the linear and the complex.
The linear is predictable and permits the use of mathematical tools of high predictive value.
Complex systems,on the other hand, are marked by an absence of visible causal links between their elements, “masking a high degree of interdependence and extremely low predictability.” They also incorporate non-linear elements often called “tipping points.”
One reason for the severity of the financial crisis, and the losses incurred by banks, is that bankers and financial analysts were using linear tools in a non-linear, highly complex environment otherwise known as the financial markets.The models didn’t work.
The problem we face now as investors will end up being existential for some banking institutions and sovereigns. Our (uncontentious) core thesis is that throughout the west, more debt has been accumulated over the past four decades than can ever be paid back.
The question, effectively to be determined on a case-by-case basis, is whether bondholders are handed outright default (which looks increasingly like the case to come in Greece) or whether the authorities, in their understandable but misguided attempts to keep the show on the road, resort to a policy of inflation that could at some point easily spiral out of control.
As Rothbard wrote, “The longer the inflationary boom continues, the more painful and severe will be the necessary adjustment process… the boom cannot continue indefinitely, because eventually the public awakens to the governmental policy of permanent inflation, and flees from money into goods, making its purchases while [the currency] is worth more than it will be in future.”
“The result will be a ‘runaway’ or hyperinflation, so familiar to history, and particularly to the modern world. Hyperinflation, on any count, is far worse than any depression: it destroys the currency – the lifeblood of the economy; it ruins and shatters the middle class and all ‘fixed income groups;’ it wreaks havoc unbounded… To avoid such a calamity, then, credit expansion must stop sometime, and this will bring a depression into being.”
It may be a new year, but we are beset by the same problems that have been recurring since the crisis began. In most cases, those problems have worsened. One of the few improvements has been in the recapitalisation of Anglo-Saxon banks, but continental European banks seem acutely vulnerable to the potential outcome of a disorderly sovereign default.
Since the problems are the same, so are our preferred solutions: a specific focus on only the most creditworthy sovereign and quasi-sovereign debt (where it offers a positive real return); a specific focus on only the most defensive and internationally diversified equities; genuinely uncorrelated investments; and exposure to objectively the highest quality currencies, namely precious metals.
Euro zone politicians and policy makers have had plenty of time to come to terms with the continent’s problems, and continue to show no willingness to grasp admittedly difficult nettles.
It is symptomatic of the balkanised and adversarial nature of politics in the euro zone (a unified body that exists in theory but barely in fact) that Christian Noyer, chairman of the French central bank, anticipated France’s credit downgrade by suggesting that Britain should be downgraded first.
As the Hildebrand scandal also revealed, most of Europe’s central bankers are not fit to sweep the streets. And still time is running out. Readers of a certain age will recall a late 1980s “big hair” rock anthem called “The Final Countdown.” It was released by essentially a one-hit wonder band.
Its name was Europe.
(21 votes)
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nothing ten trillion Euros and an equal amount of FRNs can't fix, right?
11:58 tick tick.....
But the FED was created to prevent these types of events by invecting and withdrawling liquidity.
Controller on the movie Apollo 13 - "This cann't be right. I'm reading a triple failure."
Eliminate jobs, creating high unemployment, so no one asks for a raise.
Short the shit out of everything so as to keep prices in check.
Coordinate all international fiat printing without a reference point.
Fudge all indexes like CPI, GDP, Money supply dept………
Take the blue pill.
Latest from Farage:
http://www.youtube.com/watch?feature=player_embedded&v=MHq7vXIjNFI
So who is without hubris - you Tim Price, Schumpeter and Rothbard. Of course, of course you are without hubris you must be the insightful geniuses who reall y understand what is going on.
So now we have it from you - all intervention is fruitless and destructive - thank you for that.
In summary Tim Price is saying THE SKY IS FALLING IN ECONO JARGON!
You'd look a lot less like an idiot without that gun in your mouth.
"Although there were a few people that were warning us about this, most economists and investment advisers didn't see this coming." CNBC anchor sometime in 2012
How many big words can you fit in one pile of bullshit?
Gave up after the intro paragraph...
Rothbard should be mandatory reading in every economic class in America. If you have not done so read Rothbard’s history of banking and depression books.
I couldn't agree more. Rothbard is brilliant.
Europe 1986: Hair band
Europe 2012: Hair ball
http://www.youtube.com/watch?v=_xBWmdNICvM&feature=related
Badabing gets it.
No. The ESF was designed to fix this. The Fed only deals directly with US monetary policy. The ESF is run by the Treasury Secretary.
Thank you ZH for making me smarter every day.
I have just revised my thesis of 30% Physical PM's to 70% cash to 50/50.
Excellent. You're halfway there.
Com'on, give us the other half.....
What sane person goes long 100% PM's? Why go long 100 % anything? For a group of people who talk about how they are so much more intelligent than the uneducated masses, aka the "sheeple", there are a lot of people on here who believe they are certain about uncertain events. Hubris is being completely exposed to gold and other PM's without sufficient hedges.
80/20 works for me )
When I woke up in 2009 I quickly put half my money in precious metals (66% silver). I've had my doubts but no longer. I'll backup the truck after the market has tanked. GOLD = MONEY
BDI still plunching: Baltic Dry Index (BDI) -48 926
Ditto in all respects. Thanks, ZH!
I only invest a percentage of my available assets in PM's also -- the % I want to keep.
I just read where all the nations of the world owe something like 52 trillion dollars.
Who the fuck is this money "owed" to? Aliens?
I just can't comprehend the idea there is some extra-dimensional entity loaning funds to our world.
The majority to central bank's. Able to print central bank's hit "Ctrl + P" then loan to gubermint's, charge interest and rolled interest, also debt is rolled into central bank backed "bank's", that come with a gun to your head when debt is not repaid.
The come yelling, Pay us our printed ponzi money bitcheeez or we take your food and water, our ink purchase account is running low don't you know!!
.. Alt + F4 coming soon.
"Who the fuck is this money "owed" to? Aliens?"
Mostly each other.
One gigantic financial circle jerk.
Then why do I, and everyone I know, feel buttraped? (to use a Denningerism)
A ponzi is a scam which pays early investors out of the investments of later investors. In a sense, the world’s monetary system is one giant fiat ponzi scheme with the only question being when will the ponzi end, not if it will end.
The problem is growth is no longer able to keep up with the malinvestments caused by cheap money (0% rates + QE). Either cheaper money is increasingly provided in order to cover up the malinvestment (more QE, or purchasing of MBS, or printing money to purchase anything), or the malinvestments become exposed.
Allowing the malinvestments to become exposed is politically unfeasible, so cheaper money will be provided in order to keep the malinvestments hidden. In a sense, the new investor is the newly created currency..once the new currency stops or even slows, the ponzi fails, but keep the new currency coming in faster and faster and hyperinflation is the end result. TheSilverJournal.comBecause you, me, him, and the resta those guys over there are being forced to pay debts incurred by people spending like drunken congresscritters.
Turn around. Examine that thing sticking in your ass. Is it a Central Banker's or Politician's dick? Then you have your answer.
Aliens/bankers ... what's the diff?
There's always the possibility that aliens could be benign.
Aliens are not necessary hostile.
If you listen to David Icke, no difference!
Someday, the NGO will show up saying we can't fix things ourselves and we need their benevolent guidance (plus some technological liquor for the natives). They would end up owning the whole planet. There will be others who offer wisdom but nothing else, and if we listen to them, we will be free. Will we be wise enough to choose the right friends? Hahahaha
Better hope the hippies show up first.
owed to the banking system: they lend the money to govs and peeps who deposited the money so the banks lent sme more, and so they govs deposited that and borrowed some more and deposited that and the banks lent the new deposits.....
LTRO just the latest twist on that one. 10 trillion? no problem... its breeding in the alien bank entity belly right now -
the LTRO depositors arent the ones that borrowed it.
which means 500bn got lent to banks who lent it to other banks who deposited it with ECB and used that collateral borrow more money to lend to other banks who gonna post that as collateral to borrow more money from the ECB in the next LTRO
The Euro is saved
trebuchet
"owed to the banking system"
When did the banking system declare themselves a new country?
they didnt the operate under licence from the govs that host them :)
but they do print money, 10 times more than the central banks, its called credit.
trebuchet
"but they do print money, 10 times more than the central banks, its called credit. "
So they are magicians creating nothing from nothing?
yes
its called the modern (fractional reserve) banking system
you take 10 cash put it into a bank the bank keeps 1 back in case you need some short term cash, lends 9 to somoene else, who deposits it in their bank account and that bank lends 8 to some else, etc .etc .....
look at banks loan/capital reserve ratios.
and central govs print money coz they dont have to back it up with anything like a physical asset such as gold (which they used to do). and then they release that money into the system by buying gov bonds. or simply change the rules on how much money banks can create by changing their "reserve requirements" that 1 they have to keep back out of every 10.
lots of people here calling it a ponzi scheme.....
but thats the system underpinning you giving up your hours of labour and turning those hours into the food and fuel and housing to feed your kids/partner/xbox
The best book for explaining this with specificity, as well as other issues is "Money the greates hoax on earth" Merrill jenkins the man who wrote this was a genius and always strived for absolute accuracy. You can see his writings all over the web by yahooing his name. Highly recommended 5 stars
"So they are magicians creating nothing from nothing?"
Uhh... yes. Fractional Reserve banking is indeed magic. They put in nothing (a line item conjured up on a balance sheet by a central bank or one of its members), and you pay them something called interest.
Both sides of the Fed's balance sheet are liabilities, promises to pay. Although they call one side "assets".
I can recommend a course in Money and Banking if you would like.
P.S. It requires a "license" to join the Fractional Reserve club, but the club is full for the moment.
+10'000 billions "When did the banking system declare themselves a new country?"
They are multinational corporation (in the case of banks with regional cartels which have the sovereign power of issuing currency).
Every one of them is a country.
And advise governments with their lobbyists, provides them with consultants, aids them with mercenary troops, swaps leaders with them.
Now, if they were national, then they would have some shared interests with you, but their internationality, well, makes them not-really-of-your-country.
The proper prefix you're looking for is trans, as in transnational. A corporation is 'beyond' borders while their objective is quite universal: profit. The entire idea is a perfectly coordinated way to evade responsibility, like something out of the Kantian theory of radical evil.
Yes, and the military-industrial complex is merely one of the bank's most profitable subsidiaries, and as it happens, the most useful since it can be used to enforce the reserve status of a currency with very large, GDP-boosting bombs.
About 4000 years ago when a tribe in a desert started, in unision, a con called lending and interst.
The first axiom of business: Nothing happens until someone sells something.
Our desert folks were the first to figure that out. Milestones
Think unfunded liabilities. Promises for social security etc.
In some way and form always to the taxpayers (i.e. citizens) or beneficiaries (retirees etc.) of other countries
Rothchild his personal worth is around 500 trillion
I'm just not sure I believe that. I still have two gold pieces that he doesn't own...yet.
500 trillion what?
The whole island of Manhattan including the structures is worth 1 trillion USD. Does he then own 500 cities of similar value?
All the silver and all the gold in the world is less than 9 trillion. Maybe he owns derivatives. Let me see him collect.
That reminds me that O'Bummer, spends 1.5 times a Manhattan island's worth per year attempting to lower the unemploynment.
I have 500 Trillion Zimbabwe dollars in front of me right now. Am I wealthy or what!
Congrats! You are a Zimbabwe multi-trillionaire, so am I. Soon we will all have Zimbabwe like net worth's, but it still won't buy you a cup of coffee no matter what name they put on the paper (Euros, Dollars, etc...). They are just zeros on pieces of paper.
http://www.youtube.com/watch?v=7ubJp6rmUYM
You're right, I am also effectively a quadrillionaire!
Who the fuck is this money "owed" to? Aliens?
That's the worst spelling of Rothschild I've ever seen. :)
The Shadow banking system. People think Bill Gates or that Mexican Slim whatever are the richest men in the world. They aren't
They keep reiterating the fact that every human / family owes X amount of dollars to pay off the national debt.
Americans, families, countrymen didn't create this debt. It's not mine, or my familys nor my neighbors. This is all a ruse to keep you pliant like you have skin in the game.
I turn my back on these "debts", I never had a hand in creating them. I will ignore such hogwash and handwringing, and in the meantime keep stacking.
It's not yours! Carry on!
Ca-a-rRi-IEEE, CarahRIEEEE Things they change my-y--yFr-rie-end..Wh-o-oa C--
Damnit. Wrong Song.
I love the irony of the band's name, Europe, don't you?
Yes, I also checked the lyrics looking for hidden messages, but there aren't any...
ok something about
"we are heading for venus..
and still we stand tall...
maybe they've seen us
and welcome us all"...
There is another scary reference in the movie 2010, the sequel to 2001 a space odyssey.
At the end of the movie the aliens convert jupiter into a new star, so all of jupiters moons become habitable worlds. Its a present for us humans, and a WARNING:
All these worlds are yours, except Europa. Attempt no landing there
These aren't the droids you're looking for.
Move along.........
-Ben
Its a TRAP!! Sorry the refernce got the better of me.
Pssssttttt... The plan is - their is no plan.
Thats the plan.
Who gives a shit. "final Countdown". Ever day closer to the end day is in countdown mode. If evil is winning so bad, well, it becomes everybody's fault and we will get our ass whipped, and good. Just do what needs to be done.
TPTB fail at leadership for the benefit of society. This shit, alerts the brain on to more ideas for "making the best of it" and/or fear.
There some natural occurances, like an aging demo, the premise ofr (artificial) growth, to name a dozen. Plus, it doesn't help that banks have been in such a rape and pilliage moment.
I've done the final countdown, but lost count. Fuck it.
That 'music' makes me want to stab both ears with paring knifes. Damn, I feel dirty.
Read this one this AM in my e-mail, excellent summary. Rothbard's clearly stated points are so obviously correct it's a wonder anyone actually pays attention to Paul Krugman.
Paul who?
/
He's this leftist Keynesian version of Rush Limbaugh with a phony Nobel prize who wants Uranus to invade ouranus.
I don't want anybody in myanus!
I believe he was thinking an invasion of hisanus.
My doctor advises against that.
Sadly, Boobus Americanus (and similar species) will reply, "Murray who?"
The three people that don't? "Oh, it's that crazy anarchist guy!"
I wonder what the cops would think if I showed up at a voting site wearing my Rothbard "Enemy of the State" T-shirt?
They'd say "Hey! That doesn't look like Will Smith!"
Its definitely a good summary. We been talking about Europe and others defaults for months now. What is always true is, it can be delayed and postpone, but without any real changes it will always end up the same way...
Just waiting to see, when the euro goes away or a default what that's going to mean to the world markets and what are the after affects.
We are in some interesting times.
I'll take 80s big hair glam rock over the crap they play on the radio now.
Big Swinging Richard
"I'll take 80s big hair glam rock over the crap they play on the radio now. "
JESUS FUCK DUDE! Listen I'll try to talk you down. First call in the old lady and have her hide your weapons. If you have any meds, except Meth I't will only make you crazier, take them,take them all, borrow some dope from the neighbor kid or drive to a Black neighborhood and find a liquor store.
Once you feel it all kicking in go to Pirate Bay and search for GRATEFUL DEAD.....
BSR, take his advice you will need every bit of that booze, dope probably including thorazine to actually enjoy the Grateful Dead...
Let me list the names of the hot acts today: Lady Gaga (Madonna wannabe), Katy Perry (nice assets, but no talent), and anything rap related. At least the bands then knew they had no talent and used drugs and hairspray to cover it up. I'm not suggesting the talent was better, just less pretentious. Give me Motley Crue and a bottle of Jim Beam!
I really wanna stick my thumb in Katy Perry's butt.
But thats just me.
Not so much Katy...but HER ANTI-CHRIST FATHER....he hates em all....spics, mics, spooks, gooks, jews...atleast he is consistent! (and as Mel Brooks said...it's not funny until EVERYONE is offended...)
"WHERE ARE ALL THE WHITE WOMEN?"
Dead Prez, Immortal Technique, Tool / A Perfect Circle / Puscifer
Lots of good music is still being produced.
You are not even qualified to know what music is. Justin Bieber fanboys like you should be treated to a woolding til yer eyes pop outta yer head and yer skulls crack open.
TOOL +1,000 See you all in Arizona bay..
Lady Gag is really Todd Lundgren from the 70s.....check it out...seriously...talented but fugly.
What a coincidence --- I can remember a singer-songwriter named Todd Rundgren from back in the 70s and 80s.
You aren't Chinese, by chance, are you?
ROR!
Herro it's me!
"dont go away mad....JUST GO AWAY!"
http://www.youtube.com/watch?v=xY0HCKOmrW0&ob=av2n
Honestly, who doest get a chill listening to this great song....you have to admit...even after a few drinks....lol...
Secondly, as if this shit on the radio wasnt bad enough....THE NAMES OF THESE "ARTISTS" are hilarious....
lil shithead.....ki$$shaw etc....floor ida, cali...fornia, pit bull, german shepherd.....you name it...
BEYOND FUCKED UP