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Mike “Mish” Shedlock Answers: Is Global Trade About To Collapse; And Where Are Oil Prices Headed?

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From James Stafford of

Is Global Trade About To Collapse? Where are Oil Prices Headed? A chat with Mike Shedlock

As markets continue to yo-yo and commentators deliver mixed forecasts, investors are faced with some tough decisions and have a number of important questions that need answering. On a daily basis we are asked what’s happening with oil prices alongside questions on China’s slowdown, which commodities or instruments will provide safety in the current environment, will the Euro-zone split in the future and what impact the presidential election is going to have on the economy and markets?

To help look into these issues and more we were fortunate enough to speak with the award winning economic commentator Mike “Mish” Shedlock.

Mike’s blog: Mish’s Global Economic Trend Analysis is one of the most popular and informative economic blogs online. His millions of dedicated monthly readers find his advice invaluable and we recommend anyone interested in learning more about the global economy and financial markets to stop in and take a look:

To find his blog, you can also do a Google search for Mish

In the interview, Mish discusses:


·         Why global trade will collapse if Romney wins

·         Why investors should get out of stocks and commodities

·         Why we have been oversold on shale gas and renewable energy

·         Why oil prices will likely fall in the short-term

·         Why the Eurozone is doomed

·         Why there may soon be an oil war with China

·         How government interference is ruining the renewable energy sector

·         Why we need to get rid of fractional reserve lending With oil prices now in the high 80's and news out of Europe getting worse every day, do you expect prices to stay in this range, or do you see them dropping in the short term?

Mish: There are two conflicting forces here. One of them is oil prices over the long-term and the other is oil prices over the short-term.

Even in the short-term you will find there are conflicting forces at play. For example, stress in the Middle-East puts an upward pressure on oil prices. However, economic problems in Europe, a slow-down in Asia and a slow-down in the United States put downward pressure on oil prices. New orders are falling at a staggering rate across the board in Asia, China, Japan, Europe, and the United States which also puts further downward pressure on oil prices.

Long-term, forces such as peak oil and population growth in China are putting pressures to the upside.

One needs to balance all of those factors out when they are about ready to give a prediction on oil prices. My opinion is that over the short to mid-term, oil prices will go down. Long-term, energy is a good place to invest. If your prediction is correct and oil prices do go down – what sort of impact do you see this having on the U.S. economy, if any?

Mish: That's an interesting question. However, the question puts the cart before the horse.

Looking at prices in a vacuum is a mistake. One also has to look at why prices are doing what they're doing. For example, falling oil prices that happen when supply shocks are alleviated are a positive thing. Falling oil prices because of falling demand is another. You seldom see this kind of distinction in mainstream media.

Right now, oil prices are primarily falling because of falling demand, and that is in spite of geopolitical tensions. That is not a healthy sign for the economy. As we have seen with the recent oil workers strike in Norway and subsequent rise in oil prices. Geopolitical risks always remain to keep the markets off balance. Apart from Iran are there any other geopolitical risks you think people should be aware of?

Mish: A key geopolitical risk in the long-term is that China cannot continue at its expected rate of growth. For years, the mantra has been "China, China, China," and many thought China could maintain its 8% to 10% per year growth going forward. That's not going to happen.

I agree with Michael Pettis at China Financial Markets, that China is more likely to see 2% growth than 8% or even 6% growth over the next decade.

2% growth is a shocking reduction, even from the lowered expectations that we've seen regarding China. The implication is commodity prices, especially base metals, are going to be under extreme pressure because of China stockpiles. For further discussion please see "China Rebalancing Has Begun"; What are the Global Implications? What are your longer term projections for oil prices – say 3-5 years out?

Mish: I think it's a fool’s game to make such projections. Most of the projections on the price of gold, silver and oil are ridiculous. They are designed to sell newsletters. The bigger the hype, the greater the sales. On occasion, I will make a call. For example, when crude hit $140+ in the summer of 2008, and others called for $200, I said oil prices would drop to the $45.00 - $50.00 range or so. Oil went to $35.

Moreover, those predicting $200.00 never bothered to think what that would do to the global economy. We saw the same thing in natural gas. People were predicting $25. Look at prices now, at roughly $3.00 NG fell all the way to $2.20, lower than even this staunch deflationist thought.

I'm not willing to go out on the same limb and predict energy prices three years in advance. The reason is we really don't know for sure how central bankers are going to respond. China is particularly important. If there's universal printing of money everywhere, I would expect a lot of that to flow back into prices of gold, perhaps of silver, and perhaps energy, but we really don't know what they're going to do. We don't know when or how the Euro Zone is going to break up. I think it will, but how is as important as when.

In the US, we don't know the results of tax hikes following the 2012 election. Heck, we don't even know who the next president in the United States is going to be. Will it be Republican? Will it be Democrat? Numerous political and economic forces are pulling and tugging in different ways.

I don't believe there's anyone out there that can predict, with any kind of accuracy, what oil prices are going to do. Which is why I believe trying to predict oil prices in the midst of all of these possibilities is a fool's game. What are your views on inflation and hyperinflation.

Mish: Hyperinflation is a complete collapse in currency. It is a political event that kicks off hyperinflation, not a monetary one. Hyperinflation talk hit an extreme when oil prices hit $140. Such talk was silly then, and it is still silly now.

Hyperinflationists in general fail to understand the role of collapsing demand for credit. The total credit market is over $54 trillion. Base money supply is $2.6 trillion and excess reserves are about $1.5 trillion. Seems to me we had huge expansion in credit and Bernanke is struggling to reignite demand. I suggest he will not succeed.

The idea the US$ will suddenly go to zero is ridiculous. The US is the world’s largest holder of gold reserves, and that alone would stop it. Also note that Bernanke, as misguided as his policies are, is still beholden to the banking system. As such he has no desire for it to collapse.

As far as inflation goes, I am still widely misunderstood. I view inflation as an increase in money supply and credit, with credit marked to market. Deflation is the opposite. If one insists that inflation is about prices, then we are in a state of inflation with 10-year treasury rates below 1.5%.  

For those who woodenly view inflation in terms of prices, well, prices may or may not rise. Price have generally risen, but credit is the key behind housing prices, family formation, hiring, and in fact everything driving the economy. So, where is credit going? Demographics and student debt suggests nowhere. Indeed, credit has gone nowhere in spite of heroic efforts by Bernanke. You just mentioned that we don’t know who the next president is going to be and sticking to this topic how big an impact do you see energy prices having on this year's presidential elections?

Mish: I don’t think energy prices are what's on people's minds. What's on people's minds right now are jobs. Oil prices have kind of stabilized and in the very short-term they are likely to stay stable unless there are some dramatic results in the Mid-East or a dramatic slowdown in the US economy.  Both are possible, but a major US slowdown is arguably more likely. Regardless, I think energy prices are going to be a minor election issue. The message on peak oil seems to be confused. Many are adamant that peak oil is the largest threat to ever face humanity, whilst others believe that with new technologies and new fields being found, peak oil is a myth and we are actually swimming in oil. What are your thoughts?

Mish: The idea that we're swimming in oil is preposterous. Moreover, abiotic oil is a ridiculous pipe-dream. That said, the idea that the global economy is going to come grinding to a halt in the next year or two because of oil is also preposterous (discounting a geopolitical Mid-East shutdown). In general, I would side with the peak oil folks, noting that a global recession will likely pressure prices more than anyone thinks, barring a breakout of war or supply disruptions  in the Mid-East.

Long-term, 8% growth in China is mathematically not going to happen. People really need to get a grip on exponential math and the implications thereof. If China does attempt to grow at 8-10% as some people have predicted, there's going to be an oil war of some kind between the United States and China because there's simply not enough oil.

For a good discussion on the limits of exponential growth, please see Calpers Pension Plan Reports 1% Return; Stunning "What If" Charts at Various Compound Annualized Rates-of-Return Going Forward Shale gas has been generating a great deal of headlines recently. Do you believe it could be the solution to America’s energy challenges? We are also seeing developments in oil & gas extraction technologies. Have we been oversold on such possibilities?

Mish: I think we're oversold on everything. We're oversold on the idea of cheap energy, of free energy, of green energy, of clean energy. We're oversold on the stock market. We're oversold on what Obama can deliver. We're oversold on what Mitt Romney can deliver. We're oversold in so many areas, I can't even mention them.

In regards to new technologies, how much water will it take to extract these reserves in the midst of these droughts? What are we going to do with the contamination, how do we get rid of the waste byproducts? These kinds of projects look good on paper, but are they truly scalable in practice?

I hope I am wrong. What is the role of government in alternative energy sources?  

Mish: The role of government should be to get the hell out of the way and let the free market work. If peak oil really is a problem (and I think it is), the free market will come up with a solution if left alone.

Instead, the government is trying to pick winners. Look at the results. President Obama backed solar panel manufacturer Solyndra and the DOE loan guarantee scheme blew sky high.

Our ethanol program is a total disaster. By government mandate, corn has been diverted to ethanol production smack in the midst of a drought. Corn is not an efficient way to produce ethanol, even if there was not a drought.

Governments seldom back winners. Instead, government bureaucrats back companies that contribute to their campaigns. This is worse than it looks because such activities deprives companies with real solutions a chance at funding.

We need to get government out of the energy business completely and let the free market work. Sticking with the renewable energy theme, do you see them making a meaningful contribution to global energy production over the next 10 years?

Mish: Adding to my previous answer, government subsidies of unviable products and unviable ideas gets in the way of the free market actually producing viable products and viable ideas. Simply put, the more government interferes, the less likely we are going to see advances in the actual direction of a true solution. In regards to presidential elections, how do you think energy will fare under Obama and under Romney? Which sectors will benefit, and which will suffer?

Mish: Mitt Romney has declared that if he’s elected he is going to label China a currency manipulator and increase tariffs on China across the board. That's something that I believe he might be able to do by mandate. If he's elected and he does follow through, I think the result will be a global trade war the likes of which we have not seen since the infamous Smoot-Hawley Tariff Act compounded problems during the Great Depression. Simply put, I think that global trade will collapse if Romney wins and he follows through on his campaign promises.

Unfortunately, campaign rhetoric now is heating up to the point where President Obama and Mitt Romney are trying to outdo each other on who's going to do more to China. Thus, we may very well see a global trade war regardless of who wins.

As an aside, Mitt Romney is pledging to increase military spending. Given Romney’s statements on Iran, it's more likely he would start a war with Iran than Obama. Note that the U.S. military is one of the biggest users of petroleum worldwide and oil price shocks could be devastating.


None of this is any good for the world economy at all. I believe that Romney will do what he says. I believe he's more likely to start wars than Obama, but that doesn't make Obama any good. This is the worst slate of candidates in U.S. history running for president, and I'm writing in Ron Paul. As the global economy slows, where do you see the best investment opportunities available to investors?

Mish: At this point, the best thing to do is wait for better opportunities. I am talking my book, but something like 70-80% cash (or hedged equities) and 20-30% gold seems reasonable. I'm telling people, "Get out of the stock market. Get out of commodities except gold and perhaps a bit of silver."

A global slowdown is underway. Actually, I made a Case for US and Global Recession Right Here, Right Now.

Although nothing is certain, central bankers worldwide are highly likely to pump up money supply hoping to counteract the slowdown. If so, I think gold is going to be one of big beneficiaries. Silver may be a huge beneficiary, and I like it here. However, silver is also an industrial commodity, so gold is safer.

Bear in mind, I may seem like a broken record on this thesis given cash and gold has been my call for the last year and a half or so.

In spite of calling the global economy exceptionally well, I've simply been wrong about U.S. equities. They have risen far more than I thought, but I still caution that risk is high.

I'm going to repeat my general message here, that another slow-down, and another big downturn in the stock market is highly likely. Equities are quite overvalued at this point, cash is not trash, and staying liquid now, with a percentage in gold, is a good idea. I was hoping you could tell us your thoughts on the Euro. You mentioned previously, that you think the E.U. will split in the future, why do you think this will occur, and what will the economic and political implications be?

Mish: I think it's pretty clear that the euro's going to split because no currency union in history has ever survived without there being a corresponding fiscal union in place. Right now we're in a situation where Germany’s Chancellor Angela Merkel says that "There should be no fiscal union until there's a political union." Francois Hollande said, "There should be no political union until there's a banking union," and the German Supreme Court will not allow a political union or a fiscal union, nor a banking union without a German referendum.

I did a post on this, and it's called, "It's Just Impossible."

If politicians could not get agreements when times were good, how are they going to get these agreements now, when they're bickering over every little thing, including the amount of the ESM, whether or not the bailout of Spain should be via the ESM or the EFSF, and whether or not the Spanish government should be backstopping this loan.

They can't get an agreement on anything, and the German Constitutional Court is hanging like a Sword of Damocles over the entire thing.

For these reasons, the Euro is going to bust up. What happens to the price of the Euro depends on how it busts up. If the breakup is piecemeal and disorderly, it means one thing. If it's orderly and prepared in advance with Germany leaving and the northern states leaving, it's a completely different scenario. Any point along that line is possible, but piecemeal seems more likely. How disorderly remains to be seen.

For example, if Germany exits the Euro and goes on the deutschmark, the value of the deutschmark will soar, whilst the value of the Euro will decline.

Instead, if we see a break-up by Spain leaving, by Greece leaving, by Italy leaving, and the bulk of what's left is Germany and the northern States, then the value of the Euro can soar. Those are the two conflicting possibilities here. The market has not decided which one of those is more likely.

Meanwhile, the Euro is in a low 1.20 range to the U.S. dollar. A breakout or a breakdown might be a signal that the market is expecting one of those possibilities over the other.

We are in uncharted territory and everyone is guessing.

Short-term I am neutral on the US dollar at this level because the euro is a bit oversold, the idea of a Greek exit is no longer unfathomable, and the Fed is likely to initiate QE3 at some point. This is a change from my previous US dollar bullish stance. We mentioned China earlier, and I was wondering what you think the future holds for China, both politically and economically.

Mish: A regime change in China is coming up. The current regime has been focused on growth. However, I think the next Chinese government already understands that the growth at any cost of the current regime is not sustainable. If so, we're going to see a major shift away from an export-driven production model dependent on investment on roads, on bridges, and more production, to a consumption-driven model. That shift will be one of the major forces in the global economy.

If I'm correct on this, then it's going to be a painful adjustment, regardless of what China does. For example, a Chinese slow-down towards consumption would increase the value of the renminbi, would decrease their exports, would help the balance of trade between China and the United States and Europe, and would put intense pressure on commodity prices. In turn, asset prices and currencies of the commodity producing countries, like Australia, Brazil, and Canada will come under heavy pressure. Mark Faber is not a fan of the Federal Reserve, blaming them for the current US economic situation. He said, “Usually under a gold standard you have a bubble under one sector of the economy but you don’t have it across the board globally and that’s really what the Federal Reserve has done over the last couple of years.” Do you agree? Is the Fed to blame? And what can be done to avoid this in the future?

Mish: I agree with part of it, if not most of it. However, the idea that the gold standard itself causes bubbles is fallacious. The gold standard does not cause huge bubbles. The real culprit is fractional reserve lending. Historically, problems happened when banks lent out more money than there was gold backing it up.

The gold standard did one thing for sure. It limited trade imbalances. Once Nixon took the United States off the gold standard, the U.S. trade deficit soared (along with the exportation of manufacturing jobs).

To fix the problems of the U.S. losing jobs to China, to South Korea, to India, and other places, we need to put a gold standard back in place, not enact tariffs. Mish, thank you for your time this has been a very enjoyable and enlightening conversation for us.

For those of you who haven’t seen Mish’s superb blog and daily economic commentary we strongly recommend you visit his site: You can also do a Google search for Mish.


Interview by James Stafford of


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Mon, 07/30/2012 - 18:15 | 2663631 brewing
brewing's picture


Mon, 07/30/2012 - 18:56 | 2663687 I think I need ...
I think I need to buy a gun's picture

when argentina defaulted in 2001 they repegged the peso to the dollar and their stock market has gone up a nice 5-10% a year ever since at least thru 2008, our stock market will go up 4-8% manipulated for the next 10 years

Mon, 07/30/2012 - 20:17 | 2663818 chumbawamba
chumbawamba's picture

Mish looks like a plump woman.  I think he's hiding something.

I am Chumbawamba.

Mon, 07/30/2012 - 20:28 | 2663832 Gringo Viejo
Gringo Viejo's picture

I listen to Mish on "Coast To Coast." He gives me a woody. He can be my cellmate anytime.

Mon, 07/30/2012 - 20:53 | 2663863 Taint Boil
Taint Boil's picture



Mish can be an a$$hole – but he is a smart a$$hole. He has a way of putting you in your place. I always listen to what he has to say…..

And .... me too, if we were in prison together I would protect him in the shower.

Mon, 07/30/2012 - 21:25 | 2663924 wang (not verified)
wang's picture

mish being even referenced on ZH is a shark jumping event


why not just reference Leo



Mon, 07/30/2012 - 21:40 | 2663938 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Mish has been wrong about what the market will do for over three years now. 

Deflationistas please band together and stop talking.  We get it, you don't understand the new paradigm of economics when the world uses fiat currency to stop gap the financial system.

And as for those like Leo who are trying to outsmart the system, better luck next time.  Instead of playing roulette with all of your chips why not cash them out for gold and silver bullion.  At least then you aren't making any bets on what the counter party risk is.

Mon, 07/30/2012 - 22:10 | 2663994 Spitzer
Spitzer's picture

Mish: Hyperinflation is a complete collapse in currency. It is a political event that kicks off hyperinflation, not a monetary one.

But he thinks Bernanke can stop it in 15 minutes

Hyperinflationists in general fail to understand the role of collapsing demand for credit. The total credit market is over $54 trillion. Base money supply is $2.6 trillion and excess reserves are about $1.5 trillion. Seems to me we had huge expansion in credit and Bernanke is struggling to reignite demand. I suggest he will not succeed.

Didnt he just say hyperiflation is NOT a monetary collapse ?


The US is the world’s largest holder of gold reserves, and that alone would stop it.

No actually the ECB is. The Fed has no physical. Only the treasury does

Also note that Bernanke, as misguided as his policies are, is still beholden to the banking system. As such he has no desire for it to collapse.

Yep, he can stop it in 15 minutes...

Mon, 07/30/2012 - 22:48 | 2664060 Uber Vandal
Uber Vandal's picture

This little snippet from the Treasury web site is a good read about FRN's:

Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.


Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.


Mon, 07/30/2012 - 22:54 | 2664066 blunderdog
blunderdog's picture

   Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything This has been the case since 1933.

1933, really?  What year was that?

Tue, 07/31/2012 - 00:34 | 2664165 Michael
Michael's picture

I was banned from Mishes's blog.

But I still think depressions, not hyper-inflations for the USA.

I still visit/lurk.

Tue, 07/31/2012 - 01:19 | 2664207 Uber Vandal
Uber Vandal's picture

Perhaps we will have both and go full Zimbabwe, 95% unemployment with a side order of 98% daily inflation.



Tue, 07/31/2012 - 06:45 | 2664363 Crash N. Burn
Crash N. Burn's picture

1' Hyperinflationists in general fail to understand the role of collapsing demand for credit. 


One mans' credit is another mans' debt, and  Mike Maloney is a hyperinflationist who released  -

Mike Maloney – Debt collapse and $20,000 an ounce gold


2. Cash is not trash


Sorry Mish -

Silver breaks $33 an ounce overnight – Cash is trash video


3. However, silver is also an industrial commodity


Right. and that means we consume it. Above ground silver stockpiles are at their lowest in history. Sounds bullish to me!




Tue, 07/31/2012 - 01:03 | 2664199 bankruptcylawyer
bankruptcylawyer's picture

i have to agree in some ways. 

mish has done a really lousy job elucidating one of the most common topics on his blog ( which i visit regularly ) ----inflation versus deflation . 


any deeply competent blogger ---of which i consider mish one of the few out there-======by now should have laid to rest the constant hum drum aabout the alleged "debate" of inflation versus deflation. mish has really failed to point out that the debate is a sham. there is no debate. mish is very proud, i would even say  hubris-----when he toots his horn about deflation. he is of course technically correct about how the result of income and debt repayment is killing demand. i'm still quite shocked that he has not yet been able to come up with a proper lense for his audience to approach this subject though. 

he very well understands the concept of 'reflation' and why the stock market and especially bond markets are massively over-valued. he even accepts that oil is overpriced and that free money has flooded its way into every asset class owned by banks to keep a collapse from happening. and yet, like so many out there he harps on the fact that the problem of the impending collapse is one of deflation. COMMON ALREADY!!!!. 

THE PROBLEM HERE IS A LINGUISTIC PROBLEM OF HOW ECONONOMISTS HAVE USED 2 WORDS TO FRAME THE DEBATE. it's WRONG to talk about the price problem in terms of inflation and deflation as separte things. they are both happening all the time and with varying speed and frequency to different people, insittuitons, assets classes, central banks, currencies, bonds, etc......

its DUMB for educated critical thinkers NOT to understand that most of the people out there have been mislead. and that they need to be made to see that the false debate is intentionally misleading as to policy prescriptions. of course the deflationistas are usually keynsians. the inflationistas are characterized as classical austraian types. but if characterization were not antiquated, then how is shedlock both an austrian and a deflationist!!!!!?!?!??!!?!!?!?!?

ITS BECAUSE THEY ARE ANTIQUATED. shedlock gets the whole picture and the importance of debt restructuring or a jubilee of one sort or another, and yet, he has not at all made the connection about how the so called 'economic' debate about inflation versus deflation is actually a rhetorical trap made to entice bloggers and academics into wasting their time in a false dichotomy. it's rather sickening to me acutally. particularly when i see people in debates with paul krugman. mr demand side himself . 

i mean, this is all smoke an mirrors. YOU ARE EITHER WITH THE FEDERAL RESERVE OR YOU ARE AGAINST IT. This should be the first starting point in austrian economic debates, not whether one word or another word characterizes the nature of how messed up the price system is. What comes after the federal reserve is something to be figured out in reality , not as some academic exercise. in theory you can talk about alternatives to federal reserve notes all you want, in application you are either using a corrupt entities currency, or you are not. 




Tue, 07/31/2012 - 02:56 | 2664256 Lester
Lester's picture

Shedlock has struck me as an idiot for years.

Not like I am an apologist for RM Nixon, but to continue to spread the confusion that "Nixon took us off the gold standard" is bullshit.  What Nixon did was stop the "usual gang of suspects" (whom are all regularly in the news these days) from continuing to use France as their proxy for Looting American Gold.

America was The Only Nation redeeming its fiat for gold; and only to other Bretton Woods signatories or world bank buddies.  Nixon foiled the plot to remove all our gold and doing so extended American potential and financial power for a decade or longer.  France was the sole nation continually seeking greenback redemptions.  Not like in 1971 there was a great pile of dollars being left in France by American tourists with suitcases/touristers full of cash was there?  So where was France finding all the dollars and who was funneling them to them?

It was halting the plunder of OUR Gold that got Nixon watergated.  The lesson was not lost on successive office holders.  Ford had 2 close-call attempts, Reagan Hinckley we know got us George Bush and RR was never the same again...

America has been looted and betrayed for the last 25yrs non-stop.  Bullshit like Shedlock peddles is a distractive attempt to keep the confidence factor up while the marks lose their last nickel still confident that there is order and rationale to the activity they pursue which used to be called "investing".



Tue, 07/31/2012 - 03:46 | 2664290 Bay of Pigs
Bay of Pigs's picture

I told Mish that stuff for the last 4 or 5 years, from 2006-2007. He called me a conspiracy nut back then

Tue, 07/31/2012 - 18:37 | 2666642 BigJim
BigJim's picture

 ...America was The Only Nation redeeming its fiat for gold; and only to other Bretton Woods signatories or world bank buddies. 

we were running out of gold because, relative to the other Bretton Woods signatories, the US inflated to pay for guns and butter, ran trade deficits, and that's why its reserves were drained, not because of some evil 'plot'.

To stop the gold reserves draining, Nixon could have devalued the dollar... but he would have had to devalue it a lot, and this might have caused a panic and an immediate flood of USD back home. As it was, the USD started collapsing until Volker put a stop to it, but that was long after Tricky Dick had left office, so, from a political standpoint, Nixon did the right thing.

Which I'm sure comforts him enormously as he roasts in Hell.

Mon, 07/30/2012 - 22:22 | 2664016 All Risk No Reward
All Risk No Reward's picture

The problem with being an arrogant twit, of which Mish is one, is that it hides knowledge that might otherwise be able to break through.  Mish has some excellent insight and some absolutely awful insight (Bernanke isn't dumb, Mish, he works for a criminal cartel that has systematically broken the law to run a bubble / bust operation via their Debt Money Tyranny system).

It is hit or miss, so I don't bother with him.

BTW, inflation or deflation is a false dichotomy.

I expect both to happen - first a spiked pit deflation to bust all the debtors, eliminate Big Finance Capital's (BFC) competitors, roll up much of the world's physical assets under BFC front corporations (due to "dumb" Bernanke... -lol-) and then, most likely, hyperinflate to balance their books and call it "even."

At that point, I can only hope that Mish finally "gets" that this was an Art of War level crime, and not some misguided actions of an "academic."

I think people misinterpet what has been done the last 4 years - they weren't trying to prop up what they know can't continue.  That's the narrative to cover up what they were really doing.

They've offloaded trillions in debt to the general public and the've secure trillions in cashola via their front corporations - all just ahead of the most wicked deflation the world has ever seen.

They might still QE3, but the price of corn skyrocketing on its own doesn't bode well.  They know hungry people do desperate things.  But if they do QE3, it isn't to help you - so stop being naive and expecting a helicopter to drop anything but and anvil on your head or GMO seeds on your organic farm.  If they do QE3, it is so they can offload more debt onto you and yours and issue more debt to you so they can secure the cash for themselves.

You see, they are simply "quantitatively easing" their own losses...  and it is going to be "hard" on you and yours.

And don't expect some clown financed and promoted by BFC to over ride the wishes of BFC.  They don't promote anyone who will not obediently take orders.  The CIA, etc...  reports to Big Finance Capital at the highest levels.

Kennedy learned that the hard way after refusing to participate in an Operation Northwoods false flag event engineered to create a false pretext for war.  Once Kennedy was out of the way, though, Operation Northwoods went live against Vietnam in just 9 short months.  LL Lemnitzer, the guy "the President" demoted for presenting Northwoods to him, went to head NATO.

BFC rewards those who follow orders and those who don't - but the rewards are very, very different.

Mon, 07/30/2012 - 23:36 | 2664110 Never One Roach
Never One Roach's picture

ARNR, in the micro-outlook, do you think oil will drop substantially since you say, "all just ahead of the most wicked deflation the world has ever seen." 

Mish doesn't really answer the question but opines instead  [basically] 'it may go up or it may go down.'

Tue, 07/31/2012 - 10:56 | 2665062 prains
prains's picture

Thanks All Risk to the point and spells out the end game nicely

Tue, 07/31/2012 - 04:39 | 2664315 Triple A
Triple A's picture

I like mish but i can't believe he thinks the bottom is in with housing.

Mon, 07/30/2012 - 20:45 | 2663851 Cabreado
Cabreado's picture

"3. Zero Hedge. The mysterious person(s) behind this massive continuous stream of reports and analysis from the loony bin of Wall Street and beyond has a manic edge but accurately reflects the madness of the current situation. Zero Hedge seems to post virtually around the clock, every day. They are relentless and hugely comical, with exactly the right sharply malicious overtones required in these evil times. The characters who infest their comment section are some of the worst vermin in trolldom."

Since you are Chumbawamba,

what do you think?

Mon, 07/30/2012 - 21:48 | 2663957 RichardENixon
RichardENixon's picture

I'm not Chumbawumba but what I think is Kunstler should read his own comments section if he wants to see some real depravity.

Mon, 07/30/2012 - 22:08 | 2663990 bugs_
bugs_'s picture

"...the worst vermin in trolldom...."

I am sooo proud of ZeroHedge.

Mon, 07/30/2012 - 22:23 | 2664020 Cabreado
Cabreado's picture

I like ZH too, or I wouldn't read here.

I like humor, too, and we all need it.

"Mish looks like a plump woman.  I think he's hiding something."...

But that is not humor,
it serves no one,
it diminishes for sure,
it diminishes the messages that can be found here,

and at the eleventh hour,

everyone on the planet should give a damn.



Tue, 07/31/2012 - 01:04 | 2664195 11th_hour
11th_hour's picture

Indeed we should!

It seems as though most would rather focus on the trivial than the real.  Well, with exception of most ZH readers / commentors...

Tue, 07/31/2012 - 03:49 | 2664292 Bay of Pigs
Bay of Pigs's picture

WTF? Obviously you dont know Chumblez...

Mon, 07/30/2012 - 22:35 | 2664042 blunderdog
blunderdog's picture

No kidding.  Anyone who hangs around these boards should understand that to be a tremendous compliment.

This is the INTERNET, remember.

Mon, 07/30/2012 - 22:21 | 2664013 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

good to see you back.


Can you seee that I am friend? Can you see that I will always be your friend?

Mon, 07/30/2012 - 19:11 | 2663714 Stoploss
Stoploss's picture

That's why im writing in Ron Paul!

Libpublicrats? Ummmm, No..

Mon, 07/30/2012 - 19:47 | 2663771 Abitdodgie
Abitdodgie's picture

You push buttons on Diebold

Mon, 07/30/2012 - 22:36 | 2664043 PiratePawpaw
PiratePawpaw's picture

Shedlock is a baffoon. I get better analysis from my cat.

Mon, 07/30/2012 - 18:27 | 2663645 francis_sawyer
francis_sawyer's picture

 "Heck, we don't even know who the next president in the United States is going to be"


Maybe WE don't, but I'm sure somebody does...

Mon, 07/30/2012 - 18:39 | 2663660 NotApplicable
NotApplicable's picture

I do. His name is Robamaney.

Mon, 07/30/2012 - 19:15 | 2663718 Sofa King
Sofa King's picture

Ahhhh...a follow up to Obushma. We're screwed!

Mon, 07/30/2012 - 20:27 | 2663830 Meesohaawnee
Meesohaawnee's picture

does it really matter WHO it is.. not in my world. You could have bozo the clown. ,,ooops im sorry we already do. ok. Howdy doody. means nothing.

Mon, 07/30/2012 - 19:45 | 2663768 Abitdodgie
Abitdodgie's picture

"Will it be Republican or will it be Democrat" If he has not figured out there is no differance between the party's , then why are we reading the rest of his dribble.

Mon, 07/30/2012 - 22:24 | 2664022 All Risk No Reward
All Risk No Reward's picture

A Big Finance Capital funded and promoted lackey operative will be the next President.

That was easy.


Tue, 07/31/2012 - 00:54 | 2664181 Roger Knights
Roger Knights's picture

It (the next president) could be Biden.

Mon, 07/30/2012 - 18:28 | 2663646 Haole
Haole's picture

"Moreover, abiotic oil is a ridiculous pipe-dream."

Yeah "Mish", you're right, it's all rotten lizards, plankton and palm trees...

I stopped reading after that sentence because it is indicitive of not only how at least some of this guy's statements lack relevance but how potentially distorted his perception of reality is.

Mon, 07/30/2012 - 18:39 | 2663663 NotApplicable
NotApplicable's picture

Reality is merely one's most plausible belief system.

Mon, 07/30/2012 - 18:41 | 2663666 Haole
Haole's picture

Reality is not altered by what anyone believes.  Fixed it for you.

Mon, 07/30/2012 - 18:58 | 2663692 NotApplicable
NotApplicable's picture

Ummm... gee thanks. I was AGREEING with your statement.

But since you broke it in an effort to fix it...

None of us are all-knowning, or all-seeing, therefore, TO US, reality is just all of our perceptions assembled as we logically BELIEVE them to be.

And since we act on these beliefs, reality IS altered by our own actions.

Now, I guess I should go back and downvote you to get even or something for your failure to comprehend what wasn't a difficult concept.

But instead I'll just ask that maybe you pay attention to what I said, instead of being teacher's helper.


Mon, 07/30/2012 - 19:05 | 2663701 Haole
Haole's picture

Whatever melts your butter, my apologies in the meantime I guess...

BTW, I don't up or down vote anyone, ever, myself included.

Mon, 07/30/2012 - 22:16 | 2664006 Spitzer
Spitzer's picture

your original comment made me laugh my ass off Haole

Mon, 07/30/2012 - 19:02 | 2663702 Snake
Snake's picture

"Reality is made of language".

 J. Lacan.

Mon, 07/30/2012 - 22:33 | 2664037 DanDaley
DanDaley's picture

Sure, until you get a lightning bolt up your butt and can't say boo.  Pure reality.

Tue, 07/31/2012 - 18:35 | 2666662 BigJim
BigJim's picture

People like Lacan seem unable to appreciate that there's reality, and then there's our various perceptions and interpretations of it.

Hence statements like, "Well, in my reality, Gaia is a great Earth Goddess who will protect Her own", etc.

Mon, 07/30/2012 - 20:08 | 2663808 Arrowhead
Arrowhead's picture

 I don't necessarily buy the abiotic oil theory as I understand it but your statement about reality not being altered by one's beliefs is a bull's eye. Why don't people BELIEVE that?

Mon, 07/30/2012 - 18:47 | 2663675 Mr. Poon
Mr. Poon's picture

Abiogenic oil may or may not be the reality, but I don't think it's something we should count on.  The sensible approach would be to limit the possibility for negative surprises while leaving open the possibility for positive surprises; and the sensible approach here is to make very conservative assumptions regarding the world supply of petroleum.

Mon, 07/30/2012 - 18:52 | 2663685 NotApplicable
NotApplicable's picture

Well, the world is run by criminal cartels, so you can toss that "sensible" approach right out the window.

Mon, 07/30/2012 - 18:50 | 2663682 Captchured
Captchured's picture

So, is this your way of saying that you believe in abiotic oil being more than a pipe dream? Or, are you just saying that anybody who believes it is a pipedream and tied to macroeconomics isn't worth reading?

I'm not the best oil and gas organic geochemist in the world, but I have sure analyzed a lot of oil that can be directly tied to the organic source rock that it came from. Who knows? Maybe there is a whole bunch of abiotic oil out there waiting to be discovered and produced. I haven't seen it, yet. Have you?

Regardless of your stance on abiotic oil, I agree that the comment on abiotic oil sticks out like a sore thumb in that interview. I read that and thought to myself. "What the fuck?" Maybe that's all you meant.



Mon, 07/30/2012 - 19:51 | 2663760 CrashisOptimistic
CrashisOptimistic's picture


That's one of those comments that are almost really well worded.

Ya, pretty much all oil coming out of the ground today comes from porous rock in a locale selected because an ancient river flowed there, and has clear gravimeter indication of caprock.  

That's how you select where to drill.

The thing is for the abiotic folks is simply the basic truth that these principles of drilling didn't always exist.  A lot of dry holes were drilled before what is classified as "promising" got defined.  All those dry holes SHOULD have found abiotic oil.  They didn't

Oklahoma and Illinois should have refilled by now if abiotic mechanisms were churning out oil.  They haven't.  They are pretty near empty and once they get empty, they stay that way.

No question there are hydrocarbons on Titan and nobody shipped microorganisms there to decompose.  That methane is abiotic.  And it doesn't matter.  We don't have it.  If there is abiotic oil on Earth, it's not refilling our empty fields, and someone will have to explain why not.

As for drilling for it, that's already been done.  Every dry hole drilled could be called "an attempt to find abiotic oil" because it should be everywhere.  It's not.  It's irrelevant.

And btw, the price of oil has not changed in 100+ years, now will it ever.  The price is 5.6 million BTUs per barrel.

Spend less than that to extract it and you're ahead.  Spend more, and you're not.  As you spend more and more to extract it, you destroy civilization.  This is what is happening now.


Mon, 07/30/2012 - 20:23 | 2663826 post turtle saver
post turtle saver's picture

There, see? Gold isn't money, energy potential is money.

Mon, 07/30/2012 - 22:32 | 2664035 Spitzer
Spitzer's picture

Nuclear energy will eventually destroy oil

Mon, 07/30/2012 - 22:34 | 2664039 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

 If there is abiotic oil on Earth, it's not refilling our empty fields, a

Who is actually claiming that abiotic hydrocarbon formation works at a pace to refill fields at the same pace as current or historic extraction?

 Every dry hole drilled could be called

Why would abiotic hydrocarbon formation not have some restraints?

As you spend more and more to extract it, you destroy civilization.

The energy derived has been and will always be greater than the cost. The current cost is a function of central bank fiat creation. Not a real reflection of its actual cost. If there was an alternate currently available energy, that could be as powerful or portable, we would be using it. With or without permisson from anyone.

Tue, 07/31/2012 - 00:33 | 2664169 CrashisOptimistic
CrashisOptimistic's picture

I am not sure if we are in agreement or not.


If the rate of formation is 1 barrel per million years, okay, great.  Someone may someday find 1 barrel that is in completely non sedimentary rock, 1000 miles from any sedimentary rock from which it might have drained, and nowhere near any meteorite that might have blown it there from sedimentary rock.  In which case, we have 1 barrel of abiotic oil per million years.  I would have to suggest that remains firmly in the irrelevant category.


If you want to imagine 2 barrels per million years, then that's not quite as irrelevant.  Overall, in general, these matters must be talked about strictly in terms of numbers.  You're going to have to find me maybe 5 million barrels PER DAY to be a relevant concept in a world burning 75 mbpd of crude+condensate (not all liquids).


As for it having constraints, I sort of just said that.  If it's there, where is it?  We presently drill about 4 holes to find one hole with oil in it -- even in promising seismology.  That's a lot of dry holes accumulated over the decades with nothing in it.  More importantly, where to drill didn't always have today's tech.  We didn't have gravimeters 80 yrs ago.  We drilled.  We drilled willy nilly.  We never, ever struck oil that wasn't in sedimentary rock.


And lastly, the value and costs are measured in BTUs and only in BTUs.  BTUs don't care about currency of any kind.  The current cost of oil is higher than it was because "the easy oil is burned".  Difficult is an english word that means "lots of BTUs of effort".  


As for alternatives, all you need is 42 gallons of volume (1 barrel) with 5.6 million BTUs in it.  That's 1,641 KW-Hrs.  Find me that.  Good luck.

Mon, 07/30/2012 - 23:18 | 2664094 Joe Sixpack
Joe Sixpack's picture

I am also an abiotoc oil skeptic, but that said, what I ahve read is that if it exists, it is usually identified by being in paces where fossil oil should not be, like 30000' down where Russians have been drilling (and finding oil).

Tue, 07/31/2012 - 00:42 | 2664180 CrashisOptimistic
CrashisOptimistic's picture


That document has been widely misunderstood.


You do not expect oil 30,000 feet down because it is hot.  Not because that is not sedimentary rock.  The deeper you drill, the hotter it is and as temp rises, the proportion of hydrocarbons that can form long chains vs just plain old CH4 (methane, natgas) gets smaller and smaller.


You CAN find oil at 30K feet.  You will find it in combination with CH4 and NatGas Liquids.  It all will come up the pipe and you seperate it.  The reason you get some oil is all of it didn't dissociate into shorter chain molecules yet.  Wait another million years or so and it will.


The "unexpected" aspect of it has nothing really to do with rock type.  Usually when you get these deep formations with oil, what has happened is sedimentary rock above it was pushed lower a few million years ago by some seismic event and the conversion to natgas started.  It just hadn't finished yet when the drill got there.



Mon, 07/30/2012 - 19:07 | 2663706 LMAOLORI
LMAOLORI's picture


"I stopped reading after that sentence because it is indicitive of not only how at least some of this guy's statements lack relevance but how potentially distorted his perception of reality is."


Same here 


We were wrong about peak oil (liberal lean but we have plenty of oil)



Mort Zuckerman: Under Obama, the New American Dream Is a Job


Mon, 07/30/2012 - 23:23 | 2664098 Joe Sixpack
Joe Sixpack's picture

i.e., PeakOilPeak (oil supply, technology, $) =[A*(supply)+B*(technology)]^($)

Mon, 07/30/2012 - 18:29 | 2663647 Savyindallas
Savyindallas's picture

I really like Mish. I used to follow Denninger, but anyone who voted for Obama and who has a visceral hatred for Ron Paul like Denninger does -has to be some kind of retard--or at least has very poor judgment.

Mon, 07/30/2012 - 19:59 | 2663788 azzhatter
azzhatter's picture

I agree on Mish. Denninger is all over the place but his hatred of Paul turned me off of his tickers. Dr Paul was the last best chance we had for some sanity. Denninger also hates gold which makes no sense. Mish's columns are must read for me everyday.

Mon, 07/30/2012 - 20:30 | 2663834 LMAOLORI
LMAOLORI's picture



I don't know where you get he hates Ron Paul I never saw that perhaps you hate him because he voted for obama and he's admitted that was a mistake but whatever he has an excellent article on this situation


More Obfuscation by Bloomberg (And Others): Trade


And Now, The Consequences



Mon, 07/30/2012 - 21:22 | 2663917 Savyindallas
Savyindallas's picture

He doesn't just dislike Ron Paul  -he HATES Ron Paul   -with an irrational passion -he has toned things down a bit the past year as his readership has diminished  -but everyone who followed him from 2007 through 2011 knows where he stands - Denninger has been a Neocon -he may disguise it now-but his visceral hatred twords Ron paul was based on Dr. Paul's foreign policy  -or as Dennininger used to say--that Ron Paul would get us all killed. To Denninger -there is a Muslim terrorist around every corner.  The man is a fool.

Tue, 07/31/2012 - 01:13 | 2664204 Dingleberry
Dingleberry's picture

If Ron Paul was so good he should be an independent. He would still win his district. Easily. A good Repub (or Dem) is like saying there are good nazis.  Sorry, but guilt by association within those eternally corrupt parties.  He has only managed to get symnolic votes in the House and nothing else. The only hope for this nation is a 3rd party. Or else you can keep believing in the jackass and/or elephant.  

Tue, 07/31/2012 - 06:46 | 2664364 Savyindallas
Savyindallas's picture

Yea -like Huckaby and Obama are better? The two assclowns Denninger was pushing last election cycle.

Mon, 07/30/2012 - 22:56 | 2664070 malek
malek's picture

Denninger writes some very precise, hard hitting pieces, that's why I still read his blog. But sometimes he just goes batshit, like on the imperfections of Ron Paul or a Gold Standard.

Mish has very much softened his Deflationist views over the last years, which is a good thing. He covers an amazing width of topics right to the point, and without unnecessary hyperbole. Like many others, he has his pet silliness, in his case Peak Oil.


Tue, 07/31/2012 - 01:17 | 2664202 Dingleberry
Dingleberry's picture

I read both Mish and Karl daily for the past few years. Without a doubt, Karl has been more correct on nearly everything he has blogged about. Mish gets credit for the bond market.  But Karl's tech savvy is unmatched, and he has pretty much called the tech problems well before they happened, and still are.  Obviously this has enormous implications for our economy.  I wouldn't put juniors college fund in facebook or netflix.

 However his most important contribution is his daily litany of banking crimes. Mish does not harp so much on the crimnal activity of the banks. In fact he appears to take the position that contract law should not get in the way of the banks foreclosing on a deadbeat.  Fraud should benefit the bankers apparently.  Mish only cares about busting unions and not pissing China off or else we will get a trade war.  I guess it's not a trade war if one one doesn't fight back (i.e. the US). Karl understands that unless you put bankers in jail, and level the playing field, everything else you say is pure horse shit. Nothing else will matter. And as we see, it doesn't as the economy will still be shitty next year too.  Karl and Keiser are the two most strident yet accurate bloggers on the web.  Not perfect mind you, but you will gain far more listening to them than not.  I certainly have.

Tue, 07/31/2012 - 02:59 | 2664258 John_Coltrane
John_Coltrane's picture

Its an excellent interview.  Well thought out ideas from a guy with a great understanding of free markets, liberty and economics.  Mish's column, like ZH, is a must read if you want to understand what is really going on in the world.  One of my favoraite columns was one published during the debt ceiling debate where he wrote out a detailed (and I mean department by department) federal budget with a nearly $200B surplus assuming no new tax revenues.  His website is first class.  Around 2007-2008 Mish was advocating treasuries and laddered CDs (i.e. cash) when everyone else was saying this was the worst trade possible and you had to be in equities to protect against inflation.  I could have saved myself a couple hundred thousand $ if I had paid more attention. 

Mon, 07/30/2012 - 18:29 | 2663648 Rainman
Rainman's picture

It's a mistake to take any data from China seriously. Cue the ever-popular Larry ' all provinces in China are Greece'  Lang !!

Mon, 07/30/2012 - 18:40 | 2663652 Haole
Haole's picture

I concur. 

[sarcasm] China is likely as transparent, or more so, as the U.S. with regards to reporting accurate, boots-on-the-ground metrics and statistics. [/sarcasm]

I'd be willing to bet they have multiples of the ~1000 tons of gold they claim for instance.

Mon, 07/30/2012 - 19:13 | 2663716 g speed
g speed's picture

With the levels of internal upper echlon corruption in the "chinese edition" of central gov'ts I would bet that the actual is far far less than the claim. Most is probably in the already packed trunks and luggage of the "retire to Canada at the first sign of trouble" crowd.

Mon, 07/30/2012 - 18:31 | 2663649 q99x2
q99x2's picture

I like reading what Mish has to say mostly except his strong desire to see people of retirement age robbed of their contractual benefits, their pensions to support his willful conception of the way the world should work according to Mish. He fails to see that the middle class that have an obligation by signed contracts need the support of law and that the real problem is not pension funds and obligations to the middle class but the banksters that have destroyed the wealth of the nation. Go after the root of the problem not after each other Mish and you'll be of great service to this nation and democracy as a whole.

Mon, 07/30/2012 - 18:44 | 2663670 Mr. Poon
Mr. Poon's picture

I think he is absolutely correct on pensions.  A proper accounting for pensions would result in the immediate insolvency of the companies and/or government entities providing them.  There is no way we as a society are going to be able to pay for retirement in perpetuity for what will soon be over a third of the population (over half the population in parts of Europe).  That's completely unsustainable.  There needs to be an adjustment, and it will either be a voluntary one now or an involuntary one later.

Mon, 07/30/2012 - 19:24 | 2663736 g speed
g speed's picture


Mr Poon

"There is no way we as a society are going to be able to pay for retirement  govt jobs in perpetuity for what will soon be over a third of the population (over half the population in parts of Europe).  That's completely unsustainable.  There needs to be an adjustment"

fixed it for ya

Mon, 07/30/2012 - 19:54 | 2663778 GCT
GCT's picture

I too like to read mish's blog.  His call on retirement in the public arena is spot on.  Take a look at why most of the CA cities are going bankrupt.  We cannot continue down this road and some sensibility needs to be restored.  I actually feel sorry for the working smuck like myself that just paid their dues and may now not get the retirement promised.  I happen to feel public unions should be gone as they are screwing me to support them.  I could care less what a private union does, unless the government comes in to bail them out because most of the unions tend to support the Dems.  GM could have filed bankruptcy and still would have been in business the next day. I do not like to get into political discussions because it is usually a no win situation.

I do disagree with a gold standard even though I have bought and sold gold for 35 years.  In my mind it does not matter what currency system we use.  Criminals in charge of any system will continue to screw us. 

Until honesty returns to the system nothing is going to change.  Currently we are headed down a road I do not want to drive on.  I am not a professional investor, but even I can do some basic math and see this is going to be very ugly.  Trying to predict anything now is nuts, I prefer to follow trends that have nothing to do with financials.  Yes I may be stupid but I am in cash and PMS as the markets just want me to go in and take my money.  I prefer tangible assests I can hold or own for the time being.  Land is a good choice for me as well. 

I am sure this will not set well with some of you and that is ok with me.  Doing the math, we cannot keep paying the same pensions to public employees, if just does not work for me anyway.  We can blame who we like, we can point out what we like, but currently it is not working. 

Mon, 07/30/2012 - 20:11 | 2663812 Reven
Reven's picture

Quite right, but keep in mind, many people who contributed to 401Ks over the years will not have the retirement they thought they would either.  Nothing in this life is a sure thing, not even social security at this dismal point we have arrived at.  The key thing we must all do to protect ourselves is GET OUT OF DEBT as soon as possible and stay that way.  And also EAT HEALTHY and EXERCISE, thereby warding off excessive health care costs over our lifetime.  Only when the overweight, overlevered consumer changes his attitudes will we begin the journey to normalcy.  We can't expect to retire collecting almost as much money as we were paid during our careers.  A retired person doesn't need this type of income security unless they lived their entire lives beyond their means.  As such emotions will continue to run high on both sides of this critical issue, but sanity must reign the victor in the end.

Mon, 07/30/2012 - 22:35 | 2664041 Lednbrass
Lednbrass's picture

Sanity would be nice, but in the end it is mathematics that will regin supreme and the numbers do not favor those who voted themselves all manner of goodies in the belief that our system was a never ending cornucopia.

Mon, 07/30/2012 - 23:03 | 2664074 malek
malek's picture

Nobody ever claimed that a Gold Standard makes it impossible for gov't to screw their citizens. But it would not allow them to do it in a way that almost noone notices!

Mon, 07/30/2012 - 19:48 | 2663770 Reven
Reven's picture

We need to make a distinction between private and public pensions.  Public pensions were sold as a dream by the implied threat of strike/cutoff of vital public services.  A contract signed under such circumstances with political graft is not a valid contract.  And a contract that promises and forsees 7-8% annual growth per annum to provide these benefits is a total fraud.  Local and state Governments have the right to declare bankruptcy to break these contracts.


Furthermore, if your house and car aren't paid off by the time you retire, you're doing it WRONG.  As such, there is no need for a big fat pension that's 80-100% of your final year's salary (assuming you made sound financial decisions).  The excessive pension system in place is an extension of the overleveraged American consumer.  Both are unsustainable in the long run.


You've been given fair warning, get out of debt before you retire or else suffer the consequences.  I'm not speaking to you specifically, but most people in general.

Mon, 07/30/2012 - 19:52 | 2663776 Uncle Remus
Uncle Remus's picture

Bullshit. Everybody wants something for nothing - it's the only way the Ponzi survives. The system is rife with greed from your sacred cow "middle class" to the very corrupt broke-dick top. Rule of law is not the same as a gun to your head and trying to enforce bullshit scam "contracts" is the latter, not the former.

Mon, 07/30/2012 - 18:35 | 2663653 pain_and_soros
pain_and_soros's picture

I used to read Mish's blog until it became apparent that he was only looking for articles that "fit" & supported his theories....and it also became apparent that he is very much a head case & unstable...

if you don't believe that, read this

Mon, 07/30/2012 - 18:45 | 2663673 buzzsaw99
buzzsaw99's picture

I like and respect EJ. Mish is a joke.

Mon, 07/30/2012 - 19:23 | 2663734 Apostate2
Apostate2's picture

Many thanks for the link.

Mon, 07/30/2012 - 21:17 | 2663910 jimmyjames
jimmyjames's picture

if you don't believe that, read this


Janszen has it assbackwards arguing about prices-that is not inflation or deflation-

He has this wrong too-


You favor gold too, but for the wrong reasons. You think gold prices will rise when the money supply is contracting and the economy is in deflation.

That's backwards. If deflation had in fact occurred, gold prices would have plummeted. Gold prices went up because reflation via monetary and fiscal policy measures succeeded, contrary to your assertion (see "The Federal Reserve will not be able to stop this").


Lets see what gold did in deflation-(the last one)

Lets see what gold did in inflation (the last one) 1980-2001

Mon, 07/30/2012 - 21:19 | 2663913 Northeaster
Northeaster's picture

For the record, you do realize Eric cashed in on gold? He actually disappeared for a bit, as I have a close friend that actually worked with Eric many years ago (I personally have never met him). He made a great call way back when.

It doesn't matter which camp you're in, both have happened or are happening (read the post, it's 2006 with edit last year), this is what we have NOW:

BOTH are bad for fixed income middle-class wage earners that don't keep up with that CPI. That is FACT, 6 years later. They are BOTH right in a different way that current policy will doom us all, they only arrive to the same conclusion via a different formula.

They BOTH like gold, and BOTH clearly get there, just by a different path.

Tue, 07/31/2012 - 03:06 | 2664266 John_Coltrane
John_Coltrane's picture

Oh no, not confirmation bias!  As a human being I both try to avoid confirmation bias and yet practice it all the time.  That's why I read ZH and not the Huff Post.  How 'bout you?  I guess your comment confirms your alien origins.

Mon, 07/30/2012 - 18:37 | 2663658 SWRichmond
SWRichmond's picture

Hyperinflationists in general fail to understand the role of collapsing demand for credit. The total credit market is over $54 trillion. Base money supply is $2.6 trillion and excess reserves are about $1.5 trillion. Seems to me we had huge expansion in credit and Bernanke is struggling to reignite demand. I suggest he will not succeed.

Mish in general conflates money and credit, which are not the same thing.  This is, however, a very common error.

The idea the US$ will suddenly go to zero is ridiculous. The US is the world’s largest holder of gold reserves, and that alone would stop it.

Yes, but at what level for DOW/GOLD ratio, and for what USD/GOLD ratio?

As far as inflation goes, I am still widely misunderstood. I view inflation as an increase in money supply and credit

Mish just wanted to confirm that he conflates money and credit.

Mon, 07/30/2012 - 18:50 | 2663680 NotApplicable
NotApplicable's picture

I think it's funny that he thinks hyperinflation has no link to prices, but rather, it's a political event. (as if prices don't have a politcal component)

It seems to me he just looks at the world, and labels it all as to what he wants it to be, in order to fit into his broken system.

I wonder, does he also claim that Exeter's Pyramid is flat, since credit (and who knows what else) is money? Better yet, if all that shit is money, how does deflation even happen in a dollar world?

Given his views, it's no wonder he's "misunderstood." I can't see any line of thought of his that doesn't contradict itself.

Mon, 07/30/2012 - 19:21 | 2663729 blunderdog
blunderdog's picture

   ...conflates money and credit, which are not the same thing.

Can you roughly plot out the distinction?

Mon, 07/30/2012 - 19:36 | 2663759 jimmyjames
jimmyjames's picture

Mish in general conflates money and credit, which are not the same thing.  This is, however, a very common error.


No they are not the same thing and that is the problem-

In expansion credit does act like money as it drives GDP and production and asset prices ie: houses-

As the value of the asset grows-the holder of that asset "increases" their money supply (inflation)

If the asset decreases in price-the holder of that asset has a decrease in money supply (deflation)

And as the asset decreases in price-the debt does not-that's where credit and real money part company-

Mon, 07/30/2012 - 18:48 | 2663677 BurningFuld
BurningFuld's picture

He's been predicting a housing collapse in Canada since day he will be day.

Mon, 07/30/2012 - 19:32 | 2663746 Rainman
Rainman's picture

what is not in dispute, when is always in dispute. carry on .

Mon, 07/30/2012 - 19:03 | 2663704 JR
JR's picture

Sound money and gold are not interchangeable.

A gold standard in the hands of international financiers or in the hands of unregulated government is as fatal to a nation as fiat currency.

Much has been written in Arthur Kitson’s The Fraudulent Standard (1917) and The Bankers’ Conspiracy on how the universal adoption of the gold standard, advocated by the League of Nations, resulted in creation of “an irresponsible super-Government composed of a group of International Bankers.  It required only a few years to prove the utter incapacity of these men to manage the world’s financial affairs.”

Former director of the Bank of England, Vincent C. Vickers, wrote in Finance in the Melting Pot: “We returned to the Gold Standard in 1925 for the benefit of the City of London, and so ruined our basic industries.  It does not follow that what is best for the City of London is best for the country.

“In consequence of past policy, a farmer who borrowed from his bank, say in 1920, the money-equivalent of 100 sacks of wheat, might be obliged to sell 200 sacks of wheat a few years afterwards in order to repay that same loan, simply because a pound became twice as valuable.

“This is typical of the ‘Gold Standard System,’ which involves Inflations and Deflation.  A Monetary system which begets such flagrant injustice cannot be regarded as an equitable system.  Yet no one in authority here dares to attempt to alter it, because the financiers don’t want it altered.”

The answer is, if Americans want reality and stability, they must not allow the financiers to “issue the nation’s money,” i.e. creating a "debt-based monetary system," commodity backed or no.  The proceeds of the issue of new money should belong to the nation where it is issued.

When a private group exercises the power to originate the exchange-medium and then manipulates the volume of it, that group becomes a power greater than the government – it will invent a national money debt in which the lender surrenders nothing and which it is physically impossible for the people ever to repay.

It opens the way to economic enslavement of the people – exactly where America and Europe are now. The answer is to abolish the Fed.

Mon, 07/30/2012 - 19:25 | 2663740 blunderdog
blunderdog's picture

"Sound money" is a concept few people can describe.

Gold is an element.

Mon, 07/30/2012 - 23:21 | 2664097 malek
malek's picture

You got it so bass-ackwards, it's amazing.

First of all your qutes display once again someone in utter fear of deflation, which is ridiculous. If you let periods of higher inflation happen, then periods of deflation are the normal balancing mechanism to those. And in certain areas we have ongoing deflation for decades and nobody complains there: Would you prefer to pay the same for a satellite dish system or a microwave like10 or 20 yearsa go? Do you hate the fact that you get a much better equipped and safer car for your money than 4 decades ago, but it's price rising slower than the inflation rate?

And then you seriously come up with a proposal to take money-issueing out of the hand of "private" bankers and put it (back?) into hands of government and all will be fine??? Now how stupid is that? 

You really need to get rid of your naive belief that "our problem is not too much power in the hands of too few, but in the wrong few hands."
That's total bullshit.

The only way to limit the ones in power from issuing virtually unlimited currency is a commoditiy backed one. And gold is still the best choice for such.

Mon, 07/30/2012 - 19:21 | 2663730 BurningFuld
BurningFuld's picture

I keep saying this BUT!  Look at poor Greece. Bankers created money out of thin air and gave it to the Greeks hand over fist....right?  So there were pretty much NO rules on lending Greece money...right?  So then if money is created out of thin air and there are NO rules on lending it out why are there any rules on PAYING IT BACK! Does anyone get this?  NO rules on lending OUT then NO rules on paying back. Now wouldn't this kind of system make you think twice on lending money? 

Mon, 07/30/2012 - 19:44 | 2663766 g speed
g speed's picture

So you're saying the the Greeks (the people --the ones that were handed the money?) went out and bought hundreds of German Leopard tanks and hundreds of French fighters(aircraft) and all kinds of naval vessels for billions of Euros of debt to the countries/central banks/banks that loaned them the money with no rules on paying it back? Ya think Greece floated any bonds to pay for all that fancy military sheeit? 

I keep hearing about all those retired people getting pensions in the future bringing the country to its knees but they havent all retired yet. It must be something else at work here--ya think? 

Mon, 07/30/2012 - 19:25 | 2663738 Dr. Engali
Dr. Engali's picture

He lost me when he said hyperinflation talk is silly. Gold is telling you it's a very plausible scenerio.

Mon, 07/30/2012 - 19:34 | 2663751 johny2
johny2's picture

That is when I thought he is full of crap, and quit reading as well.

Mon, 07/30/2012 - 21:09 | 2663895 Dr. Engali
Dr. Engali's picture

Anybody who catigorically dismisses an outcome can't be taken seriously. I recognize that a deflationary spiral is probable, but I also think the fed will print massively to offset said deflation. That is when we will go from deflation to hyperinflation in my view.

Mon, 07/30/2012 - 22:43 | 2664053 PiratePawpaw
PiratePawpaw's picture

I agree. Mish is unable, or unwilling to see that.

But he seems to be coming around on gold, so maybe there is hope for him yet.

Mon, 07/30/2012 - 19:32 | 2663748 Snakeeyes
Snakeeyes's picture

Mish is right sometimes, but cheering for Obama the Marxist who hates capitalism is ridiculous.

Mon, 07/30/2012 - 19:35 | 2663752 Hobbleknee
Hobbleknee's picture

"The idea the US$ will suddenly go to zero is ridiculous."

It has already lost 96% of it's value.  Zero is only 4% away.

Mon, 07/30/2012 - 19:55 | 2663780 Hedgetard55
Hedgetard55's picture

I'll take Mish and Denninger over ten thousand Economics PhDs like Krugman, Bernanke and Stiglitz any day.

Mon, 07/30/2012 - 19:56 | 2663783 Big Ben
Big Ben's picture

The idea that going off the gold standard contributed to the US trade deficit is just plain wrong. Does Mish really believe that removing gold backing from the dollar made it stronger? And actually, the US ran a trade surplus in 1975.

The gradual decline in the US balance of payments (which seems to have started in the mid-60's) was probably caused by the peaking of oil production in the US along with the re-emergence of Japan and Germany as major industrial powers in the late 60's and early 70's. Their economies had been devastated in WWII and it took a couple of decades to rebuild them. Little fuel-efficient Japanese cars and VW beetles first started appearing in the US in the 60's and they became really popular after the oil shocks in the 70's.

Mon, 07/30/2012 - 20:57 | 2663869 jimmyjames
jimmyjames's picture

The gradual decline in the US balance of payments (which seems to have started in the mid-60's) was probably caused by the peaking of oil production in the US along with the re-emergence of Japan and Germany as major industrial powers in the late 60's and early 70's.


It had to do with Inflation ie: government printing and deficit spending and we haven't been on the gold standard since 1922-

Mish has it correct-

Mon, 07/30/2012 - 20:21 | 2663824 mick_richfield
mick_richfield's picture

I could never understand why anyone listens to Mish.

He doesn't seem very clever.

Mon, 07/30/2012 - 21:02 | 2663877 jimmyjames
jimmyjames's picture

I could never understand why anyone listens to Mish.

He doesn't seem very clever


Feel free to rebut his points-he made lots of them-

Mon, 07/30/2012 - 20:45 | 2663853 Freegold
Freegold's picture

There will be no classical goldstandard, only free floating, physical market. That´s where we´re heading. An ettempt to fix your currency to gold will fail quickly this time. And those who will sufffer most in this transition is long papergolders. They will se the price of papergold fall, looking desperate for buyers, and then it´s game over.


Gold, go get you some! "Aristotle"

Mon, 07/30/2012 - 21:00 | 2663876 jimmyjames
jimmyjames's picture

An ettempt to fix your currency to gold will fail quickly this time.


Why would that be?

The price of gold at the fix is the only question-imo

Mon, 07/30/2012 - 22:40 | 2663871 Duke of Con Dao
Duke of Con Dao's picture

Gold is the way too go...

Step right up Ladies and Gents:

see a Socialist-in-the-Closet bitch slap a National Socialist!  

YouTube - 'Nazi Party? Adolf Hitler... You Didn't Build That!' sez President Obama


Mon, 07/30/2012 - 23:05 | 2664079 msjimmied
msjimmied's picture

It's been a couple of days of the same damn link! Get a life bozo, know when to stop.

Mon, 07/30/2012 - 20:58 | 2663872 lolmao500
lolmao500's picture
Iran warns Turkey against military intervention in Syria: Al-Watan newspaper

Syrian ally Iran has warned their common neighbour Turkey that it will meet a harsh response should Ankara carry out any strikes inside Syrian territory, a pro-Damascus daily reported on Monday.

"Any attack on Syrian territory will meet with a harsh response, and the Iranian-Syrian mutual defence agreement will be activated," the Al-Watan newspaper said.

 Al-Watan cited an "Arab diplomat" as accusing Turkey of seeking to use its fears about the rebel Kurdistan Workers' Party (PKK), which already enjoys rear-bases in the far north of Iraq, as a pretext to intervene in Syria.

"Ankara is preparing an agreement with Washington to intervene militarily in the Syrian (crisis), using the Kurdish card as an excuse," the paper said.

"Turkey has agreed with the United States on a military intervention limited to the north of Syria, specifically the northern province of Aleppo, to pave the way for the creation of a safe haven guarded by the armed gangs."

Turkish newspapers have reported that some Kurdish-majority regions of northern Syria have been flying the flag of Syria's PKK ally, the Democratic Union Party (PYD), in what they have said is a deal with the Assad family's government, which was a longtime backer of the Kurdish rebel group's insurgency in Turkey.

Turkish Prime Minister Recep Tayyip Erdogan has warned that it is a "given" that Turkish troops would pursue fleeing PKK militants inside Syria, warning that Ankara would not hesitate to strike "terrorists."

Mon, 07/30/2012 - 21:14 | 2663907 Cabreado
Cabreado's picture

I'd suggest to the Mish-bashers...

Perhaps you really don't understand the fundamental issues.

If you're looking for someone, anyone to give you all the right answers...

and to do it in a way that doesn't tread on your long-held delusions,

and to do it in a way that doesn't offend your personal beliefs of whatever-flavor,

in what is a state of chaos,

you might either:

a) dig a big hole, and crawl into it

b) start your own blog, and save the world, or

c) begin some introspection of sorts, recognizing that you may too have been infected with a bad disease,
the worst disease of a society, the one where entitlement doesn't sit well with reality

Pick and choose your battles, and your enemies...

The current crop of well-known bloggers -- none of them -- are your enemies.

And in ZH tradition, I'll add some emphasis:  wake the fuck up.

Mon, 07/30/2012 - 23:05 | 2664078 blunderdog
blunderdog's picture

So there we are, right, we're the crew in the U-boat, we're sure we're getting pinged, there are at least three hostile subkillers in the area, the batteries are at about 10% and some are damaged, the CO2 scrubber is getting damp, we're past the tested depth and starting to get really curious about the rated depth, that last crunch from the hull may or may not have been a reef, the XO is trying to organize a mutiny and the captain is quoting scripture...

...the most important thing in the world right now is to argue about what *exactly* is going to kill us.

Tue, 07/31/2012 - 04:01 | 2664293 Bay of Pigs
Bay of Pigs's picture

LOL. Mish was bashing my bottom gold call at $700 in 2008

Not many deflationist takers back then

Tue, 07/31/2012 - 13:21 | 2665561 flattrader
flattrader's picture

Your sub analogy is dead on...except four of the six reactors have melted down and are still spewing radiation.

People seem to forget this.

Mon, 07/30/2012 - 21:31 | 2663932 gnomon
gnomon's picture

The very bad old days are back for a very long time.  Get used to it.  It is back to who you know and how much can you steal.  The Ponzi has lost its main flywheel, (cheap energy).   And appearances can't be kept up so as to amuse the masses and make it easier for their overlords to control them.  

No-knock entries, kangaroo courts, and chopping blocks will soon be all the rage, (in more ways than one).

I wish I had better news, but in your heart of hearts you all know this.

(And if the above does not work for the bastards, they will by design or accident halve our numbers).

Mon, 07/30/2012 - 21:39 | 2663942 Temporalist
Temporalist's picture

RBI lowers growth forecast to 6.5%

"According to the poll, India's GDP growth rate forecast for 2012-13 has been lowered to 6.5% from the earlier 7.2% on the back of a weak monsoon and high inflation.

Economists, bankers and traders expect RBI to hold interest rates when it announces its monetary policy review on Tuesday. However, public sector banks, which control nearly 70% of banking activity, have made a strong pitch for easing liquidity through a reduction in cash reserve ratio (CRR)."

Mon, 07/30/2012 - 21:46 | 2663951 reader2010
reader2010's picture

"Why there may soon be an oil war with China."


Apparently Mish didn't do his homework. The war with China has already started in Africa via the Pentagon's Lily-Pad strategy. 

Mon, 07/30/2012 - 22:09 | 2663992 bugs_
bugs_'s picture

Would Ron Paul save global trade?

Mon, 07/30/2012 - 22:15 | 2664004 toomanyfakecons...
toomanyfakeconservatives's picture

Who cares? However, he is likely to be installed as President after the MASS ARRESTS occur and Obama, Brenanke, and thousands of other top traitors are placed in chains and orange jumpsuits...

Mon, 07/30/2012 - 22:18 | 2664008 lasvegaspersona
lasvegaspersona's picture

Triffin's dilemma was noted BEFORE the Nixon shock. If the U$ remains the reserve currency then the need to have a negative trade balance will remain.

Tue, 07/31/2012 - 00:37 | 2664174 compound interest
compound interest's picture

Gold standard wouldn't solve anything, although gold can be an important part of the solution. In the long run, there are 3 steps to completely reform the whole system of global finance:

First, stop bailing out or implicitly backstopping banks by taxpayers' money.

Second, states should not provide deposit insurance for their citizens based on public funding.

Third: eliminate the monopolistic exclusive right of printing money. Governments/central banks should not be the only ones who have the right to create a currency. Let banks and big companies print their own currency, and let everyone backstop their own currencies' worth by what it sees proper collateral. For example, some banks would backstop their own currencies by gold and other PM reserves, but telecom companies would peg the value of their currencies to a unit of data traffic / 1 minute talk on the phone, etc.

States, central planners and governments are the worst managers, half of the world proved it in the last century. Why we make the same mistakes again? Why not let the markets work out their own ways? Let everyone print their own, and then we will see which is better...

Tue, 07/31/2012 - 00:51 | 2664190 Mark Noonan
Mark Noonan's picture

The gold standard, for me, is just a pledge that a dollar in 2012 will still be worth a dollar in 2112.  Back in the office I have that 1953 $5 bill which says that there is on deposit in the US Treasury $5 in silver...I like my 1950 bill even better because it says that it is redeemable for "lawful money" at any Treasury branch.  Whatever else the gold standard might do is mostly beyond my economic knowledge...but it will prevent the Federal Reserve from systemically picking my pocket so that it can bail out failed banks.

Tue, 07/31/2012 - 00:48 | 2664185 Mark Noonan
Mark Noonan's picture

I don't think we're the worst vermin in trolldom...I realize its a bit touch-and-go with reality for some of us, but worst is too strong a word...

Tue, 07/31/2012 - 03:15 | 2664272 AnAnonymous
AnAnonymous's picture

I think we're oversold on everything. We're oversold on the idea of cheap energy, of free energy, of green energy, of clean energy.


Stealing that much of environment does create a distortion in perception, huh?

It is funny how US citizen civilization is stalling as there is less and less left to steal.

A civilization of theft has to be measured by the opportunity to thieve.

Something that US citizens are unwilling to accept.

Tue, 07/31/2012 - 03:20 | 2664277 Paracelsus
Paracelsus's picture

I disagree with some of Dr. Ron Pauls' policies,but he was spot on as far as the criminality of the Federal Reserve.

I am by nature sympathetic to the working class,and with some reservations I am pro-union.That said,Mish was spot on as far as the public unions placing a huge unfunded debt on the future generation,and is driving cities to bankruptcy.I wish I could say I am wrong.    If there were enough local politicians with balls enough to raise taxes instead of selling debt( Bonds).....

Also,The fellow just buried his Missus,so why don't you boneheads give him a break.

Tue, 07/31/2012 - 04:39 | 2664295 Youri Carma
Youri Carma's picture


Mish: My opinion is that over the short to mid-term, oil prices will go down. Long-term, energy is a good place to invest.
WRONG! Oil prices are decide upon in some small London Back office not by market forces. We just had LIBOR, gold and silver prices are artificially held low by the Central bankster does Mish realy believes in fairy tales abot a free oil market ? LOlz

Mish: Hyperinflation is a complete collapse in currency. It is a political event that kicks off hyperinflation, not a monetary one. Hyperinflation talk hit an extreme when oil prices hit $140. Such talk was silly then, and it is still silly now.
WRONG! Hyperinflation is a loss of confidence in a currency and will happen once people realize what's realy going on with the dollar and when it loses it's reserve currency status, which is bound to happen, you'll just watch! Mish: The US is the world’s largest holder of gold reserves.
WRONG! The US hasn't got any gold anymore because it has been stolen. Does Mish realy think that if the gold was there they would obstruct an honest gold audit? Mish is so gullible.

Mish: The idea that we're swimming in oil is preposterous. Moreover, abiotic oil is a ridiculous pipe-dream.
WRONG! Abiotic oil isn't a dream it's called science (But science and economics never went well together)

Mish: The role of government should be to get the hell out of the way and let the free market work. If peak oil really is a problem (and I think it is), the free market will come up with a solution if left alone.
WRONG! There is no free market anymore like said. Mish is being very naive here also with his very naive Neo-Liberalistic "All come good on itself" mombo jumbo. that's what got us here in the first place.

Mish: ... I'm writing in Ron Paul.
WRONG! Ron Paul want's killing austerity (1 Trill in a year is crazy suicide) Ron Paul  want's to cut food stamps which is genocide and almost no cutting on military spending. Mish is gullible and duped for little Ran! Wake up sheople! Mish: … not enact tariffs.
WRONG! Not having tariffs is a Neo-Liberalistic pipedream of everybody having equal changes in trade while it supports slave labor. But Mish likes slave labor because he proposes even lower wages and union busting. So follow Mish into Neo-Feudalism.

Tue, 07/31/2012 - 05:47 | 2664342 SpeakerFTD
SpeakerFTD's picture

Whatever his other failings, Mish will always rate as a fantastic blogger for his early and spirited support of Ron Paul and for his efforts to explain to newbies the actions of the Fed.   He wrote a series bakc in 2008 about the "Fed Uncertaintly Principle".   At the time, few other bloggers were so focused on the Fed, and he proved to be very prescient.    ZH is terrific, but to Mish's credit, he was beating the drum on the Fed a couple of years before the birth of ZH.

His Fed Uncertainty Principle is below:

Fed Uncertainty Principle:
The fed, by its very existence, has completely distorted the market via self reinforcing observer/participant feedback loops. Thus, it is fatally flawed logic to suggest the Fed is simply following the market, therefore the market is to blame for the Fed's actions. There would not be a Fed in a free market, and by implication there would not be observer/participant feedback loops either.

Corollary Number One:
The Fed has no idea where interest rates should be. Only a free market does. The Fed will be disingenuous about what it knows (nothing of use) and doesn't know (much more than it wants to admit), particularly in times of economic stress.

Corollary Number Two: The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.

Corollary Number Three:
Don't expect the Fed to learn from past mistakes. Instead, expect the Fed to repeat them with bigger and bigger doses of exactly what created the initial problem.

Corollary Number Four:
The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it's easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.

Tue, 07/31/2012 - 09:45 | 2664353 Tom Green Swedish
Tom Green Swedish's picture

Only 46 years of oil left at current consumption.  Its not infinite like the sun. Gold or money can't buy something that doesn't exist anymore. I'd say the price will probably rise in price.  This article was long drawn out and stupid.  Does he get paid per word?  China is sort of the wild card here.  They are actually turning out to be better at hoarding commodities peacefully (the fundamental aspect of capitalism, although it doesn't recognize they are not infinite we have realized they are.  China is pretending to be friends with these countries with our monetary support. It appears we are fighting the same war as Russia but they've got a chip on their shoulder as does the rest of the countires with these assets.  But I can tell you Oil doesn't do much good without food air and water or people.

First Solar, Inc.


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Tue, 07/31/2012 - 07:25 | 2664421 northerngirl
northerngirl's picture

Mish is like most, no idea of what is really going to happen in the future and therefore is only trying to make the best of a bad situation.  I have yet to meet a person that has been able to correctly predict the future, however, I do meet people everyday that think they know what is going to happen and are preparing based on their beliefs.

Tue, 07/31/2012 - 07:56 | 2664491 blueridgeviews
blueridgeviews's picture

Global trade is already collapsing.

People, the US and the rest of the globe is contracting at an increasing pace. All this whiile the US is spending 1.4 trillion/year more than it takes in. Couple this with central banks across the Globe printing money and you can see we are in one big heap of Sh_t.

We need a new administration in DC.

We need to cut spending by minimum 10%/year. 

We need to get the bad debt out of the system.

We need to prosecute everyone that was involved in the bailouts and all the fraud that is rampant throughout the financial system.

No pain no gain!

Tue, 07/31/2012 - 09:08 | 2664685 blunderdog
blunderdog's picture

Cutting the deficit to $1T a year is like turning on a dehumidifier when you're knee-deep in the floodwaters.

Tue, 07/31/2012 - 21:10 | 2667105 chokeNpuke
chokeNpuke's picture

Mish said, "The US is the world’s largest holder of gold reserves, and that alone would stop it." the Gold in Ft Knox has not been audited since the 70's??? I attend many coin shows and the coin/gold dealers dont think the US has the largest reserves anymore...If the US has the largest reserves the gold bars are cream filled with tungsten.

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