This page has been archived and commenting is disabled.

Guest Post: How Monetization Happens: Being at the Helm When the Ship Goes Down

Tyler Durden's picture




 

Via Lew Spellman of the Spellman Report

How Monetization Happens: Being at the Helm When the Ship Goes Down

The consequences of excess debt are now facing the leaders of Europe head on, and a monumental decision must be made whether explicitly or implicitly. Excess debt leads to a long chain of D words: Deleveraging in an attempt to retire debt results in a depressed economy and declining asset prices. The depressed economy breeds private debt defaults that in turn produce distressed banks. The chain then runs through depositor flight from the banks, producing a financial crisis and in turn a devaluation of the currency as capital flees. When foreign goods become more expensive there is a declining standard of living as import prices rise faster than wages. Then in an effort to stop the government debt trap, there is a default on promised entitlements under an austerity program leading to the swift defeat of the political leaders. But ultimately there is a sovereign restructuring or a default of the government debt. Most, if not all, the D words are visiting Europe at the moment and its leaders are falling by the wayside.

There is not a precise science that tells us when the debt trap begins the downward spiral that takes the ship down, but there are some rough guidelines. Reinhart and Rogoff (This Time is Different) have found to the extent one can generalize when a country’s debt-to-income ratio reaches the 90 percent level the ship of state begins to list and currently the OECD aggregate of 30-country gross debt-to-income ratio is 105 percent.

The sustainability of a country’s stock of debt is assessed by the market relative to the income flows that will be taxed in order to support the overhead cost of interest, even assuming an endless capability to rollover principal. The unraveling occurs when the financial markets lose confidence that the debt problem will be resolved successfully through income growth, austerity, or both and the refinanced debt carries the new higher market yield.

At that point, the overhead cost of the debt load is ever more depleting of the income stream that must be taxed to pay the higher interest carry. Now on a daily basis, there is a market panic attack if the market yield on Italian sovereigns rises above 7 percent. (Note the yield was close to 5 percent earlier this year so sovereign default is indeed being priced.)

After holders of Greek debt “voluntarily” accepted an arm-twisted 50-percent haircut, the market now believes that a sovereign default by a Western democracy is no longer a fairy tale. Furthermore, the default can’t be reliably hedged by CDS contracts, which proved to be voidable at the whim of the government, thus converting hedged risks into naked risks for the holders of distressed government debt. To make matters even dicier, the BIS regulators are backing away from continuing to award capital shields to the holders of sovereign debt, as explained in my last blog (The Dumpster for Toxic Euro Sovereign Debt). Also, the market has come to believe the world is without remaining Rich Uncles willing to rescue the Poor Uncles of Europe. All these factors cause investors to revert back to pricing sovereign debt based on risk fundamentals rather than government pledges of invincibility or confidence in financial insurance.

At this point, the remaining options to avoid reaching the tipping point to the D chain explained above are few, and the decisions to be made are momentous. The options are: submit to what the market is doing to you; take the lead and offer a debt restructure at a fractional payout; or run the printing presses to purchase enough sovereign debt necessary to contain the market yields. Halfway measures such as strengthening the EFSF no longer buys even a day’s worth of market forbearance.

It certainly must be crossing the minds of the Euro leaders that there are consequences for being at the helm when the ship goes down. The alternative is to orchestrate your own departure, which was cleverly done by Papandreou in Greece by calling for an austerity referendum. In Italy, Silvio Berlusconi’s departure was orchestrated quite literally, as reported by Reuters:

“Italians sang, danced and drank champagne in the streets to celebrate the resignation of scandal-plagued billionaire Silvio Berlusconi, and an impromptu orchestra near the presidential palace played the Hallelujah chorus from Handel’s Messiah”.

Not even in my most Machiavellian thoughts had I conceived of the possible value of being “scandal-plagued” as a means to a back-door retreat from an uncomfortable situation. Given its frequency among politicians it seems to be an undervalued asset in politics. But the strategy doesn’t seem to fit Ms. Merkel, so she is stuck at the helm of the ship of state and is looking for a life raft.

And the consequence of being at the helm when all the D words cascade is more chilling when one witnesses what has happened to the Icelandic captain when his country’s ship went down. Iceland’s ex-premier is facing a formal indictment charging him with criminal violations against the laws of ministerial responsibility and “serious malfeasance of his duties as prime minister in the face of major danger looming over Icelandic financial institutions and the state treasury.” (See: Ex-Premier Charged)

We have reached the point where government bluff, bluster and promises no longer control the markets, and criminal indictments for those at the helm are threatening. If it is not possible to orchestrate an early exit, it would seem the only remaining life raft is the printing press — but that would not be easy for a German government to do out in the open, given their Weimar inflation history, as shown in the chart to the right.

The monetization of government debt is undoubtedly being conceived of as only a bridge to buy time to form a tighter Euro fiscal union with strict budget discipline. Indeed, this is being counseled by Joseph Ackermann, who seems to be the influential behind-the-scenes advisor.

But to keep things together until then, the ECB is no doubt on the job, if not directly purchasing Italian and other sovereigns, but lending to others who will purchase the same. But running the printing press does not stop with the ECB. Once QEs start for whatever reason and a number of countries are engaged, the very act of one major central bank printing to save a government drives capital offshore to perceived safer ports from inflation and a declining economy. This in turn sets up another dynamic that is well underway as other countries are driven to become sellers of their own currency in order to prevent its appreciation and maintain export market share. Thus, using the printing press to save the Euro debt leads to a global money race of competitive devaluations.

Now there is a confrontation of expectations in the markets, a bi-modal distribution if you will, of those believing the deflationary forces of the D chain above will dominate and those believing, now with greater justification, that the monetary produced inflationary route will be the Euro outcome.

Expect some inconsistent pricing in the market by those being moved to bet on inflation hedges side by side with those willing to bet on deflation hedges. What must be most maddening to a deflation hawk is the asset of choice in that circumstance, long-term government bonds, are at the very heart of the credit problem and are not the solution to protecting one’s portfolio. Nor is it the solution to the inflation hawks either. So the questionable sovereigns go begging among private investors with only the central bank as a friend.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 11/19/2011 - 17:44 | 1894556 Careless Whisper
Careless Whisper's picture

The Careless Whisper Saturday Update & Threadjacking

 

 

PIC OF THE DAY: Resisting Arrest At University Of California, Davis

http://www.eschatonblog.com/2011/11/teach-your-children-well.html

VIDEO OF THE DAY: OWS Displays Hi-Tech "Bat Signal" On Verizon HQ In Manhattan

http://www.youtube.com/watch?v=CxG4g62rnd8

David Tepper Becomes Mutha Fucka Global Shareholder To Taunt Corzine; Bought Corzine's Old House As A Tear-Down

http://www.nypost.com/p/news/business/vultures_pick_mf_carcass_EkuxrN5GV...

State (NJ) Takes Newborn Because It Doesn't Like Baby's Name

http://www.nypost.com/p/news/local/shock_newborn_couple_who_named_kids_s...

Cantor Analyst Fired For Telling Truth; Called Unprofessional

http://blogs.wsj.com/marketbeat/2011/11/18/annaly-cantor-analyst-gets-cr...

Miami "Doctor" Has "Pumping Parties"; Injects Cement In Womens' Butts

http://www.miamiherald.com/2011/11/18/2509172/doctor-accused-of-injectin...

China Obeys Big Pharma Pfizer; Death Penalty For Counterfeit Viagra

http://www.greenwichtime.com/news/article/Sex-pill-makers-jailed-as-Chin...

Miami Grand Jury Indicts Police Captain Alleging Ties To Drug Cartel

http://www.sun-sentinel.com/news/local/crime/fl-opa-locka-cop-arrest-fol...

Gallup Poll; No Surprise, US Trusts Auto Mechanics Three Times More Than Members Of Congress

http://www.gallup.com/poll/1654/Honesty-Ethics-Professions.aspx 

VIDEO: Commercial Of The Day; Nasty Pig. Dominant Jeans.

http://www.youtube.com/watch?v=Sduf-7jcV8E 

VIDEO: "Raw Dog" Rant - Bankers Have Raped You and Your Family

http://www.youtube.com/watch?v=RA88kcyQsLw#t=5m48s

Sat, 11/19/2011 - 17:57 | 1894576 Taku
Taku's picture

Thanks for the links.

Sat, 11/19/2011 - 18:28 | 1894601 Ahmeexnal
Ahmeexnal's picture

First link is great. Didn't know napalm came in those small cannisters.

Well, who would have thunk you can actually buy it:

http://www.napalm.net/

Sat, 11/19/2011 - 18:35 | 1894623 Theta_Burn
Theta_Burn's picture

I clicked first link as well, i commend these protesters for showing restraint, and this is exactly why I can't join them as i would immediatley be arrested for atrocious assault on a police officer.

On that nazi losing custody of his children, thank god for the intervention by the state in this case...

Funny I'm in Jersey and didn't see this anywhere. where do you dig this shit up?

 

Sat, 11/19/2011 - 18:59 | 1894678 a growing concern
a growing concern's picture

Seriously. How the fuck can you pepper spray someone who's just sitting there?

Sat, 11/19/2011 - 19:17 | 1894731 AUD
AUD's picture

Same way the French army used to routinely murder people for just walking down the street in Algeria.

Sat, 11/19/2011 - 19:48 | 1894809 Careless Whisper
Careless Whisper's picture

Makes you wonder, at what point do those stupid college kids defend themselves against an unprovoked assault?

 

Sat, 11/19/2011 - 21:27 | 1894960 trav7777
trav7777's picture

after being conditioned for 20+ years that "violence is never the answer"?

LOL.  How about in the year 20-never?

Sun, 11/20/2011 - 02:03 | 1895324 AldousHuxley
AldousHuxley's picture

The OWS kids need to go beg on the free way ramp to gather up $20 and buy one of these police riot helmets with protector screen

 

http://www.ebay.com/itm/VINTAGE-APPROVED-HELMET-EVANSVILLE-POLICE-DEPT-M...

 

Or if use some ClingWrap and cover your face up:

 

http://farm1.static.flickr.com/138/318278342_4438947141.jpg?v=0

 

For anti-tazer clothing...

 

http://blockyourid.com/~gbpprorg/mil/taser/index.html

Sun, 11/20/2011 - 09:06 | 1895494 boiltherich
boiltherich's picture

If they are getting sprayed in the face for just sitting at rest can you imagine what the cops would do if they actually in any way looked like they were going to resist? 

That nasty pig jeans ad was just sad on so many levels.  I know people have the freedom to choose to wreck their own bodies but it should be illegal to deface a human body of a minor that way.  When they actually grow up and find out what consequences come with their acts it will be too late.  Makes you wonder why a whole generation just universally decided they could not stand having white skin doesn't it? 

Sun, 11/20/2011 - 09:42 | 1895522 Eally Ucked
Eally Ucked's picture

Just imagine situation when somebody finds the way to their minds that peaceful is not the way and guerillas war is the most of the fun and excitement? New game police vs youth, and there won't be big, fat policeman spraying them with that shit without reaction, for now they're just kids with high ideals and if gamers join them to have real life thrill the fun will start.

Sun, 11/20/2011 - 09:54 | 1895530 Careless Whisper
Careless Whisper's picture

The model isn't a minor. He's 20 years old. As for the tattoos, you make some good points. But to each his own as they say. 

The model is from Arizona and was working in a warehouse before becoming a model;

http://www.youtube.com/watch?v=w3Uw8Pf-oVo

 

Sun, 11/20/2011 - 12:55 | 1895786 boiltherich
boiltherich's picture
CW:  Thanks for the link and info, it does not matter that he is now 20 the point is the same, he did not get those tats overnight and I have seen children as young as 12 here with significant visible tattoos, I repeat it should be illegal to do this to a minor.  In reality that "jeans" company was advertising to minors, that much is obvious, skateboard?  Texting in ghettoese, and promoting tats over half his once perfect body now defaced like it was a rail car on a siding covered with some mindless taggers graffiti, it is sad.  Nothing says substance abuse and mental problems like such self scarification, and these young people are doing this for a variety of reason none of which are acceptable.  Some do it as a fad and rebellion just as we once sported long hair and blue jeans as our only sartorial choice, but Levis you can take off and a suit put on, a haircut  could be had for a few bucks, and while some rebellion is a necessary feature of the maturation process it needs to be done in a way that does not mean permanent marking of the body which later will cause real mental anguish when they are denied jobs and scare off people they otherwise would like to have been friends with.  In short, as an adult he has the right to fuck his life and body up as he deems fit, in a warehouse who would complain?  But to hold him up as an example to youth is really not a lot different from advertising cigarettes to children. 
Sun, 11/20/2011 - 13:41 | 1895866 trav7777
trav7777's picture

dude, ghetto is cool, aintcha heard?  Black culture is leading, because the powers that control media ADORE blacks.

And self-destruction is at the heart of their culture and always has been.

I've met girls as young as 26 trying to get this ink burnt off...good luck with that, morons.

Sun, 11/20/2011 - 13:38 | 1895862 trav7777
trav7777's picture

white skin?  Because there is an entire propaganda machine having conditioned everyone since the year the NAACP was founded that whiteness is equivalent to evil.

The tribe hammers that meme NONSTOP.  To those who say oh that shit is rayciss or antisemitic, look up who runs/funds the SPLC and NAACP.  Look at who coined the term "racism."

Thank goodness for the slavs; they don't give a fuck about any of this crap.

Sat, 11/19/2011 - 23:20 | 1895142 EINSILVERGUY
EINSILVERGUY's picture

Makes me wonder when will they get a fucking clue and realize that nothing is free and you have to earn your way through life

Work through necessity. It gives you 20/20

No sympathies for these 60's timewarp idiots

 

 

 

 

Sun, 11/20/2011 - 03:51 | 1895375 Transformer
Transformer's picture

You're the one that's a fucking idiot.  Protests become incredibly effective when the protesters do not respond back, for the very reason that most of us feel strong emotions when we see that picture.  The point of the protest is to show the cruelty and true nature of the rulers.  This picture shows that, unequivically.  Non violence shows the oppressors for who they are.  That said, I'm always amazed that someone just doesn't pull a gun out and shoot the cop.  You have to understand though, that is exactly what TPTB wants to happen. The protestors know this, and they are constantly coached to not respond, that there is much more power in taking the abuse.

The pen (or in this case, picture/video) is mightier than the sword.

 

Sun, 11/20/2011 - 13:42 | 1895869 trav7777
trav7777's picture

you're a fucking moron.

nonviolent protests are USELESS.  If nonviolence works, why the HELL did we bomb Libya?

Sun, 11/20/2011 - 02:07 | 1895326 AldousHuxley
AldousHuxley's picture

nature says fight or flee.

nature doesn't give you wins for putting up with it.

Sat, 11/19/2011 - 20:19 | 1894860 falak pema
falak pema's picture

the french lost.

Sat, 11/19/2011 - 20:39 | 1894883 Michael
Michael's picture

I just thank God every day for the complete and total worldwide economic collapse. The collapse solves everything and gets the banksters and their lobbyists out of all our lives for good. Don't feel sorry for the oligarch and aristocrat families. They can ride the subway and eat tuna fish sandwiches or be dead.? It's their time to go bye bye.

Sun, 11/20/2011 - 04:25 | 1895384 Kiwi Pete
Kiwi Pete's picture

Yeah but Ghandi won. And so did Mandela. And so did M L King. and so did the Egyptians. 

Sun, 11/20/2011 - 09:10 | 1895496 boiltherich
boiltherich's picture

And the Boston Massacre was the one event that most galvanized the colonies into real sustained resistance to the crown. 

Sun, 11/20/2011 - 13:45 | 1895875 trav7777
trav7777's picture

Gandhi didn't win; the English withdrew.

Most the other colonies got independence in 47, some without even doing jack for it.

Mandela didn't win, the powers in the major States like the US and UK, with their race hustling machines gave the nation over to Mandela's people to destroy. 

The Egyptians fought back.

Nevermind the 100s of protests, like in Iran, which were totally and brutally CRUSHED.  50 years of Iron Curtain, but I guess you forgot that

Sat, 11/19/2011 - 19:46 | 1894806 trav7777
trav7777's picture

morons like you are the problem who think the ends justify the means.

You empower a state to take someone else's kids, wait until they hear that YOU are teaching them all this seditious shit about the Federal Reserve and threatening assault on holy figures like the police.

Sat, 11/19/2011 - 21:12 | 1894934 Theta_Burn
Theta_Burn's picture

Directed at me?

WTF are you talking about?

You really think that these kids were taken because of names? sure. wish there were more info regarding these wonderful parents. In Jersey police need to come to the home 3 times before a case worker is assigned.

I'm sure thier rap sheet speaks for itself

Another totally out of context link, but you knew that right? just nothing else to add but asshat commentary?

Again looking at the pic of the dad with the nazi flag in the backround I'll say it again good for the kids somebody stepped in to give them 1/2 a chance at life.

Stear clear of generalisms, you seem smarter than that and if not fuck off

 

 

 

Sat, 11/19/2011 - 21:29 | 1894962 trav7777
trav7777's picture

you just said you can't join the protest because you would commit deadly assault against the holy police.

you are also on a website that preaches sedition about the government, its institutions, and the Federal Reserve.

Fuck the State taking children.  I would much rather have people sterilized so that there is no needless suffering of the children of idiots.

Sat, 11/19/2011 - 21:41 | 1894992 Theta_Burn
Theta_Burn's picture

If assualted BY the police for peaceful, lawful protest...then fuck yes

Sterilization to prevent suffering, I'll agree with you there...would that be state sanctioned sterilization?

Children of idiots..see I knew you would see the light.

I'm aware of what ZH represents. but in THIS case I'll side with the state

 

Sun, 11/20/2011 - 13:07 | 1895805 boiltherich
boiltherich's picture

A lot of this is pure judgment calling, like the SCOTUS ruled re obscenity, we might not be able to define what is obscene but we know it when we see it.  I for one like to know where the boundaries are spelled out in black and white lest the government use ambiguous or spurious interpretations of laws to effectively arrest anyone for any reason.  They may find a definition hard to craft but they must craft it anyway.  When cops can do as depicted in the videos then we have already lost any pretense to rights, they have become a goon squad that exists only to protect the property rights of the 1% just like all the other levers of our government.

Sat, 11/19/2011 - 21:39 | 1894989 masterinchancery
masterinchancery's picture

Are you seriously saying that parents can't name their children what they want? Are you aware of the consequences of moving children into foster care?

Sat, 11/19/2011 - 21:42 | 1894997 Theta_Burn
Theta_Burn's picture

Dude, for sure there is WAY more to the story

Sun, 11/20/2011 - 00:08 | 1895197 Chuck Walla
Chuck Walla's picture

Aen't cops part of the 99%? They eat their own?

Sat, 11/19/2011 - 18:47 | 1894646 Fred Hayek
Fred Hayek's picture

According to Palahniuk, in Fight Club, it's actually pretty easy to make.

Sat, 11/19/2011 - 18:48 | 1894650 Ahmeexnal
Ahmeexnal's picture

equal parts with OJ.

Sat, 11/19/2011 - 17:45 | 1894559 americanspirit
americanspirit's picture

Excess debt leads to a long string of 'D' words, all of which can be summarized in a single 'D' word - Duh.

Sat, 11/19/2011 - 17:53 | 1894567 Corn1945
Corn1945's picture

It's impossible to print your way to prosperity. Printing does not create wealth.

The Euro zone has failed. There is no way to get all these different cultures into a tighter union. The first attempt to do that failed.

Prininting money will lead to hyper-inflation because the PIIGS will never fix the budget problems if they know the ECB will monetize every time they get into trouble.

Develop plans to go back to the original currencies. Accept the economic contraction and allow the system to clear itself.

The alternative is hyper-inflation, the total destruction of the European economies, and war. 

 

The Euro has failed. Stop with the bullshit now. 

Sat, 11/19/2011 - 18:52 | 1894661 trav7777
trav7777's picture

again, it's not about that.

The creditmoney system is fatal...the math inherent in it makes it INEVITABLE that it will collapse just as soon as sufficient new borrowing does not meet the exponential growth needs built into ANY system of compound growth.

They CAN print their way out of massive default, sure...on a balance sheet.  But, the notion of replacing what money really IS or was for the past 400 years since the inception of the BOE and its pattern of sovereign lending and issuance of credit in lieu of money...that will be one HELL of an adjustment.

Given a backdrop of aggregate CONTRACTION due to peak oil, what the fk is a promise of principal plus interest in the future worth?  Even if we reduce this to a trivial case, in a zero coupon, when you have contraction, how can anyone expect the maturity to be worth what you think it is?

Bonds see this type of action all the time; when a company borrows X and says we will repay X+Y in the future, and suddenly their prospects of growing enough to do that become obviously junked, the bonds reprice to a market value commensurate with what they actually WILL be able to repay.

Debtmoney is in the throes of such an existential struggle.  Even IF this paper money shit continues indefinitely, the value of any promise to pay is worth a lot less now than it was before growth ceased.  This is how deflation in credit will accompany inflation in pure currency value and stock prices based upon presumptions of sustained worldwide growth at today's nominal currency values must go down.

Or, gas, oil, food, etc., real things, go up in ratio to the SP500 or the debtmoney denominators.

Sat, 11/19/2011 - 19:40 | 1894796 Manthong
Manthong's picture

"Furthermore, the default can’t be reliably hedged by CDS contracts, which proved to be voidable at the whim of the government."

Not just insurance contracts that are arbitrary anymore..

GM and Chrysler "bonds" come to mind.

http://www.youtube.com/watch?v=hJ0MHWH-MOM&feature=related

Sat, 11/19/2011 - 21:41 | 1894993 masterinchancery
masterinchancery's picture

Another example of the basic fact that all government bonds are Ponzi schemes.

Sun, 11/20/2011 - 14:51 | 1896024 earleflorida
earleflorida's picture

yep,... just superimpose their follishness [?] to our printing 'your way' to prosperity here in the u.s. as to the Nth degree in magnitude - the u.s. has failed miserably, period!

i'd rather stay abroad in europe than face the 'Real Carnage' that will soon fall upon america's leaders in calling the kettle-black

Sat, 11/19/2011 - 17:54 | 1894569 AUD
AUD's picture

The sustainability of a country’s stock of debt is assessed by the market relative to the income flows that will be taxed in order to support the overhead cost of interest, even assuming an endless capability to rollover principal.

This explanation doesn't take into consideration a credit bubble, take the UST for example.....

Sat, 11/19/2011 - 18:12 | 1894588 topcallingtroll
topcallingtroll's picture

American exceptionalism.

We own all your punk asses.

Sat, 11/19/2011 - 18:16 | 1894593 AUD
AUD's picture

Yes, yes, I know, it's different this time.

Sat, 11/19/2011 - 18:22 | 1894599 topcallingtroll
topcallingtroll's picture

Great comeback.

Sat, 11/19/2011 - 18:56 | 1894673 trav7777
trav7777's picture

sure it does...the idea is you just tax to pay the coupon.  that's what austerity IS in its purest form.  Keep motherfuckers paying you the interest forever, then their children, then their grandchildren.

The BOE invented this racket 400 years ago.  These financiers have financed the overthrow even of Kings in the past, instituted colonial wars to seize collateral, and on and on.  They busted out Argentina and Colombia even in the past 10 years.  Foreign interests used debt spun from thin air as claims against entire nations.  Now, those foreign interests have title to real land and real assets in S. America and they rent entire countries to the citizens there.

Sat, 11/19/2011 - 19:37 | 1894760 AUD
AUD's picture

What income flows? In the case of UST's (& I'll include Gilts, Bunds etc) nobody gives a shit about income flows. What they give a shit about is profit in the form of rising bond prices - capital appreciation. Bond prices have been rising since 1980 & at the long end at least have a ways to go yet. Remember, for every halving of yields, bond prices double. Central banks ensure bond prices rise & will continue to do this until the day they can't, just like a credit bubble.

Just like a relentlessly rising stockmarket or HY or IG market, no one gives a fuck if the companies that issue these 'securities' produce anything. When the market is rising, they can roll their debt anyhow.

Sat, 11/19/2011 - 19:47 | 1894808 trav7777
trav7777's picture

bond prices against what?  Oil?  Gold?  LOL.  Same as the SP500's imaginary price appreciation.

Sure the numbers are higher but so are the pricetags when I go to Safeway

Sat, 11/19/2011 - 20:02 | 1894830 AUD
AUD's picture

Against dollars, or Pounds, Euro's, Yen etc.

Of course it doesn't make sense, that's what I'm saying, it's a credit bubble!

The 'profits' (take note of the quotation marks) have been so vast for 40 years that the game has continued, kind of like a Ponzi scheme.

Sun, 11/20/2011 - 10:59 | 1895571 BidnessMan
BidnessMan's picture

True until Argentina, Iceland, Ecuador et al say No Mas and declare Odius Debt.  

http://en.wikipedia.org/wiki/Odious_debt

Ecuador is a canary in the coal mine.  Did an interesting Odius Debt analysis a couple of years ago and declared some billions of debt wracked up by former Ecuadorian governments as rebuked.  Correa told the squid and the rest of the banking cabal to go jump in a lake.  Have not seen any US or European gunboats invading in the past couple of years.  Ecuador was temporarily shut out of international borrowing, but hey it just meant they had to live within their means.  What a concept.  The Chinese have been happy to step in and lend billions to Ecuador for hydro-electric infrastructure in exchange for oil export rights.  Several Latin American and African countries have figured out that China can be a perfectly acceptable alternative for infrastructure funding.  Ecuador and other oil exporters can sit and wait - the value of their oil in the ground is only going up.  And Ecuador bought 30 tons of gold for the national treasury with the interest payments they did not make.  

And Argentina has shown that after about five years bankers start showing up again to lend more money.  A new cast of banking newbies wanting to close a sale - selling money is what they do.  IMF leverage to enforce austerity is dwindling with the Chinese as an alternative borrowing source.  And once more countries internalize what Ecuador did, Odius Debt will become more commonly applied.  Sorry chumps - was not a good idea to lend money to the last crowd who stole most of it and sent it offshore to numbered Swiss bank accounts.  We are not paying.  

Ecuador President Correa has a PhD in Economics from the University of Illinois, so not a tinpot crackpot.  I am not an Ecuadorean, but I have purchased some property there to get some of my assets outside of the US.  Gas is $1.60 a gallon, and Ecuador exports good quality seafood, coffee and cocoa.  Gas, coffee, chocolate - what more do I need?  

Sun, 11/20/2011 - 13:47 | 1895880 trav7777
trav7777's picture

people like China because they know China has no navy

Sun, 11/20/2011 - 13:51 | 1895887 sitenine
sitenine's picture

China has no navy?

http://en.wikipedia.org/wiki/People%27s_Liberation_Army_Navy

Sometimes, your comments are just baffling trav...

Sun, 11/20/2011 - 15:23 | 1896065 earleflorida
earleflorida's picture

this too, has been out there since 2008 - but perhaps long before it became public___ref: http://www.telegraph.co.uk.com/news/worldnews/asia/1917167/Chinese-nuclear-submarine-base.html

Sat, 11/19/2011 - 18:09 | 1894586 eddiebe
eddiebe's picture

Double damn! Downright depressing.

Sat, 11/19/2011 - 19:23 | 1894752 Mae Kadoodie
Mae Kadoodie's picture

Double D's turn out to be quite a mouthful.

Sat, 11/19/2011 - 19:48 | 1894812 trav7777
trav7777's picture

had a chick with Gs...her bra looked more like a fucking engineering structure

Sat, 11/19/2011 - 18:19 | 1894596 bullishequity
bullishequity's picture

WOW. Right on the Money. This guy Spellman's website is amazing. He's had it right the WHOLE way. Those kids at McCombs Business School are lucky.

 

Sat, 11/19/2011 - 18:23 | 1894597 ISEEIT
ISEEIT's picture

Krug-man? is long the regime and fiat rules bitchez!

Partaay like it ain't 1984.

Gold and forest.

Forest is what the watermelons always adore after all. The 'Hit' meister had his forest crew.

Somethings never change & history is written by the winners.

This is America right?

Thanks, I thought for a moment that we had already been eliminated as 'inappropriate' and' counter productive'.

Maybe even "adverse to social justice", or complicit in the "destruction of our enviorment".

My bad.

I mistook liberty for freedom?

To complicated. Just give me farmville and promises of lethargic disingagment, TONS of T.V and (hopefully) lithium in my (their) water. 

All is SWELL.

Hurray!!

A Black guy is President and we can all be happy now because OUR shit clearly works and the otherside lost!

Yippee!

 

Sun, 11/20/2011 - 14:16 | 1895945 Kayman
Kayman's picture

ISEEIT

American forests are being sold to China everyday.

Whaaaat  a country...

Sat, 11/19/2011 - 18:22 | 1894598 Belrev
Belrev's picture

The chain then runs through depositor flight from the banks, producing a financial crisis and in turn a devaluation of the currency as capital flees.

I stopped reading after this sentence. Why post someone's nonsensical garbage on an otherwise reputable blog?

Where did capital flee to in 2008? USTs.
Which currency appressiate in value in 2008? USD.
What happened to CPI as a result of GFC in 2008? It went down.

The fact is that financial crisis was immediately preceded by rampant inflation and flight from USD.

Sat, 11/19/2011 - 19:03 | 1894694 trav7777
trav7777's picture

yeah, and what almost happened in 2008?  Systemic banking collapse.  Even the Fed admits that.

If you actually think the flight into USTs would have been the final resting place of all that dollar slosh, then you're foolish...it was just moving up the quality ladder through increasingly constricting passageways.

See, given global financial integration, it's relatively easy to move from B to BB up to A to AAA, etc.  Just point and click.  Things get a lot harder after that point.  A lot of money fled to USTs just like a lot of people ran up to the dry part of the Titanic as it sank.  You see that a lot on sinking ships, a whole ton of people crowding the highside railing.

They were able to save the ship at that point...it's anybody's guess going forward.  Talk to me when oil supply declines by 20%.

Oh, and capital wasn't really fleeing to USTs and USD, bud.  USTs maybe.  The dollar spike was caused by the redemption of foreign speculative positions against which USDs were lent.  South Seas Bubble mechanics.  Spare dollars were parked while people waited to see what would shake down.

And, what did?  An epic printing operation by the Fed and an epic borrowing operation by the USG.  The Gov'ts are the only actors who will or can continue to borrow; I said this to Douchinger prior to all this shit going down.  If YOU will not borrow to continue to grow the credit system, the government WILL borrow on your behalf, at the point of a gun.

Sat, 11/19/2011 - 20:04 | 1894844 eureka
eureka's picture

Trav is right - also ust is seen ad "safe-haven" cause it's backed by 300 million FED fiat sponsored tax-n-consumption slaves willing to sponsor US Empire militarism with bases in 120 countries securing pipelines and USD reserve status. It's simple - US is a mafia ponzi scheme selling protection against itself.

Sun, 11/20/2011 - 09:35 | 1895512 boiltherich
boiltherich's picture

Also because mercantilist nations like Japan and China had to sell local currency and buy US$ via treasuries to hold down appreciation in yen and yuan and euro etc. or lose their coveted market shares.  Race to the bottom. 

Sat, 11/19/2011 - 18:22 | 1894600 greased up deaf guy
greased up deaf guy's picture

when the sh*t goes down, you better be ready... http://www.youtube.com/watch?v=ThppEppMw5w&feature=youtube_gdata_player

Sat, 11/19/2011 - 18:24 | 1894603 sheeple2012
sheeple2012's picture

der Fuhrer ... another D word

Sat, 11/19/2011 - 18:27 | 1894607 blindman
blindman's picture

@"being at the helm.."
http://en.wikipedia.org/wiki/Essex_(whaleship)
.
After-math
.
"Captain George Pollard, Jr. returned to sea to captain the whaleship Two Brothers. After it was wrecked on the French Frigate Shoals during a storm off the coast of Hawaii on his first voyage, he retired from whaling and became Nantucket's night watchman. Every November 20, he would lock himself in his room and fast in memory of the men of the Essex.

First Mate Owen Chase wrote an account of the disaster, the Narrative of the Most Extraordinary and Distressing Shipwreck of the Whale-Ship Essex; this was used by Herman Melville as one of the inspirations for his novel Moby-Dick. Memories of the harrowing ordeal haunted Chase. He suffered terrible headaches and nightmares. Later in his life, Chase began hiding food in the attic of his Nantucket house on Orange Street and was eventually institutionalized.[3]
"
..

Sat, 11/19/2011 - 18:54 | 1894667 Jendrzejczyk
Jendrzejczyk's picture

Will hiding food in the garage end in the same result? My....uhm, friend's wife wants to know.

Sat, 11/19/2011 - 20:00 | 1894831 blindman
blindman's picture

jeez, i hope not. i will do what i can to
prevent anything like it. my hope is that
the land is and will remain more hospitable
than the the open sea can be to a few men lost
in a row boat.

Sun, 11/20/2011 - 09:35 | 1895516 boiltherich
boiltherich's picture

Jend:  Thanks for the knee slapping howler at 5:30 in the morning!  My....um friends wife!  ROTFLMAO.

Sat, 11/19/2011 - 18:29 | 1894613 aleph0
aleph0's picture

I'll say it again :

 

If Governments printed their own debt-free money, rather than borrowing it from the International Central Banking system, headed by the B.I.S. ( who were tried in Nuernberg for financing war ), then National Debt would not exist , just a Currency Exchange Rate.

Why hasn't any Politician ( apart from RP ) gone this route  to "save the world" from drowning in unrepayable Debt  ?
Why ?
...because :  without DEBT ...  the Banksters and complicit Politicians would be out of office .. fast .

Sat, 11/19/2011 - 19:20 | 1894739 css1971
css1971's picture

Credit is centralised money. Every transaction can be monitored and authorised, or not.

i.e. Power.

Sat, 11/19/2011 - 19:36 | 1894787 defencev
defencev's picture

Bullshit. Printing leads to,first, hike in price of gold and PM and then to hike in all material goods, i.e. to inflation. US Dollar can stay indefinitely World reserve currency if monetization of US debt is eliminated. As a first step, shit Bernanke should be kicked out. US politicians should deal with debt and other financial obligations without Fed printng press. Then Marxist Obama will go. And then we will see if there are politicians in US who are willing to deal with fiscal realities. In theory, everything can go to hell with USD staying very strong under this scenario... Everybody who wants to avoid total collapse should stick to this scenario...

Sat, 11/19/2011 - 20:17 | 1894856 grey7beard
grey7beard's picture

>> Then Marxist Obama

As soon as you whack jobs start with the marxist non-sense, you lose all credibility. 

Sat, 11/19/2011 - 19:37 | 1894788 catch edge ghost
catch edge ghost's picture

Consider that with 0% interest, that is essentially what has occured.  It will continue, slowly replacing the 'old' system as reforms are adopted. 

The problem in a utopian debt free greenbacker democratic mob rule world is that price inflation can get out of hand very quickly. This is why you see so much political theatre regarding the national debt as they try to come up with some way to pull it off without a hyper inflation occuring six months into it.

Decisions will not be left to the People when the People are allowed to simply print their money. It will be left to technocrats. Spending will be hard wired for years at a time with little means of recourse for voters. The worst part won't even be the high inflation, you'll be paying more tax too - instead of NO tax as the utopians have promised.

The 'old' parasitic system isn't going away, it's going supranational.  The utopian notes of the individual nations will subordinate to an international fiat that is the world reserve currency.

When it is all settled, you will be enjoying the worst of both worlds.

Sat, 11/19/2011 - 18:45 | 1894614 Dick Darlington
Dick Darlington's picture

Some interesting links to stories which have D written all over them. Spain is the starring actor in all of these.

http://www.reuters.com/article/2011/11/04/spain-rmbs-idUSL5E7M35B020111104

http://www.bbc.co.uk/news/business-15789385

http://www.bloomberg.com/news/2011-11-17/spain-s-unsellable-real-estate-...

 

Oh, almost forgot this one from Ireland. Strong smell of capital d there too.

http://namawinelake.wordpress.com/2011/11/18/ireland-mortgage-arrears-fo...

Sun, 11/20/2011 - 09:41 | 1895520 boiltherich
boiltherich's picture

Dick D (all these D words) I had a look at the Irish link about the mortgage bomb.  I had read this in the Times a few days ago but wanted to remind readers that in Ireland you cannot discharge mortgage debt in bankruptcy.  Even if you lose the house in default you still owe the mortgage. 

Sat, 11/19/2011 - 18:33 | 1894617 Sudden Debt
Sudden Debt's picture

I'd never thought i'd live to see and be in such a mess...
And it's getting pretty darn scary to see it unfold!

Sat, 11/19/2011 - 20:05 | 1894845 falak pema
falak pema's picture

obviously you were so deep into silver worship you didn't see the writing on the wall; it started in WS, it'll end in WS, the deflagration. From the halls of Montezuma to the shores of Tripoli we will see the wave unfurl. 

Sun, 11/20/2011 - 06:35 | 1895431 Sudden Debt
Sudden Debt's picture

You're actually right, but now it's more like a escape package for when our financial system totally breaks down and when governments really start to hunt down money to tax and take.

Sat, 11/19/2011 - 18:34 | 1894619 sitenine
sitenine's picture

+1 Lew Spellman

This is priceless, 'Not even in my most Machiavellian thoughts had I conceived of the possible value of being “scandal-plagued” as a means to a back-door retreat from an uncomfortable situation. Given its frequency among politicians it seems to be an undervalued asset in politics.'

Sat, 11/19/2011 - 18:34 | 1894622 RobotTrader
RobotTrader's picture

Everything is hinged on a bailout

 

They better hope some massive monetization/stimulization or some other crookery occurs soon in Europe.

Otherwise, all the "hard asset" speculators will go down in flames in 2011, and anyone holding dollars and U.S. Treasuries will be the ones "making their year"

Best thing would be to start cheering on the TPTB and hope they do something grand and spectacular.

Sat, 11/19/2011 - 18:38 | 1894628 The Deleuzian
The Deleuzian's picture

I always said that QE III (???) would materialize when the people started begging for it...It's close...I can hear it--- but I can't see it

Sat, 11/19/2011 - 19:20 | 1894738 CrashisOptimistic
CrashisOptimistic's picture

 

A spectacular something is spectacular dilution of Euros.  If the Euro falls, so does the S&P, or so it has for months.

The bottom line here is private lenders are not going to put money into that disaster anymore.  Austerity EU-wide has to be sharp, severe, and long lasting, and that will destroy their GDP, which in turn will cause a miss in tax revenues and thus deficit targets, forcing the EU to insist on even more austerity, as they lend them more bridge financing, the interest on which makes it all worse.

This is not a solution.  Not even short term.

If they decide to fold it all up and let them default, the banks will just laugh at them.  "We're not interested in your declaration of default.  We will carry the paper on you until we can find an asset of yours to confiscate."   Forever.

 

Sat, 11/19/2011 - 20:02 | 1894837 falak pema
falak pema's picture

only one problem : the banks will die before the sovereigns do. No back up from FED will save them.

Sun, 11/20/2011 - 10:52 | 1895563 reload
reload's picture

F-P is right. Banks, or at least some banks are going down. The politicians need a populist counterweight to austerity, the `we are all in this together` slant. The Uber connected Banks will feed on the dead ones. But in the choas many bank deposits will vanish.

Common stack holders in even surviving banks will not do well, only the fortunate few holding teir1 bank bonds will benefit-and probably only in the very long run.

Sat, 11/19/2011 - 19:23 | 1894746 CrashisOptimistic
CrashisOptimistic's picture

 

dupe

Sat, 11/19/2011 - 19:52 | 1894820 Careless Whisper
Careless Whisper's picture

Robo, one day soon you're gonna turn on cnbs and they're going to be talking about a gold buying panic.

 

Sun, 11/20/2011 - 09:47 | 1895524 boiltherich
boiltherich's picture

Are you sure that CNBS would report a gold buying panic?  I get the impression that they would have a static image of a CBS peacock and a SORRY THIS STATION TEMPORARILY OFF THE AIR sign broadcast all day.  It would be as if they were forced to mention Ron Paul's name or something. 

Sat, 11/19/2011 - 18:36 | 1894624 JW n FL
JW n FL's picture

 

 

CLGC’s memo proposes that the ABA pay CLGC $850,000 to conduct “opposition research” on Occupy Wall Street in order to construct “negative narratives” about the protests and allied politicians. The memo also asserts that Democratic victories in 2012 would be detrimental for Wall Street and targets specific races in which it says Wall Street would benefit by electing Republicans instead.

According to the memo, if Democrats embrace OWS, “This would mean more than just short-term political discomfort for Wall Street. … It has the potential to have very long-lasting political, policy and financial impacts on the companies in the center of the bullseye.”

The memo also suggests that Democratic victories in 2012 should not be the ABA’s biggest concern. “… (T)he bigger concern,” the memo says, “should be that Republicans will no longer defend Wall Street companies.”

Two of the memo’s authors, partners Sam Geduldig and Jay Cranford, previously worked for House Speaker John Boehner, R-Ohio. Geduldig joined CLGC before Boehner became speaker;  Cranford joined CLGC this year after serving as the speaker’s assistant for policy. A third partner, Steve Clark, is reportedly “tight” with Boehner, according to a story by Roll Call that CLGC features on its website. 

Jeff Sigmund, an ABA spokesperson, confirmed that the association got the memo. “Our Government Relations staff did receive the proposal – it was unsolicited and we chose not to act on it in any way,” he said in a statement to "Up."

CLGC did not return calls seeking comment.

Boehner spokesman Michael Steel declined to comment on the memo. But he responded to its characterization of Republicans as defenders of Wall Street by saying, “My understanding is that President Obama is the single largest recipient of donations from Wall Street.”

http://openchannel.msnbc.msn.com/_news/2011/11/19/8884405-lobbying-firms-memo-spells-out-plan-to-undermine-occupy-wall-street

Sat, 11/19/2011 - 18:36 | 1894625 devo
devo's picture

Has a CDS ever been triggered/paid?

Sat, 11/19/2011 - 18:46 | 1894645 sitenine
sitenine's picture

Yes, IAG will attest to that.

Sat, 11/19/2011 - 18:51 | 1894660 devo
devo's picture

Thanks, mate. I only began following this stuff hardcore this past year, and the phrase I hear a lot is "it's not a credit event"...seems like they're never triggered. I'll have to research the AIG situation.

Sat, 11/19/2011 - 19:07 | 1894708 sitenine
sitenine's picture

Note that most of the "it's not a credit event" talk is coming (or came) from the ISDA recently, which is trying to convince everyone (successfully or not?) that a "voluntary" default (or haircut as it is being called) does not trigger CDS payouts on the Greek (sovereign) "default".  AIG suffered payout CDS losses mostly on Lehman and Bear Sturns (not sovereign) fallout.  Happy researching to you, devo.

Sat, 11/19/2011 - 19:35 | 1894772 FlimFlam
FlimFlam's picture

"At this point, the remaining options to avoid reaching the tipping point ..."

 

There are no such options, hopiumguy.  Rogers knows: 100% chance of another crash:

 

http://www.investmentweek.co.uk/investment-week/news/2124105/rogers-100-...

Sun, 11/20/2011 - 09:59 | 1895532 boiltherich
boiltherich's picture

He (Rogers) is saying this time it will be worse than 2008 and it is universally accepted that the crisis of 2008 brought us within hours of a global crash and depression, so worse would have to at least be a crash and depression. 

I just want to nit pick here and say that this not going to be worse than 2008 because it is PART of 2008, that crisis never ended, it just got delayed by crisis intervention that we all knew was in the end a lost cause that should have been permitted to play out because interfering would only make the inevitable failure that much worse.  Every one of us has used the term kick the can at some point, the can was default, either outright or by printing and it's consequences.  They made it harder for laymen to spot in the case of Greece because they used a combination of printing and a 50% outright default, but it is still ongoing. 

Also I want to add that if this is not a depression we are in since 2008 I would hate to see what a "real" depression looks like.  They keep saying how narrow our escape was from a crash and depression, from where I sit I am wondering who but the upper 1% are not in a dpression. 

Sat, 11/19/2011 - 19:51 | 1894816 falak pema
falak pema's picture

Am I one eyed cyclop or are these articles written by cyclops like I feel I'm becoming, in order to understand them like hostage in 'Stockholm syndrome' mindset? 

Not a WORD about US sovereign, municipal and private sector debts in a GLOBAL incestuous financial network, which on a govt to govt debt / gdp ratios basis makes greece look like a well run country. How can we moan and groan on the implications of Euro debt when we don't say a word about the grand daddy of all western country debts; where it all began? Could you light my candle please? 

Or is exorbitant privilege a talisman that clothes the emperor while everyone else is left naked?

BTW : who is pulling the plug on the Euro sovereigns? Who is making the interest rate rise to stratosphere. If this interest on Italy were at par with Germany it would make the euro crisis a storm in tea cup.  Could it be the very banks whose right hand tries to save the world from contagion as it KNOWS its own MEGA INDEBTMENT in homeland, while their left hand lights the incendiary fire in Euroland. Nero has many sons today.

Sat, 11/19/2011 - 20:03 | 1894843 Dingleberry
Dingleberry's picture

you are correct......same shit happened with the Asian tigers in the 90's, and Japan before that.  One day everything is looking straight up, and then out of the blue shit comes out of left field.  Notice how "overnite" the Soviet Union collapsed?   How about Latin America?  Economies can be brought down AT WILL, and usually are.  And if a nation doesn't tow the debt line, they are labelled a pariah nation-state.  These euro countires will be brought to heel eventually.  There is no such thing as "coincidence", as I have learned watching these (rigged) markets over the last 3 decades. China is next on the block, FYI, after this Euro shit shakes out.  Now I will be labelled a "conspiracy nut". Fine by me. At least I'm not an idiot that believes otherwise.

Sun, 11/20/2011 - 00:03 | 1895187 honestann
honestann's picture

Damn straight.  Better to think for ourselves, be wrong once in a while due to some mistake or lack of information, but mostly be "right on the money".

And actually, given how many so-called "crazy conspiracy theories" have turned out to be "right on the money" or largely correct, everyone should take every reasonable opportunity to consider every "crazy conspiracy theory" until they have sufficient observations and evidence to formulate good solid personal opinion one way or the other.

Sat, 11/19/2011 - 19:58 | 1894829 rambler6421
rambler6421's picture

Hyperinflation bitchez!

 

libertarian86.blogspot.com

Sat, 11/19/2011 - 20:44 | 1894892 onarga74
onarga74's picture

I'll take the other side of that.  History must repeat and the perfect storm is here.  Our congress can't play marbles let alone do the peoples business.  Germany aint gonna dump good money after bad to prop up anyone. Hyper deflation will have people buyin houses with a 1% mortgage and gold will sell for the price of a box of pencils.  Deflation cash is king.  Inflation  things are king. ABC  The first gold plunge this week or next will be liquidations to pay for stock losses. 

Sun, 11/20/2011 - 00:31 | 1895183 honestann
honestann's picture

Yes just as you said, paper gold got crushed in 2008 when stocks tanked, and that dropped the price of physical gold too.  However, even with this, gold had a positive year in 2008, bounded by much larger positive years on both sides.

Your analysis is wrong only because THIS TIME a great many more people recognize that GOLD IS CASH aka MONEY.  THIS TIME gold may benefit even more by being widely recongized as the one real, stable form of "cash" and "money" as against ALL fiat currencies than it is hurt by liquidations of paper gold to cover margin calls.  And no, people do NOT liquidate physical gold to cover paper losses, at least not very often.

This does not even count any benefit from the physical markets overwhelming the paper markets, which may be likely when "all hell breaks loose" and people are looking for ways to achieve the UTMOST safety of their liquid wealth.  Well, a great many people are learning that UTMOST SAFETY is CONTRADICTORY with anything made of paper.  And thus, there may be a viscious rush to physical gold, silver, platinum, palladium... as well as all other real, physical goods.  And in that case the paper markets will EXPLODE because they are only 1% backed by anything physical, which will ROCKET the nominal values of physical gold(measured in any fiat currency) into outer space.

So your short term history is correct, but your longer term history and your analysis are wrong... fortunately.

Sun, 11/20/2011 - 01:28 | 1895287 onarga74
onarga74's picture

In August I missed the "top" call by a measly 100 bucks.  Man, did everyone rip me a new one but I was right.  I need to work on the details I guess.  We'll have a chat in month.  Gold owners will be dumping your "safety" so you can buy all you want.  Gold my friend is source of funds in a macro crisis not a safety net.  You'll see.

by onarga74
on Tue, 08/09/2011 - 08:47
#1542039

 

The last 3 week move in gold is at the top (1650-1750 area) No one is bearish on gold and obviously people regard it as a "safe" haven.  Everyone including sovereigns are in and on board.  This train to their chagrin is going backwards.  The high seen overnight won't be seen again for decades if then.

Sat, 11/19/2011 - 20:20 | 1894862 onarga74
onarga74's picture

Could be a historic week.  One of the Greek gods decided not to sign an oath that would have sealed the austerity program.  Now we'll have a Black Monday and a Black Friday with the possibility that the painters might just do the whole week.

Sat, 11/19/2011 - 22:34 | 1895076 Lost1
Lost1's picture

I can’t speak for Europe but America is doomed because we have been fed a line of Socialist BS for decades and we like it. Regardless of what groups like the Tea Party say, like we need to cut government but don’t touch my SSN or Medicare. An Example “Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers. But they can expect to receive medical services — from prescriptions to hospital care — worth $355,000, or about three times what they put in.” How can any system withstand these levels of spending? This isn’t meant to be a poke at the Tea Party but even if the more conservative of Americans doesn’t get it how can we expect the radical left who want a cradle to grave entitlement system to see the forest for the trees. It kills me to see the Democrats talk about infrastructure stimulus which ends up usually being more road construction all the while telling us that we need to build transportation systems that use alternate energy that don’t utilize roads. So as far as I can see this Sovereign debt problem can never get better. We Americans don’t want to suffer the pain that it will take to break the borrow and spend mentality. Look at what happens when any politician seriously talks about real cuts.

Sat, 11/19/2011 - 23:47 | 1895162 honestann
honestann's picture

People have no freaking idea how cheap life should be, and would be if governments stopped trying to control everything.  When I was a kid, the doctor would come make a house call (that's right, come to our house) when someone was sick, and charge $10, including whatever shots he might administer or pills he might leave.  And hell, I'm only in my early 50s, so it wasn't THAT long ago (about 40 years ago).  Today medical care is vastly, vastly, vastly, vastly, vastly more expensive than it should be.

And how about housing, another of the big 3 expenses for people?  Well, people spend about 8 to 12 times more for a home than they would if government had absolutely ZERO involvement in housing and loans for housing.  The first time I performed this computation, I thought "no way, this must be wrong, the difference simply CANNOT be this huge".  So I went back and performed the analysis from scratch, again and again and again and... same results.  I have stated the basic details of this analysis previously on ZH.

Then there's education.  Nobody disputes education is 100 times more expensive now than a couple generations ago.  The fees and required expenses at good universities were about $200 per semester.  Now kids leave with $25,000 to $100,000 of debt from student loans, and get much lower quality, much less useful education.

To tie this information into the message I answer, the cost of goods and services WOULD revert to such low levels if governments defaulted and were scaled back to minimalist levels, that EVEN THE POOR could afford to live a decent life.  What's far, far, far more important is that every penny that every productive individual earns AFTER the collapse would buy them vastly more than today.

I used to be surprised when people considered this scenario "unbelievable".  Now I'm too used to this reaction to be surprised.  But it is so clear and so obvious to any honest individual with half a brain who has considered it.  This issue has many elements, but just consider this much.  The productive potential of every individual has increased DRAMATICALLY in the past 50 years, due to computers, software, automation, better machinery, better techniques, better engineering and better science here and there.

There is NO LEGITIMATE REASON WHATSOEVER that honest, ethical, productive individuals should not be living a vastly better life than last generation or the generation before.  But THEY ARE NOT.  Why?  The answer is very clear to anyone who is honest, observant and has half a brain.

The answer is, the non-productive predators-that-be and predator-class are stealing increasing percentages of wealth from producers, and distributing increasing quantities of producer wealth to the parasites who support them, vote for them, and keep them in power.  This has two huge negative-feedback effects.  First, more producers throw up their hands and join the predators (if they can) or parasites (if they can't).  This leaves fewer producers to create all the goods for everyone, and that extra burden leaves less for everyone.  Second, the burden on producers (material, financial, psychological and more) grossly degrades the efficiency and effectiveness of each producer.  Untold quantities of time and resources are wasted, and untold efforts, inventions, endeavors and developments are never tried.

So let the system default, and end the power wielded by the predators-that-be and predator-class who control and ARE "the system".  All honest, ethical, productive individuals will be VASTLY better off.  Untold numbers of predators and parasites will recognize the virtue and viability of productive life and begin an honest life of their own.  Those who won't will be shot dead in self-defense in the process of a crime, or be locked up forever for trying to live as a predator or parasite.  The majority of those who try to convert to productive life will be helped, voluntarily, by the majority of producers.  Producers are generally happy to voluntarily help others trying to learn and be productive.

The secret of the good life is to... get real.  Be honest.  Be ethical.  Be productive.  Accept reality for what it is, and make best productive use of it to invent, design, develop, produce... and ultimately enjoy "the good life".  And make no mistake, the good life is both practical and inexpensive once the predators, parasites and their endless schemes are done away with.

LET THE SYSTEM COLLAPSE.  That's the best thing that could possibly happen.

Sun, 11/20/2011 - 01:19 | 1895277 Hulk
Hulk's picture

Absa Fucking Lutely Honestann, well stated...

Sun, 11/20/2011 - 10:28 | 1895549 boiltherich
boiltherich's picture

I agree mostly, I have been saying for a long time that healthcare costs alone would destroy us at the rate we are going.  I mean university costs as well but a college education on an individual level is a luxury, getting a ruptured appendix removed is not.  As you say though if healthcare were priced by what people can actually afford rather than what the government claims it can afford we could all get our appendix removed and not be bankrupted by it.  When I was born Mom spent six days in the hospital and the total bill for everything was under $400.  I too am early 50's.  But, congress decided long ago it would rather have campaign contributions from companies that milk the system for profits than do what is best for the nation and people.  Just look at Bill Frist and Hospital Corporation of America. 

The only thing I don't agree with is that we can now do anything about any of this but ride the tiger we have by the tail till the grisly end and hope that once the total collapse does come we have a Ron Paul in place to start over who will separate our constitution from the claw-like talons of corporate interests.    I will say this, if the government/corporate collapse default does come but average citizens are not permitted to participate in it as I suspect will be the case then the war will not be over only just beginning.  A reset has to be universal or it is not a reset, it is confiscation by the elite of the last bit of sovereignty we each supposedly have by right.

Sun, 11/20/2011 - 10:24 | 1895548 BidnessMan
BidnessMan's picture

My last quarter at Georgia Tech in Spring 1977, tuition for a full-time in-state student went above $200 for the first time.  I worked my way through Tech as a Co-op student in 5 years, and graduated with no college loan debt.  I was in a fraternity, had a great college experience, and still had enough time to study and graduate with High Honors.  Impossible for any student today regardless of their desire or work effort.  Availability of college loans allowed colleges to ratchet up tuition far beyond the inflation rate.  Government college loans were no favor to college students..... The system will have to collapse before it will get better.    

Sun, 11/20/2011 - 12:40 | 1895756 bjennings
bjennings's picture

I'm sorry but you don't make any sense.  You're talking good Fox News talking points though.

Sun, 11/20/2011 - 00:13 | 1895193 QQQBall
QQQBall's picture

delete

 

 

Sun, 11/20/2011 - 00:10 | 1895196 QQQBall
QQQBall's picture

UC Davis of all places.

 

I wonder if it was man-to-man, one-on-one, if numbnuts would be so courageous?

http://www.balloon-juice.com/2011/11/19/police-pepper-spray-ows-student-...

Sun, 11/20/2011 - 00:43 | 1895238 Bansters-in-my-...
Bansters-in-my- feces's picture

Devils'n Da details.

Sun, 11/20/2011 - 01:16 | 1895271 Schmuck Raker
Schmuck Raker's picture

TYLER, PLEASE post a copy/link of Nomura's Jens Nordvig's

"Currency risk in a Eurozone break-up - Legal Aspects"

if at all possible.

Sun, 11/20/2011 - 02:52 | 1895350 caerus
caerus's picture


the true story next week imho will be the farce that is the "super duper" committee...they are already preparing a plan "b" and further delay of any decisions that mean anything of import to the supposedly free citizens of this country...the requisite cuts will not be made...decisions of any import will be delayed..and the sad charade will continue...the debt burden will grow and u.s. ratings will be cut...

"although the official deadline is midnight wednesday, the committee is legally barred from voting on any plan that was not made public at least 48 hours in advance."

deficit panel gridlocks as deadline nears

time has run out...these are not supermen nor superwomen...these are hardly citizens...

Sun, 11/20/2011 - 03:48 | 1895374 Use of Weapons
Use of Weapons's picture

New Mexico votes 65-0 to move public money to Credit Unions

 

I'm surprised no-one has jumped all over this yet:

Sun, 11/20/2011 - 09:14 | 1895499 Bob
Bob's picture

Hell yeah!

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