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Guest Post: Our Counterfeit Economy

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

Our Counterfeit Economy

The U.S. economy is in effect a counterfeit economy, living on money created from thin air that is unbacked by an equivalent productive expansion of surplus value.

Yesterday we looked at counterfeiting and money printing and discovered they are one in the same: (Counterfeit Money, Counterfeit Policy.) If we apply the same analysis to the U.S. economy, we have to conclude the entire U.S. economy is also counterfeit.

The analysis is not as complicated as store-bought economists would have you think. Much of what passes for "economics and finance" is simply distraction, a sophisticated version of bread and circuses.

Let's start with two basic concepts: productive value and surplus value. The classic example of a productive asset is a factory that produces goods that have a market value that exceed the input (production) costs. In other words, the factory produces surplus value.

We can measure value by any number of means: ounces of gold, quatloos, sea shells, etc. To keep things simple, let's just measure value in units. If it costs 10 units to produce a good (including labor, materials, energy inputs, transportation, and a return on the investment to construct and maintain the factory), then the output (products manufactured by the factory) must fetch 11 units in the open market to create 1 unit of surplus that can be invested or spent on consuming other goods or services.

If it takes 10 units of input costs to make a product that is only worth 9 units, then the process generates a net loss. There is no surplus to spend; rather, there is a loss that must be covered by cash, borrowing or the selling of other assets. When the cash, ability to borrow and assets that can be sold all run out, then the enterprise is recognized as insolvent and it closes.

If the factory's output has little to no market value, then the investment is what we call a mal-investment--an investment that only claimed to be valuable because it was speculative or protected from price discovery in a transparent market.

Our current economic theory holds that any good or service produced has value, which we measure in dollars of gross domestic product (GDP). The intrinsic flaw in this way of assessing value is that it doesn't recognize mal-investments.

Here are some examples.

-- If a military aircraft woefully underperforms and costs so much field commanders dare not risk its combat deployment, then what value was created by its manufacture?

-- If it takes 10 units of input costs to produce a biofuel crop that is processed into fuel worth 9 units, then what value was created by the process of making that biofuel?

-- If a subdivision of new homes is built in the middle of nowhere and finds no buyers, then what value was created by the construction of these houses?

-- If a costly medicine is distributed at great expense in the millions of doses and is discovered to have little to no effect on longevity or other metrics of health, then what value was created by the immense cost squandered on this medication?

In all these cases, the mal-investment was added to the GDP as if it created productive value. The factory and the costly but essentially useless aircraft (think B-1B bomber) were added to the GDP, but they did not create useable military value. The biofuel production facilities were all added to the GDP, even though the process generated a net loss. The homes built in the middle of nowhere were also added to the GDP, along with the costs of the worthless medication.

Consider a financial sector that is declared "too big to fail" and trillions of units are borrowed on the taxpayers' account to bail out the albatross banks. The bailout of banks created no productive value, even as it took money away from potentially productive investments.

Since surplus value is not limitless, the money squandered on these mal-investments was no longer available for productive investments. Rather, these mal-investments sucked up all the surplus generated by the entire economy. Now there is no money left for superior (and cost-effective) military aircraft, medications that actually cure diseases rather than reduce symptoms, homes that are in desirable, cost-effective locales, productive energy investments, and solvent banks.

Let's say an economy required 1 million units of input costs to generate 2 million units of productive value, i.e. goods and services whose price has been discovered by a transparent market. That economy has 1 million units of surplus to spend on consumption, productive investments and mal-investments.

Since everything requires maintenance and infrastructure, then there is no such thing as a steady-state economy: for example, factory machines wear out and have to be replaced. If there is no surplus money left because it has been sunk into mal-investments, then the factory's ability to create productive value and surplus value degrades.

If the mal-investments have been prodigious, at some point the factory is incapable of producing any surplus at all.

There is a "fix": borrow money based on the future surplus. If the amount being borrowed is modest in comparison to the potential surplus created by a refurbished factory, and the borrowed money is productively invested, then this reliance on credit and leverage may pay off.

But if the borrowed money is spent on consumption and mal-investments rather than being invested in productive assets, then the only "fix" left is to borrow more money--not just mortgaging the future surplus of the factory, but leveraging it into a stupendous sum of borrowed money.

At some point the sums being borrowed far exceed the potential surplus generated by the factory, even if the factory amd market are running at optimum levels. If the factory requires 100 units of investment to generate 50 units of surplus, but 1,000 units of money have been borrowed against that future surplus, then the interest payments on that 1,000 will eventually exceed the modest potential surplus value.

Note that future surpluses are all imaginary; it could turn out that the market for the factory's goods declines and there will be little to no surplus value created in the future.

Borrowing money based on imaginary future surpluses is a higher form of counterfeiting. And that is precisely what the U.S. is doing, borrowing immense sums at every level, private, corporate and State/Federal, all leveraged against phantom future surpluses, even as the economy requires some 10% of its supposed output (GDP) to be borrowed and spent on consumption each and every year just to run in place, i.e. the Red Queen's Race (Bernanke, Goldilocks and The Red Queen January 10, 2011).

In other words, the U.S. economy is running a massive deficit, and squandering the vast sums being borrowed on consumption and mal-investments. Once you rely on more borrowing against imaginary future surpluses to fund your current expenses, then eventually the costs of servicing that debt exceeds any possible future surplus.

The last-ditch "fix" is to simply print units of money (or borrow it into existence like the Federal Reserve)--counterfeiting, pure and simple-- and deceive the market for a time via the illusion that the freshly printed units of money are actually backed by productive value or surplus.

As history has shown, eventually the market discovers the actual value of this counterfeit money, i.e. near-zero, and the system implodes.

Alternatively, the credit markets grasp that there is no way the economy can pay the interest on its monumental debts, never mind pay back the principal, and then the number of people willing to lend surplus capital to the economy declines to zero, as does the economy's ability to sustain itself with leveraged debt.

The system then implodes as the "free money machine" of ever-expanding debt breaks down. Once there is no more "free money" to fund consumption and mal-investment, then the reality of systemic insolvency is revealed to all.

You cannot counterfeit actual surplus value generated by productive assets, you can only counterfeit proxy claims on future surplus. That is the U.S. economy in a nutshell: we are counterfeiting claims on our future surplus, even as we squander vast sums on horrifically obvious mal-investments and wasteful, cost-ineffective consumption.

 

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Wed, 02/01/2012 - 13:24 | 2116820 trav7777
trav7777's picture

Future surplus gone bitchez

Wed, 02/01/2012 - 13:42 | 2116836 TruthInSunshine
TruthInSunshine's picture

Let me summarize this entire article with one chart (and you can replace the gold in it - it doesn't matter if you think gold is valuable or a barbaric relic - with anything else that you believe does have inherent value, that is finite in quantity, whether oil, wheat or whatever - regardless as to how plentiful or rare it may be - as long as it's finite):

 

http://goldnews.bullionvault.com/files/Trillion2.png

 

And the emperor declared, "Dilutus Maximus Fiat Ad Infinitum!"


But soon, the crowd slowly became aware that he hath no clothing.

 

p.s. That chart only plots the money supply until mid 2005. 2006 to 2011 is very interesting. I can't wait until the 2012 through 2020 chart is here.

Wed, 02/01/2012 - 13:44 | 2116902 francis_sawyer
Wed, 02/01/2012 - 13:47 | 2116915 kridkrid
kridkrid's picture

another simple chart: http://blogs.reuters.com/rolfe-winkler/files/2009/09/public-and-private-... - Of course we know that debt and money are the same thing, so as one might expect, my chart that shows aggregate debt looks similar to yours that show money. 

Wed, 02/01/2012 - 13:50 | 2116924 TruthInSunshine
TruthInSunshine's picture

In fact, there will inevitably be a one-to-one ratio, in a fractional reserve bankster's paradise.

Wed, 02/01/2012 - 13:58 | 2116952 economics1996
economics1996's picture

Here is the future that lies ahead if you fail to understand and do something about our inflationary government policies. You will receive Social Security if it is not reformed, but it will be worth a cup of coffee, maybe.

Let’s go to Lady Listowel (Germany-Austria-1923 during the hyperinflation years) for some historical accuracy and perspective as she writes about how inflation affected her circle of friends and the elderly:

“One use to see the appearance of their flats gradually changing. One remembered where there used to hang a picture, or a carpet, or a secretaire. Eventually their rooms would be almost empty – and on paper some people were reduced to nothing.

In practice, people didn’t just die. They were terribly hungry, and relations and friends would help with a little food from time to time. We sent them parcels, or took them ourselves because we had no cash to pay for postage. And some of them begged – not in the streets – but by making casual visits (one knew only too well what they had come for) or by writing letters asking for help.

Everyone still tried to keep up appearances: at first, early on, people looked around to see what economies they could make, what clubs to resign from, what luxuries to do without. Later it was a question of considering what necessities to do without.

And when the food was not a problem – after all, we lived most of the time in the country where we could get it – there were troubles because we had no money. Only one of us could afford to go to Budapest at a time. There was no way to get medical help without money. If you had a toothache you couldn’t afford a dentist. If you needed to go to the hospital, you might get into a convent; otherwise you stayed home, and got better, or got worse.”

Wed, 02/01/2012 - 14:18 | 2117013 JPM Hater001
JPM Hater001's picture

Edited for mass consumption...Permission granted to copy and paste to papers everywhere in the first person.  It will be in mine next week.

Dear Editor
I felt it prudent to share the fleecing that continues to occur in America.
On November 8th, 2010 I did some bulk purchasing for my pantry from Sam’s Club Online. Having recently seen the massive increase in beef by some 22%, blamed I might add on everything but monetary policy, I thought I would see what the purchase of these same items would cost today. Fortunately, Sam's keeps my order available for me to download and compare.  I submit for your approval the top 13 most used items in our households and the current inflationary increase over 14 months to purchase the exact same product:
Dakota Maid All Purpose flour 25 lbs. - 30%
Crystal Sugar® Granulated 25 lbs. - 277%
Jif® Extra Crunchy Peanut Butter - 40 oz. - 50%
Golden Star® Jasmine Rice - 25 lbs. - 7%
Bakers & Chefs Gar den Rotini 6 lb. - 10%
Idahoan® Mashed Potatoes 5 lb. bag - 16%
Chicken Flavor Bouillon - 4.4 lb. bucket - 84%
Freeze Dried Sliced Mushrooms 1.5 oz. - 534%
Imitation Vanilla - 64 oz. plastic jug - 58%
Hunt's® Tomato Sauce - 12/15 oz. cans - 72%
Del Monte® Whole Kernel Corn - 8/15 oz. cans - 25%
Hunt's® Diced Tomatoes - 8/14.5 oz. cans - 90%
Del Monte® Cut Green Beans - 12/14.5 oz. cans - 18%

I have been stressing that we are playing a very dangerous game. This inflation is a very predictable outcome to the unbridled borrowing and spending by our governments- state and national. In Wisconsin Scott Walker actually does something to save the state literally billions and they recall him? Are you crazy? Why would you sign your children's life away? If they can't convince people to get fiscal policy under control in Wisconsin the federal government has no chance.

Ron Paul is the only candidate talking about the monetary policy and role the Federal Reserve plays in our life. Look at these numbers! YOU ARE BEING ROBBED and President Obama (I still respect the office if not the man), Mitt Romney, Newt Gingrich and Rick Santorum have no idea what is going on. Watch the next debate and ask why not a single question is asked about inflation, Ben Bernanke, the Fed, gold, or, I might add, this false war the propaganda machine is building up with Iran. Wars are very inflationary by the way.

Joseph Gobbels would have been proud with what we have become. If you don’t know who he is...turn off Snookie and take out a book.

Wed, 02/01/2012 - 14:43 | 2117128 JPM Hater001
JPM Hater001's picture

Here is the actual raw data if you care:
ITEM / ITEM #    -  PRICE       Current Price   Inflation
Dakota Maid All Purpose flour 25 lbs $6.86            8.93        30%
Crystal Sugar® Granulated 25 lbs $3.94   $14.87        277%
Bakers & Chefs Cle ar Frying Oil 35 lbs $22.49       $22.49   27.28     21%
Bakers & Chefs Soy Salad Oil       $22.49Salad Oil                 27.79     24%
Arm & Hammer® Baking Soda 13.5 Oz     $6.16     6.68        8%
Jif® Extra Crunchy Peanut Butter jars - 40 oz.$6.98            10.44     50%
Spam® Classic - 4/12 oz $9.28      9.99        7%
Peak® Pinto Beans- 10 lb. bag     $5.73     8.53        49%
Golden Star® Jasmi ne Rice - 25lbs            $16.48   17.59     7%
Bakers & Chefs Gar den Rotini 6 lb.          $4.98     5.48        10%
Idahoan® Original Mashed Potatoes 5 lb. bag      $5.88     6.82        16%
Knorr® Chicken Fla vor Bouillon - 4.4 lb. bucket   $9.88     18.17                     84%
MALABAR BLACK PEPP  10 ER 10 OZ         $2.98     3.88                        30%
Tone's Freeze Drie d Sliced Mushrooms 1.5oz     $1.34     8.5          534%
Tone's® Beef Base- 16 oz. jar      $3.48     7.56        117%
Tone's® Imitation Vanilla - 64oz plastic jug            $4.18     6.59        6.59        58%
Tone's® Italian Se asoning - 6 oz.               $3.98     4.68                        18%
Tone's® Minced Gar lic - 23 oz. shaker    $4.98     5.68                        14%
Tone's® Minced Oni on - 15 oz. shaker   $4.98     5.22                        5%
Hunt's® Tomato Sauce - 12/15oz cans     $6.98     12                           72%
Hunt's® Tomato Pas te - 12/6 oz                $5.38    5.82        8%
Del Monte® Whole K ernel Corn - 8/15. 25 oz. cans           $4.72     5.88        25%
Hunt's® Diced Toma toes - 8/14.5oz can $5.98     11.37     11.37     90%
Del Monte® Cut Gre en Beans - 12/14.5 $7.08     8.38                        18%

And yes, I bought far more than one of each of these.  I am wealthy in sugar currency.

Wed, 02/01/2012 - 14:53 | 2117186 Raging Debate
Raging Debate's picture

I handed out multiple pounds of sugar for holiday baking this year. As I explained to people that thought I was mad two years ago, if I wanted TWO spoonfuls of sugar in my coffee (which I also have lots of) then I will have it. Sometimes, it is the little things that keep a person sane.

Wed, 02/01/2012 - 14:55 | 2117195 kridkrid
kridkrid's picture

that's fantastic.  I've been wanting to do the same, but haven't.  Kudos.  Of course, food and energy have nothing to do with inflation (wink, wink, nod, nod).

Wed, 02/01/2012 - 15:24 | 2117352 JPM Hater001
JPM Hater001's picture

I'll report you to a FEMA camp you keep that up.

Thought crime is serious.

Thu, 02/02/2012 - 12:54 | 2120312 SilverRhino
SilverRhino's picture

Cleaned up this data.  This should be a lot easier to import into excel as a csv.  Can you validate the price dates?

ITEM / ITEM #,PRICE (11/2010),Current Price (12/2011),Inflation
Dakota Maid All Purpose flour 25 lbs.,$6.86,$8.93,30.17%
Crystal Sugar? Granulated 25 lbs,$3.94,$14.87,277.41%
Bakers & Chefs Cle ar Frying Oil 35 lbs,$22.49,$27.28,21.30%
Bakers & Chefs Soy Salad Oil,$22.49,$27.79,23.57%
Arm & Hammer? Baking Soda 13.5 Oz,$6.16,$6.68,8.44%
Jif? Extra Crunchy Peanut Butter jars - 40 oz.,$6.98,$10.44,49.57%
Spam? Classic - 4/12 oz,$9.28,$9.99,7.65%
Peak? Pinto Beans- 10 lb. bag   ,$5.73,$8.53,48.87%
Golden Star? Jasmi ne Rice - 25lbs,$16.48,$17.59,6.74%
Bakers & Chefs Gar den Rotini 6 lb.,$4.98,$5.48,10.04%
Idahoan? Original Mashed Potatoes 5 lb. bag,$5.88,$6.82,15.99%
Knorr? Chicken Fla vor Bouillon - 4.4 lb. bucket,$9.88,$18.17,83.91%
MALABAR BLACK PEPP  10 ER 10 OZ,$2.98,$3.88,30.20%
Tone's Freeze Drie d Sliced Mushrooms 1.5oz,$1.34,$8.50,534.33%
Tone's? Beef Base- 16 oz. jar,$3.48,$7.56,117.24%
Tone's? Imitation Vanilla - 64oz plastic jug,$4.18,$6.59,57.66%
Tone's? Italian Se asoning - 6 oz.,$3.98,$4.68,17.59%
Tone's? Minced Gar lic - 23 oz. shaker,$4.98,$5.68,14.06%
Tone's? Minced Oni on - 15 oz. shaker,$4.98,$5.22,4.82%
Hunt's? Tomato Sauce - 12/15oz cans,$6.98,$12.00,71.92%
Hunt's? Tomato Pas te - 12/6 oz,$5.38,$5.82,8.18%
Del Monte? Whole K ernel Corn - 8/15. 25 oz. cans,$4.72,$5.88,24.58%
Hunt's? Diced Toma toes - 8/14.5oz can,$5.98,$11.37,90.13%
Del Monte? Cut Gre en Beans - 12/14.5,$7.08,$8.38,18.36%

 

and yes that is a very distrubing level of inflation.

Wed, 02/01/2012 - 13:29 | 2116839 Manthong
Manthong's picture

The futere surplus will be there..

Surplus troops in Boston and LA.

Wed, 02/01/2012 - 14:24 | 2117050 poor fella
poor fella's picture

Will help the unemployment numbers.

For that matter, we can take the unemployed youth of the country (soon to approach Spanish levels) and pay them to watch their parents and neighbors. They can train for these new positions down at the baseball diamond since there will be no time for mindless entertainment or 'community'.

It's all about solving more than one problem at a time.  ;)

Wed, 02/01/2012 - 15:44 | 2117454 OutLookingIn
OutLookingIn's picture

Wrong.

WAR. The nation puts them all in unifiorm, hands them a weapon and sends them off to be cannon fodder.

The corporate elite make lots of money from war. The 99 percenters - not so much!

Wed, 02/01/2012 - 13:31 | 2116847 He_Who Carried ...
He_Who Carried The Sun's picture

Further down on his website it says:

This guy is THE leading visionary on reality.

Hahaha, wake up and stop "envision" reality boy.

All you need to do is FACE IT !!

Wed, 02/01/2012 - 13:34 | 2116862 Random_Robert
Random_Robert's picture

Mad fuckin' Max bitchez...

or maybe not.

Wed, 02/01/2012 - 13:39 | 2116880 DoChenRollingBearing
DoChenRollingBearing's picture

@ trav7777

Spare parts, bitchez!

Wed, 02/01/2012 - 13:44 | 2116885 vast-dom
vast-dom's picture

You mean future to the Nth rehypothecation of the CDS of the actual surplus in derivatives?

Wed, 02/01/2012 - 13:27 | 2116831 djsmps
djsmps's picture

Current CNBC top headlines:

Greece Hours Away From a Deal With Creditors: Finance Ministry Official (Story Developing)


After a Delay, MF Global’s Missing Money Is Traced

Wed, 02/01/2012 - 13:31 | 2116846 GeneMarchbanks
GeneMarchbanks's picture

Wait... are they related? Cause if that MF 'money' ended up in Greece I'm going to be really concerned...

Wed, 02/01/2012 - 13:48 | 2116874 TruthInSunshine
TruthInSunshine's picture

I posted about the MF Global scam last night:

 

After Delay, MF Global’s Missing Money Is Traced

The New York Times

January 31, 2012, 9:42 pm

By BEN PROTESS and AZAM AHMED

Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing, people briefed on the investigation said.

 

While authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, investigators remain uncertain about whether they can retrieve the money.


[My edit here- hmmmmmm? Really? Investigators have traced hundreds of millions of MF Global former vaporfiat to specific banks, but remain uncertain about whether they can retrieve  said money? hmmmmm?] 

 

Wed, 02/01/2012 - 14:50 | 2117085 Archduke
Archduke's picture

it's in offshore banks, hidden by layers of shell companies and trusts with flee clauses.

 

 

for Brits, the BBC's Panorama investigates Lord Ashcroft's offshore empire in the Carribean,

including interviews with Nicholas Shaxon (non-Brits can view it through TOR tunnel)

 

http://www.bbc.co.uk/iplayer/episode/b01c2h4t/Panorama_Secrets_of_the_To...

 

 

Wed, 02/01/2012 - 15:28 | 2117379 honestann
honestann's picture

fiat is fungible.  just TAKE IT BACK.  it matters not where they routed the specific dollar bills and computer bits they stole.  just TAKE IT BACK.  obviously they're trying to find ways to justify the theft and protect the predators... most especially jon corzine.

Wed, 02/01/2012 - 13:41 | 2116882 Cult_of_Reason
Cult_of_Reason's picture

But CNBC conveniently does not mention these headlines (just to name a few from this morning):

1. US gasoline demand falls to lowest level since September 2001
2. Baltic Dry Index collapses to the lowest level in a decade
3. Chinese official communist government PMI for January inched up to 50.5; but more reliable private HSBC's China final manufacturing PMI stood at 48.8 in January, its third successive contraction.
4. Europe PMI was less bad than expected but still contracting @ 48.8
5. South Korea’s exports unexpectedly fell for the first time in more than two years in January
6. Hong Kong’s economy grew by a less-than-estimated 3% in the fourth quarter
7. Australia home prices plunged by the most on record in 2011
8. Chinese home prices fell for a fifth month in a row in January as well, the longest losing streak since data started being collected.

Wed, 02/01/2012 - 13:50 | 2116922 walküre
walküre's picture

They are given the proper headlines to suit the market manipulations that are being bestowed upon us daily by the banking overlords.

When the banking overlords are crashing the markets later this year, the above headlines will start to show up.

Wall Street, corporate media, Washington are the epidemy of a PROPAGANDA TRIFECTA!

Simply brilliant the way they've established themselves.

 

Wed, 02/01/2012 - 13:57 | 2116951 TruthInSunshine
TruthInSunshine's picture

Cult_of_Reason - you get it. Many here do. It's called selective dissemination, and it's straight from the Goebbel's handbook.

Hell, I remember when Reuters headlines were literally being revised within seconds regarding Christmas season retail sales, where a prior headline that reported weaker YoY sales was revised to literally state the opposite (and it wasn't due to a discrepancy in the actual numbers, either).

The google cache function is the only way people had of comparing the two contrasting headlines as each paper reporting the headline subsequently towed the line.

Wed, 02/01/2012 - 14:31 | 2117091 JPM Hater001
JPM Hater001's picture

Well, I see it's working...We're up 139...

All is fine.

Wed, 02/01/2012 - 14:00 | 2116964 mayhem_korner
mayhem_korner's picture

Baltic Dry Index collapses to the lowest level in a decade

 

Like scissors to paper (in the paper-scissors-rock game), BDI trump the touted 50/200 day cross.  Things are going to go south in a hurry folks.

Wed, 02/01/2012 - 14:03 | 2116975 undercover brother
undercover brother's picture

Up and up she goes and where she stops, no one knows.   as long as the central banks are commited to ZIRP and thusly printing currency, negative news will be largely ignored.  Dollar based assets such as stocks and gold have no choice but to continue ever higiher until the one day the whole system collapses on itself.   unfortunately it's pointless and a waste of mental energy to attempt to place a timetable on such an event.   

Wed, 02/01/2012 - 14:18 | 2117028 walküre
walküre's picture

uhm, we can "ignore" negative news all day and night long. there's a term for that. it's called DELUSION

in the real world... (global) trade and demand are collapsing

 

Wed, 02/01/2012 - 13:32 | 2116850 LongSoupLine
LongSoupLine's picture

 

 

What does any of this have to do with Facebook?

Wed, 02/01/2012 - 13:32 | 2116853 Random_Robert
Random_Robert's picture

"You cannot counterfeit actual surplus value generated by productive assets, you can only counterfeit proxy claims on future surplus."

Careful Charles.... Current US legal tender laws (not to mention the Federal Reserve Act) REQUIRE you to be wrong about that.

Why did Bernard Von Knothouse get taken down? The law protects the counterfeiters.

Truth is Treason in the Empire of Lies....

Again, be careful.

Wed, 02/01/2012 - 13:41 | 2116887 SwingForce
SwingForce's picture

The victims in this crime woulb be the people who buy Treasury Bonds/bills etc., no?

Wed, 02/01/2012 - 15:02 | 2117232 Tedster
Tedster's picture

Nuthouse got taken down because he was stupid enough to put a USD face value on his rounds, and make them look vaguely official. The face value was also about (then) double the melt value.

Duh.

Don't try this at home kids.

Wed, 02/01/2012 - 15:24 | 2117359 NotApplicable
NotApplicable's picture

This act was so stupid, I have to wonder if he was really legit, or just trolling, trying to discredit the whole idea (and maybe tar Dr. Paul's character)?

All he had to do was to avoid the word "dollar" and he'd been in the clear, but no, he made it the focus of his movement, guaranteeing the response he received. Add to that the idea of changing the face value over time, and it is hard to NOT consider it a monetary scheme.

Minted PMs should be classified by weight and purity alone. Anything else is just asking for trouble from the gang whose turf is being invaded.

Wed, 02/01/2012 - 13:32 | 2116855 BLOTTO
BLOTTO's picture

Counterfeit Life.

Wed, 02/01/2012 - 13:34 | 2116863 John Law Lives
John Law Lives's picture

That counterfeit economy will feel real enough to the estimated 10,000 - 15,000 employees of American Airlines who may be getting pink slips soon:

http://www.nbcdfw.com/news/business/AA-to-Cut-Up-to-15000-Jobs-138477399...

 

Wed, 02/01/2012 - 13:34 | 2116864 GeneMarchbanks
GeneMarchbanks's picture

'You cannot counterfeit actual surplus value generated by productive assets, you can only counterfeit proxy claims on future surplus. That is the U.S. economy in a nutshell: we are counterfeiting claims on our future surplus, even as we squander vast sums on horrifically obvious mal-investments and wasteful, cost-ineffective consumption.'

Finding new and innovative ways of 'explaining' what is going is, paradoxically, similar to the very thing you are trying to condemn. The entire article can just read: PONZI scheme keep moving; all would be explained.

Wed, 02/01/2012 - 15:36 | 2117418 NotApplicable
NotApplicable's picture

I disagree. Ponzi scheme is a such a politicized, common phrase now, that is accepted (or rejected) without much thought as to its meaning (like decimated, or fascist).

I found this article to be an excellent restatement of the problem in wholly understandable terms that aren't overloaded with prejudice. I can talk about malinvestment to people until I'm blue in the face, but might not get anywhere until I use the example of say, empty subdivisions. It doesn't take much of an economist to recognize that giving jobs to homebuilders is secondary to building houses that are actually needed. The malinvestment then becomes recognizeable once I ask, "Could that money have been better utilized to solve other, actual human needs?"

But if I merely state that the ponzi scheme keeps moving, well, they're more likely to ignore it, instead noting my tin-foil hat nature.

Wed, 02/01/2012 - 13:34 | 2116867 Dr. Engali
Dr. Engali's picture

Gartman is in CNBS trying to take credit for the Baltic dry index. He claims it is no longer a signal for global economic strength. He also says he likes gold in non- U. S dollars. How much have you missed on Dennis?

Wed, 02/01/2012 - 13:38 | 2116877 GeneMarchbanks
GeneMarchbanks's picture

Yep. I concur to an extent, it makes a ton of sense to go short AUD long AU. Gartman...

Wed, 02/01/2012 - 13:38 | 2116871 Random_Robert
Random_Robert's picture

A friend of mine in LA is a Plastic Surgeon who is minting REAL money by creating counterfeit boobies...

Unfortunately, the end result is the same; since said boobies provide no real VALUE when it comes time to nurse a baby.

They only provide superficial value to the gawkers and wanna be motor-boaters...

Wed, 02/01/2012 - 13:41 | 2116886 ozziindaus
ozziindaus's picture

I bet some cockhead is shelling out good money to have access to those pups

Wed, 02/01/2012 - 15:05 | 2117245 NotApplicable
NotApplicable's picture

It's LA, where all plastic surgery is considered a capital investment, as these people have nothing else of value other than their image.

Wed, 02/01/2012 - 13:38 | 2116876 DavidPierre
DavidPierre's picture

 

Somebody is broke... who? Does it really matter?

 http://www.jsmineset.com/2012/01/30/the-impending-undeclared-default-of-5-major-us-banks/

The subject of the interview is nothing new as we we were already aware that the big banks are broke, what IS news is that Mr. Sinclair believes that THIS week is "when" it happens. Well...not the bankruptcies of course but a "decision" by the ISDA (International Swaps and Derivatives Assoc.) will make regarding the "non default" or "trigger" of Greek debt.

This has been written and talked about for months on end, the 5 largest banks in the U.S. have written 97% of the CDS on the planet. Think about this for a moment, were one ... which would lead to many defaults occur at the same time, we would have another AIG situation. However, this time it would be "AIG cubed, times 5"! The banking system would then be ..."officially" bankrupt rather than bankrupt for all intents and purposes. It is this decision by the ISDA that Mr. Sinclair believes will be made this week that will ... and has already lead to more massive QE money printing to liquify the system in the hopes of putting enough cushion in ahead of time for whatever reaction comes about.

He is talking about 10 or more "MF Globals" in the near future where sovereign debt was purchased, then hedged, yet the "hedges" have been made worthless because ISDA refuses to "admit" that default occured.

THIS really is a big problem! Someone, somewhere is broke.

Will it be the "writers" of the insurance? Or the "buyers"? Well, let's clear this up ... IT DOESN'T MATTER!

This is like saying you went to an orgy with 20 people and 1 of them had AIDS. Does it really matter who it was?

A great metaphor for Europe at present, no bank trusts any other bank and thus interbank lending has basically ceased to exist. Then, going one step further, if the European banks don't trust each other, why would any other non European bank trust them?

"Someone is broke" is a fact and because the global financial system truly is "global", this means they... thus "we" are ALL broke! Period, end of story!

Which leads back to broken record time. Nothing paper has the true value as is perceived today. Either they allow bankruptcies to occur as Mother Nature demands or they print $ Trillions more and throw it on top of the already raging bonfire. 

 Which choice will be made? TPTB will not ever admit defeat nor give up "power" willingly, they will print until the cows come home and the currencies approach zero. What we do not know is how long investors will leave their heads in the sand. Do they wake up and panic or continue their oblivious ways while $1,000 is not enough to purchase a Happy Meal?

The panic will happen first, then and only then we will get a revaluation of the currencies. Can we go down the Weimar road for 2,3, 4 more years? Yes but the "structure" and leverage of the current system makes an "accident" along the way very, very likely. Again though, does it really matter? Matter how?

How you will prepare and protect yourselves with "precious metals everything" of course! No, no matter how this plays out, in a currency/debt crisis such as this, REAL MONEY is your best safe haven. Whether it is this week as Mr. Sinclair says or 6 months from now, "they" will have to decide what road we will take. Deny everything, admit to nothing and print...or call reality for what it is and let bankruptcys roll around the planet like atom bombs.

It doesn't matter "when or how", what really matters is what you have done and are doing to prepare for it!

www.lemetropolecafe.com

Wed, 02/01/2012 - 13:42 | 2116894 DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

I almost always like your stuff DP.  Great analyses.

We are, as a world, all broke.  Physical gold will help those of us who own it.

Wed, 02/01/2012 - 14:22 | 2116938 DavidPierre
DavidPierre's picture

The Fascist Business Model is a cord to strangle the neck of a nation. The rage of nationalism, the eradication of liberties, the pursuit of conjured enemies, the constant sense of alert, the attack on enemies with alienation of allies, all tend to effectively conceal the theft and corruption.

Corruption in Fascist Business Model

http://news.goldseek.com/GoldenJackass/1328130000.php

"The system will collapse and files from regulators and law enforcement will be destroyed during the collapse.

The 911 event was an orchestrated event within the reaction matrix, a mega trial run to see how people would react and how the system would deal with the destruction.

It was also the site one of the biggest gold heists ever. ScotiaMoccatta's gold in the vaults at the WTC was completely looted, never to be recovered, a well documented but poorly known story. The coming collapse is not a question of if but when. Only hard assets such as precious metal, agricultural assets, and other essentials will survive. Pay little heed to banks, the CDS contracts, the mortgage fraud, and all the other schemes these banksters run. The Roman Empire's back was broken. This cartel's back will be broken too. So just sit back and relax if well positioned in gold & silver."

Wed, 02/01/2012 - 14:31 | 2117080 walküre
walküre's picture

ftd.de has an article on this today

http://www.ftd.de/finanzen/maerkte/:krisensignal-suedeuropaeische-banken...

w/o ECB cash the lending to businesses had stalled across Southern Europe. Before LTRO the situation was pretty dire it says. ECB Draghi is promising more relief by end of February.

Now the ECB is quasi directly supporting the European corporate sector with lifelines or the system would collapse. First it was nations, now its businesses and soon it will be the people.

And then there's a propaganda piece about the outlook for Germany's growth which supposedly looks promising. Sure, Germany is going to grow on its own when pretty much the rest of Europe is going from recession into depression. You can't make this stuff up, it's so good!

 

Wed, 02/01/2012 - 13:39 | 2116879 Gringo Viejo
Gringo Viejo's picture

Having lost the bulk of our manufacturing base, we now have a "service" economy. That's to say an economy essentially based on everyone taking in one another's laundry.

Wed, 02/01/2012 - 15:07 | 2117253 NotApplicable
NotApplicable's picture

Good thing I'm a step ahead of the herd.

I do hair and nails, too!

Wed, 02/01/2012 - 13:40 | 2116881 ozziindaus
ozziindaus's picture

The examples you use of wasteful spending can be better described as transfers of wealth and that's the point. Please note that it's not all wasted. Although disproportionate, a lot of that cheese went back into the economy.

Wed, 02/01/2012 - 13:45 | 2116899 DoChenRollingBearing
DoChenRollingBearing's picture

"Old Business" ozzii

Thanks for your comment the other day about NTN smacking INA in needle bearings here in N. America.

Wed, 02/01/2012 - 13:46 | 2116908 ozziindaus
ozziindaus's picture

No probs DoChen.

Wed, 02/01/2012 - 13:41 | 2116883 Dre4dwolf
Dre4dwolf's picture

Well, if there are no future surpluses left, then really the money going to shit is the last of our problems, given that population growth is fixed to grow exponentially forever until we run out of food.

 

The banks should of been dissolved back in 2007~2009, and they should of dumped money into agriculture, mining and fuel discovery, a little money spent on R&D (to improve mining and gathering efficiency) wouldn't of been bad either.

 

I have worked in city/govt buildings, everyone and I MEAN EVERYONE who works for govt pretty much sits in their chair, browses the internet / shopping online for 9 hours a day eating Doritos, then they go home and pass out and rinse/repeat.

The govt robs you through inflation/taxes to pay useless eaters, (themselves the governors/presidents/congress/senate ) included.

Government is composed of a body of useless eaters/water containers that have a wool pulled over everyone's eyes, and everyone blindly feeds the cancer that is Government(s) and Bank(s). . . . can you blame them though? most grow up indoctrinated in Govt Schools, have studied their entire lives for Govt regulated Tests.... The banks and Govts have essentially brain washed society from crib to grave. . . they have conditioned society to be slaves to feed the useless eaters.

 

Wed, 02/01/2012 - 14:45 | 2117111 walküre
walküre's picture

"useless eaters"

80% of government could be eliminated tomorrow and most people wouldn't even notice. The internet and online services have made 80% of the staffers completely redundant.

Every industry has laid off workers because of one automated process or the other. Only government is growing. Makes no sense.

The money ponzi is kept alive to afford those government drones imo. That's why the Soviet Union eventually collapsed because government was so big, it had 3 stooges for one job and all 3 took home a full salary. The real economy was hollow and people noticed that the money paid to government drones was completely worthless. So, the people started bartering and paying with hard currency.

Wed, 02/01/2012 - 15:08 | 2117257 NotApplicable
NotApplicable's picture

How long until they go after Craigslist, I wonder?

Wed, 02/01/2012 - 17:35 | 2117814 Anti Psychotic
Anti Psychotic's picture

I had a car for sale on Craigslist and got one potential "buyer" who pretty forcefully wanted to know if I would agree to put a lower price on the bill of sale so he could pay lower taxes.  I told him that it wasn't my business what he did with the bill of sale after the deal.  His response was "On your release of liability, you must write a selling price.  Would you be willing to write a lower price?".  

Sounded like a trap to me.

Wed, 02/01/2012 - 13:45 | 2116904 stopthejunk1
stopthejunk1's picture

Interesting post, but I'm not sure it gets to the root of the problem.

Fiat money IS counterfeiting.  The only reason to have a fiat money system is so that you can increase the supply of money without doing any work, i.e. without producing anything.

So the real problem is:

-Our "money" is backed by nothing, except a promise to pay.  That promise is a lie, because the only way the debt can be "paid" is with new debt.  You are trading your hard-earned labor and effort for paper that is constantly declining in value.

-Every time the government makes a debt payment, it does so by inflating the money supply, which weakens the purchasing power of the dollars you hold.  This is theft.

-every time a bank makes a loan under our fraudulent fractional reserve banking system, the money supply increases and the value of your savings declines.  This is theft.

-whenever the Fed buys ANY asset, it increases the money supply by about 10 times the value of that asset.  This is THEFT.

 

The only way to fix this is to dismantle the federal reserve and liquidate its assets; and repudiate the "debt" that it claims that we owe.  This can be done with the stroke of a pen.  The 250 million ounces of gold that the Fed holds (which is valued on paper at $42/oz!!!) should be divided up proportionately among the holders of federal reserve notes; this would put the true price of gold somewhere north of $4000.  We can then issue a new dollar, debt-free, redeemable in gold at that price level.  This would take us back to honest, constitutional money.

We have gone from "we are all Keynesians now" (Nixon) to "we are all impoverished now."  It is time to reject Keynesian economics as the broken fraud that it is.  Demand for money is exogenous, and the federal reserve should not be engaging in the price-fixing of interest rates.

The real source of the problem is that TOO FEW PEOPLE UNDERSTAND THIS.  And that is intentional.  People tend to get pissed off once they understand they're being robbed.

Wed, 02/01/2012 - 13:49 | 2116921 ozziindaus
ozziindaus's picture

Dollars certainly do have value. As a reserve currency, the value of the USD is constantly floated on the open market backed by oil.

Where's Steve from Virginia to explain this?

http://economic-undertow.blogspot.com/

Wed, 02/01/2012 - 14:01 | 2116946 stopthejunk1
stopthejunk1's picture

Yeah dollars have value; just less and less value every year.  The "dollar", by which we mean the "one dollar federal reserve note", which promises to pay a dollar when redeemed (except that you can't redeem it) has lost 97% OF ITS PURCHASING POWER since it was introduced in 1913.

Expect the price of oil (and anything else "real", that is not currently in a bubble)  to continue to go up as we "ease" the money supply.  And expect other nations to continue to look for alternative ways to price and trade oil, as we've seen recently in the news (India, China, etc.)  No one with their eyes open wants to trade in dollars; but they will have to get out of dollars slowly, or else they will cause a panic and their dollar holdings will collapse in value. 

And sure, the dollar has value: the people that get the best value out of the dollar are those that hold it first, before their newly-printed dollar drives up the price level.  That would be: the rich, the bankers, and the government.   And next in line, the people that they give their money to: big corporations.

 

Wed, 02/01/2012 - 14:23 | 2117053 ozziindaus
ozziindaus's picture

Yes this is all common knowledge but what if I asked you to adjust your time scale to say, 2008 (height of housing, equity and oil bubbles) . In this case, your dollars will be worth 30-40% more.

Wed, 02/01/2012 - 14:21 | 2117044 alien-IQ
alien-IQ's picture

The dollar is backed by several thousand nuclear warheads and a few hundred military bases around the globe.

We are the worlds reserve currency by force not consent.

The value of our currency is based on the fear that we will destroy your country if you do not accept our worthless counterfeit paper in exchange for your real assets.

America is not respected be cause it is "good". It is feared because it is ruthless. To believe it is anything other is folly.

Wed, 02/01/2012 - 14:28 | 2117073 ozziindaus
ozziindaus's picture

I understand and totally agree with you but you have just made a point that dollars do have value in this day and age. Would you have the same cynical opinion if all of that military might was backing the price of gold?

Wed, 02/01/2012 - 14:46 | 2117136 alien-IQ
alien-IQ's picture

there is no need to have a military backing the "value" of gold since gold's value is universally accepted by consent and has been a constant store of value for thousands of years.

the only function military power could exercise in relation to gold would be to seize the gold of the nations we invade...but we would never do that would we?

Wed, 02/01/2012 - 14:48 | 2117150 walküre
walküre's picture

You don't need military to back the price of gold. Gold is backed by virtue of a 5000 year payment record just fine.

You might need military to protect your gold from pirates or you might need military to go out and plunder and steal someone else's gold.

Wed, 02/01/2012 - 13:55 | 2116941 mayhem_korner
mayhem_korner's picture

You are trading your hard-earned labor and effort for paper that is constantly declining in value.

 

Spot on.  And here's where (in my view), this end-game is simply a race to reality: people will eventually figure this out.  Those that figure it out early will convert their constantly-declining fiat currency to stores of value (commodities, PMs, non-perishables, etc.).  Those that are late to the game are going to be crushed by inflation as the tail-chasing goes parabolic.  And believe it or not, the psycho Ben is hoping that the fear of inflation will panic folks into buying just enough to 'lift' the economy without throwing it into a hyperinflationary depression.  It's that type of uber-arrogance that the system is tethered to.

Wed, 02/01/2012 - 15:39 | 2117432 NotApplicable
NotApplicable's picture

If only we still produced real wealth, then it just might work. Instead, we're liquidating the last bit of capital in order to survive yet another day.

Wed, 02/01/2012 - 13:46 | 2116910 mayhem_korner
mayhem_korner's picture

In all these cases, the mal-investment was added to the GDP as if it created productive value.

 

And when additional investment/consumption needs to occur to actually produce the value intended by the original, mal-investment, the original investment by rights should be backed out of the GDP measure.  Will never happen of course, but it's when the replacement investment occurs that the loss is actually booked.

Wed, 02/01/2012 - 13:47 | 2116914 Benedict Farse
Benedict Farse's picture

Bullish.

Wed, 02/01/2012 - 13:49 | 2116920 DoChenRollingBearing
DoChenRollingBearing's picture

See the Baltic Dry Index:

http://stockcharts.com/h-sc/ui?s=%24bdi

Wed, 02/01/2012 - 14:54 | 2117190 walküre
walküre's picture

let's look at BDI over 5 years and overlap EURUSD and S&P

maybe there's a trend in there somewhere

Wed, 02/01/2012 - 15:46 | 2117464 HedgeYourself
HedgeYourself's picture

You can do that in Bloomberg, here: http://www.bloomberg.com/apps/quote?ticker=BDIY:IND This looks quite miserable - it is about to go under the 12/04/2008, where it was 666 (!?), which is lowest reading for 5Y of data available... Sure it is all bullish, or at least priced in ;)

Wed, 02/01/2012 - 13:50 | 2116923 zerozulu
zerozulu's picture

Counterfeit American dream.

Wed, 02/01/2012 - 13:52 | 2116926 alien-IQ
alien-IQ's picture

I love the writings from Of Two Minds. Charles is a terrific and insightful writer. However...the one fact that seems inescapable (and tragic) is this: The system is corrupt and broken and it is going to remain corrupt and broken until it completely collapses. Face it....we are beyond the point of no return.

We can write endless suggestions about how to fix things. We can have endless debates about how fucked up things are and why....But they don't amount to a hill of beans. Nothing we say will change anything. Those driving this machine do not care about the passengers. The sooner we accept that, the better we can prepare for the inevitable impact.

Many people will be caught completely by surprise when the wheels come off. They will be devastated. Destroyed. And they will have deserved it. It's the price you pay for willful ignorance.

Wed, 02/01/2012 - 15:14 | 2117290 NotApplicable
NotApplicable's picture

And us "wingnuts" inherit the Earth.

Wed, 02/01/2012 - 18:03 | 2117901 Questan1913
Questan1913's picture

Alien-IQ,

"they will have deserved it"  Wrong. 

Thu, 02/02/2012 - 00:37 | 2118975 StychoKiller
StychoKiller's picture

Au-contraire!  The monkeys playing see, hear & speak no evil do deserve the bite that reality has in store for them.

Wed, 02/01/2012 - 13:52 | 2116932 YesWeKahn
YesWeKahn's picture

If the central bank can counterfeit in the name of supporting economy, I don't see why other things can't be counterfeited.

Wed, 02/01/2012 - 13:59 | 2116956 Doctor Doom
Doctor Doom's picture

Question to you:

 

I am reading ZH for quite some time and educated myself on the issues effecting our monetary and financial system. I got it: It´s broken.

As conclusion, I invested most of my savings into physically gold and silver. I read the stories about the "real value" of gold and silver and how the price is manipulated by uncovered shorts. I think it´s true - COMEX is fraud.

But is this not true for most of other assets in which people virtually invest via futures and derivatives. I mean there are $700 trillion in derivatives which do not impact the prices at all. Think what happens derivatives investors want to get the real asset....

So, here my question: Does the story around the "real value" of gold and silver" not apply to all assets (if there is no exposure to debt attached to the asset)???

Shall copper be 1.000.000$ per kilo? Is the real value of an iPhone $50.000?

 

 

Wed, 02/01/2012 - 15:05 | 2117243 blunderdog
blunderdog's picture

This is going to sound simple-minded, but that's only because it is.  The money-men have pooched it.  NO ONE can pay.

The fact that a bank can print a piece of paper which says it'll be paid $100 trillion when some particular credit event occurs doesn't mean that counterparty has the $100 trillion.  It's just a piece of paper. 

At the end of the day--if the bankers/thieves don't have something of real value to trade for the actual commodities they "want to get their hands on," they won't be able to take the commodities.

This is the basis for hyperinflationary collapse.  Even bankers have to eat food--it doesn't matter if they have mountains of "money" when there's nothing to eat.

Wed, 02/01/2012 - 14:00 | 2116967 taniquetil
taniquetil's picture

I'm starting to think that at some point Obama's going to run up the deficit so high that it's greater than the present discounted value of all future US surplus tax revenue.

 

Or maybe he already has?

Wed, 02/01/2012 - 14:01 | 2116971 W10321303
W10321303's picture

Can't even sell India our 'superior' fighter jets.

Ground Control    .......10

What good is an Industrial Policy if you can't even 'dump' your WMDs?

To Major Tom    ...........9

Now the French make better bombers?

Wed, 02/01/2012 - 14:03 | 2116979 The Old Man
The Old Man's picture

Good read, alot of info targeted, most of which we know, but still very informative.

What if?................

We're being set up?

Let's say the arising situation is actually an economic war. Let's say this war is not with cultures and soveriegn nations, as they seem to want us to believe. Let's say this is a war with the banks and with financial "psuedo sovereign" organizations.

All of you know what happens when what Charles' is saying get's out of control. 

This is looking more like a currency collapse or massive financial restructuring every day.

If they go default, there are going to be a lot of really pissed people and nations. And I'm not talking about Greece.

It's anybody's guess as to what will result. It sure as hell won't be good.

GLTA

Wed, 02/01/2012 - 14:03 | 2116981 brown_hornet
brown_hornet's picture

Oz- Went back in to the economy inefficiently.  Thus creating the need for more wealth transfer.

Wed, 02/01/2012 - 14:32 | 2117096 ozziindaus
ozziindaus's picture

No doubt but through the eyes of a narcissistic psychopath, every dollar spent into the economy that doesn’t directly benefit them is regarded wasteful and inefficient.

Wed, 02/01/2012 - 14:10 | 2117002 Sandmann
Sandmann's picture

Cui Bono ?  It is always instructive to see who is benefitting directly from these policies. Who is getting the regular and increasing paycheck without any contingencies. Who is getting a guaranteed bonus, and uplift to their standard of living.

Then to look at the feedng chain and see who might be paying. It is almost as if a New Class is being born , a permanent Economic and Political Elite which has cornered the food warehouses in times of famine

 

Wed, 02/01/2012 - 15:05 | 2117177 Dr. Acula
Dr. Acula's picture

>who is benefitting directly from these policies

Nobody is benefiting.

There are no nanotech therapies, no cyborg bodies, no lunar colonies, no interstellar vacationing.

There are only beast-like groundlings with large bank accounts.

 

Wed, 02/01/2012 - 14:10 | 2117004 falak pema
falak pema's picture

Presented as such this argument is stilted and stultified in the age where capital formation as a means to an end is considered an optimal system for creating material wealth by financial leverage either injected as loan or as equity; for which the liquidity pump is  a vital prerequisite. 

Its only justification is contextual and not timeless. In this day and age of debt mountain reality and zero growth possibility, we are living in counterfeit economy; as the print and dump fiat pump in an oligarchically controlled environment, by central banks and consorts, is effectively pie in the sky and criminal sleight of hand, impoverishing the majority and entitling the stinking rich even more. 

So lets gets the premise of the argument in focus or we won't learn right from wrong in analytical hindsight, extrapolated often in exuberant continuation of past tradition into foreward projections by spin doctors of hopium who bemuse and confuse us or predicitions to the contrary by doom and gloom Cassandras. 

We are here as a result of past corruption, not because capitalism is bad. And the deeper argument is not : is capitalism still a means to an end or an anachronism?

It is, how do we create satisfaction of human needs and social progress without raping the earth of its remaining resources and contaminating our environment beyond sustainance and survival. Capital formation, a means to new ends, defined in new paradigm that is not continuation of illimited material consumption in a resource constrained world is the new horizon.

CHS does not address this issue at all. He is totally contextual and discusses mal investment and debt bubble sterility, which is now old hat. Move on CHS. Lets talk about post reset. 

Wed, 02/01/2012 - 14:29 | 2117081 GeneMarchbanks
GeneMarchbanks's picture

'Move on CHS. Lets talk about post reset.'

Arguably that is even more meaningless. This concept of a 'reset' is getting to absurd levels. What you're witnessing is process of decay and decline with sporadic crises like Fukushima just to remind us that we're still creatures here and at the mercy of an earth we long ago became indifferent to in order to live in the man-made one.

In the East they are living through action, in the West they are talking. Endless talk. Discussions about hypothetical situations that may or may not be the case at all, and even if they are it means nothing. Two entire continents full of talkative, insanely self involved navel gazers. Decadence at its peak.

Wed, 02/01/2012 - 16:02 | 2117508 falak pema
falak pema's picture

Depressing to see an intelligent poster like CHS not trying to see around the curve. 

We have to keep our collective heads out of the water. Its a vital necessity. Not go down with a sinking ship. Life goes on and never say die stays imperative necessity. 

The BRIC countries will generate growth even if first world flounders. Seeing where the world moves even as USA fumbles and stumbles remains a subject of vital interest. 

As a European I see the decay this crisis will create for a long period but it will also secrete its own anti viruses.

Wed, 02/01/2012 - 14:19 | 2117034 EatersOfTheFed
EatersOfTheFed's picture

When is the debt jubliee going to occur?

Wed, 02/01/2012 - 15:16 | 2117301 blunderdog
blunderdog's picture

How about when Greece goes totally belly-up without triggering a CDS payout?

Wed, 02/01/2012 - 14:38 | 2117119 zerotohero
zerotohero's picture

I should invest in WHEELBARROWS - cause your gonna need one to carry all that fiat paper to the store for milk and bread.

Wed, 02/01/2012 - 15:43 | 2117450 NotApplicable
NotApplicable's picture

The future is in plastic!

Wed, 02/01/2012 - 15:57 | 2117489 non_anon
non_anon's picture

ok, mrs Robinson

Wed, 02/01/2012 - 15:14 | 2117287 sidkof
sidkof's picture

my co-worker's step-aunt makes $82 hourly on the internet. She has been laid off for 6 months but last month her paycheck was $8731 just working on the internet for a few hours. Read more here... LazyCash9.com

Wed, 02/01/2012 - 15:14 | 2117288 non_anon
non_anon's picture

reality will catch up at some point in the future

Wed, 02/01/2012 - 15:17 | 2117308 sidkof
sidkof's picture

my co-worker's step-aunt makes $82 hourly on the internet. She has been laid off for 6 months but last month her paycheck was $8731 just working on the internet for a few hours. Read more here... LazyCash9.com

Wed, 02/01/2012 - 15:44 | 2117456 NotApplicable
NotApplicable's picture

"co-worker's step-aunt"

LOL, now that's getting creative.

Wed, 02/01/2012 - 18:25 | 2118008 NuYawkFrankie
NuYawkFrankie's picture

I'm surpised the isnt a brother-in-law in there somehere!

Wed, 02/01/2012 - 18:17 | 2117956 NuYawkFrankie
NuYawkFrankie's picture

Wow! Sounds like a great deal!

Just so happens, I'm expecting a $1/2 million wire transfer from the former Nigerian High Commisioner to Burkino Faso any day now. Seems he had to get outta Dodge in a hurry (sumthin about a military take-over, frozen accounts - that sorta sh!t) and needed to use my account to transfer lord knows how many millions!   And here's the kicker - I get one halfa million outta it... kust for lettin him use my acct for 2 or 3 days! Yeehaaa!

Anyway - thanks for the heads-up on your deal!

That step-aunt of yours sure sounds like one smart cookie ;)

Wed, 02/01/2012 - 15:18 | 2117314 honestann
honestann's picture

Two absolute certain constants:
#1:  predators never stop lying.
#2:  negotiating with predators never works.

Wed, 02/01/2012 - 15:29 | 2117378 DavidPierre
DavidPierre's picture

The Official Counterfeiter

Back in 1969, a Disney cartoonist sat down at his story board and produced a booklet that the Disney organization never saw:  It was a presentation of fractional reserve banking and the role of the Federal Reserve System. His name was Vic Lockman. He was the first cartoonist ever to do a booklet based on the Austrian theory of the business cycle.

http://scripturalscrutinydotcom.files.wordpress.com/2012/01/the-official-counterfeiter-biblical-economics.pdf

Wed, 02/01/2012 - 16:16 | 2117574 honestann
honestann's picture

Hey, that's a great PDF.  Thanks.

Wed, 02/01/2012 - 17:31 | 2117796 ozziindaus
ozziindaus's picture

Scrooge McDuck was extremely Austrian. Check him out.

Wed, 02/01/2012 - 15:39 | 2117429 hidingfromhelis
hidingfromhelis's picture

Screw fundamentals; I'm goin' long malinvestment!  It's a growth industry we can believe in.

Wed, 02/01/2012 - 16:12 | 2117560 OutLookingIn
OutLookingIn's picture

Hollow shell. A shadow of it's former self. As a dessert mirage. The land of make believe. With a population of hocus pokus believers. Without morals. Void of compassion. No trace of fairness. Greed run amok. The height of sefishness. Corruption at every turn. No truth in anything.

I'm sorry where you thinking I was talking about America the beutiful? No. The end days of the Roman Empire!

However, kinda makes you start to feel a little uncomfortable... doesn't it?

There are none so blind as they who refuse to see.

Okay. You can go back to your big screen TV, your tweeting, your online gaming, whatever.  

Wed, 02/01/2012 - 16:53 | 2117698 blunderdog
blunderdog's picture

kinda makes you start to feel a little uncomfortable... doesn't it?

Not me, naw.  I don't care much for this "empire" thingie.  Most of the people I know who've been spectacularly well-rewarded by their participation in "the system" are assholes.  It'd be great to see a different system, even if it just ends up rewarding a different set of assholes.

Change of scenery and all that. 

Thu, 02/02/2012 - 02:49 | 2119162 IrritableBowels
IrritableBowels's picture

"As a dessert mirage."

I see brownies and chocolate chip cookies on the horizon, HAHA.

Wed, 02/01/2012 - 19:09 | 2118172 zippy_uk
zippy_uk's picture

This is really about the "miracle" baby boomer economy. It works like this...

1. Issue all your kids with credit cards (does not matter that they don't know what one is yet).

2. Extend the borrowing limit on the kids credit card - more stimulus

3. Issue credit cards to the kids future children (not yet born yet)..;

4. Repeat steps 2/3 ...

5. Max out all the credit cards

6. From all the "consumption stimulus" - see your assets (houses) rocket in value. You are now rich. Economy is in a golden age

7. Save the extra you get in to pension funds and the stock market. All your peers are doing this - you all get rich together as the market only goes up.

8.  Having got rich - make sure you vote down any pesky tax increases - the benefits you have got you earned by paying in but the government owes you for your vote - so demand more benefits.

9. Other peoples wages (yonger people) are getting out of hand - the young expect to buy a house and live in decent living conditions - so off shore their jobs. They are ungrateful anyway and its not your fault that the world is overpopulated. The young will just have to wait, just like you didn't. In any case you can now buy so much more at Walmart or Tesco. If fact it makes sense to borrow money from your house as it is worth so much money.

10. When the credit card bill comes due don't pay it - it belongs to the kids. You never had any issues paying your way so whats their problem any how. In any case in the long run we are all dead anyway

This way, all the good things in live a virtually free.. however there are a few things to avoid..

1. You can talk about your generation, but don't let anyone else talk about their own

2. Make sure there is no discussion of money, credit, or generational imbalances. Only advocating the consumer (boomers) is valid. Talk of productivity or saving can only take place behind closed doors.

3. Suppress any non mainstream discussions. The internet is for trouble makers. Keep the discussions focused on terrorism, fighting for freedom and ensuring other countries are grateful for the protection our wars bring them.

4. Do not allow discussions of sustainability. Ensure the tax system is skewed to consumption not productivity.

5. Don't allow young people access to the internet. Try to ban it in any way possible.

6. In case the economy does not go a planned, make sure you are near retirement with savings and have paid off your mortgage. Swap paper assets for gold.

7. If you can't manage 6, don't grow old because you will become dependent on younger people who may have been browsing too much internet and who have "the wrong outlook". They might have dangerous ideas such as not thinking your house you own is worth as much as you know it is and try to hustle you down in price. Politically they might want inflation to price them selves back into the job market at the expense of your fixed income, or want a "no taxes for no benefits in return" nofare state theatening the social security schemes you are entitle to (because you paid in)

Wed, 02/01/2012 - 19:18 | 2118203 bill1102inf
bill1102inf's picture

ftw

Wed, 02/01/2012 - 22:10 | 2118655 rufusbird
rufusbird's picture

Great article. It just made me think, how beneficial to a society is a financial services industry that drains more in fees and commissions and pays out in salary, and bonus checks, and profits, that are greater than the wealth which it produces? Sustainable. I don't think for long.

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